FY 1998 State Spending Under the New Welfare Program

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HHS News Release

Overview:

Fiscal Year 1998 was the first full year that all states implemented the new welfare program now called Temporary Assistance for Needy Families (TANF). States demonstrated remarkable progress in welfare reform during the year -- over 1.5 million families who were on welfare in 1997 were working in 1998, caseloads continued to decline at an unprecedented rate with 20 percent fewer recipients than in FY 1997, and all states subject to the overall work participation rate in FY 1997 met it. States also continued to make large investments in their work first welfare programs, spending or committing to spend 84 percent of their federal funds. Nineteen states spent 100 percent of their block grant. Although states can reserve funds from year to year without limitation (for example, states can save dollars for "rainy day funds"), when FY 1997 and 1998 funds are combined, states left only 10 percent of the federal block grant unspent.

In an effort to meet the critical need of quality, affordable child care for parents moving from welfare to work, states increased the transfer of TANF funds to the child care block grant. Even with the significant spending of both federal and state funds, however, states are facing the new challenges of reaching families with greater barriers to work and supporting families to remain in work.

FY 1998 Highlights

Maintenance of Effort. The new welfare reform law requires states to continue to spend state funds at a level equal to at least 80 percent of their FY 1994 levels. If states meet the minimum work participation rates, the law also allows them to reduce their minimum-spending requirement to 75 percent. In FY 1998, all states expended enough to meet the 75 percent maintenance of effort amount. Thirteen states reported state spending above 80 percent, with one state -- West Virginia -- exceeding 100 percent. Since states are not required to report any expenditures in excess of the maintenance of effort requirement, states may actually be spending more than reported.

Child Care. Child care continues to be a critical support for families moving from welfare to work. States made significant investments in child care in FY 1998, transferring a total of $652 million in TANF funds to the child care block grant, an over three-fold increase from FY 1997. States report they are committing over 99 percent of their child care block grant funds. In addition, states spent over $1 billion of their own funds on child care.

Work Activities, Cash Assistance, and Other Supports. States furthered the goal of the welfare law by making work first the priority for their programs. In FY 1998 states spent $1.2 billion in combined federal and state funds on work activities. States spent $6.8 billion, or 69 percent, of their FY 98 federal TANF funds on cash assistance and work-based assistance. (The work-based assistance in this category may include paychecks earned by TANF recipients in return for community service jobs or subsidized employment.) Additionally, states reported spending $1.1 billion in federal TANF funds and $1.3 billion in state maintenance of effort funds on other expenditures, which included fraud control programs, emergency assistance (e.g., one-time benefits to divert families from having to rely on welfare), staff training, domestic violence services, and child welfare programs.

Transferring TANF Funds. The new welfare law gives states the authority to transfer portions of their TANF grant to either the Child Care and Development Block Grant or the Social Services Block Grant. Thirty-nine states reported transferring funds in amounts ranging from 2 to 29 percent of their TANF grant. In total, $652 million or 4 percent of TANF funds were transferred to the child care block grant and $1.1 billion or 7 percent was transferred to the Social Services Block Grant.

Administrative Costs. States continue to invest in transforming their welfare offices into employment centers, and to expect more from their workforce as eligibility workers are trained as job counselors. In FY 1998, state administrative expenditures amounted to $913 million, or 9 percent of total federal TANF expenditures -- well below the TANF administrative cost limit of 15 percent.

Separate State Programs. In FY 1998, a fewer number of states -- 15 -- chose to fund programs with separate state funds than in FY 1997. Expenditures on separate programs represented less than four percent of total state spending. States with separate programs spent most of their separate state program funds -- 55 percent -- on cash and work-based assistance by providing support to primarily two-parent families, pregnant women, migrant seasonal workers, and qualified legal immigrants. Most of the remaining funds were spent on child care (35 percent) and non-direct services categorized as other expenditures.

Unobligated Balances. States can carry forward unobligated TANF funds for use in future years, for example to meet unanticipated needs or reserve dollars for "rainy day" funds. In FY 1998, states obligated $13.9 billion or 84 percent of the total federal funds. The remaining $2.7 billion in unobligated funds remain in the federal treasury, with no time limit, until states draw down the dollars.

Attachments Omitted:

Table A - Federal Awards, Transfers and Expenditures in FY 1998 Part 1, Part 2, Part 3
Table B - Expenditures of State Funds in FY 1998
Table C - Expenditures of State Funds in Separate State Programs in FY 1998
Table D - Expenditures of State Funds in FY 1998

Note: All HHS press releases, fact sheets and other press materials are available at http://www.hhs.gov/news.

Contact: ACF Press Office (202) 401-9215
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