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TAXWatch: TANF – $281M Federal Money We Haven’t Spent

T his week we focus on our safety net systems for people or families in need.  In the early 1990s, a major part of this net came from the federal Aid to Families with Dependent Children (AFDC) program, which matched state dollars of financial assistance for a needy family.  That program was replaced with what we have now, Temporary Assistance for Needy Families (TANF), which is a federal block grant program that, at least in theory, gives states a substantial amount of federal money for purposes like cash assistance, work activities, work supportive services, and child care.

Hawaii gets about $99 million a year under this program.  In 2017, it spent $52 million in federal funds while it spent about three times that amount from its own funds.

That means there was $47 million in federal money left over just from that year.  A state can (at least for now) carry the money over to future years, but…as of last year, Hawaii had $281 million in unspent TANF money.  That means our state was underutilizing this money on a consistent, year-to-year basis.

A post on the website efficient.gov quotes an assistant division administrator for the Department of Human Services as saying, “I’m concerned the reserve is larger than it needs to be.  I do worry that if we don’t spend it, then our clients aren’t benefiting from it. We definitely need to make changes to get that money out the door.”

The federal program also has what is known as a maintenance of effort (MOE) requirement.  It says that states must maintain a certain level of state TANF spending which is based on a state’s spending for AFDC and similar programs before TANF was enacted.  In other words, we needed to and did spend our taxpayer dollars on this program while we left the federal money on the table.

Worse, a good chunk of the federal dollars we did spend were spent in a questionable place—at least in relation to the purpose of the TANF program.  The Center on Budget and Policy Priorities stated that nearly $32 million of TANF money was spent on the University of Hawaii.  Perhaps the justification was that the dollars went to financial aid for needy students.  But CBPP pointed out that this “funding served families with incomes up to 300 percent of the federal poverty line and was not focused on helping TANF cash assistance recipients prepare for work.  In comparison, the TANF benefit level for a single-parent family of three in Hawaii represents 31 percent of the federal poverty line.”

Not only that.  Another central principle behind the TANF program was that states could spend more of the funds on child care subsidies — which are essential to enabling low-income parents to work — rather than on direct financial assistance.  Nationally, states spent about 16% of TANF money on child care. Hawaii spent just 5%.

So here we have a double-edged problem.  We aren’t spending the federal money we can get, thereby increasing the burden on local taxpayers.  We are spending the money on programs targeted not just to the poor, and we are as a result shortchanging the effort to get people off the dole and into the workforce.  To put it another way, the money intended to help the poor is being skimmed off to do something else.

Lawmakers, wake up and smell the plumerias!   Let’s get some of this federal money pulled down.  Let’s get our state money directed to where it is supposed to do the most good.  Maybe we can even use it to combat our homeless crisis!

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About Tom Yamachika

Tom Yamachika
Tom Yamachika is the President of the Tax Foundation of Hawaii, a private, nonprofit educational organization dedicated to informing the taxpaying public about the finances of our state and local governments in Hawaii. Tom is also a tax attorney in solo practice and has been since early 2013. Prior to 2013, he was with the accounting firm Accuity LLP, which was formed in 2006 from the Honolulu office of Coopers & Lybrand (which later became PricewaterhouseCoopers). Before that, he served as an Administrative Rules Specialist in the State of Hawaii Department of Taxation from 1994 to 1996, where he drafted rules, interpretive releases, and legislation on several different state taxes. Prior to that, he practiced litigation and tax law with Cades Schutte Fleming & Wright in Honolulu.

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