Policy Brief: To Lessen Hardship, States Should Invest More TANF Dollars in Basic Assistance for Families

States spend only about a fifth of their combined federal and state dollars under the Temporary Assistance for Needy Families (TANF) block grant on basic assistance for families with children, our analysis of the latest data from fiscal year 2019 shows, and several states spend less than a tenth. States are using their considerable flexibility under TANF, the primary cash assistance program for families with the lowest incomes, to divert funds away from income support for families and toward other, often unrelated state budget areas, as they have increasingly done since TANF’s creation in 1996. By changing course and redirecting the funds back towards cash assistance, states could improve academic, health, and economic outcomes for children in families in poverty, research shows.[1] (See our full report for greater detail, as well as our fact sheets and spreadsheet with state-by-state information.[2])

Since 2019, a year in which the country experienced its lowest poverty rate since the Great Recession of 2007-09, the situation has changed radically. Millions of families with children, especially families of color, have been hard hit by COVID-19 and the resulting economic crisis, which has caused enormous job losses.[3] Many families have turned to TANF (as well as other public programs) for relief, and more will likely seek assistance as the crisis continues and families exhaust their limited savings and eligibility for unemployment insurance.[4] Unfortunately, TANF’s block grant structure and fixed annual funding leave it ill equipped to respond to the sharp increase in need.

Limited Basic Assistance Spending, Few Families Getting Help

Direct financial assistance has weakened significantly under TANF, with potentially devastating long-term consequences for children growing up in families with little or no cash income to meet basic needs.

States spend a little more than one-fifth of their federal and state TANF funds on basic cash assistance. (See Figure 1.) States spent $6.5 billion, or just 21 percent, of their federal and state TANF funds on basic assistance for families struggling to make ends meet in 2019, down from $14 billion (71 percent) in 1997, TANF’s first year of implementation. That amounts to a 71 percent decrease when adjusting for inflation. When TANF began, basic assistance was the single biggest use of TANF funds in all states.

Figure 1

The share of federal and state TANF funds spent on basic assistance varies across states, from 4 percent to 69 percent in 2019. Fourteen states spent less than 10 percent on basic assistance, while 11 spent more than 30 percent.

State spending decisions in TANF can exacerbate racial disparities. Research has found that states with larger shares of Black residents tend to spend lower shares of their TANF funds on basic assistance.[5] Not surprisingly, the states that spend the smallest shares of their TANF funds on basic assistance tend to have lower benefits and assist a smaller share of families living in poverty than the typical state.[6] As a result, Black children are likelier than Latino and white children to live in states with extremely low TANF benefits or where cash assistance reaches a low share of families experiencing poverty. One example is North Carolina, which spends only 6 percent of its TANF funds on basic assistance. The state hasn’t raised cash assistance benefits since 1990, and its TANF program reaches only 7 in 100 families with children in poverty.

However, state spending decisions affect all families facing a crisis or struggling to pay for the basics. For example, Texas spends only 4 percent of its TANF funds on basic assistance, providing a weak safety net for 20 percent of the nation’s Latino children, 9 percent of the nation’s Black children, 9 percent of the nation’s Asian children, and 6 percent of the nation’s white children.[7]

States Spend Little on Work Activities or Supports

A central tenet of TANF was that cash assistance should provide temporary support while a family engages in required activities to help it connect to or prepare for work. Yet states use only 13 percent of their TANF funds for work activities and supports. (See Table 1.) The share spent to help families work varies across states, ranging from less than 1 percent to 27 percent. Seven states spent less than 5 percent of their funds on work activities and work supports and supportive services combined.

Need for Child Care Assistance to Help Parents Work Remains High

Child care requires significant investment through a combination of dedicated programs outside TANF and an appropriate level of TANF child care spending that leaves room for needed investment in basic assistance for families. As with work programs, a central tenet of TANF’s creation was that states could spend more of the funds on child care subsidies — which are essential to enabling low-income parents to work — rather than on cash assistance. Yet states’ TANF spending on child care has been flat or declining for over a decade.

