Temporary Assistance for Needy Families: Update on Program Performance

Published by the Government Accountability Office on 2012-06-05.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                             United States Government Accountability Office

GAO                          Testimony
                             Before the Senate Finance Committee

                             TEMPORARY ASSISTANCE
For Release on Delivery
Expected at 10:00 a.m. EDT
Tuesday, June 5, 2012

                             FOR NEEDY FAMILIES
                             Update on Program
                             Statement of Kay E. Brown, Director
                             Education, Workforce and Income Security Issues

Chairman Baucus, Ranking Member Hatch, and Members of the

I am pleased to have the opportunity to participate in today’s discussion
on combating poverty and understanding new challenges for families. I
will focus on the role of the Temporary Assistance for Needy Families
(TANF) block grant in helping low-income families with children. As you
know, the federal government significantly changed federal welfare policy
in 1996 when it created TANF, a $16.5 billion annual block grant provided
to states to operate their own welfare programs within federal guidelines. 1
States are also required to maintain a specified level of their own
spending to receive TANF funds. Over the past 15 years, the federal
government and states have spent a total of $406 billion for TANF, about
60 percent of which were federal funds. This federal-state partnership has
undergone multiple program and fiscal changes, including a dramatic
drop in the number of families receiving monthly cash assistance benefits,
as well as two economic recessions. According to the Bureau of the
Census, poverty among children fell from about 21 percent in 1995 to
about 16 percent in 2000, rising again to 22 percent in 2010. Examining
TANF’s past performance can help shed light on the challenges facing
low-income families and the role of the federal government in combating

My remarks today –based primarily on reports issued by GAO from 2010
to 2012 on TANF and related issues—will focus on TANF’s performance
in three areas: (1) as a cash safety net for families in need, (2) as a
welfare-to-work program that promotes employment, and (3) as a funding
source for various services that address families’ needs. We used
multiple methodologies to develop our findings for these reports. We
reviewed and analyzed state TANF data reported to the Department of
Health and Human Services (HHS); reported on microsimulation analyses
conducted for us by the Urban Institute; reviewed relevant federal laws,
regulations, and guidance and relevant research on the factors affecting
the decline of cash recipient families; interviewed HHS officials; and
collected information from TANF officials using different methods for
different studies, including surveying and interviewing state TANF
administrators and conducting site visits in selected states. We assessed
the data we received for data reliability and concluded that the data were

    See Pub. L. No. 104-193, § 103(a)(1), 110 Stat. 2105, 2112.

Page 1                                                            GAO-12-812T
             sufficiently reliable for the purposes of this testimony. (See related reports
             cited throughout for more information on scope and methodology of our
             work.) We conducted our work in accordance with generally accepted
             government auditing standards. Those standards required that we plan
             and perform the audit to obtain sufficient, appropriate evidence to provide
             a reasonable basis for our findings and conclusions based on our audit
             objectives. We believe that the evidence obtained provides a reasonable
             basis for our findings and conclusions based on our audit objectives.

             In summary, the federal-state TANF partnership makes significant
             resources available to address poverty in the lives of families with
             children. With these resources, TANF has provided a basic safety net to
             many families and helped many parents step into jobs. At the same time,
             there are questions about the strength and breadth of the TANF safety
             net. Many eligible families—some of whom have very low incomes—are
             not receiving TANF cash assistance. Regarding TANF as a welfare-to-
             work program, the emphasis on work participation rates as a measure of
             state program performance has helped change the culture of state
             welfare programs to focus on moving families into employment. However,
             features of the work participation rates as currently implemented undercut
             their effectiveness as a way to encourage states to engage parents,
             including those difficult to serve, and help them achieve self-sufficiency.
             Finally, states have used TANF funds to support a variety of programs
             other than cash assistance as allowed by law. Yet, we do not know
             enough about this spending or whether this flexibility is resulting in the
             most efficient and effective use of funds at this time.

