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Monday, October 18, 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 was a temporary fund for two years, FY2009 and FY2010, and expired on September 30, 2010. All of the available $5 billion was awarded by the fund’s expiration date to states, tribes, and territories.

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 was 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 were 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 had to 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 were 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.

A total of 49 states, the District of Columbia, Puerto Rico, and the Virgin Islands had their applications for ECF grants approved. Additionally, 25 tribes and tribal organizations had approved ECF applications. Of the total $5 billion awarded, $1.6 billion was for basic assistance, $2.1 billion for short-term aid, and $1.3 billion for subsidized employment. Twelve states (Colorado, Delaware, Maryland, Michigan, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Tennessee, and Washington state) have received their maximum ECF grants.

Though the economy grew in the last half of 2009 and the first half 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. Thus far in 2010, the House has twice passed bills that included extensions to the ECF in 2010; proposals that included ECF extensions have also been before the Senate during the year but have not passed. Basic TANF funding was also scheduled to expire on September 30, 2010. TANF was extended through December 3, 2010, as part of a government-wide continuing resolution (P.L. 111-242), but the ECF was not extended. Congress did provide a $506 million appropriation for the TANF “regular” contingency fund (created in the 1996 welfare law), which is currently the source of any additional federal TANF funds to meet additional costs associated with the lingering effects of the 2007-2009 recession.

Date of Report: October 6, 2010
Number of Pages: 12
Order Number: R41078
Price: $29.95

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