April 21, 1999
Provisions of Final TANF Regulations
Pertaining to Wage Subsidies and Publicly-Funded Jobs
by Clifford M. Johnson
Final regulations for the Temporary Assistance for Needy Families (TANF) program, issued on April 12, 1999 by the U.S. Department of Health and Human Services (HHS), contain important new provisions governing the use of TANF funds to create publicly-funded jobs for welfare recipients.
Prior to the issuance of these final regulations, HHS had indicated that any month in which an individual worked in a job that was subsidized (in whole or in part) with TANF funds would count against the federal 60-month time limit on assistance under TANF. The new final regulations reverse this position, stating that subsidized employment does not constitute assistance and will not count against the federal time limit. This change in federal policy will not prevent states from counting months in subsidized jobs against their own state time limits, and it may raise other concerns or objections at the state level to the use of TANF funds to create publicly-funded jobs. Nonetheless, the final regulations represent a key change and offer important new options for those seeking to expand job opportunities for welfare recipients.
The following series of questions and answers explain some of the details of the final regulations governing subsidized employment and describe the principal concerns or objections that states may raise in response to these regulations. The final rules can be found at 64 Federal Register 17719-17931. The regulations, a fact sheet and HHS executive summary also are available at the HHS ACF Office of Family Assistance website at <http://www.acf.dhhs.gov/programs/ofa/>. Additional material regarding the final regulations will be published by the Center on Budget and Policy Priorities and the Center for Law and Social Policy in the coming weeks.
Q: How do the final regulations clarify that subsidized employment does not count against the federal 60-month time limit on assistance under TANF?
A: Under the 1996 welfare law, many federal requirements including the federal 60-month time limit apply only when families are receiving "assistance" funded with the TANF block grant. For this reason, the definition of "assistance" adopted by HHS in federal TANF regulations is extremely important.
Proposed regulations issued by HHS in November 1997 stated that wages subsidized with federal TANF funds would be counted as "assistance" and that the federal time limit "clock" would continue to run for individuals working in these subsidized jobs. This result could be avoided under the proposed regulations only if wage subsidies were financed with state "maintenance of effort" (MOE) funds rather than federal TANF funds.
The final regulations reverse this HHS policy regarding wage subsidies financed with federal TANF funds. Under the new regulations, such wage subsidies do not constitute "assistance" and the federal time limit "clock" does not continue to run for individuals working in these subsidized jobs.
Q: Does this change in the definition of "assistance" mean that individuals working in TANF-funded jobs will no longer be subject to any welfare time limits?
A: Not necessarily. The final regulations will prevent months spent in subsidized employment from counting against the federal time limit on assistance under TANF, but it is possible that some states will continue to count these months against their own state time limits. Many states already have time limits that are shorter than the federal limit, and they are not prohibited from establishing their own rules on how those time limits will be applied. State policies regarding the applicability of state time limits in cases of subsidized employment will have to be reviewed on a state-by-state basis. In some states, changes in state law or regulation may be necessary in order to prevent subsidized employment from counting against state time limits.
Q: What happens if an individual working in a publicly-funded job financed through TANF also receives a supplemental welfare grant?
A: Any cash grant to an individual that is intended to meet basic needs, regardless of the amount of the grant, constitutes "assistance" under TANF. This means that any month in which someone works in a subsidized job and receives a supplemental welfare check will count against the federal 60-month time limit on assistance. States can avoid this result only by using state "maintenance of effort" (MOE) funds rather than federal TANF funds to pay for the supplemental grants provided to such workers.
Q: Can individuals working in publicly-funded jobs and not otherwise receiving "assistance" still be counted toward state work participation rates under the final regulations?
A: No, participants in public job creation programs or other subsidized employment will no longer be counted in either the numerator or the denominator when calculating state work participation rates. However, these individuals can be counted when calculating state caseload reduction credits, which help states meet their work participation rates in the following year. In most states, these caseload reduction credits have been so large that they have had no difficulty meeting the work participation rates established by the 1996 welfare law (except for those applying to two-parent families). That pattern is likely to continue under the final regulations.
Q: How do the final regulations affect the assignment of child support when custodial parents are working in subsidized employment?
A: The 1996 welfare law requires states to retain child support payments if they are made on behalf of families receiving "assistance" under TANF and to reimburse the federal government for its share of that assistance. By excluding wage subsidies from the definition of "assistance," the final regulations clarify that states no longer can retain these child support payments as reimbursement for state and federal TANF costs when the custodial parent is working in a subsidized or publicly-funded job. Previous HHS guidelines regarding child support already had indicated that child support payments could not be retained as reimbursement for the cost of wages earned in wage-based programs, but it is unclear whether states have been complying with these child support guidelines.
The new final regulations may evoke concerns from states about the cost of foregoing this reimbursement and about the administrative difficulty of ensuring that child support payments are passed through to custodial families when appropriate. At the same time, the requirement that such payments be passed through to custodial families will make children in those families better off and give noncustodial parents a stronger incentive to pay child support on a regular basis.
Q: Do the new TANF regulations govern the use of federal welfare-to-work (WtW) funds administered by the U.S. Department of Labor?
A: Yes. In the final TANF regulations, HHS states that wage subsidies financed with WtW funds should not be treated as "assistance" under TANF. As a result, for purposes of federal time limits on assistance as well as child support and work participation requirements, WtW wage subsidies will be subject to the same rules and treated in the same manner as wage subsidies financed with federal TANF funds.
Q: Overall, how are the final regulations likely to affect participants in public job creation programs funded through TANF or WtW programs?
A: The final regulations open up important new opportunities to help hard-to-employ welfare recipients by using TANF or WtW funds to create publicly-funded jobs. Under these new regulations, the federal time limit "clock" will not run for participants in public job creation programs. Proponents of such programs also will have strong arguments that state time limits on assistance should not apply when individuals work in publicly-funded jobs. Finally, participants in such programs now will be entitled to receive child support payments made on their behalf, rather than having them be retained by the state as reimbursement for TANF assistance. In all these respects, the final regulations expand opportunities to create jobs and improve the economic well-being of hard-to-employ welfare recipients.