The Future of Children, Princeton - Brookings: Providing research and analysis to promote effective policies and programs for children.

The 1996 law repealed Aid to Families with Dependent Children (AFDC), the principal program providing cash assistance to families with children, as well as several related programs, and replaced them with TANF block grants.¹ Under AFDC, states were mandated to provide assistance to all eligible poor families, but had broad discretion in setting benefit levels. The federal government paid half or more of all program costs on an open-ended basis (that is, federal funding rose and fell with caseload levels). States also were required to provide work-related services and requirements for AFDC families, but these programs typically were not a central focus in state and local welfare administration. Such programs were often underfunded and affected a limited share of eligible families.

Under TANF, each state receives a block grant and has broad discretion in using the funds for programs that provide cash assistance for needy families, as well as for an array of other benefits and services that accomplish the purposes of the law.² The law's four purposes are to:

• Provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives;


• End needy parents' dependence on government benefits by promoting job preparation, work, and marriage;


• Prevent and reduce the incidence of out-of-wedlock pregnancies; and


• Encourage the formation and maintenance of two-parent families.

Key features of TANF block grants are summarized in Box 1. In implementing TANF, states have generally developed programs that provide time-limited assistance and place a strong emphasis on work.³ In most states, parents receiving TANF—including parents of very young children—are required to participate in work-related activities, and all cash assistance can be terminated when parents violate a program rule or reach a time limit of 60 months or less. State programs generally emphasize rapid entry to the workforce and restrict education and training activities. Liberalized eligibility rules adopted by many states have expanded the availability of cash assistance for two-parent families and those entering employment. However, new restrictions were placed on federal assistance to certain groups, such as immigrants and teen parents.

As states implemented the 1996 law, there was an unprecedented decline in the nation's welfare caseload. Implementation of TANF coincided with expanded employment opportunities in an extraordinarily strong economy and a number of policy changes that greatly increased returns from low-wage work (that is, an increase in the minimum wage, expansion of the earned income tax credit, and increases in child care spending and public health care coverage). The decline in the welfare caseload began before TANF was enacted, but accelerated afterward.

In early 1994, 5.1 million families were receiving AFDC assistance. By the time TANF was enacted, in August 1996, the number had fallen to 4.4 million families. By September 2000, only 2.2 million families were receiving ongoing assistance.⁴ Child poverty also fell during this period, from 22% in 1994 to 17% in 1999. However, the welfare caseload dropped much faster, and the share of poor children receiving assistance fell from 62% in 1994 to 40% in 1999.⁵

Many families leaving welfare are still living in poverty. Studies consistently have found that about 60% of families leaving welfare are working, but often in low-paying jobs with no employer-provided benefits, and often without continued food stamp benefits or Medicaid coverage even when still eligible. (See the article by Zedlewski in this journal issue.) The other 40% of families leaving welfare are not working. Based on the limited information available, it appears that some—though not most—of these families are residing with partners or other adults, and many face multiple obstacles to employment. In some states, a significant share of case closures are due to sanctions or noncompliance with program requirements, such as failure to meet a work requirement, attend a meeting, or respond to a notice.⁶ Families whose cases are closed because of sanctions are likely to have a low education level, little or no work history, and more serious employment barriers.⁷

Concerns about families leaving welfare without employment have been heightened by findings that the poorest families have experienced a drop in income in recent years. Between 1995 and 1998, female-headed families generally experienced increases in disposable income, but the poorest 20% suffered a loss over this period, principally because of the sharp drop in receipt of various welfare-related benefits.⁸

Among families still receiving TANF assistance, many have serious barriers to employment, such as no recent work history and no high school diploma. About half report poor physical or mental health.⁹ Other barriers include illiteracy, substance abuse, domestic violence, and ill or disabled family members.

Nationally, as the welfare caseload declined and cash assistance expenditures fell, more funds became available for programs to help families address barriers to employment and for other state welfare-related activities.¹⁰ States were able to use TANF funds to serve poor families that left TANF or that never received TANF cash assistance, as well as those still on the rolls, and many states redirected TANF funds to child care and child welfare services.¹¹ Some states used TANF funds to substitute for prior state spending, giving rise to disputes about the magnitude and significance of such supplantation.¹²

Some of the key questions likely to emerge during TANF reauthorization are summarized in Box 2.