TANF Cash Benefits Have Fallen by More Than 20 Percent in Most States and Continue to Erode
October 17, 2016
Cash assistance benefits for the nation’s poorest families with children fell again in purchasing power this year and are now at least 20 percent below their 1996 levels in 35 states plus the District of Columbia, after adjusting for inflation. For 99 percent of recipients nationally, the purchasing power of their benefits is below the level in 1996, when the welfare reform law created the Temporary Assistance for Needy Families (TANF) block grant. States should halt the erosion of TANF benefits and begin restoring the purchasing power lost over the past 20 years.States should halt the erosion of TANF benefits and begin restoring the purchasing power lost over the past 20 years.
Eight states plus Washington, D.C., raised TANF benefits between July 2015 (the start of fiscal year 2016 in most states) and July 2016; two others enacted legislation that raised benefit levels after July 2016. The remaining 41 states did not adjust benefits, allowing inflation to continue eroding the benefits’ value. (No state cut TANF benefits in nominal dollars in the past year.)
The erosion of TANF benefits since TANF’s creation in 1996 comes on top of even larger benefit declines over the preceding quarter-century. Between 1970 and 1996, the value of cash assistance benefits for poor families with children fell by more than 40 percent in real terms in two-thirds of the states.
As of July 1, 2016, every state’s TANF benefits for a family of three with no other cash income were below 50 percent of the poverty line, measured by the Department of Health and Human Services’ (HHS) 2016 poverty guidelines. Most states’ benefits were below 30 percent of the poverty line. In every state, benefits for a family of three with no other cash income were also below the Fair Market Rent — the Department of Housing and Urban Development’s (HUD) estimate of the rent and utility costs of modest housing in a local area — for a modest two-bedroom apartment; in 30 states and D.C., they covered less than half of the Fair Market Rent. Additionally, less than a quarter of TANF families receive HUD housing assistance to help cover rent. Even when benefits from SNAP (formerly food stamps) are added to TANF family grants, families with no other income remain below the poverty line in every state.
In addition, TANF provides a safety net to significantly fewer poor families than in the past: in 2014, just 23 families received TANF benefits for every 100 poor families with children, down from 68 families receiving TANF for every 100 poor families in 1996. Even more troubling, 12 states’ TANF programs reach only ten families or fewer for every 100 poor families. TANF often is these families’ only source of support; without it they would have no cash income to meet basic needs.
This paper, an annual update of state TANF benefit levels as of July 1, covers changes in TANF benefits between July 1, 2015 and July 1, 2016. The benefit levels cited here reflect the monthly benefits for a family of three with no other income as of July 1, 2016; they may exceed what many families actually receive because TANF benefits in eight states (California, Connecticut, Illinois, New York, Pennsylvania, South Dakota, Vermont, and Virginia) vary by geographic region. Unless noted otherwise, this paper reports the benefit level in the state’s most populous region.
Eight States and D.C. Have Raised TANF Benefits Since 2015
Eight states and the District of Columbia raised TANF benefit levels between July 1, 2015 and July 1, 2016 (see Table 1), increasing the median state benefit from $429 to $432. Most of these increases were modest and reflect default periodic adjustments to benefit levels.
|States Raising TANF Benefits in Past Year (monthly benefit for family of three)|
|July 2016 Benefits||Increase Since July 2015|
|District of Columbia||$441||$7|
- The District of Columbia raised benefits by $7 to $441 in October 2015 as part of a cost of living adjustment (COLA) started in 2014. Benefits will rise significantly in October 2016 to $508.
- Montana raised benefits by $2 to $588 in July 2016. The state’s benefits are pegged to 35 percent of the federal poverty level.
- Nebraska raised benefits by $72 to $436. Legislation enacted in 2015 called for benefits to meet 55 percent of the state’s standard of need, which adjusts biannually.
- New Mexico partially restored benefit cuts made in 2011, raising benefits by $29 to $409 following 2015 legislation that mandated a 5 percent benefit increase.