             The TANF block grant was created by the Personal Responsibility and
Background   Work Opportunity Reconciliation Act of 1996 (PRWORA) 2 and was
             designed to give states the flexibility to provide both traditional welfare
             cash assistance benefits as well as a variety of other benefits and
             services to meet the needs of low-income families and children. States
             have responsibility for designing, implementing, and administering their
             welfare programs to comply with federal guidelines, as defined by federal
             law and HHS that oversees state TANF programs at the federal level.
             Importantly, with the fixed federal funding stream, states assume greater
             fiscal risks in the event of a recession or increased program costs.

                 Pub. L. No. 104-193, § 103(a), 110 Stat. 2105, 2112.

             Page 2                                                             GAO-12-812T
                      However, in acknowledgment of these risks, PRWORA also created a
                      TANF Contingency Fund that states could access in times of economic
                      distress. 3 Similarly, during the recent economic recession, Congress
                      created a $5 billion Emergency Contingency Fund for state TANF
                      programs through the American Recovery and Reinvestment Act of 2009,
                      available in fiscal years 2009 and 2010. 4

                      The story of TANF’s early years is well known. During a strong economy,
TANF’s Cash           increased federal support for work supports like child care, and the new
Assistance Role Has   TANF program’s emphasis on work, welfare rolls were cut by more than
                      half. Many former welfare recipients increased their income through
Declined              employment, and employment rates among single parents increased. At
                      the same time that some families worked more and had higher incomes,
                      others had income that left them still eligible for TANF cash assistance.
                      However, many of these eligible families were not participating in the
                      program. According to our estimates in a previous report, 5 the vast
                      majority—87 percent—of the caseload decline can be explained by the
                      decline in eligible families participating in the program, in part because of
                      changes to state welfare programs. These changes include mandatory
                      work requirements, changes to application procedures, lower benefits,
                      and policies such as lifetime limits on assistance, diversion policies, and
                      sanctions for non-compliance, according to a review of the research.
                      Among eligible families who did not participate, 11 percent did not work,
                      did not receive means-tested disability benefits, and had very low
                      incomes. While we have not updated this analysis, some research shows
                      that this potentially vulnerable group may be growing. 6

                      Despite the decrease in the cash assistance caseload overall, the number
                      of cases in which aid was provided only for the children in the household
                      increased slightly, amounting to about half the cash assistance caseload.
                      For these households, the adult is not included in the benefit calculation,

                          Pub. L. No. 104-193, § 103(a)(1), 110 Stat. 2105, 2122.
                          Pub. L. No. 111-5, § 2101(a)(1), 123 Stat. 115, 446.
                        GAO, Temporary Assistance for Needy Families: Fewer Eligible Families Have Received
                      Cash Assistance Since the 1990s, and the Recession’s Impact on Caseloads Varies by
                      State. GAO-10-164 (Washington, D.C.: February 2010).
                       Pamela Loprestand Austin Nichols. The Dynamics of Disconnection for Low-Income
                      Mothers, Focus, Vol. 28, No. 2, (Fall/Winter 2011-12).

                      Page 3                                                                   GAO-12-812T
                      generally either because: (1) the parent is receiving cash support through
                      the Supplemental Security Income program; (2) the parent is an
                      immigrant who is ineligible; (3) the child is living with a nonparent
                      caregiver; or (4) the parent has been sanctioned and removed from cash
                      assistance for failing to comply with program requirements. Nationally,
                      about one-third of these “child only” households are children living with
                      non-parent caregivers.

                      We also know that during and after this recent significant recession, while
                      caseloads increased in most states, the overall national increase totaled
                      about 13 percent from fiscal years 2008 to 2011. This has been the first
                      test of TANF—with its capped block grant structure—during severe
                      economic times. This relatively modest increase—and decreases in some
                      states—has raised questions about the responsiveness of TANF to
                      changing economic conditions. We recently completed work on what was
                      happening to people who had exhausted their unemployment insurance
                      benefits after losing a job in the recession. 7 While almost 40 percent of
                      near-poor households with children that had exhausted UI received aid
                      through the Supplemental Nutrition Assistance Program (formerly known
                      as food stamps), we estimated that less than 10 percent received TANF
                      cash assistance.

