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II. TANF Expenditures and Balances

TANF funds can be spent on "assistance" and "non-assistance." "Assistance" includes payments directed at ongoing, basic needs. "Non-assistance" includes non-recurrent, short-term benefits designed to provide supportive non-cash services and to deal with individual crisis situations. "Non-assistance" also includes child care, transportation, and supports provided to employed families, Individual Development Account (IDA) benefits, refundable earned income tax credits, work subsidies to employers, and services such as education and training, case management, job search, and counseling. The definition of "assistance" is important because the major TANF program requirements (e.g., work requirements, time limits on Federal assistance, and data reporting) apply only to families receiving "assistance." In FY 2003, total Federal and State TANF expenditures on "assistance" amounted to $11.7 billion, compared to $14.6 billion that was spent on "non-assistance."

At the beginning of FY 2003, States reported having about $2.6 billion in unobligated Federal TANF funds and $3.1 billion in unliquidated obligations from prior years, for a total of about $5.7 billion. By the end of FY 2003, about $2.3 billion remained unobligated and $1.6 billion remained unliquidated, leaving about $3.9 billion in Federal TANF funds on hand at year’s end. States may reserve unobligated Federal funds for use in future fiscal years, although carried-over funds can generally only be spent on assistance payments to families. Table B shows beginning and end-of-year Federal TANF balances for each State.

States may transfer up to 30 percent of their annual Federal TANF grant into the Child Care and Development Fund (CCDF) and the Social Services Block Grant (SSBG). Within this cap, States are further limited to transferring no more than 10 percent to the SSBG. In FY 2003, States transferred $1.8 billion into the CCDF and $927 million into the SSBG of their FY 2003 Federal award, approximately the same as they did in FY 2002.

States spent and transferred nearly $19.0 billion in Federal TANF funds in FY 2003. State MOE expenditures totaled nearly $10.1 billion in FY 2003, $1.6 billion of which was spent on TANF-allowable costs through Separate State Programs (SSPs). States need only report MOE spending that is sufficient to meet their MOE obligation, so reported MOE expenditures understate the actual amount of State spending on activities allowable under TANF. Many States, for example, operate refundable State tax credit programs for low-income working families that would qualify as MOE, but States often claim only a portion of these expenditures as MOE.

Link to Table Version   Source of Data for Figure A

Link to Table Version

Link to Table Version

State expenditure trends are broken down into six general spending categories: cash assistance, work activities, transportation and work supports, direct child care (not counting CCDF and SSBG transfers), administration and systems costs, and expenditures for other benefits and services.

Spending patterns have shifted dramatically since TANF was enacted, reflecting the decline in welfare caseloads and increased spending on supportive non-cash services. Figure A compares State spending of Federal TANF and State MOE funds during FY 1997—TANF’s first year—to spending in FY 2002 and FY 2003 in the six major categories. Since the enactment of TANF, States have shifted spending away from cash aid, with larger proportions of expenditures being made on child care, work activities, transportation and work supports, and other benefits and services.

Cash Assistance

States spent $11.0 billion, or 41.8 percent, of their total Federal TANF and State MOE funds in FY 2003 on cash assistance. This represents an increase of $589 million, or 5.7 percent, when compared to the $10.4 billion, or 41.0 percent, spent on cash assistance during FY 2002.

These amounts include both TANF basic assistance for families and aid payments previously permitted under the AFDC program and allowed to continue under TANF (such as those for children involved in foster care or the juvenile justice system). Considered separately, basic assistance increased by 8.6 percent, or $810 million, from FY 2002, while assistance under prior law decreased by $221 million. Cash assistance includes ongoing benefits directed at basic needs such as food, clothing, shelter, utilities, household goods, personal care items, and general incidental expenses.

Work Activities

States spent $2.6 billion in combined funds (9.9 percent) on work activities in FY 2003, which includes work subsidies, education and training, and other job readiness activities such as employment counseling, job development, and job placement information and referral services. This is a modest decrease ($128 million) from levels reported for work activities during FY 2002.

Transportation and Work Supports

Spending on transportation benefits (such as allowances, bus tokens, car payments, auto insurance reimbursement, and van services) for working or otherwise participating families totaled $543 million (2.1 percent) in FY 2003. This represents a decline of $41 million (7.0 percent) from FY 2002. Such services are provided to recipients and non-recipients to enable them to work or participate in other activities such as education or training or for respite purposes (short-term temporary care of persons with disabilities).

Child Care

Spending in TANF on child care totaled $3.5 billion, or 13.2 percent of all spending. This was a decrease of $36 million from the prior year. States reported that 91 percent of direct Federal TANF and State MOE funding for child care was for subsidies to working families.

