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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' which was released on 
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Report to the Chairman, Subcommittee on Income Security and Family 
Support, Committee on Ways and Means, House of Representatives: 

United States Government Accountability Office: 
GAO: 

February 2010: 

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: 

GAO-10-164: 

GAO Highlights: 

Highlights of GAO-10-164, a report to the Chairman, Subcommittee on 
Income Security and Family Support, Committee on Ways and Means, House 
of Representatives. 

Why GAO Did This Study: 

Following sweeping changes made to federal welfare policy in 1996 with 
the creation of the Temporary Assistance for Needy Families (TANF) 
program, the number of needy families who received cash assistance 
fell by more than half to 1.7 million in 2008. Poverty among children 
also fell from about 21 percent in 1995 to about 16 percent in 2000, 
rising again to 19 percent in 2008. The current recession deepened in 
2008, raising questions about state TANF programs’ response to 
increased needs. GAO was asked to provide Congress with information on 
the (1) factors contributing to the decline in the number of families 
receiving assistance; (2) characteristics of participating and 
nonparticipating eligible families; (3) impact of higher participation 
in TANF cash assistance on child poverty; and (4) changes states are 
experiencing in caseloads and spending in the current recession. GAO’s 
methodologies included using microsimulation analyses; reviewing 
relevant research and federal laws; interviewing TANF officials in 21 
selected states; analyzing state cash assistance data; and 
interviewing researchers, federal officials, and other experts. 

What GAO Found: 

The decline in the number of poor families receiving cash assistance 
from 1995 to 2005 reflects declines in both the number of eligible 
families and in eligible families’ participation. The strong economy 
of the 1990s, TANF’s focus on work, and other factors contributed to 
increased family incomes and a decline in the number of eligible 
families. However, most of the caseload decline—about 87 percent—
resulted from fewer eligible families participating in the program, 
perhaps in response to TANF work requirements, time limits, and 
sanction and diversion policies. 

Compared to TANF families, eligible nonparticipating families worked 
more and had higher incomes and educational levels. However, among 
eligible families who did not participate, 11 percent did not work, 
did not receive means-tested disability benefits, and had very low 
incomes. 

800,000 fewer children would live in extreme poverty—below half the 
federal poverty threshold—if participation increased from 40 percent 
to 84 percent of eligible families, the level it reached in 1995, the 
year before TANF was created. While TANF benefits would generally 
increase incomes, higher participation would not significantly change 
the number of children in poverty overall, partly because many 
children in poverty are not poor enough to be eligible for TANF and 
because TANF cash benefits are typically low. 

From June 2008 to June 2009, the number of families receiving TANF 
cash assistance rose in 12 of the 21 states GAO surveyed, although the 
recession’s impact on cash assistance caseloads varied by state. To 
offset higher costs of cash assistance, few states reported reducing 
TANF-related spending on family- and/or work-supports during this time 
period. Instead, states paid for increases by using funding sources 
such as 2009 emergency stimulus funds. 

Figure: Families Estimated as Eligible for and Participating in AFDC 
or TANF Cash Assistance Programs, Monthly Average, by Calendar Year, 
1995 through 2005: 

[Refer to PDF for image: multiple line graph] 

Year: 1995; 
Eligible for AFDC or TANF Cash Assistance Programs: 5,690,000; 
Participating in AFDC or TANF Cash Assistance Programs: 4,800,000; 
Eligible, but not participating: 890,000. 

Year: 1996; 
Eligible for AFDC or TANF Cash Assistance Programs: 5,600,000; 
Participating in AFDC or TANF Cash Assistance Programs: 4,430,000; 
Eligible, but not participating: 1,170,000. 

Year: 1997; 
Eligible for AFDC or TANF Cash Assistance Programs: 5,400,000; 
Participating in AFDC or TANF Cash Assistance Programs: 3,700,000; 
Eligible, but not participating: 1,700,000. 

Year: 1998; 
Eligible for AFDC or TANF Cash Assistance Programs: 5,470,000; 
Participating in AFDC or TANF Cash Assistance Programs: 3,050,000; 
Eligible, but not participating: 2,465,000. 

Year: 1999; 
Eligible for AFDC or TANF Cash Assistance Programs: 5,070,000; 
Participating in AFDC or TANF Cash Assistance Programs: 2,650,000; 
Eligible, but not participating: 2,405,000. 

Year: 2000; 
Eligible for AFDC or TANF Cash Assistance Programs: 4,440,000; 
Participating in AFDC or TANF Cash Assistance Programs: 2,300,000; 
Eligible, but not participating: 1,140,000. 

Year: 2001; 
Eligible for AFDC or TANF Cash Assistance Programs: 4,560,000; 
Participating in AFDC or TANF Cash Assistance Programs: 2,190,000; 
Eligible, but not participating: 2,370,000. 

Year: 2002; 
Eligible for AFDC or TANF Cash Assistance Programs: 4,550,000; 
Participating in AFDC or TANF Cash Assistance Programs: 2,190,000; 
Eligible, but not participating: 2,360,000. 

Year: 2003; 
Eligible for AFDC or TANF Cash Assistance Programs: 4,770,000; 
Participating in AFDC or TANF Cash Assistance Programs: 2,180,000; 
Eligible, but not participating: 2,590,000. 

Year: 2004; 
Eligible for AFDC or TANF Cash Assistance Programs: 5,220,000; 
Participating in AFDC or TANF Cash Assistance Programs: 2,190,000; 
Eligible, but not participating: 3,030,000. 

Year: 2005; 
Eligible for AFDC or TANF Cash Assistance Programs: 5,270,000; 
Participating in AFDC or TANF Cash Assistance Programs: 2,130,000; 
Eligible, but not participating: 3,140,000. 

Source: GAO analysis of data from HHS's Indicators of Welfare 
Dependence, based on the TRIM3 model. 

[End of figure] 

What GAO Recommends: 

GAO is not making recommendations in this report. In its comments, the 
Department of Health and Human Services noted that the report was 
informative and did not disagree with GAO’s findings. GAO also 
addressed technical comments as appropriate. 

View [hyperlink, http://www.gao.gov/products/GAO-10-164] or key 
components. For more information, contact Kay E. Brown at (202) 512-
7215 or BrownKE@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Factors Contributing to the Decline in Cash Recipients Include 
Declines in the Number of Eligible Families and in Eligible Families' 
Participation: 

Eligible Nonparticipating Families Generally Had Higher Incomes Than 
TANF Recipients, but a Portion of Eligible Nonparticipants Had Very 
Low Incomes: 

Increased TANF Participation Would Reduce the Number of Children in 
Extreme Poverty, but Would Not Significantly Change the Number in 
Poverty: 

In the Current Recession, Changes in Cash Assistance Caseloads Varied 
Widely in States We Surveyed While Few States Reduced Spending for 
Family and/or Work Supports: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Comments from the Department of Health and Human Services: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Related GAO Reports: 

Tables: 

Table 1: Cash Assistance Caseload Changes and Unemployment Information 
in Selected States, June 2008 through June 2009: 

Table 2: Disposition of Spending for Family and/or Work Supports by 
States That Increased Spending on Cash Assistance, Selected States, 
June 2008 through June 2009: 

Table 3: Sources of Funding Used by States to Offset Increased 
Spending on TANF-related Cash Assistance, June 2008 through June 2009: 

Figures: 

Figure 1: Families Estimated as Eligible for and Participating in Cash 
Assistance through the AFDC or TANF Cash Assistance Programs, Monthly 
Average, by Calendar Year, 1995 through 2005: 

Figure 2: Estimated Impact of Monthly TANF Cash Assistance Receipt on 
the Net Income of a Working Parent Who Receives Other Supports: 

Figure 3: TANF Cash Assistance: Estimates of Participating and 
Eligible Nonparticipating Families in 2005, Annual Basis: 

Figure 4: Estimated Median Annual Incomes of TANF-Eligible Families in 
2005: 

Figure 5: Receipt of Other Public Supports among Estimated TANF- 
Eligible Families in 2005, Annual Basis: 

Figure 6: Race and Ethnicity of Estimated TANF-Eligible Families in 
2005, Annual Basis: 

Figure 7: Family Structure of Estimated TANF-Eligible Families in 
2005, Annual Basis: 

Figure 8: Estimated Eligible Nonparticipating Families as a Share of 
Total Eligible Families in 2005, Annual Basis: 

Figure 9: Receipt of Other Public Supports among Estimated TANF- 
Eligible Families in 2005, by Eligible Family Type, Annual Basis: 

Figure 10: Estimated Impact of Monthly TANF Cash Assistance Receipt on 
a Family in Extreme Poverty in Illinois in 2005: A Working Single 
Parent with One or Two Children: 

Figure 11: Estimated Impact of Monthly TANF Cash Assistance Receipt on 
a Family in Poverty in Illinois in 2005: A Working Single Parent with 
One or Two Children: 

Figure 12: Percent Change in the Number of Families Receiving TANF 
Cash Assistance, by State, June 2008 through June 2009: 

Figure 13: For States with a Solely State-Funded Program, Percent 
Change in the Number of Families Receiving Cash Assistance from TANF 
and from TANF and Solely State-Funded Programs Combined, June 2008 
through June 2009: 

Abbreviations: 

ACF: Administration for Children and Families: 

AFDC: Aid to Families with Dependent Children: 

ARRA: American Recovery and Reinvestment Act of 2009: 

ASEC: Annual Social and Economic Supplement: 

BLS: U.S. Bureau of Labor Statistics: 

CCDF: Child Care and Development Fund: 

CPS: Current Population Survey: 

EITC: Earned Income Tax Credit: 

HHS: Department of Health and Human Services: 

MOE: maintenance of effort: 

PRWORA: Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996: 

SNAP: Supplemental Nutrition Assistance Program: 

SSBG: Social Services Block Grant: 

SSDI: Social Security Disability Insurance: 

SSI: Supplemental Security Income: 

SSP: separate state program: 

TANF: Temporary Assistance for Needy Families: 

TRIM3: Transfer Income Model, version 3: 

UI: Unemployment Insurance: 

WIC: Special Supplemental Nutrition Assistance Program for Women, 
Infants, and Children: 

United States Government Accountability Office: 
Washington, DC 20548: 

February 23, 2010: 

The Honorable Jim McDermott: 
Chairman: 
Subcommittee on Income Security and Family Support: 
Committee on Ways and Means: 
House of Representatives: 

Dear Mr. Chairman: 

Following sweeping changes made to federal welfare policy in 1996 with 
the creation of the Temporary Assistance for Needy Families (TANF) 
program, the number of needy families receiving 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 on average 
each month in 2008.[Footnote 1] With the creation of TANF, welfare 
changed from a program entitling eligible families to monthly cash 
payments to a capped block grant that emphasized employment and work 
supports for most adult participants who receive such assistance. 
Since 1996, the decline in the number of families receiving cash 
assistance has been cited as evidence of welfare reform's success in 
reducing families' dependency on government benefits--a chief program 
goal. The extent of the decline, however, was deeper and faster--
especially in the late 1990s--than analysts and others had 
anticipated, and the number of low-income families who were eligible 
for TANF cash assistance but who did not participate in the program 
increased. 

During this period, poverty among all children initially fell, from 
about 21 percent in 1995 to about 16 percent in 2000--the lowest level 
since the late 1970s, according to U.S. Census data. Poverty for all 
children then rose thereafter until it reached 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. The recession that began in late 2007 deepened 
nationally in 2008, putting additional pressures on families living in 
poverty, especially families with children, who are particularly 
vulnerable. The growing recession also raised questions about how 
states, which provide cash assistance to families through TANF, would 
address any increases in need. 

In light of the decline in the number of low-income families who 
receive cash assistance, especially given the current recession, you 
asked us to examine what is known about the factors contributing to 
this decline and its implications. More specifically, you asked us to 
address the following questions: 

1. What factors have contributed to the decline in families receiving 
TANF cash assistance since the 1990s? 

2. Among eligible families, how do the characteristics of families who 
do not receive TANF cash assistance compare with families who do 
receive TANF cash assistance? 

3. How does the participation of eligible families in TANF affect the 
number of children in extreme poverty and poverty? 

4. In the current recession, what changes are states experiencing in 
their cash assistance caseloads and what changes, if any, have states 
made in their TANF-related spending to date to respond to any 
increases? 

To determine which factors contributed to the decline in caseload, we 
conducted a literature review of relevant research; interviewed TANF 
experts, as well as officials at the Department of Health and Human 
Services (HHS); reviewed TANF caseload and other data; and reviewed 
relevant federal laws and regulations. In conducting our literature 
review, we searched various databases for peer-reviewed journals and 
other publications; obtained recommendations from TANF researchers and 
policy experts, including HHS officials; and reviewed policy and 
research organization Web sites for relevant studies. We cited studies 
that at least two social scientists had reviewed and assessed for the 
adequacy of their methodologies. We also contracted with the Urban 
Institute to conduct analyses--using the Transfer Income Model, 
version 3, known as TRIM3--of changes in families' TANF eligibility 
and receipt of TANF cash assistance.[Footnote 2] These analyses helped 
us estimate the extent to which changes in eligibility rules under 
TANF affected the number of families eligible for cash assistance 
after welfare reform.[Footnote 3] For this analysis, we applied TANF 
eligibility rules for 2005, including rules established by 
states,[Footnote 4] to all families in 1995, which was the year prior 
to welfare reform under the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 (PRWORA).[Footnote 5] We also 
contacted state-based social service and other organizations in 
selected states regarding state TANF practices and policies that could 
affect a family's decision to participate in the program.[Footnote 6] 
To determine how TANF cash recipients compare to eligible 
nonrecipients and to estimate the impact of TANF cash assistance on 
child poverty and extreme poverty, we requested additional analyses 
using TRIM3. For our analysis of the characteristics of cash 
recipients and eligible nonrecipients, we used 2005 data, the most 
recent publicly available TRIM3 data when we conducted our work. In 
comparing the characteristics of cash recipients and eligible 
nonrecipients, differences are statistically significant at the 95 
percent confidence level unless otherwise noted. For our analysis of 
the impact of higher rates of TANF cash assistance on child poverty 
and extreme poverty, we compared data from 2005 to data from 1995, the 
year prior to welfare reform. To determine how the number of families 
receiving cash assistance changed and how states have changed their 
use of block grant funds in response to the most recent recession, we 
conducted semi-structured telephone interviews with TANF officials in 
21 states and obtained the most recent data available on their cash 
assistance caseloads. In analyzing caseload changes, we included 
families receiving cash assistance through both federally funded TANF 
block grants as well as through separate state programs (SSP), which 
use state funds that count towards qualifying for the federal TANF 
block grant and which are subject to certain federal TANF 
requirements. In addition, we obtained data on cash assistance 
caseloads that states funded through newer programs funded only by 
states--known as "solely state-funded programs"--which are not subject 
to federal work requirements or federal reporting. The 21 states we 
selected had a range of child poverty rates, unemployment rates, cash 
assistance caseloads, approaches to sanctions and monthly earnings 
limits, and geographic diversity. Collectively these states represent 
more than half the families receiving TANF cash assistance nationally. 
Our analysis focused on the period between June 2008--6 months after 
the official start of the current recession--and June 2009. We 
assessed the data we received from TRIM3 and from state agencies for 
data reliability. On the basis of these assessments, we concluded that 
the data were sufficiently reliable for the purposes of our report. We 
also provided our draft report to three external reviewers who have 
conducted research and published on welfare reform issues and whose 
work reflects a variety of approaches to this work. We incorporated 
their comments as appropriate. 

We conducted our work from November 2008 to February 2010 in 
accordance with all sections of GAO's Quality Assurance Framework that 
are relevant to our objectives. The framework requires that we plan 
and perform the engagement to obtain sufficient and appropriate 
evidence to meet our stated objectives and to discuss any limitations 
in our work. We believe that the information and data obtained, and 
the analysis conducted, provide a reasonable basis for any findings 
and conclusions in this product. 

Background: 

TANF Goals, Structure, and Requirements: 

The TANF program represented a significant departure from Aid to 
Families with Dependent Children (AFDC), the federal welfare program 
it replaced--in program goals, funding structure, and program 
requirements. Under the TANF block grant program, created by PRWORA 
and reauthorized in 2006,[Footnote 7] states receive federal funds to 
design and operate their own welfare programs within federal 
guidelines. In addition to providing cash benefits to eligible 
families, as AFDC did, the TANF program, instead, focuses on, among 
other things, ending the dependence of needy parents on government 
benefits by promoting job preparation, work, and marriage. HHS 
administers the TANF program, which provides states with up to about 
$16.5 billion each year in TANF block grant funds. To qualify to 
receive its portion of the available TANF funds, each state must 
contribute a specified level of its own funds, which is referred to as 
the state's maintenance of effort (MOE).[Footnote 8] In addition to 
providing cash assistance, states may use these TANF and MOE funds to 
finance a wide range of benefits, services, activities, or programs, 
such as child care and other activities that further TANF program 
goals. 

