The federal welfare
reform legislation, the Personal Responsibility and Work Opportunity
Reconciliation Act (PRWORA), was passed in 1996. Prior to this, all
states' welfare programs were funded through the Aid to Families with Dependent
Children Program (AFDC). The AFDC program was an uncapped federal entitlement
program that required states to provide matching dollars to draw down federal
funds. Rich states put up lots of state match and pulled down substantial
amounts of federal funds. These states ran big welfare programs and provided
generous monthly checks to low-income families. Poorer states, like SC,
had fewer state dollars to provide as match and consequently received much
smaller federal allotments. Welfare checks for low-income families in poor
states were significantly lower.
the AFDC program was ended and the entitlement program was replaced with
a block grant. A major hurdle in the passage of PRWORA was determining a
formula for allocating federal block grant funds to states. Rich states
wanted a formula based on prior receipt of federal AFDC dollars while poor
states wanted a formula that equalized federal funds. In the end, federal
funds were allocated to states based on the average amount of federal AFDC
funds received by the states in a prior three-year period (1993-1995). This
was a victory for rich states as it guaranteed that the unequal distribution
of federal funds that existed in the AFDC program would continue under the
block grant program. Poor states (especially poor southern states) were
unhappy with this situation and threatened to pull support from the legislation.
In an effort
to placate these states and keep the legislation on-track, the supplemental
grant funding was added to the bill. The supplemental grant funding provided
an additional federal funding appropriation of 800 million dollars for four
years beginning in federal fiscal year 1998 for "qualifying states".
The formula provides that each state that qualifies received a grant equal
to 2.5% of their federal AFDC drawdown for 1994 in the first year. In each
subsequent year the amount of the prior year is increased by the amount
received in the first year. (That is, the money doubles in the second year,
triples in the third year, etc.) Qualifications for supplemental grants
were established so that most states receiving fewer federal dollars in
the block grant formula would be eligible for supplemental dollars. States
qualified for supplemental grants in two ways, population growth and spending
per poor person.
grants had the effect of providing some additional funding to the 17 qualifying
states, they did little to address the real problems with the TANF funding
formula. Basing TANF funding on the prior AFDC formula had the effect of
cementing in place the inequities that states experienced in the prior program.
Since AFDC grants were based on each state's ability to pay match dollars,
and TANF funds are based on AFDC grants, then TANF funds are actually based
on the state's economy in 1993. Nine years later, states are still unable
to make any change that would result in increased federal dollars. The result
of this funding formula is shown in the attached chart. TANF allocations
per poor child vary from a low of $411 to a high of $2,744.
Beyond the inequities
of basing TANF funds on AFDC grants, the two programs are designed to accomplish
vastly different purposes. The AFDC program existed to pay cash assistance
checks to needy families. The TANF program was designed to move families
from cash assistance to employment. States understood the purpose of TANF
and have moved far away from the cash assistance programs. In 2000, states
spent less than half of their TANF grants, 49%, on cash assistance. The
majority of each states' TANF grant was spent on helping parents attain
and retain employment. While welfare payments vary a great deal from state
to state, the cost of childcare, transportation, and job training does not,
and these are the services states are purchasing with their TANF dollars.
Using welfare spending formulas to allocate block grants for a work program
is unreasonable and illogical.
The PRWORA expires
this year and must be reauthorized to continue funding. Reauthorization
provides an opportunity to rectify the funding inequities in the original
legislation. TANF funds are intended to help needy families. It makes sense
therefore, to allocate funds to states based on need. A revision to the
current TANF funding formula is necessary to ensure that poor citizens have
the same supports and the same opportunities no matter where they live.