- South Carolina raised benefits by $5 to $282. Benefits are based on a share of the state’s standard of need, which adjusts periodically.
- South Dakota, which periodically adjusts its benefit level, increased benefits for a family of three from $599 to $615 in July 2016.
- Texas raised benefits by $4 to $285 in October 2015. The legislature generally adjusts benefit levels annually to maintain the maximum grant at 17 percent of the poverty line. In October 2016, benefits will rise again, to $286.
- Virginia raised its benefits twice in one year as a result of legislative action — by 2.5 percent in January 2016 and another 2.5 percent in July 2016 — for a total increase of $20, to $409.
- Wyoming’s benefits have kept pace with inflation since the state implemented a COLA in 2009. In July 2016, benefits rose by $5 to $657.
One other state adopted a benefit increase as part of its fiscal year 2017 budget: California, where benefits will rise by 1.4 percent in October 2016.
Benefits Leave Families Below Half of Poverty Line
TANF benefits leave family incomes below half of the poverty line in every state. (See Figure 1 and Appendix Table 2.) In 1996, 16 states had benefit levels below 30 percent of the poverty line; today, 33 states and D.C. do. In 16 of those states, benefit levels are below 20 percent of the poverty line — that is, below $336 a month for a family of three.
Because TANF benefits have fallen substantially in value, they do much less to help families escape “deep poverty” (family incomes below half of the poverty line) than in 1996. A poor family relying solely on TANF to provide the basics for its children — such as during a period of joblessness, illness, or disability — is further below the poverty line today than in 1996 in every state except Maryland, Texas (which keeps benefits pegged at 17 percent of the poverty line), and Wyoming. (See Figure 2 and Appendix Tables 2 and 3.) In many states, the decline has been dramatic:
- Since 1996, benefits have fallen by 20 percent or more in 35 states plus D.C., 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.
- In five states (Arizona, Hawaii, Idaho, Oklahoma, and Washington), TANF benefits are below their nominal 1996 levels. After adjusting for inflation, benefits in Arizona and Hawaii are more than 40 percent below their 1996 levels.
The decline in TANF benefits since 1996 follows a quarter-century of major declines in the real value of benefits provided through TANF’s predecessor, Aid to Families with Dependent Children (AFDC). Between 1970 and 1996, AFDC benefits fell by more than 20 percent in every state but one and by more than 40 percent in two-thirds of the states, after adjusting for inflation.
Some families can combine TANF benefits with earned income to help meet basic needs; nearly all states have adopted “make work pay” policies under which TANF benefits phase out gradually as family earnings increase. But such families still become ineligible for TANF cash assistance at very low income levels in nearly all states. And, not all TANF families can supplement benefits with earnings; many families include parents who have significant disabilities or other barriers to work or cannot find jobs in the current labor market.
Benefits Cover Only Fraction of Modest Housing Costs
Even as TANF benefits continue declining, the cost of housing in most areas is rising. The monthly TANF benefit for a family of three is now below the estimated cost of a modest two-bedroom apartment and utilities (based on HUD Fair Market Rents) in every state. It is less than half of the Fair Market Rent in 30 states and D.C., compared with only seven states in 1996. Between 1996 and 2016, the median Fair Market Rent nationally rose from $543 to $849, while the median TANF benefit only rose from $377 to $432. (These figures are in nominal dollars.)
In fact, the share of housing costs that TANF benefits cover declined in all but two states between 1996 and 2016. (See Figure 3.)
Most TANF families receive no housing subsidies — in fact, only about 22 percent TANF families live in a household that receives HUD housing assistance. Some states provide small additional funds to help families cover housing costs, but these rarely cover the large gap between TANF grants and local Fair Market Rents.
TANF families without housing assistance have high rates of housing instability — resulting in doubling up with friends or relatives, living in substandard conditions, frequent moves, eviction, and/or homelessness. Such instability can harm both adults and children associated with poor school performance, poor cognitive development, increased health risks, and mental health problems.
