Temporary Assistance for Needy Families
Implications of Caseload and Program Changes for Families and Program Monitoring Gao ID: GAO-10-815T September 21, 2010The Temporary Assistance for Needy Families (TANF) program, created in 1996, is one of the key federal funding streams provided to states to assist women and children in poverty. A critical aspect of TANF has been its focus on employment and self-sufficiency, and the primary means to measure state efforts in this area has been TANF's work participation rate requirements. Legislative changes in 2005 were generally expected to strengthen these work requirements. Given changes in the number of families participating in TANF over time and questions about whether the program is achieving its goals, this testimony draws on previous GAO work to focus on 1) key changes to state welfare programs made in response to TANF and other legislation and their effect on caseload trends; 2) how low-income single-parent families are faring; and 3) how recent developments in state programs and the economy may affect federal monitoring of TANF. To address these issues, in previous work conducted from November 2008 to May 2010, GAO analyzed state data reported to the Department of Health and Human Services; used microsimulation analyses; surveyed state TANF administrators in 50 states and the District of Columbia; interviewed officials in 21 states selected to represent a range of economic conditions and TANF policy decisions; conducted site visits to Florida, Ohio, and Oregon; and reviewed relevant federal laws, regulations, and research.
Changes states made to their welfare programs as they implemented TANF contributed to a significant decline in program participation, but caseloads are starting to increase in many states. 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 families poor enough to be eligible for cash assistance. However, research shows that state policies--including TANF work requirements, time limits, and sanction and diversion policies--also contributed to the caseload decline, as fewer eligible families participated in the program. In recent years, states have varied in their response to changes in economic conditions, with caseloads rising in 37 states and falling in 13 states between December 2007 and September 2009, the latest data available when we did our work. Like TANF recipients, families who left TANF, as well as those who qualified for the program but who did not participate, had low incomes and continued to rely on other government supports. In the years following welfare reform, many of the parents who left cash assistance found employment, and some were better off than they were on welfare, but earnings were typically low and many worked in unstable, low-wage jobs with few benefits. Among eligible families who did not participate, a small subset did not work and had very low incomes. Efforts to measure states' engagement of TANF recipients in work activities and to monitor states' use of all TANF funds have been of limited use in ensuring accountability for meeting federal TANF goals, according to our analysis. Work participation rates--a key performance measure for TANF, as currently measured and reported, do not appear to be achieving the intended purpose of encouraging states to engage specified proportions of TANF recipients in work activities. In addition, states' decisions to shift their spending from cash assistance to other programs and work supports such as childcare have highlighted gaps in the information available at the federal level on how many families received TANF services and how states used funds to meet TANF goals. A central feature of the TANF block grant is the flexibility it provides to states to design and implement welfare programs tailored to address their own circumstances, but this flexibility must be balanced with mechanisms to ensure state programs are held accountable for meeting program goals. The limited usefulness of current measures of work participation and the lack of information on how states use funds to aid families and to meet TANF goals hinders decision makers in considering the success of TANF and what trade offs might be involved in any changes to TANF when it is reauthorized.
GAO-10-815T, Temporary Assistance for Needy Families: Implications of Caseload and Program Changes for Families and Program Monitoring
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Testimony:
Before the Committee on Finance, U.S. Senate:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 10:00 a.m. EST:
Tuesday, September 21, 2010:
Temporary Assistance For Needy Families:
Implications of Caseload and Program Changes for Families and Program
Monitoring:
Statement of Kay E. Brown, Director:
Education, Workforce, and Income Security:
GAO-10-815T:
GAO Highlights:
Highlights of GAO-10-815T, a testimony before the Committee on
Finance, U.S. Senate.
Why GAO Did This Study:
The Temporary Assistance for Needy Families (TANF) program, created in
1996, is one of the key federal funding streams provided to states to
assist women and children in poverty. A critical aspect of TANF has
been its focus on employment and self-sufficiency, and the primary
means to measure state efforts in this area has been TANF‘s work
participation rate requirements. Legislative changes in 2005 were
generally expected to strengthen these work requirements. Given
changes in the number of families participating in TANF over time and
questions about whether the program is achieving its goals, this
testimony draws on previous GAO work to focus on 1) key changes to
state welfare programs made in response to TANF and other legislation
and their effect on caseload trends; 2) how low-income single-parent
families are faring; and 3) how recent developments in state programs
and the economy may affect federal monitoring of TANF. To address
these issues, in previous work conducted from November 2008 to May
2010, GAO analyzed state data reported to the Department of Health and
Human Services; used microsimulation analyses; surveyed state TANF
administrators in 50 states and the District of Columbia; interviewed
officials in 21 states selected to represent a range of economic
conditions and TANF policy decisions; conducted site visits to
Florida, Ohio, and Oregon; and reviewed relevant federal laws,
regulations, and research.
What GAO Found:
Changes states made to their welfare programs as they implemented TANF
contributed to a significant decline in program participation, but
caseloads are starting to increase in many states. 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 families poor
enough to be eligible for cash assistance. However, research shows
that state policies”including TANF work requirements, time limits, and
sanction and diversion policies”also contributed to the caseload
decline, as fewer eligible families participated in the program. In
recent years, states have varied in their response to changes in
economic conditions, with caseloads rising in 37 states and falling in
13 states between December 2007 and September 2009, the latest data
available when we did our work.
