TANF Cash Benefits Have Fallen by More Than 20 Percent in Most States and Continue to Erode
October 13, 2017
Cash assistance benefits for the nation’s poorest families with children fell again in purchasing power this year and are now at least 20 percent below their 1996 levels in 35 states plus the District of Columbia, after adjusting for inflation. For 99 percent of recipients nationally, the purchasing power of their benefits is below the level in 1996, when the welfare reform law created the Temporary Assistance for Needy Families (TANF) block grant. States should halt the erosion of TANF benefits and begin restoring the purchasing power lost over the past 20 years.Living on such limited incomes risks exposing children to excessive levels of hardship and stress, which research shows can negatively affect their health and undermine their development, limiting their future economic and social mobility. To improve children’s chances of succeeding over the long term, states should halt the erosion of TANF benefits and begin restoring the purchasing power lost over the past 20 years.
Nine states plus Washington, D.C., raised TANF benefits between July 2016 (the start of fiscal year 2017 in most states) and July 2017; two others enacted legislation that will raise benefit levels after July 2017. No state cut benefits but 41 states did not adjust benefits, allowing inflation to continue eroding the benefits’ value.
The erosion of TANF benefits since TANF’s creation in 1996 comes on top of even larger benefit declines over the preceding quarter-century. Between 1970 and 1996, the value of cash assistance benefits for poor families with children fell by more than 40 percent in real terms in two-thirds of the states.
As of July 1, 2017, every state’s TANF benefits for a family of three with no other cash income were at or below 60 percent of the poverty line, measured by the Department of Health and Human Services’ (HHS) 2017 poverty guidelines. Most states’ benefits were below 30 percent of the poverty line. In every state, benefits for a family of three with no other cash income were also below the Fair Market Rent — the Department of Housing and Urban Development’s (HUD) estimate of the rent and utility costs of modest housing in a local area — for a modest two-bedroom apartment; in 31 states and D.C., they covered less than half of the Fair Market Rent. Additionally, less than a quarter of TANF families receive HUD housing assistance to help cover rent. Even when benefits from SNAP (formerly food stamps) are added to TANF family grants, families with no other income remain below the poverty line in every state.
In addition, TANF provides a safety net to significantly fewer poor families than in the past: in 2015, just 23 families received TANF benefits for every 100 poor families with children, down from 68 families receiving TANF for every 100 poor families in 1996. Even more troubling, 14 states’ TANF programs reach only ten families or fewer for every 100 poor families. TANF often is these families’ only source of support; without it, they would have no cash income to meet basic needs.
This paper, an annual update of state TANF benefit levels as of July 1, covers changes in TANF benefits between July 1, 2016 and July 1, 2017. The benefit levels cited here reflect the monthly benefits for a family of three with no other income as of July 1, 2017; they may exceed what many families actually receive because families often do not receive the maximum TANF benefit and family grants in seven states (California, Connecticut, Illinois, New York, Pennsylvania, Vermont, and Virginia) vary by geographic region. Unless noted otherwise, this paper reports the benefit level in the state’s most populous region.
Nine States and D.C. Have Raised TANF Benefits Since 2016
Nine states and the District of Columbia raised TANF benefit levels between July 1, 2016 and July 1, 2017 (see Table 1), but most increases were very small and the median state benefit remained $432. Two states and D.C. made one-time increases through legislative or administrative actions; in the other seven states, benefits rose automatically through periodic adjustment processes.
- California lawmakers passed a 1.4 percent benefit increase.
- The District of Columbia raised benefits by 15 percent to bring benefits in line with other high-cost jurisdictions. (D.C. does have a cost of living adjustment — or COLA — for TANF benefits, but this year it increased benefits beyond its COLA.)
- Virginia lawmakers passed a 2.5 percent benefit increase.
- Maryland raised benefits by about 2 percent based on changes in the state’s Minimum Living Level, a standard of need tied to living costs.
- Nebraska, where benefits are tied to the state’s Standard of Need, raised benefits by 3 percent.
- New Hampshire raised benefits to 60 percent of the poverty line and set them to adjust automatically each year.
- Ohio raised benefits by $1 based on a COLA.
- South Carolina, where benefits are tied to the state’s Need Standard, raised benefits by $1.
- Texas, where the maximum grant is 17 percent of the federal poverty line, raised benefits by $1.
- Wyoming, where benefits have kept pace with inflation since the state implemented a COLA in 2009, raised, benefits by less than 1 percent.
