The Fiscal Responsibility Act (FRA) reflects the debt limit agreements reached over the weekend between the White House and Republican congressional negotiators. This legislation, which is currently expected to be considered by the House tomorrow, includes a set of changes affecting work requirements in the Temporary Assistance for Needy Families (TANF) program and Supplemental Nutrition Assistance Program (SNAP, commonly called food stamps). The legislation does not include new work requirements in the Medicaid program, which were previously approved as part of the Limit, Save, and Grow Act (LSGA) passed by House Republicans in April.
Several TANF changes would increase the practical effect of that program’s current work requirements, which nominally expect 50 percent of adults collecting assistance to engage in at least part-time work or other activities. Despite that general expectation, few states currently engage 50 percent of adult recipients in work activities—and more than half of “work-eligible” recipients reported no hours of work activity. A key reason why is the fact that TANF provides states credit for net caseload reduction toward the 50 percent work rate target—and caseloads have declined significantly in recent decades. Under current law, this “caseload reduction credit” equals net caseload declines since 2005. Through FY 2021, those declines averaged some 65 percent across the country, meaning the current caseload reduction credit alone effectively wipes out the nominal 50 percent work requirement in a typical state.
The FRA updates the baseline year for calculating the caseload reduction credit from 2005 to 2015, giving states less “credit” for past declines. Between 2005 and 2015, the national TANF caseload fell by 22 percent—from under 2.1 million to 1.6 million families. Thus under this change, the caseload reduction credit in the average state would decline to around 42 percent, thereby applying a modest TANF work requirement for the first time in years. This change also tees up the obvious next caseload reduction credit update—to bring the baseline year even closer to the present—whenever Congress reauthorizes the TANF program. TANF currently expires in a few months, although divided government limits the chances for a long-term reauthorization before 2025.
A second important TANF change in the FRA is to eliminate starting in FY 2025 the current “small checks scheme” (a term included in the LSGA that survives in the FRA), which some states like California have exploited in the past decade. Under this scheme, California provides working parents on food stamps $10 per month in TANF-funded assistance so they can be counted as “on TANF” and working. States like California could turn to other loopholes to avoid engaging current recipients in work and activities, and regrettably the FRA fails to also close the “excess MOE loophole” as the House bill did. That leaves more work for future reauthorization legislation. But the shrinking number of loopholes available to states that seek to avoid engaging current TANF recipients in work and productive activities is a welcome trend.
For over a decade, Republicans have sought without success to enact policies tightening the TANF program’s work requirements—which are now effectively wiped out by long-term caseload declines and loopholes some states eagerly exploit. Along the way, Democrats have insisted on increasing spending on TANF while adopting policies weakening those same requirements. The TANF changes in the FRA modestly tighten the program’s work requirements without increasing spending, while also spotlighting where additional commonsense changes are needed. Those changes are a meaningful step in the right direction and, especially in the context of bipartisan legislation, more than a fair compromise.