Like TANF recipients, families who left TANF, as well as those who
qualified for the program but who did not participate, had low incomes
and continued to rely on other government supports. In the years
following welfare reform, many of the parents who left cash assistance
found employment, and some were better off than they were on welfare,
but earnings were typically low and many worked in unstable, low-wage
jobs with few benefits. Among eligible families who did not
participate, a small subset did not work and had very low incomes.
Efforts to measure states‘ engagement of TANF recipients in work
activities and to monitor states‘ use of all TANF funds have been of
limited use in ensuring accountability for meeting federal TANF goals,
according to our analysis. Work participation rates”a key performance
measure for TANF, as currently measured and reported, do not appear to
be achieving the intended purpose of encouraging states to engage
specified proportions of TANF recipients in work activities. In
addition, states‘ decisions to shift their spending from cash
assistance to other programs and work supports such as childcare have
highlighted gaps in the information available at the federal level on
how many families received TANF services and how states used funds to
meet TANF goals.
A central feature of the TANF block grant is the flexibility it
provides to states to design and implement welfare programs tailored
to address their own circumstances, but this flexibility must be
balanced with mechanisms to ensure state programs are held accountable
for meeting program goals. The limited usefulness of current measures
of work participation and the lack of information on how states use
funds to aid families and to meet TANF goals hinders decision makers
in considering the success of TANF and what trade offs might be
involved in any changes to TANF when it is reauthorized.
View [hyperlink, http://www.gao.gov/products/GAO-10-815T] or key
components. For more information, contact Kay E. Brown at (202) 512-
7215 or BrownKE@gao.gov.
[End of section]
Mr. Chairman and Members of the Committee:
I am pleased to have the opportunity to participate in today's
discussion of women in poverty. I will focus on the role of the
Temporary Assistance for Needy Families (TANF) program in providing
assistance to this population. As you know, many families receiving
TANF cash assistance are headed by single parents, and because the
vast majority of those parents are women, the $16.5 billion TANF block
grant is one of the key federal funding streams provided to states to
assist women and children in poverty. The Bureau of the Census just
released last week poverty statistics for 2009 and the poverty rate
for children is now at 20.7 percent, the highest it has been this
decade. My remarks today are mainly based on two of our recent reports
entitled TANF: Fewer Eligible Families Have Received Cash Assistance
Since the 1990s, and the Recession's Impact on Caseloads Varies by
State; and TANF: Implications of Recent Legislative and Economic
Changes for State Programs and Work Participation Rates.[Footnote 1]
As you know, the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (PRWORA) introduced sweeping changes to
federal welfare policy. PRWORA ended Aid to Families with Dependent
Children (AFDC), which entitled eligible families to monthly cash
payments, and created TANF, a capped block grant that emphasizes
employment and work supports for most families who receive cash
assistance. Under the TANF block grant program, states receive a
capped amount of federal funds to design and operate their own welfare
programs within federal guidelines. The Department of Health and Human
Services (HHS) administers the TANF program, which provides states
with up to about $16.5 billion each year in TANF block grant funds,
and each state must contribute a specified level of its own funds to
qualify for the grant. Within certain limitations, states set their
own eligibility limits and benefit levels for cash recipients, but
they must restrict most families to a lifetime limit of 60 months of
federally funded TANF cash assistance. Central to TANF's focus on
employment and self-sufficiency are TANF's work participation rate
requirements, which require states to involve a minimum percentage of
their families receiving TANF cash assistance in work activities for a
required number of hours each week.
Recently, several legislative and economic changes have affected TANF.
First, with the reauthorization of the TANF block grant through the
Deficit Reduction Act of 2005 (DRA), the Congress took steps generally
expected to strengthen TANF work requirements by modifying the credit
provided to states for reducing the number of families receiving TANF.
Following DRA, the U.S. economy experienced a severe recession and, in
response, the Congress passed the American Recovery and Reinvestment
Act of 2009 (Recovery Act) which included provisions affecting TANF
such as the creation of a $5 billion Emergency Contingency Fund for
state TANF programs. States qualify for this fund based on increases
in expenditures for short -term non-recurrent benefits or subsidized
employment or increases in the number of families receiving cash
assistance. This fund supplemented the TANF contingency fund, which
under PRWORA had made up to $2 billion available to states.
With the creation of TANF, the number of families who received 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
in 2008. More recently, however, caseloads have begun to rise in some
states. Recent changes in state TANF programs made in response to DRA
as well as changes in the economy have raised questions about how the
program has affected low-income families over time and how best to
monitor TANF's progress in meeting two of its key goals--to provide
assistance to needy families so that children may be cared for in
their own homes or in the homes of relatives and to end the dependence
of needy families on government benefits by promoting job preparation,
work, and marriage.
