TANF Cash Benefits Continued To Lose Value in 2013

Cash assistance benefits for the nation’s poorest families with children fell again in purchasing power in 2013 and are now at least 20 percent below their 1996 levels in 37 states, after adjusting for inflation.  Seven states increased Temporary Assistance for Needy Families (TANF) grant amounts in 2013, with five of these based on annual adjustments.  An additional state enacted a TANF benefit increase that will take effect next year.  No state cut TANF benefit levels in nominal dollars this year.  While several more states increased benefits this year than in the last few years, most kept family grant levels unchanged, allowing inflation to continue to erode the benefits’ value.  With the country’s economic outlook looking somewhat more favorable in the coming year, states should halt the erosion of TANF benefits and slowly restore some of the purchasing power the grants have lost over the past 17 years.

For 99 percent of TANF recipients, the purchasing power of TANF benefits is below 1996 levels, after adjusting for inflation.  These declines came on top of even larger declines in benefits over the preceding quarter-century; between 1970 and 1996, cash assistance benefit levels for poor families with children fell by more than 40 percent in real terms in two-thirds of the states.  As of July 1, 2013, every state’s benefits for a family of three with no other cash income were below 50 percent of the federal poverty line, measured by the Department of Health and Human Services 2013 poverty guidelines.  Benefits were below 30 percent of the poverty line in most states.  And, the TANF benefit level for a family of three with no other cash income is less than the Fair Market Rent for a two-bedroom apartment in every state, nationwide.^[1]   In fact, in 25 states, TANF benefits cover less than half of the Fair Market Rent.  When SNAP benefits (the Supplemental Nutrition Assistance Program, formerly known as food stamps) are added to TANF family grants, families with no other income are still below the poverty line.

TANF provides a safety net to relatively few poor families:  in 2012, just 25 families received TANF benefits for every 100 poor families, down from 68 families receiving TANF for every 100 in poverty in 1996.  But for the families that participate in the program, it often is their only source of support, and without it, they would have no cash income to meet their basic needs. 

This paper is an annual update of state TANF benefit levels as of July 1 each year (the beginning of the fiscal year for most states).  This update covers the changes in TANF benefit levels between July 1, 2012 and July 1, 2013.  The benefit levels cited here reflect the monthly benefits for a family of three with no other income as of July 1, 2013.  However, while the family grants cited in this paper are among the highest a family can receive, they are not always the most typical grant families receive.  TANF benefit levels in several states vary by geographic regions; in these states, families in some regions of the state receive lower benefits than the levels used in this analysis.^[2]

A Few States Increased TANF Benefits in 2013

Between July 2012 and July 2013, no state cut benefit levels in nominal dollars.  A few states increased benefits to follow through on past commitments to modestly raise benefits or adjust them for inflation.  One state made legislative changes to improve benefit levels in the coming years.

Seven states increased benefit levels between July 2012 and July 1, 2013.  (See Table 1 and Appendix 1.)

States with Annual Adjustments

• Effective July 2013, Connecticut increased its benefit level for a family of three from $674 to $688 based on an annual cost-of-living adjustment (COLA). The state’s COLA was enacted in 2007, but was suspended for the past four years.
• Maryland had a small benefit increase in October 2012 and will have a larger increase effective November 2013.  Maryland increased the TANF benefit by $2 to $576 for a family of three on October 1, 2012.  Effective November 1, 2013, Maryland’s benefit for a family of three will increase by $48 a month, to $624.^[3]
• Ohio, which adjusts its TANF benefits annually in line with the Social Security COLA, raised its benefit for a family of three from $450 to $458, effective January 1, 2013. 
• On October 1, 2012, Texas increased its benefit by $8 to $271.  The Texas legislature generally adjusts its benefit level annually to maintain the average monthly TANF grant at 17 percent of the poverty line.  Effective October 1, 2013, Texas’ benefit for a family of three increased by $6 to $277.
• Wyoming’s COLA, implemented in 2009, has enabled the state’s TANF benefit to keep pace with inflation since then.  On July 1, 2013, Wyoming’s benefit for a family of three increased to $616.

Other Benefit Level Increases

• Montana made a one-time increase to its benefit from $504 to $510 for a family of three.
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• Beginning in 2009, New York instituted three 10 percent annual increases to the basic allowance portion of its cash grants.^[4]  The final increase was originally slated to take place in 2011, but the governor postponed it.  In 2012, the state implemented the delayed final increase in two separate steps, one in July and the other in October.  After the final step, New York’s benefit for a family of three increased from $770 to $789 on October 1, 2012.

Future Benefit Level Increases

Additionally, California policymakers approved two changes to their TANF benefit level policy, which will take effect in 2014.  In March 2014, the state will increase the family grant from $638 to $670 for a family of three.  The state will also reintroduce a COLA for the family grant in 2014.  However, unlike the state’s prior annual COLA, which has not been in effect for the last several years, the new COLA adjustments will occur only if there are sufficient funds available in the newly-created Child Poverty Account.

Benefits Leave Families Far Below Poverty Line

TANF benefit levels are so low that they are not sufficient to provide family income above half of the poverty line in any state.^[5]  (See Figure 1 and Appendix 2.)  In 1996, 16 states had cash grants below 30 percent of the poverty line; today, benefits for a family of three with no other cash income are below 30 percent of the poverty line in 32 states and the District of Columbia.  In 16 of those states, monthly benefit levels are less than 20 percent of the poverty line — that is, less than $326 a month for a family of three.  

