A recent set of proposed rules in the Temporary Assistance for Needy Families (TANF) program would require most states to reassess and adjust how they spend TANF funds and would significantly alter a smaller number of states’ use of TANF to fund financial aid programs. These proposed rules represent an overdue shift in TANF to rectify the program’s failure to support families experiencing significant financial hardship, disproportionately harming black families. And it presents an opportunity for states to identify how to align federal and state funding to support higher education attainment. The proposed changes emphasize the importance of strategies to support students who might qualify for TANF, and for students with low incomes who do not. The proposed changes elevate the need for state policymakers to fund state financial aid programs with general fund dollars or other non-TANF sources to avoid worsening college affordability. They also add to the importance of a new federal affordability guarantee that will create debt-free pathways for the students with the greatest financial need.
The recently released notice of proposed rulemaking (NPRM) from the Department of Health and Human Services (HHS, the Department) comprises seven proposals to amend the TANF program to “strengthen the safety net and reduce administrative burden” and align state activities with the programs core purposes. The proposed rule clarifies the permissible spending of TANF funds tied to each of TANF’s core purposes and calls out some non-permissible activities for the first time. The Department estimates the financial impact of non-permissible activities across states to range between $1 to $3 billion dollars annually. If the final rules are promulgated, states who do not comply will be subject to penalties.
Two of the seven proposals would directly affect postsecondary education, forcing some states to identify other state funding sources for existing programs. One of the proposals would impact how some states fund “college scholarships” using TANF. In the notice, the department estimates that states spend approximately $1.14 billion annually on college scholarships and that $970 million to $1.3 billion could be “non-allowable”. It is critical to note that the Department clearly states that “tuition assistance and other education and training supports…may support the economic advancement of parents with low incomes.” However, the Department asserts that for adults without children, it is “unlikely there could be sufficient evidence or logical coherence to show that education and training for individuals who are not parents could be reasonably calculated to end the dependence of needy parents” (TANF purpose two) or “in preventing and reducing out-of-wedlock pregnancies” (TANF purpose three). States that would like to claim that college scholarships for childless adults meet one of TANF’s core purposes would be subject to the “reasonable person” test, laid out in the NPRM, which includes submitting evidence to back their claim.
The second proposal would cap the income level that qualifies as “needy” at 200% of the federal poverty level (FPL), adjusted for family size for all federal TANF and state maintenance of effort (MOE) expenditures under purposes one and two. The Department identified 40 states using TANF funds for programs that serve higher-income families across a range of services, including “college scholarships”, pre-kindergarten, tax credits, and more. They found that some of these programs supported families making 300% to 400% FPL, or even higher. States that are using TANF resources for services under purposes one and two would need to limit those expenditures to families at or below the 200% FPL cap. States that are interested in providing, or continuing to provide, college scholarship funding to parents with low incomes must also adhere to this cap.
State policymakers that have utilized TANF for financial aid will need to assess whether that is an allowable use. HHS’s proposed regulation appears to suggest that it often is not, especially if not targeted to a TANF-eligible population and consistent with one of TANF’s core purposes. Affected states, including California and Michigan, will need to find different funding sources to maintain adequate financial aid support for students. States must also ensure that TANF-eligible families who need support receive it by prioritizing cash assistance, wraparound services, and pathways to postsecondary credential attainment. States should also use this moment to review their TANF rules around postsecondary education and ensure they reflect the demand for postsecondary credentials and pathways to attainment.
The Temporary Assistance for Needy Families (TANF) program was established in 1996 as part of a federal “welfare reform” effort that was deeply steeped in a legacy of racist narratives and policies. States have broad flexibility to administer TANF with the program’s four core purposes. Those reforms prioritized state flexibility to allow for a range of state approaches to serve TANF-eligible populations. However, the flexibility resulted in a perverse incentive for states to reduce cash assistance cases to instead supplant state general funds. The results have been stark, only 21 out of every 100 TANF-eligible families nationally receiving cash assistance (compared to 68 out of every 100 in 1996). Given the scope of the anticipated impacts, the Department should ensure that state policymakers have enough time to adjust budgets in ways that do not compromise college-going and college affordability.
Providing pathways to gaining credentials for parents with low incomes is vital. It is estimated that nationwide welfare reform significantly decreased the probability of college enrollment for adult women by at least 20 percent. It also reduced participation in full-time vocational and education training programs, and these effects were far worse for moms of color. Cutting off college as a path to economic security exposed low-income women and their children to greater harm during economic crises, including the current COVID-19 pandemic. States have a wide range of options available under current flexibilities to reduce or eliminate restrictions on education in TANF, as well as other public programs, like the Supplemental Nutrition Assistance Program (SNAP).
The Department is requesting comments from state agencies and stakeholders on these proposals until December 1, 2023. After the comment period closes, the Department will review comments and could respond to issues raised that require justification for the new rule(s). Unless set by statute, there is no time limit within which an agency must publish a final rule after publishing an NPRM, but HHS has indicated the provisions would be effective at the start of the fiscal year following finalization. Parties who are interested in engaging on this issue can submit a comment and conduct outreach to their state human service agency, which will be responsible for implementing the final rules, to inform them how these proposals would affect their communities should they become final.
For more information, contact Carrie Welton, Senior Director, Policy & Advocacy: Anti-Poverty & Basic Needs at [email protected].
