Creating Subsidized Employment Opportunities for Low-Income Parents
The Legacy of the TANF Emergency Fund

PDF of this report (35pp.)

By LaDonna Pavetti, Ph.D.Liz Schott and Elizabeth Lower-Basch

February 16, 2011

Subsidized Jobs Created by the TANF Emergency Fund:

  • Placed more than 260,000 low-income adults and youth in paid jobs during a time of high unemployment.
  • Supported local economies by putting money into the hands of individuals most likely to spend it.
  • Helped states sustain work-focused TANF programs.
  • Provided direct and timely support to help businesses, non-profits, and local governments weather the recession.
  • Provided opportunities for low-income parents and youth to maintain a connection to the labor force and build new skills. 
  • Created new partnerships between TANF agencies, workforce agencies, businesses, foundations, advocates, and local nonprofit service providers.
  • Demonstrated the feasibility of creating cost-effective, publicly funded jobs in the private and public sectors on a large scale during a downturn. 

Issued Jointly With

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Introduction

Amidst the worst downturn since the Great Depression, Congress included the Temporary Assistance for Needy Families (TANF) Emergency Fund [1] in the 2009 Recovery Act to help states cover the costs of providing more assistance to low-income families suffering from the ill effects of the downturn.  The Fund provided $5 billion over two years for increased state or federal TANF spending in three categories of aid to TANF-eligible families [2] with children:  (1) basic assistance, (2) non-recurrent, short-term (or emergency) benefits, and (3) subsidized employment. 

The fund expired on September 30, 2010.  Some 39 states, the District of Columbia, Puerto Rico, the Virgin Islands, and eight Tribal TANF programs received approval to use $1.3 billion from the fund to create new subsidized employment programs or expand existing ones.  The remaining $3.7 billion in the fund was approved to cover increased costs associated with providing basic assistance and non-recurrent, short-term benefits, such as assistance to avoid eviction and potential homelessness.   

TANF Emergency Funds (EF) were available to cover 80 percent of a state’s increased costs in each of the three categories. [3]  This meant states had to spend more on needy families to obtain the funds and had to cover 20 percent of the increased expenditures with other funding sources (including federal TANF block grant funds or state maintenance-of-effort funds). For subsidized employment programs, states could count as state spending the employer costs to supervise and train subsidized employees, which made it possible to operate a subsidized employment program with minimal financial resources beyond the federal funds available from the EF.[4]

A key feature of the TANF EF was its flexibility: states decided how best to use the funds to serve families in need, such as how best to structure their subsidized employment programs.  This made it possible for states to operate large statewide countercyclical programs, as well as smaller programs targeted to population groups or geographical areas that face particular labor market challenges, such as non-custodial parents and rural communities with high rates of unemployment.

This paper presents the results of a telephone survey of the subsidized employment programs funded all or in part with funds from the TANF EF, conducted by staff from the Center on Budget and Policy Priorities (CBPP) and the Center for Law and Social Policy (CLASP) during the summer and fall of 2010.  We collected this information with two goals in mind:  (1) to understand how states used the flexibility they were given to design and implement subsidized employment programs and what challenges they faced in getting them up and running, and (2) to provide a written record of states’ experiences that could be used to inform future efforts.  We targeted our data collection efforts to the 33 states operating employment programs that served adults.  We were successful in conducting telephone interviews with 30 of the states and gathered basic information from written documents from the other states.  During the interviews, we obtained information on the populations that states decided to serve, how they structured their wage subsidies, the types of jobs they provided, how they operated their programs, how many individuals were employed, and their plans to continue programs after the end of the EF.[5] 

This paper opens with a brief description of subsidized employment programs that preceded those created through the TANF EF.  The second section presents information on EF-supported programs.  Subsequent sections describe several key elements of state programs:  (1) program purpose; (2) target population; (3) subsidy structure; (4) types of jobs provided; and (5) administrative structure.  The paper concludes by highlighting the following lessons that can be drawn from states’ experiences:

  • It is possible (though challenging) to get large-scale, countercyclical job creation programs up and running relatively quickly and to engage the private sector in creating job opportunities.
  • Subsidized jobs targeted to disadvantaged individuals benefit not only participating workers and businesses but also entire communities and society at large.
  • Flexibility makes success possible in many different environments.
  • New targeted funding can provide the catalyst for innovation and increased collaboration.
  • Subsidized employment programs can be implemented at reasonable cost.
  • Subsidized employment programs serve a variety of purposes; their performance should be judged on measures that are consistent with their purpose.

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End Notes:

[1] Statutory language refers to the “Emergency Contingency Fund” but, to avoid confusion with the TANF Contingency Fund which was created in 1996 when the TANF block grant was created, the U.S. Department of Health and Human Services referred to it as the Emergency Fund, a convention we follow throughout the paper.

[2] States could – and many did – serve broader low-income populations than just families eligible for TANF cash assistance. 

[3] For the basic assistance category, a state also had to have a caseload increase which many states did because of the recession.  A state did not have to experience an increase in its assistance caseload to draw down Emergency Funds for the non-recurrent short-term benefits and subsidized employment categories, but did have to show increased spending.   Increased spending (and for basic assistance, increased caseload) is measured relative to a base year that was either 2007 or 2008, whichever was lower.

[4] Supervision and training expenses up to 25 percent of the costs of wages could be claimed without explicit documentation on the costs of training and supervision.  Actual expenses exceeding 25 percent could be claimed only with explicit documentation of the costs.  

[5] Because of the way ARRA was written, subsidized jobs created with the Emergency Fund were not included in the number of jobs created by the Recovery Act that states reported. 

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