In addition to the new goals and funding structure of the TANF 
program, PRWORA established more stringent work requirements; credits 
to states for reducing caseloads; time limits; and restrictions on 
immigrant receipt of assistance.[Footnote 9] The act also established 
that eligible families were no longer entitled to receive cash 
assistance from states, as they had been under AFDC. States must 
involve a minimum percentage of their adult TANF and MOE cash 
assistance recipients in work activities for a required number of 
hours each week.[Footnote 10] Under PRWORA, states are allowed to 
reduce their required work participation rates by earning credit for 
reducing their cash assistance caseloads.[Footnote 11] All states have 
received such caseload reduction credits, thereby reducing the work 
participation rate they must meet. The caseload reduction credit also 
introduced an incentive for states to contain or reduce the number of 
families receiving cash assistance, since states that fail to meet the 
target work participation rates face financial penalties. To emphasize 
the temporary nature of assistance, states must restrict most families 
to a lifetime limit of 60 months of federally funded TANF cash 
assistance, although states can implement shorter time limits. 
[Footnote 12] A few states have chosen to terminate benefits only for 
the adults in the family unit; otherwise benefits are terminated for 
the entire family after the lifetime limit expires, although some 
states may continue serving families using state funds. PRWORA also 
limited the eligibility of immigrants for means-tested benefits--
including TANF--to those who have been in the country legally for 5 
years.[Footnote 13] While federal law generally limits TANF cash 
welfare to low-income families with either a child under the age of 18 
(or under the age of 19 if the child is in school) or a pregnant 
woman, states set their own eligibility limits and benefit levels for 
cash recipients. 

In designing and implementing their 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 use TANF and 
MOE funds to provide child care subsidies, education and training, and 
other services, for TANF cash recipients as well as other low-income 
families. In addition, TANF funds are also transferred to the Child 
Care and Development Fund (CCDF) to help fund subsidized child care 
and to the Social Services Block Grant (SSBG) program to help fund 
child welfare agencies. According to 2006 figures, TANF spending on 
support services and transfers exceeded spending on cash assistance. 
In fiscal year 2006, states spent approximately $10 billion on cash 
assistance and $11 billion on support services and transfers.[Footnote 
14] 

States also imposed financial consequences, or sanctions, on families 
that did not comply with TANF work or other requirements as well as 
implemented strategies to divert families from cash assistance. States 
have implemented partial sanctions, in which benefits are reduced, and 
full-family sanctions, in which benefits are ended for the entire 
family for a period of time or until compliance if an adult failed to 
meet TANF program requirements. Often states increase the severity of 
the sanction based on the number of times or the amount of time the 
individual is noncompliant. As of July 2008, nearly all states had 
policies ending cash benefits for the whole family or closing cases as 
their most severe sanction for an adult's noncompliance with work 
requirements.[Footnote 15] Many states have also implemented programs 
or strategies intended to divert families from cash assistance. One 
diversion strategy was to provide one-time, non-recurring benefits 
instead of monthly TANF cash assistance to families who face temporary 
hardships. Families who receive certain non-recurring short-term 
benefits are not required to participate in federally mandated work 
activities, and their receipt of these benefits does not count towards 
the family's 60-month lifetime limit. 

Cash assistance may be funded by the TANF block grant, MOE funds, or 
state-only funds, and the source of the money determines which TANF 
requirements apply to the recipient. With certain exceptions, 
recipients of cash assistance funded by the TANF block grant are 
subject to work participation requirements, the 60-month lifetime 
limit on receipt of cash assistance, and immigration restrictions. 
Some states provide cash assistance through SSP programs using MOE 
funds. Recipients of cash assistance funded through SSPs are subject 
to TANF work participation requirements, but not the time limits or 
immigrant restrictions. SSP recipients began to be counted in the 
calculation of the TANF work participation rate beginning in fiscal 
year 2007 as a result of TANF reauthorization. In response to the 
changes made in reauthorization, some states chose to provide cash 
assistance funded with the state's own funds that are not counted 
towards the MOE requirement. Recipients of assistance from these 
solely state-funded programs are not subject to TANF requirements. 

TANF and Recessions: 

To help states in the event of an economic downturn, PRWORA created a 
TANF contingency fund of up to $2 billion. To qualify for access to 
the contingency fund, states must meet a test of economic need. In 
addition, states may draw upon unused portions of their own federal 
TANF grants from previous years--often referred to as carry-over or 
reserve funds. Most recently, the American Recovery and Reinvestment 
Act of 2009 (ARRA) made an additional $5 billion available to states 
for fiscal years 2009 and 2010 through a new Emergency Contingency 
Fund.[Footnote 16] This fund reimburses states for 80 percent of their 
increased expenditures for cash assistance, provided there is also an 
increase in caseload; non-recurrent short term benefits; or subsidized 
employment in a quarter in fiscal year 2009 or fiscal year 2010, as 
compared with the comparable quarter in fiscal year 2007 or fiscal 
year 2008. 

Poverty Measurement in the United States: 

Poverty is measured in the United States using the federal poverty 
threshold, which is calculated annually by the U.S. Census Bureau. The 
threshold reflects estimates of the amount of money individuals and 
families of various sizes need to purchase goods and services deemed 
minimally adequate based on 1960s living standards, and is adjusted 
each year using the consumer price index. Persons or families having 
income below this amount are, for statistical purposes, considered to 
be living in poverty. The poverty threshold varies by family size and 
composition but does not vary by geographic location. Extreme or deep 
poverty is defined as income below 50 percent of the federal poverty 
threshold for a given family. For example, for a single parent with 
two children the poverty threshold in 2008 was $17,346; for that 
family type, the extreme poverty threshold was $8,673. Over the years, 
the official Census measure of poverty has been criticized for, among 
other things, not fully capturing the value of public supports and 
benefits, such as SNAP or the Earned Income Tax Credit (EITC), and for 
not considering health care and work-related costs.[Footnote 17] In 
1995, a National Academy of Sciences panel recommended that changes be 
made to the threshold to count noncash benefits, tax credits, and 
taxes; deduct certain expenses from income such as child care and 
transportation; and adjust income levels according to an area's cost 
of living. In recent years, such noncash benefits and supports have 
comprised larger portions of the assistance package for families with 
low incomes.[Footnote 18] In response to these issues, several pieces 
of legislation have been proposed to update the federal poverty 
measure, although none has been passed as of the date of this report. 

Poverty in the United States is also measured through the poverty 
guidelines, which are published annually by HHS and are used by some 
federal programs in determining the income eligibility of individuals 
and families for need-based assistance.[Footnote 19] The poverty 
guidelines are a simplified version of the Census poverty thresholds. 
Although the guidelines reflect variations in family size, the poverty 
guidelines--unlike the thresholds--do not reflect variations in the 
age group of the family members. Alaska and Hawaii have higher federal 
poverty guidelines than the rest of the country. 

Factors Contributing to the Decline in Cash Recipients Include 
Declines in the Number of Eligible Families and in Eligible Families' 
Participation: 

Since the 1990s, the decline in the number of families receiving cash 
assistance reflects declines not only in the number of eligible 
families but also in eligible families' participation in the program 
in response to TANF policies.[Footnote 20] From 1995 to 2005, the 
number of families who were eligible for cash assistance fell from 
about 5.69 million families on average each month under AFDC to about 
5.27 million families eligible on average each month under TANF--a 
decline of about 420,000 families eligible for cash assistance 
overall, according to our TRIM3 analysis.[Footnote 21] Factors that 
contributed to the decline in the number of families eligible for TANF 
cash assistance include families' higher incomes, which reflect TANF's 
focus on work and the strong economy of the 1990s, and changes to 
eligibility rules. However, a much larger portion of the caseload 
decline from 1995 to 2005 reflects sharp declines in eligible 
families' participation in the program. Research suggests that changes 
in participation resulted from, among other things, the dynamics of 
family decision-making in response to TANF policies, including 
mandatory work activities, state diversion strategies, time limits, 
and sanctions for non-compliance with work and other program 
requirements. 

Higher Employment Rates and Earnings Reduced the Number of Families 
Eligible for Cash Assistance More than Changes in Eligibility Rules: 

The requirement to engage in work activities in order to receive TANF 
cash benefits changed the culture of cash assistance, leading more low-
income families towards employment and raising their earned incomes. 
During this period of declining caseloads, labor force participation 
increased among single mothers, the population most affected by TANF. 
According to the Bureau of Labor Statistics (BLS), the labor-force 
participation of single mothers with children rose 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 PRWORA. In addition, as we noted in a 2005 report, most of the 
parents who left cash welfare found employment, and some families who 
left cash welfare were better off than they were on welfare.[Footnote 
22] However, our report also found that earnings were typically low, 
and many families who left cash welfare worked in unstable, low-wage 
jobs with few benefits and advancement opportunities. A more recent 
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 receiving TANF benefits. Although former recipients experienced 
some declines in their employment rates and income levels after 2001, 
both measures were nevertheless at the same level or higher in 2005 
than in 1999.[Footnote 23] 

Wage increases--due in part to increases in the minimum wage in 1996 
and 1997 as well as the 1990s expansions in the Earned Income Tax 
Credit (EITC)--contributed to the decline in the number of families 
who were eligible for TANF cash assistance. Wages for low-wage workers 
increased from 1994 to 2000. During these 6 years, the 10th percentile 
of the hourly wage rate distribution rose 12.4 percent, in contrast to 
declines in previous years, while the middle--the 50th percentile--
rose about 9 percent, based on numbers in a study by the Congressional 
Budget Office.[Footnote 24] Expansions in the EITC for low-income 
working families in effect provide a subsidy that increases the 
incentive to work. A number of studies found that the EITC increased 
labor-force participation among single women.[Footnote 25] According 
to one study, as well as experts we interviewed, the EITC also played 
an important role in the decline in the TANF caseload,[Footnote 26] 
because higher incomes made families ineligible. 

The strong economy of the late 1990s facilitated the movement towards 
work by creating jobs and reducing unemployment, thereby reducing the 
need for cash assistance.[Footnote 27] The annual U.S. unemployment 
rate for workers ages 16 and over declined from 5.6 percent in 1995-- 
before TANF was created--to 4.0 percent in 2000, according to BLS 
data. In the same period from 1995 to 2000, the annual unemployment 
rate for single women with children fell from 16.6 percent in 1995, to 
11.0 percent in 2000, according to BLS data. Starting in 2001, the 
unemployment rate for single women rose for several years, reaching 
15.1 percent in 2005. During this time, the number of TANF-eligible 
families increased, while the participation rate remained stable or 
fell. Researchers do not agree on the extent to which a strong economy 
relative to TANF work requirements and other changes affected TANF 
eligibility. Nevertheless several studies as well as experts we 
interviewed agreed that the strong economy played a major role in the 
decline, making it easier for single mothers and others to find jobs. 

Changes to welfare eligibility rules that occurred under PRWORA, such 
as time limits for receiving cash assistance and restrictions on 
eligibility for legal immigrants, also contributed to the decline in 
families' eligibility for cash assistance. However, we found that 
these kinds of rules changes--by themselves--accounted for a small 
portion of the caseload decline. Using the TRIM3 microsimulation 
model, we applied certain 2005 TANF rules to the families estimated as 
eligible for cash assistance in 1995 under AFDC.[Footnote 28] 

According to our TRIM3 analysis, had 2005 TANF eligibility-related 
rules on time limits and immigrant restrictions been in place in 1995, 
1.6 percent fewer families overall would have been eligible for cash 
assistance in 1995.[Footnote 29] We obtained similar results when we 
applied a more comprehensive range of eligibility-related rules to the 
1995 population. This more comprehensive analysis included--in 
addition to rules on time limits and immigrant restrictions--rules for 
two-parent families and teen parents; caps on benefits if a family's 
size increases; and financial eligibility rules.[Footnote 30] These 
rules varied in their impact on eligibility. Some rules contributed to 
increases in the number of families who would have been eligible, 
while other rules contributed to reductions in eligible families. 
[Footnote 31] In this analysis, had this wider range of 2005 TANF 
eligibility-related rules been in place in 1995, about 1 percent fewer 
families overall would have been eligible for cash assistance. 
Overall, although these analyses cannot definitively establish the 
portion of the caseload change from 1995 to 2005 that was due solely 
to a particular rule change, they suggest that the net effect was 
small.[Footnote 32] 

Following welfare reform, there was some concern that the number of 
eligible families would decline because of competition among states to 
make their policies more stringent and less attractive to low-income 
families--such as by lowering the maximum income a family could earn 
and still be eligible for TANF.[Footnote 33] However, from 1996 to 
2006, very few states reduced their maximum cash assistance benefits 
for a family of three--the money families receive if they have no 
other income. A 2002 review analyzed a range of state policy changes 
enacted by states, including policies on earned income and assets 
disregards, work activities, and sanctions. The study found little 
evidence that states competed to expand restrictive policies while 
also decreasing policies to enhance access. Instead, it found that 
states adopted both types of policies in varying combinations, leading 
to substantial variation among the states.[Footnote 34] 

Factors Affecting Eligible Families' Participation Played a Larger 
Role in the Decline than Changes in Families' Eligibility: 

While declines in the number of families eligible for cash assistance 
accounted for some of the caseload decline, the preponderance of the 
decline reflects changes in eligible families' participation in the 
program. From 1995 to 2005, the number of families eligible for cash 
assistance declined by about half a million families, but the decline 
in the share of eligible families participating in AFDC/TANF cash 
assistance has been dramatic--from about 84 percent of eligible 
families receiving cash assistance in 1995 (4.8 million) to about 40 
percent of eligible families in 2005 (2.13 million).[Footnote 35] In 
that period, the number of eligible families who did not participate 
in cash assistance climbed from an estimated 890,000 in 1995 under the 
AFDC entitlement program to about 3.14 million eligible families in 
2005 under the TANF cash assistance program, according to HHS data. 
[Footnote 36] The change in the participation rate from 1995 to 2005 
accounted for about 87 percent of the decline in cash recipients in 
that period.[Footnote 37] (See figure 1.) 

Figure 1: Families Estimated as Eligible for and Participating in Cash 
Assistance through the AFDC or TANF Cash Assistance Programs, Monthly 
Average, by Calendar Year, 1995 through 2005: 

[Refer to PDF for image: multiple line graph] 

Year: 1995; 
Eligible for AFDC or TANF Cash Assistance Programs: 5,690,000; 
Participating in AFDC or TANF Cash Assistance Programs: 4,800,000; 
Eligible, but not participating: 890,000. 

Year: 1996; 
Eligible for AFDC or TANF Cash Assistance Programs: 5,600,000; 
Participating in AFDC or TANF Cash Assistance Programs: 4,430,000; 
Eligible, but not participating: 1,170,000. 

Year: 1997; 
Eligible for AFDC or TANF Cash Assistance Programs: 5,400,000; 
Participating in AFDC or TANF Cash Assistance Programs: 3,700,000; 
Eligible, but not participating: 1,700,000. 

Year: 1998; 
Eligible for AFDC or TANF Cash Assistance Programs: 5,470,000; 
Participating in AFDC or TANF Cash Assistance Programs: 3,050,000; 
Eligible, but not participating: 2,465,000. 

Year: 1999; 
Eligible for AFDC or TANF Cash Assistance Programs: 5,070,000; 
Participating in AFDC or TANF Cash Assistance Programs: 2,650,000; 
Eligible, but not participating: 2,405,000. 

Year: 2000; 
Eligible for AFDC or TANF Cash Assistance Programs: 4,440,000; 
Participating in AFDC or TANF Cash Assistance Programs: 2,300,000; 
Eligible, but not participating: 1,140,000. 

Year: 2001; 
Eligible for AFDC or TANF Cash Assistance Programs: 4,560,000; 
Participating in AFDC or TANF Cash Assistance Programs: 2,190,000; 
Eligible, but not participating: 2,370,000. 

Year: 2002; 
Eligible for AFDC or TANF Cash Assistance Programs: 4,550,000; 
Participating in AFDC or TANF Cash Assistance Programs: 2,190,000; 
Eligible, but not participating: 2,360,000. 

Year: 2003; 
Eligible for AFDC or TANF Cash Assistance Programs: 4,770,000; 
Participating in AFDC or TANF Cash Assistance Programs: 2,180,000; 
Eligible, but not participating: 2,590,000. 

Year: 2004; 
Eligible for AFDC or TANF Cash Assistance Programs: 5,220,000; 
Participating in AFDC or TANF Cash Assistance Programs: 2,190,000; 
Eligible, but not participating: 3,030,000. 

Year: 2005; 
Eligible for AFDC or TANF Cash Assistance Programs: 5,270,000; 
Participating in AFDC or TANF Cash Assistance Programs: 2,130,000; 
Eligible, but not participating: 3,140,000. 

Source: GAO analysis of data from HHS's Indicators of Welfare 
Dependence, based on the TRIM3 model. 

[End of figure] 

Research suggests that the dynamics of family decision-making in 
relation to TANF work requirements, time limits, and other policies 
have played a key role in the decline in the number of families 
receiving cash assistance, and experts we interviewed agreed. The 
decline in participation reflected changes in families' decisions 
about whether to apply for TANF cash assistance in the first place, 
and, for those who receive cash assistance, whether to continue or 
leave the program, as well as responses to state policies such as 
sanctions and diversion. 

One of the most important factors affecting whether or not eligible 
families participate is the requirement to participate in work 
activities under TANF, according to research as well as the experts we 
interviewed.[Footnote 38] To receive cash benefits, TANF recipients 
must generally participate in work activities such as job search, job 
skills training, and employment for a minimum number of hours per 
week--with the hours varying depending on family type and the age of 
the youngest child. Such mandated work activities under TANF have been 
well studied, and according to a research synthesis conducted for HHS, 
multiple studies have provided compelling evidence that these work 
activities may cause declines in the caseload,[Footnote 39] as 
families choose not to apply rather than be expected to fulfill the 
work requirement or find it difficult to apply or continue 
participation in the program. As we noted in an earlier report, 
studies have shown that families who are eligible for TANF, including 
cash recipients, often have characteristics that make employment 
difficult, such as substance abuse, poor mental or physical health, 
disability, low educational attainment, limited work experience, 
limited English proficiency, low basic skills, or exposure to domestic 
violence. Many recipients have two or more of these characteristics, 
making it especially difficult for them to get and keep jobs.[Footnote 
40] 

Eligible families may also not participate in TANF because they view 
the TANF application and eligibility determination process as too 
burdensome and not worth the effort. With its focus on work and 
temporary assistance, the TANF application process can include pre- 
application interviews and assessments of employability. It can also 
include non-work-related requirements for school attendance, meetings 
and cooperation with other agencies, or fingerprinting. Some states 
also added questions to cash assistance applications after 1996 on 
assets, living situations, or household characteristics.[Footnote 41] 
According to a 2003 study of low-income families, non-applicants who 
visited a TANF office but chose not to apply cited as important 
reasons for their decisions the effort, or "hassle" to do so, as well 
as discouragement by a caseworker or poor treatment.[Footnote 42] Two 
researchers we interviewed also emphasized that implementation 
practices and procedures in local welfare offices affect 
participation. Several legal and social service organizations that we 
contacted in 21 states reported that, in their view, eligible families 
do not participate in TANF partly because of their difficulties with 
the application process. Additional difficulties they cited included 
documentation requirements; literacy and language barriers, which 
interfered with the completion of application forms; the number of 
required trips to the TANF office; poor treatment by caseworkers; and 
inconvenient business hours and/or locations of TANF offices. 

