Off the Charts Blog | Center on Budget and Policy Priorities

Some policymakers, such as House Budget Committee Chairman Paul Ryan, have suggested that the government restructure a variety of federally funded programs for low-income families — including Medicaid and SNAP (formerly known as food stamps) — similar to the way the 1996 welfare law converted the Aid to Families with Dependent Children (AFDC) program to the Temporary Assistance for Needy Families (TANF) block grant.

We’ve taken a close look at how states have used their federal and state funds under TANF in a new paper.  Our findings provide a cautionary tale about the dangers of converting basic safety-net programs to block grants.

We found that:

• Spending on basic assistance now accounts for a relatively small share of federal and state TANF expenditures. At TANF’s onset, states used 70 percent of their combined TANF funds for basic assistance for poor families.  That figure fell to only about 29 percent in 2011.  Nine states spent less than 15 percent of their combined TANF funds on basic assistance in 2011.

• States initially shifted some resources from cash assistance to child care and work-related activities, but spending in these areas has remained generally flat for the last decade and has dropped somewhat in recent years.  States now spend only about a quarter of their TANF dollars on child care and work activities.
• States are using a significant and growing share of TANF funds to support other state services, including child welfare; they also have diverted substantial funds formerly used to assist poor families to other purposes. In some cases, states’ use of TANF funds for other services has enabled them to expand useful existing services.  In other cases, states have used the dollars to replace existing state funds, thereby freeing those state funds for purposes unrelated to providing a safety net or work opportunities for low-income families.

When the recession hit in late 2007, many states could not — for fiscal or political reasons — reclaim those dollars to address the substantial increases in need for cash assistance among the growing numbers of poor families; instead, facing budget shortfalls, many states cut already-low TANF benefit amounts further, shortened TANF time limits, or took other actions to shrink caseloads or keep them from rising much in the face of mounting need.

As policymakers consider TANF’s future — and how they might reform other safety-net programs — they should heed these lessons.  For states, block grants may look enticing because they offer flexibility.  But, it ultimately leaves them worse off over time.

The block grant structure isn’t a winning one for the federal government, either.  As we’ve seen under TANF, it can lead to less accountability, less federal direction and oversight, and state spending of federal funds in ways that Congress did not intend.

In an upcoming post, we’ll take a closer look at some of the state-by-state details behind the national numbers.

Click here to read the full paper and the related state fact sheets.