Also, Maine and Washington State passed legislation this year to increase benefits after July 2017. Maine raised its benefit in October 2017 by 20 percent and will index it to inflation in 2018. Washington State will increase its benefit by 2.5 percent in 2019; this is the second increase since a 15 percent cut to the grant in 2011, but it is still only a partial restoration of the cut.
Benefits Leave Families Below Half of Poverty Line
TANF benefits leave family incomes at or below 60 percent of the poverty line in every state. (See Figure 1 and Appendix Table 2.) In 1996, 16 states had benefit levels at or below 30 percent of the poverty line; today, 34 states and D.C. do. In 18 of those states, benefit levels are at or below 20 percent of the poverty line — that is, $340 a month for a family of three or less.
Because TANF benefits have fallen substantially in value, they do much less to help families escape “deep poverty” (family incomes below half of the poverty line) than in 1996. A poor family relying solely on TANF to provide the basics for its children — such as during a period of joblessness, illness, or disability — has less purchasing power with their benefits today than in 1996 in 47 states and D.C. (See Figure 2 and Appendix Tables 2 and 3.) In many states, the decline has been dramatic:
- Since 1996, benefits have fallen by 20 percent or more in 35 states plus D.C., after adjusting for inflation.
- Sixteen states had the same nominal benefit levels in July 2017 as in 1996, meaning that benefits have fallen in inflation-adjusted terms by more than 35 percent.
- In five states (Arizona, Hawaii, Idaho, Oklahoma, and Washington), TANF benefits are below their nominal 1996 levels. After adjusting for inflation, benefits in Arizona and Hawaii are more than 40 percent below their 1996 levels.
The decline in TANF benefits since 1996 follows a quarter-century of major declines in the real value of benefits provided through TANF’s predecessor, Aid to Families with Dependent Children (AFDC). Between 1970 and 1996, AFDC benefits fell by more than 20 percent in every state but one and by more than 40 percent in two-thirds of the states, after adjusting for inflation.
Some families can combine TANF benefits with earned income to help meet basic needs; nearly all states have adopted “make work pay” policies under which TANF benefits phase out gradually as family earnings increase. But such families still become ineligible for TANF cash assistance at very low income levels in nearly all states. And not all TANF families can supplement benefits with earnings; many families include parents who have significant disabilities or other barriers to work or cannot find jobs in the current labor market.
Even as TANF benefits continue declining, the cost of housing in most areas is rising. The monthly TANF benefit for a family of three is now below the estimated cost of a modest two-bedroom apartment and utilities (based on HUD Fair Market Rents) in every state. It is less than half of the Fair Market Rent in 32 states and D.C., compared with only eight states in 1996. Between 1996 and 2017, the median Fair Market Rent nationally rose from $543 to $885, while the median TANF benefit only rose from $377 to $432. (These figures are in nominal dollars.) The share of housing costs that TANF benefits cover declined in all but three states between 1996 and 2017. (See Figure 3.)
Most TANF families receive no housing subsidies — in fact, only 1 in 4 families with children eligible for federal housing assistance (including both TANF and non-TANF families) receive it. Some states provide small additional funds to help families cover housing costs, but these rarely cover the large gap between TANF grants and local Fair Market Rents.
TANF families without housing assistance have high rates of housing instability — resulting in doubling up with friends or relatives, living in substandard conditions, frequent moves, eviction, and/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.
Research Shows Increasing Cash Payments to Families in Poverty Can Improve Children’s Long-term Outcomes
Access to economic security programs — and specifically, cash assistance programs — is critical for poor families. CBPP’s review of several high-quality research studies on the long-term impacts of economic security programs finds that bolstering family income can help poor children catch up in a range of areas.a
Programs that offer higher assistance payments can have a significant impact on children’s academic success. A series of cross-program comparisons of several cash assistance programs in the United States and Canada in the 1990s show that young children transitioning into school who participated in programs that offer more income assistance consistently had better academic performance than peers assigned to less generous cash assistance programs. In fact, the more that programs increased families’ income, the more that children’s academic achievement rose.b
Other research shows that increasing family income during early childhood can have positive impacts that persist into adulthood. One study that followed low-income children from early childhood into their adult years found that each additional $3,000 in annual income in early childhood (in 2005 dollars) is associated with an added 135 hours of work per year as a young adult and an additional 17 percent in annual earnings.c
A recent retrospective study tracked sons assisted by the early 20th century Mothers’ Pensions program, which served low-income mothers whose husbands were missing or incapacitated. The study found that assisted children completed one-third more years of schooling, had nearly 14 percent higher incomes by early adulthood, were less likely to be underweight, and lived an average of one year longer than peers whose mothers had applied for the income assistance but were turned away.d
Some have suggested that increases in parental employment — not income — are the real reason children seem to fare better in economic security programs, but evidence from 1990s welfare-to-work experiments suggests otherwise. Programs that boosted both income and parental employment increased young children’s achievement, but programs that only increased employment did not. This suggests that income gains tend to help children succeed in school, while lifting parental employment is neither necessary nor sufficient to do so.e
Cash assistance is important and TANF plays a critical role in helping families meet their basic needs. Increasing TANF benefits will not only help poor families in the short term but may also lead to better outcomes for children throughout their lives.
