April 7, 2000                            

Head of Congressional welfare reform panel tells all 50 Governors it's essential that states use their TANF resources and use them wisely.

Early in 1999, U.S. Representative Nancy L. Johnson (R-CT), chair of the House Ways and Means Subcommittee on Human Resources, which has jurisdiction over TANF, sent a letter to the governors of all 50 states urging them to spend more of their TANF funds or risk having Congress take some portion back. This warning was made more concrete by several congressional attempts later in 1999 to rescind some unspent TANF funds. Fortunately, from the perspective of the states and from the perspective of those who are interested in seeing the states use the resources and flexibility available to them under TANF in ways that are effective in both helping people move from welfare to true self-sufficiency and in assisting those with significant barriers to employment, none of these attempts were successful. This outcome was due in large part to the efforts of Congresswoman Johnson and others who continue to take a big-picture, long-term view of the challenges involved in making welfare reform work over time, in both good times and bad.

In March 2000, Representative Johnson sent another letter to the governors, noting that progress had been made in increasing the use of TANF funds but again suggesting that future TANF funding would be safeguarded only if states continue to make efforts to spend the funds they are now receiving, and to spend those funds wisely and in accordance with the true objectives of welfare reform.

These letters from Representative Johnson are extremely important since she is the key Congressperson on TANF issues. In this context, it is important to note that her March 2000 letter clearly warns states against using TANF to supplant state funds. The letter notes that supplantation* is allowed under the law but that it goes against Congressional intent. The letter also makes clear that Congress will look unfavorably on states that have committed such abuses when the reauthorization of TANF comes before the Congress in 2001 and 2002.

Representative Johnson's advice on this point, as contained in her March 2000 letter, is as follows:

In reviewing these and similar investments for your own state, I hope you will be careful to avoid supplanting TANF funds. By supplantation, I mean replacing state dollars with TANF dollars on activities that are legal uses of TANF funding. Supplantation, of course, is perfectly legal under the TANF statute. However, if the savings from supplanted federal funds are used for purposes other than those specified in the TANF legislation, Congress will react by assuming that we have provided states with too much money. As the reauthorization of the TANF legislation in 2002 approaches, it would be a shame if a few states followed the suggestions of their budget officials and replaced state dollars with TANF dollars in order to provide tax cuts, build roads or bridges, or in general use funds for non-TANF purposes. It has become increasingly clear that the media, child advocates, Congressional committees, and, at my request, the General Accounting Office, are watching to see if states supplant TANF funds. Thus, it is likely that jurisdictions that do so will become widely known and criticized. Equally important, these jurisdictions could provoke Congress to take actions that would hold serious consequences for every state.

Attached are downloadable copies of Representative Johnson's March 1999 letter, her March 2000 letter and a recent report by the Center on Budget and Policy Priorities (CBPP) entitled How Much Additional TANF Spending Can New York Afford? That report concludes that New York can increase its use of TANF funds while maintaining an adequate Rainy Day reserve.

One of the most interesting and useful insights in the CBPP report is that states that spend less of their TANF funds are likely to be hurt more by rescissions or by new funding formulas than those who spend more.

States that avoid spending their full TANF allocation for fear of future congressional cutbacks may be creating a self-fulfilling prophecy. All of the 1999 congressional proposals to rescind TANF funds would have distributed the cuts based on each state=s share of total unobligated balances for all states. Thus, states that had left substantial amounts of TANF unspent would have faced deep cuts, while states that had spent or transferred all of their TANF funds would not have had funding reduced. In other words, the more a state=s unspent TANF balance continues to grow because annual spending remains below the annual allocation, the greater the likelihood that the state=s TANF funds will be reduced in future congressional action.

For additional information on New York's use of its TANF resources, see the following reports on the Fiscal Policy Institute's website (www.fiscalpolicy.org): Improving New York State's Utilization of Its TANF Block Grant and Related "Maintenance of Effort" Resources, and Programs and Services Funded by Family Assistance Resources. Both reports are based on testimony that the Fiscal Policy Institute and Housing Works presented at the Human Services budget hearing conducted by the Senate Finance and Assembly Ways and Means Committees on Februrary 9, 2000.