NC Budget and Tax Center, TANF 20 Years Later

Twenty years later, TANF does little to relieve poverty and hardship

This blog is the second post in a series that will detail how lawmakers have weakened Temporary Assistance for Needy Families (TANF) over the past 20 years, explain why TANF is a cautionary tale rather than a model for other work and income support programs, and map out a better way forward.

TANF does little today to help families make ends meet or to connect them to work to reduce their need for supports—thus violating the purported intention of the 1996 welfare law to move people off welfare to work. Known as WorkFirst in North Carolina, TANF is a cautionary tale, not a model, for lifting families out of poverty.  Below are the top three reasons why.

1. WorkFirst provides a safety net for fewer families who are poor, despite increased need. Just 8 out of 100 North Carolina families with kids living below the federal poverty line benefit from the program today, as opposed to 74 out of 100 when the law was first enacted (known as the TANF-to-poverty ratio; see the chart below). There are only seven states with a lower ratio. In other words, cash assistance through TANF is simply inaccessible in North Carolina.

In fact, WorkFirst failed to cushion families against deep spikes in unemployment during the Great Recession and its aftermath. The TANF-to-poverty ratio either stayed flat or fell every year since the 2007 downturn. Since 2006-07, nearly 50,000 more families with children live in poverty, but caseloads dropped by more than 36 percent. One would expect, at minimum, for the cash assistance program to respond modestly to meet the surge in poverty, but WorkFirst failed completely to react and left a lot of needy families without the basics.


2. For the few families who do receive cash aid, the benefits are inadequate and losing purchasing power. This is contributing to a rise in deep poverty. WorkFirst benefits are tremendously low: just $272 for a family of three. This is more than one-third below 1996 levels, when adjusted for inflation. That means poor families and children must stretch their cash assistance a whole lot further today than in the past. On a related note, benefits for a family of three are just 16 percent of the stingy poverty level compared to 25 percent in 1996, meaning cash aid does much less today to help families escape deep poverty (see the chart below). Even when you add in food assistance, combined benefits are just below half of the poverty level.

The eroded value of benefits is a reflection of federal lawmakers to block grant TANF  with no adjustment for inflation, as well as state lawmakers’ failure to react and raise WorkFirst cash benefits—not even once—since the 1996 welfare law passed. These decisions, coupled with work requirements and time limits, contributed to a rise in nationwide deep poverty, which can hurt children’s healthy development over the long-term. In North Carolina, there are twice as many families with children living in deep poverty now than in 1995-96.


3. Although a core purported goal of the welfare law was to boost employment among poor families, North Carolina spends just over a third of TANF funds to help improve these families’ employability. The law gave states a great deal of flexibility under the block grant structure, with the goal that states would be better positioned to come up with innovative and local programs to help families find and maintain work. Yet, North Carolina spending on work-related activities or job preparation only makes up 6 percent of total funding. When combining these activities with child care—which supports employment among low-income families—the investments total 35 percent (see the chart below).

As indicated earlier, basic assistance is reaching fewer families, with $1 out of every $10 going toward cash aid today compared to $1 in $4 in 2001. Over time, North Carolina has diverted funds from cash aid and work activities to fill budget holes, support early education, fund services for families above the poverty level, bolster child welfare systems, and expand support for pregnancy prevention and two-parent family formation. But in recent years, lawmakers have supplanted existing state spending for early childhood education and subsidy efforts, which enabled them to shift even more funds to other uses, such as tax cuts.


By and large, these three major points illustrate that North Carolina—like most states across the U.S.—has not adequately used TANF to provide a safety net for families in need or to help parents prepare for or connect to work.

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