Using Unspent TANF Funds to Further Self-Sufficiency Among Welfare Recipients 

By Ivory Copeland 

Background 

The issue of unspent Temporary Assistance for Needy Families (TANF) funds has become increasingly important with the progression of welfare reform. Although some support reserving these funds in case of an economic downturn, others urge their being invested in services for hard-to-serve welfare recipients and a broader low-income population. Examining the use of unspent state TANF funds now is critical because of approaching time limits on the receipt of TANF and the likely focus on TANF funding levels in the upcoming reauthorization of welfare reform legislation in 2002. If unspent TANF funds continue to accumulate, this
may lead Congress to reexamine appropriation levels for fiscal 2002 and beyond. 

Under federal regulations, states may spend federal TANF funds on “non-assistance,” such as work supports for low-income families, without triggering federal time limits or affecting work participation rates.  Consequently, there are opportunities for states to increase the focus on self-sufficiency and to develop programs and initiatives that will truly improve the lives of families on welfare. This Issue Note presents some of the emerging issues related to the use of unspent TANF funds to develop integrated and coordinated support service systems to assist welfare recipients in moving toward self-sufficiency. It also describes how some states have already begun to develop innovative programs and supports that take advantage of the regulatory flexibility. 

Policy and Program Issues 

Why do some states have unspent TANF funds? States may have unspent TANF funds for several reasons. Some states have deliberately created reserves in case of an economic downturn. In other states, program savings may have been greater than expected. Some states have delayed spending because of initial uncertainty about allowable costs. In still other states, the enactment and implementation of new programs has required significant lead time. Understanding why states have remaining unspent TANF funds is critical to determining whether these funds will be available only on a one-time basis or whether they will
be available to fund ongoing programs. 

How do states determine whether there are unspent and unobligated TANF funds? Federal reports show TANF funds in three categories: spent, unliquidated obligations, and unspent and unobligated.  Unliquidated obligations include funds that have been committed but not yet paid because services have not yet been rendered. They also include payments for programs that are funded in phases; these amounts may be obligated but spent over time. Unobligated funds are funds that have not yet been committed to specific programs or activities. At the present time, reserve and /or rainy-day funds may be reported as unobligated funds. Although nearly all sates have experienced dramatic caseload declines and have reduced their expenditures for cash assistance, no all states have unspent TANF funds. Therefore, the amount of unspent TANF funds remaining varies by state. States with large reported amounts of unobligated TANF funds through the end of fiscal 1999 include New York, with $643.1 million; Michigan, with $146.1 million; Washington, with $130.2 million; Georgia, with $113.0 million; and West Virginia, with $89.2 million. 

Several states reported no unspent or unobligated federal TANF funds as of the end of fiscal 1999, including Arizona, Arkansas, California, Colorado, Delaware, Florida, Illinois, Kansas, Kentucky, Nevada, New Jersey, Ohio, and Texas. In general, the amount of state unobligated funds is declining. At the end of fiscal 1999, about $1.79 billion in unobligated balances remained, compared with about $2.7 billion in unobligated balances at the end of fiscal 1998. The cumulative unobligated balances for fiscal years 1997, 1998, and 1999 at the end of fiscal 1999 was $2.85 billion, or about 6 percent of the $46.8 billion in federal funds
awarded since the implementation of TANF. The Center on Budget and Policy Priorities has released more recent data on unspent TANF funds based on preliminary state expenditure data for the current fiscal period. For more information, see Unspent TANF Funds in the Middle of Fiscal Federal Year 2000, at http://www.cbpp.org/8-2-00wel.htm. 

Although states may report unobligated funds, funds may not be available for new ongoing programs. In some cases, these funds reflect planned reserves. In other cases, already authorized programs may fully use future-year allocations, so current balances are available only for one-time expenditures. In addition, the amount of unspent funds reported as unobligated may change as estimated expenditures are updated or as state appropriations are clarified. Clarification of federal reporting requirements may also affect the level of funds that appear to be unobligated. Beginning with fiscal 2000, states must report unspent reserve or rainy-day funds as unobligated funds rather than as unliquidated obligations. Additional clarification regarding reporting unspent funds is expected. Finally, the funds resulting from savings associated with caseload reductions may increase or decrease depending on the economy. As a result,
projections regarding the amounts available for new programming will need to be reviewed in light of all these factors. 

