Unspent TANF Funds at the End of Federal
Fiscal Year 2000
By Ed Lazere
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Spending on cash assistance for needy families with children has fallen dramatically since the early 1990s as a result of the declining number of families receiving such assistance. Available federal funding under the Temporary Assistance to Needy Families block grant has not dropped, however, because each state’s annual TANF allocation as established in the 1996 welfare law is based largely on the amount of federal welfare funding it received in the early 1990's. Many states have taken advantage of the TANF funds freed up by welfare caseload declines to invest in a wide range of benefits and services for needy families, such as transportation, child care, job training, and substance abuse treatment.
Many states also have left a portion of their TANF funds unspent. Under the 1996 welfare law, funds that a state leaves unspent in a given year are reserved by the federal government and can be accessed by the state in future years. TANF balances have become an important issue in many states because they present an opportunity to implement new investments that help needy families overcome barriers to work and to provide supports that help low-income working families remain employed. The issue of unspent TANF funds also is important because some federal policy makers have proposed reducing TANF funds and using the savings for other purposes. As a result, state officials have been urged by some federal policymakers and interest groups to invest a greater share of their TANF funds in benefits and services that help needy families, and many states have developed and implemented plans to expend their TANF reserves over the next few years.
This paper analyzes unspent TANF funds through the end of federal fiscal year 2000 — September 30, 2000 — based on expenditure data states have prepared for federal reporting purposes. (The federal fiscal year runs from October through September.) It also includes information on the amount of funds states have transferred from TANF to the Child Care Development Fund and the Social Services Block Grant, as well as the level of expenditures states have made from their own funds as part of the TANF maintenance-of-effort requirement. It is an update of earlier Center reports on unspent TANF funds.
While these new TANF financial data indicate that many states have a substantial amount of unspent funds, they also show that TANF spending has increased in many states.
- Nationally, the use of TANF funds — i.e., TANF expenditures and TANF funds transferred to either the Social Services Block Grant or the Child Care Development Fund — equaled 93 percent of the FY 2000 national TANF allocation.
- Over half of the states had TANF expenditures and transfers that equaled or nearly equaled their annual TANF grant. In these states, the balance of unspent TANF funds did not increase over the past year.
- In 12 states, TANF expenditures exceeded the annual TANF allotment in FY 2000, which means the states drew from their TANF reserves to help finance their FY 2000 expenditures.
These findings are presented in Table 4. A more detailed report on the use of TANF funds in fiscal year 2000 is forthcoming from the Center on Budget and Policy Priorities.
Data Source
Each state is required to report to the U.S. Department of Health and Human Services on its expenditures of TANF funds on a quarterly basis, using the "ACF-196" federal reporting form. These reports identify expenditures of TANF funds by major category, such as basic cash assistance, education and training, child care, and transportation. The reports also show the extent to which states transferred TANF funds to the social services block grant and the child care block grant, the amount of TANF funds that remain unspent, and expenditures states made from their own funds as a condition of receiving the TANF block grant — known as state maintenance-of-effort (MOE) funds.
The ACF-196 reports for the quarter ending on September 30, 2000 were collected from November 2000 through January 2001 by the Center on Budget and Policy Priorities from the state agencies responsible for preparing the ACF-196 reports — typically the budget, accounting, or federal reporting division of the state's welfare agency. These data have not been verified by the U.S. Department of Health and Human Services and thus should be considered preliminary. In addition, some states may have revised their ACF-196 reports since the time they were obtained for this analysis.
Unliquidated Obligations and Unobligated Funds
TANF funds that a state has not spent (or transferred to another block grant) are
reported in two categories on the ACF-196 reports, following traditional budgeting
methods: "unliquidated obligations" and "unobligated" funds.
- "Unliquidated obligations" refer to amounts that a state has committed to spend but has not yet spent. For example, this could include funds a state has contracted to pay a private service provider, such as a child care agency, but has not yet paid out because the service has not yet been provided. Unliquidated obligations also could include payments that a state is processing, but has not finalized, for services that already have been provided.
- "Unobligated" TANF funds refer to the funds states have neither spent nor committed to spend as of a given date. Because unliquidated obligations generally reflect an intent to make expenditures, these reported fund may not be available for spending the way that unobligated funds are. For two reasons described below, however, it is worthwhile to examine the amount of unliquidated obligations in each state when examining unspent TANF balances, as this paper does.
Some funds reported as unliquidated obligations could be considered unobligated funds. The definition of unliquidated obligations has varied from state to state. The definitions appear to vary so widely that some states report all TANF funds that have not been expended as unliquidated obligations, while a number of other states report all unspent TANF funds as unobligated and report no unliquidated obligations. (This is illustrated in Table III.)
In states with substantial amounts of unliquidated obligations and little or no unobligated funds, it seems likely that at least a portion of unliquidated obligations reflect funds that generally would be considered unobligated funds. Some state officials have acknowledged in phone conversations with Center on Budget and Policy Priorities staff that all unspent TANF funds are reported as unliquidated obligations, whether the funds have been committed for a specific purpose or not.
