Welfare Reform: States Provide TANF-Funded Services to Many Low-Income Families Who Do Not Receive Cash Assistance

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 ended the Aid to Families with Dependent Children program and created the Temporary Assistance for Needy Families (TANF) block grant to states. TANF emphasizes work and responsibility over dependence on government benefits. It also requires states to maintain a historical level of spending on welfare-related programs. The focus of welfare spending has shifted from monthly cash payments to services. Between fiscal years 1995 and 2000, state expenditures for cash assistance decreased from 71 to 43 percent of total welfare spending. In fiscal year 2000, 26 states used more than half of their TANF and state maintenance-of-effort (MOE) expenditures on services other than cash assistance. In fiscal year 1995, no state spent more than 50 percent of its welfare dollars on these services. In addition to providing benefits and services to families included in the welfare caseload, states are also using TANF/MOE funds to provide services to other low-income families. GAO estimates that at least 46 percent more families than counted in TANF caseload reports are receiving services funded, at least, in part, by TANF/MOE funds. The data on families receiving services are limited in providing a full count of all families provided with TANF/MOE funds. The impact of an economic downturn on funding for work support programs is unclear and will depend on such factors as the extent to which welfare caseloads increase, whether states have TANF reserves available, and the budgetary decisions states make to address the costs associated with increased caseloads.