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This brief, part of the Urban Institute's "Recession and Recover" series, examines how the TANF program (formerly AFDC) responds during a recession and how that response may differ in the current recession from its response in the past.
Changes to welfare have significantly curtailed the role
that the Temporary Assistance for Needy Families
(TANF) program can play in cushioning the current
recession. Historically, welfare caseloads rose during
recessions, lagging behind the increases in unemployment
(Council of Economic Advisers 1997). Unemployed
parents who were either not eligible for
unemployment insurance or who had exhausted these
benefits often turned to welfare for cash assistance. But
reforms in 1996 eliminated the individual entitlement to
welfare and, more recently, stricter work-participation
requirements were set. Most likely, Congress will need
to consider increasing program funds and relaxing the
work-participation requirements if this recession turns
out to be long and deep, as many predict.
TANF, like its predecessor, the Aid to Families with
Dependent Children (AFDC) program, offers the only
source of cash assistance to families
with children and very low incomes
that is not contingent on prior work
history. Before TANF took hold, all eligible
families were “entitled” to assistance.
Now, the federal government
provides states an annual block grant
fixed at about $17 billion to run their
TANF programs, and states must
maintain 80 percent of their prior
spending on programs that TANF
replaced.1 This new financing arrangement
also gave states enormous latitude
in program design.
TANF also initiated five-year lifetime
time limits on benefits paid through the
federal block grant, though states can
exempt up to 20 percent of the caseload
from this limit. States can pay benefits
beyond the time limit using their own
money. Finally, on pain of a financial
penalty, federal rules also require states
to show that at least half of the caseload
participates in work-related activities.
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