Economics, Entitlements

What just happened to TANF?

Few have heard of George Sheldon, Acting Assistant Secretary at the Department of Health and Human Services (HHS). The understated memo he issued to states late last week hasn’t garnered much press, either.

Surprisingly little, given that the memo allows states to bypass a cornerstone of the 1996 “welfare-to-work” reform act: the work requirement itself.

Under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), adult Temporary Assistance for Needy Families (TANF) recipients must participate in work activities for a certain number of hours per month to receive the cash benefit. States have requirements as well: to receive the block grant money, they must engage half of all single-parent and 90 percent of two-parent TANF families in work activities.

The basic concept: If you want welfare benefits, you have to work for them. And if you are a state and want TANF grant money to distribute to your most needy residents, you will have to work for that, too.

But Mr. Sheldon and the Obama Administration may have called that basic understanding into question with his memo.

To fully understand what happened, you need to know three sections of the Act:

•    Section 1115 of the Social Security Act lets the Secretary of HHS waive certain TANF requirements for states conducting experimental and pilot programs with TANF funding. The exception clearly exists to foster state-level policy innovation.

•    Section 402 of the Social Security Act contains general and specific guidelines for states receiving TANF grants. These include the fundamental and tangential aims of the Act: serving needy families, increasing economic self-sufficiency, and reducing teen pregnancy rates. Also present is a work requirement:

(iii) Ensure that parents and caretakers receiving assistance under the program engage in work activities in accordance with section 407.

•    Section 407 describes these work requirements in detail and outlines the participation rate requirement for states. It’s not eligible for waiver under section 1115.

Here’s what happened:

Mr. Sheldon announced that the Secretary would consider waiving the work participation requirement in section 402—and stated that because section 407 was related to the section 402 guideline, the Secretary would also consider waiving the work participation rate requirements of section 407.

So what does it actually mean?

On its face, the memo seems to knock the teeth out of the 1996 reform that, at least until recently, has proven remarkably successful in reducing welfare rolls, controlling costs, and transitioning needy families into self-sustaining lives. Between 1994 and 2004, for example, caseloads declined about 60 percent. And between 1993 and 2000, employment among single, never-married mothers bumped up over 20 percentage points. By these measures, the program has enjoyed unparalleled success. Why the change?

Turns out things get murky when you look closer.

Ten years of unprecedented economic growth followed the 1996 reform. That’s not the case anymore. A tougher job market has pushed more families into TANF. And a tough job market has made the unsubsidized employment that traditionally satisfies most TANF work requirements increasingly difficult to find and hold. Furthermore, in an economy where education is central to long-term, stable employment, the lack of flexibility for job training in lieu of actual “work activity” may be problematic.

And because states are finding that satisfying the work participation rate requirements is increasingly difficult, many already bias their numbers in underhanded ways.

Some transfer work-eligible but unlikely-to-work individuals onto federal Social Security Income (SSI) or Social Security Disability Income (SSDI) rolls—both of which have ballooned over the past decade. The state benefit is twofold: these individuals no longer eat up the state’s TANF money, and because they are no longer on TANF rolls, they do not lower the work participation rate. According to Richard Burkhauser, a professor at Cornell and AEI adjunct scholar, this interaction is perhaps the most concerning of TANF’s problems.

Others keep gainfully-employed TANF individuals on the rolls longer than federal guidelines suggest. Through “earned-income disregards,” states increase the levels of income at which individuals remain eligible for benefits, allowing successful people stay on the rolls longer. This boosts the state’s work participation rate.
So effectively, some states are using a regressive distribution system in a program intended help the most vulnerable. Shove the toughest cases onto federal rolls, and transfer some of that savings to the most functioning recipients to boost participation numbers.

So no, TANF is not perfect. And the work participation rates have certainly created headaches and counterproductive workarounds.

But to compromise the cornerstone of a landmark welfare reform bill with a slick bit of interpretive finesse is not the way to solve these problems.

The work requirement was not just a way for the federal government to allocate money to states based on performance. It was an unequivocal social statement: Our country must protect its most vulnerable populations. And that statement had a second part: Work is vital to both American identity and the goal of helping vulnerable individuals climb out of that net.

If Congress wants to undertake another round of serious welfare reform to address the issues that TANF, SSI and SSDI face, let them.

But for HHS to overrule monumental Congressional consensus with a memo is arrogance. And it may have just kicked a bottom rung out of the ladder up.

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