Policy Brief: Despite Recent Increases in Some States, TANF Cash Benefits Are Still Too Low
October 12, 2018
A core purpose of the Temporary Assistance for Needy Families (TANF) program is to provide families that have fallen on hard economic times with direct financial assistance, or cash assistance, to help them meet basic needs. Despite benefit increases in multiple states during the past year, TANF benefit levels are still too low and have eroded in value since TANF’s creation in 1996. These low benefits disproportionately affect black families because they are more likely than the white population to live in the states with the lowest benefits. As of July 2018, benefits for a family of three with no other income:
- Are at or below 60 percent of the poverty line in every state.
- Have lost at least 20 percent of their inflation-adjusted value since 1996 in most states.
- Don’t meet the rent and utility costs of a modest two-bedroom apartment in any state.
States have considerable flexibility in how they use their TANF funds. As caseloads have declined, many states have invested those funds in other areas — 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. States should halt the erosion of TANF benefits and continue restoring the purchasing power lost over the past 22 years. States should halt the erosion of TANF benefits.
Ten states and the District of Columbia raised TANF benefits levels between July 1, 2017 and July 1, 2018. In addition, six states made legislative or administrative changes to increase benefits later in 2018 or in 2019. Many of the grant increases represent historic changes for the state TANF programs, though they continue to leave benefits far below the poverty line for a family of three.
Benefits Are Low and Have Eroded in Value
TANF benefits leave family incomes below half the poverty line in every state except for one. (See Figure 1.) And TANF families are further below the poverty line than when TANF began two decades ago. In 1996, 16 states had benefit levels at or below 30 percent of the poverty line; today, 33 states do. In 18 of those states, benefit levels are at or below 20 percent of the poverty line — that is, $346 a month or less for a family of three. Moreover, over half (53 percent) of the country’s black population lives in one of these 18 states compared to only 39 percent of the white population.
Benefits have lost considerable value in the vast majority of states. Since 1996, they have shrunk by 20 percent or more in 36 states, after adjusting for inflation. Fifteen states had the same nominal benefit levels in July 2018 as in 1996, meaning that benefits have fallen in inflation-adjusted terms by more than 37 percent. (See Figure 2.)
Four states (Arizona, Hawaii, Idaho, and Oklahoma) have cut and not restored TANF benefits in the last 20 years, so benefits there are below their 1996 levels even without adjusting for inflation. In three of those states — Arizona, Hawaii, and Oklahoma — benefits have shrunk by 40 percent or more after adjusting for inflation.
Benefits Cover Only Fraction of Modest Housing Costs
Although TANF benefit levels have changed little, housing costs in most areas have continued to rise, leaving families with far less income than they need to make ends meet. In every state, the monthly TANF benefit for a family of three is well below the Fair Market Rent, the Department of Housing and Urban Development’s estimated cost of a modest two-bedroom apartment and utilities. It’s less than half of the estimated Fair Market Rent in 30 states and D.C., compared with only 8 states in 1996. (See Table 1.) In addition, nearly half (48 percent) of the black population lives in states where TANF benefits cover less than one-third of the estimated Fair Market Rent, compared to 30 percent of the white population.
Moreover, most TANF families receive no housing subsidies — in fact, only slightly more than 20 percent of TANF families receive HUD housing assistance. Some states provide small additional funds to help low-income families cover housing costs, but these rarely cover the large gap between TANF grants and local Fair Market Rents.
Low-income families without housing assistance likely have high rates of housing instability, research shows, resulting in doubling up with friends or relatives, living in substandard conditions, frequent moves, eviction, or homelessness. Such instability can harm both adults and children and is associated with poor school performance, poor cognitive development, increased health risks, and mental health problems.
TANF Benefits Should Support Families Getting Back to Work
TANF recipients have a limited time on benefits and are required to participate in work or work-preparation activities such as education or training (unless they qualify for a state exemption). During this time-limited, work-focused window, TANF benefits have an important role to play in helping parents to succeed in school or work.
Recent research on the impacts of living in chronic scarcity, where essentials such as food and housing are in short supply, highlight the ways in which direct financial assistance can help parents succeed. Unfortunately, whether or not families receive cash assistance often depends on where they live. Black families are more likely to live in the states where TANF benefits are lowest and that have the lowest levels of access to and spending on cash assistance. States need to improve the adequacy of their TANF benefit levels to ensure that all families in poverty have access to the cash they need to meet their basic needs. With many state TANF caseloads reaching their lowest levels ever, state policymakers can use the resulting savings to provide more adequate basic assistance:
- First, they should reinvest federal and state TANF funds back into the core purposes of TANF, such as providing cash grants for poor families. States should also direct those funds toward services and activities that support families that either receive or qualify for TANF direct financial assistance.
- Second, as part of this reinvestment, states should restore the full value of benefits lost since 1996 and reverse any 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.
|State TANF Benefit Levels Related to Measures of Need and Erosion of Value|
|State||Monthly benefit, July 2018||Benefit, percent of poverty line||Change 1996-2018, adjusted for inflation||Percent of Fair Market Rent|
 For more detail, see Ashley Burnside and Ife Floyd, “TANF Benefits Remain Low Despite Recent Increases in Some States,” Center on Budget and Policy Priorities, updated October 12, 2018, https://www.cbpp.org/research/family-income-support/tanf-benefits-remain-low-despite-recent-increases-in-some-states.
 The 2018 poverty guideline from the Department of Health and Human Services (HHS) for a family of three is $1,732 per month in the 48 contiguous states and Washington, D.C. (See https://aspe.hhs.gov/poverty-guidelines.) CBPP uses HHS’ poverty guidelines in this analysis because they are used to determine financial eligibility for certain programs.
 Racial composition analysis based on U.S. Census July 2017 population data.
 CBPP calculation of TANF caseload and HUD administrative 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,” CBPP, October 7, 2015, http://www.cbpp.org/research/housing/research-shows-housing-vouchers-reduce-hardship-and-provide-platform-for-long-term.
 Allison Daminger et al., “Poverty Interrupted: Applying Behavioral Science to the Context of Chronic Scarcity,” ideas42, May 2015, http://www.ideas42.org/wp-content/uploads/2015/05/I42_PovertyWhitePaper_Digital_FINAL-1.pdf.
 A statutory cost-of-living adjustment (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 only three states whose benefits have risen since 1996 in inflation-adjusted terms. Ohio’s COLA follows the same approach used for Social Security and Supplemental Security Income benefits: the state uses the Social Security Administration’s COLA percentage to raise TANF benefits at the start of every calendar year.