Eligible families may also not apply for TANF cash assistance--or 
complete the application process--because of state policies and 
practices on diversion. As part of their process for assessing 
eligibility for TANF cash assistance, nearly all states also have at 
least one type of strategy for diverting applicants from cash 
assistance, according to a 2008 report.[Footnote 43] Diversion 
strategies states use include requiring applicants to complete a job 
search, program orientation, or employment plan as a condition of 
eligibility. Many states provide a one-time payment to families to 
meet immediate needs--most often for applicants with a job or job 
offer.[Footnote 44] In return for one-time cash assistance, states 
usually initiate a period of TANF ineligibility that keeps families 
off the caseload. Some research indicates that families who received 
such one-time assistance are less likely to ever participate in TANF, 
even if they remain eligible for assistance.[Footnote 45] 

The 60-month lifetime limit for families established under PRWORA 
represented a fundamental change to cash assistance, and this time 
limit is generally viewed as contributing to the decline in families 
receiving cash assistance as well. Nationally, many TANF households--
about 47 percent in fiscal year 2006--are not subject to federal or 
state time limits because they are "child-only" cases in which a child 
lives with a relative or families in which the parent is not eligible 
for benefits. Time limits--which are shorter in some states than the 
federal limit--make some families ineligible for TANF, but such limits 
may also lead eligible families to consider alternatives if they think 
they will need TANF cash benefits in the future. According to 
researchers and other experts we interviewed, families may hold off on 
applying for TANF--and "bank their time" for when they may have 
greater needs. Research suggests that such banking of time occurs, 
especially among families with young children who may be concerned 
about how much time they would have left on welfare, and that it 
contributes to the decline in the use of cash assistance.[Footnote 46] 

An additional element is that the value of TANF cash benefits--which 
are determined by states--has fallen over time, which could affect 
families' participation. Our TRIM3 analysis estimates that average 
cash benefits under 2005 rules were 17 percent lower than they were 
under 1995 rules.[Footnote 47] This reduction occurred because cash 
benefit levels in many states have not been updated or kept pace with 
inflation--24 states had maximum cash benefits set at the same levels 
in 2006 as in 1996, and 6 states had maximum cash benefit levels that 
were lower than in 1996. Several legal and social service providers in 
21 states we contacted agreed that low benefit levels contributed to 
the non-participation of eligible families. In 2006, the maximum cash 
benefit levels among the states ranged from $170 per month to $723 per 
month for a family of three,[Footnote 48] while the median for all 
states was $396 per month for a family of three--less than a third of 
the poverty threshold for this type of family. 

Another factor that may affect family decisions is that the TANF cash 
welfare system is no longer the main "gateway" into other supports and 
services, as AFDC was. PRWORA severed the link between cash assistance 
and Medicaid benefits for health care. As a result, post-PRWORA, TANF 
recipient families are not automatically eligible to receive Medicaid 
benefits. Independent of TANF, low-income families who are not 
eligible for Medicaid can also apply for benefits under the State 
Children's Health Insurance Program, which was established in 1997 to 
cover additional low-income children. Child care subsidies were 
consolidated under PRWORA for low-income families, and families do not 
need TANF as a gateway to these subsidies. Although SNAP (formerly 
food stamps) was available to low-income families before TANF was 
created, federal legislation after PRWORA created options for states 
to simplify application and eligibility determination processes and 
increase enrollment in SNAP. Some researchers have suggested that 
families may decide to take up other supports and benefits in lieu of 
TANF, partly because they do not entail requirements such as regular 
visits by social workers and are not subject to time limits, among 
other reasons. 

A related issue is that some families may be less inclined to take up 
TANF cash assistance because participation in TANF could reduce their 
benefits from other programs, leaving them with little, if any, net 
increase in family resources. TANF cash assistance is counted as cash 
income by some other assistance programs. As a result, having a higher 
income because of TANF could reduce a family's benefits from SNAP or 
increase the amount the family must pay for subsidized child care or 
housing.[Footnote 49] Most families who receive TANF benefits would 
see increases in their annual net income. However, the greater the 
number of other supports a TANF family receives, the smaller the 
relative increase in annual net income that they gain from 
participating in TANF. According to our estimates--using Illinois, the 
state with the median maximum TANF cash benefit, as an example--if a 
single parent with two children received child support; tax credits; 
SNAP benefits; benefits under the Special Supplemental Nutrition 
Program for Women, Infants, and Children (WIC), a federal nutritional 
program; and a housing subsidy in addition to having monthly earnings, 
the family would have an overall monthly net income of $1,743-or an 
annual net income of about $20,916.[Footnote 50] If the family also 
received TANF cash benefits of $185 monthly, adjustments to the other 
benefits they received would result in a $53 net increase. (See figure 
2.) 

Figure 2: Estimated Impact of Monthly TANF Cash Assistance Receipt on 
the Net Income of a Working Parent Who Receives Other Supports: 

[Refer to PDF for image: horizontal bar graph] 

Single parent with two children, Without TANF: 
Monthly earnings: $632; 
Child support payment income: $100; 
Net taxes (including federal EITC and tax credits): $213; 
Other non-cash benefits (SNAP, WIC, and Housing Subsidy): $798: 
- SNAP: $263; 
- WIC: $39; 
- Housing subsidy: $496; 
Monthly TANF cash assistance payments: 0; 
Total: $1,743. 

Single parent with two children, With TANF: 
Monthly earnings: $632; 
Child support payment income: $50; 
Net taxes (including federal EITC and tax credits): $213; 
Other non-cash benefits (SNAP, WIC, and Housing Subsidy): $716: 
- SNAP: $222; 
- WIC: $39; 
- Housing subsidy: $455; 
Monthly TANF cash assistance payments: $185; 
Total: $1,796. 

Source: GAO analysis of TRIM3 microsimulation model data. 

Note: Each family was assumed to have one working adult, earning $632 
per month. This is the median earnings of TANF families containing one 
adult and two children, according to our analysis of 2005 
participants. It is also the amount one would earn by working 18 hours 
per week at the Illinois minimum wage of $8 per hour. 

[End of figure] 

Although few families receive as many benefits and supports as in this 
example, we found in another analysis we conducted using TRIM3 that an 
estimated 19 percent of families receiving four types of supports--in 
addition to TANF cash benefits--would see their net income rise by the 
full amount that they gained from participating in TANF, but 17 
percent of these families would actually lose annual net income. 
[Footnote 51] Whether families gain or lose net income may reflect the 
choice of supports, families' demographics and income, relevant state 
rules, and level of benefits. 

Finally, according to some studies as well as researchers we 
interviewed, 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.[Footnote 52] 
Eligible families who receive cash assistance but do not comply with 
TANF program requirements may face financial consequences, or 
sanctions.[Footnote 53] Under state sanction policies, families may 
lose all or part of their TANF cash benefits, and possibly other 
public benefits as well, if they do not comply with TANF's work and 
other requirements.[Footnote 54] In addition to being sanctioned for 
noncompliance with work activities, TANF families may also be 
sanctioned for failing to comply with behavioral requirements, such as 
obtaining drug treatment, cooperating with establishing paternity, or 
ensuring that children are immunized and attend school. In one study, 
TANF recipients who reported having been sanctioned cited missing an 
appointment or failing to file required paperwork as the most common 
reasons for their loss of benefits.[Footnote 55] Such work and 
behavioral requirements may be particularly challenging for families 
with physical or mental impairments.[Footnote 56] As we noted in an 
earlier GAO report, impairments were relatively common among TANF 
recipients, and, while recipients with impairments may sometimes be 
exempted from work requirements and time limits, they may be at risk 
of having their benefits reduced or terminated through sanctions. 
[Footnote 57] 

Overall, according to researchers and other experts we interviewed, 
there is a general consensus that these factors--including TANF 
policies, the strong economy, and family decision-making processes-- 
played a role in contributing to the decline in the number of families 
receiving TANF cash assistance. However, there is not agreement on the 
relative weight of each factor. This is partly because many policy 
changes were implemented around the same time period that TANF was 
created--such as increases in the minimum wage, expansions of the 
EITC, and the de-linking of Medicaid from cash welfare--and are 
difficult to isolate from each other and from the economic climate. It 
is also because several of these factors have moved in the same 
direction--such as TANF, with its emphasis on work, initially being 
implemented during a strong economy when more low-wage jobs were 
available--so it is hard to disentangle their effects.[Footnote 58] 
Furthermore, as we have discussed, TANF policies--including mandatory 
work activities, state diversion strategies, time limits, and 
sanctions for non-compliance with work and other program requirements--
can influence participation, including family decisions about whether 
to apply, remain on cash assistance, or leave. 

Eligible Nonparticipating Families Generally Had Higher Incomes Than 
TANF Recipients, but a Portion of Eligible Nonparticipants Had Very 
Low Incomes: 

Although they are similar in many ways, families participating in TANF 
and eligible nonparticipating families differed in their incomes, 
education, and use of other public supports in 2005, according to our 
TRIM3 analysis.[Footnote 59] Eligible families who did not participate 
in TANF generally had relatively higher incomes and higher education 
levels than TANF families. However, among eligible nonparticipants, 11 
percent of nonparticipating families did not work or receive 
Supplemental Security Income (SSI)--a cash assistance program for 
people with disabilities. This subgroup of nonparticipating families 
also had very low incomes compared with other nonparticipants, and a 
larger portion of them received SNAP and subsidized housing. 

Although Similar in Many Ways, Participating and Eligible 
Nonparticipating Families Differed in Income, Education, and Use of 
Other Public Supports: 

According to our TRIM3 analysis, an estimated 6.6 million families 
were eligible for TANF cash assistance for at least 1 month in 2005. 
Of those families, 2.66 million, or 40 percent, were estimated to have 
ever received TANF cash assistance during the year.[Footnote 60] (See 
figure 3.) 

Figure 3: TANF Cash Assistance: Estimates of Participating and 
Eligible Nonparticipating Families in 2005, Annual Basis: 

[Refer to PDF for image: pie-chart] 

Participants: 40% (2.66 million); 
Eligible nonparticipants: 60% (3.97 million). 

Source: GAO analysis of TRIM3 microsimulation model data. 

Note: The estimates for the number of participants and eligible 
nonparticipants in this analysis are different from those used in 
figure 1 (which shows trends from 1995-2005 in participating and 
eligible nonparticipating families) because HHS estimates in the 2008 
Indicators of Welfare Dependence reflect estimates for an average 
month, by calendar year and include estimates for family units in the 
U.S. territories and units that consist solely of a pregnant woman, 
while our eligibility estimates reflect annual estimates and do not 
include these units. Both estimates are based on the TRIM3 
microsimulation. 

[End of figure] 

While all families who were eligible to receive TANF cash assistance 
in 2005 had low incomes, about the same proportions of both 
participants and eligible nonparticipants (44 percent compared to 41 
percent) were headed by an adult without earnings,[Footnote 61] and 
hardships such as not having enough to eat were common among families 
in poverty.[Footnote 62] 

However, eligible families who did not participate in TANF cash 
assistance had relatively higher incomes than TANF recipients. 
[Footnote 63] Overall, nonparticipating eligible families had median 
incomes about $5,000 higher than TANF families. According to our 
estimates, in 2005 the median annual income for eligible 
nonparticipating families was roughly $15,000 compared to $9,600 
annually for families receiving TANF. (See figure 4.) 

Figure 4: Estimated Median Annual Incomes of TANF-Eligible Families in 
2005: 

[Refer to PDF for image: horizontal bar graph] 

Families participating in TANF: 
Median annual income: $9,606. 

Eligible families not participating in TANF: 
Median annual income: $15,000. 

Source: GAO analysis of TRIM3 microsimulation model data. 

Note: Income is defined here as all gross cash income except for means-
tested benefits. In order to be consistent with the Census Bureau's 
standard poverty methodology, each family's income is calculated based 
on all related persons living in the household. Consequently, both the 
primary family and the related subfamily are considered to have the 
same income. This is not the case for determining TANF eligibility, 
however. For example, a 20-year-old parent living with her parents 
would be considered as having the same income as her parents for the 
purposes of this figure. However, for purposes of TANF eligibility, 
only the 20-year-old parent's income is considered. 

[End of figure] 

Eligible families who did not participate in the TANF cash assistance 
program also had higher rates of full-time employment (44 percent) 
compared to TANF cash recipients (33 percent) and lower rates of work- 
limiting disabilities (11 percent) compared to TANF recipients (18 
percent). While approximately the same proportion of both groups--less 
than 10 percent--had income from an unmarried partner, the median 
amount contributed by that partner was considerably greater in the 
eligible nonparticipating families. 

Eligible families who did not participate in TANF generally had higher 
education levels than TANF families. Eligible adults not receiving 
TANF were more likely to have graduated from high school than adults 
receiving TANF cash assistance (40 percent compared to 33 percent). A 
larger proportion of nonparticipating families also had some education 
beyond high school (36 percent compared to 32 percent). 

In addition, eligible families who did not participate in TANF cash 
assistance were much less likely to receive SNAP benefits than TANF 
cash recipients, and eligible nonparticipants were also less likely to 
receive subsidized housing and child care subsidies. According to our 
estimates, 59 percent of eligible families who did not participate in 
TANF received SNAP in 2005 compared to 88 percent of TANF families. 
[Footnote 64] 

Similarly, our estimates show that 13 percent of eligible families not 
participating in TANF received subsidized housing compared to 22 
percent of TANF participants. The differences in the two groups' 
receipt of subsidized child care were not as large, with 8 percent of 
eligible families not participating in TANF receiving child care 
subsidized by CCDF compared to 11 percent of TANF participants. 
[Footnote 65] (See figure 5.) 

Figure 5: Receipt of Other Public Supports among Estimated TANF- 
Eligible Families in 2005, Annual Basis: 

[Refer to PDF for image: multiple vertical bar graph] 

SNAP: 
Families participating in TANF: 88%; 
Eligible for TANF, but not participating in TANF: 59%. 

Subsidized housing: 
Families participating in TANF: 22%; 
Eligible for TANF, but not participating in TANF: 13%. 

CCDF-subsidized child care: 
Families participating in TANF: 11%; 
Eligible for TANF, but not participating in TANF: 8%. 

SSI: 
Families participating in TANF: 22%; 
Eligible for TANF, but not participating in TANF: 18%. 

Any one of these public supports: 
Families participating in TANF: 91%; 
Eligible for TANF, but not participating in TANF: 66%. 

Source: GAO analysis of TRIM3 microsimulation model data. 

Note: In this figure, the SSI column reflects the SSI participation of 
individuals in the family unit. While there is no federal prohibition 
against receiving both TANF and SSI, individuals who receive SSI do 
not qualify for TANF in nearly all states. Other members who are not 
receiving SSI would continue to be eligible for TANF. Only child care 
subsidies funded by the Child Care and Development Fund are captured 
in these figures, and SSI is the only cash benefit besides TANF that 
is simulated by TRIM3. 

[End of figure] 

According to our TRIM3 analyses, a greater proportion of eligible 
nonparticipating families were White and a smaller proportion were 
Black than for TANF cash recipients, while there were not significant 
differences with other racial groups. (See figure 6.) 

Figure 6: Race and Ethnicity of Estimated TANF-Eligible Families in 
2005, Annual Basis: 

[Refer to PDF for image: multiple vertical bar graph] 

Race of head of household: White; 
Families participating in TANF: 35%; 
Eligible for TANF, but not participating: 46%. 

Race of head of household: Black; 
Families participating in TANF: 32%; 
Eligible for TANF, but not participating: 23%. 

Race of head of household: Asian[A]; 
Families participating in TANF: 3%; 
Eligible for TANF, but not participating: 3%. 

Race of head of household: Hispanic[A]; 
Families participating in TANF: 26%; 
Eligible for TANF, but not participating: 24%. 

Race of head of household: Other[A]; 
Families participating in TANF: 3%; 
Eligible for TANF, but not participating: 4%. 

Source: GAO analysis of TRIM3 microsimulation model data. 

[A] Values for TANF participants and nonparticipants are not 
statistically different from each other at the 95% confidence level. 

[End of figure] 

A greater proportion of eligible families who did not receive TANF in 
2005 were married than TANF families (27 percent compared to 16 
percent) and a smaller proportion of eligible non-recipients were 
headed by a single mother (50 percent compared to 61 percent), 
according to our analysis. (See figure 7.) 

Figure 7: Family Structure of Estimated TANF-Eligible Families in 
2005, Annual Basis: 

[Refer to PDF for image: multiple vertical bar graph] 

Family type: Single mother; 
Families participating in TANF: 61%; 
Eligible for TANF, but not participating: 50%. 

