	Introduction

The Temporary Assistance for Needy Families (TANF) block grant provides grants to states, territories, and Indian tribes for benefits and services to help ameliorate, or address the root causes of, childhood economic disadvantage. TANF Funding and History

The 1996 welfare reform law that created TANF based the bulk of its funding on historical expenditures in its predecessor programs. Financing the Pre-TANF Programs

Before the 1996 welfare reform law, federal grants helped states fund the Aid to Families with Dependent Children (AFDC) programs of cash assistance for needy families with children; Emergency Assistance (EA) for families with children; and the Job Opportunity and Basic Skills (JOBS) training program, which provided employment services and education to AFDC recipients. The amount of federal funding in the predecessor programs for a state depended on the expenditures in the state. It is not adjusted for changes in conditions either nationally or in each state, such as changes in prices (inflation), the cash assistance caseload, or the population (e.g., poor children). However, having the TANF block grant based on historical expenditures had a number of additional implications. In the earlier years, funding in addition to the basic block grant came from welfare-to-work grants, supplemental grants, and bonus funds. TANF requires states to maintain spending from their own funds on TANF or TANF-related activities. The $10.4 billion, called the maintenance-of-effort level, represents 75% of what was spent from state funds in FY1994 in TANF's predecessor programs of cash, emergency assistance, job training, and welfare-related child care spending. How States May Use TANF Funds

TANF is a broad-purpose block grant that gives states the flexibility to use its funds to address both the effects of, and the root causes of, childhood economic disadvantage. Figure 5 shows both the level and composition of spending in FY1995 under the pre-TANF programs and in FY2000 and FY2014 under TANF. In FY2014, cash assistance accounted for 26% of all TANF and MOE dollars. Other work supports represented $4.5 billion in FY2014, or 14.3% of total TANF and MOE dollars. Selected TANF Financing Issues

The TANF funding level, both nationally and for each state, is rooted in what states spent in the early to mid-1990s in the pre-TANF programs that were focused on cash assistance for needy families with children. These rules would require legislation to increase spending for TANF to be offset by corresponding decreases in other mandatory spending programs or through increases in revenue. However, these rules differ from those of mandatory programs that provide direct benefits for individuals. The relevant population depends on opinions about whether TANF should be focused on providing benefits and services to the cash assistance population; whether the current size of the cash assistance caseload is indicative of meeting the needs of the population eligible for TANF cash assistance; or whether TANF should be viewed as a block grant to address child poverty more broadly. The Allocation of Federal TANF Funds among the States

In addition to the total basic block grant being based on the early to mid-1990s levels, each state's funding is also based on what it received in federal grants in TANF's predecessor programs during this period. As shown in the figure, the contingency fund often has not behaved as a countercyclical source of extra TANF funds. There are some implications of the potential lack of a counter-cyclical funding source for TANF. Table A-2 provides the amount of federal funding through the TANF basic block grant by state as well as state MOE levels at 75% and 80% rates of FY1994 predecessor program state expenditures.
The Temporary Assistance for Needy Families (TANF) block grant provides grants to states, Indian tribes, and territories to help them fund a wide range of benefits and services for needy families with children. It was created in the 1996 welfare reform law, which rewrote the rules for cash assistance programs for these families. The 1996 law also created TANF as a broad-purpose block grant with state flexibility to design programs to address both the effects of and root causes of childhood economic disadvantage.
TANF funding is based on the amount of federal and state expenditures in its predecessor programs (Aid to Families with Dependent Children (AFDC), and related programs) in the early to mid-1990s. The bulk of federal TANF funds is in a basic block grant. Both the national total of the basic block grant, $16.5 billion per year, and each state's grant are based on federal funding in the predecessor programs during this period. States must also expend a minimum amount of their own funds on TANF or TANF-related programs under the maintenance of effort (MOE) requirement. That minimum totals $10.4 billion per year. The MOE is based on state expenditures in the predecessor programs in FY1994. Over time, states have received some extra TANF funding: welfare-to-work grants, contingency funds, supplemental grants, and bonus funds. However, these grants were small relative to the basic block grant and MOE funding.
The cash assistance caseload declined substantially in the late 1990s from its 1994 peak, resulting in a decline in spending on TANF basic assistance. In FY1995, under TANF's predecessor programs, AFDC cash assistance represented 70% of total expenditures in the programs consolidated into TANF. By FY2000 cash assistance had declined to 40% of total TANF and MOE funds; in FY2014 cash assistance represented 26% of all TANF and MOE funds. TANF also provides funds for state-subsidized child care programs ($5.1 billion or 16% of total FY2014 TANF and MOE funds) as well as a wide range of services, including those addressing child abuse and neglect and pre-kindergarten programs.
Most of TANF's financing issues relate to its fixed level of funding, based on programs and conditions that existed in the early and mid-1990s. Neither the national total funding level nor each state's level of funding has been adjusted for changes since then, such as inflation, the size of the cash assistance caseload, or changes in the poverty population. From FY1997 through FY2014, the TANF block grant lost 32% of its value due to inflation alone. The TANF allocation "locked in" historical differences among the states that resulted in a wide range of funding levels relative to the number of poor children. Further, TANF potentially lacks a source of sufficient additional funding in case of a future economic downturn. Should Congress seek to address these issues, it would do so in the context of budget rules that apply to TANF as a mandatory program with fixed funding. Current budget rules would require legislation to increase TANF funding to contain corresponding offsets by reducing other mandatory funds and/or increasing revenues.