Vice President for Family Income Support Policy
As I noted in a recent post on Congress' failure to fund TANF Supplemental Grants for 17 mostly poor states, one way to help offset the loss of that funding would be to redesign the TANF Contingency Fund. When Congress created the TANF block grant in 1996, it created the TANF Contingency Fund for states to draw upon during periods of economic distress. The goal was to address some of the risks and hardships that states would face as a result of the conversion of Aid to Families with Dependent Children (AFDC) — an entitlement program whose funding rose automatically in recessions — into a block grant with fixed federal funding. However, the fund is not well-designed to achieve its stated purpose.
Congress provided $612 million for the Contingency Fund for fiscal year 2012, which begins October 1, but only a minority of states — and not necessarily those with the greatest need — will qualify. Last year, just 20 states and the District of Columbia qualified. Several of the states that did not qualify — California, Florida, Georgia, Illinois, and Rhode Island, among others — have faced unemployment rates well above the national average.
Since the TANF bill that Congress passed last week extended the program for only three months, lawmakers will have an opportunity later this fall to revisit the Contingency Fund. We have proposed a redesign to correct the fund's design flaws so that more states — and especially those with the greatest need — can qualify for it. An improved Contingency Fund would have the following features:
During this recession, many states have been unable to respond to increased need because they have no extra funds to draw upon. The Contingency Fund is too small to help states respond fully, but the changes outlined above will make more effective use of available resources.