How can unspent TANF funds be used to facilitate the welfare-to-work transition and to help working poor families? States have the opportunity and flexibility to use unspent TANF funds to develop innovative support systems. Such systems can help these
families overcome barriers to long-term self-sufficiency. Many states are already using TANF funds to help families leaving welfare and to address the needs of working poor families. Potential areas for increased investment include the following. 

· Hard-to-Serve Welfare Recipients. Increasingly, a greater number of those remaining on the welfare rolls will be adults who face multiple barriers to self-sufficiency, such as a substance abuse problem, a mental health condition, or a lack of skills and education. States can use unobligated funds to develop comprehensive strategies to address the needs of this population. For more information on hard-to-serve populations and welfare-to-work issues, see WIN’s Issue Note, The Hard to Place: Understanding the Population and Strategies to Serve Them, at http://www.welfareinfo.org/hardto.htm, and Addressing Substance Abuse and Mental Health Barriers to Employment, at http://www.welfareinfo.org/substanceabuse.htm. 

· Employment Retention and Career Advancement. Although recipients are increasingly leaving the rolls for employment, many of the jobs they are finding are low-paying and are insufficient to bring their families out of poverty. States can develop strategies to help ensure recipients leave welfare for jobs that pay livable wages and offer opportunities for career advancement. States can also develop or expand post employment services to assist with the transition from welfare to work, such as mentoring, work expense allowances, and increased access to training. For more information on career retention and advancement strategies, see WIN’s Issue Note, Promoting Employment Retention, at http://www.welfareinfo.org/issuenotepromotingemploymentretention.htm, and Career Advancement for Welfare Recipients and Low-Wage Workers, at http://www.welfareinfo.org/issuenotecareeradvancement2.htm. 

· Earned Income Tax Credits. A state earned income tax credit (EITC) can provide support for families that are making the transition from welfare to work. A refundable state EITC is not considered “assistance” for purposes of TANF, so federal TANF time limits and other requirements do not apply. For more information on welfare and state tax credit options, see WIN’s Issue Note, The Earned Income Tax Credit, at http://www.welfareinfo.org/friedmanapril.htm. 

· Food Stamps. Most families leaving the welfare rolls still earn incomes well below the federal poverty level and continue to need government aid, such as food stamps, to cover basic expenses. States can take additional steps to ensure that families eligible for food stamps are made aware of this assistance. For more information on food stamp issues, see WIN’s Issue Note, Food Stamp Education and Outreach: Working to Provide Nutrition Benefits to Eligible Households, at http://www.welfareinfo.org/foodstampout.htm. 

· Health Care and Medicaid. Access to health care is a key concern for recipients leaving welfare for employment. People who are in better health generally have better employment outcomes. States can use TANF funds to improve access to health care so families in need have better employment outcomes and a greater chance to become self-sufficient. For more information on health care issues and state options, see WIN’s Issue Note, State Options to Increase Health Insurance for the Working Poor, at http://www.welfareinfo.org/janjune.htm. 

· Immigrants. Immigrants are often ineligible for federally funded TANF services. Finding ways to address increasing immigrant populations will present state policymakers with some formidable challenges. For more information, see WIN’s Issue Note, Immigration and Welfare Reform, at http://www.welfareinfo.org/immigrantissue.htm. 

· Transportation. Transportation problems can be significant barriers to securing and retaining employment. Often there is a spatial mismatch; jobs are located in certain areas, while the people who need these jobs are concentrated in other areas. Consequently, employment opportunities are often out of reach for many welfare leavers and working poor families. To meet the transportation needs of the growing number of recipients leaving the welfare rolls, states can use TANF funds to develop new approaches. For more information, see WIN’s Resource Note, Coordinating Transportation Services for Low-Income Workers, at http://www.welfareinfo.org/transportationresourceoct.htm. 

