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II. TANF Expenditures and Balances

1/ Funds used includes both TANF expenditures and transfers to the Child Care Development Fund (CCDF) and the Social Services Block grant (SSBG).

2/ State program expenditures include both State Maintenance of Effort (MOE) and Separate State Program (SSP) expenditures.

Source: TANF Financial Report.

TANF funds can be spent on “assistance” and “non-assistance.” “Assistance” includes payments directed at ongoing, basic needs. “Non-assistance” includes child care, transportation, and supports provided to employed families, non-recurrent short-term benefits, Individual Development Accounts (IDAs), 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 2006, total Federal and State TANF expenditures on “assistance” amounted to $11.3 billion, compared with $14.3 billion that was spent on “non-assistance.”

At the beginning of FY 2006, States reported having about $2.1 billion in unobligated Federal TANF funds and $1.8 billion in unliquidated obligations from prior years, for a total of about $3.9 billion in unspent TANF funds. By the end of FY 2006, about $2.2 billion remained unobligated and $1.9 billion remained unliquidated, leaving about $4.0 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). Of this 30 percent, during FY 2006 States were limited to transferring no more than 10 percent to the SSBG. In FY 2006, States transferred $1.9 billion into the CCDF and $982 million into the SSBG of their FY 2006 Federal award[1]

States spent and transferred a total of $16.4 billion in Federal TANF funds in FY 2006. State MOE expenditures totaled $12.0 billion in FY 2006, $2.9 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, and because of this 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.

¹The amounts reported under this column include unexpended federal grant funds the States have carried over from prior fiscal years.

Expenditures

State expenditure trends are broken down into six general spending categories: cash assistance, work activities, transportation and work supports, child care, administration and systems costs, and expenditures for other benefits and services.

Link to Table Version    Source of Data for Figure A

Link to Table Version

Link to Table Version

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 2005 and FY 2006 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 $10.5 billion, or 40.9 percent, of their total Federal TANF and State MOE funds in FY 2006 on cash assistance. This represents a decrease of 6.2 percent when compared with the $11.2 billion spent on cash assistance during FY 2005. 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). 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 $2.4 billion in combined funds (9.2 percent) on work activities in FY 2006, 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 an increase of 6.6 percent from levels reported for work activities during FY 2005.

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 $472 million (1.8 percent) in FY 2006. This represents a decline of 8.0 percent from FY 2005. 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 on child care totaled $3.5 billion, or 13.8 percent of all spending. This was an increase of 11.2 percent from the prior year. In addition, States transferred a net of $1.9 billion in Federal TANF funds from the TANF program into the CCDF. Taken together, States continued to spend significant Federal TANF and State MOE funds on child care. During FY 2006, States devoted just over $5.4 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 the CCDF are not necessarily spent during the current fiscal year and can be returned to TANF at a later time). It should be noted that States spent a considerable amount of additional non-TANF funds on child care for low-income working families, many of whom may have previously been on welfare.

Administrative and Systems Costs

Administrative and information systems expenditures in FY 2006 totaled $2.4 billion, or 9.4 percent, of total expenditures. Of the $2.4 billion, States claimed $2.1 billion for administrative costs that fall within the 15 percent administrative spending cap and $273 million on information systems. Combined, these amounts were 1.4 percent higher than in FY 2005.

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 2006. Refundable tax credit program spending was $1.2 billion, which was an increase of 10.2 percent over the prior year. 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 for foster care and juvenile justice services allowed under prior law decreased 20.7 percent to $750 million. Individual Development Account programs accounted for $1.7 million.

Spending on non-recurrent short term benefits increased 8.3 percent to $289 million in FY 2006. 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 $940 million, an 11.9 percent increase over FY 2005 levels. 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 miscellaneous other activities totaled $3.1 billion, representing an 11.1 percent increase over the prior year. 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 2006 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, and part-time student grant programs.

Figure B breaks down the “other” category, to show how States expended combined Federal TANF and State MOE funds for the activities during FY 2006.

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 (SSI); 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 SSI) or families that consist of a non-parent caretaker relative (although the Deficit Reduction Act of 2005 included work participation requirements for adults in SSPs beginning in FY 2007 which will likely change the composition of these programs).

Appendix

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This is a Historical Document.