September 27, 1999

Allocation Of The $3 Billion TANF Rescission Among States
Would Treat Some States Inequitably

by Ed Lazere

Overview

The Labor-HHS-Education appropriations bill that a House subcommittee approved September 23 would rescind $3 billion in TANF block grant funds allocated to states and re-appropriate these funds for fiscal year 2001. This measure is part of an effort by the House Leadership to "make the numbers fit" for the Labor-HHS-Education bill and the appropriations bills in general.

As another Center analysis explains, this measure would be likely to hinder state initiatives designed to help poor families reach self-sufficiency.(1) Once the precedent of rescinding TANF funds is established, that will increase the likelihood of further rescissions in the future. Lacking an assurance that all rescinded funds will be returned in fiscal year 2001 — when Congress must squeeze appropriations within the tight discretionary spending caps for that year — many states are likely to treat this rescission as a cut rather than a deferral. If a stable TANF funding stream is no longer assured, states are likely to be wary of mounting new TANF-funded initiatives to aid hard-to-employ families remaining on the welfare rolls or to assist struggling working poor families.

Furthermore, as the analysis below indicates, the rescission would affect many states inequitably. Under the rescission the House Labor-HHS-Education appropriations subcommittee has adopted, the amount to be rescinded from each state would be based on each state's share of the national amount of "unobligated" TANF funds as of September 30, 1999. That, however, is a poor measure of unspent state TANF balances and would result in some states bearing inequitably large shares of the rescission. This problem could become severe if Congress did extend the rescission a year from now to help meet the budget caps for fiscal year 2001.

Unspent TANF funds fall into two categories — funds that have been "obligated" but not yet spent, such as funds committed under a contract for services to be delivered, and funds that have not been obligated. How unspent TANF funds are categorized as "obligated" or "unobligated" varies greatly among the states. Unspent TANF funds considered obligated by one state would be considered unobligated by another state.

To be considered "obligated," funds are supposed to have been committed for a specific purpose. Some states, however, evidently are reporting TANF funds that have not been committed as being obligated. States that have significant amounts of unspent TANF funds but little or no self-reported "unobligated" funds would be left largely untouched under the House rescission plan. Because these states would largely escape the rescission, the amounts rescinded from the other states would be larger.

As a result, basing the amount of funds to be rescinded from a state on that state's share of the "unobligated" funds nationally would unfairly penalize states that have used a narrow definition of what constitutes an obligation, while favoring states that have used a very expansive definition.

The attached tables illustrate the wide variation among states in the definition of an obligation of TANF funds. Table I shows that some states report most or all of their unspent TANF balances as being obligated, while other states report little or none of their unspent funds as obligated. Table II shows how the House rescission would be allocated among the states, based on unobligated TANF funds as of March 31, 1999, the most recent TANF financial data currently available.(2) (Data on unobligated funds as of September 30, the date called for in the House bill, will not be available until mid-November.) The table shows that for many states, the percentage of the $3 billion rescission the state would bear differs significantly from the percentage of unspent TANF balances for which the state is responsible.

In a number of states, the rescission would represent a very large share of the state's unspent TANF balance. In 21 states, the rescission would consume more than two-thirds of the state's unspent TANF balance. (See Table III.) Moreover, many states have set aside TANF funds as a "rainy day" reserve to be tapped in an economic downturn. Under the rescission, a number of states that have taken this prudent step — and have appropriately reported their rainy day reserve as unobligated — could be left with reserves much smaller than the state has planned for (and in some cases, less than state law requires). If not restored, the rescission could leave some of these states especially vulnerable in the event of an economic downturn. Meanwhile, other states that have categorized their rainy day reserve as an obligation of funds would be protected.

States that Would be Most Inequitably Affected
By the $3 Billion TANF Rescission

As this analysis indicates, the TANF rescission the House Labor-HHS-Education Appropriations Subcommittee has approved would adversely affect states that report most or all of their unspent TANF funds as "unobligated." The shares of the rescission borne by these states would be significantly larger than these states’ shares of total unspent TANF funds.

In 23 states, the share of the rescission the state would bear would be at least 50 percent higher than the state’s share of the unspent TANF balance nationally. (In other words, the rescission amount would be at least 50 percent larger in these states than if the rescission were based on total unspent funds.) In another five states, the rescission would be between one-fourth and one-half larger than the state’s share of total unspent funds.

States in which the Rescission Would be At Least 50 Percent Larger than the State’s Share of Unspent TANF Funds
Alabama Michigan Oklahoma
Connecticut Minnesota Rhode Island
Idaho Nebraska South Carolina
Kansas New Hampshire Utah
Kentucky New Jersey Vermont
Louisiana New Mexico Washington
Maine North Carolina West Virginia
Maryland North Dakota

In virtually all of these states, the rescission would represent more than two-thirds of the state’s unspent TANF reserve.

