Description and Assessment of State Approaches to Diversion Programs and Activities Under Welfare Reform. E. The Lump Sum Payment


The process of screening TANF applicants for their potential eligibility for lump sum payments involves 1) determining what the immediate needs of the applicants are and how many of these needs can be addressed by lump sum payments, and 2) determining how the lump sum payments will be made. This section describes these characteristics of lump sum payment programs as reported by the states: how much can applicants receive in lump sum payments, for what purpose can these payments be used, in what form are the lump sum payments awarded, and how often can one apply for these payments. These program dimensions can also be found in Table II-1.


How Much Applicants Can Receive in Lump Sum Payments

The general approach used by the states is to set a ceiling, i.e. a maximum amount, for the lump sum payment potentially available to a TANF applicant and then determine the actual payment amount based on the diverted applicant's specific needs. These maximum amounts are most frequently calculated as multiples of the monthly TANF benefit as shown in Table II-1. In eleven states, the maximum payment is three times the monthly TANF benefit, in three states the maximum payment is twice the monthly benefit, and in two states it is four times the monthly benefit. Two states, Kentucky and Texas offer a flat amount as the maximum payment, $1500 and $1000 respectively. A few states allow for lump sum payments in excess of the maximum amount. If an applicant in Maryland has compelling needs as determined by the caseworker, then supervisors can approve up to 12 months of lump sum payments. An applicant can not receive more than the $1500 ceiling in Kentucky during the 12 month period. Nevada also plans to allow applicants with special circumstances to receive more than the maximum amount subject to an administrator's approval.

Table II-1 also shows the maximum amount for lump sum payments as calculated for a family of three in each state. The amount ranges from $606 in Florida to $1638 in Washington to $3052 in Minnesota.(1) This wide range reflects the variability in the TANF monthly benefit levels across the country as the states, similar to the AFDC program which TANF replaced, set their own standards of need and benefits levels for their TANF programs.

How Can the Lump Sum Payments Be Used

Sixteen of the 20 states with operating lump sum payment programs allow the lump sum payments to be used to address any short-term need in order keep the family off the TANF rolls and help the family attain or maintain self-sufficiency. These short term needs can include a wide range of expenses or debts such as child care, car repairs, medical bills, clothing, rent, utility bills, and work uniforms or tools. In Maryland, lump sum cash payment was used to assist a TANF applicant in purchasing a license required by state law to sell used cars. In Washington, lump sum payments were used to assist in the start-up of a small business.

Six states - Arkansas, Iowa, Nevada, Rhode Island, South Dakota and Wisconsin - specify that lump sum payments can only be used to address employment-related needs.(2) In Nevada, for example, the lump sum cash payment could be provided to a TANF applicant living in a remote area who has a job offer elsewhere and needs help with moving expenses. The payment could also be used to purchase work clothing, obtain a license, or repair a vehicle. In South Dakota, the lump sum payment program is viewed as a work-related support service and is considered appropriate only for individuals with strong work histories who are employed or are about to be employed. Payments can only be used for specific expenses primarily related to keeping or getting a job.

Several states require, before authorizing an amount for lump sum payments, that specific needs be documented with bills, receipts, or other evidence of expense and that caseworkers approve each expense for which the lump sum will be used. Minnesota requires such documentation of specific needs, and in Arkansas caseworkers must verify how the lump sum payment was used. In Nevada, the lump sum payment amount must be supported by documentation and the caseworkers' final determination must be approved by a supervisor. Caseworkers in West Virginia can get involved in negotiating the amount of an expense, e.g., car repair estimate, to ensure that the expense is not in excess of the maximum amount available. In Kentucky, the proposed lump sum payment must meet a short term need such as transportation, housing or an employment-related need and must be verfied by the caseworker.

On the other hand, some states require little verification of applicants' needs and documentation of how the lump sum payments are actually used. In Florida there is no verification process and no follow-up on how the payments were spent. In Montana, while up-front verification of expenses/needs is required, the state does not require verification that the lump sum payment was actually used for the verified expenses/needs.

In most states, the assessment of applicants' short-term needs and the calculation of the amount of lump sum payments occur at one point in time during the screening process. A few states, however, have created a window of time during which an applicant who has received lump sum payments may return for additional payments. In Washington, for example, an applicant is considered eligible for lump sum diversion for one month. If the initial lump sum payment is less than the maximum amount ($1638 for a family of three), then a recipient may seek assistance for other eligible expenses during that month - effectively "drawing down" on the maximum amount. Utah and Kentucky use a similar approach for its lump sum payment program; in Kentucky the "window" for drawing down the $1500 maximum amount is 12 months and in Utah the "window" for drawing down the $1278 maximum is four months.

How Lump Sum Payments Are Made

The lump sum payments are made available to recipients in three forms: cash, vouchers, and third party payments. The states' choices about how lump sum payments are made could be related to their decisions about how rigorously to verify applicants' needs and document the use of the lump sum payments. The use of vouchers and third party payments affords the states greater assurances that the lump sum payments will be used for their intended purposes than the use of cash payments given directly to the recipients.

However, while the states generally reported using a combination of cash, vouchers, and third party payments depending upon the nature of the expense, most states appeared to prefer the use of cash payments over vouchers and third party payments. Only four states out of the 20 states with operating lump sum payment programs have an explicit preference for non-cash payments: Maine and Washington use only vouchers; Minnesota prefers to use vouchers but will occasionally allow a cash payment; and South Dakota prefers vouchers or vendor payments - cash payments are very rare. Four states, Florida, Idaho, Utah and Wisconsin, use only cash payments.

How Often One Can Receive Lump Sum Payment Assistance

As illustrated by Table II-1, there is substantial variability among states regarding how often a family can receive lump sum cash payments. Eight states have a "one time only" policy essentially meaning that families can receive lump sum payment once in a lifetime. Five states do not specify a limit for how often applicants can receive a lump sum payment. Washington, Kentucky, North Carolina, and Alaska allow applicants to receive lump sum payments once a year; Minnesota allows applicants to receive lump sum payments every three years; and in Utah families can apply every four months to receive lump sum payments.(3) In California, Colorado and Iowa, the limits will likely vary because these decisions are made at the county with no guidance from the state.