How Are States Using Welfare Funding? Often, Not to Help People Work.

By J.B. Wogan

When Congress reformed the nation’s welfare program 20 years ago, it set a new condition for eligibility: Recipients must have a job or be searching for one. But the 1996 reforms also gave states freedom to decide how to spend their federal welfare funding. As a result, many aren’t spending it on programs that directly help people find employment.

Last year, on average, states used less than 10 percent of welfare funding for work-related services, such as subsidized employment, job training, job search assistance and transportation vouchers. In Louisiana, a policy research group recently referred to the state’s welfare program as a slush fund “used to plug holes in the state budget caused by large tax cuts.”

This isn’t illegal, said Liz Schott, a senior fellow with the Center on Budget and Policy Priorities (CBPP). Instead, it highlights a gray area that allows states to use the money in ways that technically meet the letter of the law but break from the spirit of a work-oriented welfare program.

One of those areas is child welfare.

The 1996 law is known for its prioritization of work, but it also allows Temporary Assistance for Needy Families (TANF) funds to be used for programs that “encourage the formation and maintenance of two-parent families.” That wiggle room has led states to shift money over to programs that have, at best, a tenuous relationship to work. Arizona, for example, spent almost half of its TANF funds last year on child welfare.

“It’s a big pot,” said Schott. “It’s just too tempting.”

States also often use TANF funding for preschool and refundable tax credits, among other things. According to 2015 TANF data analyzed by the CBPP:

  • 24 states used less than half of their TANF funds on “core activities,” which include job training, subsidized work, child care, education and basic cash assistance.
  • On average, states spent about one quarter of TANF funds on cash assistance to help families pay for basic needs, such as food, shelter and clothing.
  • States have diverged on whether cash assistance represents a marginal or central part of welfare: seven spent less than 10 percent on basic assistance, while five spent more than 50 percent. 
  • Seven states spent more than 20 percent on child welfare services. 
  • Seven states spent more than 20 percent on refundable portions of state or local tax credits for the working poor. 
  • Four states spent more than 20 percent on pre-kindergarten and Head Start programs.

Because the welfare funds can go toward a variety of uses, they offer state agencies an easy way to provide financial support for family programs without making requests to their legislature or Congress. That’s especially true of child welfare services, which have seen a slight decline in federal block grant funding since automatic budget cuts went into effect in 2013.

“States have a legal or moral obligation to support these children,” explained Elizabeth Lower-Basch, a director at the Center for Law and Social Policy and former welfare analyst at the U.S. Department of Health and Human Services. “They’re not getting a lot of federal funding, and it’s a lot easier to tap into TANF than to look for other funding.”

The Secretaries’ Innovation Group, a national association for Republican appointees overseeing workforce development and human services, supports the use of welfare dollars for purposes like child welfare.

“We would argue it is part of the TANF purpose relating to strengthening families,” said Jason Turner, the executive director of the group, in an email. “Spending on roads would obviously not be.”

Lower-Basch also pointed out that in some cases, the 2015 TANF data reflect decisions made by politicians more than a decade ago when the economy was stronger and fewer people needed help finding work. At the time, shifting welfare money to programs that helped low-income families in other ways may have made more sense.
But, she cautions, that may have set a precedent.

“Once you put it into other things,” she said, “it’s hard to pull it back out.”

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