July 10, 2020
Many families are struggling financially due to the coronavirus pandemic. Amid widespread unemployment, some may rely on welfare benefits for income support. While cash assistance may be a viable option for certain families, welfare benefits generally are time-limited, so households that had exhausted their benefits before the pandemic or that reach their time limits as the COVID-19 crisis continues may be deemed ineligible.
Welfare time limits began with the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, which established the Temporary Assistance for Needy Families (TANF) program. TANF replaced the previous welfare program, Aid to Families with Dependent Children, and mandated 60-month lifetime time limits for this form of federal cash assistance. States, however, reserve the right to set stricter time limits or to continue to fund TANF caseloads beyond 60 months using their own funds. In practice, only a few states allow individuals to remain on TANF indefinitely, and many impose time limits shorter than 60 months.
TANF time limits discourage welfare use and may increase work among low-income individuals. Nonetheless, TANF requires most beneficiaries to participate in work or job training programs, so loss of eligibility does not necessarily lead to increased employment among former TANF recipients. In a policy brief and working paper, I show that TANF time limits bind for many individuals. I find that removing TANF eligibility—and, therefore, work requirements—often decreases employment and earnings among families affected by TANF policies. Loss of TANF benefits thus doubly diminishes their access to financial resources.
The coronavirus pandemic has decreased labor market opportunities substantially, so time limits are unlikely to lead to increases in work. This is especially true because TANF recipients tend to have low education levels and limited job opportunities that are concentrated in sectors with high risk of coronavirus exposure. Hence, TANF recipients who exhaust their time limits likely won’t be able to make up for their loss in welfare benefits with increased earnings, and because TANF is targeted at very low-income families, even small decreases in income could significantly affect their living standards. Furthermore, families who use much of their TANF eligibility during the COVID-19 pandemic won’t be able to rely on this cushion to weather financial difficulties in the future.
Given these potentially detrimental effects, nine states have chosen to suspend or extend their TANF time limits. Specifically, Alaska, California, Connecticut, Delaware, Maine, Massachusetts, Minnesota, New Hampshire, and Washington have relaxed time limits, at least for those who were already receiving benefits when the pandemic began. Such increases in TANF generosity may provide much-needed income support to families during COVID-19. However, because states generally must pay out of pocket for half their TANF expenses, the relaxed time limits may further strain state governments already experiencing severe budget shortfalls. While the federal government supports a TANF Contingency Fund from which states experiencing economic downturns may draw additional funds, these appropriations are relatively small. During the Great Recession, the federal government allocated additional funding toward TANF through the American Recovery and Reinvestment Act of 2009, and a similar approach could enable states to increase their program generosity during the coronavirus pandemic. In the absence of additional federal supports, however, states wishing to meet additional need for TANF must rely on their own “rainy day funds,” which vary considerably in scope.
State policymakers must weigh the costs and benefits of providing additional support to TANF beneficiaries during this pandemic recession. While some state governments may struggle to fund additional safety net benefits, time limits could prove devastating to families already on the edge and unable to find work as jobs vanish and businesses shutter.