Skip to main content

Ending the Small Checks Scam


May 31, 2023

It’s no secret that strengthening work requirements for key welfare benefits has been a flashpoint in the debt limit negotiations. House Republicans, led by Speaker Kevin McCarthy (R-CA), insisted on including stronger work requirements in any agreement that raises the debt limit. Meanwhile President Joe Biden vacillated. At first, he noted his past support for work requirements and seemed open to more. But then he tried to quell liberal backlash by saying he wouldn’t support adding “anything of any consequence” to current law.

The president was likely thinking of work requirement changes Republicans proposed involving Temporary Assistance for Needy Families (TANF) welfare checks as being without consequence. The reason is simple. The Congressional Budget Office (CBO) estimated that TANF changes House Republicans included in their April debt limit bill would result in virtually no savings—a paltry $6 million over the coming decade, in a program expected to spend $165 billion in just federal funds during that time. As Roll Call headlined, those relatively small savings made the TANF policies ripe for inclusion in a debt limit agreement.

And sure enough, that’s exactly what happened. The text of the Fiscal Responsibility Act—which reflects the agreement reached over the weekend between the White House and congressional Republicans—includes several TANF work requirement changes adapted from the House-passed legislation.

But even though CBO projected limited savings from the proposed TANF changes, that doesn’t mean they wouldn’t have significant practical effects within the fixed TANF block grant program. Consider the agreement to close a loophole some states have exploited to avoid current work requirements. The House bill—and the bipartisan Fiscal Responsibility Actofficially dub the ploy the “small checks scheme.” The Wall Street Journal recently offered a pithier title: a scam.

Here’s how it works: TANF generally expects 50 percent of adult recipients to engage in at least part-time work or activities like a job search or education and training in exchange for benefits. To be counted toward this “work participation rate,” an adult must be on TANF, which paid monthly benefits ranging from $146 in Mississippi to $862 in New Hampshire in 2020.

Enter clever state lawmakers, who in the past decade started importing working adults into their TANF program to satisfy its work requirement and avoid federal penalties. California, for example, has since 2014 operated the Work Incentive Nutritional Supplement (WINS) program. Unlike the regular TANF program, WINS pays a tiny TANF-funded benefit to working adults on food stamps. These working adults receive a $10 monthly benefit paid for with state TANF dollars and—voila—they are “on” TANF and count towards its work rate. As California readily admits, the goal of WINS is to “increase the State’s Work Participation Rate.”

The scam has been effective at artificially raising TANF work rates—and thereby absolving states from engaging more of the program’s real recipients in work and training. According to the nonpartisan Congressional Research Service (CRS), the introduction of California’s small checks scheme caused “more than half (54%)” of the apparent increase in the national TANF program’s work rate from 2013 to 2015. CRS reports that work rate increases in the past decade “stemmed mostly” from small check schemes in California and other states.

Actual TANF recipients are the biggest losers in this scheme. The House Ways and Means Committee notes more than half of work-eligible adults on TANF currently report zero hours of work or other activities each week. Work is the only sure path out of poverty, and ignoring parents on welfare simply delays, and makes more difficult, their progress towards self-support. Taxpayers who pay for TANF benefits also lose when our neighbors don’t realize the upward progress that federal law expects.

Work-based progress is exactly what then-Senator Joe Biden said was needed a generation ago when he supported policies that set TANF work requirements in motion. In 1988 Biden wrote that the predecessor program to TANF “only parcels out welfare checks and does nothing to help the poor find productive jobs.” And in 1996, as the Senate voted to create the new work-based TANF program, he said “I think everyone here believes that work should be the premise of our welfare system.”

The Fiscal Responsibility Act would better ensure that premise is real by ending the small checks scam—by blocking states from counting adults who receive less than $35 in state TANF-funded assistance toward the program’s work requirement. That is a change of consequence, and one bipartisan negotiators were right to include in their agreement.

About the Author

Matt Weidinger