· Child Care. State investments in childcare have increased dramatically since the advent of welfare reform. The challenge facing states is how to best use remaining funds to improve child care systems so they are more accessible and reliable and do not continue to be an obstacle to securing and retaining employment. States can use TANF funds to develop off-hour childcare and other approaches to increase the stability of child care and promote job retention. For more information on improving childcare for low-income populations, see WIN’s Issue Note, Child Care Subsidies: Strategies to Provide Outreach to Eligible Families, at http://www.welfareinfo.org/childcaresubsidiesissuenote.htm. 

· Housing. The lack of affordable housing because of increasing housing costs is a problem for many welfare recipients. 

States have several options to provide housing assistance to these families, including emergency housing assistance, housing vouchers, and subsidies. For more information, see WIN’s Issue Note, Housing and Welfare Reform: Strategic Intersections in Place-Based Strategies, at http://www.welfareinfo.org/housingresource.htm. 

Postsecondary Education. The final TANF regulations allow states to provide income support to
low-income parents attending postsecondary education programs. States can enhance existing TANF programs so they encourage work but also provide access to postsecondary education. For more information, see WIN’s Issue Note, Postsecondary Education under Welfare Reform, at
http://www.welfareinfo.org/vocational%20ed.htm. 

Collaboration. Many state human service agencies are developing and implementing new strategies to coordinate or integrate services and systems. In some instances, welfare offices are working with other state agencies to expand access to services for families in need. For more information, see WIN’s Issue Note, Collaboration between the Welfare and Workforce Development Systems, at http://www.welfareinfo.org/workforcecollab.htm 

How might unspent TANF funds and surpluses affect federal appropriations for fiscal 2002 and
future authorization levels for TANF? During the budget discussions for fiscal 2001, there were
proposals to take back unspent TANF funds and to reduce the level of TANF funding to states. If unspent TANF funds continue to accumulate, this may lead Congress to rescind or reduce funding levels for fiscal 2002 and/or to reduce authorizations for federal funding after fiscal 2002. In addition, Congress may look at how effective it believes state spending strategies have been, considering both the levels and types of authorized expenditures as it considers reauthorization amounts. 

If Congress decides to reduce TANF funding, it may use these savings to fund other programs for low-income families, such as childcare, expanded access to health care, or housing subsidies. Congress may use these reductions to fund tax reductions or programs that do not target low-income families.  Increases in other low-income programs may be desirable. However, increases made at the expense of reduced TANF funding could mean less flexibility for states in designing programs and setting priorities and more difficulty for states in adjusting to economic downturns with existing appropriations. If total funding for low-income programs declines, it will be almost impossible to develop programs that will help the working poor stabilize employment and increase skills and earnings. 

A reduction in funding will also force Congress to determine how the cuts are to be allocated. This issue may be particularly difficult, because some will argue it is unfair to penalize states that have spent their full allocations and others will assert that many of the states with unobligated funds have some of the greatest needs. 

Research Findings 

There is a large body of research on the importance of work supports for people who are making the transition from welfare to work and those who have left welfare but continue to need such supports. Much of this research focuses on childcare, transportation, and housing problems, as well as the lack of access to postsecondary education and health care, and how these factors impact the lives of these families. The Administration for Children and Families of the U.S. Department of Health and Human Services (HHS) has funded various evaluations of state programs designed to promote employment. For more information, visit http://www.acf.dhhs.gov/programs/opre/rd&e.htm. 

HHS’ Office of the Assistant Secretary of Planning and Evaluation also is looking at the impact of state welfare-to-work programs and policies. Its studies include evaluations of the Minnesota Family Investment Program (MFIP) and the Los Angeles Greater Avenues for Independence (GAIN) program. These and other state welfare-to-work programs studied generally lead to increases in employment and improved outcomes for the program participants. Yet these evaluations also typically suggest that newly employed recipients continue to need supports. For more information, visit http://aspe.hhs.gov/hsp/hspwelfare.htm. 

