The 1996 Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) provided a block grant to states to create the Temporary Assistance for Needy Families (TANF) program. In doing so, it required states to engage certain minimum percentages of their TANF caseloads—50 percent of all families and 90 percent of two-parent families—in specified work and work-related activities for a specified number of hours per week. Sanctions, or financial penalties for noncompliance with program requirements, have long been perceived as a major tool for encouraging TANF recipients who might not be inclined to participate in work activities to do so. The logic behind sanctions is that adverse consequences—such as a reduction in the TANF cash grant (a partial sanction) or gradual or immediate termination of the TANF grant (a full-family sanction)—can help influence the participation decisions that welfare recipients make.
In reauthorizing the TANF program, the Deficit Reduction Act of 2005 (DRA) changed the way the work participation rates are calculated and thereby effectively increased the rates required of states. Work participation rates are calculated by dividing a numerator consisting of “participants”—families engaged in federally acceptable work activities for the requisite hours per week—by a denominator that is a count of “total families.” Largely because states received credits in their participation rates for caseload reductions that occurred after 1995 and because the count of “total families” included only certain TANF recipients, the real rates that states had to meet prior to the DRA were substantially below 50 and 90 percent. As of fiscal year 2007, states will receive credits in their participation rates for caseload reductions that occur after 2005 and the count of “total families” will include TANF recipients as well as families receiving assistance through separate state programs that count toward maintenance of effort (MOE) requirements. Because of these changes, states now face the challenge of achieving participation rates that are considerably higher and close to the 50 and 90 percent standards set in the law. As states consider their options for meeting the higher work participation rates, they are likely to consider how they might redefine their TANF and separate state programs and make better use of sanction policies and procedures to encourage higher levels of participation in program activities.