Helping State TANF Programs Respond to Hard Economic Times

September 30, 2011 at 12:33 pm

As I noted in a recent post on Congress’ failure to fund TANF Supplemental Grants for 17 mostly poor states, one way to help offset the loss of that funding would be to redesign the TANF Contingency Fund. When Congress created the TANF block grant in 1996, it created the TANF Contingency Fund for states to draw upon during periods of economic distress. The goal was to address some of the risks and hardships that states would face as a result of the conversion of Aid to Families with Dependent Children (AFDC) — an entitlement program whose funding rose automatically in recessions — into a block grant with fixed federal funding. However, the fund is not well-designed to achieve its stated purpose.

Congress provided $612 million for the Contingency Fund for fiscal year 2012, which begins October 1, but only a minority of states — and not necessarily those with the greatest need — will qualify. Last year, just 20 states and the District of Columbia qualified. Several of the states that did not qualify — California, Florida, Georgia, Illinois, and Rhode Island, among others — have faced unemployment rates well above the national average.

Since the TANF bill that Congress passed last week extended the program for only three months, lawmakers will have an opportunity later this fall to revisit the Contingency Fund. We have proposed a redesign to correct the fund’s design flaws so that more states — and especially those with the greatest need — can qualify for it. An improved Contingency Fund would have the following features:

  • A simpler, updated economic hardship “trigger” to qualify a state for funds. Any state with an unemployment rate at or above 6.5 percent would qualify for money from the fund. The fund’s current triggers are out of date and unnecessarily complicated.
  • Receipt of funds for a longer period. States that hit the trigger should receive funds in that calendar quarter and the next three quarters, which would allow them to maximize their use of the additional funds without worrying about whether they will lose their eligibility in the next month or two. States currently qualify for funds on a month-to-month basis.
  • More narrowly targeted funding. Congress should limit the use of the Contingency Fund to subsidized employment and basic cash assistance, two categories of spending that are directly related to helping families meet their basic needs in hard economic times. Currently, states can use the Contingency Fund to meet any goal of the TANF program, many of which have no direct relationship to the hardships families are facing because of the economic downturn.
  • Requirement that a state increase its help to needy families. The amount of extra help for which a state can qualify should be based on the amount by which it has increased its spending above a base year in the targeted categories. This approach ensures that a state receives additional funds only for increased spending and can’t simply use the funds to replace existing spending.
  • Elimination of overly restrictive state spending requirements . The Contingency Fund’s maintenance-of-effort (MOE) provisions are complex and can hinder otherwise-eligible states from accessing the fund. If Congress adds the requirement above that a state increase its spending to qualify for Contingency Funds, the complex and restrictive MOE requirement is no longer needed.

During this recession, many states have been unable to respond to increased need because they have no extra funds to draw upon. The Contingency Fund is too small to help states respond fully, but the changes outlined above will make more effective use of available resources.

Elderly and Disabled Refugees Face SSI Cutoff

September 29, 2011 at 2:56 pm

Up to 4,600 impoverished elderly or disabled refugees will lose their Supplemental Security Income (SSI) benefits on October 1, when a temporary provision of law expires.  Several hundred more will lose their benefits each month thereafter.  Congress should act quickly to avert the severe hardship that this small but vulnerable group will face.

SSI provides a bare-bones income — $674 a month for an individual or $1,011 for a couple, about three-fourths of the poverty level — to elderly or severely disabled people who cannot work and have little or no income and few resources.

In the 1996 welfare law, Congress generally barred future immigrants from collecting SSI but made a limited exception for refugees, asylees, Cuban-Haitian entrants, and similar victims of human-rights violations.  Congress permitted those groups — who fled persecution in their home countries and typically arrived with nothing but the clothes on their backs — to receive SSI benefits for a certain period (if they otherwise met the program’s strict eligibility criteria) to give them time to become citizens.

In 2008, Congress overwhelmingly passed and President Bush signed a law lengthening the SSI eligibility period for refugees from seven years to nine.  But that law expires on October 1.  Up to 4,600 refugees who have been here for more than seven years will fail to get their SSI check for October, and several hundred more will hit the seven-year limit each month thereafter.

Lawmakers’ assumption that elderly and disabled refugees can readily become citizens and thereby retain SSI eligibility has turned out to be over-optimistic, for several reasons.  Refugees may not even apply for citizenship until they have been in the country for five years; asylees and similar groups face even longer waits (and much higher fees).

Applicants for naturalization must pass tests in English and civics — a steep hurdle for people who often had limited education in their home country and are elderly or seriously disabled.  And to become citizens, they must navigate a confusing bureaucracy, often without help from an attorney or friend who is knowledgeable on these matters.

The affected refugees come from the former Soviet Union, Afghanistan, Cuba, Ethiopia, Indochina, Iraq, Iran, Liberia, Somalia, Sierra Leone, Sudan, the former Yugoslavia, and other troubled places.  Some helped the United States in its overseas wars.  Unlike most refugees, who adapt to life in the United States, join the workforce, and need only a temporary helping hand, the small number who qualify for SSI can’t support themselves.

Representatives McDermott (D-WA) and Ros-Lehtinen (R-FL) have led efforts in the House to extend the nine-year rule; Senator Schumer is spearheading efforts in the Senate.  A permanent fix — repealing the time limit entirely — would be the best solution.  But most urgent is fast action to remedy the cutoff scheduled for October 1.