The Research Forum on Children, Families and the New Federalism has a database that includes descriptions of both reviewed and unreviewed research projects as well as summaries of findings. This database is searchable, so users can look for information about specific program interventions or target populations. For more information, visit http://www.researchforum.org/. 

Research on welfare leavers also suggests the importance of support systems for those leaving the rolls. These studies indicate that, on average, leavers have positive outcomes. Yet a recent study from Welfare, Children and Families: A Three City Study project at Johns Hopkins University suggests that long-term recipients, recipients in poorer health or with less education, and sanctioned recipients have lower post-welfare income and are at greater risk of returning to TANF. These recipients also generally have lower employment rates. The differences in outcomes for different former welfare recipients suggests the need for support systems for those still on the rolls, especially as time limits approach. For more information on leavers’ outcomes, see The Diversity of Welfare Leavers, at http://www.jhu.edu/~welfare. 

Innovative Practices 

Many states are using TANF funds to develop innovative programs and underwrite collaborative and integrated systems of support services for families in need. More recent examples of state programs and initiatives follow. 

The New York State Office of Children and Family Services (OCFS) recently announced the availability of additional funding for the Healthy Families New York (HF) home visiting program. The voluntary home visitation program for expectant and new parents seeks to promote positive growth and development to improve families’ health and social outcomes. Started in 1995, HF is a collaborative initiative of OCFS and the New York State Department of Health (DOH). The current request for proposals is seeking to expand the program to launch new programs in high-need areas, enhance existing programs, and start a pilot project that combines the HF model and another DOH program model. Most of the new funds for the program are TANF funds, so the families served must meet TANF requirements. Contact: Joy Griffith,
518/474-3166 or AX7800@dfa.state.ny.us; or Lisa Gordon, 518/474-6512 or AX7540@dfa.state.ny.us. 

Under Washington’s WorkFirst program, welfare recipients are allowed to enroll in Pre-Employment Training (PET), an intensive 12-week preparatory course designed to provide instruction in “soft skills,” rather than required to accept the first job offered to them. The state has reinvested about $15 million annually in the community college system for initiatives such as pre-employment training, student financial aid, and onsite case management. The governor recently announced a new type of pre-employment training project; $500,000 in WorkFirst savings will be reinvested into projects designed to move low-income workers into information-technology jobs. These pre-employment training projects will offer up to 12 months of training and instruction so participants are qualified to enter the computer-networking field. The pilot project will be implemented at Edmonds Community College in Lynnwood. The welfare offices and the community college will screen applicants for the program. In addition, the community college will provide case management services, childcare and job search assistance, and post-employment services. It will also collaborate with businesses to provide internships and employment. Contact: Sandy Riopelle,425/640-1361. 

In New Jersey, Burlington County and New Jersey Transit officials have created a new bus service for WorkFirst New Jersey (WFNJ) participants. WFNJ participants pay a fare of $1.00, and the BurLink buses will take them to work or job training sites, education institutions, medical and child care service providers, and other locations. This initiative represents a partnership among transit authorities, state and county authorities, and the private sector. Contact: Michael Klufas, BurLink, 973/491-7078. 

Also in New Jersey, the governor signed legislation in August 2000 to create the New Jersey Earned Income Tax Credit (NJEITC). NJEITC is targeted to families with incomes of $20,000 or less that also receive the federal EITC. New Jersey residents can apply for the new tax credit when they file their state income tax returns for the 2000 tax year. It is expected that the program will be fully implemented in 2003. Contact: Office of the Governor, 609/777-2600. 

In California, the San Mateo County Housing Opportunities Program (HOP) is a component of the
Self-Sufficiency Program. HOP provides rental subsidies in the form of housing scholarships to families. The one-year program pays 60 percent of the total rent for the first six months and 30 percent for the remaining six months. To be eligible for HOP, families must be receiving, eligible for, or have recently left TANF; must be enrolled in an education or job training program and have completed 75 percent of their job skills education; must be employed; or must have a well-constructed plan of education and career development that will enable them to achieve self-reliance within the program timeframe and be assessed as highly motivated. Families in the program also are connected with mentors and receive case management services and life-skills training. The Human Investment Program for Housing administers HOP, in conjunction with the county’s human services agency. Contact: Edilyn Dumapias, Self-Sufficiency Program
Director, 650/348-6660. 

