Many policymakers continue to claim that the 1996 welfare reform law which created the Temporary Assistance for Needy Families (TANF) program was a major success. They see the TANF program’s design and block grant structure as a model for the reform of other safety net programs.
TANF’s record over the last 15 years shows, however, that its role as a safety net has declined sharply over time. (See Figure 1). In 1996, for every 100 families with children living in poverty, TANF provided cash aid to 68 families. By 2010, it provided cash assistance to only 27 such families for every 100 in poverty. (We refer to this as the TANF-to-poverty ratio.)
- Sharply declining TANF caseloads are the main reason for the fall in the TANF-to-poverty ratio. The national TANF caseload declined by 58 percent between 1995 and 2010, from 4.7 million to 2.0 million. TANF caseloads declined by at least 27 percent in every state and by more than 50 percent in 36 states. Meanwhile, the number of families with children in poverty increased by 17 percent over this period, from 6.2 million to 7.3 million, and the number of poor children climbed by 12 percent, or by 1.7 million children.
- The TANF-to-poverty ratio fell in all states but especially sharply in some. In 1994-95, almost half of the states had a ratio higher than 75 (in other words, in these states, more than 75 families with children received cash aid for every 100 living in poverty); in 2009-10, none did. In 1994-95, no state had a ratio lower than 25; in 2009-10, half of the states did.States in the Northeast had the highest TANF-to-poverty ratios in both 1994-95 and 2009-10, while the states in the South had the lowest. However, the average ratios fell in all four regions. The average ratio fell from 97 to 44 in the Northeast, from 72 to 26 in the West, from 72 to 27 in the Midwest, and from 64 to 18 in the South.
- TANF’s declining role as a safety net has far-reaching consequences. In 1995, TANF’s predecessor, Aid to Families with Dependent Children, lifted out of deep poverty 62 percent of the children who otherwise would have been below half of the poverty line; by 2005, this figure for TANF was just 21 percent. TANF programs in states with a very low TANF-to-poverty ratio do little to protect children from deep poverty.Evidence suggests that poverty among young children not only slows them in school but also shrinks their earnings as adults. Poverty researchers Greg J. Duncan of the University of California, Irvine and Katherine Magnuson of the University of Wisconsin found that among families with incomes below $25,000, children whose families received a $3,000 annual income boost when the children were under age 6 earned 17 percent more as adults, and worked 135 more hours per year after age 25, than otherwise-similar children whose families didn’t receive the income boost.
- Problems with TANF’s block grant structure, work participation rate, and Contingency Fund have weakened TANF’s effectiveness as a safety net for poor families. Since TANF’s inception, states have taken advantage of the block grant’s flexibility. When TANF caseloads declined in the late 1990s as the unemployment rate fell to 4 percent, they shifted TANF funds to other purposes, such as child care. However, when the economy slowed and the need for cash assistance substantially increased, states were unable to reclaim those dollars to help the growing number of families that needed it; instead, they responded by cutting TANF benefits and tightening eligibility rules, often by shortening or tightening time limits. Also, because the TANF block grant is fixed at $16.6 billion a year, inflation has eroded its value by almost 30 percent since TANF’s creation in 1996.States’ primary performance measure under TANF, the work participation rate, discourages states from assisting families in the greatest need. States are more likely to meet the rate if they assist families that already have some education, skills, and/or work experience and have the best chance of either securing employment or participating in a narrowly defined set of work activities. States can identify such families in various ways, and many states do so. As a result, the families that most need a safety net are the leastlikely to have access to it.In establishing TANF in 1996, Congress created the Contingency Fund to give states additional federal funds to respond to increased needs during economic downturns. However, the Contingency Fund has never worked the way it was intended, for reasons such as insufficient funding and overly restrictive rules for when states can access the Fund.
- Policymakers can strengthen TANF’s role as a safety net for very poor families. When Congress reauthorizes TANF — which could occur in 2012 — it should redesign the Contingency Fund so more states can make use of it in difficult economic times, establish a new performance measure that maintains TANF’s emphasis on work without rewarding states for simply removing families from the TANF caseload, and expand the types of work-preparation and work-promoting activities that states can count toward the work requirement, among other reforms.
This paper uses the TANF-to-poverty ratio — the ratio of families receiving TANF cash assistance to the number of families in poverty — to describe how TANF’s role in helping poor families has declined over time. The ratio is calculated by dividing the number of TANF cases (based on administrative data from the U.S. Department of Health and Human Services or, since 2006, data collected from states by CBPP) by the number of families with children in poverty from the Census Bureau’s Current Population Survey (CPS). We use two-year averages for our state-level calculations in order to improve the reliability of the data. (See the methodology appendix for further details. See the text box on the following page for a discussion of other measures of TANF’s effectiveness as a safety net.)