Family type: Married; 
Families participating in TANF: 16%; 
Eligible for TANF, but not participating: 27%. 

Family type: No parents[A] (Guardians only); 
Families participating in TANF: 13%; 
Eligible for TANF, but not participating: 13%. 

Family type: Single father[A]; 
Families participating in TANF: 7%; 
Eligible for TANF, but not participating: 7%. 

Family type: Single teen parent[A]; 
Families participating in TANF: 3%; 
Eligible for TANF, but not participating: 3%. 

Source: GAO analysis of TRIM3 microsimulation model data. 

[A] Values for TANF participants and nonparticipants are not 
statistically significantly different from each other. 

[End of figure] 

Among Eligible Nonparticipants in 2005, a Portion of Families Did Not 
Work and Had Very Low Incomes, but Received Public Supports: 

While many eligible families who did not participate in TANF had 
higher incomes than families on TANF, a portion of nonparticipating 
families had very low incomes. According to our estimates, of the 
nearly 4 million families who were eligible for TANF cash assistance 
for 1 or more months in 2005 but did not participate that year, 
732,000 were neither working nor receiving Supplemental Security 
Income (SSI), a cash assistance program for people with disabilities. 
This subgroup of more disadvantaged nonparticipants accounted for 11 
percent of all families who were eligible for TANF cash assistance in 
2005, according to our TRIM3 analysis.[Footnote 66] (See figure 8.) 

Figure 8: Estimated Eligible Nonparticipating Families as a Share of 
Total Eligible Families in 2005, Annual Basis: 

[Refer to PDF for image: pie-chart] 

Participating in TANF: 40% (2.7 million); 
Not participating in TANF, but employed or receiving SSI: 49% (3.2 
million); 
Not participating in TANF, not employed, and not receiving SSI: 11% 
(732,000). 

Source: GAO analysis of TRIM3 microsimulation model data. 

Note: In this figure, SSI receipt refers to the SSI participation of 
individuals in the family unit. While there is no federal prohibition 
against receiving both TANF and SSI, individuals who receive SSI do 
not qualify for TANF in nearly all states. Other family members who 
are not receiving SSI would continue to be eligible for TANF. SSI is 
the only cash benefit besides TANF that is simulated by TRIM3. 

[End of figure] 

This subgroup of nonparticipating eligible families also had very low 
incomes.[Footnote 67] The median annual income for eligible families 
who were not working or receiving TANF or SSI was $7,020--compared to 
$16,316 for other eligible nonparticipating families--an amount equal 
to about 45 percent of the federal poverty threshold for a family 
consisting of one adult and two children. The median income for this 
subgroup of eligible nonparticipants was also lower than the median 
income for TANF cash recipients. 

Twelve percent of this subgroup of families was also headed by a 
parent who reported having a work-limiting disability--similar to 
other nonparticipants.[Footnote 68] Families in this subgroup also had 
low levels of education, with 70 percent having a high school 
education or less compared with 63 percent for other nonparticipants. 

This subgroup of eligible nonparticipating families who were not 
working and not receiving SSI were slightly more likely than other 
nonparticipants to be receiving SNAP and public housing, with 63 
percent receiving SNAP and 18 percent receiving subsidized public 
housing. However, they were less likely than other nonparticipants to 
receive child care subsidies. They were similar to other 
nonparticipants in that they generally received public supports at 
lower rates than TANF families. (See figure 9.) 

Figure 9: Receipt of Other Public Supports among Estimated TANF- 
Eligible Families in 2005, by Eligible Family Type, Annual Basis: 

[Refer to PDF for image: multiple vertical bar graph] 

Percent of families participating: 

SNAP: 
Families participating in TANF: 88%; 
Eligible for TANF, but not participating in TANF: 58%; 
Not participating in TANF, not employed, and not receiving SSI: 63%. 

Subsidized housing: 
Families participating in TANF: 22%; 
Eligible for TANF, but not participating in TANF: 12%; 
Not participating in TANF, not employed, and not receiving SSI: 18%. 

CCDF-subsidized child care: 
Families participating in TANF: 11%; 
Eligible for TANF, but not participating in TANF: 9%; 
Not participating in TANF, not employed, and not receiving SSI: 4%. 

SSI: 
Families participating in TANF: 22%; 
Eligible for TANF, but not participating in TANF: 22%; 
Not participating in TANF, not employed, and not receiving SSI: n/a. 

Any one of these public supports: 
Families participating in TANF: 91%; 
Eligible for TANF, but not participating in TANF: 66%; 
Not participating in TANF, not employed, and not receiving SSI: 66%. 

Source: GAO analysis of TRIM3 microsimulation model data. 

Note: In this figure, the SSI column reflects the SSI participation of 
individuals in the family unit. While there is no federal prohibition 
against receiving both TANF and SSI, individuals who receive SSI do 
not qualify for TANF in nearly all states. Other members who are not 
receiving SSI would continue to be eligible for TANF. Only child care 
subsidies funded by the Child Care and Development Fund are captured 
in these figures, and SSI is the only cash benefit besides TANF that 
is simulated by TRIM3. 

[End of figure] 

Increased TANF Participation Would Reduce the Number of Children in 
Extreme Poverty, but Would Not Significantly Change the Number in 
Poverty: 

Fewer Children Would Be in Extreme Poverty If TANF Participation 
Increased: 

Increased TANF participation would reduce the number of children in 
extreme poverty--those below half the poverty threshold--according to 
our analyses.[Footnote 69] According to our TRIM3 analysis, an 
estimated 4.8 million children were in extreme poverty for at least 
one month in 2005.[Footnote 70] 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--800,000 
fewer children would have been in extreme poverty.[Footnote 71] This 
higher participation would reduce the share of children in extreme 
poverty by close to 17 percent because the gain in income from TANF 
benefits would raise some families' incomes above the extreme poverty 
threshold.[Footnote 72] The median income for families with children 
in extreme poverty in 2005 was $5,400. If TANF participation were 
higher, families in extreme poverty would have median incomes of 
$5,964--10 percent higher on average.[Footnote 73] For those families 
who would gain TANF cash assistance at the 1995 participation rate, 
the average increase in TANF annual income is estimated to be $2,554 
per family. 

According to our estimates--using Illinois, the state with the median 
maximum TANF benefit, as an example--a TANF-eligible family in extreme 
poverty, consisting of a working single parent with two children that 
applied for and received cash assistance, would gain enough in TANF 
benefits to be just above the extreme poverty threshold.[Footnote 74] 
In this scenario, this family has estimated monthly earnings of $346, 
which is roughly half the median for families participating in TANF. 
[Footnote 75] Before receiving TANF cash assistance, this family has 
an estimated income of $446 per month, including child support, which 
would provide an income equal to 34 percent of the poverty threshold. 
After receiving TANF, this family's income would increase to $676 per 
month-equal to 52 percent of poverty.[Footnote 76] A family with one 
child would similarly benefit. (See figure 10.) 

Figure 10: Estimated Impact of Monthly TANF Cash Assistance Receipt on 
a Family in Extreme Poverty in Illinois in 2005: A Working Single 
Parent with One or Two Children: 

[Refer to PDF for image: horizontal bar graph] 

Single parent with one child: 

Without TANF: 
Monthly earnings: $346; 
Child support payment income: $100; 
Monthly TANF cash assistance: None; 
Extreme poverty threshold: $561; 
Gap: $115. 

With TANF: 
Monthly earnings: $346; 
Child support payment income: $50; 
Monthly TANF cash assistance: $176; 
Extreme poverty threshold: $561; 
Surplus: $11. 

Single parent with two children: 

Without TANF: 
Monthly earnings: $346; 
Child support payment income: $100; 
Monthly TANF cash assistance: None; 
Extreme poverty threshold: $656; 
Gap: $210. 

With TANF: 
Monthly earnings: $346; 
Child support payment income: $50; 
Monthly TANF cash assistance: $280; 
Extreme poverty threshold: $656; 
Surplus: $20. 

Source: GAO analysis of TRIM3 microsimulation model data. 

Note: The $346 in estimated monthly earnings is roughly half the 
median for families receiving TANF cash assistance. 

[End of figure] 

However, some families would remain in extreme poverty even with TANF 
benefits--those with no earned income or with low earned incomes who 
receive the maximum cash benefit in their state. For example, in 
Illinois, a single parent with two children who had no earned income 
would receive $396 per month in TANF benefits--an amount that would be 
$260 below the extreme poverty threshold for that type of family. 

If More Eligible Families Participated in TANF, the Number of Children 
in Poverty Would Not Significantly Change: 

Although the median income of eligible families would rise if TANF 
participation increased, neither the number of children in poverty nor 
the poverty rate would significantly change if families who were 
eligible for TANF cash assistance in 2005 participated at the higher 
1995 rate.[Footnote 77] Nearly all of the estimated 3.3 million 
families in our TRIM3 analysis who would gain TANF benefits at the 
higher 1995 participation rate would experience an increase in their 
annual net income. However, these benefits would not be enough to lift 
a significant portion of them above the poverty threshold.[Footnote 78] 

One reason for this is that many children in poverty are not eligible 
for TANF, since the majority of states set their TANF eligibility 
standards at less than half of the federal poverty guidelines. 
[Footnote 79] States have the flexibility to determine how high or low 
to set their eligibility standards relative to the federal poverty 
guidelines. For example, in Alabama, a family of three must have 
earnings below $269 per month to be eligible for TANF cash assistance--
an income that represents about 19 percent of the poverty guideline 
for this family size in 2006. Alabama has the lowest income 
eligibility threshold.[Footnote 80] In 2006, 56 percent of children in 
poverty lived in states that set their eligibility standards for TANF 
cash assistance below half of the federal poverty guidelines. Because 
of this, increasing TANF participation would not affect child poverty 
among children in states with very low eligibility standards. 

Another reason is that TANF benefits are typically too low to raise 
children in poverty above the federal poverty threshold. These 
benefits range from $170 per month in Mississippi to $723 per month in 
California for a family of three.[Footnote 81] The median income for 
all families in poverty in 2005 was approximately $10,500. If TANF 
participation were higher, families in poverty would have median 
incomes of about $11,100. This income is below the federal poverty 
threshold for a family of three.[Footnote 82] According to our 
estimates, TANF-eligible families consisting of one working adult and 
one or two children in Illinois--the state that has the median maximum 
TANF benefit--would still be in poverty after receiving TANF cash 
assistance.[Footnote 83] In this example, prior to participating in 
TANF, the income of the family with one child would fall $390 short of 
the federal poverty threshold and the income of the family with two 
children would fall $579 below poverty. After receiving TANF cash 
assistance, the incomes of both types of families would rise, but not 
enough to reach the poverty threshold. (See figure 11.) 

Figure 11: Estimated Impact of Monthly TANF Cash Assistance Receipt on 
a Family in Poverty in Illinois in 2005: A Working Single Parent with 
One or Two Children: 

[Refer to PDF for image: horizontal bar graph] 

Single parent with one child: 

Without TANF: 
Monthly earnings: $632; 
Child support payment income: $100; 
Monthly TANF cash assistance: None; 
Extreme poverty threshold: $1,122; 
Gap: $390. 

With TANF: 
Monthly earnings: $632; 
Child support payment income: $50; 
Monthly TANF cash assistance: $81; 
Extreme poverty threshold: $561; 
Gap: $359. 

Single parent with two children: 

Without TANF: 
Monthly earnings: $632; 
Child support payment income: $100; 
Monthly TANF cash assistance: None; 
Extreme poverty threshold: $1,311; 
Gap: $579. 

With TANF: 
Monthly earnings: $632; 
Child support payment income: $50; 
Monthly TANF cash assistance: $185; 
Extreme poverty threshold: $1,311; 
Gap: $444. 

Source: GAO analysis of TRIM3 microsimulation model data. 

[End of figure] 

Finally, higher TANF participation would not significantly affect 
child poverty because some TANF families already have incomes above 
the federal poverty threshold. As of 2005, seven states have policies 
that allow a family of three with an income just above the federal 
poverty threshold to retain their TANF eligibility for at least 2 
months. These states are Alaska, California, Connecticut, Delaware, 
Hawaii, Texas, and Virginia. In these states higher TANF participation 
could result in more families above poverty receiving benefits, which 
would not result in a reduction of the poverty rate. Twenty-eight 
percent of all children in poverty and 35 percent of children 
receiving cash assistance lived in these states in 2005. 

In the Current Recession, Changes in Cash Assistance Caseloads Varied 
Widely in States We Surveyed While Few States Reduced Spending for 
Family and/or Work Supports: 

TANF and Solely State-Funded Cash Assistance Caseloads Increased to 
Varying Degrees in the Majority of States We Surveyed: 

Between June 2008--6 months after the start of the current recession-- 
and June 2009, the number of families receiving TANF cash assistance 
increased in 12 of the 21 states we reviewed, decreased in 6 states 
and remained relatively unchanged in 3 states, according to state-
provided data.[Footnote 84] The magnitude of these caseload changes, 
however, varied widely across states. For instance, over the same time 
period, the number of families receiving TANF cash assistance 
increased by 22 percent in Nevada and decreased by 9 percent in Texas. 
(See figure 12.) 

Figure 12: Percent Change in the Number of Families Receiving TANF 
Cash Assistance, by State, June 2008 through June 2009: 

[Refer to PDF for image: map of the United States] 

Arizona: 7% increase; 
California: 12% increase; 
Colorado: 15% increase; 
District of Columbia: 19% increase; 
Florida: 14% increase; 
Georgia: 3% decrease; 
Illinois: 2% increase; 
Iowa: 7% increase; 
Massachusetts: 3% decrease; 
Michigan: 3% decrease; 
Mississippi: 1% decrease; 
Nevada: 22% increase; 
New Hampshire: 38% increase; 
New Jersey: 3% decrease; 
New York: 1% decrease; 
North Carolina: 10% increase; 
Ohio: 17% increase; 
Pennsylvania: 1% increase; 
Rhode Island: 10% decrease; 
Texas: 9% decrease; 
Washington: 18% increase; 
Other states were not surveyed. 

Source: GAO analysis of state-provided data. 

[End of figure] 

During the current recession, more of the states we surveyed[Footnote 
85] saw increases in the number of two-parent families receiving cash 
assistance than in the number of single-parent families or child-only 
cases.[Footnote 86] Between June 2008 and June 2009, the number of two-
parent families receiving cash assistance increased in 17 of the 
states we surveyed, while the number of single-parent families 
increased in 15 states and the number of child-only cases increased in 
12 states. The median percent change in the number of two-parent 
families receiving cash assistance was an increase of 27 percent--far 
more than for other types of eligible families. While the number of 
two-parent families as a portion of all families receiving assistance 
was small, the increase in this population of cash assistance 
recipients is notable because they are the least common type of 
recipient group. Further, several state officials and representatives 
of social service organizations noted the increase in two-parent 
families associated with the current recession, which, according to 
unemployment data, has had a greater impact on men than women and 
might result in the need for two-parent families to seek assistance. 

While many of these two-parent families received assistance through 
their state's TANF program, about 20 percent of these families 
received assistance through their state's solely state-funded 
programs. Most of these programs also grew to varying degrees during 
the recession. Of the states we contacted, 13 maintained solely state- 
funded programs during the time period we examined and 9 of these 
experienced caseload increases between June 2008 and June 2009. These 
increases ranged from a 2 percent increase in the District of Columbia 
to a 10-fold increase in Colorado.[Footnote 87] Some state officials 
we surveyed explained that their assessment of their ability to meet 
federal work participation rates determined which families would be 
served through the solely state-funded program.[Footnote 88] 
Specifically, officials in the 13 states with solely state-funded 
programs explained that these programs, in whole or part, served two- 
parent families because the state was concerned that it would not be 
able to meet the federally established 90 percent work participation 
rate for two-parent families. In seven of the states with a solely 
state-funded program, the state's entire two-parent family caseload 
was served through this program. In a few states, solely state-funded 
programs also served families with disabilities who similarly may have 
been unable to meet mandatory work participation rates, particularly 
requirements for a minimum number of hours in a work activity, 
according to state officials. 

In order to understand more fully the extent to which families are 
receiving cash assistance in the current recession, including those 
families who are in solely state-funded programs in caseloads provides 
a more comprehensive picture of these changes.[Footnote 89] Because 
these programs are funded only by states and are not counted toward 
state maintenance-of-effort requirements, HHS lacks authority to 
require that their caseload data be reported to HHS, according to HHS 
officials. In some states, including families from these solely state-
funded programs in the state's total cash assistance caseload provided 
a more accurate picture of increases or decreases in states' programs 
in the current recession.[Footnote 90] For instance, in Colorado, the 
number of families receiving TANF cash assistance increased by 15 
percent. However, the solely state-funded program experienced a large 
amount of growth, and overall the state's cash assistance caseload 
increased by more than 33 percent. In Rhode Island, the number of 
families receiving TANF cash assistance decreased by 10 percent. 
However, in October 2008 the state discontinued benefits to children 
it had been serving through the solely state-funded program whose 
parents had received 5 years of assistance, so overall the state's 
cash assistance caseload decreased by more than 20 percent. In other 
states, including the solely state-funded caseload reveals a more 
modest degree of change than the TANF caseload might indicate. For 
example, New Hampshire eliminated part of its solely state-funded 
program due to budget concerns and moved families receiving benefits 
into the TANF program. As a result, the number of families receiving 
TANF cash assistance increased by almost 38 percent, while overall the 
state's cash assistance caseload increased by a substantial, but more 
modest, 23 percent. (See figure 13.) 

