TANF Cash Benefits as of January 1, 2004

Publication Date: September 2005

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Social conditions

Type:

Abstract:

The Temporary Assistance for Needy Families (TANF) block grant is a major source of cash assistance -- commonly referred to as "welfare" -- for low income families with children. TANF also provides funds to states for a wide range of benefits and services for both families receiving cash assistance and other families. Though the federal government provides TANF funds to states, the states themselves determine cash benefit amounts. As of January 1, 2004, maximum benefit amounts vary greatly by state: for a family of three, benefits vary from $923 per month in Alaska to $170 per month in Mississippi.

TANF was created by the 1996 welfare reform law, which ended the Aid to Families with Dependent Children (AFDC) program. States also determined AFDC benefit amounts, and most have retained their pre-1996 benefit structure under TANF. During the debate on welfare reform in the mid-1990s, some feared that fixed funding would lead states to cut benefits in a "race-to-the-bottom." The race to the bottom did not happen. In 24 jurisdictions, there was no change in maximum benefits from July 1996 to January 2004. Twenty-one jurisdictions increased their benefits; eight of these had benefit increases sufficient to offset inflation over the period. Six jurisdictions cut benefits.

Maximum benefits are generally paid to families without a wage earner. However, almost all jurisdictions have increased rewards for recipients who work, effectively raising the amount of earnings a recipient may keep before she becomes ineligible for cash assistance. The percent of adult recipients reported as "employed" climbed from 11% in FY1996 to 26% in FY2002. State TANF programs generally disregard a sizable share of earnings for at least a period of time (some disregard 100% of earnings for the first few months on a job).

The rules for treating families with earnings vary greatly from state to state, and thus the level of earnings at which a family becomes ineligible for TANF varies greatly by state. A recipient in a family of three (single mother, two children) who obtains a job and works 20 hours a week at a minimum wage job remains eligible for TANF in most states, though in some she becomes ineligible for assistance in a few months. However, in most states her earnings plus the Earned Income Tax Credit (EITC) and food stamps would be insufficient to raise her total income above the poverty line. A recipient in a family of three who obtains a job and works 40 hours per week at the minimum wage remains eligible for TANF in the first month on the job in 29 states. However, after a year on the job, she would be eligible for TANF cash in only 17 states. In all cases, with or without TANF, the family with yearround, 40 hour per week, minimum wage earnings would have total income (counting federally determined food stamps and EITC) slightly about the poverty threshold.

This report will be updated when information about January 2005 benefit levels becomes available.