TANF rules tough on states; new federal changes in welfare rules put restrictions on state flexibility, but states have options to keep programs focused on their goals.

• Author: Steisel, Sheri
• Position: Temporary assistance to needy families

The federal government is changing the focus of TANF," says Michigan Senator Bill Hardiman. "They want it to be all about work participation rates of people on welfare rather than our own goals about helping parents leave welfare for work." Budget reconciliation makes fundamental changes in the state/federal TANF partnership with new restrictions on state flexibility. However, states do have some options to keep their successful TANF programs and still meet the higher federal requirements. But these options may require changes in state laws and budgets.

The creation of the Temporary Assistance to Needy families (TANF) block grant in 1996 marked a significant step in federalism. States were given broad authority over their welfare programs and a federal block grant to fund them. TANF has been a remarkable success. States created new programs to move families off welfare and into jobs. Parents left welfare for work and caseloads dropped at historic rates. States used the TANF block grant for new programs serving low-income working families--child care, pre-K programs, job training, afterschool programs and child welfare.

"States care more about getting parents into jobs and off welfare," says Arkansas Representative Jay Bradford. "Now, if parents get work and leave welfare, we could get penalized for it."

Congress took away state flexibility by changing the federal work participation rules. Under the 1996 law, states were required to have 50 percent of their adult-headed cases and 90 percent of their two-parent families in work activities. Most states relied on the credit given for reducing their caseloads to meet these requirements. Sharp caseload drops--more than 50 percent in most states--meant that states could focus on their own goals.

The TANF changes take away that flexibility, shifting the base year for the credit from 1995 to 2005, eliminating most of the credits states already earned. The law also requires states to include families receiving benefits in separate state programs in the work participation rate calculation, restricting how states can use their own money. States are subject to significant penalties if they fall short--millions in lost federal money and required increases in state spending--starting in October.

Most states will struggle to meet these rates. Fifteen have current work participation rates under 25 percent, so they would have to more than double them to reach the new federal standard. Twelve more states...