Figure 13: For States with a Solely State-Funded Program, Percent 
Change in the Number of Families Receiving Cash Assistance from TANF 
and from TANF and Solely State-Funded Programs Combined, June 2008 
through June 2009: 

[Refer to PDF for image: multiple vertical bar graph] 

Percentage of families: 

State: Colorado; 
TANF and SSP: 14.9%; 
TANF, SSP, and SSF: 33.3%. 

State: District of Columbia; 
TANF and SSP: 19.3%; 
TANF, SSP, and SSF: 8.4%. 

State: Georgia; 
TANF and SSP: -2.5%; 
TANF, SSP, and SSF: -2.5%. 

State: Illinois; 
TANF and SSP: 1.6%; 
TANF, SSP, and SSF: 3.8%. 

State: Massachusetts; 
TANF and SSP: -2.9%; 
TANF, SSP, and SSF: -1.9%. 

State: Michigan; 
TANF and SSP: -3.0%; 
TANF, SSP, and SSF: -1.7%. 

State: Mississippi; 
TANF and SSP: -0.8%; 
TANF, SSP, and SSF: -0.8%. 

State: New Hampshire; 
TANF and SSP: 37.9%; 
TANF, SSP, and SSF: 23.4%. 

State: New Jersey; 
TANF and SSP: -2.7%; 
TANF, SSP, and SSF: -2.6%. 

State: New York; 
TANF and SSP: -1.1%; 
TANF, SSP, and SSF: -0.3%. 

State: Pennsylvania; 
TANF and SSP: 0.8%; 
TANF, SSP, and SSF: 0.7%. 

State: Rhode Island; 
TANF and SSP: -10.4%; 
TANF, SSP, and SSF: -21.3%. 

State: Texas; 
TANF and SSP: -8.9%; 
TANF, SSP, and SSF: =8.5%. 

Source: GAO analysis of state-provided data. 

[End of figure] 

In the time period we examined, there was no clear association between 
the change in the number of families receiving cash assistance in a 
state and either the unemployment rate or the change in unemployment 
rate in that state. (See table 1.) For instance, Illinois, the 
District of Columbia, Florida, and Georgia all had unemployment rates 
of between 10 and 11 percent in June 2009. However, caseloads 
increased 4 percentage points in Illinois, 8 percentage points in the 
District of Columbia, and 14 percentage points in Florida, and 
decreased 3 percentage points in Georgia, between June 2008 and June 
2009. Similarly, both New Jersey and Washington experienced a 4 
percentage point increase in unemployment rates between June 2008 and 
June 2009. However, caseloads decreased 3 percentage points in New 
Jersey and increased 18 percentage points in Washington over the same 
period of time. This does not mean that there is no relationship 
between unemployment and cash assistance caseloads, but rather that 
unemployment is one of many factors--including the state's eligibility 
and asset limits, the state's application process, and other state- 
specific program characteristics--that may affect a state's caseload. 

Table 1: Cash Assistance Caseload Changes and Unemployment Information 
in Selected States, June 2008 through June 2009: 

State: Arizona; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: 7.25%; 
Unemployment rate June 2009: 8.7%; 
Change in unemployment rate June 2008 to June 2009: 3.2%. 

State: California; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: 11.51%; 
Unemployment rate June 2009: 11.6%; 
Change in unemployment rate June 2008 to June 2009: 4.5%. 

State: Colorado; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: 33.29%; 
Unemployment rate June 2009: 7.6%; 
Change in unemployment rate June 2008 to June 2009: 2.8%. 

State: District of Columbia; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: 8.44%; 
Unemployment rate June 2009: 10.9%; 
Change in unemployment rate June 2008 to June 2009: 4.1%. 

State: Florida; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: 14.25%; 
Unemployment rate June 2009: 10.7%; 
Change in unemployment rate June 2008 to June 2009: 4.7%. 

State: Georgia; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: -2.50%; 
Unemployment rate June 2009: 10.1%; 
Change in unemployment rate June 2008 to June 2009: 4.0%. 

State: Illinois; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: 3.82%; 
Unemployment rate June 2009: 10.3%; 
Change in unemployment rate June 2008 to June 2009: 3.7%. 

State: Iowa; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: 6.65%; 
Unemployment rate June 2009: 6.2%; 
Change in unemployment rate June 2008 to June 2009: 2.1%. 

State: Massachusetts; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: -1.91%; 
Unemployment rate June 2009: 8.6%; 
Change in unemployment rate June 2008 to June 2009: 3.5%. 

State: Michigan; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: -1.71%; 
Unemployment rate June 2009: 15.2%; 
Change in unemployment rate June 2008 to June 2009: 7.1%. 

State: Mississippi; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: -0.83%; 
Unemployment rate June 2009: 9.1%; 
Change in unemployment rate June 2008 to June 2009: 2.2%. 

State: Nevada; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: 21.66%; 
Unemployment rate June 2009: 11.9%; 
Change in unemployment rate June 2008 to June 2009: 5.5%. 

State: New Hampshire; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: 23.39%; 
Unemployment rate June 2009: 6.8%; 
Change in unemployment rate June 2008 to June 2009: 3.1%. 

State: New Jersey; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: -2.61%; 
Unemployment rate June 2009: 9.2%; 
Change in unemployment rate June 2008 to June 2009: 4.0%. 

State: New York; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: -0.28%; 
Unemployment rate June 2009: 8.7%; 
Change in unemployment rate June 2008 to June 2009: 3.4%. 

State: North Carolina; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: 9.96%; 
Unemployment rate June 2009: 11.0%; 
Change in unemployment rate June 2008 to June 2009: 4.9%. 

State: Ohio; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: 16.54%; 
Unemployment rate June 2009: 11.1%; 
Change in unemployment rate June 2008 to June 2009: 4.7%. 

State: Pennsylvania; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: 0.68%; 
Unemployment rate June 2009: 8.4%; 
Change in unemployment rate June 2008 to June 2009: 3.1%. 

State: Rhode Island; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: -21.27%; 
Unemployment rate June 2009: 12.4%; 
Change in unemployment rate June 2008 to June 2009: 4.7%. 

State: Texas; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: -8.51%; 
Unemployment rate June 2009: 7.5%; 
Change in unemployment rate June 2008 to June 2009: 2.7%. 

State: Washington; 
Percent change in caseload (TANF+ SSP+ solely state-funded programs) 
June 2008 to June 2009: 17.76%; 
Unemployment rate June 2009: 9.2%; 
Change in unemployment rate June 2008 to June 2009: 4.0%. 

Source: GAO analysis of state-provided data and data from U.S. Bureau 
of Labor Statistics. 

[End of table] 

Since June 2009, state and local fiscal conditions have continued to 
deteriorate, and the effect of the changes in the economic climate on 
TANF and solely state-funded cash assistance programs is unknown. For 
example, the impact of expiring extensions of unemployment insurance 
(UI) on state caseloads is hard to predict. Officials from eight 
states believed that the number of families receiving cash assistance 
in their states had not increased, or had not increased as much as 
might have been expected, because families were still collecting UI 
benefits.[Footnote 91] If jobs are still not available when UI 
benefits end, these families may turn to TANF for cash assistance. 
However, two experts we interviewed questioned the extent to which UI 
has lessened or delayed the need for cash assistance. Eligibility for 
UI is generally conditional on meeting certain state-imposed 
qualifications, including having a minimum amount of wages and 
employment over a defined period of time as well as having become 
unemployed for good cause under state law. According to two experts we 
interviewed, many TANF-eligible single-mothers would not likely meet 
the criteria for receipt. Still, UI benefit extensions may be delaying 
the need for cash assistance for some two-parent families that do 
qualify for UI benefits. 

Few States We Surveyed Reduced Spending on Family and Work Supports 
during the Current Recession to Offset Increased Spending on Cash 
Assistance: 

Few states we surveyed reported that they had reduced TANF block grant 
and MOE spending for family and work supports, such as child care and 
subsidized employment programs, to offset increased expenditures for 
growth in their cash assistance caseloads.[Footnote 92] When a state's 
spending on cash assistance increases, it has several options to 
address this need for additional resources. The state can use reserve 
funds, if available, to defray costs; use state funds to augment the 
TANF program; access the TANF contingency fund; access the Emergency 
Contingency Fund created under ARRA; shift resources from work support 
programs; or cut services. In a previous GAO report, we found that 
when cash assistance caseloads and related spending increased in the 
states we reviewed, there was an associated contraction in the 
spending for other forms of aid and services.[Footnote 93] However, we 
did not observe this trend in the time period we explored. According 
to state officials, 11 of the 21 states we surveyed increased spending 
on cash assistance between June 2008 and June 2009. Of these 11 
states, 7 either maintained or increased the amount of TANF-related 
spending for family and work supports--including child-care subsidies, 
transportation subsidies, subsidized employment, CCDF, and SSBG. The 
remaining four states reduced spending for family and/or work supports 
to offset the cost of increased spending on cash assistance.[Footnote 
94] However, in three of the seven states that did not make cuts to 
family and/or work supports, officials offered that they expected 
there would be cuts in TANF-related spending for these services in the 
near future because of state budget and resource constraints 
associated with their growing caseloads. (See table 2.) 

Table 2: Disposition of Spending for Family and/or Work Supports by 
States That Increased Spending on Cash Assistance, Selected States, 
June 2008 through June 2009: 

State: California; 
Cut TANF-related spending for family and/or work supports. 

State: Colorado; 
Maintained or increased TANF-related spending for family and/or work 
supports. 

State: District of Columbia; 
Maintained or increased TANF-related spending for family and/or work 
supports. 

State: Florida; 
Maintained or increased TANF-related spending for family and/or work 
supports. 

State: Illinois; 
Maintained or increased TANF-related spending for family and/or work 
supports. 

State: Iowa; 
Maintained or increased TANF-related spending for family and/or work 
supports. 

State: Massachusetts; 
Cut TANF-related spending for family and/or work supports. 

State: Nevada; 
Maintained or increased TANF-related spending for family and/or work 
supports. 

State: New Hampshire; 
Maintained or increased TANF-related spending for family and/or work 
supports. 

State: Ohio; 
Cut TANF-related spending for family and/or work supports. 

State: Washington; 
Cut TANF-related spending for family and/or work supports. 

Source: Interviews with state officials. 

Note: Of the 21 states we surveyed, 10 states did not increase 
spending on TANF-related cash assistance in this time frame. These 
states were Arizona, Georgia, Michigan, Mississippi, New Jersey, New 
York, North Carolina, Pennsylvania, Rhode Island, and Texas. 

[End of table] 

States that increased spending on cash assistance while maintaining or 
increasing TANF-related spending for family and/or work supports did 
so by spending reserve funds, accessing the TANF Contingency Fund, 
accessing the ARRA Emergency Contingency Fund, or a combination of the 
three. (See table 3.) Under PRWORA, states can save portions of their 
TANF block grant to use in the future for cash assistance to families. 
According to state officials, four of the seven states accessed these 
reserve or carry-over funds accumulated from previous years to 
increase cash assistance expenditures and maintain or increase 
expenditures on the family supports. Officials in one of these states, 
though, told us that projections show that it will have expended all 
of its reserve funds within the next 2 years. 

Table 3: Sources of Funding Used by States to Offset Increased 
Spending on TANF-related Cash Assistance, June 2008 through June 2009: 

State: California[A]; 
Used Reserve Fund: [Empty]; 
Used TANF Contingency Fund: [Empty]; 
Used Emergency Contingency Fund: [Check]. 

State: Colorado; 
Used Reserve Fund: [Check]; 
Used TANF Contingency Fund: [Check]; 
Used Emergency Contingency Fund: [Check]. 

State: District of Columbia; 
Used Reserve Fund: [Check]; 
Used TANF Contingency Fund: [Empty]; 
Used Emergency Contingency Fund: [Check]. 

State: Florida; 
Used Reserve Fund: [Empty]; 
Used TANF Contingency Fund: [Empty]; 
Used Emergency Contingency Fund: [Check]. 

State: Illinois; 
Used Reserve Fund: [Empty]; 
Used TANF Contingency Fund: [Empty]; 
Used Emergency Contingency Fund: [Check]. 

State: Iowa; 
Used Reserve Fund: [Check]; 
Used TANF Contingency Fund: [Empty]; 
Used Emergency Contingency Fund: [Check]. 

State: Massachusetts[A]; 
Used Reserve Fund: [Empty]; 
Used TANF Contingency Fund: [Check]; 
Used Emergency Contingency Fund: [Check]. 

State: Nevada; 
Used Reserve Fund: [Check]; 
Used TANF Contingency Fund: [Check]; 
Used Emergency Contingency Fund: [Check]. 

State: New Hampshire; 
Used Reserve Fund: [Empty]; 
Used TANF Contingency Fund: [Empty]; 
Used Emergency Contingency Fund: [Check]. 

State: Ohio[A]; 
Used Reserve Fund: [Check]; 
Used TANF Contingency Fund: [Empty]; 
Used Emergency Contingency Fund: [Check]. 

State: Washington[A]; 
Used Reserve Fund: [Check]; 
Used TANF Contingency Fund: [Check]; 
Used Emergency Contingency Fund: [Check]. 

Source: Interviews with state officials and HHS-provided documentation. 

Note: Of the 21 states we surveyed, 10 states did not increase 
spending on TANF-related cash assistance in this time frame. These 
states were Arizona, Georgia, Michigan, Mississippi, New Jersey, New 
York, North Carolina, Pennsylvania, Rhode Island, and Texas. 

[A] This table also includes the four states that cut TANF-related 
spending for family and/or work supports in this time frame-- 
California, Massachusetts, Ohio, and Washington. 

[End of table] 

Until recently, states may also have been eligible to use the TANF 
Contingency Fund, but these funds are now depleted. Of the seven 
states in our survey that increased spending on cash assistance while 
maintaining TANF-related spending on family and work supports, all 
seven were eligible to apply for access to the Contingency Fund, 
according to HHS, and in fiscal year 2009, two of these states had 
drawn money from this fund. At the end of the fiscal year in September 
2009, there was about $212 million left in the contingency fund. For 
the first quarter of the 2010 fiscal year, New York had applied for 
more than half the remaining sum, according to state officials. 
Anticipating the exhaustion of the Contingency Fund, officials from 
one state we surveyed questioned the state's ability to continue 
funding their TANF programs at current levels. According to HHS 
officials, final payments from the TANF Contingency Fund were 
distributed in December 2009. 

In addition, states used or planned to use money drawn from the 
Emergency Contingency Fund created by ARRA to allow them to increase 
spending on cash assistance without cutting TANF-related spending for 
family and work supports. According to HHS data, as of October 2009, 
all 21 of the states we surveyed applied for money from the Emergency 
Contingency Fund, including all 7 of the states that increased 
spending on cash assistance but did not reduce TANF-related spending 
for family and work supports.[Footnote 95] Most states we surveyed 
that had applied for Emergency Contingency Funds plan to use them to 
cover the growing number of families receiving cash assistance, 
according to state officials. In addition, officials in some states 
told us that these funds may allow them to continue providing family 
and work supports at the current level and expand subsidized 
employment programs.[Footnote 96] However, one state official 
explained that caseloads and spending could increase or remain high 
beyond fiscal year 2010, the time when Emergency Contingency Funds 
will no longer be available to supplement funding. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to HHS for its review, and a copy 
of the agency's written response is in appendix II. In its comments, 
HHS said that the report was informative and did not disagree with our 
findings. HHS noted that the report provided useful insights into a 
range of factors that help account for declines in TANF participation, 
the extent to which increased participation in TANF among eligible 
families could reduce the severity of poverty, and the challenges 
facing states as they respond to increased need during the economic 
downturn. The agency also noted several useful areas for additional 
work, for example, on the extent and nature of disability among 
eligible nonparticipants and how participation may change over the 
course of the recession. With regard to our finding on the 
characteristics of participants and nonparticipants, HHS suggested 
that more could be learned by examining subgroups of nonparticipants 
rather than examining nonparticipants broadly as a group. The agency 
also suggested that we discuss our findings about nonparticipants in 
the context of the research literature on this subject. Our study was 
designed to describe the characteristics of both participants and 
eligible nonparticipants, as requested, and we further identified the 
characteristics of one important subgroup of nonparticipating eligible 
families. While we agree that further analyses of subgroups of 
nonparticipants could be useful, conducting such analyses was beyond 
the scope of our engagement. Finally, HHS also provided technical 
comments on the draft, and in response to these comments, we made 
changes where appropriate. 

We also provided the draft report to external reviewers with expertise 
in welfare reform and TANF and incorporated their comments as 
appropriate. 

As agreed with your office, unless you publicly announce its contents 
earlier, we plan no further distribution of this report until 30 days 
after its issue date. At that time, we will send copies of this report 
to the Secretary of Health and Human Services, appropriate 
congressional committees, and other interested parties. The report is 
also available at no charge on the GAO Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-7215 or brownke@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. Key contributors to this report are 
listed in appendix IV. 

Sincerely yours, 

Signed by: 

Kay E. Brown: 
Director, Education, Workforce, and Income Security Issues: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

We designed our study to provide information on (1) the factors that 
contributed to the decline in families receiving TANF cash assistance 
since the 1990s, (2) how the characteristics of eligible families who 
participate in TANF compare to eligible families who do not receive 
TANF cash assistance, (3) how the participation of eligible families 
in TANF affects the number of children in extreme poverty and poverty, 
and (4) the changes states are experiencing in the number of families 
receiving cash assistance in the current recession and what changes, 
if any, states have made in their TANF-related spending to respond to 
any increases. 

Overall, to address these objectives, we contracted with the Urban 
Institute for analyses using the Transfer Income Model, version 3--a 
microsimulation model known as TRIM3--which simulates major 
governmental tax, transfer, and health programs, including TANF; 
[Footnote 97] reviewed literature and relevant federal laws and 
regulations; interviewed TANF experts and officials at HHS; 
interviewed state TANF officials in 21 selected states and obtained 
state TANF data; and contacted state-based social services 
organizations in the selected states. 

