IDAs and TANF Reauthorization Mark Greenberg Center for Law and Social Policy November 8, 2002

Outline Why Does TANF matter for IDAs? Current situation –What’s the law –What are states doing What happened in reauthorization effort? –In general –Concerning IDAs What might happen next? Discussion: what would help?

Why does TANF matter? Big (relatively) funding stream, broad flexibility –$16.5 billion in federal funds, $10-$11 billion in state maintenance of effort dollars –Can be used for anything reasonably calculated to accomplish law’s purposes, including IDAs –Can be used both for TANF IDAs and for other asset formation strategies.

TANF purposes Provide assistance to needy families so that children may be cared for in their homes or homes of relatives End dependence of needy parents on government benefits by promoting job preparation, work, marriage Prevent and reduce out of wedlock pregnancies Encourage formation and maintenance of two parent families.

TANF IDAs Must be for home ownership, postsecondary education, or business start-up Funds match earned income of participants If statutory requirements met, funds in IDA will not be considered when determining eligibility or benefits in other federal means-tested programs.

Alternative approaches: state/local IDAs/savings plans Could be for other savings purposes Probably must be for members of low income families, but state has broad discretion in determining income eligibility Can decide whether to have match, what counts as match But, funds not automatically disregarded in other means-tested programs.

Time frames for spending TANF funds TANF used for IDAs is considered nonassistance, and HHS says: –If funds not obligated when current year funds, they can only be spent for assistance; –When funds obligated for nonassistance, they must be spent by end of next year. –Simply earmarking funds for IDA program is not considered spending.

What have states done? According to HHS: –31 states provide for IDAs in their state TANF plans 27 for postsecondary education 24 for first home purchase 25 for business capitalization 3 for medical expenses 12 for other (e.g., training, purchase or repair of car, work-related costs, emergency cost)

Use of TANF funds for IDAs In FY 2000, eight states spent total of $2 million: –Arkansas, Indiana, Iowa, Michigan, Missouri, Ohio, Texas, Virginia CSD: Through 2002, seventeen states have committed $16 million: –Arkansas, Florida, Illinois, Indiana, Iowa, Louisiana, Michigan, Montana, New Jersey, Ohio, Oklahoma, South Carolina, Tennessee, Texas, Vermont, Virginia, Washington

Competition for TANF funds Initial uncertainty, but now states and others understand multiple allowable uses Assistance caseloads have stopped falling for many states State TANF spending exceeded annual block grants by $2 billion in FY 2001 and 2002 (CBPP).

Reauthorization Had been expected before September 30, 2002 Congress and administration unable to agree: –Administration submitted highly controversial plan in February –House passed bill substantially similar to administration plan in May –Senate Finance Committee adopted different bill in June, never came to senate floor Funding now being extended temporarily through continuing resolutions Congress likely to take up again in 2003

Why no bill in 2002? Substantive disputes, including: –Work requirements –Education and training –Marriage –Immigrant eligibility for public benefits –Funding (not basic block grant, but overall cost of package) –Superwaivers Assertions by each side that other didn’t want a bill this year.

IDAs in TANF reauthorization Very little attention or discussion No provisions in House bill Two provisions in Senate Finance bill –Broaden allowable uses to include car purchase –Remove language saying IDA must be “trust” Under both bills, IDAs would benefit because no time period for obligating or spending “nonassistance” funds.

What happens next? Don’t know Congress could: –Pass multi-year extension during lame duck session (probably very unlikely) –Pass limited extension next year –Take up comprehensive revisions next year.

Practical implications TANF will continue to be potential source of funding for IDAs, but: –Unlikely to be significant new funding, greater competition for current funding –More pressure on states to expand work participation and (perhaps) marriage initiatives.

Discussion What issues have arisen in efforts to use TANF for IDAs in states? What changes in federal law might make a difference?