In addition, States transferred $1.8 billion in Federal TANF funds from the TANF program into the CCDF, just below the level transferred in FY 2002 (including prior year spending adjustments). Taken together, States continued to spend significant Federal TANF and State MOE funds on child care. During FY 2003, States devoted almost $5.3 billion to child care, either directly through the State’s TANF program or by transferring Federal TANF funds to the CCDF Discretionary Fund. Funds transferred to CCDF are not necessarily spent during the current fiscal year and can be returned to TANF at a later time. States spent a considerable amount of additional (non-TANF) funds on child care for low-income working families, many who may have previously been on welfare.

Administrative and Systems Costs

Administrative and information systems expenditures in FY 2003 totaled $2.5 billion, or 9.3 percent, of total expenditures. Of the $2.5 billion, States claimed $2.1 billion for administrative costs that fall within the 15 percent administrative spending cap and $345 million on information systems. Combined, these amounts were $166 million less than in FY 2002.

Expenditures for Other Benefits and Services

Approximately $6.3 billion of combined expenditures were made on a variety of other benefits and services during FY 2003. Individual Development Account programs accounted for $27 million for an increase of $19 million from the prior year. Spending for foster care and juvenile justice services allowed under prior law increased $76 million to $845 million. Refundable tax credit program spending was $1.0 billion, which was an increase of $241 million. Refundable tax credits include refundable State earned income tax credits paid to families and State and local tax credits, as well as expenditures on any other refundable tax credits provided under State or local law that are consistent with the purposes of TANF.

Spending on non-recurrent short-term benefits increased $23 million to $261 million in FY 2003. Non-recurrent short term benefits include expenditures on one-time, short-term benefits to families in the form of cash, vouchers, subsidies, or similar forms of payment to deal with a specific crisis situation or episode of need, or as a short-term benefit to help a family avoid the need for ongoing assistance.

Pregnancy prevention and two-parent family formation programs accounted for $1.2 billion (an increase of $220 million). These funds were spent on activities designed to either reduce the incidence of out-of-wedlock pregnancies or encourage paternal involvement in the lives of their children. Most pregnancy prevention efforts have focused on teenagers. State approaches to preventing teen pregnancy can be divided into several categories: education curricula on sex, abstinence, and relationships; reproductive health services; youth development programs; media campaigns; efforts to prevent repeat teen births; and multiple component interventions. State initiatives directed toward family formation tend to focus on involvement of non-custodial parents in their children’s lives. Other initiatives include parenting education, family crisis counseling, marriage counseling, mentoring, and eliminating eligibility criteria that discourage two-parent families from applying for assistance.

Spending on "other" non-assistance activities totaled $2.9 billion (an increase of $127 million). These expenditures include a variety of services, including family preservation activities, parenting training, substance abuse treatment activities, domestic violence services, and case management. Many States used funds in FY 2003 to provide preventive services to help youth, young children, and families at risk of either remaining or becoming welfare recipients. Programs for youth and children include after-school and stay-in-school programs, teen pregnancy prevention programs, and community youth grants. These programs provide services such as tutoring, counseling, job referrals, and community activities as alternatives to drug abuse, gang activity, sexual activity, and dropping out of school. Other supportive service expenditures that promoted family, work, and job preparation included help with utilities, rent or mortgage assistance, primary and secondary school textbook reimbursement programs for low-income families, tuition and book fees for post-secondary school or training programs, part-time student grant programs, and medical services not met by Medicaid/SCHIP for children in low-income families.

Figure B breaks down the "other" category to show how States expended combined Federal TANF and State MOE funds for the activities during FY 2003.

Link to Table Version    Source of Data for Figure B

Additional MOE Expenditure Information

Some States also provided MOE-funded assistance programs to families outside of the regular TANF program. For example, some States used Separate State Programs (SSPs) to provide financial assistance to: two-parent families; families with physical, mental health, substance abuse, or domestic violence issues; families in which the parent or caretaker is receiving or has applied for Supplemental Security Income; families in which the caretaker relative is not the parent; families in which a parent is attending post-secondary school or in which a minor parent is a student; and families that have exhausted their Federal time limits. A few States provided financial assistance to families with legal immigrants who are not eligible for TANF, and States operating such programs generally continued to require individuals to participate in work activities. Separate State programs operated for two-parent families usually include work activities that mirror those in the State's TANF program. The exceptions usually involved families in which the parent or relative is temporarily or permanently incapacitated in some way (e.g., mental health or substance abuse issues, or receipt of Supplemental Security Income) or families that consist of a non-parent caretaker relative and children.

Appendix

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This is a Historical Document.