Enactment of the Deficit Reduction Act of 2005 (DRA, P.L. 109-171) ended more than four years of congressional debate on “reauthorizing” the block grant of Temporary Assistance for Needy Families (TANF). The DRA extended funding for most TANF grants through FY2010, except TANF supplemental grants which expire after FY2008. Supplemental grants go to 17 states that have high population growth or low historic funding in TANF’s predecessor programs per poor person.
TANF is best known as the funding source for welfare benefits for low-income families with children. In 2005, about two million families per month received TANF cash welfare, down from the historical high of five million families receiving cash welfare in the mid-1990s. In 2005, about three in ten poor children were in families that received TANF cash welfare. However, TANF funds a wide range of “nonwelfare” benefits and services for needy families with children. In FY2005, spending on activities related to traditional cash welfare accounted for a little more than half of total TANF funding, while other “nonwelfare” activities accounted for the remainder. Still, most issues that Congress has debated in the past, and will potentially consider in the 110th Congress, relate to TANF cash welfare.
The DRA revised the rules relating to TANF work participation standards for families receiving welfare, by requiring states to either increase participation in activities or reduce their welfare caseloads to meet these numerical performance standards. Many states had to act quickly to avoid failing these standards, which were effective in FY2007. Further, states must engage 90% of their two-parent welfare caseload in activities — a fairly high standard that President Bush’s FY2008 budget seeks to eliminate. The DRA also required the Department of Health and Human Services (HHS) to issue regulations defining the specific activities that may be counted toward the participation standards. The regulations, published June 29, 2006, clarified that the participation standards focus on work or short-term job preparation. This raises old issues of whether a “work-first” orientation is best for those who have barriers to employment, such as very low levels of educational attainment or disabilities.
Congress might consider proposals left over from TANF reauthorization proposals, but not included in DRA, to loosen some rules for nonwelfare spending, such as allowing carry-over funds to be used for nonwelfare benefits and services and to consider any TANF child care or transportation benefits “nonwelfare” and not subject to the rules associated with welfare benefits. Congress might also consider improving the information available on how TANF funds are used for nonwelfare benefits. Additionally, legislation that affects foster care, child welfare services for abused and neglected children, and child care funding would have an effect on TANF, since large amounts of TANF “nonwelfare” dollars are used to supplement dedicated federal and state funding for these programs. This report will be updated as legislative events warrant.