American Families Need TANF — the Next Stimulus Package Must Fund it
In their latest attempt to provide relief to Americans affected by the COVID-19 crisis, the democratic-led House strived to strengthen the nation’s social safety net through the HEROES Act. The unprecedented, $3 trillion legislation included $10 billion to support SNAP, more than $1 billion to support WIC, and direct cash payments to eligible individuals. The act also promised to add “flexibility” to the Temporary Assistance for Needy Families (TANF) program — but it fell short of any serious effort to do so.
HEROES proposed suspending the TANF federal time limit and work participation rate requirements until January 2021. In addition, it introduced penalties and sanctions for non-compliant jurisdictions. This is a good first step that will increase eligibility and reduce attrition; but strengthening TANF will require funding.
Since its creation as a block grant in 1996, TANF has received $16.5 billion from the federal government each year. This amount has never been adjusted for inflation and as a result, its real value has fallen by 40%. To receive TANF funding, states must also provide funds — but after adjusting for inflation, the current requirement for states is about half the amount that these spent in 1994 in the AFDC (TANF’s precursor).
The program is therefore grossly underfunded, with most of its resources diverted from cash assistance and work-related activities to other services such as marriage counseling, transportation vouchers, and state-funded scholarship programs. Yet amid the COVID-19 crisis, financing these underfunded aspects of TANF will make families more prosperous in the short- and long-term.
In the short-term, TANF programs are allowed to provide non-recurrent, short-term benefits (NRST) in the form of cash assistance. NRSTs are meant to help with emergencies such as making up for lost wages, paying for utilities, burial assistance, housing assistance, and more — for a period of up to four months. NRSTs can help cover costs of families for whom the CARES Act direct payment was not large enough; they can serve as income for families that did not receive the stimulus check due to delays or bureaucratic mistakes; or they can serve as income for families still waiting to receive their unemployment insurance.
In the long-term, TANF cash assistance and work-related activities can provide support while families navigate a post COVID-19 world — where they re-adjust to new jobs, working conditions, schedules, and wages. For families that have been laid off and as a result have lost their connection to their previous employer, TANF work-related activities such as job training can help them improve their skills and connect to new jobs. Similarly, for families in industries that might not recover swiftly (such as the leisure industry), TANF cash assistance can support them while TANF work-related activities train them to qualify for jobs in new industries.
For TANF to support families during this time and to effectively contribute to the nation’s economic recovery, congress must fund the program in its next stimulus package.
Currently, there are no federal TANF funds available as “rainy day” funds. States and tribes must provide any additional funding to support the program — but many states are facing budget shortfalls induced by the COVID-19 crisis. In some states, counties are responsible for funding their local TANF office — but the municipal bond market is not at its best, making it difficult for small counties to provide additional funding to their TANF programs. Even with the latest efforts from the Federal Reserve, it is very unlikely that small- and medium-sized counties will be able to expand their TANF programs.
Multiple states have TANF unobligated and unused “rainy day” funds, but some of the most affected states do not. In fiscal year 2018, California, Illinois, and Massachusetts had $0 in their TANF rainy day funds; New York had $513 million, New Jersey had $11 million, and Michigan had $56 million in TANF unused funds. Tennessee is the state with the largest TANF rainy day fund: $570 million in 2018. Explaining the varying amounts of unobligated funds is complex, but a low TANF rainy day fund generally indicates higher spending in basic assistance rather than the mismanagement of resources.
Federal funding is therefore crucial to support the success of TANF. States, counties and tribes cannot expand their TANF programs without federal help. During the Great Recession, the Recovery Act provided about $5 billion in additional assistance to TANF. These funds allowed states to handle caseload increases without bearing the costs. With unemployment reaching Depression-era levels in such a short term — TANF must receive the funding to deploy a net that can handle significant increases in caseloads.
In the next stimulus package, Congress must fund TANF and ensure that the funds are directed specifically towards basic assistance, NRSTs, and work-related activities. Only then can TANF work as an effective safety net during these difficult times.
