Obama Budget Calls for Strengthening TANF

In this week’s budget request, President Obama called for significant new funding to strengthen the effectiveness of Temporary Assistance for Needy Families (TANF) as a safety net for the lowest-income families with children. These proposals are a strong complement to the legislative changes contemplated by the House Ways and Means committee last year, which would have made improvements to the TANF work participation requirements, but did not include any new funding.  

Specifically, the budget request calls for:

  • The first increase to the federal TANF block grant since it was created in 1996. Since then, the value of the block grant has declined by a third due to inflation; moreover, the block grant has not been adjusted to account for population growth. The budget calls for an increase of $750 million in FY 2017, rising to $2.25 billion by FY 2021, for a total increase of $8 billion over 5 years. The budget suggests that these funds might be distributed based on the number of poor children in each state; this is important, because the current block grant formula, which is based on historical spending levels, gives states widely varying amounts per poor child.
  • A corresponding expectation that states will invest their own funds in programs for low-income people. The budget calls for an increase in the amount that states must spend—known as “maintenance of effort” (MOE)—proportional to the increase in federal funds, and would prevent states from claiming third-party non-governmental expenditures towards that requirement.
  • Across both federal and state dollars, states would have to use at least 55 percent of the funds for core purposes and benefits—cash assistance, work-related activities, and child care. (This share would rise to 60 percent by 2021.) In addition, all TANF and MOE funds would have to be spent on low-income families, defined as those with incomes of 200 percent of the federal poverty level or less.  Currently, states may set their own definitions for what constitutes a “needy” family.
  • Setting aside a $2 billion pool for a new “TANF Economic Response Fund” modeled on the experience of the TANF Emergency Fund that states could access in times of high unemployment. These funds could be used for basic assistance, non-recurrent short-term benefits, and subsidized employment programs; to qualify, states would have to increase their spending in these areas compared to a base period.
  • Repurposing the current TANF contingency funds (which can now be used for any TANF purpose) to provide $473 million to support subsidized employment programs for low-income parents, guardians, and youth, and $100 million for two-generational demonstration projects that would focus on both parental employment and children’s needs. Many states operated subsidized employment programs when the Emergency Fund was available, and found it an effective tool for connecting low-income people to work. Two-generational programs are a promising approach that takes into account parents’ dual roles as workers and caregivers, and that recognizes how children’s well-being is inextricably tied to their parents.

The budget proposal does not make specific recommendations for changes to the TANF work requirements, but signals the Administration’s willingness to work with Congress to identify possible improvements. It highlights the importance of making sure that states are held accountable for their performance in outcomes such as helping parents get jobs, sustain employment, and make progress in the workforce. It also notes the importance of giving states the flexibility to coordinate with workforce efforts under the Workforce Innovation and Opportunity Act (WIOA), and to serve families with the most serious barriers to employment.  The budget would also make reducing child poverty an explicit goal of TANF and direct HHS to report an indicator of progress towards this goal annually.

Separate from TANF, the budget proposes $2 billion over 5 years for a new initiative to test efforts to provide emergency assistance to the growing number of very low-income families facing significant economic hardship and distress. This would support competitive grants to states and counties that would be encouraged to partner with community-based organizations and allow for rigorous evaluation of the effectiveness of these supports, without undermining key existing safety net programs.