TANF-ACF-PI-2009-06 (Questions and Answers on the TANF Contingency Fund (separate from the Emergency Contingency Fund authorized by the American Recovery and Reinvestment Act of 2009))
States Operating Temporary Assistance for Needy Families (TANF) Plans and Other Interested Parties.
Questions and Answers on the TANF Contingency Fund (separate from the Emergency Contingency Fund authorized by the American Recovery and Reinvestment Act of 2009).
Section 403(b) of the Social Security Act, Section 409(a)(10) of the Social Security Act, 45 CFR 260.30, 45 CFR 264.0, and 45 CFR 264.70 – 264.77.
This Program Instruction (PI) provides responses to questions about the Contingency Fund, particularly with respect to how various requirements apply when the Fund is depleted before the end of a fiscal year.
The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 (P.L.104-193, as amended) created a $2 billion Contingency Fund to assist States in meeting the need for welfare assistance during periods of economic downturn. PRWORA initially authorized the TANF program through fiscal year (FY) 2002. When the Deficit Reduction Act of 2005 (P.L. 109-171) reauthorized the TANF program through FY 2010, it retained the Contingency Fund.
TANF Program Instruction TANF-ACF-PI-97-8, dated October 27, 1997, provided the initial guidance to States on the requirements for receiving contingency funds and instructions for applying for these funds. That PI has been superseded by the Contingency Fund requirements in the TANF regulations at 45 CFR 264, Subpart B.
TANF Program Instruction TANF-ACF-PI-2008-04, dated May 6, 2008, addressed questions from States about receiving contingency funds, including application procedures and the basic requirements for receiving, retaining, and remitting contingency funds. The PI provided a basic application form, a table that shows each State’s 100 percent Contingency Fund Maintenance-of-Effort (MOE) requirement, and a link to obtain each State’s Federal Medical Assistance Percentage (FMAP) for applicable fiscal years.
At the beginning of FY 2009, there was $1.3 billion in the Contingency Fund. However, due to the economic downturn, the number of States requesting contingency funds has increased and, as of July 20, 2009, $228 million remained in the Fund. We have received additional questions about how the various Contingency Fund provisions will work in the event the Fund is depleted before the end of a fiscal year.
Contingency funds are additional Federal funds available to States, at their request, when unfavorable economic conditions exist. They are considered provisional payments, according to section 403(b)(3)(A) of the Social Security Act. This is because the exact amount of contingency funds that the State may actually keep is not determined until after the fiscal year ends. A State that receives a provisional payment must meet specific spending requirements to keep some or all of the contingency funds.
QUESTIONS AND ANSWERS::
Question: When can a State apply for contingency funds for FY 2010?
Answer: A State may apply up to one month before the month for which it is requesting contingency funds, e.g., September 1, 2009, for the October FY 2010 Contingency Fund award. As under current practice, a State can request a payment for the full fiscal year or for specific months.
Frequency of Contingency Fund Provisional Payments
Question: How will Contingency Fund provisional payments be distributed, given the possibility that the Fund may run out during a particular month in FY 2010?
Answer: Prior to FY 2010, once a State was determined eligible to receive contingency funds, we would make provisional payments in quarterly installments. Beginning FY 2010, once we determine a State's eligibility, we will make provisional payments on a monthly basis. Otherwise, it would be possible for some States to receive a payment for all three months of a quarter, while other States that become eligible for or apply later in the quarter would not receive funds, because we had advanced some States up to three months in payments.
Making Payments "in the Order in which the Secretary Receives Requests for Such Payments"
Question: The statute specifies that the Secretary shall make payments "in the order in which the Secretary receives requests for such payments." How will the Administration for Children and Families (ACF) make this determination?
Answer: All applications that are received before the first day of a month for which funds are being requested shall be considered to have been submitted at the same time. For example, an application for the month of October FY 2010 received on September 10, 2009, and one received September 20, 2009, will be deemed to have been received at the same time. Once a month for which funds are being requested begins, the order will be based on the date in which we receive the application. The application may be sent electronically or by mail.
If a State has applied for the full fiscal year or for specific months in advance, we will deem such a request to be new application before the beginning of each month and it will be given the same priority as any other application that arrives in the one-month period before the beginning of each new month.
Question: If the Contingency Fund does not have enough money to make all the payments due for a given month, how will the funds be awarded?
Answer: We will award the funds in the order in which a State applies (as described above). In the event two or more States have applied at the same time, we will take the total amount of Contingency Fund provisional payments due and the amount left in the Fund and pay each State its prorated share.
Determining the Federal Match Rate for Contingency Fund Payments
Question: The Federal match rate for contingency funds is based on the State's Federal Medical Assistance Percentage (FMAP) for the fiscal year for which funds are awarded. If a State received contingency funds for fewer than 12 months during the fiscal year, the applicable Federal match rate is reduced to equal 1/12th multiplied by the number of eligible months in the fiscal year for which the State received funding multiplied by the FMAP. How will the Federal match rate be calculated if a State is eligible to receive contingency funds for a month, but does not receive them because the Fund is depleted? Will this reduce the effective Federal match rate? For example, if a State with a 50 percent FMAP is eligible to receive Contingency Fund payments for all 12 months in FY 2010 but receives payments for just three months because the Fund is depleted, would the Federal match rate be 50 percent or decline to 12.5 percent (i.e., because it receives the funds just 3 out of 12 months)?
Answer: The statute specifies that the amount of contingency funds paid to a State is a function of the FMAP and the "number of months for which the Secretary made a payment to the State." If the Contingency Fund is depleted, we will consider, for matching purposes, that the State would have received a payment for each month that it was eligible had funds been available and use that number to determine the Federal match rate. Otherwise, States would be required to meet a substantially higher Federal match rate than in prior years due to exhaustion of the fund, not because their request was for less than the full fiscal year. Basing the Federal match rate on the actual months of receipt would result in States facing an unknown effective Federal match rate until the fund was depleted and States would likely have to remit contingency funds. However, if such funds were remitted, the Fund would no longer be exhausted, and the States could receive more funds for subsequent months, which in turn would increase the effective Federal match rate. This would result in an iterative cycle of revisions and adjustments and is not a practical solution. As a result, we will count the number of payment months as being equal to the number of months that the State would be eligible for a payment in a year in which the Fund is depleted.
Maintenance-of-Effort (MOE) Level
Question: Will ACF reduce the MOE level of effort requirement if funds are available for less than the full year?
Answer: No, the MOE requirement will remain the same. As explained in TANF-ACF-PI-2008-04, "Even if an eligible State elects to receive Contingency Funds for just one month in a fiscal year, it must still meet the 100 percent Contingency Fund MOE requirement." The fact that an eligible State may not be able to receive contingency funds for all the months that it is eligible to receive them because the Fund is depleted does not change this statutory limitation.
Question: How will you treat provisional payments that have been awarded to a State but are subsequently remitted because the State either does not want them or because it did not meet all the requirements to keep them?
Answer: If funds are remitted and States did not receive their full requested allocation, we will issue these remitted funds to the States month by month and in the order in which they applied for funds (as described above).
Inquiries about this document should be directed to the appropriate Office of Family Assistance (OFA) Regional Office TANF Program Manager.
Office of Family Assistance