The final TANF regulations have given states an incentive to report unspent funds as being obligated. The TANF regulations that went into effect on October 1, 1999 include a new provision that restricts a state's use of unspent funds from prior years. The regulations prohibit states from spending carryover funds on activities other than cash assistance or other forms of ongoing assistance intended to meet a family's basic needs, such as housing.(2) The federal regulations thus do not allow states to use unspent TANF funds from previous years on many otherwise allowable activities, such as work supports for employed families. These kinds of activities represent a growing share of the use of TANF funds.
The regulations provide one exception to the restriction on use of prior-year TANF funds. Funds that a state obligates from its current-year TANF allocation for activities other than ongoing basic assistance can be spent in that year or the following year. If, for example, a state obligated $10 million in TANF funds for transportation services in FY 2000, it would have until the end of FY 2001 to spend those funds on transportation. (Any of those funds not spent by the end of FY 2001 would have to be spent in future years on ongoing basic assistance.) By contrast, if the state did not obligate TANF funds in FY 2000, none of its funds carried forward could be spent on transportation for employed families in FY 2001.
It is likely that this restriction on the use of carryover TANF funds does not greatly limit a state's ability to use TANF funds. States can retain flexibility by using carryover funds to provide cash assistance and using their current-year TANF allocation for other services and benefits. Nevertheless, it appears that some state officials believe this provision limits their flexibility, and this appears to have led a number of states to obligate a substantial amount of their unspent funds from the FY 2000 allocation before the end of fiscal year.(3)
No systematic analysis of the large amount of TANF obligations has been conducted, but it is likely that at least a significant share of the obligated funds are or will become available for new uses. In some cases, TANF funds have been obligated by granting spending authority to counties or other local entities. In these cases, it is likely that the local entities have not committed all available funds, which means that at least some of the funds effectively remain unobligated at the local level. In other states that have obligated large amounts of TANF funds for specific activities, such as child care, it may take a long period to actually expend the large amount of newly obligated funds. In these states, policy makers may decide at a future date to alter the planned use of those funds. This means that a portion of the unliquidated obligations in some states, while reflecting a real obligation of funds, ultimately may be available for other uses.
TABLE I: Unobligated TANF Funds at the End of Federal Fiscal
Year 2000
Table I identifies the level of unobligated TANF funds in each state as of
September 30, 2000, the end of federal fiscal year 2000. These are the most recent data
available.
The first column identifies unobligated TANF amounts that remain unspent from each state's TANF allocations for fiscal years 1997 through 2000. The second column of Table I measures the accumulated unobligated TANF balance as a percentage of the cumulative amount of TANF funding available to each state from fiscal year 1997 through fiscal year 2000. It thus reflects the portion of all TANF funds available to the state since the inception of the TANF block grant that have not been spent. (Each state's annual TANF allocation is included in Table VI of this report.)
EXAMPLE: As of September 30, 2000, Mississippi had $62.9 million in unobligated TANF funds. This amount equals 17 percent of the TANF funds that have been available to Mississippi in the period from fiscal year 1997, when TANF was implemented, through fiscal year 2000.
TABLE I
Unobligated TANF Funds as of Sept. 30, 2000 (end of federal fiscal year 2000)
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TABLE II: States With Unliquidated Obligations of TANF Funds at
the End of Federal Fiscal Year 2000
The figures in Table I do not reflect amounts reported as unliquidated
obligations, because such funds generally are not available for new spending initiatives.
Unliquidated obligations generally are amounts a state has committed to spend —
through contracts that have been established or goods and services that have been received
— but has not yet paid out.
Yet, as noted earlier, a number of states report substantial unliquidated obligations of TANF funds. In some states with substantial unliquidated obligations and little or no unobligated funds, at least some of the unliquidated obligations generally would be considered unobligated funds. Some of the states obligated a substantial amount of TANF funds by giving increased spending authority to local welfare agencies. In such states, at least some of these funds may remain unobligated at the local level. In other states where unliquidated obligations increased significantly in recent months, it may be difficult to spend such large amounts over the next year. As a result, policy makers may have the opportunity to re-direct some of those obligated funds to help low-income families in other ways. For both of these reasons, it is important to assess the amounts of TANF funds reported as unliquidated obligations.
Table II identifies the unliquidated TANF obligations in each state as of September 30, 2000. The table also calculates the amount of each state's unliquidated obligations as a percentage of the cumulative amount of TANF funds made available to each state through the end of fiscal year 2000.
EXAMPLE: At the end of federal fiscal year 2000, Virginia reported $36.8 million in federal TANF funds as unliquidated obligations. The amount of unliquidated obligations is equivalent to 6 percent of the TANF funds that have been available to the state from the inception of its TANF program.