States in which the Rescission Would be 25 Percent to 50 Percent Larger than the State’s Share of Unspent TANF Funds
Florida Mississippi
New York Tennessee
Washington, DC

The equity problems posed by how the rescission would be apportioned among the states are explored more fully in the remainder of this analysis.

 

Why the Rescission Treats Some States Inequitably

Unspent TANF funds fall into two categories: "unliquidated obligations" and "unobligated" funds.

Because unliquidated obligations are supposed to reflect amounts committed to be spent, it might seem appropriate, at first blush, to base a rescission on each state's share of the unobligated TANF funds nationally. But for such an approach to be equitable, the determination of what constitutes an obligation of TANF funds must be uniform across the states. That is not the case.

Until the issuance of final federal TANF regulations in April 1999, instructions for filing TANF financial reports did not call for states to use any particular definition of what constitutes an obligation of TANF funds. This may have contributed to the inconsistent interpretation of this term in the financial reports that states have submitted to HHS. Starting with fiscal year 2000, states will be required to use a standard HHS definition of this term.(3) This directive, however, does not apply to state reports on funds unspent as of September 30, 1999. Consequently, it does not apply to the data to be used to determine the amount that would be rescinded from each state under the House measure.

Major Equity Problems

Because states vary so substantially in determining when unspent TANF funds should be reported as obligated, a rescission based on each state's report of unobligated funds would be inequitable. A state that has reported all of its unspent TANF funds as being obligated would escape the rescission. But a state reporting most or all of its unspent TANF funds as being unobligated would bear the brunt of the rescission. Such a state's share of the $3 billion rescission would substantially exceed its share of unspent TANF funds overall.

In many of the states reporting most of their unspent TANF funds as unobligated, the rescission would gobble up at least two-thirds of the unspent TANF balances. That could lessen the ability of many of these states to implement measures to provide more intensive employment-preparation assistance to those families that remain on the public assistance rolls with the time limits approaching, and to provide more significant assistance to families that have left welfare for work but remain thousands of dollars below the poverty line.

Table II shows each state's unspent TANF funds as of March 31, 1999 — including both unobligated funds and unliquidated obligations — and the distribution of unspent funds nationally. The third and fourth columns of the table show the percentage of each state's TANF funds that would be rescinded, and the distribution of the rescission among the states. Table III measures the amount to be rescinded from each state as a percentage of that state's total unspent TANF balance.

Examination of the table indicates that equity problems abound.

This problem is not easy to solve. An approach that bases the amount of TANF funds each state would lose under a rescission on each state's share of the total amount of TANF funds unspent nationally also would be inequitable. Although a portion of the funds reported as unliquidated obligations by some states have not actually been committed, in other states, the funds classified as unliquidated obligations do represent funds that have been committed for services or benefits and cannot be pulled back without creating serious problems. Given the inconsistent classification across states of when TANF funds should be considered as obligated, it is extremely difficult to ascertain, on a comparable basis across states, the amount of TANF funds that are both unspent and uncommitted.


TABLE I

Unspent TANF Funds as of March 31 1999
Broken Out By Unobligated Funds and Unliquidated Obligations

Unobligated
Funds
As of 3-31-99*

Unliquidated
Obligations
As of 3-31-99*

Total
Unspent Funds

(all figures in millions)

