Indicators of Welfare Dependence: Annual Report to Congress, 2009-2013. Temporary Assistance for Needy Families (TANF) and Aid to Families with Dependent Children (AFDC)


The Aid to Families with Dependent Children (AFDC) program — originally named the Aid to Dependent Children program — was established by the Social Security Act of 1935 as a grant program to enable states to provide cash welfare payments for needy children who had been deprived of parental support or care because their fathers or mothers were absent from the home, incapacitated, deceased, or unemployed. All 50 states, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands operated an AFDC program. States defined “need,” set their own benefit levels, established (within federal limitations) income and resource limits, and administered the program or supervised its administration. States were entitled to unlimited federal funds for reimbursement of benefit payments, at “matching” rates that were inversely related to state per capita income. States were required to provide aid to all persons who were in classes eligible under federal law and whose income and resources were within state-set limits.

During the 1990s, the federal government increasingly used its authority under section 1115 of the Social Security Act to waive portions of the federal requirements under AFDC. This allowed states to test such changes as expanded earned income disregards, family caps, education and adult oversight requirements for minor mothers, increased work requirements and stronger sanctions for failure to comply with them, time limits on benefits, and expanded access to transitional benefits such as child care and medical assistance. As a condition of receiving waivers, states were required to conduct rigorous evaluations of the impacts of these changes on the welfare receipt, employment, and earnings of participants.

Public Law 104-193, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), replaced AFDC, AFDC administration, the Job Opportunities and Basic Skills Training (JOBS) program and the Emergency Assistance (EA) program with a block grant called the Temporary Assistance for Needy Families (TANF) program. Key elements of TANF include a lifetime limit of 60 months1 on the amount of time a family with an adult can receive assistance funded with federal funds, increasing work participation rate requirements that states must meet for families receiving assistance, and broad state flexibility on program design and use of funds. Spending through the TANF block grant for state family assistance grants is capped and funded at $16.5 billion per year, slightly above FY 1995 federal expenditures for the four component programs without adjusting for subsequent inflation. States also must meet a “maintenance of effort (MOE) requirement” by spending on needy families at least 80 percent of the amount of state funds used in FY 1994 on these programs (75 percent if they meet their work participation rate requirements).

TANF gives states wide latitude in spending both federal TANF funds and state MOE funds. Subject to a few restrictions, TANF funds may be used in any way that supports one of the four statutory purposes of TANF: to provide assistance to needy families so that children can be cared for at home; to end the dependence of needy parents on government benefits by promoting job preparation, work and marriage; to prevent and reduce the incidence of out-of-wedlock pregnancies; and to encourage the formation and maintenance of two-parent families.

Legislative Changes

The current legislative authority for the TANF block grant is from the Deficit Reduction Act of 2005 (Public Law 109-171). Enacted in February 2006, the Deficit Reduction Act of 2005, or DRA (Public Law 109-171), reauthorized the original 1996 legislation at an annual funding level of $16.5 billion for state family assistance grants and made changes to the state work participation requirements (effective FY 2007). Under TANF, states must engage a certain percentage of the families in countable activities for a minimum average number of hours per week or face financial penalty. Nominally, the requirement is 50 percent; however, a provision known as the caseload reduction credit allows a state to reduce the rate it must meet by the decline in its caseload (net of decline due to federal or state eligibility changes) between a base year and a comparison year (the year prior to the year of whose rate it affects). The DRA revised the base year of the caseload reduction credit from FY 1995 to FY 2005. Prior to the DRA, states had experienced dramatic caseload declines (many in excess of 40 percent) and the caseload reduction credit had virtually eliminated the work participation requirements for most states.

In addition, the DRA made families with an adult receiving assistance in a “separate state program” subject to the work participation rate. A separate state program is operated outside the rules of TANF but funded entirely with qualified state maintenance-of-effort expenditures. Additionally, HHS regulations created consistent definitions of countable work activities, specified the circumstances under which parents who reside with a child who is a recipient of assistance should be required to participate in work activities, and required states to establish and maintain work participation verification procedures.

Finally, the DRA included $150 million for the Healthy Marriage Promotion and Responsible Fatherhood Grants in FY 2006 through FY 2010; the Claims Resolution Act of 2010 and other subsequent legislation continued to provide $150 million for this purpose, specifying that funding should be equally split between healthy marriage and responsible fatherhood activities.