TANF Extension Leaves Many Poor States Out in the Cold

September 28, 2011 at 3:53 pm

For the first time since creating the Temporary Assistance for Needy Families (TANF) program in 1996, Congress last week extended the program without including funding for TANF Supplemental Grants aimed at 17 mostly poor states (see table).  It did so even as the Census Bureau was releasing data showing very high levels of poverty and “deep poverty” (incomes below half the poverty line) in many of those 17 states.

TANF Spending Per Poor Child Much Lower in Supplemental Grant States

Congress created the Supplemental Grants as part of the original welfare reform law to give poorer states and states with growing populations a better opportunity to achieve the goals of the 1996 welfare law.  The grants reduce the large disparity between poorer and wealthier states in TANF funding per poor child under the basic TANF block grant funding formula (see chart).

The Supplemental Grants ran out earlier this year after Congress cut funding in December.  The bill passed last week extends TANF for only three months, but the bill’s omission of Supplemental Grant funding makes it unlikely that Congress will include the grants in future TANF extensions.

The 17 states that will lose funding include:

  • Eleven states in which poverty or deep poverty increased significantly between 2009 and 2010 Alabama, Arizona, Florida, Georgia, Louisiana, New Mexico, Nevada, North Carolina, Tennessee, Texas, and Utah.
  • The two states with the nation’s highest deep poverty rates in 2010 — Mississippi and New Mexico.
  • The state with the largest increase in deep poverty since the start of the recession — Nevada, where the rate rose from 4.6 percent in 2007 to 7.0 percent in 2010.
  • The five states with the highest child poverty rates in 2010 — Mississippi, New Mexico, Alabama, Arkansas, and Louisiana.
  • Three of the four states with the largest increases in child poverty since the start of the recession — Florida, Nevada, and Utah, where the child poverty rate went up by more than 40 percent.

These 17 states, many of which are already struggling to maintain a safety net for very poor families at a time of rising need, will now have an even harder time doing so.  In most of these states, the Supplemental Grants account for 9 or 10 percent of TANF funding.

If Congress is unwilling to restore Supplemental Grant funding, another option would be to redesign TANF’s Contingency Fund so that more states can qualify.  I’ll write more about this in an upcoming blog post.

Many Supplemental Grant States Have High Rates of Poverty and Deep Poverty

Five Ways to Strengthen Housing Assistance Without Expanding the “Moving-to-Work” Demonstration

September 28, 2011 at 1:51 pm

As I wrote yesterday and discuss more in a new analysis, some members of Congress have called for expanding the Department of Housing and Urban Development’s (HUD) Moving-to-Work (MTW) demonstration, which provides state and local agencies sweeping authority to operate outside the laws and regulations that normally govern the public housing and “Section 8” housing voucher programs.

Though frequently well-administered at the local level, MTW is an ineffective way to test policy alternatives or streamline program rules, and has produced substantial harmful effects — including permitting funds to be shifted away from vouchers that help needy families and undercutting federal standards that are key to the effectiveness of housing assistance programs.

Fortunately, Congress and HUD could take other measures that would effectively streamline rules, test innovative policies, and empower high-performing agencies, without undermining important program standards or permitting funding shifts from vouchers that leave vulnerable families on waiting lists for assistance and at risk of homelessness.  Here are five examples:

  1. Enact national reforms included in the Section 8 Voucher Reform Act (SEVRA) and Section 8 Savings Act (SESA) to update and streamline requirements in areas such as housing quality inspections and determining tenants’ rents. These changes would not only make assistance more effective, but also save more than $700 million over five years, according to the Congressional Budget Office.
  2. Adopt HUD’s proposal for a rigorous, targeted demonstration testing alternative ways to set rents and encourage work and saving among housing assistance recipients.
  3. Allow agencies to convert some public housing developments to more flexible and reliable Section 8 subsidies.  HUD proposed this under its Rental Assistance Demonstration (RAD), a version of which the Senate Appropriations Committee recently approved.
  4. Support small agencies that opt to coordinate or consolidate operations, a step that would greatly ease administrative burdens for local agencies and HUD.
  5. Give extra flexibility (such as reduced HUD oversight of financial management) to agencies that score exceptionally well on HUD performance assessments.

5 Reasons Why the Supercommittee Should Include Revenues

September 28, 2011 at 10:24 am

The Center issued a report yesterday giving five reasons why the new congressional committee on deficit reduction must consider revenue increases as well as spending cuts in order to produce a balanced plan.  In brief, they are:

  1. Spending cuts alone can’t do the job. The key fiscal policy goal is to reduce deficits sufficiently to stabilize the debt relative to the size of the economy.  The only way to accomplish this without severe cuts that would hit low- and middle-income Americans hard — in areas ranging from Medicare, Medicaid, and possibly Social Security to basic assistance for the poor — and weaken core government functions like education, scientific research, and ensuring safe food and water, is through revenue increases.
  2. The 2001-2003 tax cuts are a significant contributor to projected deficits. Letting some or all of those tax cuts expire would make a significant contribution to reducing the deficit.
  3. Higher-income people can and should share in the sacrifices needed to reduce long-term deficits. Low- and moderate-income households shouldn’t be forced to bear a disproportionate share of the burden through cuts in Medicare, Medicaid, Social Security, and programs targeted on people who are poor or near-poor.
  4. Taxes are low both in historical terms and in comparison with other countries. By either standard, the United States has significant room for increasing tax revenues.
  5. Higher taxes are not an inherent barrier to economic growth. In fact, the Congressional Budget Office (CBO) has said that tax increases used to reduce budget deficits can improve long-term economic growth and job creation. The experience of the 1990s shows that claims that reasonable revenue increases will sink the economy largely reflect politics and ideology, not solid analysis.

Click here for the full report.