Mandatory Spending

Function 600 - Income Security

Reduce TANF's State Family Assistance Grant by 10 Percent

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

Billions of Dollars 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017-2021 2017-2026
Change in Outlays 0 -1.0 -1.5 -1.6 -1.6 -1.6 -1.6 -1.6 -1.6 -1.6 -5.6 -13.8

This option would take effect in October 2017.

Temporary Assistance for Needy Families (TANF) provides cash assistance, work support (such as subsidized child care), and other services to some low-income families with children. Almost all of the federal government’s TANF funding is provided through a block grant called the state family assistance grant (SFAG), which totals $16 billion annually. The states administer TANF and have considerable latitude in determining the mix of cash assistance, work support, and other services that the program provides. The states also determine the requirements for participation in work-related activities that some recipients must meet to avoid receiving less cash assistance through the program.

Beginning in October 2017, this option would decrease the SFAG by 10 percent. That change would reduce federal spending by $14 billion through 2026, the Congressional Budget Office estimates.

One rationale for this option is that it might prevent some families from becoming dependent on federal aid if states responded to the reduction in SFAG funding by making their work requirements more stringent to reduce their spending on cash assistance. The more stringent work requirements would probably result in some families’ receiving cash assistance for shorter periods. And in some cases, families might find work more quickly, either to compensate for the loss of cash assistance or to comply with the work requirements. However, some states might respond to the reduction in funding by decreasing their spending on work support, which could make finding and keeping jobs harder.

A rationale against this option is that it would reduce the amount of assistance available to low-income families with children. Because federal spending on TANF has stayed about the same since 1998 (the program’s first full year), the purchasing power of that funding has fallen by about 25 percent. As real (inflation-adjusted) spending on TANF has decreased, so has the number of families who get cash assistance from the program—from 3.2 million families in 1998 to 1.3 million in 2015. In comparison, roughly 6.9 million families had income below the poverty threshold in 2015, CBO estimates. Reducing real spending on the program by an additional 10 percent would further limit the number of families that it served or the amount of assistance that it provided.