a Arloc Sherman and Tazra Mitchell, “Economic Security Programs Help Low-Income Children Succeed Over Long Term, Many Studies Find,” Center on Budget and Policy Priorities, July 17, 2017, https://www.cbpp.org/research/poverty-and-inequality/economic-security-programs-help-low-income-children-succeed-over#.
b Pamela A. Morris, Lisa A. Gennetian, and Greg J. Duncan, “Effects of Welfare and Employment Policies on Young Children: New Findings on Policy Experiments Conducted in the Early 1990s,” Social Policy Report, vol. 19, no. 2 (2005), pp. 3-17, http://www.srcd.org/sites/default/files/documents/spr19-2.pdf.
c Greg J. Duncan, Kathleen M. Ziol-Guest, and Ariel Kalil, “Early-Childhood Poverty and Adult Attainment, Behavior, and Health,” Child Development, vol. 81, no. 1 (January/February 2010), pp. 306-325. The $3,000 figure is in 2005 dollars. The 17 percent figure appears as 19 percent in the study but is a typo; a revised figure of 17 percent appears in Duncan and Magnuson (2011).
d Anna Aizer et al., “The Long-Run Impact of Cash Transfers to Poor Families,” American Economic Review, vol. 106, no. 4 (2016), pp. 935–971. An earlier version of this paper is at http://www.nber.org/papers/w20103.
e Morris, Gennetian, and Duncan.
SNAP Benefits Help, But Large Shortfall Remains
TANF and SNAP benefits together do a better job of pulling families out of deep poverty than TANF alone. About 85 percent of TANF households consistently receive SNAP benefits. In fiscal year 2014, the average monthly SNAP benefit for households with TANF income was $404.
Nevertheless, families receiving both SNAP and TANF benefits still fall below 75 percent of the poverty line in every state except Alaska, New Hampshire, and New York, as Figure 4 shows. (Moreover, to simplify the comparison, CBPP’s calculation for the SNAP benefit uses reasonable assumptions of TANF families’ shelter costs and non-TANF income, which yield greater SNAP benefits than the average TANF family likely receives.)
After Years of Disinvestment, It’s Time to Raise TANF Benefits
Two decades after its creation, TANF is not fulfilling one of its core purposes: to provide a safety net for poor families. States spend only a quarter of federal and state TANF funds on basic assistance, down from 40 percent in 2000. In the years immediately after the 1996 welfare law, large caseload declines allowed states to channel freed-up funds from cash benefits to welfare reform efforts like child care and welfare-to-work programs. But funding in those areas has been flat or declining for over a decade. Instead, states over time redirected a substantial portion of their federal TANF and state maintenance-of-effort (MOE) funds to other purposes, 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.
Nor did states invest the funds freed up by caseload declines to maintain their cash assistance programs. This failure left the most disadvantaged families without much of a safety net. As this paper shows, it is increasingly difficult for TANF recipients to meet basic needs, even when they also receive SNAP. In particular, TANF families often find themselves in poor housing conditions with few resources to pay for even a modest apartment.
TANF recipients have a limited time on benefits and must participate in work or work-preparation activities (unless they qualify for a state exemption). During this time-limited, work-focused window, TANF benefits need to do a better job of enabling families to meet basic needs so they can focus on finding work and/or increasing their skills to become self-sufficient. The destitution that accompanies today’s low TANF benefit levels frequently creates instability that can interfere with these goals and undermine welfare reform.
Most of the states that raised benefits in the past year did so through annual or periodic adjustments that generally occur by default or automatically. Such an approach — when combined with an initial benefit increase to recover lost purchasing power due to inflation — can be an effective way to protect benefits from erosion due to inflation. With many state TANF caseloads reaching their lowest levels ever, state policymakers can use the resulting savings to provide more adequate levels of basic assistance:
- First, they should reinvest TANF and MOE funds back into the core purposes of TANF, such as providing cash grants for poor families.