My remarks today--based primarily on our February and May 2010
reports--will focus on the following three issues: (1) key changes
made to state welfare programs in response to TANF and other
legislation and the effect of these changes on caseload trends; (2)
how single parent families with children are faring, including those
who receive TANF cash assistance as well as those who are eligible but
do not receive assistance; and (3) the implications of recent
developments on monitoring state TANF programs.
We used multiple methodologies to develop our findings for these
reports. We reviewed and analyzed state TANF data reported to HHS;
reported on microsimulation analyses conducted for us by the Urban
Institute using a model known as TRIM3[Footnote 2]; reviewed relevant
federal laws, regulations, and guidance and relevant research on the
factors affecting the decline of cash recipient families; interviewed
HHS officials; surveyed state TANF administrators from the 50 states
and Washington, D.C.; interviewed TANF officials in 21 states, and
conducted site visits to meet with state and local TANF officials in
Florida, Ohio, and Oregon. The states we selected for interviews and
site visits had a range of economic conditions, caseloads, TANF
policies, and geographic diversity. We assessed the data we received
for data reliability and concluded that the data were sufficiently
reliable for the purposes of our report.
We conducted our work from November 2008 to May 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.
Changes to State TANF Programs Contributed to a Long-Term Decline in
Participation but Caseloads are Starting to Increase in Many States:
In response to the creation of TANF, states implemented more work-
focused welfare programs, and research shows that these changes--in
concert with other policy changes and economic conditions--contributed
to raising the incomes of single parent families so that fewer were
eligible for cash assistance. In designing and implementing their new
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.[Footnote 3] States also imposed financial
consequences, or sanctions, on families that did not comply with TANF
work or other requirements, strengthening the incentives for TANF
participants to comply with work requirements. Other concurrent policy
changes contributed to an increase in the share of single parents in
the labor force. These included an increase in the Earned Income Tax
Credit (EITC) in the 1990s and increases in the minimum wage in 1996
and 1997, both of which contributed to an increase in the returns to
work. Additional funds for federal and state work supports such as
child care also made it easier for single parents to enter the labor
force. Finally, the strong economy of the 1990s facilitated the move
from welfare to work for many TANF recipients. A decline in the
unemployment rate and strong economic growth contributed to the
widespread availability of job openings for workers of all skill
levels in many parts of the country. During this period, labor force
participation increased among single mothers, the population most
affected by TANF--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 welfare reform. Because
the incomes of many single-parent families increased as a result of
these policies, in total, 420,000 fewer families had incomes low
enough to be eligible for cash assistance in 2005 compared to 1995,
according to HHS data.
At the same time that some families worked more and had higher
incomes, others had income that left them still eligible for TANF cash
assistance; however, many of these eligible families were not
participating in the program. According to our estimates, the vast
majority--87 percent--of the caseload decline can be explained by the
decline in eligible families participating in the program, in part
because of changes to state welfare programs. (See Fig. 1). These
changes include mandatory work requirements, changes to application
procedures, lower benefits, and policies such as lifetime limits on
assistance, diversion policies, and sanctions for non-compliance,
according to a review of the research.
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: 5.69 million;
Participating in AFDC or TANF Cash Assistance Programs: 4.8 million;
Eligible but not participating: 890,000.
Year: 1996;
Eligible for AFDC or TANF Cash Assistance Programs: 5.62 million;
Participating in AFDC or TANF Cash Assistance Programs: 4.43 million;
Eligible but not participating: 1.2 million.
Year: 1997;
Eligible for AFDC or TANF Cash Assistance Programs: 5.41 million;
Participating in AFDC or TANF Cash Assistance Programs: 3.74 million;
Eligible but not participating: 1.67 million.
Year: 1998;
Eligible for AFDC or TANF Cash Assistance Programs: 5.47 million;
Participating in AFDC or TANF Cash Assistance Programs: 3.05 million;
Eligible but not participating: 2.42 million.
Year: 1999;
Eligible for AFDC or TANF Cash Assistance Programs: 5.07 million;
Participating in AFDC or TANF Cash Assistance Programs: 2.65 million;
Eligible but not participating: 2.42 million.
Year: 2000;
Eligible for AFDC or TANF Cash Assistance Programs: 4.44 million;
Participating in AFDC or TANF Cash Assistance Programs: 2.3 million;
Eligible but not participating: 2.13 million.
Year: 2001;
Eligible for AFDC or TANF Cash Assistance Programs: 4.56 million;
Participating in AFDC or TANF Cash Assistance Programs: 2.19 million;
Eligible but not participating: 2.37 million.
Year: 2002;
Eligible for AFDC or TANF Cash Assistance Programs: 4.55 million;
Participating in AFDC or TANF Cash Assistance Programs: 2.19 million;
Eligible but not participating: 2.36 million.
Year: 2003;
Eligible for AFDC or TANF Cash Assistance Programs: 4.77 million;
Participating in AFDC or TANF Cash Assistance Programs: 2.18 million;
Eligible but not participating: 2.59 million.
Year: 2004;
Eligible for AFDC or TANF Cash Assistance Programs: 5.22 million;
Participating in AFDC or TANF Cash Assistance Programs: 2.19 million;
Eligible but not participating: 3.03 million.