Resource Contacts 

Center on Budget and Policy Priorities, http://www.cbpp.org/, 202/408-1080. 

Center for Community Change, http://www.communitychange.org/, 202/342-0567. 

Center for Law and Social Policy, http://www.clasp.org/, 202/328-5140. 

LINC Project, http://www.lincproject.org/, 212/633-6967. 

National Conference of State Legislatures, http://www.ncsl.org/, 202/624-5400. 

National Governors’ Association Center for Best Practices, http://www.nga.org/, 202/624-5300. 

Office of Family Assistance, Administration for Children and Families, U.S. Department of Health and Human
Services, http://www.acf.dhhs.gov/programs/ofa/, 202/401-9289. 

Welfare to Work Partnership, http://www.welfaretowork.org/, 202/955-3005. 

Publications 

Acs, G., Ross Phillips, and K. and D. McKenzie. “On the Bottom Rung: A Profile of Americans in Low-Income Working Families.” In Assessing the New Federalism. Washington, D.C.: Urban Institute, October 2000. Available at http://newfederalism.urban.org/html/anf_a42.html 

Administration for Children and Families. “Final Rule—TANF Program.” Federal Register, April 1999, vol.64, no.69. 

Administration for Children and Families. TANF Annual Report—Expenditures in the TANF Program in Fiscal Year 1999. Washington, D.C.: U.S. Department of Health and Human Services, August 2000. Available at http://www.acf.dhhs.gov/programs/ofs/data/q499/hilites.htm

American Public Human Services Association. Welfare Reform in America’s Urban Centers. Washington, D.C.: American Public Human Services Association, October 2000. Available at
http://www.aphsa.org/opd/research/researchdigest1000.asp 

Brown, R., E. Ganzglass, S. Golonka, J. Hyland, and M. Simon. Working Out of Poverty: Employment Retention and Career Advancement for Welfare Recipients. Washington, D.C.: National Governors’ Association, July 1998. Available at http://www.nga.org/Welfare/EmploymentRetention.htm

Carnevale, A., P. and K. Reich, with N.C. Johnson and K. Sylvester. A Piece of the Puzzle: How States Can Use Education to Make Work Pay for Welfare Recipients. Princeton, N.J.: Educational Testing Service, 2000. Available at http://www.span-online.org/puzzle.pdf 

Center for Community Change. “Using Unspent TANF Funds to Address Unmet Housing Needs.” Organizing. No. 17. Washington, D.C.: Center for Community Change, November 1999. Available at  http://www.communitychange.org/organizing.htm

Center for Public Policy Priorities. “TANF Spending in 2000–01: Notable Improvements and Missed Opportunities.” Policy Pages. No. 95 (September 3, 1999). Washington, D.C.: Center for Public Policy Priorities. Available at http://www.cppp.org/products/policypages/91-110/91-110html/PP95.html 

Johnson, N. TANF Funds May Be Used to Create or Expand Refundable Child Care Tax Credits. Washington, D.C.: Center for Budget and Policy Priorities, October 2000. Visit http://www.cbpp.org/10-11-00sfp.htm 

Lazere, E. Unspent TANF Funds in the Middle of Federal Fiscal Year 2000. Washington, D.C.: Center on Budget and Policy Priorities, August 2000. Available at http://www.cbpp.org/8-2-00wel.htm

Lazere, E. Welfare Balances After Three Years of TANF Block Grants: Unspent TANF Funds at the End of Fiscal Year 1999. Washington, D.C.: Center on Budget and Policy Priorities, January 2000. Available at http://www.cbpp.org/1-11-00wel.pdf 

LINC Project. “Low-Income Groups Seek to Redefine the Economic Security Agenda: Looking Ahead to TANF Reauthorization.” Available at http://www.lincproject.org/reauth.htm

