Current Federal Policies | Analysis of Policy Proposals | Workforce Research Current Federal Policies Temporary Assistance for Needy Families BACKGROUND In 1996, the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) created Temporary Assistance for Needy Families (TANF) — a program that overhauled public assistance for low-income families. TANF replaced Aid to Families with Dependent Children (AFDC), the Job Opportunities and Basic Skills Training (JOBS) Program, and the Emergency Assistance (EA) Program. The core principles underlying TANF are an emphasis on work, an end to "entitlement" for benefits, and devolution of program authority to the states. Work First: Limitations on Training A primary objective of TANF is to move individuals off of public assistance and into work. To that end, TANF mandates that states engage recipients in "work activities" and sets a minimum rate of client participation in such activities that each state must meet to avoid a penalty. TANF is very specific about what states can count as an allowable work activity. Common examples include unsubsidized or subsidized employment, work experience (such as unpaid community employment), and on-the-job training. Vocational training is an allowable activity, so long that it is no longer than 12 months in duration. In addition, TANF forbids states from allowing any more than 30% of their work participation requirements to be met by individuals in vocational training or attending high school. However, most states have not approached this 30% allowance; the number involved in training activities is usually significantly less, due to the overall work first emphasis of TANF. Finally, TANF does not include post-secondary education as a work activity. Time Limits on Benefits Whereas assistance under AFDC was an entitlement, TANF recipients are limited to five years of federal assistance within their lifetimes. States may opt for shorter time limits. Under TANF, time-limited "assistance" includes any cash, voucher or other similar benefit that can be used to meet the on-going basic daily needs of families. However, the 1999 Final Rule on TANF clarified that individuals can receive other services through TANF that will not count against their "clock". Such services include education and training, child care and transportation subsidies for working individuals, Individual Development Account (IDA) contributions, and wage subsidies. The 1999 Regulations also specify that when state funds are used separately to fund "assistance", this state-only aid need not be time-limited. Block Grants to States Under AFDC, funds flowed from the federal government to the states based on the size of the state's caseload and the state's capacity to provide funding. By contrast, under TANF states receive funds through a block grant that is fixed regardless of the size of a state's current caseload. Each state's block grant was set in 1996 at a level approximately equal to the state's recent federal spending in 1994/95 for AFDC, AFDC Administration, JOBS and EA combined. In order to receive the full federal block grant, states must continue their own state spending for qualified expenditures at a specified minimum percentage of their 1994 spending (either 75% or 80%, depending on the state's current work participation levels). This required expenditure is known as the state's Maintenance of Effort (MOE). If a state fails to meet its MOE, it risks a dollar-for-dollar reduction in its federal block grant. States that achieve "high performance" in terms of employment outcomes for TANF recipients may receive a bonus of up to 5% of their grant. These bonus-eligible employment outcomes include long-term employment retention and earnings gains for TANF clients. However, states are not required to track such employment outcomes for clients in order to qualify for their basic block grant. Since 1996 the number of people on public assistance has declined dramatically, whereas the size of states' block grants has remained constant. As a result, most states have accumulated large surpluses of TANF dollars. States have been allowed to spend these funds flexibly on a range of low-income individuals, including workers earning under 200% of the poverty line, and public assistance recipients. Some states have used these funds to support skills training, transportation subsidies for workers, child care, and IDA contributions. Many others have held on to the money or diverted it to other programs. As caseloads begin to rise with the downturn of the economy, these surpluses will diminish and states will likely spend a greater portion of their block grants on cash assistance. HOW HAS TANF WORKED IN PRACTICE? There are some aspects of TANF that could have improved upon the old welfare system. The rhetoric behind TANF pledged to expand opportunities for welfare recipients to succeed at work, and to allow states greater flexibility in developing innovative strategies to prepare and support welfare recipients before and during employment. However, TANF's "work first" mandate, its dictation of allowable activities for TANF clients, and its focus on "caseload reduction" instead of employment advancement have driven TANF toward short-term objectives that generated few long-term gains in helping TANF recipients become more self-sufficient. Strict Limits on Work-Connected Education and Training Many states have adopted a strict "work first" strategy that has eliminated job-connected education and training as an option for most or all public assistance