TANF 5th Annual Report to Congress

IX. Child Poverty and TANF

The TANF Child Poverty Regulation
Appendices

Annual Federal poverty measures are generated from Census Bureau surveys of household income, looking at the amount of cash income received by the individual or family. Non-cash transfers (e.g., food stamps and housing subsidies) are not included in the income definition, nor are subtractions or additions to income made through the tax system. An individual’s or family’s poverty status is assessed by comparing total cash income to a standard of basic needs (the poverty threshold) which varies by the size of the family. In 2001, the Federal poverty threshold for a family of four (two adults plus two children) was $17,960.

The Census Bureau also produces a series of poverty statistics using alternative definitions of income that incorporate other additions and reductions to income, such as capital gains and losses, near-cash transfers, and Federal and State taxes, including the payroll tax and the Earned Income Tax Credit (EITC). Using this expanded definition of income, the child poverty rate decreases to 13.1 percent from the 1996 level of 16.2 percent based on the official defintion. Inclusion of the EITC alone removed more than 2.4 million poor children from poverty. (See Table 9.3)

While the poverty rate indicates the proportion of the population that is poor, the poverty gap indicates the income deficit for those in poverty, that is, the amount of money that would be required to raise all poor families to the poverty line. Table 9.3 displays the poverty gap for families with children from 1991 to 2001 using a pre-transfer measure of the poverty gap, the official measure of poverty, and an alternative measure of poverty that includes near-cash transfers and Federal and State taxes, including the EITC.

Between 1996 and 2001, the national child poverty rate fell by 20 percent (from 20.5 percent to 16.3 percent). See Tables 9:1 and 9:2. The decline is even more marked for specific groups: the African American child poverty rate dropped from 39.9 percent to 30.2 percent, the lowest rate on record; the Hispanic child poverty rate dropped from 40.3 percent to 28.0 percent, the largest five year drop on record.

There are also significant differences in the child poverty rate by marital status. In married, two parent families, about one child in 12 is poor (8.0 percent), while about 39 percent of the children living in a female-headed, single parent family are poor.

The Census Bureau also produces a series of poverty statistics using alternative definitions of income that incorporate other additions and reductions to income, such as capital gains and losses, near-cash transfers, and Federal and State taxes, including payroll tax and the Earned Income Tax Credit (EITC). Using this expanded definition of income, the 2000 child poverty rate decreases to 12.7 percent from 16.2 percent based on the official definition. Inclusion of the EITC alone removed more than 2.4 million poor children from poverty. (See Table 9:3.)

While the poverty rate indicates the proportion of the population that is poor, the poverty gap indicates the income deficit for those in poverty, that is, the amount of money that would be required to raise all poor families to the poverty line. Table 9:3 displays the poverty gap for families with children from 1990 to 2000 using a pre-transfer measure of the poverty gap, the official measure of poverty, and an alternative measure of poverty that includes near-cash transfers and Federal and State taxes, including the EITC.

While overall child poverty levels are affected by various factors, employment is central to assisting families to escape poverty, and States have made remarkable progress since the enactment of the TANF program in moving families into work. However, many families who have moved to work have not yet escaped poverty. Many States are now focusing more on helping families move beyond taking a job to successfully retaining and advancing in employment. Some measure of how well States are doing in this regard is reflected in the data from the States competing for the TANF High Performance Bonus awards. (Job entry, job retention, and job advancement are the three work measures used in the High Performance Bonus system. See Chapter V. High Performance Bonus.)

In addition, a number of innovative States are using the resources and flexibility under TANF to not only increase employment and reduce dependence but also to directly or indirectly make more income available to aided families. Such strategies include:

Improving child support collections, including increasing the amount of child support collected from non-custodial parents that is passed through to children;

Enacting State refundable tax credits;

Helping families receive food stamps, the Earned Income Tax Credit, other earnings supplements, and wage subsidies and offering more generous earnings disregards;

Helping families during periods between jobs with subsidies to aid quick re-employment efforts;

Providing employment assistance for other family members, such as child-only families where a caretaker relative is not receiving TANF assistance but is seeking employment; and

Increasing the stability of work through employer partnerships that focus on the first job, on job advancement after the first job, and on combinations of work, training, and education.

The TANF Child Poverty Regulation

Congressional concern regarding the effect of the TANF program on the well-being of children led to the enactment, in 1996, of section 413(i) of the Social Security Act. This provision requires the Department to monitor changes in the child poverty rate relative to TANF. If the State experiences an increase in its child poverty rate of five percent or more as a result of the TANF program(s) in the State, it must submit and implement a corrective action plan to reduce the State’s child poverty rate.

The Department published a final rule to implement this section of the law on June 23, 2000 (65 FR 39233). To date, based on child poverty rates for 1996, 1997, and 1998, no State was required to submit a corrective action plan or any additional information for these child poverty assessment periods. (See Table 9:4 and Table 9:5.)

Appendices

	Download Excel Workbook
Table 9:1	Poverty Rates for All Children for Years 1979-2001
Table 9:2	Poverty Rates for All Children for Years 1979-2001
Table 9:3	Income Poverty Gap for All Families with Children 1991 -2001, Official and Comprehensive Definitions of Income (In Billions of Dollars)
Table 9:4	State Estimates for Children Under 18 in Poverty for the United States: 1996 and 1997: Special Computation for 45 CFR 284
Table 9:5	State Estimates for Children Under 18 in Poverty for the United States: 1997 and 1998: Special Computation for 45 CFR 284

Fifth Annual Report to Congress (February 2003)

IX. Child Poverty and TANF