TEMPORARY ASSISTANCE FOR NEEDY FAMILIES
(TANF)

Sixth Annual Report to Congress

Expenditures
            Cash Assistance
            Work Activities
            Transportation and Work Supports
            Child Care
            Administrative and Systems Costs
            Expenditures for Other Benefits and Services
Additional MOE Expenditure Information
Link to Appendices

States have broad flexibility to spend Federal TANF funds on various benefits and services for families, but are required to spend a considerable amount of their own funds on the same or similar activities (called Maintenance of Effort or MOE).  Combined State expenditures of Federal TANF and State TANF MOE funds totaled $25.4 billion in FY 2002, a slight decrease (-$111 million) from the previous year.  Since activities sponsored through these sources are similar, and often involve co-mingling of State and Federal funds, it is helpful to consider Federal TANF expenditures within the context of States' overall spending on TANF-related activities.  Table A provides an overview of FY 2002 expenditures and balances.

Table A

Expenditures and Balances
Total TANF Expenditures in FY 2002

	Dollars
Beginning of Year Carryover	$6,352,673,180
FY 2002 New Federal Grants	$17,004,190,260
Total Federal Funds Available	$23,356,863,440
Federal Funds Transferred to CCDF	$1,926,299,277
Federal Funds Transferred to SSBG	$1,031,375,598
Net Federal Funds Available for TANF	$20,399,188,565
Total Federal Expenditures	$14,587,709,021
Federal Unliquidated Obligations	$3,133,163,514
Federal Unobligated Balance	$2,678,316,026

States received Federal TANF grants totaling $17 billion nationally in FY 2002, which included each State's base TANF grant, and additional Federal bonuses and supplemental grants.  States may reserve unspent Federal funds for use in future fiscal years, although carried-over funds can only be spent on assistance payments to families.  Over $2.5 billion was available for obligation in FY 2002 from prior years Federal TANF funding.  In addition, States had $3.8 billion in Federal TANF funds that they had obligated at the end of the previous year, but which would not be liquidated (spent) until FY 2002, giving States a total of $6.4 in Federal TANF cash on hand at the beginning of FY 2002.  As of the end of FY 2002, about $2.7 billion remained unobligated and an additional $3.1 billion of unobligated funds remained unliquidated, leaving about $5.8 billion in Federal TANF cash on hand at the year's end.  Table B shows beginning and end of year Federal TANF balances for each State.

States may transfer up to 30 percent of their annual Federal TANF grant into the Child Care and Development Fund (CCDF) or Social Services Block Grant (SSBG) program.  Of this 30 percent, States are limited to transferring no more than 10 percent to the SSBG program.  In FY 2002, States transferred $1.9 billion into CCDF (11 percent) and $1.0 billion (6 percent) into SSBG of their 2002 Federal award, approximately the same as they did the prior year.

Total spending and transfers of Federal TANF dollars was $17.5 billion in FY 2002.  The additional MOE funding States are required to spend must equal at least 80 percent of their pre-TANF (1994) State expenditures (or 75 percent if they meet Federal work participation requirements) on similar programs, and totaled $10.8 billion in FY 2002, $1.7 billion of which was spent on TANF-allowable costs of Separate State Programs (SSP).  States need only report MOE spending that is sufficient to meet their MOE obligation and because of this reported MOE expenditures understate the actual amount of State spending on TANF-related activities that have been claimed.  Many States, for example, operate refundable State tax credit programs for low-income working families that would qualify as MOE, but States often claim only a portion of these expenditures as MOE.

Click here for Table B

Expenditures

State expenditure trends are broken down into six general spending categories:  cash assistance, work activities, transportation and work supports, child care, administration and systems costs, and expenditures for other benefits and services. 

Spending patterns have shifted dramatically since TANF was enacted, reflecting the decline in welfare caseloads and increased spending on supportive non-cash services.  Figure A compares State spending of Federal TANF and State MOE funds during FY 1997 - TANF's first year - with FY 2001 and FY 2002 in the six major categories.  Even within the past year, State spending patterns have continued to shift away from cash aid, with increasing proportions of expenditures being made on child care, work and other services.

Link to table version

Cash Assistance

States spent $10.4 billion, or 41 percent, of their total Federal TANF and State MOE funds in FY 2002 on cash assistance.  This represents a decrease of $0.7 billion, or six percent, when compared to the $11.1 billion, or 43.6 percent, spent on cash assistance during FY 2001.

These amounts include both $9.4 billion in basic TANF cash assistance for families and $1.0 billion in aid payments for others that were permitted under the prior law AFDC program (for children involved in foster care or the juvenile justice system) and allowed to continue under TANF.  Considered separately, basic TANF cash assistance dropped by three percent, or $0.8 billion, from FY 2001, while assistance under prior law remained essentially constant.  Basic cash assistance includes ongoing benefits directed at basic needs (e.g., food, clothing, shelter, utilities, household goods, personal care items, and general incidental expenses), as well as supportive services for families that are not employed. 

Work Activities

States spent $2.7 billion in combined funds, or 10.7 percent of total expenditures, on work activities in FY 2002, which includes work subsidies, education and training, and other job readiness activities such as employment counseling, job development, and job placement information and referral services.  This spending was the same as in FY 2001.

