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Policy Brief: Despite Recent Increases in Some States, TANF Cash Benefits Are Still Too Low

UPDATED
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.[1] 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.[2] (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.[3]

Figure 1
Maximum TANF Benefits Leave Families Well Below Federal Poverty Line

 

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.

Figure 2
TANF Benefits in Most States Have Declined in Inflation-Adjusted Terms Since 1996

 

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.[4] 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.[5] 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.[6]

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.[7] 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.[8] 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.
TABLE 1
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
Alabama 215 12.4% -17.8% 28.2%
Alaska 923 42.6% -37.3% 71.6%
Arizona 278 16.1% -49.7% 29.0%
Arkansas 204 11.8% -37.3% 28.3%
California 714 41.2% -24.8% 42.0%
Colorado 462 26.7% -18.6% 37.1%
Connecticut 698 40.3% -31.1% 53.9%
Delaware 338 19.5% -37.3% 29.8%
D.C. 576 33.3% -12.9% 32.1%
Florida 303 17.5% -37.3% 27.1%
Georgia 280 16.2% -37.3% 30.7%
Hawaii 610 30.6% -46.3% 32.5%
Idaho 309 17.8% -38.8% 38.5%
Illinois 432 24.9% -28.1% 40.8%
Indiana 288 16.6% -37.3% 35.6%
Iowa 426 24.6% -37.3% 54.5%
Kansas 429 24.8% -37.3% 52.6%
Kentucky 262 15.1% -37.3% 35.0%
Louisiana 240 13.9% -20.8% 27.7%
Maine 582 33.6% -12.7% 59.8%
Maryland 677 39.1% 13.9% 44.8%
Massachusetts 618 35.7% -31.4% 41.5%
Michigan 492 28.4% -32.8% 56.2%
Minnesota 532 30.7% -37.3% 54.3%
Mississippi 170 9.8% -11.1% 22.5%
Missouri 292 16.9% -37.3% 36.3%
Montana 588 34.0% -15.8% 70.1%
Nebraska 450 26.0% -22.4% 55.2%
Nevada 383 22.1% -31.0% 39.6%
New Hampshire 1039 60.0% 18.5% 89.5%
New Jersey 424 24.5% -37.3% 28.9%
New Mexico 447 25.8% -27.9% 54.1%
New York 789 45.6% -14.2% 50.5%
North Carolina 272 15.7% -37.3% 32.0%
North Dakota 486 28.1% -29.3% 56.8%
Ohio 483 27.9% -11.1% 60.9%
Oklahoma 292 16.9% -40.3% 36.5%
Oregon 506 29.2% -31.0% 45.8%
Pennsylvania 421 24.3% -37.3% 41.5%
Rhode Island 554 32.0% -37.3% 53.4%
South Carolina 286 16.5% -10.3% 33.6%
South Dakota 615 35.5% -10.3% 82.6%
Tennessee 185 10.7% -37.3% 22.6%
Texas 290 16.7% -3.2% 28.9%
Utah 498 28.8% -24.9% 53.9%
Vermont 640 37.0% -32.7% 54.9%
Virginia 419 24.2% -25.7% 34.0%
Washington 569 32.9% -34.6% 40.7%
West Virginia 340 19.6% -15.7% 46.4%
Wisconsin 653 37.7% -20.8% 76.0%
Wyoming 675 39.0% 17.6% 78.9%

For more detailed notes on state benefit levels, please see our full report at http://www.cbpp.org/research/family-income-support/tanf -benefits-remain-low-despite-recent-increases-in-some-states.

Sources: TANF benefit levels for a single-parent family of three were compiled by CBPP from various state sources and are current as of July 1, 2018. Share of the poverty line calculated using Health and Human Services 2018 Poverty Guidelines. 1996 TANF benefits for a family of three collected from the Congressional Research Service. Benefits adjusted for inflation using the CPI-U-RS. Share of Fair Market Rents calculated using housing cost data from the National Low Income Housing Coalition’s Out of Reach report.

End Notes

[1] 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.

[2] 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.

[3] Racial composition analysis based on U.S. Census July 2017 population data.

[4] CBPP calculation of TANF caseload and HUD administrative data.

[5] Matthew Desmond, “Eviction and the Reproduction of Urban Poverty,” American Journal of Sociology, 118(1), 2012.

[6] 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.

[7] 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.

[8] 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.