TABLE II
Unliquidated Obligations of TANF Funds as of September 30, 2000
(end of federal fiscal year 2000)
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TABLE III: Total Unspent TANF Funds at the End of
Federal Fiscal Year 2000
As noted in Table II, an examination of unspent TANF funds in any state should
include amounts of unliquidated obligations. To get a full picture of the amount of
unspent TANF funds in a given state, it may be appropriate to examine the combined amounts
of unobligated funds and unliquidated obligations, even though a portion of the obligated
funds may be committed for a specific purpose and may soon be spent.
Table III identifies the accumulated amount of unobligated TANF funds in each state as of September 30, 2000 as shown in Table I, and the accumulated amount of unliquidated obligations, as shown in Table II. This table then shows the combined amount of the two types of unspent TANF funds and presents the combined amount as a percentage of the cumulative amount of TANF funds made available to each state through the end of federal fiscal year 2000.
EXAMPLE: Idaho reported $17.4 million in unobligated federal TANF funds and $9.0 million in unliquidated obligations at the end of federal fiscal year 2000. The total amount of unspent TANF funds was $26.4 million, and this equaled 24 percent of the TANF funds that have been available to the state from the inception of its TANF program.
TABLE III
Total Unspent TANF Funds as of September 30, 2000
(end of federal fiscal year 2000)
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Table IV: Use of TANF Funds in FY 2000 as a Percent
of FY 2000 TANF Grants
The new data for fiscal year 2000 reveal that states on average are now spending
most of their annual TANF allocations. As a result, the balance of unspent TANF funds
increased only modestly in fiscal year 2000. In some states, the use of TANF funds in FY
2000 exceeded their annual TANF grant, which means they drew from TANF reserves to fund
their TANF program.
Table IV compares the use of TANF funds — TANF expenditures and TANF funds transferred to either the Social Services Block Grant or the Child Care Development Fund — with the state's fiscal year 2000 TANF allocation. The table presents each state's use of TANF funds as a percent of their FY 2000 award.
The table also presents each state's use of TANF funds as a percent of its FY 2000 TANF award less any bonuses awarded during the fiscal year. During the year five states were awarded bonuses of $20 million each for reducing out-of-wedlock births, and 27 states received High Performance Bonus awards that totalled $200 million. Because states could not anticipate receiving these bonuses — and because there is no guarantee of future receipt of bonuses — comparing the use of TANF funds with the basic TANF allocation provides a useful indication of the extent to which states are using TANF funds they can expect to receive each year.
EXAMPLE: In FY 2000, TANF expenditures and transfers in Arizona totalled $249.1 million. The state's TANF allocation for the year equaled $258.7 million — including a $236 million basic allocation and $22.7 million in bonuses awarded in the middle of the fiscal year. The state's use of TANF funds equaled 96 percent of its total TANF allocation. Arizona's use of TANF funds equaled 106 percent of its basic TANF allocation for FY 2000.
TABLE IV
Use of TANF Funds in FY 2000 as a Percent of FY 2000 TANF Grants
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Use of TANF Funds, FY 2000* ($ figures in million) |
FY 2000 TANF Grant |
Use of Funds As Percent of Total Grant |
FY 2000 |
Use of Funds |
Alabama |
$85.8 |
$121.5 |
71% |
$101.5 |
84% |
Alaska |
62.9 |
65.7 |
96 |
65.7 |
96 |
Arizona |
249.1 |
258.7 |
96 |
236.0 |
106 |
Arkansas |
79.7 |
61.3 |
130 |
61.3 |
130 |
California |
3,809.7 |
3,775.6 |
101 |
3,730.2 |
102 |
Colorado |
129.0 |
146.1 |
88 |
146.1 |
88 |
Connecticut |
269.2 |
269.2 |
100 |
266.8 |
101 |
Delaware |
35.6 |
33.9 |
105 |
32.3 |
110 |
District of Columbia |
84.7 |
112.6 |
75 |
92.6 |
91 |
Florida |
570.6 |
613.9 |
93 |
607.1 |
94 |
Georgia |
297.1 |
358.4 |
83 |
358.4 |
83 |
Hawaii |
85.1 |
99.8 |
85 |
98.9 |
86 |
Idaho |
39.8 |
33.1 |
120 |
33.1 |
120 |
Illinois |
626.6 |
626.6 |
100 |
585.1 |
107 |
Indiana |
258.1 |
215.6 |
120 |
206.8 |
125 |
Iowa |
142.5 |
132.7 |
107 |
131.5 |
108 |
Kansas |
101.9 |
101.9 |
100 |
101.9 |
100 |
Kentucky |
176.6 |
181.3 |
97 |
181.3 |
97 |
Louisiana |
123.6 |
180.4 |
69 |
176.6 |
70 |
Maine |
66.1 |
78.1 |
85 |
78.1 |
85 |
Maryland |
210.6 |
229.1 |
92 |
229.1 |
92 |
Massachusetts |
436.3 |
469.9 |
93 |
459.4 |
95 |
Michigan |
819.2 |
797.9 |
103 |
775.4 |
106 |
Minnesota |
224.2 |
276.6 |