Alabama

$46.9

0

$46.9

Alaska

$6.1

$13.8

$19.8

Arizona

$70.6

$40.4

$111.0

Arkansas

$1.7

$35.8

$37.5

California

$526.9

$1,198.5

$1,725.3

Colorado

$5.6

$90.8

$96.4

Connecticut

$9.7

$0.0

$9.7

Delaware

$0.0

$0.0

$0.0

District of Columbia

$31.8

$8.2

$40.0

Florida

$313.7

$92.9

$406.6

Georgia

$75.6

$37.4

$112.9

Hawaii

$1.1

$0.8

$2.0

Idaho

$38.4

$0.0

$38.4

Illinois

$0.0

$0.0

$0.0

Indiana

$0.0

$149.9

$149.9

Iowa

$6.0

$38.8

$44.8

Kansas

$24.2

$0.0

$24.2

Kentucky

$30.5

$0.0

$30.5

Louisiana

$106.8

$0.0

$106.8

Maine

$5.1

$0.0

$5.1

Maryland

$155.9

$26.0

$182.0

Massachusetts

$0.0

$75.5

$75.5

Michigan

$163.1

$0.0

$163.1

Minnesota

$180.1

$0.0

$180.1

Mississippi

$61.1

$26.1

$87.2

Missouri

$0.0

$48.7

$48.7

Montana

$0.9

$38.6

$39.5

Nebraska

$4.7

$0.0

$4.7

Nevada

$0.0

$8.9

$8.9

New Hampshire

$8.8

$0.0

$8.8

New Jersey

$231.0

$50.1

$281.1

New Mexico

$70.7

$4.9

$75.6

New York

$769.2

$182.0

$951.3

North Carolina

$100.0

$0.0

$100.0

North Dakota

$11.1

$0.0

$11.1

Ohio

$137.9

$517.4

$655.3

Oklahoma

$132.5

$0.0

$132.5

Oregon

$0.0

$117.3

$117.3

Pennsylvania

$152.3

$82.8

$235.0

Rhode Island

$21.7

$0.0

$21.7

South Carolina

$51.4

$0.0

$51.4

South Dakota

$4.4

$11.3

$15.8

Tennessee

$81.3

$34.4

$115.7

Texas

$39.6

$218.6

$258.2

Utah

$19.2

$0.0

$19.2

Vermont

$7.8

$0.0

$7.8

Virginia

$22.9

$32.0

$55.0

Washington

$186.7

$0.0

$186.7

West Virginia

$108.4

$0.0

$108.4

Wisconsin

$159.5

$166.1

$325.6

Wyoming

$4.5

$43.2

$47.7

* This includes unobligated TANF funds plus unliquidated obligations of TANF funds as of March 31, 1999.
Center on Budget and Policy Priorities


TABLE II

Unspent TANF Funds as of March 31, 1999,
As Compared with the Distribution of the $3 Billion TANF Rescission

$3 Billion Rescission

Total

(Based on Unobligated Funds)

Unspent TANF Funds

Distribution of

Percent

($ figures in millions)

(As of 3-31-1999*)

