Declining TANF Child Care Spending Underscores Need for Major Child Care Investment

By Christina Walker and Hannah Matthews

This month, the Administration for Children and Families (ACF) in the U.S. Department of Health and Human Services released expenditure data from the federal Temporary Assistance for Needy Families (TANF) program, which allows states to use their block grants for child care assistance. TANF spending on child care decreased by $45 million in 2015. Nationally, about $2.6 billion of TANF funds were used for child care through direct spending on child care and transfers to the Child Care and Development Block Grant (CCDBG).

August marks the 20th anniversary of welfare reform, which created TANF.  As part of welfare reform, Congress made new investments in CCDBG recognizing that low-income mothers need help paying for child care so they can go to work or job training. Since TANF’s creation, states have been permitted to spend TANF directly on child care assistance or transfer up to 30 percent of block grant funds to CCDBG. After cash assistance, child care has consistently been the second largest use of TANF funds.

In the early years of welfare reform, combined TANF transfers and direct TANF spending on child care reached $4 billion. However, as the block grant has declined in value, the amount spent on child care has fallen by 35 percent and has remained near $2.6 billion or below for the past four years. In 2015, states transferred $1.3 billion from TANF to CCDBG, a decrease of $65 million from the previous year, and spent $1.2 billion in TANF funds for direct child care assistance, an increase of $17 million from the previous year.

Use of TANF funds varies greatly by state.  Twelve states transferred 30 percent of their block grant to CCDBG or a combination of CCDBG and the Social Services Block Grant: Alaska, Colorado, Florida, Indiana, Iowa, Massachusetts, Mississippi, Montana, Nebraska, Oklahoma, Utah, and Washington. Six states transferred 25-29 percent of funds – Hawaii, Idaho, New Mexico, North Carolina, Vermont, and Wisconsin. The largest declines in combined TANF funds used for child care in 2015 (including transfers and direct spending) were in: Ohio (-$49 million), Wisconsin (-$46 million), Pennsylvania (-$37 million), and New York (-$24 million). The biggest increases were in: Washington, ($34 million), Colorado ($27 million), Indiana ($23 million), and North Carolina ($17 million).  

TANF requires states to contribute maintenance-of-effort (MOE) funds, $2.7 billion of which they spent on child care.  Because a portion of TANF MOE funds spent on child care may also be counted toward states’ CCDBG MOE requirement, total child care spending (CCDBG and TANF combined) for 2015 cannot be determined until 2015 CCDBG expenditure data are available.

While the net expenditure change from 2014 to 2015 is not dramatic, the overall trend is reason for distress. Prior to this latest release of administrative data, CLASP’s analysis of 2014 CCDBG and TANF data showed combined child care assistance spending at a 12-year low and the number of children receiving CCDBG-funded child care assistance at a 16-year low, with only 1.4 million children receiving any help. Not since 1998 have so few children been served.

TANF has failed poor children and their families in providing a safety net and buffering them from the harm caused by poverty. TANF is also not a reliable or sufficient source of funding for child care assistance. As states implement the 2014 bipartisan reauthorization of CCDBG, they are facing increased pressure for resources; implementing important health and safety and continuity provisions of the law could come at the cost of serving even fewer children as Congress has not allocated significant new resources. To implement the important new changes in the law without further decreasing the number of children served, CCDBG needs an immediate $1.2 billion increase in the federal 2017 fiscal year. In future years, far greater investments will be needed to ensure that more low-income families have access to affordable, high-quality child care that can support family economic stability and children’s success.

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