TANF Benefits Particularly Inadequate in High-Cost Housing Markets
TANF’s low benefits make it especially difficult for recipients to afford housing in high-cost housing markets, where the Fair Market Rent significantly exceeds the state average FMR. Areas like New York City and San Francisco are known for their expensive housing markets, but other areas also have high housing costs:
- In Miami, Florida, the FMR for a two-bedroom apartment is $1,250, or $212 above the state average. Florida’s TANF benefit for a family of three ($303) is less than 25 percent of Miami’s FMR.
- In Philadelphia, Pennsylvania, the FMR for a two-bedroom apartment is $1,210, or $260 above the state average. Though Philadelphia has the state’s highest housing costs, it’s not in the region of the state with the highest TANF benefit. The benefit for a family of three ($403) is just 33 percent of Philadelphia’s FMR.*
- In Fairfax County, Virginia, the FMR for a two-bedroom apartment is $1,623, or $456 above the state average — one of the biggest such gaps in the country. Fairfax County is in the region of Virginia with the highest TANF benefit ($409 for a family of three), but it still only covers 25 percent of the county FMR.
- In Seattle, Washington, the FMR for two-bedroom apartment is $1,523, or $320 above the state average. The TANF benefit for a family of three ($521) covers just 34 percent of the area FMR.
* Other analysis in this report uses the highest regional benefit in the state, $421, to represent Pennsylvania.
SNAP Benefits Help, But Large Shortfall Remains
Unlike TANF, SNAP has provided a strong safety net for many unemployed families and individuals during the economic downturn and slow recovery. TANF and SNAP benefits together do a better job of pulling families out of deep poverty than TANF alone. About 85 percent of TANF households consistently receive SNAP benefits. In fiscal year 2014, the average monthly SNAP benefit for households with TANF income was $407.
Nevertheless, families receiving both SNAP and TANF benefits still fall below 75 percent of the poverty line in every state except Alaska and New York, as Figure 4 shows. (Moreover, to simplify the comparison, the SNAP benefit levels used for this comparison overstate the SNAP benefit that many TANF families actually receive.)
After Years of Disinvestment, It’s Time to Raise TANF Benefits
Twenty years after its creation, TANF is not fulfilling one of its core purposes: to provide a safety net for poor families. States spend only a quarter of federal and state TANF funds on basic assistance, down from 70 percent in 1997. In the years immediately after the 1996 welfare law, large caseload declines allowed states to channel freed-up funds from cash benefits to welfare reform efforts like child care and welfare-to-work programs. But funding in those areas has been flat or declined for over a decade. Instead, states over time redirected a substantial portion of their federal TANF and state maintenance-of-effort (MOE) funds to other purposes, in some cases to “supplant” (replace) existing state spending and thereby help close budget holes or to free up funds for purposes unrelated to low-income families or children.
Nor did states invest the funds freed up by caseload declines to maintain their cash assistance programs. This failure left the most disadvantaged families without much of a safety net. As this paper shows, it is increasingly difficult for TANF recipients to meet basic needs, even when they also receive SNAP. In particular, TANF families often find themselves in poor housing conditions with few resources to pay for even a modest apartment.
TANF recipients have a limited time on benefits and must participate in work or work-preparation activities (unless they qualify for a state exemption). During this time-limited, work-focused window, TANF benefits need to do a better job of enabling families to meet basic needs so they can focus on finding work and/or increasing their skills in order to become self-sufficient. The destitution that accompanies today’s low TANF benefit levels frequently creates instability that can interfere with these goals and undermine welfare reform.