Unspent Funds

In Dollars

Distribution

Alabama

$46.9

0.6%

$33.6

1.1%

Alaska

$19.8

0.3%

$4.3

0.1%

Arizona

$111.0

1.5%

$50.6

1.7%

Arkansas

$37.5

0.5%

$1.2

0.0%

California

$1,725.3

22.8%

$377.4

12.6%

Colorado

$96.4

1.3%

$4.0

0.1%

Connecticut

$9.7

0.1%

$6.9

0.2%

Delaware

$0.0

0.0%

$0.0

0.0%

District of Columbia

$40.0

0.5%

$22.8

0.8%

Florida

$406.6

5.4%

$224.7

7.5%

Georgia

$112.9

1.5%

$54.1

1.8%

Hawaii

$2.0

0.0%

$0.8

0.0%

Idaho

$38.4

0.5%

$27.5

0.9%

Illinois

$0.0

0.0%

$0.0

0.0%

Indiana

$149.9

2.0%

$0.0

0.0%

Iowa

$44.8

0.6%

$4.3

0.1%

Kansas

$24.2

0.3%

$17.3

0.6%

Kentucky

$30.5

0.4%

$21.9

0.7%

Louisiana

$106.8

1.4%

$76.5

2.6%

Maine

$5.1

0.1%

$3.7

0.1%

Maryland

$182.0

2.4%

$111.7

3.7%

Massachusetts

$75.5

1.0%

$0.0

0.0%

Michigan

$163.1

2.2%

$116.9

3.9%

Minnesota

$180.1

2.4%

$129.1

4.3%

Mississippi

$87.2

1.2%

$43.8

1.5%

Missouri

$48.7

0.6%

$0.0

0.0%

Montana

$39.5

0.5%

$0.7

0.0%

Nebraska

$4.7

0.1%

$3.3

0.1%

Nevada

$8.9

0.1%

$0.0

0.0%

New Hampshire

$8.8

0.1%

$6.3

0.2%

New Jersey

$281.1

3.7%

$165.5

5.5%

New Mexico

$75.6

1.0%

$50.6

1.7%

New York

$951.3

12.6%

$551.1

18.4%

North Carolina

$100.0

1.3%

$71.6

2.4%

North Dakota

$11.1

0.1%

$7.9

0.3%

Ohio

$655.3

8.6%

$98.8

3.3%

Oklahoma

$132.5

1.7%

$95.0

3.2%

Oregon

$117.3

1.5%

$0.0

0.0%

Pennsylvania

$235.0

3.1%

$109.1

3.6%

Rhode Island

$21.7

0.3%

$15.6

0.5%

South Carolina

$51.4

0.7%

$36.8

1.2%

South Dakota

$15.8

0.2%

$3.2

0.1%

Tennessee

$115.7

1.5%

$58.3

1.9%

Texas

$258.2

3.4%

$28.4

0.9%

Utah

$19.2

0.3%

$13.8

0.5%

Vermont

$7.8

0.1%

$5.6

0.2%

Virginia

$55.0

0.7%

$16.4

0.5%

Washington

$186.7

2.5%

$133.8

4.5%

West Virginia

$108.4

1.4%

$77.7

2.6%

Wisconsin

$325.6

4.3%

$114.2

3.8%

Wyoming

$47.7

0.6%

$3.2

0.1%

* This includes unobligated TANF funds plus unliquidated obligations of TANF funds as of March 31, 1999.
READING THIS TABLE:
  Column two shows each state's share of total unspent TANF funds. Column Four shows each state's share of the amount that would be rescinded under the House proposal. For states in which column four is greater than column two, the state's share of the rescission would be greater than its share of the unspent TANF funds nationally.
Center on Budget and Policy Priorities

TABLE III

TANF Rescission As a Percentage of
Unspent TANF Funds by State

Total
Unspent TANF Funds
(As of 3-31-1999*)

$3 Billion
Rescission

Rescission as a
Percent of
Unspent Funds

Alabama

$46.9

$33.6

72%

Alaska

$19.8

$4.3

22%

Arizona

$111.0

$50.6

46%

Arkansas

$37.5

$1.2

3%

California

$1,725.3

$377.4

22%

Colorado

$96.4

$4.0

4%

Connecticut

$9.7

$6.9

72%

Delaware

$0.0

$0.0

NA

District of Columbia

$40.0

$22.8

57%

Florida

$406.6

$224.7

55%

Georgia

$112.9

$54.1

48%

Hawaii

$2.0

$0.8

41%

Idaho

$38.4

$27.5

72%

Illinois

$0.0

$0.0

NA

Indiana

$149.9

$0.0

0%

Iowa

$44.8

$4.3

10%

Kansas

$24.2

$17.3

72%

Kentucky

$30.5

$21.9

72%

Louisiana

$106.8

$76.5

72%

Maine

$5.1

$3.7

72%

Maryland

$182.0

$111.7

61%

Massachusetts

$75.5

$0.0

0%

Michigan

$163.1

$116.9

72%

Minnesota

$180.1

$129.1

72%

Mississippi

$87.2

$43.8

50%

Missouri

$48.7

$0.0

0%

Montana

$39.5

$0.7

2%

Nebraska

$4.7

$3.3

72%

Nevada

$8.9

$0.0

0%

New Hampshire

$8.8

$6.3

72%

New Jersey

$281.1

$165.5

59%

New Mexico

$75.6

$50.6

67%

New York

$951.3

$551.1

58%

North Carolina

$100.0

$71.6

72%

North Dakota

$11.1

$7.9

72%

Ohio

$655.3

$98.8

15%

Oklahoma

$132.5

$95.0

72%

Oregon

$117.3

$0.0

0%

Pennsylvania

$235.0

$109.1

46%

Rhode Island

$21.7

$15.6

72%

South Carolina

$51.4

$36.8

72%

South Dakota

$15.8

$3.2

20%

Tennessee

$115.7

$58.3

50%

Texas

$258.2

$28.4

11%

Utah

$19.2

$13.8

72%

Vermont

$7.8

$5.6

72%

Virginia

$55.0

$16.4

30%

Washington

$186.7

$133.8

72%

West Virginia

$108.4

$77.7

72%

Wisconsin

$325.6

$114.2

35%

Wyoming

$47.7

$3.2

7%

* This includes unobligated TANF funds plus unliquidated obligations of TANF funds as of March 31, 1999.
Center on Budget and Policy Priorities

Endnotes:

1. See "Should TANF Block Grant Funds Be Rescinded?," Center on Budget and Policy Priorities, September 23, 1999 (/cms/index.cfm?fa=view&id=2179).

2. These data are from the "ACF-196" TANF financial reports states that have submitted to the U.S. Department of Health and Human Services for the quarter ending March 31, 1999. These figures differ from those in a table prepared earlier by HHS, which were based on unobligated TANF funds as of December 31, 1998. The March 31 TANF financial reports were collected from each state by the Center on Budget and Policy Priorities.

3. The regulations define obligations as "amounts of orders placed, contracts and subgrants awarded, goods and services received, and similar transactions during a given period that will require payment by the grantee during the same or a future period." Unliquidated obligations are those obligations for which payment has not been made. See 45 CFR ยง 92.3.