In 2019, states spent 16 percent of their federal and state TANF funds on child care. The share varies tremendously across states, from 0 to 68 percent. Ten states spent more than 30 percent, while 14 states spent less than 5 percent.

States Spent Only Half of Federal and State TANF Funds on Basic Assistance and Work-Related Activities in 2019
Basic Assistance/Work Activities Other Activities
Basic Assistance 21% Program Management 10%
Work Activities 10% Refundable Tax Credits 9%
Work Supports and Supportive Services 3% Pre-K/Head Start 8%
Child Care 16% Child Welfare 8%
    Other 14%
Total 50% Total 49%

Note: TANF = Temporary Assistance for Needy Families.

Source: CBPP analysis of Department of Health and Human Services 2019 TANF financial data

How States Spend the Rest of TANF Funds

Instead of investing in helping families meet their basic needs, states use a large share of TANF funds — more than three-quarters in some states — in other areas.

In some cases, states used TANF funds to expand programs, such as Earned Income Tax Credits (EITCs) or pre-kindergarten, or to cover the growing costs of existing services, such as child welfare. While these are worthy and important investments, states should use funding other than federal and state TANF funds for them, particularly when states on average states spend only around one-fifth of their TANF funds to provide basic assistance. Also, some states have used TANF funds to replace existing state funds, thereby freeing those state funds for purposes unrelated to providing financial assistance or work opportunities to families with low incomes.

Key areas of spending outside of basic assistance and work support for families include:

  • Child welfare. Some 42 states used TANF funds for child welfare services in 2019. This represents 8 percent of total federal and state TANF spending and 9 percent of spending for those 42 states. Fourteen states spent more than 20 percent of their TANF funds in this area.
  • Pre-K/Head Start. Some 26 states used TANF funds for pre-K/Head Start in 2019. This represents 8 percent of total federal and state TANF spending and 12 percent of spending for those 26 states. Six states spent more than 20 percent of their TANF funds in this area.
  • Refundable tax credits for low-income working families. The credits are an important work support and a permissible use of federal and state TANF funds, but as with TANF’s work activities, work supports, and child care, funding for them should leave adequate room for cash assistance for families. In 2019, 21 states and the District of Columbia used these funds for refundable tax credits, most commonly a state EITC. This represented 9 percent of total federal and state TANF spending and 18 percent of spending for those 21 states and D.C. Seven of these states spent more than 20 percent of their TANF funds in this area.
  • Other areas. The rest of federal TANF spending goes to areas including program management (10 percent of TANF spending), short-term non-recurring benefits to help low-income families in crisis (3 percent), transfers to the Social Services Block Grant (4 percent), pregnancy and family programs (1 percent), services for youth and children (3 percent), and services “authorized under prior law” (2 percent), meaning they are not within the four TANF purposes specified in federal law but were in the state’s Aid to Families with Dependent Children (AFDC) Emergency Assistance plan when TANF replaced AFDC.

Targeting TANF Funds for Direct Financial Assistance to Families Can Improve Outcomes

According to a report from the National Academies of the Sciences, income support programs can improve children’s academic, health, and economic outcomes.[8] Thus, investing in direct financial assistance for children provides opportunities for all children to thrive. States can invest their TANF funds in basic assistance to increase the monthly grants that families receive. Other useful forms of direct financial assistance include transportation vouchers, housing supplements, and non-recurrent short-term benefits that families can receive during an emergency.

Federal policymakers could encourage states to use more TANF funds to lessen child poverty by:

  • Restoring the block grant at least to its original value and targeting the new funds where need is greatest. The block grant has lost about 40 percent of its value since 1996 due to inflation. This means states have fewer federal funds to invest in families struggling to make ends meet, despite a high level of need. Nationally, for every 100 families living in poverty, only 23 families received TANF cash assistance in 2019.[9]

    To promote the stability that’s critical for children’s growth and development and to contribute to a more equitable recovery, additional federal funding should be allocated to states based on the share of families living in deep poverty. The new funds should be designated for three purposes: (1) monthly cash assistance; (2) subsidized jobs; and (3) training programs that prepare recipients for higher-paying jobs with a long-term positive earnings trajectory. [10] Most of the new funds should be designated for the first two purposes so they go directly to families.