                      A key TANF goal is helping parents prepare for and find jobs. The primary
TANF Emphasizes the   means to measure state efforts in this area has been TANF’s work
Importance of Work    participation requirements. Generally, states are held accountable for
                      ensuring that at least 50 percent of all families receiving TANF cash
but Its Work          assistance and considered work-eligible participate in one or more of the
Performance Measure   federally defined allowable activities for the required number of hours
Falls Short           each week. However, over the years, states have not typically engaged
                      that many recipients in work activities on an annual basis—instead, states
                      have engaged about one third of families in allowable work activities
                      nationwide. Most states have relied on a combination of factors, including
                      various policy and funding options in federal law and regulations, to meet
                      the work participation requirements without reaching the specified 50
                      percent. 8

                       GAO, Unemployment Insurance: Economic Circumstances of Individuals Who
                      Exhausted Benefits, GAO-12-408 (Washington, D.C.: February 2012).

                      Page 4                                                               GAO-12-812T
                         Factors that influenced states’ work participation rates included not only
                         the number of families receiving TANF cash assistance who participated
                         in work activities, but also:

                         •     decreases in the number of families receiving TANF cash assistance
                               (not due to program eligibility changes) that provide a state credit
                               toward meeting its rates ,
                         •     state spending on TANF-related services beyond what is required that
                               also provides a state credit toward meeting its rates,
                         •     state policies that allow working families to continue receiving TANF
                               cash assistance, helping a state to increase its rate, and
                         •     state policies that provide nonworking families cash assistance
                               outside of the TANF program. For example, some states serve
                               families with work barriers outside of state TANF because of concerns
                               that they will not be able to meet work requirements.

                         Many states have cited challenges in meeting TANF work participation
                         rates, such as requirements to verify participants’ actual activity hours
                         and certain limitations on the types and timing of activities that count
                         toward meeting the requirements.

                         Because of the various factors that affect the calculation of states’ work
                         participation rates, the rate’s usefulness as an indicator of a state’s effort
                         to help participants achieve self-sufficiency is limited. Further, the TANF
                         work participation rates, as enacted, in combination with the flexibility
                         provided, may not serve as an incentive for states to engage more
                         families or to work with families with complex needs.

                         While the focus is often on TANF’s role in cash assistance, it plays a
States Rely on TANF      significant role in states’ budgets for other programs and services for low-
Flexibility to Provide   income families, as allowed under TANF. The substantial decline in
                         traditional cash assistance caseloads combined with state spending
a Broad Array of         flexibilities under the TANF block grant allowed states to broaden their
Services                 use of TANF funds. As a result, TANF and state TANF-related dollars
                         played an increasing role in state budgets outside of traditional cash
                         assistance payments. In our 2006 report that reviewed state budgets in
                         nine states, 9 we found that in the decade after Congress created TANF,


                         Page 5                                                              GAO-12-812T
the states used their federal and state TANF-related funds to support a
wide range of state priorities, such as child welfare services, mental
health services, substance abuse services, prekindergarten, and
refundable state earned income credits for the working poor, among

While some of this spending, such as that for child care assistance,
relates directly to helping cash assistance recipients leave and stay off
the welfare rolls, other spending is directed to a broader population that
did not necessarily ever receive welfare payments. This is in keeping with
the broad purposes of TANF specified in the law:

•     providing assistance to needy families so that children could be cared
      for in their own homes or in the homes of relatives;
•     ending needy families’ dependence on government benefits by
      promoting job preparation, work, and marriage;
•     preventing and reducing the incidence of out-of-wedlock pregnancies;
•     encouraging the formation and maintenance of two-parent families.

