Welfare Reform:

Better Information Needed to Understand Trends in States' Uses of the TANF Block Grant

GAO-06-414: Published: Mar 3, 2006. Publicly Released: Apr 3, 2006.

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Stanley J. Czerwinski
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Under the Temporary Assistance for Needy Families (TANF) block grant created as part of the 1996 welfare reforms, states have the authority to make key decisions about how to allocate federal and state funds to assist low-income families. States also make key decisions, through their budget processes, about federal and state funds associated with other programs providing assistance for the low-income population. States' increased flexibility under TANF as well as the budgetary stresses they experienced after a recession draw attention to the fiscal partnership between the federal government and states. To update GAO's previous work, this report examines (1) changes in the overall level of welfare-related spending; (2) changes in spending priorities for welfare-related nonhealth services; and (3) the contribution of TANF funds to states' spending for welfare-related services. GAO reviewed spending in nine states for state fiscal years 1995, 2000, and 2004 and focused on spending for working-age adults and children, excluding the elderly, long-term and institutional care.

GAO found that spending for low-income people for health and nonhealth services in nine states generally increased in real terms from 1995 to 2000 and from 2000 to 2004. Health spending, excluding spending for the elderly, outpaced nonhealth spending over the decade and now consumes an even greater share of total spending for low-income people, mirroring a nationwide expansion in health care costs. Spending increases were substantially supported by both federal and state funds in the health and nonhealth areas in each time period, reflecting the important federal-state partnership supporting these low-income programs. Overall, spending increases reflected changes in eligible populations and needs, increasing costs, as well as policy changes. While nonhealth spending increased in real terms, spending priorities shifted away from cash assistance to other forms of aid, particularly work supports, in keeping with welfare reform goals. The largest increases for noncash services occurred from 1995 to 2000, with smaller increases from 2000 to 2004, when some state officials cited challenges in maintaining services. By 2004, states used federal and state TANF funds to support a broad range of services, in contrast to 1995 when spending priorities focused more on cash assistance. However, reporting and oversight mechanisms have not kept pace with the evolving role of TANF funds in state budgets, leaving information gaps at the national level related to numbers served and how states use funds to meet welfare reform goals, hampering oversight. Any efforts to address these gaps should strike an appropriate balance between flexibility for state grantees and accountability for federal funds and goals.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: When Congress reauthorized TANF through the Deficit Reduction Act of 2005, it broadened the population of TANF recipients covered by performance standards and strengthened work and reporting requirements. It also required HHS, the oversight agency, to issue new regulations to improve accountability for state TANF programs. HHS issued interim regulations in June 2006 and final regulations in February 2008.

    Matter: To better inform its oversight and decision-making process, Congress may wish to consider ways to address two key information gaps for the TANF block grant: (1) insufficient information on the numbers served by TANF funds and (2) limited information on how funds are used--for example, on which target populations and as part of what strategies and approaches--to meet TANF goals.

  2. Status: Closed - Implemented

    Comments: When the TANF grant program was reauthorized in 2005, HHS was required to issue new regulations to improve accountability for state TANF programs. HHS issued interim regulations in June 2006 and final regulations in February 2008 to enhance its oversight of the program.

    Matter: Efforts to obtain more information must take into account how to do so in the most cost-effective and least burdensome way. Some options include Congress directing the Secretary of the Department of Health and Human Services (HHS) to require states to include more information in state TANF plans filed with HHS on their strategies and approaches for using funds; require states to include more information on all aspects of TANF spending in the annual reports they must file with HHS; and revise other reporting requirements regarding the uses and recipients of TANF-related funds. Congress may wish to require the Secretary to consult with key welfare reform stakeholders in assessing and revising reporting requirements or information-gathering strategies.


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