Year: 2005;
Eligible for AFDC or TANF Cash Assistance Programs: 5.27 million;
Participating in AFDC or TANF Cash Assistance Programs: 2.13 million;
Eligible but not participating: 3.14 million.
Source: GAO analysis of data from HHS's Indicators of Welfare
Dependence, based on the TRIM3 model.
Note: For estimates of families' eligibility and participation using
TRIM3, 2005 was the latest data that was publicly available when we
conducted our work. TRIM3 is a microsimulation model funded by HHS
that simulates major governmental tax, transfer, and health programs.
[End of figure]
While mandatory work activities assisted some participants in getting
jobs, according to a research synthesis conducted for HHS, these
mandates may have led other families to choose not to apply rather
than be expected to fulfill the requirement to work. Other families
may have found it more difficult to apply for or continue to
participate in the program, especially those with poor mental or
physical health or other characteristics that make employment
difficult. A decline in average cash benefits may also have
contributed to the decline in participation. Average cash benefits
under 2005 TANF rules were 17 percent lower than they were under 1995
AFDC rules, according to our TRIM3 estimates, as cash benefit levels
in many states have not been updated or kept pace with inflation.
Research also suggests that in response to lifetime limits on the
amount of time a family can receive cash assistance eligible families
may hold off on applying for cash assistance and "bank" their time, a
practice that could contribute to the decline in families' use of cash
assistance. In addition, fewer families may have applied or completed
applications for TANF cash assistance because of state policies and
practices for diverting applicants from cash assistance; nearly all
states have at least one type of diversion strategy, such as the use
of one-time nonrecurring benefits instead of monthly cash assistance.
Finally, some studies and researchers noted that 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.
During the recent economic recession, caseloads increased in some
states but decreased in others, as circumstances in individual states
as well as states' responses to the economic conditions varied.
Between December 2007 and September 2009, 37 states had increases in
the number of families receiving TANF cash assistance while 13 states
had decreases. However, the degree of change in families receiving
TANF cash assistance varied significantly by state, as some states
experienced caseload increases or decreases of over 25 percent while
others experienced minimal changes of 0 to 5 percent. Nationwide, the
total number of families receiving TANF cash assistance increased by 6
percent during this time period although the subset of two-parent
families receiving such assistance increased by 57 percent. Initially
few states reported reducing TANF-related spending on family and/or
work supports in response to the recession, instead using funding
sources such as the Emergency Contingency Fund created by the Recovery
Act to respond to rising caseloads and/or to establish or expand
subsidized employment programs. However, through their comments on our
national survey and during our site visits, state officials discussed
how the economic recession has caused changes to local TANF service
delivery in some states. A majority of state TANF officials
nationwide, as well as TANF officials from all eight localities we
visited, reported that they made changes in local offices' TANF
service delivery because of the economic recession.[Footnote 4]
Specifically, of the 31 states reporting such changes through our
survey, 22 had reduced the number of TANF staff, 11 had reduced work
hours at offices, and 7 had reduced the number of offices.[Footnote 5]
Officials in all three states we visited also reported that local TANF
caseworkers are now managing an increased number of TANF cash
assistance families per person. As a result of these increased
caseloads, along with tightened resources, local officials in all
three of the states we visited expressed their concerns that staff are
less able to provide services to meet TANF cash assistance families'
needs and move them toward self-sufficiency.
Most TANF Participants and Eligible Non-Recipients have Low Incomes,
and A Small Subgroup Have Very Low Incomes:
Research on how families are faring after welfare reform has shown
that, like those who receive TANF cash assistance, families that have
left welfare, either for work or for other reasons, tend to remain low
income and most depend in part on other public benefits. As we noted
in a 2005 report, most of the parents who left cash welfare found
employment and some were better off than they were on welfare, but
earnings were typically low and many worked in unstable, low-wage jobs
with few benefits and advancement opportunities.[Footnote 6] There is
evidence that some former TANF recipients have had better outcomes;
for example, a 2009 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 on TANF. [Footnote 7] However, even among
working families, many rely on government supports such as the EITC,
Medicaid, the Supplemental Nutrition Assistance Program (SNAP),
formerly known as the Food Stamp Program, and other programs to help
support their families and lift them out of poverty, as most parents
who recently left welfare are not earning enough to be self-
supporting. In addition, a considerable body of work has documented
families who are often described as "disconnected" from the workforce.
It is not yet known whether or to what extent the recession has led to
an increase in the number of these families.
A recent GAO analysis of the characteristics of low-income families
several years post-welfare reform found that while families who were
receiving TANF cash assistance in 2005 had low incomes, a third worked
full-time and most received other public supports, according to the
most recent data available. The median household income of families
receiving TANF cash assistance was $9,606 per year, not including
means-tested benefits. One third of families who received TANF cash
assistance at some point during the year (33 percent) were engaged in
full-time employment, while 44 percent were headed by an adult without
earnings. About a fifth (18 percent) of these families were headed by
an adult who had a work-limiting disability. The vast majority of
families receiving TANF cash assistance--91 percent--also received at
least one other public benefit, with most (88 percent) receiving
benefits from the Supplemental Nutritional Assistance Program (SNAP),
formerly known as the Food Stamp Program, and a smaller proportion
receiving subsidized housing (22 percent), child care subsidized by
the Child Care and Development Fund (CCDF) (11 percent), or
Supplemental Security Income (SSI), a cash assistance program for low-
income people with disabilities (22 percent). Only 16 percent of
families receiving cash assistance included married couples, and even
fewer--less than 10 percent--had income from an unmarried partner.