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Because TANF benefits have declined substantially in value, they do much less to help families escape deep poverty than they did in 1996.  With the exception of Maryland and Wyoming, a poor family relying solely on TANF to provide the basics for its children (such as during a period of joblessness, illness, or disability) in every state is further below the poverty line today than in 1996. (See Figure 2 and Appendices 2 and 3.)  In many states, the decline in the value of benefits has been quite large:

• Since 1996, the value of cash assistance benefits has declined by 20 percent or more in 37 states. 
• In the 17 states that have the same nominal benefit levels in July 2013 as in 1996, the benefits have declined in inflation-adjusted terms by more than 30 percent.  Most of these states have not adjusted benefits since before welfare reform in 1996.
• In six states, TANF benefits are below their 1996 levels in nominal terms.  Benefits in three of those states are worth at least 40 percent less than in 1996, when inflation is taken into account.

The decline in the value of benefits under TANF since 1996 follows a quarter century (prior to 1996) of major declines in the real value of benefits provided through Aid to Families With Dependent Children (AFDC; TANF replaced the program).  Between 1970 and 1996, AFDC benefit levels fell by more than 20 percent, after adjusting for inflation, in all but one state and by more than 40 percent in two-thirds of the states.^[6]

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 are able to supplement benefits with earnings; many families include parents with significant disabilities or other barriers to work, or who cannot find jobs in a labor market that remains weak. 

TANF Benefits Alone Are Not Sufficient to Cover Housing Costs

TANF benefits cover only a fraction of a family’s housing costs, and housing is only one of the basic needs that a family must meet (although it is one of the largest).  The monthly TANF benefit level for a family of three is now less than the estimated cost of a modest two-bedroom apartment (based on HUD Fair Market Rents, or FMRs) in all states, and less than half of the FMR in 28 states.  (See Figure 3.)  Some TANF families receive housing subsidies, but most do not.  Only one in four eligible low-income households receives any federal housing assistance because of program funding limitations.^[7]  Many states provide small amounts of additional funds to help families cover housing costs, but this is often not enough to cover the large gap between TANF grants and FMR.  (See box, “Supplemental Housing Benefits,” above.) 

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Between 2000 and 2013, the median Fair Market Rent in the 50 states and the District of Columbia increased from $580 to $795, while the median TANF benefit increased from $379 to just $428.  (These figures are in nominal dollars — i.e., they are not adjusted for inflation.)  As TANF benefits decline in real dollars in most states, they cover a smaller share of housing costs over time, as Figure 3 shows.  

The share of the Fair Market Rent that TANF benefit levels cover has decreased quite sharply in some states.  Vermont’s TANF benefit level, for example, equaled the FMR for a two-bedroom apartment in 2000 but covered only two-thirds of the FMR by 2013.  (See Appendix 4.)

SNAP Benefits Help Fill the Gap, But a Substantial Shortfall Remains

Unlike TANF, the Supplemental Nutrition Assistance Program (SNAP, formerly known as the Food Stamp Program) has provided a strong safety net for many unemployed families and individuals during the recession.  TANF and SNAP benefits together do a better job of pulling families out of deep poverty than TANF alone.  About 81 percent of TANF households consistently receive SNAP benefits.^[8]  In 2010, the average monthly SNAP benefit for households with TANF income was $427 a month.^[9]

Nevertheless, families receiving both SNAP and TANF benefits still fall below 75 percent of the poverty line in 48 states and Washington, D.C.  (See Figure 4.)  In nearly all states, the gap between combined TANF and SNAP benefits and the poverty line is substantial. 

Moreover, the current SNAP benefit levels reflect a temporary increase provided under the 2009 Recovery Act that is now phasing down and will end on October 31, 2013,^[10] leaving TANF families that receive SNAP further below the poverty line.  (In addition, to simplify the comparison, the SNAP benefit levels used for this comparison overstate the size of the SNAP benefit that many TANF families actually receive.^[11])

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After Years of Cuts and Stagnation, It’s Time to Raise TANF Benefits

This paper shows that it is increasingly difficult for TANF recipients to meet their basic needs, even when they also receive SNAP.  The situation has worsened since TANF replaced AFDC.  Though most states have increased TANF benefit levels (in nominal dollars) at least once since 1996, these small increases have been far from sufficient to keep up with inflation, and the benefits’ value has eroded.  It is time for states to reconsider the value of their TANF benefits.  A minority of states have begun to address the disparities between cash assistance and meeting a family’s basic needs through increasing benefit levels, instituting COLAs, and implementing and increasing housing supplements.  But still more states should consider similar policy changes.

Families receiving TANF have a limited period of time on benefits, and they must participate in work or work preparation activities (unless they qualify for a particular state exemption).  During this time-limited, work-focused window, families should be able to meet their basic needs, allowing them to focus on finding work, increasing their skills, or both, so they are able to leave welfare.  The chaos and instability that frequently result from the level of destitution that accompanies these low TANF benefit levels can interfere with these goals and undermine welfare reform.

While no state cut benefits between July 2012 and July 2013, few states raised them, restored recent reductions, or halted the declines in the benefits’ purchasing power.  With state fiscal conditions beginning to improve, this is a good time for state policymakers to stem the decline and start to turn it around.  States should consider taking two steps toward providing more adequate levels of basic assistance. 

First, they should seek to restore at least part of the value of benefits that has been lost in recent years, even if that requires several incremental increases over a period of years.  Second, they should put mechanisms in place to prevent the erosion from reoccurring.^[12]  Adjusting TANF benefits yearly in step with inflation can maintain these families’ purchasing power and help them meet their basic needs.  Such COLAs will improve the lives of parents and children receiving TANF, while also helping struggling local communities as poor families quickly put that money into the local economy.