Let's Talk TANF: Congress Gets Around to It

The federal budget reconciliation bill for federal fiscal year 2007 (which began on October 1, 2006) passed in early February. That bill included the long-awaited reauthorization of the Temporary Assistance for Needy Families (TANF) program. Congress was originally scheduled to reauthorize the TANF program four years ago and had been operating the program on stopgap resolutions since then.

Many details will emerge over the next few months, but here are the main provisions:

• The TANF block grant will stay at the same level. This is a federal fund that the states must spend on programs for low-income families with children. In Illinois this amounts to $535 million a year. It has been at this level since 1997 and thus has lost substantial value because it has not kept up with the annual increase in the cost of living.
• Child care funding will go up $200 million per year nationally for five years, or about $8.8 million per year in Illinois. This is not a block grant fund but a matching fund that the states will have to draw down by spending state funds. This is far below the amount needed to keep up with inflation and with the child care needs of the added numbers of TANF cases that must meet work requirements under the new provisions outlined below. 
  
• Effective October 1, 2006, states will have to have 50 percent of their TANF caseloads engaged in 30 hours per week of activities countable under federal rules as “work activities.” Separately they will have to have 90 percent of two-parent families engaged in 30 hours per week of countable work activities.
  
• Work participation rates will be reduced only by the amount that the state’s TANF caseloads decrease since the base year of 2005. Since Illinois caseloads were at an all-time low in 2005, Illinois is unlikely to get any benefit from this new caseload reduction credit. The work requirement in Illinois will most likely be 50 percent for the foreseeable future. Current estimates are that 46 percent of the Illinois TANF caseload meets the work requirements.
  
• Financial penalties against states that do not meet work participation rates remain the same as under prior law. The initial penalty is up to 5 percent of the block grant, and the state maintenance-of-effort requirement will increase, for a total penalty of about $25 million.
• For the first time, the bill requires that the federal TANF agency produce regulations defining what activities count as “work activities,” how recipients must report their hours of work activities, and what documentation will be required to verify those activities. The regulations will define what kinds of TANF families are “child only” families. These rules must be published and in effect by June 30, 2006. There is potential for difficulty in these rules.

Illinois officials have a number of options for implementing these new statutory provisions. We will continue to cover both state and federal implementation activities over the next months.

For more information, contact John Bouman.

Poverty Action Report
February 2006