Many TANF eligible families do not participate in the program,
possibly because they left the program or because they did not apply.
Our analysis found that on average, these families had higher incomes
than TANF recipients, but median incomes remained low, a significant
proportion did not work full time, and many received public supports
other than TANF. Compared to TANF cash assistance recipients, eligible
non-recipients had higher median incomes ($15,000 per year) and higher
rates of full-time employment (44 percent). However, a significant
proportion of TANF-eligible non-recipient families--41 percent--were
headed by an adult without any earnings, and 11 percent had a work
limiting disability. A somewhat lower percentage of those eligible but
not receiving TANF cash assistance received other public benefits (66
percent received any benefit), but a majority lived in households that
received SNAP (59 percent). Receipt of other benefits was also
somewhat lower than among TANF recipients, with 13 percent receiving
subsidized housing, 8 percent receiving CCDF-subsidized child care,
and 18 percent receiving SSI. More eligible non-participating families
were headed by married couples than participating families, but no
more had income from an unmarried partner.
A small subgroup of families eligible for but not receiving TANF cash
assistance (732,000 families in 2005), did not work and did not
receive SSI benefits and this group has lower incomes than TANF
recipients and other eligible non-recipients. In addition, these
families also had lower receipt of other public benefits compared to
TANF recipients. Among families with no earned income that received
neither TANF nor SSI, the median income from all sources was $7,020,
an amount equal to about 45 percent of the federal poverty threshold
for a family consisting of one adult and two children. Twelve percent
of this group of families was headed by a parent who reported having a
work-limiting disability. The extent to which these families received
other public benefits was similar to that of other families eligible
but not participating in TANF, with 66 percent receiving any benefit.
Most (63 percent) received SNAP benefits while 18 percent received
subsidized housing, and 4 percent received CCDF-subsidized child care.
These more disadvantaged non-participants accounted for 11 percent of
all families who were eligible for TANF cash assistance in 2005.
Efforts to Measure States' Engagement of TANF Recipients in Work
Activities and to Monitor States' Use of All TANF Funds Fall Short:
Data on caseload trends, state policies, and how families are faring
can provide important insight into how TANF programs are working.
However, work participation rates--a key accountability feature of
TANF, as currently measured and reported--do not appear to be
achieving the intended purpose of encouraging states to engage
specified proportions of TANF adults in work activities. In addition,
as cash assistance caseloads fell, many states shifted their spending
away from cash assistance toward work supports such as child care,
highlighting information gaps at the federal level in how many
families received TANF services and how states used federal and state
MOE funds to meet TANF goals.
States Used Flexibilities Allowed in Law to Engage a Smaller Share of
Participants in Work Activities than Stated Goal:
To promote TANF's focus on work, HHS measures state performance by the
proportion of TANF participants engaged in allowable work activities.
States are expected to ensure that at least 50 percent of all families
receiving TANF cash assistance participate in one or more of 12
categories of work activities[Footnote 8] for an average of 30 hours
per week.[Footnote 9] PRWORA established penalties for states that did
not meet their required work participation rates and gave HHS the
authority to make determinations regarding these penalties.
However, states can take advantage of program options to make it
easier to meet their required rates. For example, states can annually
apply to HHS for a caseload reduction credit that generally decreased
the state's required work participation rates by the same percentage
that the state's caseload decreased since a specified year,
established as 1995 in PRWORA.[Footnote 10] Because of the significant
drop in caseload size, many states were able to reduce their required
work participation rate. In fact, 18 states reported caseload
reductions of at least 50 percent in fiscal year 2006, effectively
reducing their required work participation rate to zero. In addition,
states can modify the calculation of their work participation rates by
funding certain families with state maintenance-of-effort (MOE)
dollars[Footnote 11] rather than federal TANF block grant dollars. By
using state MOE dollars rather than federal dollars, states are able
to remove these families from the work participation rate calculation.
Between 2001 and 2006, all but two states met the participation rate
requirement, according to HHS data.[Footnote 12] However, nationally,
between 31 and 34 percent of families receiving cash assistance met
their work requirements during this time.
In 2006, DRA reauthorized the TANF block grant through fiscal year
2010 and made several modifications that were generally expected to
strengthen TANF work requirements intended to help more families
attain self-sufficiency, and to improve data reliability.[Footnote 13]
For example, DRA modified the caseload reduction credit by changing
the base year from 1995 to 2005, and it mandated that families
receiving cash assistance funded with state maintenance of effort
dollars be included in the calculation of the work participation
rates. It also directed HHS to issue regulations defining the 12 work
activities and included new requirements to better ensure the
reliability of work participation rate data.
