Noem's Wrong Thinking on TANF (but...)

Kristi Noem is recently announced a new bill that she has put forth to change the role of TANF (Temporary Aid to Families).  Before I go into detail about what Noem's legislation would do, it is important to have a basic understanding of what TANF is and some other alphabet soup issues.

TANF is a block grant program that was established in 1996 to provide cash assistance to families in poverty.  The program has been deeply neglected over the years and therefore has lost a lot of it ability to help reduce poverty.  At least that is according to the Hill writer in March of 2014:

There are now more than 20 million people living in deep poverty— below half of the poverty line—including more than 15 million women and children.  That’s an increase of more than 60 percentsince 2000 and a lack of cash assistance is a contributing factor. 

The TANF block grant has lost nearly 30 percent of its value since 1996 because it was never indexed to inflation.   In no state are benefits greater than 50 percent of the poverty line, and in most they are below 30 percent of the poverty line.  

Is this really a model for “successful reform”?  One that leads to fewer people in need receiving assistance, greater deprivation, and diminishing resources at the state level?

To get the grant, states have to show a maintenance of effort requirement (MOE).  The Congressional Budget Office explains the requirement in January 2015 report:

...The most important federal rule is the maintenanceof-effort (MOE) requirement, which is designed to limit the extent to which federal funding displaces money that state governments would otherwise have spent on services for low-income families. Specifically, for each dollar that nonfederal spending on TANF is less than 75 percent of nonfederal spending in 1994 on the programs that preceded TANF, the state loses a dollar of federal funding through the SFAG. (No state has ever been penalized in that way, however.) Related to that rule is an incentive for states to spend more than the MOE requirement: The federal government rewards each state that does so by reducing the number of families that must participate in work-related activities for the state to receive its full allotment of federal funding. 

MOE spending—that is, nonfederal spending that can be counted toward the MOE requirement—must be for services that try to achieve one of TANF’s four goals. And for services that were not part of the programs that TANF replaced, only state spending in excess of 1995 levels can be included in MOE spending. A state can include spending by local governments and nongovernmental entities, such as private charities, that is directed at one of TANF’s goals; however, spending by nongovernmental entities accounted for only 2 percent of MOE spending in 2011.

It is the spending of third parties that states can count towards their MOE that Kristi is targeting:

Some states are counting third-party spending as “state spending” and driving their apparent investments to artificially high levels.  As a result, those states don’t need as many TANF recipients to be engaged in work-related activities in order to continue receiving full federal funding.  Under H.R.2959, states could no longer count spending by third parties as state spending, meaning states would need to engage more adults in work-related activities in exchange for federal benefits, as the program was originally intended. 

Of note, South Dakota does not count third-party spending as state spending in order to reduce the portion of TANF recipients engaged in work-related activities. 

“We need to ensure other states follow South Dakota’s example,” continued Noem.  “By continuing to engage participants in work activities at the level intended, the state has upheld the integrity of the program and ensured the support we provide through TANF is support that really helps struggling families.”

What does the CBO have to say about the impact of this plan in their January 2015 report?

The prohibition would reduce the extent to which some states met the work standard by spending in excess of the MOE requirement; to meet the standard, a number of those states would probably make up for what they had lost by tightening time limits and work requirements. Such measures would be likely to shorten the average duration of assistance and could also reduce the number of families that received that assistance (see Table 4). However, other states might continue to rely on MOE spending to meet the work standard; they could do so by increasing their own spending on TANF, which could fund additional aid for low-income families.

There are two ways to meet the requirements if this goes through and the grant doesn't change in other ways.  One way is that states will come up with more money to fund and increase the case load (South Dakota would definitely come up with more money, right?).  The other way is to reduce the case load to meet the requirements.   

Noem holds South Dakota up as a shining beacon of the proper way to use TANF funds, however, South Dakota's poverty rate has seen increases, it has helped reduce homelessness in South Dakota or helped the poorest counties in the nation; two things she talks about in her press release:

More than 1,000 South Dakotans, including nearly 300 children, were homeless at some point last year, according to a recent report by the South Dakota Housing for the Homeless. What is perhaps more shocking is that three of the five lowest-income counties in the country are located in our state. For many impacted by poverty, it’s been a challenge that has been passed from one generation to the next. I want to help end that cycle. 

In the end, Mrs. Noem's actions I think would do nothing to improve TANF or help people get employment.  In some cases, you can't get employment if there are no jobs to be had.  I actually don't have a problem not allowing states to use third-party spending for the MOE.  Some states are not using it to help more people but to simply reduce their own spending needs.  However, and reduction needs other very significant changes.  In a hearing on this exact issue in 2012, the third-party issue was discussed, but most people seem to think that the problem was really how the work equation was used was the real problem.  The other problem is the lack of funding of the program.  These issues should be included in the reform, otherwise your idea of improving TANF will not increase employment and only hurt those in the greatest need.