Moffitt, R., and J. Roff. The Diversity of Welfare Leavers. Baltimore, MD.: Johns Hopkins University, September 2000. Available at http://www.jhu.edu/~welfare/17468-welfarebrief.new.pdf 

National Campaign for Jobs and Income. “Poverty Amidst Plenty: Amount of Unspent Federal Anti-Poverty Funds Grows Despite Persistent Need.” Available at http://www.nationalcampaign.org/ccc/tanfsurplus

National Conference of State Legislatures. Programs and Services Funded with TANF and MOE. Denver, Colo.: National Conference of State Legislatures, September 1999. Available at
http://www.ncsl.org/statefed/welfare/tanfuses.htm 

National Governors’ Association. Next Steps in Welfare Reform: State Innovations in TANF. Washington, D.C.: National Governors’ Association, April 2000. Visit http://www.nga.org/Welfare/Innovations.PDF

Reichert, D. Getting to Work: Providing Transportation in a Work-Based System. Denver, Colo.: National Conference of State Legislatures, July 1999. Available at
http://www.ncsl.org/statefed/WELFARE/TRANSCH.HTM

Relave, N. “Career Advancement for Welfare Recipients and Low-Wage Workers.” Issue Note. Washington, D.C.: Welfare Information Network, October 2000. Available at
http://www.welfareinfo.org/issuenotecareeradvancement2.htm 

State Policy Documentation Project. “State Work Activities and Postsecondary Education.” Available at http://www.spdp.org/tanf/postsecondary.PDF

State Policy Documentation Project. “State Work Activities and Post-Employment Benefits and Services.” Available at http://www.spdp.org/tanf/postempymt.pdf 

Steisel, S. A Checklist for State Legislators—Taking Advantage of the New Flexibility of Temporary Assistance for Needy Families Funds and State Maintenance of Effort Funds. Denver, CO.: National Conference of State Legislatures, August 1999. Available at http://www.ncsl.org/statefed/chklist1.htm

Strawn, J. Beyond Job Search or Basic Education: Rethinking the Role of Skills in
Welfare Reform. Washington, D.C.: Center for Law and Social Policy, April 1998.
Available at http://www.clasp.org/pubs/jobseducation/beyondexec.htm

Strawn, J., and K. Martinson. Steady Work and Better Jobs: How to Help Low-Income Parents
Sustain Employment and Advance in the Workforce. New York, N.Y.: Manpower Demonstration
Research Corporation, June 2000. Available at
http://www.mdrc.org/Reports2000/SteadyWorkGuide.pdf

Van Lare, B., and G. Griener. “Reauthorization of TANF—An Early Perspective.” Issue Note.
Washington, D.C.: Welfare Information Network, July 2000. Available at
http://www.welfareinfo.org/issuenotereauthorization.htm 

Welfare Law Center. “Final Federal TANF Regulations Give States Broad Program and Spending Flexibility—States Face Critical Choices on How to Serve Needy Families.” 

Welfare News (June 1999). Available at http://www.welfarelaw.org/finaltanf.htm 

Wisconsin Council on Children and Families. Working and Poor. Post-Secondary Education. Madison, WI: Wisconsin Council on Children and Families, January 2000. Available at
http://www.wccf.org/postseced.pdf

 Wolfe, L., and J. Tucker. Getting Smart About Welfare: Policy Research on the Impact of Welfare Reform on Low-Income Women Enrolled in College. Washington, D.C.: Center for Women Policy Studies, 1999. Available at http://www.centerwomenpolicy.org/pdf/pubcatcurrent.pdf.

The Welfare Information Network is supported by grants from the Annie E. Casey
Foundation, the Charles Stewart Mott Foundation, the David and Lucile Packard Foundation,
the Edna McConnell Clark Foundation, the Ford Foundation, the McKnight Foundation, the
Woods Fund of Chicago, and the Administration for Children and Families, U.S. Department
of Health and Human Services, and the U.S. Department of Labor.