Data Issues Relating to the TANF Program and the AFDC-TANF Transition

States had the option of beginning their TANF programs as soon as PRWORA was enacted in August 1996, and a few states began TANF programs as early as September 1996. All states were required to implement TANF by July 1, 1997. Because states implemented TANF at different times, the FY 1997 data reflect a combination of the AFDC and TANF programs. In some states, limited data are available for FY 1997 because states were given a transition period of six months after they implemented TANF before they were required to report data on the characteristics and work activities of TANF participants.

Because of the greatly expanded range of allowable uses of funds under TANF, a substantial portion of TANF funds are being spent on activities other than cash payments to families and associated services. Table TANF 4 in this Appendix which tracks overall expenditure trends includes only those TANF funds spent on “cash and work-based assistance” and “administrative costs,” not on work activities, supportive services, or other allowable uses of funds. Spending on these other activities is detailed in Table TANF 5. Note that TANF administrative costs include funds spent administering all activities, not just cash and work-based assistance. (Administrative costs under AFDC had included a small amount of funds for administering AFDC child care programs; such programs, and the costs of administering them, were transferred to the Child Care and Development Fund as part of PRWORA.)

There also is potential for discontinuity between the AFDC and the TANF caseload figures. For example, under TANF there is no longer a separate “Unemployed Parent” (UP) program, as there was under AFDC. While a separate work participation rate is calculated for two-parent families, this population is not identical to the UP caseload under AFDC. It also is possible that a limited number of families will be considered recipients of TANF assistance, even if they do not receive a monthly cash benefit. The vast majority of families receiving “assistance”2 are, in fact, receiving cash payments.

Another data issue concerns the treatment of families who receive cash and other forms of assistance under Separate State Programs (SSPs), funded by MOE dollars rather than federal TANF funds. Under TANF, some states use SSP programs to serve specific categories of families (e.g., two-parent families, families who have exhausted their time limits). Initially, however, states did not have to include them in calculating of their work participation rates. As of October 2006, such families are included in the work participation rate calculation, but continue to be excluded from the application of the federal time limits on receipt of assistance. Starting with the 2004 edition, this Indicators report adds recipients in SSPs into the caseload totals(the split between TANF and SSP caseloads is shown in Table TANF 3, nationally, and in Table TANF 15, by state). Native Americans served through state TANF and SSP programs are included in these caseload counts, but families served through TANF programs operated by Tribal governments are excluded. Expenditures for SSPs are shown in Table TANF 5.

AFDC/TANF Program Data

The following tables and figures present data on caseloads, expenditures, and recipient characteristics of the AFDC and TANF programs. Trends in national caseloads and expenditures are shown in Figures TANF 1 and TANF 2, and the first set of tables (Tables TANF 1 through 6). These are followed by information on characteristics of AFDC/TANF families (Table TANF 7)4 and a series of tables presenting state-by-state data on trends in the AFDC/TANF program (Tables TANF 8 through 15). These data complement the data on trends in AFDC/TANF recipiency and participation rates shown in Tables IND 3a and IND 4a in Chapter II.

AFDC/TANF Caseload Trends (Tables TANF 1 through TANF 3 and Figure TANF 1). After dramatic declines during the 1990s, welfare caseloads reached their lowest point since FY 1969 in FY 2008 and increased in FY 2009. With increases in the need for cash assistance due to the 2007-2009 recession, the average monthly number of recipients increased by almost 7 percent from FY 2008 to FY 2009. In FY 2009, the average monthly number of TANF recipients was 4.254 million persons. From the peak of 14.2 million in FY 1994, the number of AFDC/TANF recipients dropped by 72 percent in FY 2009.5

AFDC/TANF Expenditures (Figure TANF 2 and Tables TANF 4 through TANF 6). Tables TANF 4 and 5 show trends in expenditures on AFDC and TANF. Table TANF 4 tracks both programs, breaking out the costs of benefits and administrative expenses. It also shows the division between federal and state spending. Table TANF 5 shows the variety of activities funded under the TANF program.

Figure TANF 2 and Table TANF 6 show that inflation has had a significant effect in eroding the value of the average monthly AFDC/TANF benefit. In real dollars, by 2009 the average monthly benefit per recipient had declined by 35 percent from what it was at its peak in the late 1970s.

AFDC/TANF Recipient Characteristics (Table TANF 7). With the dramatic declines in the welfare rolls since the implementation of TANF, there has been discussion regarding how the composition of the caseload has changed over time. Two trends that emerged are the increases in the proportion of families with no adult in the assistance unit and employment among adult recipients.