Transportation and Work Supports

Spending on transportation benefits (such as allowances, bus tokens, car payments, auto insurance reimbursement, and van services) for working or otherwise participating families totaled $584 million in FY 2002, or 2.3 percent of all spending, and $74 million less than in FY 2001, an 11 percent decline . Such services are provided to recipients and non-recipients to enable them to work or participate in other activities, such as education, or training, or for respite purposes.

Child Care

Direct Federal TANF and State MOE spending on child care totaled $3.5 billion, or 13.8 percent of all spending. This was an increase of approximately $150 million or 4.3 percent over the prior year. States reported that about 88 percent of direct Federal TANF and State MOE funding for child care was for subsidies to working families (i.e., non-assistance).

In addition, States transferred $1.9 billion in Federal TANF funds from the TANF program into the CCDF, the same level transferred in FY 2001. Taken together, States continued to spend significant Federal TANF and State MOE funds on child care. During FY 2002, States spent just over $5.4 billion, either directly through the State's TANF program or by transferring Federal TANF funds to the CCDF Discretionary Fund. It should be noted that States spent a considerable amount of additional (non-TANF) funds on child care for low-income working families, many of whom may have previously been on welfare.

Administrative and Systems Costs

Administrative and information systems expenditures in FY 2002 totaled $2.6 billion, or 10.3 percent, of total expenditures. Of the $2.6 billion, States claimed $2.3 billion for administrative costs that fall within the 15 percent administrative spending cap and $359 million for information systems. Combined, these amounts were $22.5 million less than in FY 2001.

Expenditures for Other Benefits and Services

Approximately $5.5 billion of combined expenditures were made on a variety of other non-cash assistance services during FY 2002, including Individual Development Account programs ($7.7 million – an increase of $6.8 million), foster care and juvenile justice services allowed under prior law ($768.9 million – an increase of $104 million), refundable tax credit programs ($765.5 million – an increase of $94 million), non-recurrent short term benefits ($237.8 million – an increase of $9.9 million), pregnancy prevention and two-parent family formation programs ($1.0 billion – an increase of $623 million), and miscellaneous other activities ($2.8 billion – a decline of $348 million).

Figure B breaks down the “Other” category, to show how States expended combined Federal TANF and State MOE funds for the activities during FY 2002.

 

Link to table version

Refundable tax credits include refundable State earned income tax credits paid to families and State and local tax credits, as well as expenditures on any other refundable tax credits provided under State or local law that are consistent with the purposes of TANF. 

Non-recurrent short term benefits include expenditures on one-time, short-term benefits to families in the form of cash, vouchers, subsidies, or similar forms of payment to deal with a specific crisis situation or episode of need, or as a diversion activity to help a family avoid the need for ongoing assistance.

During FY 2002, States spent over $1.0 billion, more than doubling their expenditures in FY 2001, on activities designed to either reduce the incidence of out-of-wedlock pregnancies or encourage paternal involvement in the lives of their children.  Most pregnancy prevention efforts have focused on teenagers.  State approaches to preventing teen pregnancy can be divided into several categories:  education curricula on sex, abstinence, and relationships; reproductive health services; youth development programs; media campaigns; efforts to prevent repeat teen births; and multiple component interventions.  State initiatives directed toward family formation tend to focus on involvement of non-custodial parents in their children's lives.  Other initiatives include parenting education, family crisis counseling, marriage counseling, mentoring, and eliminating eligibility criteria that discourage two-parent families from applying for assistance.

The balance of expenditures (miscellaneous other activities) made by States include a variety of services, including family preservation activities, parenting training, substance abuse treatment activities, domestic violence services, and case management.

Additional MOE Expenditure Information

Additional detail on State spending on TANF and SSPs is available in the State MOE expenditure reports. While States continued providing traditional supportive services to families, like child care and transportation, many States also used MOE funds in FY 2002 to provide preventive services to help youth, young children, and families at risk of either remaining or becoming welfare recipients.  Programs for youth and children include:  after-school and stay-in-school programs; teen pregnancy prevention programs; and community youth grants.  These programs provide services such as tutoring, counseling, job referrals, and community activities as alternatives to drug abuse, gang activity, sexual activity, and dropping out of school.  Other supportive service expenditures that promoted family, work and job preparation included help with utilities, rent or mortgage assistance, primary and secondary school textbook reimbursement programs for low-income families, tuition and book fees for post-secondary school or training programs, part-time student grant programs, and medical services not met by Medicaid/SCHIP for children in low-income families.

Some States also provided MOE-funded cash assistance programs to families in certain circumstances.  Expenditures for such programs totaled $860 million, as shown in Appendix Table 2:6. For example, these States used SSPs to provide financial assistance to:  two-parent families; families with physical, mental health, substance abuse, or domestic violence issues; families in which the parent or caretaker is receiving or has applied for Supplemental Security Income; families in which the caretaker relative is not the parent; families in which a parent is attending post-secondary school or in which a minor parent is a student, and families that have exhausted their Federal time limits.  A few States provided financial assistance to families with legal immigrants who are not eligible for TANF, and States operating such programs generally continued to require individuals to participate in work activities.  Separate State programs operated for two-parent families usually include work activities that mirror those in the State's TANF program.  The exceptions usually involved families in which the parent or relative is temporarily or permanently incapacitated in some way (e.g., mental health or substance abuse issues, or receipt of Supplemental Security Income) or families that consist of a non-parent caretaker relative.