	Introduction

President Obama's FY2015 budget proposes to add to the Temporary Assistance for Needy Families (TANF) block grant a $602 million per year "Pathways to Jobs" fund. The fund would exclusively finance subsidized employment programs. The Administration's "Pathways to Jobs" proposal comes as interest in subsidized employment for the economically disadvantaged has been rekindled by a brief experience of TANF-funded jobs during the recent recession. Background

Subsidized employment programs use government funds to pay all or part of the wages of those working in jobs. The job may be in either the public or the private sector. CETA's public service employment program ended in 1981. Since the enactment of the 1996 welfare reform law, which established TANF, states have had the authority to use TANF funds for subsidizing the employment for certain populations. The TANF Emergency Contingency Fund and Subsidized Employment

The American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) included a provision to create a special temporary "Emergency Contingency Fund" (ECF) within TANF. The ECF was created, in part, because of projections that the "regular" TANF contingency fund created in the 1996 welfare reform law would be exhausted. Of the $5 billion in extra funds provided to states and tribes under the ECF, $1.3 billion financed extra spending for subsidized employment. About half of these slots were for needy parents; the other half were used to expand youth employment programs. Many of those served by ECF subsidized jobs were not on the TANF cash assistance rolls. ECF-subsidized employment benefitted a broader population of disadvantaged adults and youth. Subsidized employment programs can be intended to serve a number of policy purposes, including (1) creating jobs, (2) providing income support to those in subsidized jobs, and (3) increasing the long-term employability of participants. There is some research to draw upon in assessing whether the TANF subsidized employment initiative might meet these goals. Job Creation

A policy goal of subsidized employment, particularly during economic downturns, is creating jobs that would otherwise not exist. Thus, the past research indicates that if the goal of a subsidized employment program is to provide income support through work, subsidized employment can be an effective strategy. Ending the Current Law Contingency Fund

The President's FY2015 budget proposal would offset the cost of the new "Pathways to Jobs" fund by ending the current law contingency fund. As shown in the figure, the contingency fund often has not behaved as a countercyclical source of extra TANF funds. The fund was little used before FY2008.
President Obama's FY2015 budget proposal would establish within the Temporary Assistance for Needy Families (TANF) block grant a "Pathways to Jobs" fund. The fund would help states pay for subsidized employment programs targeted toward needy parents, guardians, and youth. Subsidized employment programs use government funds to pay all or part of the wages, benefits, and other costs of employing a participant. Under the President's proposal, the subsidized job could be in either the public or the private sector. Funding for "Pathways to Jobs" would be $602 million per year beginning in FY2015.
The Administration's "Pathways to Jobs" proposal comes as interest in subsidized employment as a policy for the economically disadvantaged was rekindled by a brief experience of TANF-funded jobs during the recent recession. The American Recovery and Reinvestment Act of 2009 (P.L. 111-5) created a temporary "Emergency Contingency Fund" (ECF) that provided $5 billion for FY2009 and FY2010. The ECF was created, in part, because of projections that the TANF contingency fund created in the 1996 welfare reform law would be exhausted.
The ECF was different from other TANF grants to states in that it financed only certain TANF expenditures: basic assistance, short-term aid, and subsidized employment. Of the $5 billion in ECF funding, $1.3 billion financed increased subsidized employment expenditures. An estimated 280,000 persons benefitted from ECF-funded subsidized jobs. About half of these persons were adult parents; the other half were youth. ECF subsidized employment differed from earlier subsidized jobs initiatives by placing some adult parents in private sector jobs, in addition to public service employment. ECF-funded subsidized employment served a population broader than those on the TANF cash assistance rolls.
Subsidized employment programs can have a number of policy goals: job creation, particularly during a recession; providing income support through work; and improving the long-term employability of participants. There is little recent experience to draw on in assessing the Administration's proposal. However, past research has indicated that subsidized employment programs can meet the goal of providing income support through work, as evaluations have indicated that such programs employ those who would otherwise not have a job. The research is less conclusive on the other policy goals.
The costs of the Administration's proposed TANF-subsidized employment initiative would be offset by ending the current law TANF contingency fund. The TANF contingency fund was created in the 1996 welfare reform law and provided $2 billion for extra grants to states during recessions. However, the fund often has not behaved as a countercyclical source of extra TANF funds. In assessing the Administration's proposal, policy makers might also consider whether savings from ending the current contingency fund should go to subsidized employment programs or other uses—for example, creating a modified contingency fund to provide a better countercyclical source of extra TANF funds.