House TANF Bill Would Expand Work Requirements, Add Performance Outcomes

By Kermit Kaleba, May 10, 2018

On Tuesday, the House Ways and Means Committee released a discussion draft of legislation to reauthorize the Temporary Assistance for Needy Families (TANF) program. The draft bill takes some important steps towards modernizing the nation’s primary antipoverty cash assistance program by establishing new employment and earnings outcomes to evaluate state performance in transitioning TANF recipients into work opportunities, but undermines this effort by proposing to significantly expand mandatory work requirements for qualifying individuals.

The “Joining Opportunity with Benefits and Services for Success Act” would make the following key changes:

  • Replacing the current “work participation rate” with a broader work requirement for certain TANF recipients. Under current law, states are required to meet two annual performance benchmarks, known as work participation rates. States must ensure that 1) 50 percent of TANF-receiving families with work-eligible adults in the state are engaged in a minimum number of hours of work or related activities – usually an average of 30 hours per week, although there are some exceptions – and that 2) 90 percent of families with two work-eligible adults are engaged in qualifying work activities. States are given significant flexibility in terms of setting individual work requirements, though they must sanction individuals who do not comply with state requirements. States that fail to meet their work participation can be subject to reductions in their states grants, starting at five percent of their total federal allocation and increasing for each successive year of non-compliance. In Fiscal Year (FY) 2016, roughly 1.1 million individuals were deemed to be work eligible, and nearly 600,000 individuals engaged in some form of qualifying work activity – mostly through unsubsidized employment.

The work participation rates have long been subject to criticism from both the right and the left, with the former camp often arguing that the work participation rates are too lenient – because they allow a large percentage of work-eligible TANF individuals to not be engaged in work or related activities – and progressives arguing that the work participation rates encourage states to adopt a “work-first” approach that emphasizes rapid labor market attachment over more sustainable career pathways. The law does discourage participation in education and training, limiting the percentage of individuals engaged in training that can count towards the work participation rates and capping participation in certain training activities at twelve months. In FY 2016, only about 4 percent of all work-eligible TANF recipients engaged in vocational education, job skills training, or on the job training.

The discussion draft would eliminate the work participation rates, but in doing so would expand the work requirements so that states had to ensure all work-eligible adults are engaged in qualifying work or related activities, rather than a percentage of those individuals, and sanction individuals who fail to comply with those work requirements with a reduction or termination of benefits. The law would eliminate state penalties for failure to meet participation rates.

This approach would likely have significant negative impacts both for states and TANF recipients. For states, it would require substantially increasing administrative capacity to ensure compliance with the new requirements, while providing no new resources at the federal level to address increased costs. It would reduce state flexibility to determine whether TANF recipients are able to successfully engage in work or training activities, and require states to provide hundreds of thousands of new employment or training opportunities for affected individuals. For TANF recipients themselves, the increased work requirement provisions would almost certainly lead to many individuals losing access to cash assistance for non-compliance – particularly in areas with fewer job opportunities and for individuals with barriers to employment – and would place significant pressure on qualifying participants to accept lower-wage jobs in order to maintain benefit access.

National Skills Coalition strongly opposes the expansion of work requirements in federal public assistance programs, as they have consistently proven to be ineffective at moving individuals out of poverty and into family-supporting jobs, and generally lead to reductions in access to needed benefits. They also create significant administrative burdens on states and other stakeholders who are responsible for ensuring compliance with hourly requirements. We would urge the committee to reject this expansion of work requirements, though we support the elimination of the cumbersome work participation rates.

On the plus side, it appears that the discussion draft would remove some of the training restrictions – including the 30 percent cap on vocational education and the twelve month limit on participation – which would be consistent with National Skills Coalition’s reauthorization recommendations, and should be retained in any final bill.

  • Adopting new state outcomes measures. In lieu of the work participation rates, states would be required to negotiate annual performance metrics that are (somewhat) consistent with the core performance measures under the Workforce Innovation and Opportunity Act (WIOA). Starting in FY 2020, states would be required to establish and meet targets for:
    • The percentage of work-eligible individuals who are in unsubsidized employment during the second quarter after exiting TANF;
    • The percentage of work-eligible individuals who are in unsubsidized employment during the second and fourth quarters after exiting TANF;
    • The median earnings of work-eligible individuals who are in unsubsidized employment during the second quarter after exiting TANF; and
    • The percentage of work-eligible individuals under the age of 24 who are enrolled in a secondary school or equivalent program, who receive a high school diploma or equivalency during participation in TANF or within one year after exit.

