Lessons from the TANF Emergency Fund

Oct 05, 2010

By Elizabeth Lower-Basch

On September 21, 2010, the Senate Finance Committee held a hearing on Welfare Reform: A New Conversation on Women and Poverty.  CLASP submitted testimony for the record on Oct. 5 that focuses on the experience of the TANF Emergency Fund and the lessons that can be taken from it for reauthorization.  Below is an excerpt:

It has now been 14 years since TANF replaced AFDC.  Lawmakers created TANF at a time when the economy was booming, and they based its policies on the assumption that jobs would be plentiful.  These policies have not fared well in the recent deep recession and slow recovery. 

In February 2009, as part of the American Recovery and Reinvestment Act of 2009 (ARRA), Congress created a new TANF Emergency Fund, funded at $5 billion.  The TANF Emergency Fund provided states 80 percent of the funding for spending increases in three categories of TANF-related expenditures in FYs 2009 or 2010 over FYs 2007 or 2008.  The three categories of expenditures that could be claimed were basic assistance, non-recurrent short-term benefits, and subsidized employment.  With this program having just come to an end, and with states having drawn down the full $5 billion allotted, it is an appropriate time to make an initial assessment of the lessons learned over the past two years.

  • States need a permanent counter-cyclical funding mechanism so that they can serve more needy families during periods of high unemployment. The availability of the Emergency Fund after the past two years has clearly averted cuts to benefits and services that would have otherwise occurred, given the drastic decline in state revenues.
  • Many states' assistance programs are minimally responsive to need. States should be held accountable for their performance in preventing severe hardship among children.
  • Subsidized jobs should play a larger role in TANF program going forward. While today's economic conditions are thankfully unusual, even after the economy improves, subsidized jobs may still have a role to play in the TANF program.
  • Cash assistance is only one part of the TANF program. However, almost all of the data reporting under the TANF block grant only applies to families receiving assistance - ongoing monthly benefits.
  • The "maintenance of effort" (MOE) requirement is losing effectiveness. Use of third-party spending for MOE has the potential to drastically undermine the MOE requirement, undercutting its intent that states continue to invest their own funds in programs serving low-income families.

We hope that Congress will draw from these lessons from the Contingency Fund as it prepares to reauthorize TANF next year

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