President’s Budget Would Bolster TANF

President Obama included in his budget an important initiative to strengthen the Temporary Assistance for Needy Families (TANF) program, as my colleague LaDonna Pavetti noted earlier this week.  Here’s a closer look.   

The initiative:

• Increases resources for TANF.  The budget adds $8 billion to the TANF block grant over five years.  Each state would receive some portion of those funds; policymakers would need to set a precise allocation formula, perhaps based on the number of poor children in each state, which is one option that the Department of Health and Human Services (HHS) has identified.
• Targets state and federal spending on core welfare reform areas.  Only about half of state and federal TANF spending now goes toward the program’s core purposes of work activities, child care, and basic cash assistance, and some states spend an even smaller share.  Under the President’s budget, each state initially would be required to spend at least 55 percent of state and federal funds on these core areas, rising incrementally over five years to reach at least 60 percent by 2021.  The budget also requires states to spend all TANF funds on low-income families (those with incomes below 200 percent of the federal poverty level). 
• Improves work programs and work performance measures.  The budget calls on Congress to revise the law to give states more flexibility to design effective work programs in exchange for holding states accountable for the outcome that really matters — helping parents find jobs.
• Focuses on reducing child poverty.  The budget adds child poverty reduction as a new TANF purpose and proposes that HHS publish annual state-by-state data on child poverty.
• Repurposes the Contingency Fund.  The budget builds on a prior proposal that’s had bipartisan support to redirect funds that are now in the poorly designed TANF Contingency Fund.  The proposal would shift these funds to finance two important innovative approaches to reducing poverty and promoting self-sufficiency:  subsidized jobs programs and two-generation initiatives designed to improve both parents’ employment outcomes and their children’s developmental and educational outcomes.
• Creates a new TANF Economic Response Fund.  The budget creates a countercyclical measure modeled after the effective TANF Emergency Fund that policymakers created during the Great Recession.  High unemployment in a state would trigger the fund, which would provide additional federal TANF funding to a state for increased spending on basic cash assistance, short-term non-recurrent benefits, or subsidized employment.  The budget proposes $2 billion over five years for this fund.