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CENTER ON BUDGET
AND POLICY PRIORITIES
January 3, 2000
SUPPLANTATION USING TANF FUNDS MAY INCREASE SUBSTANTIALLY
IN THE NEAR FUTURE
The 1996 federal welfare law established the Temporary Assistance to Needy Families
Block grant, with federal funding to states fix at roughly $16.5 billion annually through 2002.
As cash assistance caseloads have falien sharply since 1994, so has spending on cash assistance.
This has freed up substantial amounts of TANF funds, some of which have been reinvested and
some of which have been left unspent.
The final TANF regulations issued in 1999 give states extensive opportunities to use
these funds to aid low-income families. For example, the regulations make clear that states can
use TANF funds to serve families with incomes above the eligibility limit for cash welfare
benefits. The regulations also identify many types of activities for which TANF funds can be
used without time limit or other TANF requirements applying. In addition, the regulations and
related guidance from HHS highlight the fact that TANF expenditures intended to reduce out-of-
wedlock births or to promote two-parent fami 'S can be used to serve non-needy families as well
as needy families.
The TANF regulations have been praised widely for affirming and enhancing state
flexibility to help needy families and to address the problems of out-of-wedlock births and
single-parent families.
Unfortunately, the available funds and TANF regulations also have the unintended effect
of increasing the likelihood that states will use TANF funds to supplant, rather than supplement,
existing state spending. The term "supplantation" is defined here to mean the use of TANF
funds to replace state spending in ways that allow states to use the freed-up funds for any budget
activity - e.g., tax cuts, spending on programs that are not targeted on low-income families with
children, or programs serving low-income families that cannot be funded directly with TANF.
The "new spending" test allows state spending on eligible programs to be counted
toward the TANF maintenance-of-effort requirement only to the extent that it
exceeds the 1995 spending level. Yet in cases where spending cannot be counted
toward the state MOE requirement due to the new spending test, states can choose
to fund the entire program with federal TANF resources, thereby reducing state
spending and undermining the new spending test's intent.
820 First Street, NE, Suite 510, Washington, DC 20002
Tel: 202-408-1080
Fax: 202-408-1056
[email protected]
http://www.cbpp.org
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"ocrText": "CENTER ON BUDGET\nAND POLICY PRIORITIES\nJanuary 3, 2000\nSUPPLANTATION USING TANF FUNDS MAY INCREASE SUBSTANTIALLY\nIN THE NEAR FUTURE\nThe 1996 federal welfare law established the Temporary Assistance to Needy Families\nBlock grant, with federal funding to states fix at roughly $16.5 billion annually through 2002.\nAs cash assistance caseloads have falien sharply since 1994, so has spending on cash assistance.\nThis has freed up substantial amounts of TANF funds, some of which have been reinvested and\nsome of which have been left unspent.\nThe final TANF regulations issued in 1999 give states extensive opportunities to use\nthese funds to aid low-income families. For example, the regulations make clear that states can\nuse TANF funds to serve families with incomes above the eligibility limit for cash welfare\nbenefits. The regulations also identify many types of activities for which TANF funds can be\nused without time limit or other TANF requirements applying. In addition, the regulations and\nrelated guidance from HHS highlight the fact that TANF expenditures intended to reduce out-of-\nwedlock births or to promote two-parent fami 'S can be used to serve non-needy families as well\nas needy families.\nThe TANF regulations have been praised widely for affirming and enhancing state\nflexibility to help needy families and to address the problems of out-of-wedlock births and\nsingle-parent families.\nUnfortunately, the available funds and TANF regulations also have the unintended effect\nof increasing the likelihood that states will use TANF funds to supplant, rather than supplement,\nexisting state spending. The term \"supplantation\" is defined here to mean the use of TANF\nfunds to replace state spending in ways that allow states to use the freed-up funds for any budget\nactivity - e.g., tax cuts, spending on programs that are not targeted on low-income families with\nchildren, or programs serving low-income families that cannot be funded directly with TANF.\nThe \"new spending\" test allows state spending on eligible programs to be counted\ntoward the TANF maintenance-of-effort requirement only to the extent that it\nexceeds the 1995 spending level. Yet in cases where spending cannot be counted\ntoward the state MOE requirement due to the new spending test, states can choose\nto fund the entire program with federal TANF resources, thereby reducing state\nspending and undermining the new spending test's intent.\n820 First Street, NE, Suite 510, Washington, DC 20002\nTel: 202-408-1080\nFax: 202-408-1056\[email protected]\nhttp://www.cbpp.org"
}