The federal stimulus law gives Pennsylvania the opportunity to draw down $360 million in federal aid to low-income families. So far, Pennsylvania has drawn down only $29 million of this money and has only limited plans for further expenditures -- although the September 2010 deadline for expenditures is fast approaching. Pennsylvania should act decisively to create jobs and other programs to help low-income parents – and the state’s economy – with these federal dollars.
What is the TANF Emergency Fund?
The American Recovery and Reinvestment Act of 2009 created a TANF Emergency Contingency Fund (also called the TANF Emergency Fund). The TANF Emergency Fund provides for 80% federal reimbursement for certain increased state spending through September 2010, a date the Obama administration has proposed to extend. State expenditures can be for any of three purposes: (1) basic assistance for needy families, (2) short-term non-recurrent benefits, and (3) subsidized employment.
What programs could be funded with the TANF Emergency Fund?
The TANF Emergency Fund will reimburse states for increases in the following three types of spending:
(1) Basic assistance: This is cash payments or vouchers to meet needy families’ basic needs. In Pennsylvania, basic assistance is predominantly provided by the TANF (Temporary Assistance for Needy Families) program, which provides cash assistance to families who are extremely poor and who cooperate with work requirements. Temporary subsidies to families who leave TANF for work also qualify as basic assistance.
To receive reimbursement under this category, state expenditures must have increased, and the caseload itself must have increased since the baseline year (2007 or 2008). After years of caseload decline, Pennsylvania’s TANF caseload has finally begun to creep up, and Pennsylvania now likely qualifies for reimbursement under this category. The caseload is unlikely to expand dramatically, however. Increased basic assistance spending will not draw down significant federal funds unless the state takes steps to increase payments.
(2) Non-recurrent short-term benefits: These are payments that are “designed to deal with a specific crisis situation or episode of need,” are not intended to meet ongoing needs, and will not extend beyond four months. This is a very broad category that can include utility assistance programs, homelessness prevention, back-to-school payments, domestic violence or other short-term services, assistance in applying for government benefits, and other emergency assistance programs.
(3) Subsidized employment: Subsidized employment provides a wage subsidy and supervision and training to help individuals gain work experience. Under this category, states can either expand existing subsidized employment programs for TANF participants – like “paid work experience” in Pennsylvania – or create new programs for low-income individuals to enable them to work for wages, gain experience, and qualify for federal tax credits for workers. HHS allows in-kind employer supervision and training costs to count as the state’s 20% share of wage costs, enabling states to create jobs programs with wages funded 100% by the federal government.
How much is potentially available to Pennsylvania?
Pennsylvania is eligible for potentially $360 million in TANF Emergency Funds, but has drawn down about $29 million. Although the TANF Emergency Fund is capped at $5 billion for all states, only $1.18 billion had been awarded to all states as of January 27, 2010. If Pennsylvania acts quickly, it should be able to draw down the remaining $331 million for which it is eligible. If Pennsylvania does not act quickly, the $330 million could be reallocated to other states.
Who can be served by these funds?
TANF ECF funds must be spent on needy families, who need not be receiving TANF cash assistance. States can define which families are “needy.” For example, Pennsylvania could define as “needy” families with incomes below 200% of the federal poverty line, that is, $3,052 a month for a family of three. The income limit need not be the same for all programs funded under the TANF ECF.
Non-custodial parents and pregnant women can qualify as families. Under some circumstances, TANF ECF funds could be provided to individuals not living with children.
Does the state need to spend its own money to draw down federal TANF ECF money?
Although the TANF ECF requires a 20% state share of spending to draw down federal reimbursement, the 20% need not come from state coffers. Third-party expenditures can count as the 20% state share as long as certain paperwork requirements are satisfied. The third-party expenditures could be in the form of a grant to the state, employer supervision and training of subsidized employees, debt forgiveness (for example, in exchange for restoring or maintaining utility service to needy families and receiving 80% reimbursement), or simply allowing nonprofits to count their own increased expenditures.
There are other creative ways of finding the state 20% share. Willing retailers could sell gift cards to the state at 80% of their full value, with the 20% discount countable as the state’s share of TANF ECF funding. The state would then give the gift cards to needy families to pay for necessities at no state cost. The only caveat is that the state’s 20% share may be neither federal funds (other than TANF block grant funds) nor state expenditures that have already been used as a state match to draw down other federal funds.
What is the baseline for measuring whether state spending has increased?
To qualify for reimbursement in any of the three categories, a state must have increased expenditures in that category in any given calendar quarter over its spending in the equivalent quarter in the baseline year, either federal fiscal year 2007 or 2008. For example, to qualify for federal reimbursement in the quarter covering July - September 2010 in any of the three categories, the state would compare its spending in that category with its spending in the equivalent quarter in 2007 or 2008. Each category of spending is considered independently, and the state can choose a different baseline year (2007 or 2008) for each category.
If the state counts third-party expenditures as the state’s 20% share, it will have to report to the federal government on that third party’s expenditures on qualifying activities in the baseline year. This is necessary to ensure an apples-to-apples comparison of funding when determining whether the state’s spending has increased.