We conducted our work from November 2008 to February 2010 in 
accordance with all sections of GAO's Quality Assurance Framework that 
are relevant to our objectives. The framework requires that we plan 
and perform the engagement to obtain sufficient and appropriate 
evidence to meet our stated objectives and to discuss any limitations 
in our work. We believe that the information and data obtained, and 
the analysis conducted, provide a reasonable basis for any findings 
and conclusions in this product. 

Analyses Using the Transfer Income Model, Version 3 (TRIM3): 

To identify factors contributing to the caseload decline (for question 
1), compare the characteristics of TANF participants and non- 
participants (for question 2), and analyze the impact of TANF 
participation on child poverty and extreme poverty (for question 3), 
we contracted with the Urban Institute for analyses--using the 
Transfer Income Model, version 3, known as TRIM3. TRIM3 is maintained 
and developed at the Urban Institute under primary funding from HHS, 
Office of the Assistant Secretary for Planning and Evaluation. TRIM3 
simulates major governmental tax, transfer, and health programs, 
including TANF. TRIM3 can be used to estimate the effect of rule 
changes, such as restrictions on eligibility for legal immigrants, on 
the number of eligible families; compare the income and other 
characteristics of participating and nonparticipating families; and 
estimate the effect of higher TANF participation rates on child 
poverty and extreme child poverty, with incomes below 50 percent of 
the federal poverty level. Using TRIM3 for these analyses required our 
input on assumptions and/or interpretations about economic behavior 
and about the rules governing federal programs. Therefore, the 
conclusions presented in this report are attributable only to GAO. 

The TRIM3 microsimulation model was used to estimate the number of 
families who would be eligible for TANF and the amount of their 
potential benefits. The model simulates the process a caseworker would 
go through to determine eligibility based on each family's state of 
residence, household composition, income, and other factors. TRIM3 
relies on the Annual Social and Economic Supplement (ASEC) to the 
Current Population Survey (CPS), as well as information from the 
Welfare Rules Database, to simulate eligibility based on state 
specific program rules and information on income and other eligibility 
criteria. 

The model was also used to estimate the number of families who 
participate in the TANF program. While the ASEC includes information 
on whether a family received TANF, the benefit is substantially under- 
reported. Among TANF-eligible families who did not report receipt of 
TANF, a family's likelihood of TANF participation is estimated based 
on the family's demographic characteristics and the level of potential 
benefit. Simulated participation decisions are aligned to bring the 
simulated caseload acceptably close to the actual caseload in overall 
size and by key characteristics. TRIM3 does not model certain aspects 
of program eligibility, such as sanctions from failing to comply with 
work rules or child support rules, diversion strategies, or adherence 
to behavioral requirements such as school attendance and 
immunizations. The fact that TRIM3 does not model sanctions means that 
the model may overestimate eligibility and underestimate participation 
rates. 

In this study, we used both "baseline" simulations and "alternative" 
simulations of TANF cash assistance. TRIM3 baseline simulations are 
simulations that apply the actual policies that were in place in a 
particular year to the CPS survey data for that year. In a baseline 
simulation, the initially-estimated probabilities of participation are 
modified in order to bring the size and characteristics of the 
simulated caseload sufficiently close to the size and characteristics 
of the actual caseload in that year. We used TRIM3 baseline estimates 
for TANF cash assistance for our analyses of the characteristics of 
participants and nonparticipants in 2005, and as the point of 
comparison for the alternative simulations--using 1995 participation 
rates--for our analyses of the effect of TANF 2005 rules on the 1995 
AFDC population and our analyses of TANF participation on child 
poverty. 

Our TRIM3 analyses are based on data from 2005 because it was the most 
recent publicly available data when we conducted our work. We chose 
1995 as a comparison year partly because it was the year prior to the 
creation of TANF under PRWORA. Researchers at the Urban Institute also 
advised us that 1996 data was not likely to be reliable because of 
data system transitions from the prior program, AFDC, to TANF. 
Furthermore, Urban Institute researchers told us they could not use 
1996 data to analyze the impact of PRWORA rules on families' 
eligibility because non-citizens' legal status (e.g., whether legal 
permanent resident, undocumented, refugee, or temporary resident) had 
not been imputed for that year's data. Given these technical 
limitations, we agreed that 1995 data was best and that it also 
provided a 10-year spread for comparison. 

To provide insight into the impact of the immigrant restrictions, time 
limits, and other PRWORA rules on TANF eligibility, we applied the 
PRWORA changes to the 1995 caseload data, assuming that the rules had 
been imposed 10 years before they were actually imposed. In cases of 
state options with regard to policies, states were assumed to make the 
same choices as they made in 2005. It is important to note that this 
type of analysis cannot definitively establish the portion of caseload 
change from 1995 to 2005 that is due solely to a particular rules 
change, due to the potential inter-relationships between rules, 
population characteristics, and participation behavior. 

To compare the characteristics of eligible families who participate in 
TANF to eligible families who do not receive TANF cash assistance, we 
analyzed differences in demographic characteristics, such as race, 
age, family type; income differences, such as median income and 
poverty status; and the receipt of other public supports such as SNAP, 
subsidized child care, or subsidized housing. For this analysis we 
used 2005 data, the most recent available. Estimates in this analysis 
are based on annual data, so as to capture longer term characteristics 
of these families, and the distribution of the annual caseload by some 
characteristics could be different from the distribution of the 
monthly-snapshot caseload. When looking at income differences between 
groups, we compared all gross cash income, such as earnings and child 
support, and excluded means-tested benefits such as TANF or 
Supplemental Security Income (SSI), a cash assistance program for low- 
income people who are elderly or who have disabilities. We also 
examined the characteristics of a subgroup of eligible nonparticipants 
who during the year were neither working nor receiving SSI. In 
comparing the characteristics of participants and nonparticipants, 
differences are statistically significant at the 95 percent confidence 
level unless otherwise noted. 

To estimate how the participation of eligible families in TANF affects 
the number of children in extreme poverty and poverty, we imposed the 
1995 AFDC participation rate of 84 percent on the 2005 population. To 
do this, we started from each family's probability of participation as 
produced by TRIM3's baseline simulation--the result of the statistical 
equation, adjusted by adjustment factors established during the 
baseline alignment process--but we applied an additional across-the- 
board adjustment factor to increase each family's probability of 
participation. This has the effect of bringing in the "next most 
likely" families until the desired participation rate is reached. Some 
families are technically eligible for TANF but are financially better 
off without taking TANF, due to the fact that the amount of child 
support that would be retained by the state exceeds the TANF benefit 
they would receive. These families were simulated to remain 
nonparticipants; all the new TANF participants were selected from 
families who would receive more in TANF than they would lose in child 
support income. 

To estimate the impact of TANF receipt on examples of families in 
extreme poverty and poverty, we chose Illinois because it is the state 
with the median TANF benefit. Earnings for families in poverty were 
set at $632 per month. This is the median earnings of TANF families 
containing one adult and two children, according to our analysis of 
2005 participants. It is also the amount one would earn by working 18 
hours per week at the Illinois minimum wage of $8 per hour. Earnings 
for families in extreme poverty were set at $346, based on the 
assumption that families in extreme poverty work 10 hours a week at 
the Illinois minimum wage of $8 per hour, and about half of median 
earnings of TANF families containing one adult and two children. 

We assessed the reliability of the TRIM3 modeling procedures by 
reviewing extensive documentation on the TRIM3 model and input data 
sources, having several conversations with staff from the Urban 
Institute who were responsible for the work provided under our 
contract, reviewing the Urban Institute's internal quality control 
procedures, and having extensive discussions about the underlying 
assumptions used in specifying the models. We identified data 
limitations in the CPS that we reconciled with the Urban Institute 
through meetings and acquiring additional documentation. In addition 
to the estimates presented in the report, the Urban Institute 
calculated standard errors and performed statistical tests of 
significance for all estimates and pairwise comparisons. We verified 
that those calculations were correct by reviewing the CPS technical 
documentation. We evaluated other TRIM3 estimates, particularly those 
illustrating hypothetical scenarios, on the basis of substantive 
significance rather than statistical significance. To this end, we 
considered the size and direction of the effect rather than whether 
the statistic differed from zero to assess the validity of the 
estimate. We determined that none of the data limitations or modeling 
assumptions affected or compromised the analysis for this report and 
the data are considered to be sufficiently reliable for our purposes. 

Review of Literature and Legislation: 

To analyze the factors that contributed to the decline in families 
receiving TANF cash assistance since the 1990s, we conducted a review 
of relevant literature by researchers by obtaining recommendations for 
studies from internal GAO and external TANF researchers and policy 
experts, including HHS officials; searching various databases for peer-
reviewed journal articles and other publications; and reviewing policy 
and research organization websites for relevant studies. We used the 
relevant research to analyze the factors researchers have identified 
as contributing to the declining number of families receiving cash 
assistance. At least two social scientists or statisticians with 
specialized training in the evaluation of research methodology 
reviewed each study to assess its methodology. Our conclusions about 
the factors contributing to the decline in the number of cash 
recipients are based, in part, on our assessment of the evidence 
presented in these studies. We also reviewed relevant federal laws and 
regulations. We did not conduct a legal analysis of state laws of 
state cash assistance programs for this report. As noted elsewhere, 
references to state laws or rules were based on the Welfare Rules 
Database, which is maintained at the Urban Institute under HHS/ACF 
funding and is used by the TRIM3 model in its simulations. 

Interviews with Researchers and Policy Analysts: 

We also interviewed researchers and policy analysts at academic 
centers and other organizations to obtain their perspectives on 
factors that contributed to the decline in cash assistance caseloads 
since the 1990s and any information they may have had on state 
experiences during the current recession. In selecting experts for our 
interviews, we sought researchers and organizations who have conducted 
work on welfare issues and who could provide us with a range of 
perspectives. We interviewed TANF researchers and officials at the 
Department of Health and Human Services (HHS) as well as researchers 
and policy analysts at the American Enterprise Institute for Public 
Policy Research, The Brookings Institution, Center on Budget and 
Policy Priorities, Center for Law and Social Policy, Congressional 
Research Service, Johns Hopkins University, Mathematica Policy 
Research, Inc., the Urban Institute, and the University of Michigan 
(National Poverty Center).[Footnote 98] We also interviewed officials 
at the American Public Human Services Association, the National 
Conference of State Legislatures, and the National Governors 
Association. 

Interviews with State Officials: 

To determine if and how the number of families receiving cash 
assistance and the use of TANF-related funds have changed during the 
current recession, we conducted semi-structured telephone interviews 
with TANF officials in 21 states and obtained data on their TANF 
programs, and where applicable, SSPs and solely state-funded programs. 
In addition, we reviewed TANF data on the number of families receiving 
cash assistance and other administrative data available through HHS. 
We pre-tested our questions in California, Iowa, New York, and Rhode 
Island. In our interviews, we asked questions about changes in the 
number of families receiving cash assistance, in the uses of the TANF 
block grant and MOE funds, and in other polices that might affect the 
number of applicants or recipients. We also asked about state's plans 
for use of ARRA stimulus funding. 

The 21 states we selected to interview represent a range of child 
poverty rates, unemployment rates, cash assistance caseloads, 
approaches to sanctions and monthly earnings limits, and geographic 
diversity. Collectively these states represent more than half the 
families receiving TANF cash assistance nationally. Our analysis 
focused on the period between June 2008 and June 2009, beginning 6 
months after the official start of the current recession. The 21 
states included in our analysis were: Arizona, California, Colorado, 
Florida, Georgia, Illinois, Iowa, Massachusetts, Michigan, 
Mississippi, New Hampshire, New Jersey, New York, Nevada, North 
Carolina, Ohio, Pennsylvania, Rhode Island, Texas, Washington, and the 
District of Columbia.[Footnote 99] 

Analysis of Caseload Data: 

We collected data on the number of families receiving cash assistance 
from June 2008 and June 2009 for the 21 states we selected. This 
includes federal TANF data as well as data from separate state 
programs and solely state-funded programs for states that had such 
programs.[Footnote 100] We analyzed these data for changes in the 
number of families receiving cash assistance as well as the types of 
families receiving cash assistance. 

We assessed the reliability of data obtained through our 21 state 
agency surveys by asking questions on the survey that helped us gauge 
the agency's processes and procedures for collecting and maintaining 
data of reasonable quality and reliability. We asked questions 
pertaining to data entry procedures, training, edit checks, written 
documentation of procedures, supervisory or other internal and 
external reviews of data, and known limitations of the data. The 
answers were analyzed for concerns and states were re-contacted as 
necessary to gain clarity about the concern and assess the degree to 
which the concern would limit data quality. We determined that none of 
these concerns or limitations affected or compromised the data 
submitted for this review and the data are considered to be 
sufficiently reliable for our purposes. 

State-Based Social Service Organizations: 

To understand why eligible families may not participate in TANF and to 
learn more about families' experiences with the TANF application 
process, we contacted state-level social service and other 
organizations in selected states regarding state TANF practices and 
policies. To identify state-level organizations that could provide the 
perspective of families on the experience of applying for and 
receiving cash aid, we requested the names and contact information 
from TANF officials that we interviewed in 21 states. In these 
interviews, we asked officials to identify state-level organizations 
in their states that could address issues such as application 
processes, benefit levels, and sanctions as they affect families. In 
some cases, these social services groups referred us to alternative 
organizations for our review, and in those cases we contacted these 
additional organizations. In one case, we identified and contacted a 
state-level service provider organization for a state that did not 
provide us with a contact initially. We e-mailed questions to the 
organizations we identified in these ways to obtain their perspective 
on possible reasons why eligible families would not participate in 
TANF, the ability of families to navigate the application process in 
their state, and other issues. We obtained written responses to these 
questions from state organizations and used them in this report solely 
for illustrative purposes. 

[End of section] 

Appendix II: Comments from the Department of Health and Human Services: 

Department Of Health & Human Services: 
Office Of The Secretary: 
Assistant Secretary for Legislation: 
Washington, DC 20201: 

January 28, 2010: 

Kay Brown, Director: 
Education, Workforce, and Income Security Issues: 
Government Accountability Office: 
441 G Street NW: 
Washington, DC 20548: 

Dear Ms. Brown: 

Enclosed are the Department's comments on the U.S. Government 
Accountability Office's (GAO) draft report entitled: "Temporary 
Assistance for Needy Families: Fewer Eligible Families Have Received 
Cash Assistance Since the 1990s, but Numbers are Rising in the Current 
Recession" (GA0-10-164). 

The Department appreciates the opportunity to review and comment on 
this report before its publication. 

Sincerely, 

Signed by: 

Andrea Palm: 
Acting Assistant Secretary for Legislation: 

Enclosure: 

[End of letter] 

General Comments Of The Department Of Health And Human Services On The 
Government Accountability Office's (GAO) Draft Report Entitled. 
"Temporary Assistance For Needy Families: Fewer Eligible Families Have 
Received Cash Assistance Since The 1990s, But Numbers Are Rising In 
The Current Recession" (GAO-10-164): 

The Department appreciates the opportunity to comment on the 
Government Accountability Office (GAO) draft report. 

Overall, the language in the report should reflect the shift in focus 
of the Temporary Assistance for Needy Families (TANF) program to 
helping recipients into employment, rather than welfare. Given that it 
is over a dozen years since the Personal Responsibility and Work 
Opportunity Reconciliation Act (PRWORA) was enacted and States have 
long since fundamentally reshaped their programs, GAO should 
incorporate that shift into how it discusses the program. Despite the 
fact that the Supplemental Nutrition Assistance Program (formerly Food 
Stamps) issues near-cash rather than cash benefits, it is closer to a 
"traditional" welfare program than TANF is now. 

The report provides useful insights into a range of factors that help 
account for declines in TANF participation, the extent to which 
increased participation among eligible families could reduce the 
severity of poverty, and the challenges facing States as States 
respond to increased need during the economic downturn. HHS provided 
detailed comments to GAO on this draft report in a meeting and we 
highlight the following points: 

First, it is helpful to understand that the decline in the number of 
families receiving TANF assistance is partially due to a decline in 
the number of eligible families, but principally due to reduced 
participation among eligible families. Through this report and 
additional work, ACF seeks to understand better why the share of 
eligible families participating in the program fell from 84 percent in 
1995 to 40 percent in 2005. ACF appreciates that a set of factors are 
involved, including increased work-related requirements, increased use 
of sanctions and diversion policies, continuing declines in the value 
of basic assistance in many States, and family choices. ACF also 
appreciates that it is difficult to isolate the independent effect of 
a particular rule when the reduction in participation may be due to an 
interaction between the rule and family choice and capacity. At the 
same time, ACF hopes that additional work can help refine 
understanding of the sharp drop in participation among eligible 
families, and inform what has happened to participation among eligible 
families since 2005. 

Second, it is also helpful to understand that most eligible families 
who do not participate in TANF have higher incomes than TANF families, 
but that a group of eligible nonparticipants has lower income than 
TANF recipient families. It would be particularly valuable to 
understand better the reasons for nonparticipation among the 
nonparticipating families with very low incomes. Because the universe 
of nonparticipating families appears to be comprised of subgroups, of 
which some seem less disadvantaged and others more disadvantaged than 
participating families, that more can be learned by looking at the 
subgroups rather than, for example, data relating to the median or the 
majority among nonparticipating families. ACF also recommends that GAO 
situate its findings about nonparticipating families within the 
research literature that already exists on this topic. 

