Testimony – Safety Net Programs

On behalf of the nation’s governors, I would like to thank Chairman McDermott and the Ways and Means Subcommittee on Income Security and Family Support for the opportunity to submit written testimony on this critical and timely issue.

Ensuring safety net programs are effective and responsive, particularly during an economic downturn, is especially important to governors. In addition to administering crucial supports like unemployment insurance and supplemental nutrition assistance, many states have paved the way in establishing new and innovative programs to simultaneously meet increased need for assistance and enable people to successfully transition into sustainable work. Such programs, under the Temporary Assistance for Needy Families (TANF) umbrella have included job training and skill development through education and subsidized employment; critical support services such as child care and transportation assistance to remove barriers to work; and basic cash assistance to carry people through these difficult times.

As you well know, the current and projected fiscal climate in states is bleak. A dramatic increase in housing foreclosures and unemployment, and declining consumer confidence over the last few years has resulted in an 8.2 percent decline (or $63 billion less) in state tax revenue over the last 12 months ending June 30 of this year. Forty-nine states saw total tax revenues fall during the fourth quarter of FY 2009, with 36 states reporting double-digit declines. A recent report by the Nelson A. Rockefeller Institute of Government showed state revenues plummeting for the second quarter in a row – this time a record 16.6 percent plunge. At least 17 states project budget shortfalls for the current fiscal year, and that number is expected to increase in the coming months.

While economists project the national economy is turning the corner toward recovery, state fiscal conditions, which historically lag behind any national economic recovery, will likely remain weak for several years.

I offer the state fiscal picture to serve as a backdrop for understanding how safety net programs are currently responding to the economic downturn, and more importantly, to highlight the critical opportunities that are available to you to help safety net programs be more responsive in the current environment. Through increased federal assistance under the American Recovery and Reinvestment Act (ARRA), states have successfully channeled unemployment and nutrition assistance to an increasingly eligible population. Including administrative dollars in ARRA to support implementation of these initiatives has enabled states to streamline their application and eligibility determination processes and successfully and effectively reach those needing assistance.

Nutrition assistance and unemployment insurance are usually the first two programs people turn to during an economic downturn. However, with the continued economic decline, recent data suggests more people are now seeking greater financial support and applying for welfare. Accordingly, and with federal reporting guidance now in place, more states have recently begun to avail themselves of the TANF Emergency Contingency Fund created by ARRA. The Emergency Fund provides an 80 percent federal match for increased state expenditures related to subsidized employment, short-term nonrecurring benefits, and basic cash assistance. Through increased public-private partnerships, and ramp up of existing state programs and supports, a number of states are leveraging these resources to effectively serve people in need of assistance. It is important to underscore, however, that even as more states begin to avail themselves of this resource, some states, because of severe budget constraints and strict legislative requirements in their state, simply cannot afford to meet the 20 percent match requirement.

Apart from the Emergency Fund, a number of opportunities do exist for improving the existing TANF program and enabling states to more effectively serve people during this economic downturn. Greater flexibility for states to adapt their TANF programs to the current economic climate and needs of their constituents must underscore this effort. Similarly, relaxing some of the strict definitions and time limits on allowable activities that were imposed in the Deficit Reduction Act of 2005 and subsequent regulation is a step in the right direction. Given the state of unemployment across the country, the current narrow allowance for job search and job readiness, along with time limits on education, is an unnecessary obstacle to preparing the unemployed to successfully re-enter the labor market

Further consideration of the inherent tension in TANF as both a work-first and a safety net program needs to occur. In addition, governors believe the following principles, as reflected in NGA policy, should guide any improvements made to TANF, and would enable the program to more effectively respond to the emerging needs of people struggling in this recession:

  • The TANF block grant is intended to provide states and territories with significant flexibility to develop and implement innovative welfare reform initiatives and to serve a broad population of families in need. States’ ability to implement innovative approaches to assist low-income families must continue, and this flexibility should be restored and, indeed, strengthened.
  • A strong state-federal partnership must be central to any welfare reform effort. Changes in the TANF program made at the federal level must be carefully crafted so as not to impede the progress made by innovative state and county programs.
  • The emphasis on work should continue to be paramount in TANF. The federal government should recognize the success of state-tailored approaches to addressing an individual’s needs by providing states greater discretion in defining appropriate work activities. This should include the authority to determine which individuals require additional preparation for work and the duration and scope of such activities.
  • Time limits on assistance have an important signaling effect to both recipients and to caseworkers about the urgency of addressing a family’s needs and should continue. At state option, and under certain limited circumstances, individuals who have reached their time limit on federally-funded cash assistance and are working in unsubsidized employment consistent with the purposes of the law should have the ability to earn additional months of eligibility for federally funded assistance.
  • Two-parent families and single-parent families should be subject to the same work participation rates. Congress should eliminate the separate two-parent work participation rate currently in statute.
  • States should receive partial credit for those individuals who are working part of the required hours to meet the federal weekly standard. Permitting partial credit would discourage an “all or nothing” approach to engaging individuals, and it would encourage states to continue to serve those individuals who are engaged in work, although not for the requisite hours.
  • Bonuses, rather than penalties, are an effective mechanism for the federal government to use to encourage and reward state innovative approaches to welfare reform. If a penalty-based system is used, penalty relief for states should be provided, along with increased flexibility in determining reasonable cause, providing for corrective compliance and reducing penalties based on the extent of noncompliance.
  • The federal government must maintain its financial commitment to the TANF block grant by providing full funding for the block grant and allowing for inflationary increases in the program to enable states to sustain the system of services delivered to broad populations of low-income families.
  • TANF should continue to allocate supplemental funds to states with high population growth or historically low welfare spending and include these funds in the qualifying state’s base grant amount. Funds for any new qualifying states should be in addition to the current total TANF funding as adjusted for inflation.
  • The TANF contingency fund should be strengthened to make it a more viable source of federal support in times of economic downturn. Improvements to the contingency fund should include more appropriate triggers for eligibility and elimination of the high match requirement imposed on states that access the contingency fund.
  • The ability to maintain state “rainy day” funds should be enhanced, and Congress and the Administration should consider new incentives for states to “save” funds so that states are better equipped in times of economic difficulty.
  • States should be provided greater flexibility to coordinate federally funded state-administered programs. The federal government should work with states to explore ways to simplify and align rules for related programs in order to enhance states’ abilities to create a cohesive system of support for low-income families.
  • States should continue to receive credit for those families who successfully transition off of welfare.
  • Congress should permanently restore the federal incentive match to child support enforcement previously repealed in the Deficit Reduction Act of 2005.

In closing, I thank you for the opportunity to submit testimony on behalf of governors concerning our mutual concern for how safety programs are responding to and meeting the needs of people during the economic downturn. We look forward to continuing, and strengthening, the state-federal partnership and working collaboratively to improve our safety net programs. In so doing, we will maximize our ability to capitalize on available resources and most effectively and efficiently serve the American people.