The Department of Health and Human Services would be required to utilize a statistical adjustment model to adjust state proposed levels of performance based on economic conditions and characteristics of the service population – mirroring similar provisions under WIOA – and be required to publish online performance reports for each state, including a grade of state performance on the performance metrics and any penalties or corrective action taken by the agency for failure to achieve requisite performance levels. The bill does not establish any specific penalties for non-performance but authorizes the Secretary of HHS to establish regulations governing the performance negotiation process.

In general, the shift to an outcomes-based model for TANF would be consistent with NSC’s reauthorization recommendations, and we applaud the committee for taking this important step. However, there are some concerns about the performance measures outlined and the lack of clear state accountability. The bill does not include a measure related to attainment of recognized postsecondary credentials, a key innovation under WIOA that was intended to ensure that states are incentivized to invest in high-quality training opportunities for low-income residents. While the inclusion of secondary attainment metrics is critical – fewer than ten percent of adult TANF recipients have any educational attainment beyond the high school level – it is vital to support and encourage attainment of postsecondary credentials in an economy where 80 percent of all jobs require some form of postsecondary education.

NSC would strongly encourage the committee to amend the performance criteria to align with the WIOA requirements, and we would further encourage the committee to include WIOA’s metrics relating to measurable skills gains while participating in education and training. NSC also encourages the committee to provide greater clarity on expectations for states that fail to meet one or more performance requirements, and consider adopting measures to reward states that exceed performance measures.

  • Changing the current funding model. TANF currently has two primary funding streams: a state block grant funded at roughly $16.5 billion per year, and a contingency fund of around $600 million. The draft bill would maintain the current funding levels for the basic state block grant, but would significantly alter the distribution of the grant by dividing the funding into two new streams. States would now receive an annual “mandatory” amount equal to 75 percent of their FY 2018 state grant allocation, which would be conditioned on states continuing to “maintenance of effort” spending requirements (although state MOE requirements would be reduced from current levels). States would also be eligible for “matching” funds equal to 25 percent of their FY 2018 allocations, which would provide a dollar for dollar match on state expenditures for certain “core” activities, including cash assistance, case management, work wage subsidies, and supportive services. Unused matching funds would be redistributed to other states.

The proposed changes to the block grant are troubling on several levels. Topline funding for the state block grant has not been increased since the original TANF reform bill in 1996, and with inflation the purchasing power of the grant has declined by more than 30 percent over that time. Failing to increase funding for the basic grant – and reducing state MOE requirements – means fewer resources overall are available to support critical activities for TANF recipients. The bill would also prohibit states from using TANF dollars directly to provide child care or child welfare, instead requiring states to transfer funds into other programs (such as the Child Care and Development Fund) before utilizing those dollars for child care costs.

The new “matching” grants would likely result in fewer services for TANF recipients, as cash-strapped states are forced to choose between expending scarce state dollars on cash assistance, training and other key benefits; or foregoing federal resources. The proposed funding formula for the new matching grants is also of concern; the Congressional Research Service estimates that the formula would result in significant redistribution of TANF funds, with some states gaining large relative increases in federal funds – Texas, Arkansas, Nevada, and Alabama would all see more than 50 percent increases – while other states would lose funding, including California ($419 million per year) and New York ($374 million per year).

There is some merit in ensuring that states are utilizing their TANF dollars to pay for “core” services like cash assistance and training. In FY 2016, states spent less than half of their combined federal and state MOE funds on cash assistance, child care, and work-related activities, and in fact the Obama administration had proposed requiring states to spend at least 55 percent of their combined funds on these activities in his FY 2017 budget request. However, the matching requirements are likely to create significant challenges for states, even with the reduced MOE requirements. National Skills Coalition would urge the committee to reject the proposed division of the basic state block grant, and increase overall federal funding to restore the grants to their historical inflation-adjusted levels.

The Ways and Means Committee is likely to consider the bill later this month, but prospects for moving it to the House floor are unclear. House Republicans are still gauging support for a Farm Bill reauthorization package approved by the House Agriculture Committee last month, which has drawn strong opposition from Democrats for its proposed expansion of work requirements for SNAP recipients; it seems likely that the Farm Bill would need to be moved ahead of any TANF reauthorization effort. It is unlikely that the discussion draft would be able to attract 60 votes in the Senate, even if it were to pass the House this year. National Skills Coalition will continue to monitor developments with this process and provide updates to the field as new information becomes available.