  • Directing states to spend at least 50 percent of existing TANF block grant and state “maintenance of effort” (MOE) funds towards direct financial assistance to help families meet their basic needs.[11] Given evidence of the impacts of income on children’s long-term growth and development, Congress should require states to spend a higher portion of their TANF block grant funds on direct financial support for needy families. As this report notes, states spent 71 percent of TANF funds on basic assistance in 1997 but only 21 percent in 2019.
  • Requiring states to target all TANF and MOE spending towards families with incomes at or below 100 percent of the federal poverty level. Under current law, states must generally spend funds on “needy families,” but there is no national definition of “needy” or income eligibility limit for TANF-funded programs. As a result, TANF funds often go to families with incomes well above the federal poverty line even though a growing number of families are living in deep poverty — often in states where TANF benefits are low and reach few families. Federal lawmakers should require states to target their TANF funds towards families with the lowest incomes.

End Notes

[1] National Academies of Sciences, Engineering and Medicine, “A Roadmap to Reducing Child Poverty,” 2019, https://www.nap.edu/catalog/25246/a-roadmap-to-reducing-child-poverty.

[2] Ali Safawi and Liz Schott, “To Lessen Hardship, States Should Invest More of Their TANF Dollars in Basic Assistance for Families,” CBPP, updated January 7, 2021, https://www.cbpp.org/research/family-income-support/states-should-invest-more-of-their-tanf-dollars-in-basic-assistance; CBPP, “How States Spend Funds Under the TANF Block Grant,” updated February 25, 2020, https://www.cbpp.org/research/family-income-support/state-fact-sheets-how-states-spend-funds-under-the-tanf-block-grant.

[3] Arloc Sherman et al., “New Data on Hardship Underscore Continued Need for Substantial COVID Relief,” CBPP, December 2, 2020, https://www.cbpp.org/research/poverty-and-inequality/new-data-on-hardship-underscore-continued-need-for-substantial-covid.

[4] Laura Meyer, “Senate Republican Plan’s Emergency Fund a Good Step, But Inadequate,” CBPP, July 30, 2020, https://www.cbpp.org/blog/senate-republican-plans-emergency-fund-a-good-step-but-inadequate.

[5] Zachary Parolin, “Temporary Assistance for Needy Families and the Black-White Child Poverty Gap in the United States,” Socio-Economic Review, May 14, 2019, https://doi.org/10.1093/ser/mwz025.

[6] For in-depth analysis of TANF benefit levels, see Ali Safawi and Ife Floyd, “TANF Benefits Still Too Low to Help Families, Especially Black Families, Avoid Increased Hardship,” CBPP, updated October 8, 2020, https://www.cbpp.org/research/family-income-support/tanf-benefits-still-too-low-to-help-families-especially-black. For in-depth analysis of TANF caseloads and access, see Laura Meyer and Ife Floyd, “Cash Assistance Should Reach Millions More Families to Lessen Hardship,” CBPP, updated November 30, 2020, https://www.cbpp.org/research/family-income-support/cash-assistance-should-reach-millions-more-families-to-lessen.

[7] CBPP analysis of the racial and ethnic composition of states based on 2019 U.S. Census data.

[8] National Academies, op. cit.

[9] Meyer and Floyd, op. cit.

[10] For more information and recommendations on using TANF funds for these purposes, see Safawi and Floyd, op. cit.; Safawi and Pavetti, op. cit.; Laura Meyer, “Next Relief Package Should Include Funds for Subsidized Jobs,” CBPP, July 30, 2020, https://www.cbpp.org/blog/next-relief-package-should-include-funds-for-subsidized-jobs.

[11] Under TANF’s MOE requirement, states must maintain a certain level of state TANF spending, based on a state’s spending for AFDC and related programs prior to TANF’s creation in 1996.