This trend away from cash assistance has continued. In fact, in fiscal year
2011, federal TANF and state expenditures for purposes other than cash
assistance 10 totaled 71 percent of all expenditures. This stands in sharp
contrast with 27 percent spent for purposes other than cash assistance in
fiscal year 1997, when states first implemented TANF. Beyond the cash
assistance rolls, the total number of families assisted is not known, as we
have noted in our previous work. 11

TANF funds can play an important role in some states’ child welfare
budgets. In our previous work, 12 Texas state officials told us that 30

  We refer to this category as cash assistance, although in federal law, regulations and
expenditure reports it is referred to as “assistance” which includes cash, payments,
vouchers, and other forms of benefits designed to meet a family’s ongoing basic needs. In
each of these years, the vast majority of the expenditures were for cash assistance.
  GAO, Welfare Reform: States Provide TANF-Funded Services to Many Low-Income
Families Who Do Not Receive Cash Assistance, GAO-02-564 (Washington, D.C.: Apr. 5,

Page 6                                                                      GAO-12-812T
               percent of the child welfare agency’s budget was funded with TANF
               dollars in state fiscal year 2010. Many states have used TANF to fund
               child welfare services because, although TANF funding is a capped block
               grant, it is a relatively flexible funding source. However, some states may
               not be able to continue relying on TANF to fund child welfare services
               because they need to use TANF funds to address other program goals,
               such as promoting work. For example, Tennessee officials told us that
               they previously used some of their TANF grant to fund enhanced
               payments for children’s relative caregivers and their Relative Caregiver
               Program, but that the state recently discontinued this practice due to
               budget constraints.

               While states have devoted significant amounts of the block grant as well
               as state funds to these and other activities, little is known about the use of
               these funds. Existing TANF oversight mechanisms focus more on the
               cash assistance and welfare-to-work components of the block grant. For
               example, when states use TANF funds for some purposes, they are not
               required to report on funding levels for specific services and how those
               services fit into a strategy or approach for meeting TANF goals. In effect,
               there is little information on the numbers of people served by TANF-
               funded programs other than cash assistance, and there is no real
               measure of workload or of how services supported by TANF and state
               TANF-related funds meet the goals of welfare reform. This information
               gap hinders decision makers in considering the success of TANF and
               what trade offs might be involved in any changes to TANF when it is

               The federal-state TANF partnership makes significant resources available
Concluding     to address poverty in the lives of families with children. With these
Observations   resources, TANF has provided a basic safety net to many families,
               triggered a focus on work in the nation’s welfare offices while helping
               many parents step into jobs, and provided states flexibility to help families
               in ways they believe will help prevent dependence on public assistance
               and improve the lives of children.

               At the same time, it does raise questions about the strength and breadth
               of the TANF safety net. Are some eligible families falling through?

               The emphasis on work participation rates as a measure of program
               performance has helped change the culture of state welfare programs to
               focus on moving families into employment, but weaknesses in the
               measure undercut its effectiveness. Are the work participation rates

               Page 7                                                             GAO-12-812T
                   providing the right incentive to states to engage parents, including those
                   difficult to serve, and help them achieve self-sufficiency?

                   The flexibility of the TANF block grant has allowed states to shift their
                   spending away from cash assistance and toward other programs and
                   services for low-income families, potentially expanding the ability of states
                   to combat poverty in new ways. However, we do not have enough
                   information about the use of these funds to determine whether this
                   flexibility is resulting in the most efficient and effective strategies at this
                   time of scarce government resources and great need among the nation’s
                   low-income families.

                   Chairman Baucus, Ranking Member Hatch, and Members of the
                   Committee, this concludes my statement. I would be pleased to respond
                   to any questions you may have.

                   For questions about this statement, please contact me at (202) 512-7215
GAO Contacts and   or brownke@gao.gov. Contact points for our Offices of Congressional
Acknowledgments    Relations and Public Affairs may be found on the last page of this
                   statement. Individuals who made key contributions to this testimony
                   include Alexander G. Galuten, Gale C. Harris, Sara S. Kelly, Kathryn A.
                   Larin, and Theresa Lo.

                   Page 8                                                              GAO-12-812T
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