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State Budget Cuts Hitting TANF, the Safety Net of Last Resort

Facing another year of large budget shortfalls because of the weak economy, states are making deep cuts in many education and human service programs, including Temporary Assistance for Needy Families (TANF).  We issued a report today detailing those cuts.  Here’s the overview:

States are implementing some of the harshest cuts in recent history for many of the nation’s most vulnerable families with children who are receiving assistance through the federal Temporary Assistance for Needy Families (TANF) block grant.  The cuts will affect 700,000 low-income families that include 1.3 million children; these families represent over one-third of all low-income families receiving TANF nationwide.

A number of states are cutting cash assistance deeply or ending it entirely for many families that already live far below the poverty line, including many families with physical or mental health issues or other challenges.  Numerous states also are cutting child care and other work-related assistance that will make it harder for many poor parents who are fortunate enough to have jobs to retain them.

Among the state TANF cuts to date:

  • At least four states — California, Washington, South Carolina, and New Mexico — and the District of Columbia have cut monthly cash assistance benefits for TANF families, reducing already very low benefits.  In South Carolina, for example, TANF benefits are now just 14 percent of the poverty line for a family of three.  These cuts will push hundreds of thousands of families and children below — or further below — half of the poverty line.
  • States have shortened or otherwise tightened their lifetime time limits on receiving TANF benefits, cutting off aid entirely for thousands of very poor families and reducing benefits for thousands more.  California and Arizona are among the states that have shortened their time limits, and several other states are considering imposing time limits as short as 18 months.
  • States are cutting TANF-funded support for low-income working families.  Michigan is slashing its refundable Earned Income Tax Credit (which is partially funded with TANF funds) by two-thirds; that will raise state income taxes for several hundred thousand low-income working families and push­­­­­ more children and families into poverty.  Several other states have weakened “make-work-pay” policies by cutting or eliminating the modest TANF benefits that working-poor families can receive as supplements to their low wages.

Many of the cuts run counter to states’ longstanding approaches to welfare reform.  For example, some states that had provided support to poor parents working in low-wage jobs are abandoning those policies.  Similarly, states are shortening their time limits and eliminating some bases for extensions or exemptions, and applying these changes retroactively.  As a result, states are terminating or reducing benefits for some of the most vulnerable families, most of whom have very poor labor market prospects.

These TANF cuts are coming at a time when unemployment remains very high and the prospects of finding jobs, especially for people with low skills, are poor.  In April 2011, unemployment was 9 percent overall and 14.7 percent for individuals without a high school diploma.  More than two-fifths (43.4 percent) of the 13.7 million people who are unemployed — 5.8 million people — have been looking for work for half a year or longer, a level of long-term unemployment that remains at levels not seen in the past 60 years.

Despite these economic conditions, states are implementing policies that are shrinking the already low number of poor families with children that TANF serves.  In 1994-1995, just before TANF’s creation, the Aid to Families with Dependent Children program (AFDC, TANF’s predecessor) served 75 families with children for every 100 families with children who lived in poverty.  In 2008-2009, TANF served only 28 families for every 100 in poverty.  This ratio varies among states; in seven states in 2008-2009, TANF served fewer than 10 families for every 100 in poverty.

To be effective, a safety net must be able to expand when the need for assistance rises and to contract when need declines.  The TANF block grant is failing this test, for several reasons:  Congress has level-funded TANF since its creation, with no adjustment for inflation or other factors over the past 15 years; federal funding no longer increases when the economy weakens and poverty climbs; and states — facing serious budget shortfalls — have shifted TANF funds to other purposes and have cut the TANF matching funds they provide.

Click here for the full report.