Last Updated: 09/12/2023
Would Some Families Be Better Served in a Program Outside the TANF/MOE Structure?
After the passage of the Deficit Reduction Act of 2005 (DRA), some states began serving select groups of families in what are referred to as “solely state funded” (SSF) programs. These programs are funded with state general fund dollars that states do not count toward their state Maintenance of Effort (MOE) requirement. To date, states have primarily served families who would have difficulty meeting the TANF work requirements in these programs. About half the states serve two-parent families in solely state funded programs and a handful serve families who face significant employment challenges. One state serves almost all of its families that receive monthly cash payments in a solely state funded program. While states often impose the same work and other behavioral requirements on these families as they do on TANF recipients, there is nothing that compels them to do so. However, because there are no federal TANF or state TANF MOE funds used to provide assistance to these families, states are not required to impose work or behavioral requirements on families as a condition of eligibility. That gives states the flexibility to offer programs and services to families that are aligned with their personal or family goals or to provide monthly cash payments with no behavioral requirements.
In recent years, there has been growing interest in providing unconditional cash transfers to families. The earliest programs were funded almost exclusively with private dollars, but some of the more recent programs have been funded with public dollars, many of them using flexible funds provided to address additional needs that arose because of the pandemic. States that want to continue these programs after their current funding runs out could consider creating an SSF to continue to provide cash to families with no strings attached.
States may be able to set up an SSF without incurring additional costs. States that use state general fund dollars to provide services that meet one of TANF’s found broad purposes could potentially swap funding streams to free up state dollars to provide unconditional cash payments to some or all families with low incomes. Because TANF’s purposes are so broad, there are many services that states may provide to families with low-incomes that are funded with state (or local) general fund dollars. Examples of services that states often provide with state general funds that could be funded with TANF dollars include such programs as after school programs, child care, and case management provided to families that are unhoused or fleeing domestic violence.
The primary advantage of providing cash assistance through an SSF rather than through TANF is that a state can design a program that they believe will best meet the needs of the families served. But, there are also other considerations.
- Child Support. States must pass through all child support collected on behalf of SSF families to the families for whom the payments are collected. Whether a state gains or loses from this requirement depends on how they distribute child support payments. States that pass through all child support collected gain because they do not owe the federal government any share of the payments passed through. States that do not pass through child support payments that are collected will lose their share of the payments.
- Contingency fund. In order to receive payments from the Contingency Fund, states must meet a higher MOE requirement (100 percent of their historical spending plus an amount equal to the amount of contingency funds they receive). Any funds spent on child care do not count towards the MOE requirement which means that states that count substantial child care spending to meet their MOE requirement will no longer qualify. States that receive contingency funds and want to continue doing so may find it harder to do a funding swap.
In considering whether to establish an SSF program, states should consider questions such as:
- Which families should it serve?
- What benefits and should it include?
- How long should families be able to participate in the program.
- How should it be financed?
- Should recipients have a choice between the SSF program and the regular TANF program?
This piece written by CBPP staff is a bit dated but provides additional information for thinking about the design and implications of serving some TANF families through an SSF. Designing Solely State-Funded Programs | Center on Budget and Policy Priorities (cbpp.org)
This piece was written after the DRA when states were looking for strategies to meet the more stringent work requirements, but much of the information is relevant even if the reason for establishing an SSF is different (i.e., to provide an unconditional cash benefit to families).