Snapshot Mitigating TANF Benefits Cliffs

States have broad flexibility to design their TANF programs. TANF is a fixed, broad purpose, federal block grant to provide time-limited cash assistance and services to help low-income families with children meet their basic needs and become economically self-sufficient. States must supplement federal funds with maintenance of effort funds. As long as the services they provide satisfy one of the four broad federal purposes of TANF, states have flexibility to design and administer their programs within federal parameters. For example, states choose the type and amount of assistance payments, what other services to provide and the eligibility requirements for assistance. TANF participants are subject to a federal 60-month lifetime limit on assistance. 

Inefficient processes increase states’ administrative costs and prevent eligible families from receiving assistance. Inefficiencies resulting from burdensome administrative requirements can negatively impact both states and families. For example, bureaucratic administrative processes often lead to long wait times and application backlogs, which can increase human error in the application review process and result in erroneous application denials. They can also increase costs for states, which are subject to separate 15% caps on the amounts of federal and state maintenance of effort funds they can spend on TANF administrative costs. 

Absolute income limits are the primary driver of benefits cliffs. Federal law requires states to limit participation in programs that fall under the first two broad federal purposes of TANF to “needy” families. These include programs that (1) provide assistance to needy families so that children can be cared for in their own homes or in the homes of relatives and (2) end the dependence of needy parents on government benefits by promoting job preparation, work and marriage. States must define “needy” and can implement additional eligibility criteria. TANF participants must generally satisfy income limits, which vary widely by state. Most states have absolute rather than gradual or tiered income thresholds, meaning a small increase in earnings over the income limit can result in a sudden and total loss of assistance. This is a bigger factor when income limits are not indexed to inflation and effectively shrink over time. 

Asset limits can have unintended consequences. While there is no federal requirement, many states subject TANF participants to asset or resource limits—meaning they cannot receive assistance if they have assets over a certain value. Proponents of asset limits argue they are necessary to prevent dependence on public benefits; however, some research shows asset limits inhibit self-sufficiency. For example, asset limits can disincentivize savings and leave low-income families more vulnerable to job loss or emergency costs. They can also force families to choose between owning assets, such as a vehicle to get them to work, and receiving TANF assistance.  

Work requirements can be complicated and difficult to satisfy. With some exceptions, TANF participants must engage in work activities within 24 months of receiving assistance and states must meet work participation benchmarks. While states decide what it means to engage in work, federal law establishes 12 categories of work activities that satisfy work requirements, though some are limited. For example, only some work activities, such as unsubsidized employment and on-the-job training, count toward the first 20 hours of participation. For some families, the cost or lack of child care and absence of paid family and sick leave make work requirements difficult to satisfy. Additionally, many states have full-family sanctions, meaning an entire family becomes ineligible for assistance when one parent falls out of compliance with a TANF work requirement.  

Identify and optimize federally permitted program flexibilities. 

• Florida (S 2500, 2023) appropriated funds to analyze options and develop an implementation plan for the legislature to address benefits cliffs faced by families receiving temporary cash assistance and school-readiness program services. 
• Kentucky (HJR 39, 2023) directed its Cabinet for Health and Family Services to review all public assistance programs and identify all flexibilities permitted under federal law and integrate a user-friendly benefits cliff calculator tool into public assistance outreach and support efforts. 

Standardize eligibility across programs and ease administrative restrictions. 

• Colorado (H 1259, 2022) allows TANF eligibility rules to be aligned with other public assistance programs and requires the state’s Department of Human Services to annually review and promulgate rules as necessary to ensure the standard of need is equitable, promotes economic mobility and self-sufficiency and reflects the current economic status of the state. The bill also requires that counties offer an extension beyond the 60-month lifetime maximum for all households that demonstrate good cause and to “inform and not penalize” any applicant or household that demonstrates good cause for an exemption from the work requirements.  
• Colorado (H 1380, 2022) requires implementation of a work management system across all counties to interface with the state benefits management system used to process and approve applications for state public assistance programs. The requirement includes SNAP, Medicaid and TANF, and aligns SNAP eligibility and enrollment with the low-income energy assistance program to increase access and efficiency. 

Make income limits more flexible. 

• Indiana (H 1009, 2022) allows families to increase their household earnings by $15,000 before becoming ineligible for TANF assistance. 
• Missouri (S 45, 2023) requires transitional TANF, SNAP and child care assistance for recipients who become ineligible for benefits due to an increase in income. Transitional assistance gradually steps down the monthly benefit proportionate to the increase in income so that recipients experience a 20% reduction of monthly benefits per specified income tier.  

Make asset limits less restrictive. 

• Indiana (H 1361, 2022) allows families to increase the total value of their household assets to $10,000 before becoming ineligible for TANF assistance. The bill also prohibits the value of a child’s primary residence and $20,000 in motor vehicles belonging to members of a child’s family from being considered for TANF eligibility purposes.  
• Maine (H 592, 2023) increased the asset limit for TANF eligibility to $10,000 per family and requires that one vehicle for each licensed driver in the family be exempt. 
• Washington (H 1447, 2023) exempts retirement funds, pension plans and retirement accounts from consideration as a resource or asset for public assistance eligibility. 

Adopt work requirements that build economic stability and promote education and training. 

• Maine (H 44, 2021) repealed full-family termination of TANF benefits when one parent falls out of eligibility compliance, including compliance with work requirements, to ensure children are not impacted by the actions of one parent. 
• Virginia (H 1820, 2021) allows TANF work requirements to be satisfied by educational activities that lead to a post-secondary credential, such as a degree or industry-recognized credential, certification or license.