We found that the proportion of families receiving TANF cash
assistance that met work participation requirements has changed little
since DRA was enacted and is still below the 50 percent generally
specified as the required rate. In fiscal years 2007 and 2008--the two
years following DRA for which national data are available--between 29
and 30 percent of families receiving TANF cash assistance met their
work requirements.[Footnote 14] In numbers of families, 243,000 of
816,000 families met their work requirements in fiscal year 2008. The
small decrease in the proportion of families that met their
requirements after DRA may be related, in part, to the federal work
activity definitions and tightened work hour reporting and
verification procedures states had to comply with after the act, as
well as states' ability to make the required changes.[Footnote 15]
The types of work activities in which families receiving TANF cash
assistance most frequently participated were similar before and after
DRA. For example, among families that met their work requirements, the
majority participated in unsubsidized employment in the years both
before and after DRA. In all of the years analyzed, the next most
frequent work activities were job search and job readiness assistance,
vocational educational training, and work experience. [Footnote 16]
Although the national rate did not change significantly, fewer states
met the required work participation rates after DRA, according to HHS
data.[Footnote 17] As before DRA, states used a variety of options and
strategies to meet their required work participation rate. For example:
* States continued to request caseload reduction credits to help lower
their required work participation rates; however, the credits were
significantly smaller after DRA, since caseloads went down less after
2005.
* Some states lowered their required rates by spending state MOE
dollars in excess of what is required under federal law on TANF-
related programs[Footnote 18] - a practice we found enabled 22 states
to meet their rates in 2007 and 14 states in 2008.[Footnote 19] Total
state MOE expenditures increased by almost $2 billion between fiscal
years 2006 and 2008, which appears to be related to state spending on
programs and services such as preventing and reducing out-of-wedlock
pregnancies.
* Some states used policies to ensure that families complying with
their individual work requirements were included in the work
participation rate calculation by, for example providing monthly cash
assistance to working families previously on TANF or about to lose
TANF eligibility because their working incomes placed them just above
eligibility thresholds. 18 states have implemented such programs since
DRA.
* In contrast, after DRA required that state maintenance of effort
dollars be included in the calculation of the work participation
rates, some states removed certain nonworking families from the
calculation of their rates by funding cash assistance for these
families with state dollars unconnected to the TANF program - a
practice we found in 29 states. We learned that states often use these
state-funded programs to provide cash assistance to families that
typically have the most difficulty meeting the TANF work requirements,
such as families with a disabled member or recent immigrants and
refugees.
In short, because of the various factors that affect the calculation
of states' work participation rates, the rate's usefulness as an
indicator of a state's effort to help participants achieve self-
sufficiency is limited. Moreover, the rate does not allow for clear
comparisons across state TANF programs or comparisons of individual
state programs over time. This is the same conclusion we reached in
our 2005 report that triggered some of the DRA changes to improve this
measure of states' performance. Further, our 2005 review before DRA
changes as well as the one we just completed in May of this year
indicate that the TANF work rate requirements as enacted, in
combination with the flexibility provided, may not serve as an
incentive for states to engage more families or to work with families
with complex needs. Many states have cited challenges in meeting work
performance standards under DRA, such as new requirements to verify
participants' actual activity hours and certain limitations on the
types and timing of activities that count toward meeting the
requirements. The TANF work rate requirements--as established in the
original legislation and revised in the Deficit Reduction Act--may not
yet have achieved the appropriate balance between flexibility for
states and accountability for federal TANF goals.
Reduced Cash Assistance Caseloads Freed Up TANF Funds for Purposes
Beyond Welfare-to-Work Programs But Limited Information Exists on Use
of These Funds:
The substantial decline in traditional cash assistance caseloads
combined with state spending flexibilities under the TANF block grant
allowed states to broaden their use of TANF funds. As a result, TANF
and MOE dollars played an increasing role in state budgets outside of
traditional cash assistance payments. In our 2006 report that reviewed
state budgets in nine states,[Footnote 20] we found that in the decade
since Congress created TANF, the states used their federal and state
TANF-related funds throughout their budgets for low-income
individuals, supporting a wide range of state priorities, such as
refundable state earned income credits for the working poor,
prekindergarten, child welfare services, mental health, and substance
abuse services, among others. While some of this spending, such as
that for child care assistance, relates directly to helping cash
assistance recipients leave and stay off the welfare rolls, other
spending is directed to a broader population that did not necessarily
ever receive welfare payments. This is in keeping with the broad
purposes of TANF specified in the law:
1. providing assistance so that children could be cared for in their
own homes or in the homes of relatives;
2. ending families' dependence on government benefits by promoting job
preparation, work, and marriage;
3. preventing and reducing the incidence of out-of-wedlock
pregnancies; and:
4. encouraging the formation and maintenance of two-parent families.