Third, it is notable to see that if TANF participation among eligibles 
in 2005 was as high as it had been in 1995, extreme poverty would have 
been lower among families with children, and the severity of poverty 
for those remaining extremely poor would have been reduced. At the 
same time, most of the extreme poverty among children would have 
continued, and there would have been little change in the poverty rate 
itself. Thus, in addition to concerns about participation levels, this 
suggests the importance of increased attention to strategies for 
improving employment outcomes among those families with the most 
serious employment baniers. It would be particularly helpful to 
understand better the employment histories, experiences, and 
limitations among eligible nonparticipants with very low income. It 
would also be helpful to do additional work to understand better the 
extent and nature of disability among eligible nonparticipants. 

Finally, ACF appreciated learning that among those States facing 
increased assistance costs, the Federal Contingency Rind and Emergency 
Contingency Fund have played important roles in helping a set of 
States respond to increased needs without cutting expenditures for 
child care and other work-related costs. This analysis covers a 
limited period of time, between June 2003 and June 2009, and it will 
ultimately be important to understand better how assistance 
participation changes over the course of the downturn, and the role of 
these Contingency Funds over an extended period as a vehicle for 
helping States address needs during a downturn. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

Contact: 

Kay E. Brown, Director (202) 512-7215 or brownke@gao.gov: 

Acknowledgments: 

Heather McCallum Hahn, Assistant Director; Kathryn A. Larin, Assistant 
Director; and Deborah A. Signer, Analyst-in-Charge, managed this 
assignment and made significant contributions to all aspects of this 
report. Hedieh Rahmanou Fusfield and Jessica R. Wintfeld, Analysts, 
also made important contributions to this report. Katya Melkote 
assisted with data collection and analysis, and Susannah Compton and 
James Bennett provided writing and graphics assistance. In addition, 
Susan Offutt, Chief Economist, and Max Sawicky provided assistance 
with economic aspects of this study; Shana B. Wallace and Monique B. 
Williams provided design and methodological assistance; Russell C. 
Burnett provided additional methodological assistance; and Alexander 
G. Galuten provided legal assistance. 

[End of section] 

Related GAO Reports: 

Poverty in America: Consequences for Individuals and the Economy. 
[hyperlink, http://www.gao.gov/products/GAO-07-343T]. Washington, 
D.C.: January 24, 2007. 

Welfare Reform: Better Information Needed to Understand Trends in 
States' Uses of the TANF Block Grant. [hyperlink, 
http://www.gao.gov/products/GAO-06-414]. Washington, D.C.: March 3, 
2006. 

Welfare Reform: More Information Needed to Assess Promising Strategies 
to Increase Parents' Incomes. [hyperlink, 
http://www.gao.gov/products/GAO-06-108]. Washington, D.C.: December 2, 
2005. 

Welfare Reform: HHS Should Exercise Oversight to Help Ensure TANF Work 
Participation Is Measured Consistently across States. [hyperlink, 
http://www.gao.gov/products/GAO-05-821]. Washington, D.C.: August 19, 
2005. 

Means-Tested Programs: Information on Program Access Can Be an 
Important Management Tool. [hyperlink, 
http://www.gao.gov/products/GAO-05-221]. Washington, D.C.: April 11, 
2005. 

TANF AND SSI: Opportunities Exist to Help People with Impairments 
Become More Self-Sufficient. [hyperlink, 
http://www.gao.gov/products/GAO-04-878]. Washington, D.C.: September 
15, 2004. 

Welfare Reform: Information on Changing Labor Market and State Fiscal 
Conditions. [hyperlink, http://www.gao.gov/products/GAO-03-977]. 
Washington, D.C.: July 15, 2003. 

Welfare Reform: Former TANF Recipients with Impairments Less Likely to 
Be Employed and More Likely to Receive Federal Supports. [hyperlink, 
http://www.gao.gov/products/GAO-03-210]. Washington, D.C.: December 6, 
2002. 

Welfare Reform: Outcomes for TANF Recipients with Impairments. 
[hyperlink, http://www.gao.gov/products/GAO-02-884]. Washington, D.C.: 
July 8, 2002. 

Welfare Reform: With TANF Flexibility, States Vary in How They 
Implement Work Requirements and Time Limits. [hyperlink, 
http://www.gao.gov/products/GAO-02-770]. Washington, D.C.: July 5, 
2002. 

Welfare Reform: States Provide TANF-Funded Work Support Services to 
Many Low-Income Families Who Do Not Receive Cash Assistance. 
[hyperlink, http://www.gao.gov/products/GAO-02-615T]. Washington, 
D.C.: April 10, 2002. 

Welfare Reform: States Are Using TANF Flexibility to Adapt Work 
Requirements and Time Limits to Meet State and Local Needs. 
[hyperlink, http://www.gao.gov/products/GAO-02-501T]. Washington, 
D.C.: March 7, 2002. 

Welfare Reform: Progress in Meeting Work-Focused TANF Goals. 
[hyperlink, http://www.gao.gov/products/GAO-01-522T]. Washington, 
D.C.: March 15, 2001. 

Welfare Reform: Moving Hard-to-Employ Recipients into the Workforce. 
[hyperlink, http://www.gao.gov/products/GAO-01-368]. Washington, D.C.: 
March 15, 2001. 

Unemployment Insurance: Role as Safety Net for Low-Wage Workers Is 
Limited. [hyperlink, http://www.gao.gov/products/GAO-01-181]. 
Washington, D.C.: December 29, 2000. 

[End of section] 

Footnotes: 

[1] These data are from the Department of Health and Human Services 
(HHS) for the average monthly caseload for families receiving cash 
assistance in calendar years 1995 and 2008. 

[2] TRIM3 is maintained and developed at the Urban Institute under 
primary funding from HHS, Office of the Assistant Secretary for 
Planning and Evaluation. Using TRIM3 for these analyses required our 
input on assumptions and/or interpretations about economic behavior 
and the rules governing federal programs. Therefore, the conclusions 
presented in this report are attributable only to GAO. 

[3] Throughout this report, welfare reform refers to the creation of 
TANF through the enactment of the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 (PRWORA). 

[4] GAO did not conduct a legal analysis of state laws or requirements 
for state cash assistance programs. The TRIM3 model uses the U.S. 
Census Bureau's Current Population Survey (CPS) and the Welfare Rules 
Database (maintained at the Urban Institute under HHS funding) to 
simulate eligibility based on state-specific program rules and 
information on income and other eligibility criteria. The Welfare 
Rules Database provides a longitudinal account of the changes in 
welfare rules in all 50 states and the District of Columbia. 

[5] Pub. L. No. 104-193 (1996). Although the total cash assistance 
caseload peaked in 1994 at 5.03 million families (average monthly 
numbers for calendar year 1994), we chose 1995 as a comparison year 
partly because it was the year before welfare reform. For a more 
detailed explanation of why 1995 was chosen as a comparison year, as 
well as further details about other aspects of our methodology in this 
report, see appendix I. 

[6] To identify state-level organizations that could provide the 
perspective of families on applying for and receiving TANF cash 
assistance, we requested the names and contact information from TANF 
officials that we interviewed in 21 states. For more information on 
our objectives, scope, and methodology, see appendix I. (For 
information on how we selected states for telephone interviews of TANF 
administrators, see the description of our methodology for obtaining 
information on state caseload changes in the current recession.) 

[7] Pub. L. No. 109-171 (2006). 

[8] The state's MOE amount is based on a percentage of expenditures 
made by the state in fiscal year 1994 on some of TANF's predecessor 
programs. 42 U.S.C. § 609(a)(7). 

[9] For work requirements, see 42 U.S.C. § 607. For time limits, see 
42 U.S.C. § 608(a)(7). For restrictions on immigrant receipt of 
assistance, see Pub. L. No. 104-193, Title IV (1996). 

[10] 42 U.S.C. § 607. For a state to meet its work participation rate, 
50 percent of all families--minus its caseload reduction credit--must 
participate in a work activity for an average of 30 or more hours per 
week. Similarly, 90 percent of two-parent families must participate in 
a work activity for a minimum of 35 hours per week in order for a 
state to meet its work participation rate. States may exempt adults 
and minors from work requirements for reasons such as having a child 
under the age of 1 year. Families without adult recipients--known as 
child-only cases--are also sometimes exempt from work requirements and 
time limits. Nationally, in fiscal year 2006, about 47 percent of TANF 
households were "child-only" cases, such as those in which the parent 
is an ineligible noncitizen, or is disabled and receiving disability 
insurance. 

[11] To receive credit, caseload reductions must be for reasons other 
than a state changing its eligibility requirements. 42 U.S.C. § 
607(b)(3)(B). In addition, during TANF reauthorization in 2006, the 
base year for calculating the caseload reduction credit was changed 
from fiscal year 1995 to fiscal year 2005. Since the caseload was 
lower in all states in 2005 than in 1995, the credit received was also 
smaller. As a result, since TANF reauthorization, states have likely 
had to meet a higher work participation rate than required in previous 
years. 

[12] States can exempt recipients from the 60-month limit on federally 
funded TANF assistance in cases that involve hardship or domestic 
violence. 42 U.S.C. § 608(a)(7)(C). It is up to each state to define 
hardship, and states can extend this exemption to no more than 20 
percent of their TANF caseload. 

[13] Means-tested programs are restricted to families or individuals 
who meet specified financial requirements and certain other 
eligibility criteria established for each program. Nonfinancial 
requirements may restrict eligibility to specified categories of 
beneficiaries, such as pregnant women, children, or individuals with 
disabilities. TANF, Medicaid, and the Supplemental Nutrition 
Assistance Program (SNAP) are examples of means-tested programs. 

[14] Figures include federal TANF and state MOE spending. 

[15] Gretchen Rowe and Mary Murphy, The Urban Institute, Welfare Rules 
Databook: State TANF Policies as of July 2008 (Washington, D.C.: 
August 2009). 

[16] Pub. L. No. 111-5, § 2101 (2009). 

[17] The estimates presented in this report are based on the official 
federal measure of poverty. 

[18] GAO, Poverty in America: Economic Research Shows Adverse Impacts 
on Health Status and Other Social Conditions as well as the Economic 
Growth Rate, [hyperlink, http://www.gao.gov/products/GAO-07-344] 
(Washington, D.C.: January 2007). 

[19] HHS updates the poverty guidelines at least annually as required 
by 42 U.S.C. § 9902(2) and publishes the guidelines in the Federal 
Register. See, e.g., 74 Fed. Reg. 4199 (Jan.23, 2009). 

[20] This discussion focuses on cash assistance programs under TANF 
and not on services and other supports for low-income families that 
are also funded through TANF funds. As we noted in 2002 testimony, 
TANF caseload data do not provide a complete picture of the number of 
families receiving benefits and services through TANF. GAO, Welfare 
Reform: States Provide TANF-Funded Work Support Services to Many Low- 
Income Families Who Do Not Receive Cash Assistance, GAO-02-615T 
(Washington, D.C.: Apr. 10, 2002). 

[21] These are average monthly estimates from HHS's Indicators of 
Welfare Dependence: Annual Report to Congress for 2008 (Washington, 
D.C.: 2008), based on analyses using the TRIM3 microsimulation model. 

[22] GAO, Welfare Reform: More Information Needed to Assess Promising 
Strategies to Increase Parents' Incomes, [hyperlink, 
http://www.gao.gov/products/GAO-06-108] (Washington, D.C.: December 
2005). 

[23] Bianca Frogner, Robert Moffitt, and David Ribar, Income, 
Employment, and Welfare Receipt After Welfare Reform: 1999-2005 
Evidence from the Three-City Study, Johns Hopkins University, Working 
Paper 09-02 (May 2009). 

[24] Congressional Budget Office, Changes in Low-Wage Labor Markets 
Between 1979 and 2005 (Washington, D.C.: December 2006). 

[25] See Rebecca M. Blank, "Evaluating Welfare Reform in the United 
States," Journal of Economic Literature (December 2002). 

[26] Jeffrey Grogger, "The Effects of Time Limits, the EITC, and Other 
Policy Changes on Welfare Use, Work, and Income Among Female-Headed 
Families," The Review of Economics and Statistics (May 2003). 

[27] GAO, Welfare Reform: Better Information Needed to Understand 
Trends in States' Uses of the TANF Block Grant, [hyperlink, 
http://www.gao.gov/products/GAO-06-414] (Washington, D.C.: March 2006) 
and GAO, Welfare Reform: More Information Needed to Assess Promising 
Strategies to Increase Parents' Incomes, [hyperlink, 
http://www.gao.gov/products/GAO-06-108] (Washington, D.C.: December 
2005). 

[28] TRIM3 does not model certain aspects of program eligibility, such 
as sanctions from a family's failure to comply with work rules or 
child support rules. It also does not model state diversion strategies 
such as the use of one-time, non-recurring benefits, or families' 
behavioral responses to TANF program rules, such as staying off TANF 
to conserve eligibility for time-limited assistance. 

[29] These estimates are based on analyses conducted for our study by 
the Urban Institute, using the TRIM3 microsimulation model; they 
reflect averaged monthly estimates by calendar year. For this TRIM3 
analysis, to apply rules on time limits and immigrant restrictions 
from PRWORA on the 1995 data, we assumed that the rules were actually 
changed 10 years prior to the timing of the actual legislation-in 
August 1986--so that the analysis would be able to identify families 
who would be affected by federal and state TANF time limits and 
immigrant restrictions. We also assumed that states would make the 
same choices about time limits in this hypothetical 1995 world that 
they made in 2005, such as using shorter time limits, or providing 
extensions and exemptions. 

[30] The 2005 TANF rules used in this expanded TRIM 3 analysis 
included rules on immigrant restrictions; time limits; eligibility 
rules for two-parent families and teen parents; caps on benefits if 
family size increases; 2005 asset limits; and other financial rules, 
such as those for disregarding a certain amount of earned income in 
determining eligibility--called earned income disregards--and income 
tests. Because TRIM3 incorporates information from states through the 
Urban Institute's Welfare Rules Database--an HHS-funded database 
maintained at the Urban Institute--this analysis reflects variations 
in state rules as well as federal rules in these areas. The overall 
results mask variations at the state level. In some states, the 2005 
rules would increase eligibility, while in other states the 2005 rules 
would decrease eligibility. 

[31] For example, according to our TRIM3 analysis, 2005 rules that 
increased the number of eligible families included those concerning 
the eligibility of two-parent units, which are more generous than the 
1995 AFDC rules, and rules on the use of earned income disregards, 
which may enable some families to be eligible under 2005 rules who 
would not have been in 1995. On the other hand, rules that reduced the 
number of eligible families included time limits and income 
eligibility thresholds that were not adjusted for inflation, according 
to our TRIM3 analysis. 

[32] The analysis cannot be definitive because of the potential 
interrelationships among program rules; changes in the population 
(such as the incidence of single-parent families) and in families' 
economic circumstances; and behavioral issues such as families' 
responses to program requirements, such as whether to apply for TANF. 

[33] Some observers believed that families would move to other states 
take advantage of state policies that were more generous, and that 
states would attempt to offset this possibility of increased caseloads 
by competing to have policies more stringent than neighboring states. 

[34] Thomas Gais and R. Kent Weaver, State Policy Choices Under 
Welfare Reform, Brookings Policy Brief No. 21 (Washington, D.C.: April 
2002). 

[35] This analysis of the share of eligible and participating families 
is based on trend data for an average month by calendar year in HHS's 
Indicators of Welfare Dependence: Annual Report to Congress, 2008 
(Washington, D.C.: 2008), which uses TRIM3 to model estimates of the 
TANF participation rate. In reporting participants, the data includes 
families receiving cash assistance through both TANF and separate 
state programs (SSP) using state MOE funds. As noted earlier, TRIM3 
does not model certain aspects of program eligibility, such as 
sanctions from a family's failure to comply with work rules or child 
support rules. It also does not model state diversion strategies such 
as the use of one-time, non-recurring benefits, or families' 
behavioral responses to TANF program rules, such as staying off TANF 
to conserve eligibility for time-limited assistance. 

[36] This TANF participation rate is within the range experienced by 
other non-entitlement programs. In a previous report, we found that 
participation in non-entitlement programs--including TANF--ranged from 
less than 10 percent to about 50 percent, while participation in 
entitlement programs such as SNAP (formerly known as food stamps)-- 
designed to support all those who apply and qualify--was higher, 
ranging from 50 percent to more than 70 percent. See GAO, Means-Tested 
Programs: Information on Program Access Can Be an Important Management 
Tool, [hyperlink, http://www.gao.gov/products/GAO-05-221] (Washington, 
D.C.: Mar. 11, 2005). 

[37] Declines in eligibility and in participation are not necessarily 
mutually exclusive and may interact. For example, policies such as 
time limits can affect a family's eligibility for cash assistance but 
it can also affect decisions about when or whether to apply for 
assistance, depending on a family's circumstances. 

[38] Not all TANF families are subject to work requirements. TANF law 
allows states to exclude single custodial parents caring for a child 
under the age of 1, for example. Families without adult recipients--
child-only cases--are sometimes exempt from work requirements and time 
limits. States also have the option to consider some parents not "work 
eligible," such as those on SSI or Social Security Disability 
Insurance. 

[39] Jeffrey Grogger et al., Consequences of Welfare Reform: A 
Research Synthesis, RAND Labor and Population Program. Prepared for 
the Administration for Children and Families, U.S. Department of 
Health and Human Services (July 2002). 

[40] GAO, Welfare Reform: Moving Hard-to-Employ Recipients Into the 
Workforce, [hyperlink, http://www.gao.gov/products/GAO-01-368] 
(Washington, D.C.: March 2001). 

[41] Abt Associates Inc., Study of the TANF Application Process, Final 
Report, Volume 1: Survey of States, Prepared for Department of Health 
and Human Services, Administration for Children and Families Office of 
Planning, Research and Evaluation (April 2003). 

