A key feature of the 1996 overhaul of the nation’s cash assistance system was turning funding over to the states and giving them broad flexibility on using the funds through the creation of the Temporary Assistance for Needy Families (TANF) block grant.  Prior to the TANF block grant, families in need received cash assistance through the Aid to Families with Dependent Children (AFDC) program, under which federal funds matched half or more of every dollar of cash assistance that a state provided to a needy family.  A key argument for block granting was that states needed much greater flexibility over the use of the federal funds than AFDC’s funding structure provided.  Under a block grant, proponents argued, states could shift the funds freed up when families left welfare for work to child care or other work supports, where need would increase.  States also could invest more in work programs to reflect the increased emphasis on welfare as temporary and work-focused.
That is not what happened.  In TANF’s early years, when the economy was strong and cash assistance caseloads were shrinking, states used the flexibility of the block grant to take some of the funds that had gone as benefits to families and redirect them to child care and welfare-to-work programs to further welfare reform efforts.  But over time, states redirected a substantial portion of their state and federal TANF funds to other purposes, to fill state budget holes, and in some cases to substitute for existing state spending.  Even when need increased during the Great Recession, states were often unable to bring the funds back to core welfare reform services and instead made cuts in basic assistance, child care, and work programs. A CLOSER EXAMINATION OF STATES' USE OF FUNDS UNDER TANF PROVIDES A CAUTIONARY TALE.
Thus, the cash assistance safety net for the nation’s poorest families with children has weakened significantly under the TANF block grant, with potentially devastating long-term consequences for children growing up in families with little or no cash income to meet basic needs.  And, despite the rhetoric, few of the diverted resources have gone to work preparation or employment for the families.  In their recent book, $2 a Day, authors Kathryn Edin and Luke Shaefer present a disheartening account of the human impact of states’ failure to provide a safety net for families that lose a job or are unable to find work.  Instead of the success that some claim welfare reform to be, a close examination of states’ use of funds under TANF provides a cautionary tale about the dangers of block-granting core safety-net programs and providing extensive flexibility to states on using the funds.
Currently, states spend only slightly more than one-quarter of their combined federal TANF funds and the state funds they must spend to meet TANF’s “maintenance of effort” (MOE) requirement on basic assistance to meet the essential needs of families with children, and just another quarter on child care for low-income families and on activities to connect TANF families to work.  They spend the rest of the funding on other types of services, including programs not aimed at improving employment opportunities for poor families (see Figure 1).  TANF does not require states to report on whom they serve with the federal or state funds they shift from cash assistance to other uses, let alone what outcomes they achieved.  Thus, there is no evidence that giving states this broad flexibility has improved outcomes for poor families with children. Â
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