COVID-19: The Potential Role of TANF in Addressing the Economic Effects (IN11241, Version 3, Updated April 1, 2020)

Summary

A Congressional Research Service Insight, IN11241 (Version 3), by Gene Falk, Specialist in Social Policy, updated April 1, 2020, on the potential role of the Temporary Assistance for Needy Families (TANF) block grant in addressing the economic effects of COVID-19. It describes TANF, created by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA, P.L. 104-193), its nonrecurrent short-term benefits of up to four months, and a $2 billion contingency fund that was exhausted in the last recession and now receives $608 million per year. It states that P.L. 116-136, the CARES Act, extends TANF funding through November 30, 2020 without additional funding or changes to work rules, and that HHS guidance says it can relieve states of penalties for failing to meet work participation standards.

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INSIGHTi

COVID-19: The Potential Role of TANF in
Addressing the Economic Effects

Gene Falk
Specialist in Social Policy

Updated April 1, 2020
The Temporary Assistance for Needy Families (TANF) block grant provides grants to the 50 states,
District of Columbia, American Indian tribes, and certain territories with the broad purpose of
ameliorating and addressing root causes of childhood economic disadvantage. Some of the flexibility the
block grant affords to states has been used, and augmented by federal legislation, to address the fallout
from Hurricane Katrina and the deep economic recession of 2007-2009.

Overview of TANF
TANF was created by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996
(PRWORA, P.L. 104-193) and is best known as funding for state programs that provide monthly
assistance to needy families with children. PRWORA placed work requirements on states and time limits
on families that receive this assistance. TANF funds a wide range of benefits and services—including
what are known as “non-recurrent short-term benefits,” which are defined as aid that addresses a specific
episode of need and does not exceed four months. The receipt of a nonrecurrent short-term benefit does
not count toward a family’s time limit, nor other requirements such as those related to work, assigning
child support to the state, and state reporting of detailed characteristics. In crafting a response to
Hurricane Katrina in 2005, Congress enacted special rules to permit states to tap an existing fund to pay
nonrecurrent short-term benefits to families evacuated from their homes because of Hurricane Katrina.
In terms of addressing unemployment related to a recession, TANF can also fund employment services
and subsidized employment. If an individual is in subsidized employment, the requirements of assistance
(e.g., time limits) also do not count.

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IN11241

CRS INSIGHT
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TANF Funding
The basic TANF block grant provided to states was established in PRWORA in 1996, based on spending
in its predecessor programs in the early 1990s. The basic block grant has not been adjusted for inflation or
changes in other circumstances (e.g., population growths and shifts among the states). It represents the
bulk of funding available to the states under TANF. Nationally, the assistance caseload is about 25% of
what it was in the 1990s, and states have shifted TANF funds to a wide range of activities.
PRWORA also contained a $2 billion contingency fund for economic downturns. However, that fund was
exhausted in the last recession; in recent years, Congress has provided appropriations of $608 million per
year to it. The fund is spent each year regardless of economic conditions. It is expected to be exhausted in
April of this year. Thus, there is little in the way of additional federal funding for states to meet
unexpected costs related to COVID-19.
States also have the ability to “reserve” (save) TANF funding. Some states have relatively large reserves,
others have no reserves.

Potential Legislation to Address the Effects of the COVID-19 Outbreak
The flexibility of states’ use of TANF make it a possible source of funding for them to address the
unknown and evolving needs of families resulting from the COVID-19 pandemic. However, states may
not have funds to meet unexpected costs. Moreover, the fund that was tapped to provide states with help
to address Hurricane Katrina is in the process of being exhausted for the current fiscal year.
Congress responded to the economic downturn of 2007-2009 by creating a separate emergency fund.
Such a fund to provide for increased short-term benefits would be an option to address the immediate
economic needs of families resulting from the COVID-19 pandemic. Further, Congress might consider
addressing not only these emergency needs, but also the lack of a counter-cyclical funding mechanism for
states under TANF. That is, if the economy does go into recession, there is no automatic TANF funding to
address it. The emergency fund created for the 2007-2009 recession might be considered a model for such
a fund.
Additionally, Congress might consider addressing TANF work participation standards. These standards
are rules for states, not individuals, and states are penalized if they do not have a sufficient number of
families participating for a minimum number of hours per week. Thus, they do help guide how states set
work requirements for individual recipients.
TANF regulations require that all hours that an individual is in paid employment—including paid sick
leave—count toward meeting the hourly requirement. However, the regulations limit to 16 hours per
month excused absences from non-paid activities because of illness. States may excuse hours for
individual recipients, providing “good cause” exemptions for those who are sick or caring for family
members. However, this could disadvantage states in meeting their work participation standards. The
U.S. Secretary of Health and Human Services may, but is not required to, provide a “reasonable cause”
waiver of the penalty imposed on a state for failure to meet the TANF work requirements.
P.L. 116-136, the Coronavirus Aid, Relief, and Economic Security Act (or CARES Act) extends TANF
funding through November 30, 2020. It does not provide additional TANF funding to states or address
TANF work rules for recipients of assistance. The Department of Health and Human Services (HHS) has
issued guidance to states to help them respond to the COVID-19 pandemic, noting that while it cannot
waive TANF work rules, it can relieve states of penalties for states’ failure to meet these standards and
“will exercise this authority to the maximum extent possible.”
Congressional Research Service 3

IN11241 · VERSION 3 · UPDATED
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