More recent data indicated that this trend has continued, even under
recessionary conditions. In fiscal year 2009, federal TANF and state
MOE expenditures for purposes other than cash assistance[Footnote 21]
totaled 70 percent of all expenditures compared with 27 percent in
fiscal year 1997, when states first implemented TANF, as shown in
figure 2. In addition, of the 21 states we surveyed for our February
2010 report, few reported that they had reduced federal TANF and MOE
spending for other purposes, such as child care and subsidized
employment programs, to offset increased expenditures for growth in
their cash assistance caseloads. States that increased spending on
cash assistance while maintaining or increasing spending for other
purposes did so by spending reserve funds, accessing the TANF
Contingency Fund, accessing the TANF Emergency Contingency Fund
created by the Recovery Act, or a combination of the three.[Footnote
22]
Figure 2: Expenditures for Cash Assistance and Other Purposes, Fiscal
Years 1997 and 2009:
[Refer to PDF for image: horizontal bar graph]
FY 1997:
Expenditures on cash assistance[A]: 73%;
All other expenditures: 27%.
FY 2009:
Expenditures on cash assistance[A]: 30%;
All other expenditures: 70%.
Source: GAO analysis of HHS TANF expenditure data.
Note: Expenditures for both cash assistance and other purposes totaled
$19.0 billion in fiscal year 1997 and $30.6 billion in fiscal year
2009. The fiscal year 2009 data include Recovery Act spending of $550
million. Excluding Recovery Act spending does not change the
percentages.
[End of figure]
This shift in spending left gaps in the information gathered at the
federal level to ensure state accountability. Because existing
oversight mechanisms focus on cash assistance, which no longer
accounts for the majority of TANF and MOE spending, we may be missing
important information on the total numbers served and how states use
TANF funds to help families to achieve program goals in ways beyond
their welfare-to-work programs. For example, states have used
significant portions of their TANF funds to augment their child care
subsidy programs, which often serve non-TANF families, yet we do not
know how many children are served or what role these subsidies play in
helping low-income families avoid welfare dependency, a key TANF goal.
Further, many states use TANF funds to fund a significant portion of
their child welfare programs. In effect, there is little information
on the numbers of people served by TANF-funded programs other than
cash assistance, and there is no real measure of workload or of how
services supported by TANF and MOE funds meet the goals of welfare
reform.
Another implication of changing caseloads relates to their changing
composition, with about half of the families receiving cash assistance
composed of cases with no adult receiving assistance in fiscal year
2008 compared with less than one-quarter in fiscal year 1998 (see fig.
3). 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. These families,
with parents or guardians not receiving TANF cash assistance and
generally not subject to work requirements, have not been the focus of
efforts to help families achieve self-sufficiency.
Figure 3: Proportion of Child-Only Families Receiving Cash Assistance,
Fiscal Year 1998 and Fiscal Year 2008:
[Refer to PDF for image: horizontal bar graph]
FY 1997:
Cases with an adult: 77%;
Cases with no adult receiving benefits: 23%.
FY 2009:
Cases with an adult: 50%;
Cases with no adult receiving benefits: 50%.
Source: GAO analysis of HHS data.
[End of figure]
Concluding Observations:
Nearly 15 years after the creation of TANF, the expected upcoming
reauthorization of the program has brought renewed interest to efforts
to assess how well the program is meeting the needs of low income
families with children--most headed by women--and putting them on a
path to self-sufficiency. While the dramatic decline in the TANF
caseload following welfare reform and the increase in employment among
single mothers has been cited as evidence for the program's success,
questions have been raised about its effect on families. Many who left
the rolls transitioned to low wage, unstable jobs, and research has
shown that a small subset of families who neither receive TANF nor
earn income may have been left behind. Following the recent economic
recession, poverty among children has climbed to its highest level in
years.
A central feature of the TANF block grant is the flexibility it
provides to states to design and implement welfare programs tailored
to address their own circumstances, but this flexibility must be
balanced with mechanisms to ensure state programs are held accountable
for meeting program goals. Over time we have learned that states'
success in engaging TANF cash assistance recipients in the type,
hours, and levels of work activities specified in the law has, in many
cases, been limited, though they have met the required targets using
the flexibility allowed. Although the DRA changes to TANF work
requirements were expected to strengthen the work participation rate
as a performance measure and move more families toward self-
sufficiency, the proportion of TANF recipients engaged in work
activities remains unchanged. States' use of the modifications allowed
in federal law and regulations, as well as states' policy choices,
have diminished the rates' usefulness as the national performance
measure for TANF, and shown it to be limited as an incentive for
states to engage more families or work with families with complex
needs. Furthermore, while states have devoted significant amounts of
the block grant funds as well as state funds to other activities,
little is known about use of these funds. Lack of information on how
states use these funds to aid families and to meet TANF goals hinders
decision makers in considering the success of TANF and what trade offs
might be involved in any changes to TANF when it is reauthorized.
We provided a draft of the reports we drew on for this testimony to
HHS for its review, and copies of the agency's written responses can
be found in the appendices of the relevant reports. In its comments,
HHS generally said that the reports were informative and did not
disagree with our findings.
Mr. Chairman, this concludes my statement. I would be pleased to
respond to any questions you or other Members of the Committee may
have.
GAO Contacts and Acknowledgments:
For questions about this statement, 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 statement. Individuals who made key contributions to this
testimony include Hedieh Rahmanou Fusfield, Rachel Frisk, Alexander G.
