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Sixteen years ago today, President Clinton signed into law the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 — commonly known as “welfare reform.” A key component was its creation of the Temporary Assistance for Needy Families (TANF) block grant to replace Aid to Families with Dependent Children (AFDC).
Since then, TANF has played a shrinking role as a safety net for poor families, serving a small share of poor families and lifting many fewer families out of deep poverty than AFDC did (see chart).
With a 16-year history that has encompassed both the extraordinarily strong economy of the 1990s and the extraordinarily weak economy of recent years, it’s now clear that TANF needs retooling to ensure that a strong safety net and sufficient employment assistance is available when people need them most. (Click here to see our updated chart book, which includes key facts and figures about TANF’s track record.)
TANF reform is long overdue: although the program was due for reauthorization in 2010, Congress has enacted a series of short-term extensions since then (the current one expires September 30). It will likely enact yet another short-term extension, but it may enact a longer-term reauthorization in the coming year.
Thus, policymakers have an opportunity to enhance TANF’s effectiveness as both a safety net and a work program. Congress could help to achieve these goals by making changes that include:
- Increasing the focus on employment by giving states the option to be held accountable for employment outcomes. The TANF Work Participation Rate is a failed measure of state performance. States that perform well under the measure often do so because they are not providing assistance to families with the greatest needs. States shouldn’t be rewarded for not meeting either the basic needs or the employment assistance needs of these families. Instead, we should let states build on what they have learned about what works best to help recipients find and maintain employment — and hold them accountable for the employment outcomes they achieve.
- Transforming the Contingency Fund into a Subsidized Employment Fund to provide employment to families during economic downturns. Congress recognized that states would need funds to address additional needs during hard economic times. However, the TANF Contingency Fund that it created for this purpose has not worked as intended. With high unemployment rates expected to continue for some time, now is the time to redesign the Contingency Fund.
A redesign should ensure that states with the greatest need can access the Fund and that they use the monies only for activities that directly address economic hardship caused by a weak economy, such as subsidized employment. States have demonstrated that it is possible to provide subsidized jobs to large numbers of unemployed individuals. When they received extra funds during the recession, states placed about 260,000 unemployed low-income parents and young adults in subsidized jobs.
- Addressing the disincentives that states have to provide a safety net for families. TANF’s safety net role has weakened significantly. Congress could take several steps to encourage states to serve more families in need: (1) mandate that states spend a minimum share of TANF funds on basic assistance or subsidized employment; (2) consider the extent to which a state provides a safety net to families when considering penalty relief for states that do not meet the TANF work rate; and (3) eliminate the caseload reduction credit, which encourages states to keep the number of families they serve low.
- Ensuring that state and federal TANF funds are targeted to promoting and supporting work and providing a safety net to families. In a constrained fiscal environment, it is important that policymakers target limited resources for these key purposes. As caseloads have fallen, states have not reinvested these savings in work-related activities and supports. They could redirect funds to TANF’s core purposes by mandating a minimum share of funding for specified areas, such as work activities and basic assistance, and prohibiting spending that does not further one of TANF’s goals.