recipients. Other states have opted to provide vocational training to some public assistance recipients and low-income workers. However, these "pro-training" states still must contend with federal limitations on their strategy, such as the twelve- month training limit and the 30% cap on clients in education and training. In addition, by not counting post-secondary education as a work activity, TANF deters most states from developing any long-term skills-building strategies to help welfare clients advance into "living wage" jobs. Some states have gotten around these federal barriers by funding higher education and skills training either with separate MOE funds, or with surplus TANF dollars. However, more states would make such skills-building investments if TANF regulations were amended to expand the definition of "work activities" and to remove federal limits on local training strategies. Lack of Coordination Between Welfare Agencies and Workforce Development Programs Separate from welfare reform, in 1998 Congress passed the Workforce Investment Act (WIA), in part, to facilitate coordination among several federal programs intended to help a range of people, including TANF recipients, enter and advance in the workforce. However, WIA stopped short of designating TANF agencies as "mandated partners" in a coordinated workforce development system. As a result, the TANF agencies in many local areas work independently of WIA partner agencies. In many areas, TANF's work activity requirements and "work first" emphasis have prevented TANF clients from accessing WIA-sponsored training services. Were coordination between WIA and TANF agencies better facilitated at the federal level, more local areas would likely allow TANF recipients to access training services offered through WIA agencies. One area of possible WIA-TANF coordination is outcome measurement. TANF reporting requirements, focused on "work activity" participation and caseload reduction, create a performance environment in which states are not rewarded for pursuing longer-term employment and advancement strategies for their TANF clients. WIA, by contrast, requires states to report on how those trained under WIA fare in terms of income and job retention, and rewards states in which workers increase their wages, remain employed and gain credentials in a skill area. If TANF's measured outcomes were brought more in line with those of WIA, states could better integrate the two funding streams to help TANF recipients gain skills and advance in the job market towards self-sufficiency. Short-term Focus on "Finding Any Job" vs. Developing Self-Sufficient Workers During the boom economy that characterized much of TANF's first 5 years, states saw some successes in placing welfare recipients into available jobs without concerns about competition from other more skilled job seekers, nor about their retention prospects during an economic downturn. Unfortunately, most of the TANF clients who found jobs have not improved their economic situation since they started working — largely because they lacked the skills to advance. Further, many of these new workers have recently fallen victim to the "last hired, first fired" effects of the current recession, with few skills in hand to re-enter a now more competitive labor market. As the economy turns downward, states are starting to see their caseloads swell, leaving many states with less money to invest in strategies to help these recently unemployed workers develop the skills necessary to compete in the labor market and find new jobs. If the TANF system is going to help people become economically self-sufficient for the long-term, then TANF performance measures must concentrate less on "caseload reduction" and "job placement" and more on enhancing the skills and long-term employment prospects of their TANF clients. States should be expected to produce TANF plans that specify strategies for measuring the employment and advancement gains of its public assistance clients. READ TWA'S RECOMMENDATIONS FOR IMPROVING TANF FOR ADDITIONAL READING: Bills and Regulations: Text of The Personal Responsibility and Work Opportunity Reconciliation Act of 1996, available at: http://thomas.loc.gov/cgi-bin/query/z?c104:H.R.3734.ENR:htm 1997 Final Rule on TANF available at: http://www.acf.dhhs.gov/programs/ofa/exsumcl.htm Government Summaries: Fact Sheet on the Major Provisions of The Personal Responsibility and Work Opportunity Reconciliation Act of 1996, Health and Human Services. http://www.acf.dhhs.gov/news/welfare/aspesum.htm Other Summaries and Analyses: Clymer, Carol, Brandon Robert, and Julie Strawn. States of Change: Policies and Programs to Promote Low-Wage Workers' Steady Employment and Advancement. New York: Public/Private Ventures, May 2001. Available at http://www.ppv.org/ Greenberg, Mark, Jodie Levin-Epstein, Rutledge Hutson, Theodora Ooms, Rachel Schumacher, Vicki Turetsky, David Engstrom. Welfare Reauthorization: An Early Guide to the Issues. Washington, DC: Center for Law and Social Policy, July 2000. Available at http://www.clasp.org/ Greenberg, Mark and Steve Savner, A Detailed Summary of Key Provisions of the Temporary Assistance for Needy Families Block Grant of H.R. 3734. Washington, DC: Center for Law and Social Policy, August 1996. Available at http://www.clasp.org/ Greenberg, Mark, Julie Strawn and Lisa Plimpton. State Opportunities to Provide Access to Post-Secondary Education Under TANF. Washington, DC: Center for Law and Social Policy, February, 2000. Available at http://www.clasp.org/