The Problem(s) with Block Grants

Saturday, July 16, 2011 at 12:11 AM by

As federal lawmakers grapple with options for reducing the federal deficit, some have suggested that the welfare reform block grants, known as Temporary Assistance to Needy Families (TANF), serve as a model for how to reshape the funding for other public benefits, such as Medicaid and food stamps. House Budget Committee Chairman Paul Ryan and others contend that the “success” of welfare reform and the TANF block grants illustrates how the federal government can save money by giving states more flexibility, in exchange for reduced funding and an end to the current entitlement nature of these programs.

A July 14 paper by the Center on Budget and Policy Priorities (CBPP) refutes that argument by examining the role TANF played in the recent recession, and showing that the block grant did not respond effectively to the sharp economic downturn. This blog post summarizes their findings and supplements them with our own observations about recent TANF challenges in Wisconsin. 

The CBPP paper shows that the recent recession exposed serious weaknesses in TANF’s ability to respond to significant changes in the economy, resulting largely from its block-grant structure. Some of the highlights of the paper include the following:
  • Many states’ TANF programs have responded inadequately — or not at all — to the large rise in unemployment during this very deep recession, leaving large numbers of families in severe hardship.
  • In 16 states, TANF caseloads rose by less than 10 percent between Dec. 2007 and Dec.2009, and in six states caseloads actually fell – during a period when the number of unemployed people doubled and participation in food stamps (aka Food Share or SNAP) rose by 45%.
  • TANF’s annual block grant funding level has been frozen since its creation 15 years ago and has lost 28 % of its value to inflation, with the decline growing larger with each passing year. (Required minimum levels of state funding for TANF – known as the “maintenance-of-effort, or MOE, requirement – have fallen in value by 28% as well.)
  • States whose TANF programs were more responsive to the greater need for assistance are now cutting their TANF cash assistance programs to reduce the amount of TANF expenditures used to support unemployed parents, despite a continuing poor job market.
  • Wisconsin and several other states have recently cut their cash assistance benefits.
  • The poorest families have become poorer since the block grant was initiated, and welfare reform has left a large and growing number of families disconnected from both work and safety net.

To those concerns, I would add that the Wisconsin experience illustrates how states can exploit the increased flexibility by using loopholes in rules that were intended to prevent federal block grant funds from being used to supplant state funding. A July 3 WCCF blog post discussed how the budget and budget repair bills use $111 million of TANF funds to reduce the state deficit by supplanting state funding for the Earned Income Tax Credit, thereby reducing the funding available for child care subsides and the Wisconsin Works program.

The most basic problem is that block granting and flat funding important benefit programs like Medicaid and Food Share would prevent them from growing during economic downturns when they are needed the most. The CBPP analysis of the experience with the TANF block grant clearly illustrates that this is not just a hypothetical concern.

Jon Peacock

Categories: Blog, food stamps, Medicaid, TANF | Comments Off on The Problem(s) with Block Grants

Comments are closed.