- Second, as part of this reinvestment, states should restore the full value of benefits that has been lost in recent years and 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. This not only improves the lives of parents and children receiving TANF, but also helps local communities, as poor families quickly put that money into the local economy.
|APPENDIX TABLE 1|
|Monthly TANF Benefit Levels (Single-Parent Family of Three)|
|July 1996||July 2000||July 2005||July 2010||July 2015||July 2016||July 2017||Change 1996-2017 (inflation-adjusted dollars)|
|APPENDIX TABLE 2|
|TANF Benefit Levels as Percentage of Federal Poverty Level|
|APPENDIX TABLE 3|
|Changes in Real (Inflation-Adjusted) TANF Benefits Comparing 2017 Benefits with Benefits in 1996, 2000, 2005, and 2010|
|APPENDIX TABLE 4|
|TANF Benefit Levels as Percentage of Fair Market Rents|
|APPENDIX TABLE 5|
|2017 TANF and SNAP Benefit Levels as Percentage of Federal Poverty Level (FPL)|
|TANF as Percent of FPL||SNAP + TANF as Percent of FPL|
 CBPP calculation of state TANF caseload data.
 See Appendix Table 1 for states with regional variation in TANF benefits.
 Benefits must be 55 percent of the Standard of Need, which reflects the combined costs of necessities like food, clothing, home supplies, utilities, and shelter. It is adjusted biannually to reflect inflation.
 South Carolina’s benefit level is indirectly tied to the federal poverty level. The benefit is a share (currently 33.7 percent) of the state’s Need Standard, which in turn is 50 percent of the federal poverty level. The state can change the benefit level by adjusting the percentage of the Need Standard that TANF benefits meet or by adjusting the Need Standard’s percentage of the poverty level.
 The 2017 poverty guideline from the Department of Health and Human Services (HHS) for a family of three is $1,702 per month in the 48 contiguous states and Washington, D.C.; Alaska and Hawaii have higher guidelines. (See https://aspe.hhs.gov/poverty-guidelines.) CBPP uses HHS’ poverty guidelines in this analysis because they are a simplification of the poverty thresholds (the Census Bureau’s measure of poverty) and are used to determine financial eligibility for certain programs.
1996 Green Book, House Ways and Means Committee, Table 8-15, http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=104_green_book&docid=f:wm014_08.pdf.
 Fair Market Rents, set by HUD, are gross rent estimates. They include the shelter rent plus the cost of all utilities, except telephones.
 CBPP analysis of HUD Fair Market Rents and state benefit levels.
 Will Fisher and Barbara Sard, “Chart Book: Federal Housing Spending Is Poorly Matched to Need,” Center on Budget and Policy Priorities, March 8, 2017, https://www.cbpp.org/research/housing/chart-book-federal-housing-spending-is-poorly-matched-to-need.
 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,” Center on Budget and Policy Priorities, October 7, 2015, http://www.cbpp.org/research/housing/research-shows-housing-vouchers-reduce-hardship-and-provide-platform-for-long-term.
Temporary Assistance for Needy Families (TANF) Eleventh Annual Report to Congress, Department of Health and Human Services, Office of Family Assistance, December 2014, http://www.acf.hhs.gov/sites/default/files/ofa/eleventh_report_to_congress.pdf.
Characteristics of Supplemental Nutrition Assistance Program Households: Fiscal Year 2015, Department of Agriculture, Food and Nutrition Service, November 2016, http://www.fns.usda.gov/sites/default/files/ops/Characteristics2015.pdf.
 In calculating typical SNAP benefits, this analysis assumed that a family’s shelter costs are the median shelter costs for families of three receiving SNAP with incomes at or below 80 percent of the poverty line and that the household received no income besides the TANF benefit. A family’s SNAP benefit is based on its income and deductions, most significantly the capped deduction for high shelter costs. A family receives the maximum SNAP benefit if its net income (income minus deductions) is zero, usually because its income is low or its shelter costs are high relative to income. In two-thirds of the states, the TANF benefit is so low that the estimated SNAP benefit used in Figure 4 is the maximum monthly benefit for a family of three in 2017 ($511). However, the SNAP benefit that an individual TANF family actually qualifies for, based on its particular circumstances, is likely lower than the maximum benefit because many TANF households either have other income or do not incur shelter expenses high enough to receive the maximum benefit.
 A statutory 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 SSI benefits: the state uses the Social Security Administration’s COLA percentage to raise TANF benefits at the start of every calendar year.