Galuten, Gale C. Harris, Kathryn A. Larin, and Deborah A. Signer.
[End of section]
Related GAO Products:
Temporary Assistance for Needy Families: Implications of Recent
Legislative and Economic Changes for State Programs and Work
Participation Rates, [hyperlink,
http://www.gao.gov/products/GAO-10-525.] Washington, D.C.: May 28, 2010.
Temporary Assistance for Needy Families: Implications of Changes in
Participation Rates, [hyperlink, http://www.gao.gov/products/GAO-10-495T].
Washington, D.C.: March 11, 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, [hyperlink,
http://www.gao.gov/products/GAO-10-164]. Washington, D.C.: February
23, 2010.
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.
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: 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.
[End of section]
Footnotes:
[1] See [hyperlink, http://www.gao.gov/products/GAO-10-164]
(Washington, D.C.: February 23, 2010) and [hyperlink,
http://www.gao.gov/products/GAO-10-525] (Washington, D.C.: May 28,
2010).
[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 testimony are attributable only to GAO.
[3] 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.
[4] For more information on the eight localities we visited, see
appendix I of [hyperlink, http://www.gao.gov/products/GAO-10-525].
[5] In contrast, 5 states reported that they had increased the number
of TANF staff, 4 had increased work hours at offices, and 1 had
increased the number of offices.
[6] 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.: Dec. 2005).
[7] Bianca Frogner, Robert Moffitt, 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).
[8] For two-parent families, the participation rate is 90 percent. For
illustrative purposes, we refer primarily to the expected rate for all
families. For more information on two-parent TANF families, see
[hyperlink, http://www.gao.gov/products/GAO-10-525].
[9] To be counted as engaging in work for a month, most TANF families
are required to participate in work activities for an average of 30
hours per week in that month. However, PRWORA defined different weekly
work hour requirements for teen parents attending school, single
parents of children under age 6, and two-parent families.
[10] See [hyperlink, http://www.gao.gov/products/GAO-10-525].
[11] The $16.5 billion per year TANF block grant is a fixed federal
funding stream to states, which is coupled with a maintenance-of-
effort (MOE) provision that requires states to maintain a significant
portion of their historic financial commitment to their welfare
programs. To meet the MOE requirement, each state must generally spend
75 or 80 percent of what it was spending in fiscal year 1994 on
welfare-related programs, including: Aid to Families with Dependent
Children, Job Opportunities and Basic Skills Training (JOBS),
Emergency Assistance (EA), and AFDC-related child care programs.
[12] This refers to the all families rates; during this time period,
from 1 to 4 states each year did not meet the higher two-parent rate.
[13] In our 2005 report on TANF work participation, we found
differences in how states defined the 12 TANF work activities, which
had resulted in some states counting activities that others did not
count, and, therefore, an inconsistent measurement of work
participation across states. We also found that some of the states in
our review lacked internal controls over work participation data. See
GAO, Welfare Reform: HHS Should Exercise Oversight to Help Ensure TANF
Work Participation, [hyperlink,
http://www.gao.gov/products/GAO-05-821] (Washington, D.C.: Aug. 19,
2005).
[14] An additional 8 and 10 percent of TANF families in fiscal years
2007 and 2008, respectively, participated in work activities for less
than the amount required to meet their individual work requirements.
Further, some states reported TANF families participating in "other"
work activities that do not count toward the federal work
requirements, both before and after DRA.
[15] As noted earlier, our 2005 report found differences in how states
defined the 12 TANF work activities, which had resulted in some states
counting activities that others did not count, and, therefore, an
inconsistent measurement of work participation across states. We also
found that some of the states in our review reported the hours
recipients were scheduled to work, rather than those actually worked,
as work participation. As a result, some states likely needed to make
significant changes to their work definitions and procedures after
DRA. See [hyperlink, http://www.gao.gov/products/GAO-05-821].
[16] We analyzed states' work participation data reported to HHS for
selected years. For more information, see appendix I of [hyperlink,
http://www.gao.gov/products/GAO-10-525].
[17] In 2007, 12 states did not meet the 50 percent participation rate
requirement, and in 2008, 7 states did not meet it.
[18] DRA also added a provision allowing states to count a broader
range of their own expenditures toward the TANF MOE requirement.
Additionally, if states spend in excess of the required MOE amount,
they are allowed to reduce the number of families included in the
calculation of their work participation rates through the caseload
reduction credit calculation. HHS officials told us that, prior to
DRA, only one state had claimed excess MOE expenditures toward its
caseload reduction.
[19] Although the majority of states reported excess MOE expenditures
after DRA we did not determine whether these increases reflected new
state spending.
[20] See [hyperlink, http://www.gao.gov/products/GAO-06-414].
[21] We refer to this category as cash assistance, although ACF uses
the term "basic assistance." This category includes benefits designed
to meet on-going basic needs, including cash, payments, or vouchers.
[22] States can save portions of their TANF block grant to use in the
future for cash assistance to families. PRWORA also established a
contingency fund for state TANF programs to draw on and the Recovery
Act provided additional funds on a time limited basis for states to
meet increasing needs.
[End of section]
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