Has Pennsylvania increased spending in each of the three categories, so as to qualify for federal TANF ECF reimbursement?
According to the Department of Public Welfare (DPW), which administers the TANF ECF for Pennsylvania, Pennsylvania is likely to qualify for TANF ECF reimbursement in the two categories of non-recurrent short-term benefits and subsidized employment for each quarter of 2010. It will likely qualify for reimbursement in the category of basic assistance in the July - September quarter of 2010 based on caseload increase due to the recession.
What has Pennsylvania already done to spend this money?
So far, Pennsylvania has already drawn down $29 million in TANF ECF funds for increased spending on non-recurrent short-term benefits. Most of this money went to provide heating assistance to low-income families last winter. Other funds have gone toward mortgage assistance and other non-recurrent short-term benefits.
Pennsylvania has also been expanding its use of paid work experience for TANF recipients. We expect it to claim reimbursement for these expenditures as subsidized employment, but the amount claimed will not be substantial. The state will need much bolder plans if it is to draw down all the available federal funds.
What else could Pennsylvania be doing?
Pennsylvania could take advantage of additional funding with the following steps:
(1) Basic assistance:
Increase the TANF grant amount – which since 1990 has remained at $403 a month for a family of three in most counties – and receive 80% reimbursement for the increased spending.
Increase the “earned income disregard” to 75%, to provide a partial TANF check to working parents until the parent is earning enough to support the family at the poverty level. Currently the 50% earned income disregard means that parents’ cash assistance is cut off when their earnings reach just over half the poverty level. TANF ECF funds would cover 80% of the cost of this increased spending.
Increase its transitional payments to TANF recipients who leave TANF with a job. Currently TANF leavers with jobs receive $100 a month for 3 months. Either the $100 or the 3-month time limit could be increased with 80% federal reimbursement.
(2) Non-recurrent short-term benefits:
Provide increased heating assistance, expand homelessness prevention programs, provide other emergency assistance, help needy families apply for government benefits, or help families with short-term needs meet those needs without having to go on TANF cash assistance. Especially during the recession such help could be crucial to unemployed families.
Cooperate with utilities willing to forgive debt and restore or continue utility service to customers with unpaid bills, counting this debt forgiveness as the state’s share of TANF ECF spending. The state would then pass along the 80% federal reimbursement back to the utilities. Under this arrangement, low-income families would receive continued utility service, and utilities could collect 80% of debt that might otherwise be uncollectible.
Provide back-to-school payments to low-income families, as New York has done. Last September, New York State gave $200 back-to-school grants to 800,000 low-income children, with the state’s $35 million share provided by a private foundation.
(3) Subsidized employment:
Create a large-scale jobs program for unemployed low-income parents, placing parents in jobs with government and non-profit employers. Counting the employers’ supervision and training costs as the state’s 20% share would enable 100% of wages to be funded by the federal government.
Provide summer jobs for low-income youth, again using employer supervision and training as the state’s 20% share.
Increase paid work experience for TANF recipients. In December 2009, almost twice as many TANF recipients were performing unpaid community service as were participating in paid work experience. Unlike community service, which is just working off the welfare grant, paid work experience provides a paycheck and a sense of genuine participation in the workforce, and also qualifies the parent for the federal earned income tax credit. Federal 80% reimbursement for subsidized employment makes paid work experience cheaper than community service. Pennsylvania should take more aggressive steps to offer paid work experience to the 2,732 parents currently doing community service.
Must the state pay out the TANF ECF funds before receiving reimbursement for the 80% federal share?
Not necessarily. Using estimated data, Pennsylvania can apply to the federal government for TANF ECF funding a month before the quarter for which the state is seeking federal reimbursement. The federal funds could then be provided in advance of state expenditures, with reconciliation taking place later.
When does this funding opportunity expire?
The TANF ECF is currently scheduled to expire September 30, 2010, but Congress is considering legislation to allow states another year to draw down their allotments. The Obama administration has also proposed extending the TANF ECF for another year. The Obama proposal would enable the state to spend its $360 million allocation for the current federal fiscal year, and then potentially receive another $360 for 2011.
Where can I learn more?
- U.S. Department of Health & Human Services, Administration for Children and Families, “Questions & Answers on the American Recovery And Reinvestment Act of 2009 (Recovery Act), Temporary Assistance For Needy Families (TANF) Program Emergency Fund,” available at http://www.acf.hhs.gov/programs/ofa/recovery/tanf-faq.htm.
- Liz Schott, “Opportunities Under the TANF Emergency Fund Created by the Federal Recovery Act,” Center on Budget and Policy Priorities, July 29, 2009, available at http://www.cbpp.org/files/7-29-09tanf.pdf.
- For a comprehensive set of links to TANF Emergency Fund resources, see this page from the Center on Law & Social Policy: http://www.clasp.org/issues/pages?type=temporary_assistance&id=0001.
For further assistance, contact either of the following people at Community Legal Services:
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