One notable trend that occurred in the early years of TANF is the increase in the proportion of adult recipients who are working. From the peak in FY 1999 of 27.6 percent, adult employment status declined to a low of 21.6 percent before rebounding to 25.8 percent in FY 2008.6 This rate of employed adult recipients represents more than twice the 1996 rate of 11.3 percent and more than three and one-half times the FY 1992 rate of 6.6 percent, as shown in Table TANF 7.

Another notable change in the TANF caseload is the increasing number of cases without an adult recipient. Such cases occur when the adults are ineligible (because they are a caretaker relative, SSI parent, immigrant parent, or sanctioned parent). Families with no adults receiving assistance have increased from 15 percent of the caseload in FY 1992 to 48 percent in FY 2009.6 This dramatic growth has been due to an increase in the number of cases without recipient adults during the early 1990s, followed by a decline in the number of cases that included adults in the assistance unit.

In other areas, TANF administrative data show few changes in composition. Analyses of program data have not found much evidence of an increase or decrease in readily observed barriers to employment in the current caseload. The question of whether the caseload has become more disadvantaged cannot be answered simply through TANF administrative data provided by the states, which do not contain detailed information on such barriers to employment as lack of basic skills, alcohol and drug abuse, domestic violence, and disabilities.

AFDC/TANF State-by-State Trends (Tables TANF 8 through TANF 15). There is a great deal of state-to-state variation in the trends discussed above. For example, as shown in Table TANF 10, while every state has experienced a caseload decline since the 1990s, the percentage change between the state’s caseload peak and December 2009 ranges from 96 percent (Wyoming) to 41 percent (Washington). Sixteen states have experienced caseload declines of 75 percent or more. Table TANF 10 also shows that states reached their peak caseloads as early as May 1990 (Louisiana) and as late as June 1997 (Hawaii).

Table TANF 15 shows TANF and Separate State Program (SSP) families and recipients, by state. Eighteen states had such programs.

Figure TANF 1. Average Monthly AFDC/TANF Families Receiving Assistance

Note: “Basic Families” are single-parent families and “UP Families” are two-parent cases receiving benefits under AFDC Unemployed Parent programs that operated in certain states before FY 1991 and in all states after October 1, 1990. The AFDC Basic and UP programs were replaced by TANF as of July 1, 1997 under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996. Shaded areas indicate NBER designated periods of recession from peak to trough; NBER has established December 2007 as the beginning month of the current recession. The decrease in number of families receiving assistance during the 1981-82 recession stems from changes in eligibility requirements and other policy changes mandated by OBRA 1981. Beginning in 2000, “Total Families” includes TANF and SSP families. Beginning in 2000, “Total Families” includes TANF and SSP families. Last data point plotted is December 2009.

Source: U.S. Department of Health and Human Services, Administration for Children and Families, Office of Family Assistance.

Figure TANF 2. Average Monthly AFDC/TANF Benefit per Recipient in Constant 2009 Dollars

Note: See Table TANF 6 for underlying data. Comparison of trends in the average monthly AFDC/TANF benefit per recipient in constant 2009 dollars with the weighted average maximum benefit in constant 2009 dollars.

Source: U.S. Department of Health and Human Services, Administration for Children and Families, Office of Family Assistance, Quarterly Public Assistance Statistics, 1992 & 1993 and earlier years along with unpublished data.

1 Many states limit TANF assistance to less than the 60-month federal maximum.
2 States are allowed to use TANF funds on a variety of services, including employment and training services, domestic violence services, child care, transportation, and other support services. Families receiving such services, however, generally should not be counted as recipients of TANF “assistance.” Under the final regulations for TANF, “assistance” primarily includes payments directed at ongoing basic needs. It includes payments when individuals are participating in community service and work experience (or other work activities) as a condition of receiving payments (e.g., workfare). In addition, the definition also includes certain child care and transportation benefits when families are not employed. It excludes, however, such things as: non-recurrent, short-term benefits; services without a cash value, such as education and training, case management, job search, and counseling; and benefits such as child care and transportation when provided to employed families. These are classified as “non-assistance.”
3 States began submitting caseload data on SSPs in FY 2000.
4 Family characteristics in Table TANF 7 may differ from those reported in Chapter II because the administrative data focus on recipients of assistance, whereas the survey-based data in Chapter II generally include all family members, regardless of whether they receive assistance themselves or not. For example, grandparents, adult siblings, aunts, uncles, and other adult relatives living in the same household as the recipient children may not receive assistance and thus may be excluded from the administrative data, yet they generally would be included in survey data on the family in which the TANF recipient resides.
5 Note that these figures include recipients in SSPs unless otherwise noted.
6 The percentages in this paragraph do not include cases served by SSP programs.

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