Many of the states that raised benefits in the past year did so through annual or periodic adjustments that generally occur by default or automatically. Such approaches can be an effective strategy to protect TANF benefits from erosion due to inflation. With state fiscal conditions improving, this is a good time for state policymakers to consider several steps to provide more adequate levels of basic assistance:
- First, they should reinvest TANF and MOE funds back into TANF to provide a stronger safety net 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 the additional cuts 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|
|Monthly TANF Benefit Levels (Single-Parent Family of Three)|
|July 1996||July 2000||July 2005||July 2010||July 2014||July 2015||July 2016||Change 1996-2016 (inflation-adjusted dollars)|
|APPENDIX TABLE 2|
|TANF Benefit Levels as Percentage of Federal Poverty Level|
|APPENDIX TABLE 3|
Changes in Real (Inflation-Adjusted) TANF Benefits
|APPENDIX TABLE 4|
|TANF Benefit Levels as Percentage of Fair Market Rents|
|APPENDIX TABLE 5|
|2016 TANF and SNAP Benefit Levels as Percentage of Federal Poverty Level (FPL)|
|TANF as Percent of FPL||SNAP + TANF as Percent of FPL|
 CBPP calculation of state TANF caseload data.
 See Appendix Table 1 for states with regional variation in TANF benefits.
 In October of 2016, 2017, and 2018, DC will increase benefits beyond their automatic COLA to bring them in line with other high-cost jurisdictions.
 The standard of need is the consolidation of basic necessities like food, clothing, home supplies, utilities, and shelter.
 South Carolina’s benefit level is indirectly tied to the federal poverty level. The benefit is a share (currently 33.7 percent) of the state’s Need Standard, and the Need Standard is 50 percent of the federal poverty level. The state can change the benefit level by adjusting the percentage of the Need Standard that TANF benefits meet or by adjusting the Need Standard’s percentage of the poverty level.
 The 2016 poverty guideline from the Department of Health and Human Services for a family of three is $1,680 per month in the 48 contiguous states and Washington, D.C.; Alaska and Hawaii have higher guidelines. (See https://aspe.hhs.gov/poverty-guidelines) CBPP uses HHS’ poverty guidelines in this analysis because they are a simplification of the poverty thresholds (the Census Bureau’s measure of poverty) and are used to determine financial eligibility for certain programs.
1996 Green Book, House Ways and Means Committee, Table 8-15, http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=104_green_book&docid=f:wm014_08.pdf.
 Fair Market Rents, set by HUD, are gross rent estimates. They include the shelter rent plus the cost of all utilities, except telephones.
 CBPP analysis of HUD Fair Market Rents and state benefit levels.
 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.
 Will Fischer, “Research Shows Housing Vouchers Reduce Hardship and Provide Platform for Long-Term Gains Among Children,” Center on Budget and Policy Priorities, October 7, 2015, http://www.cbpp.org/research/housing/research-shows-housing-vouchers-reduce-hardship-and-provide-platform-for-long-term.
Temporary Assistance for Needy Families (TANF) Eleventh Annual Report to Congress, Department of Health and Human Services, Office of Family Assistance, December 2014, http://www.acf.hhs.gov/sites/default/files/ofa/eleventh_report_to_congress.pdf.
Characteristics of Supplemental Nutrition Assistance Program Households: Fiscal Year 2014, Department of Agriculture, Food and Nutrition Service, December 2015, http://www.fns.usda.gov/sites/default/files/ops/Characteristics2014.pdf.
 In calculating typical SNAP benefits, this analysis assumed that a family’s shelter costs are the median shelter costs for families of three receiving SNAP with incomes at or below 80 percent of the poverty line and that the household received no income besides the TANF benefit. A family’s SNAP benefit is based on its income and deductions, most significantly the capped deduction for high shelter costs. A family receives the maximum SNAP benefit if its net income (income minus deductions) is zero, usually because its income is low or its shelter costs are high relative to income. In two-thirds of the states, the TANF benefit is so low that the estimated SNAP benefit used in Figure 4 is the maximum monthly benefit for a family of three ($511). However, the SNAP benefit that an individual TANF family actually qualifies for, based on its particular circumstances, is usually lower than the maximum benefit because many TANF households either have other income or do not incur shelter expenses high enough to receive the maximum benefit.
 A statutory 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 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.