Policy Brief: TANF Cash Benefits Are Too Low to Help Families Meet Basic Needs
February 2, 2017
A core purpose of the Temporary Assistance to Needy Families (TANF) program is to provide families that have fallen on hard economic times with cash assistance to help them meet basic needs. But TANF benefit levels are low and have eroded in value since TANF’s creation in 1996. As of July 2016, benefits for a family of three with no other income:
- Are below half of the poverty line in every state.
- Have lost at least 20 percent of their inflation-adjusted value since 1996 in most states.
- Don’t meet the rent and utility costs of a modest two-bedroom apartment in any state.
States should halt the erosion of TANF benefits. States have considerable flexibility in how they use their TANF funds, and many have invested those funds in other areas as caseloads have declined. States should halt the erosion of TANF benefits and begin restoring the purchasing power lost over the past 20 years.
Benefits Are Low and Have Eroded in Value
TANF benefits leave family incomes below half the poverty line in every state. (See Figure 1.) And TANF families are further below the poverty line than when TANF began two decades ago. In 1996, 16 states had benefit levels below 30 percent of the poverty line; today, 33 states and the District of Columbia do. In 16 states, benefit levels are below 20 percent of the poverty line — that is, below $336 a month for a family of three.
Benefits have lost considerable value in the vast majority of states. Since 1996, they have shrunk by 20 percent or more in 35 states plus the District of Columbia, after adjusting for inflation. Sixteen states had the same nominal benefit levels in July 2016 as in 1996, meaning that benefits have fallen in inflation-adjusted terms by more than 30 percent. (See Figure 2.)
Five states (Arizona, Hawaii, Idaho, Oklahoma, and Washington) have cut TANF benefits in the last 20 years, so benefits there are below their 1996 levels even without adjusting for inflation. In two of those states — Arizona and Hawaii — benefits have shrunk by more than 40 percent after adjusting for inflation.
Benefits Cover Only Fraction of Modest Housing Costs
Even as TANF benefits continue declining, housing costs in most areas are rising. In every state, the monthly TANF benefit for a family of three is well below the Fair Market Rent, or the Department of Housing and Urban Development’s estimated cost of a modest two-bedroom apartment and utilities. It’s less than half of the Fair Market Rent in 30 states and D.C., compared with only 7 states in 1996. (See table.)
Moreover, only about 22 percent of TANF families receive HUD rental assistance. Some states provide small funds to help low-income families cover housing costs, but these rarely cover the large gap between TANF grants and local Fair Market Rents.
Low-income families without housing assistance have high rates of housing instability, research shows, resulting in doubling up with friends or relatives, living in substandard conditions, frequent moves, eviction, or homelessness.
TANF Benefits Should Support Families Getting Back to Work
TANF recipients have a limited time on benefits and are required to participate in work or work-preparation activities such as education or training (unless they qualify for a state exemption). During this time-limited, work-focused window, TANF benefits have an important role to play in helping parents to succeed in school or work.
Recent research on the impacts of living in chronic scarcity, where essentials such as food and housing are in short supply, highlight the ways in which income support can help parents succeed. With state fiscal conditions improving, this is a good time for state policymakers to consider several steps to provide more adequate basic assistance:
- First, they should reinvest federal and state TANF funds in the core areas of welfare reform — cash assistance, work-related activities and supports, and child care assistance — to provide a stronger safety net and work programs for poor families.
- Second, as part of this reinvestment, states should restore the full value of benefits that has been lost in recent years and a few states should reverse the additional cuts they made during the recession, even if that requires several incremental increases over a period of years.
- Third, they should establish mechanisms to prevent benefits from eroding in the future. Adjusting TANF benefits yearly in step with inflation can maintain families’ purchasing power and help them meet basic needs — thereby improving the lives of parents and children receiving TANF while also helping local communities, as poor families quickly put that money into the local economy.
|APPENDIX TABLE 1|
|State TANF Benefit Levels Related to Measures of Need and Erosion of Value|
|State||Monthly benefit, July 2016||Benefit, percent of poverty line||Change 1996-2016, adjusted for inflation||Percent of Fair Market Rent|
 For more detail, see Megan Stanley, Ife Floyd, and Misha Hill, “TANF Cash Benefits Have Fallen by More Than 20 Percent in Most States and Continue to Erode,” CBPP, updated October 16, 2016, http://www.cbpp.org/research/family-income-support/tanf-cash-benefits-have-fallen-by-more-than-20-percent-in-most-states.
 The 2016 poverty guideline from the Department of Health and Human Services (HHS) for a family of three is $1,680 per month in the 48 contiguous states and Washington, D.C. (See https://aspe.hhs.gov/poverty-guidelines.) CBPP uses HHS’ poverty guidelines in this analysis because they are used to determine financial eligibility for certain programs.
 CBPP analysis of HUD administrative data and CBPP-compiled TANF caseload data.
 Matthew Desmond, “Eviction and the Reproduction of Urban Poverty,” American Journal of Sociology, 118(1), 2012.
 Allison Daminger, et al., “Poverty Interrupted: Applying Behavioral Science to the Context of Chronic Scarcity,” ideas42, May 2015, http://www.ideas42.org/wp-content/uploads/2015/05/I42_PovertyWhitePaper_Digital_FINAL-1.pdf.
 A statutory cost-of-living adjustment (COLA) is the best way to ensure that benefits keep pace with inflation. TANF agencies will fare much better in their state budget process if a COLA is part of the baseline of a current-needs budget. For example, Wyoming’s COLA is based on the Wyoming Cost of Living Index, the state’s inflation indicator, for the previous year. The COLA has made Wyoming one of only two states whose benefits have risen since 1996 in inflation-adjusted terms. Ohio’s COLA follows the same approach used for Social Security and SSI benefits: the state uses the Social Security Administration’s COLA percentage to raise TANF benefits at the start of every calendar year.