October 6, 2008

Office of Family Assistance
Administration for Children and Families
5th Floor East, 370 L'Enfant Promenade, SW
Washington, DC 20447

To Whom It May Concern:

On behalf of the nation's governors, we submit the following comments in response to the proposed repeal of 45 CFR 261.43 (b), announced by a Notice of Proposed Rulemaking in the Federal Register on August 8, 2008 (73 FR 46230-32). This regulation seeks to eliminate a provision in the Temporary Assistance for Needy Families Program (TANF) that allows states to receive additional caseload reduction credit for maintenance of effort (MOE) expenditures in excess of what is required by statute.

Originally included in the TANF rule published in 1999, the excess MOE credit was introduced to encourage states to increase state spending in their TANF programs above the required level, and in so doing, comply with new, more challenging work participation rates resulting from changes made in the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). Since 1999, this incentive has enabled states to provide programs and services critical for transitioning needy families and special needs populations from welfare to work, while preventing recidivism back into the welfare system.

The NPRM provides three justifications for eliminating the MOE enhanced credit provision. First, that the MOE spending incentive is no longer necessary because State TANF caseloads have plummeted, and the amount of Federal TANF and minimum required State MOE funding available per case has grown considerably. Second, that the incentive is no longer practical given that the DRA expanded the range of expenditures claimable as MOE, and as a result, a state could feasibly claim as "excess MOE" existing state and third party expenditures without truly investing new resources in programs to serve needy families. And third, that the MOE credit incentive is not consistent with Congressional intent in the DRA to restore state accountability in the TANF program and ensure real progress in moving families from welfare to self sufficiency. Governors strongly disagree with all three interpretations.

The assertion that the MOE credit incentive is no longer necessary because the TANF caseload has plummeted is inaccurate, particularly given the change in the DRA of the comparison year for caseload reduction credit from 1995 to 2005, a year of historic lows in TANF program enrollment. Since 2005, TANF caseloads have stopped their dramatic decline, in part because caseloads today are comprised largely of families with multiple needs and barriers to employment who require a plethora of services to help support their self-sufficiency.

Further, the claim that the federal-state share of spending per case has increased considers only those receiving cash assistance in isolation. While states continue to successfully move many families from welfare into work through enhanced services and work incentives, they additionally provide supports to help those who have left TANF maintain self-sufficiency and avoid recidivism back into the program, and prevent low-income working families who are TANF-eligible from needing to apply for assistance altogether.

States make a number of critical investments in TANF beyond what is required of them, in programs that include job training, transportation, child care, state EITC payments, and assistance with health insurance to sustain and empower vulnerable families. These and other work supports have enabled states to develop comprehensive, responsive and effective TANF programs that maximize impact and achieve real progress in transitioning families from welfare to work. The impact of today's faltering economy on needy families, with a national surge in unemployment, a sub-prime lending crisis, an increase in the costs of food and gasoline and a greater demand for low-income home energy assistance, calls for greater efforts to help low-income families overcome the real challenges associated with an economic downturn. States should be encouraged, not discouraged to make these greater investments in TANF above what is required of them, particularly given today's environment of economic uncertainty.

Further, the argument that the MOE incentive is no longer practical because the DRA expanded the range of expenditures claimable as MOE, and that states might feasibly claim existing expenditures without actually investing in new programs and services ignores a number of important realities. Though the DRA did expand the range of expenditures claimable as MOE, the TANF final rule released earlier this year severely contracted the scope of those MOE expenditures a state might claim. In addition, states continue to bolster their TANF programs with services and supports that are MOE credit eligible, but for which they may or may not claim credit. Allowing states to avail themselves of the MOE spending incentive now, at a time when greater effort is needed to place and keep people in jobs and many states project budget deficits for the current and upcoming years, ensures protection for spending on programs serving our most vulnerable populations, spending that might otherwise be eliminated as states make difficult decisions in order to shore up state finances. The MOE spending incentive allows a state to maximize impact in their TANF programs, while also ensuring they are compliant with federal requirements and adjust to program changes made in recent TANF regulations.

Finally, the suggestion that the MOE spending incentive is not consistent with the DRA is based on a false and unsubstantiated interpretation of law contradictory to congressional intent and the principles of true welfare reform. While the original TANF statute and the DRA did stress the importance of program accountability, they equally emphasized the need to reinvigorate state efforts and support greater state investment in TANF as a critical component of the program's success. Until now, there has been no suggestion or indication that the excess MOE provision is inappropriate, impractical, or contrary to congressional intent. In fact the opposite has occurred. The maintenance of effort incentive remained fully intact in the DRA and in the final TANF regulation published on February 5, 2008. Furthermore, ACF, through a series of regional meetings, all-states webinars and individual state outreach, has consistently reinforced the MOE spending incentive by working with states to fine tune the excess MOE methodology, and in so doing, has provided support for greater accountability and increased state investment.

As our nation faces an especially difficult time, with state and federal budget shortfalls and a continuing decline in our economic situation, the proposal to eliminate an incentive for states to serve those most in need is untimely, unjustified, and promises even more hardship for those vulnerable families relying on TANF services and supports to meet their most basic needs. Governors strongly oppose, and urge you to withdraw the proposed regulation, and instead engage with states on how we can best maximize the impact of TANF through a more collaborative and complimentary state-federal partnership.

Sincerely,

Governor Jennifer M. Granholm
Chair, Health and Human Services Committee

Governor M. Jodi Rell
Vice Chair, Health and Human Services Committee

NGA