TANF Program Serves a Fraction of Poor Families

On August 22 of this year, the law creating the Temporary Assistance to Needy Families program (TANF) turns 25 years old, and that’s not a cause for celebration. At the national level and here in Wisconsin, TANF is serving only a small fraction of the families who are living in poverty and are eligible for assistance.

The TANF law created a block grant to states that replaced the Aid to Families with Dependent Children program (AFDC). Wisconsin uses a portion of those block grant funds to finance cash assistance tied to work through the Wisconsin Works program, known as W-2.

Unfortunately, the amount of TANF funding used for direct financial assistance to families, including those who participate in work and training programs, has been shrinking in Wisconsin and many other states. According to an analysis by the Center on Budget and Policy Priorities, the portion of total federal and state TANF funding spent for “basic assistance” was just 21 percent nationally in 2019 and only 12 percent in Wisconsin. Thirty-four other states provide a larger share of their TANF funding for basic assistance.

W-2 is administered in most parts of Wisconsin by for-profit businesses that profit by suppressing the number of families they serve and by minimizing the service they provide. Because most participants find the program unhelpful, demeaning and overly bureaucratic, few economically distressed families apply for W-2.

The severe shortcomings of W-2 are illustrated by its failure to grow during the most recent recession caused by the pandemic. In 2020 and 2021 – during the deepest recession in almost a century – the number of Wisconsin families receiving W-2 cash assistance barely increased. The total number of cash assistance cases (i.e., W-2 cases plus “child-only” cases) was up just 6 percent compared to 2019, and it was a staggering 80 percent below the number receiving cash assistance in 1991, under the AFDC program.

State and federal lawmakers’ decisions to reduce direct financial assistance for people trying to escape poverty is one of the reasons for the growing economic divide that is holding back our state. That divide is particularly harmful to people furthest from opportunity – those in rural parts of the state and people of color.

The failure of W-2 to help more families during the very deep recession last year can be attributed in part to not creating a broad exception to the work requirement for receiving assistance. That requirement is especially problematic during a deadly pandemic. However, there are also more fundamental problems in the design and implementation of TANF, growing out of the racist ideology and false assumptions that led to TANF’s adoption.

The following policy choices have contributed to the failure of W-2 and TANF to serve very many of the eligible families:

• The funding level has been frozen since TANF was created, and the fixed appropriation level has lost 40 percent of its value over the past 25 years.
• Much of the funding in Wisconsin is being spent on administrative costs, and the state’s contracts with the private entities that administer W-2 enable them to increase their profits by finding ways to deny assistance to families.
• States are using federal TANF funds in ways that replace money the state had previously spent from its own coffers, as illustrated by Wisconsin’s use of federal TANF funds to substantially reduce the state share of funding for the Earned Income Tax Credit.
• The Wisconsin legislature has chipped away at W-2 benefits, and has created additional barriers to accessing public assistance.

Financial assistance for families should be a key part of TANF, not only to help cover parents’ and children’s basic needs today, but also to help create the stability necessary for children to thrive in the future. TANF funding can also provide valuable training and employment skills for parents by enabling them to participate in effective job programs, such as the Transitional Jobs program (in contrast to the demeaning and ineffective programs offered by many W-2 agencies). However, fewer and fewer families are getting these forms of assistance from state expenditures of TANF funds.

Federal lawmakers should change the structure of TANF to require that more of the funding is used to serve families who need the cash assistance that TANF can provide to improve their current circumstances. However, even with the current federal law, Wisconsin policymakers can and should make fundamental changes that help the lowest income parents across Wisconsin as they strive to support themselves and their children:

• State policymakers should scrap W-2 or at least fundamentally restructure the program so the private corporations that implement it are held accountable for providing the services needed by low-income families, rather than enabling those corporations to turn families away and maximize the profits from their contracts with the state.
• The state should increase the TANF funding allocated for the Transitional Jobs program, which has been shown to be an effective jobs training program.
• State policymakers should also increase the share of TANF funding available to provide emergency assistance to families with children, in order to help them with emergencies like car repairs, or help with rent to avoid an eviction.
• Lastly, state policy makers should consider doing a racial equity impact assessment to determine how public assistance programs can be redesigned to reduce the extreme racial disparities in Wisconsin.

According to numerous studies, having access to a stable income can improve children’s well-being and also their educational and economic outcomes. After 25 years of experience with TANF and the dwindling assistance provided by W-2, it’s time for state and federal lawmakers to make fundamental changes that enable these programs to be far more effective in providing financial assistance, stability and opportunity for low-income families.