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Tuesday, August 3, 2010

The TANF Emergency Contingency Fund

Gene Falk
Specialist in Social Policy

The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) created a $5 billion Emergency Contingency Fund (ECF) within the Temporary Assistance for Needy Families (TANF) block grant to help states, Indian tribes, and the territories pay for additional economic aid to families during the current economic downturn. It was part of a package of tax and benefit program provisions aimed at stemming the decline in family incomes and purchasing power caused by increased unemployment. The ECF is a temporary fund for two years, FY2009 and FY2010, and thus is scheduled to expire on September 30, 2010.

TANF is best known for funding cash welfare payments for low-income families, but it actually provides funds for a wide range of benefits and services to ameliorate the effects of, or address the root causes of, economic disadvantage among families with children. While TANF funds a wide range of both economic aid and human services to families with children, the ECF is limited to funding three categories of expenditures: basic assistance, a category that most closely resembles traditional cash welfare; non-recurrent short-term (e.g., emergency) aid; and subsidized employment. These categories typically are those that provide direct aid to families, rather than fund services. States, Indian tribes, and the territories are reimbursed 80% of the costs of increased expenditures in these categories. To qualify for ECF grants for increased basic assistance expenditures, a state, tribe, or territory must aid more families on its assistance rolls than it did in FY2007 or FY2008. Qualification of states, tribes, and territories for ECF grants supporting short-term aid or subsidized employment is dependent only on increased expenditures from FY2007 or FY2008. ARRA placed a limit on total ECF and other TANF contingency fund payments to states, at a combined 50% of a state's basic block grant over the two years, FY2009 and FY2010.

Through July 22, 2010, a total of 47 states, the District of Columbia, Puerto Rico, and the Virgin Islands had their applications for ECF grants approved. Additionally, 17 tribes and tribal organizations had approved ECF applications. Total awards from these approved applications were $4.1 billion. Of the total, $1.4 billion was for basic assistance, $1.7 billion for short-term aid, and $1.0 billion for subsidized employment. Of the awards, 45 jurisdictions were drawing funds for increased basic assistance expenditures, 39 for increased short-term aid, and 36 for subsidized employment. Seven states (Delaware, Michigan, Nevada, New Mexico, New York, North Carolina, and Washington state) received their maximum ECF grants.

Though the economy grew in the last half of 2009 and the first quarter of 2010, unemployment remained high. Historically, the trends in cash welfare caseload have sometimes followed economic conditions, but sometimes not. After the 1990-1991 recession, welfare caseloads actually peaked in March 1994, before beginning their decline. President Obama's FY2011 budget proposed continuing emergency funds through FY2011. The House has twice voted to extend the ECF through the end of FY2011, though the Senate has yet to approve such an extension.

Date of Report: July 26, 2010
Number of Pages: 14
Order Number: R41078
Price: $29.95

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