Report

The District Should Use Its Upcoming TANF Bonus to Increase Cash Assistance and Remove Barriers to Work

by Idara Nichelson
PDF of this Report

At the end of September, the District is likely to receive about $20 million from the federal government for reducing the number of out-of-wedlock births. DC officials are considering using bonus funds to address local budget shortfalls and possibly funding services for TANF families, such as additional child care slots. Yet, another option ‘ increasing cash assistance benefits for TANF households ‘ has become a low priority, even though DC’s current benefit levels are lower than most other states, have fallen sharply in value, and leave needy families deep in poverty.

When the District adopted home rule, welfare benefits were set at 80 percent of the federal poverty level and included annual cost-of-living adjustments. In 1991, the DC Council suspended annual adjustments and reduced benefit levels. Benefit levels were cut yet again in 1994 and in 1997 and have remained at the same level since then. As a result, the value of DC’s cash assistance benefits has fallen significantly over time, while the cost of living in the District has soared.

  •  Over the past 15 years, the maximum benefit level for TANF recipients with no other income has dropped by about 40 percent, after adjusting for inflation.
  • The current maximum TANF benefit for a single mother of two children is $379 per month, or $4,548 per year. This level equals just 29 percent of the federal poverty level.[1]
  • Even with additional income from food stamps, the annual income of a TANF family of three is just $750 per month, or about 60 percent of the federal poverty level.

Cash assistance is not only an income support, but one of the many supports needed to move families from welfare to work. The very low level of the District’s cash assistance makes it difficult for individuals to overcome personal and logistical challenges to employment. It is widely recognized that TANF recipients face not only skill-based barriers to employment, but also challenges such as finding affordable and stable housing and paying monthly utility bills. DC’s current maximum TANF grant provides too little income for families to meet these and other basic needs while attempting to secure and maintain employment. 

For these reasons, an increase in DC’s TANF benefit levels is warranted to address lost value over time. In addition, the District should consider reinstating an annual cost-of-living adjustment so that benefit levels will not erode in the future.

  • If the District increased TANF benefit levels by 15 percent ‘ the increase in the cost of living since 1997 when benefits were reduced[2] ‘ it would cost they city about $10.2 million per year. For a family of three, this would increase the monthly benefit to $432.
  • An increase of 10 percent would cost approximately $7.2 million per year and raise the benefit level for a family of three to $417 per month.
  • Based on projected rates of inflation, an annual increase in the benefit level would costs about $1.6 million in 2005.[3]

Some argue that increasing the District’s cash assistance to TANF families will lead welfare recipients from surrounding jurisdictions to move to DC. Yet, a number of studies have shown that states with high benefit levels are not “welfare magnets.” TANF households do not move frequently from state to state, and rarely are moves motivated by welfare benefits. When TANF households do move, factors such as race, age, and presence of family networks in other states are a greater influence than state benefit levels.[4]

Moreover, the District’s current maximum benefit is low compared to most other states.

  • The District currently ranks 31st in the nation for maximum TANF benefit, providing lower cash assistance to households with no other income than both Maryland (21st) and Virginia (29th).
  • Even with a 15 percent increase, DC’s maximum benefit level would still be lower than Maryland and only modestly higher than Virginia.

The debate over the use of upcoming TANF bonus dollars underscores the fact that many services that help families move from welfare to work, including child care and education, are currently under funded. Regardless of how this year’s bonus award is used, this year’s bonus award will likely be the District’s last because Congress is expected to eliminate awards for reductions in non-marital births when TANF is reauthorized. This means that District leaders will need to consider increasing local funding in order to meet welfare-to-work services in the future. Without additional local support, many of the critical supports that move individuals into employment and help them remain employed ‘ such as an increase in cash assistance, child care, and home visits for sanctioned families ‘ will be eliminated or significantly reduced. 


End Notes:

[1] The 2004 Federal Poverty Guidelines for a family of three is $15,670. US Department of Health and Human Services.

[2] Social Security Administration, Cost of Living Adjustments.

[3] Based on projected inflation of 1.17 percent of calendar year 2005. Center on Budget and Policy Priorities.

[4] Allard, Scott and Sheldon Danziger. 2000. “Welfare Magnets: Myths or Reality?” The Journal of Politics Vol. 62(2): 350-368.