[42] Robert Moffit, "The Role of Nonfinancial Factors in Exit and 
Entry in the TANF Program," The Journal of Human Resources, Vol. 38 
(2003). 

[43] Rosenberg et al., A Study of States' TANF Diversion Programs. 
Final Report, Mathematica Policy Research Institute (Dec. 8, 2008). 

[44] States' diversion strategies are determined by the states and not 
federal law. In most states, they are also considered "non-assistance" 
and, because of this, states can use them to provide temporary 
assistance without being affected by federal work requirements for 
states. Most states also do not count one-time payments toward the 
federal 60-month lifetime limit. States also have incentives for 
controlling or reducing their TANF caseloads because they are required 
to meet federal work participation rates for providing cash assistance 
to families when they use federal or MOE funds. 

[45] Andrea Hetling et al., "Do Welfare Avoidance Grants Prevent Cash 
Assistance?" Social Service Review, University of Chicago (December 
2007). 

[46] Grogger et al. (July 2002). 

[47] This analysis is based on TRIM3 estimates in which we applied all 
2005 TANF rules, with dollars deflated to 1995, to the 1995 cash 
assistance population, and compared potential aggregate cash benefits 
to that population under the 2005 rules with deflated dollars to the 
potential aggregate benefits to that population under the 1995 rules. 
The overall results of this analysis mask variations at the state 
level. Some states show small increases in potential aggregate 
benefits under the 2005 rules, while the majority of states show 
reductions of various magnitudes. 

[48] These maximum benefit levels are for the continental United 
States. 

[49] In some cases, the receipt of TANF can also work in the opposite 
direction, increasing the other benefit (e.g., exempting TANF 
recipients from having to pay a co-payment for child care). For the 
purpose of this discussion, we are including non-cash supports such as 
SNAP as part of net income. However, in discussing poverty among 
children, we exclude non-cash supports, so as to be consistent with 
the federal definition of poverty. 

[50] The maximum TANF benefit, which varies by state, refers to the 
highest amount of cash benefits that a state pays to a family per 
month. Here we are referring to the median of this cash payment across 
the states. 

[51] This TRIM3 analysis uses a slightly different benefit mix than in 
the Illinois example. In this analysis, the four benefits are child 
support retained by the family, CCDF child care subsidies, SNAP 
(formerly food stamps), and a housing subsidy. The net income includes 
all cash income (including TANF and any child support retained by the 
family), plus the value of SNAP and the value of housing subsidy, plus 
refundable tax credits, minus income tax and payroll tax liability, 
and minus child care expenses. Using calendar year 2005 Current 
Population Survey data, this analysis examined the families estimated 
to begin receiving TANF for at least part of the year if participation 
was at the same rate as in 1995-about 3.3 million families. 

[52] See Grogger et al. (2002); LaDonna Pavetti, et al., Review of 
Sanction Policies and Research Studies: Final Literature Review, 
Mathematica Policy Research, Inc. (Washington, D.C.: Mar. 10, 2003), 
and Jacob Alex Klerman and Caroline Danielson, Why Did the Welfare 
Caseload Decline? RAND Labor and Population Working Paper (June 2004). 

[53] Federal law requires a reduction or termination in benefit if a 
family does not comply with work requirements, but states determine 
the specific sanction policies for failing to comply with work 
requirements. 42 U.S.C. § 607(e)(1). 

[54] In a 2000 report, we estimated that far more families have their 
benefits reduced because of rules violations than have their benefits 
cut off. GAO, Welfare Reform: State Sanctions Policies and Number of 
Families Affected, [hyperlink, 
http://www.gao.gov/products/GAO/HEHS-00-44] (Washington, D.C.: Mar. 
31, 2000). 

[55] Andrew Cherlin et al., "Operating within the Rules: Welfare 
Recipients' Experiences with Sanctions and Case Closings," Social 
Service Review, University of Chicago (September 2002). 

[56] By impairments, we mean both mental and physical conditions. For 
instance, impairments could be physical conditions that hinder 
movement or require a cane or other mobility device, cognitive 
impairments, or mental conditions such as chronic depression. 

[57] GAO, Welfare Reform: Former TANF Recipients with Impairments Less 
Likely to be Employed and More Likely to Receive Federal Supports, 
[hyperlink, http://www.gao.gov/products/GAO-03-210] (Washington, D.C.: 
December 2002). 

[58] A September 2009 report similarly noted that declines in the TANF 
cash assistance caseload were likely attributable to factors that are 
not easy to disentangle. See LaDonna Pavetti et al., Understanding 
Temporary Assistance for Needy Families Caseloads After Passage of the 
Deficit Reduction Act of 2005, Final Report, Mathematica Policy 
Research, Inc.(Washington, D.C.: Sept. 21, 2009). 

[59] In this section, whenever we discuss eligible participating and 
nonparticipating families, we mean those simulated (estimated) by the 
TRIM3 micreosimulation model to be eligible participants and 
nonparticipants. TRIM3 relies on the Annual Social and Economic 
Supplements (ASEC) to the Current Population Survey, as well as 
information from the Urban Institute's Welfare Rules Database to 
estimate eligibility based on state specific program rules and 
information on income and other eligibility criteria. The most recent 
data available were for 2005. In this section, estimates cited are on 
an annual basis. Any family that contains a TANF unit that was 
simulated by TRIM3 to receive benefits during any month of the year is 
considered to be participating in TANF, and each family receiving or 
eligible for TANF is counted once. In comparing the characteristics of 
TANF participants and eligible nonparticipants, differences are 
statistically significant at the 95 percent confidence level unless 
otherwise noted. See appendix I for details. 

[60] The total number of families in this analysis for 2005 is an 
annual estimate based on the TRIM3 model for families who were ever 
eligible for or ever received TANF cash assistance in that year. This 
estimate is larger than the HHS estimates used in figure 1, which are 
estimated monthly averages for each calendar year, primarily because 
the annual estimate casts a "bigger net" in identifying families who 
were ever eligible for or received TANF in a particular year. In 
addition, HHS estimates used in figure 1--from the 2008 Indicators of 
Welfare Dependence--include estimates for family units in the U.S. 
territories and units that consist solely of a pregnant woman, while 
our eligibility estimates do not include these units. Both estimates 
are based on the TRIM3 microsimulation model. Finally, the 1995 
baseline used in this analysis is not the originally-run 1995 
baseline, which was created in 1997. Instead, it was rerun for this 
analysis using the most recent version of the TRIM3 TANF module, in 
order to take advantage of corrections and improvements in methods. As 
noted earlier in this report, the total number of needy families 
receiving cash assistance in 2008--1.7 million--is monthly average 
caseload data from HHS for that year, and not estimates of cash 
recipients based on TRIM3. 

[61] In this analysis, the term adult without earnings refers to 
adults in the eligible TANF unit. In comparing the characteristics of 
participants and nonparticipants, data cited are statistically 
significant to the 95 percent confidence level unless otherwise noted. 

[62] See Mark Nord, et al., Household Food Security in the United 
States, 2008, U.S. Dept. of Agriculture, Economic Research Service 
(Washington, D.C.: November 2009). We were not able to identify 
studies on hardships distinguishing between TANF recipients and non-
recipients. 

[63] When we analyzed median incomes, median income was based on all 
related persons living in the household, not solely the eligible TANF 
unit. In this analysis, the distinction between participants and 
nonparticipants reflects one point in time--the year 2005. 
Nonparticipating eligible families may at some time apply for cash 
assistance, and TANF families may also leave cash assistance for 
personal or other reasons, such as being sanctioned for noncompliance. 

[64] Families are counted as receiving a particular type of income or 
benefit if at least one person in the family is simulated by TRIM3 to 
be receiving that type of income or benefit at any point during the 
year. 

[65] Only child care subsidies funded by CCDF are captured by TRIM3. 
These estimates do not reflect families receiving child care subsidies 
from other sources of funding. 

[66] A considerable body of work discusses such families, who are 
often described as "disconnected" from the workforce. In addition to 
[hyperlink, http://www.gao.gov/products/GAO-01-368] and [hyperlink, 
http://www.gao.gov/products/GAO-03-210], see, for example, Rebecca 
Blank and Brian Kovak, The Growing Problem of Disconnected Single 
Mothers (Ann Arbor, Mich.: University of Michigan, National Poverty 
Center Working Paper Series #07-28, revised January 2008), and Sheila 
R. Zedlewski, et al., Families Coping without Earnings or Government 
Cash Assistance (Washington, D.C.: The Urban Institute, February 2003). 

[67] While there is no federal prohibition against receiving both TANF 
and SSI, individuals who receive SSI do not qualify for TANF in nearly 
all states. However, other family members who do not receive SSI would 
continue to be eligible for TANF. 

[68] SSI is the only disability-related cash assistance program 
simulated by TRIM3. Some families may receive disability-related 
payments from other programs the model does not simulate, such as 
Workers Compensation. In an earlier report, we found that families who 
left TANF cash assistance who had impairments were more likely than 
leavers without impairments to report having no income--from personal 
earnings, household earnings, or SSI benefits--in their first month 
after exiting TANF. See [hyperlink, 
http://www.gao.gov/products/GAO-03-210]. 

[69] In this section, whenever we discuss eligible participating and 
nonparticipating families, we mean those simulated (estimated) by the 
TRIM3 model to be eligible participants and nonparticipants. See 
appendix I for details. 

[70] This estimate for the number of children in extreme poverty is an 
annual figure. 

[71] To impose the 1995 AFDC participation rate of 84 percent on the 
2005 population, we started from each family's probability of 
participation as produced by TRIM3's baseline simulation. We applied 
an additional across-the-board adjustment factor to increase each 
family's probability of participation until the desired participation 
rate was reached. For this high participation rate scenario, we did 
not modify cash benefit levels. We kept the population and the TANF 
rules, including monthly benefit levels, at their 2005 levels. At this 
higher participation rate, we estimated that 4.0 million children in 
the United States would have been in extreme poverty in 2005. 

[72] A substantial portion of TANF-eligible families was in extreme 
poverty in 2005. According to our TRIM3 analysis, at least 35 percent 
of families who were eligible for TANF in at least one month of 2005-- 
but who did not participate in the program--were in extreme poverty. 
Not all children who are in extreme poverty live in families that are 
eligible for TANF, because of varying eligibility standards for TANF 
among the states. 

[73] The median income of families in extreme poverty includes 
eligible families who are not participating in TANF as well as those 
who are. Therefore, the income gained due to TANF cash assistance is 
averaged across all families in extreme poverty. 

[74] Earnings are based on the assumption that families in extreme 
poverty work 10 hours a week at the Illinois minimum wage of $8 per 
hour, roughly half of median earnings of TANF families containing one 
adult and two children according to our analysis of 2005 TANF 
participants. Families participating in the TANF program must assign 
their rights to child support to the state and do not receive the full 
amount of child support paid by the absent parent. 

[75] The income figures in this analysis of extreme poverty differ 
from the income figures in the previous analysis discussing the 11 
percent of nonparticipating families who were not employed and not 
receiving SSI. The income figures in the previous analysis were based 
on a small subset of TANF-eligible, but nonparticipating families in 
2005. The estimates we use in discussing the impact of increased TANF 
participation on poverty represent potential earnings for two types of 
TANF-eligible families in extreme poverty--a single parent with one 
child and a single parent with two children. 

[76] The effect of the EITC and non-cash benefits such as SNAP and 
housing subsidies are not presented in these calculations because they 
are not included in the official measure of poverty. 

[77] According to our TRIM3 analysis, an estimated 12.5 million 
children were in poverty in 2005. Although reducing child poverty is 
not a formal goal of the TANF program, TANF cash assistance is 
designed for low-income families, and TANF recipient families 
typically have incomes below poverty. 

[78] Some families may not see a net increase in their annual income 
by the full amount of the TANF benefit because other programs such as 
SNAP count TANF benefits in determining income eligibility, as 
discussed earlier in this report. 

[79] Published by HHS, the poverty guidelines are used for determining 
the income eligibility of individuals and families for need-based 
assistance in some federal programs. Although the guidelines reflect 
variations in family size, the poverty guidelines--unlike the poverty 
thresholds--do not reflect variations in the age group of the family 
members. 

[80] Income eligibility thresholds incorporate monthly earnings limits 
and limits on assets and depend on a number of different factors 
associated with a family's circumstances. 

[81] This range represents the continental United States. Alaska and 
Hawaii have higher federal poverty guidelines than the rest of the 
country. 

[82] The median income of families in poverty includes families who 
are not participating in TANF as well as those who are. Therefore, the 
income gained by TANF cash assistance is averaged across all families 
in poverty. 

[83] Each family was assumed to have one working adult, earning $632 
per month. This is the median earnings of TANF families containing one 
adult and two children according to our analysis of 2005 participants. 
It is also the amount one would earn by working 18 hours per week at 
the Illinois minimum wage of $8 per hour. Families participating in 
the TANF program must assign their rights to child support to the 
state and do not receive the full amount of child support paid by the 
absent parent. 

[84] In this discussion of caseload changes during the recession, the 
TANF caseload numbers include participants in states' separate state 
programs (SSP), which are funded with state MOE dollars. 

[85] Pennsylvania and Rhode Island could not provide comparable 
caseload numbers for this analysis. 

[86] Child-only cases are those in which there is no adult recipient 
of assistance. There are four main categories of "child-only" cases: 
(1) the parent is disabled and receiving SSI; (2) the parent is a 
noncitizen and therefore ineligible; (3) the child is living with a 
nonparent relative; and (4) the parent has been sanctioned and removed 
from cash assistance for failing to comply with program requirements, 
and the family's benefit has been correspondingly reduced. Guardians 
in child-only cases are not subject to work requirements. 

[87] The three states in which the solely state-funded program's 
caseload declined were New Jersey, where the TANF caseload also 
declined and at roughly the same rate; New Hampshire, which eliminated 
a portion of its solely state-funded program because of state budget 
constraints; and Rhode Island, which discontinued benefits to children 
whose parents had reached their time limit in October 2008 and 
eliminated the program as of June 2009. The caseloads for solely state-
funded programs in Mississippi and Pennsylvania remained relatively 
unchanged. For the purposes of this report, we refer to the District 
of Columbia as a state. 

[88] Prior to the reauthorization of TANF in 2006, states had used 
SSPs for this purpose. However, after reauthorization, SSP/MOE-funded 
programs became subject to TANF requirements and recipients were 
subject to the same work participation requirements as TANF recipients. 

[89] Analyses of cash assistance caseload data for 2005 in the 
previous three sections of this report provide a comprehensive 
characterization of the cash assistance caseload because they reflect 
both TANF cash assistance and SSP caseload data combined for 2005. 
Solely state-funded programs were not implemented until fiscal year 
2007. 

[90] Omitting solely state-funded families in calculating the number 
of families receiving cash assistance could lead to underestimating 
the extent of caseload growth or overestimating the extent of caseload 
decline. 

[91] Unemployment benefits had been extended, in some states, to 79 
weeks. UI recipients often cannot qualify for TANF until their UI 
benefits have been fully expended, since monthly UI benefits often 
exceed the maximum income that states allow to be eligible for TANF. 

[92] TANF block grant and MOE spending are two components of federal, 
state, and local spending on a range of programs aimed at serving low- 
income and needy populations. In this section, we will refer to them 
collectively as TANF-related spending. 

[93] GAO, Welfare Reform: Better Information Needed to Understand 
Trends in States' Uses of the TANF Block Grant, [hyperlink, 
http://www.gao.gov/products/GAO-06-414] (Washington, D.C.: March 2006). 

[94] Of the four states that reduced TANF-related spending for family 
and/or work supports, one cut spending for child care and three made 
cuts to employment-related programs. 

[95] Six of these states applied for Emergency Contingency Fund on the 
basis of increases in cash assistance spending due to caseload 
increases. One of these states also applied because of spending 
increases for non-recurring benefits and two applied because of 
spending increases for subsidized employment. 

[96] One state said that TANF-related spending on certain family and 
work supports, particularly child care, may decrease in the coming 
year because additional ARRA funds are available for this specific 
purpose. Using ARRA child care funds would free up TANF funds to 
address increases in families receiving cash assistance in this state. 

[97] The TRIM3 model uses the U.S. Census Bureau's Current Population 
Survey (CPS) and the Welfare Rules Database (maintained at the Urban 
Institute under HHS funding) to simulate eligibility based on state- 
specific program rules and information on income and other eligibility 
criteria. The Welfare Rules Database provides a longitudinal account 
of the changes in welfare rules in all 50 states and the District of 
Columbia. The database organizes the detailed information on welfare 
rules across states, time, and geographic areas within states and 
different types of assistance units. Caseworker manuals and state 
regulations provide the data from 1997 to the present, while AFDC 
State Plans and Waiver Terms and Conditions provide the data for years 
prior to 1997. GAO did not conduct a legal analysis of state laws or 
requirements for state cash assistance programs. 

[98] After we initiated our interviews, the researcher who was 
affiliated with the American Enterprise Institute moved to the 
University of Maryland (School of Public Policy). 

[99] For the purposes of this report, we refer to the District of 
Columbia as a state. 

[100] Prior to the 2006 reauthorization of TANF, the families served 
by SSPs were not subject to TANF work requirements. During that time, 
SSPs often served families that states believed were unable to meet 
mandatory work requirements, such as parents with disabilities. This 
was changed in reauthorization, when families in these programs became 
subject to federal TANF work requirements. 

[101] For information on how we selected states for telephone 
interviews of TANF administrators, see the description of our 
methodology for obtaining information on state caseload changes in the 
current recession. 

[End of section] 

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