Assessing the New Federalism is a multi-year Urban Institute project designed to analyze the devolution of responsibility for social programs from the federal government to the states, focusing primarily on health care, income security, job training, and social services. Researchers monitor program changes and fiscal developments. In collaboration with Child Trends, Inc., the project studies changes in family well-being. The project aims to provide timely, nonpartisan information to inform public debate and to help state and local decisionmakers carry out their new responsibilities more effectively.
Key components of the project include a household survey, studies of policies in 13 states, and a database with information on all states and the District of Columbia, available at the Urban Institute's Web site. This paper is one in a series of occasional papers analyzing information from these and other sources.
The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to The Urban Institute, its trustees, or its funders.
The authors thank Sheila Zedlewski, Michael Wiseman, and the many state officials and others who
provided comments on earlier drafts of this paper.
Notes: Those wishing to print this report may find it easier to use the PDF Version.
Income Eligibility Limits for Recipients in the Initial Month and after One Year of Earnings for a Family of Three with No Unearned Income or Child Care Expenses, October 1997 and July 1996
Detailed Sanction Rules for Noncompliance with Work Requirements
Introduction
The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA)
created the Temporary Assistance for Needy Families (TANF) block grant, replacing the Aid to
Families with Dependent Children (AFDC) program and giving states flexibility to create new cash
assistance programs for families with children. While the federal legislation establishes a variety of
minimum requirements in some areas, there is considerable flexibility for states to exceed these
minimum requirements and a number of areas are open to state discretion.(1)
This paper reviews some of the major decisions that states have made regarding the design of
cash assistance programs under TANF, based on information available as of October 1997. This time
period is appropriate because by October 1997 all state TANF plans had been approved and most states
had enacted legislation in response to the new TANF block grant. Not all aspects of TANF programs
are included in this review, however. State decisions concerning immunization requirements, treatment
of interstate migrants, and teen parent school attendance requirements are among those not included in
this paper. We focus on some of the major decisions regarding program eligibility and benefits, time
limits, and work requirements.(2)
The following section of the paper discusses the sources used for the descriptions of state
programs. The remaining sections describe different aspects of state programs as follows:
Asset limits
Income eligibility limits
Diversion assistance payments
Eligibility of two-parent families
Definition of time limits
Exemptions from time limits
Extensions to time limits
Implementation dates of time limits
Work exemptions based on the age of youngest child
Work sanctions
Work requirement time limits
Benefit amounts
Earnings disregards
Family caps
Child support pass-through
For each of these sections we describe briefly how these provisions were applied under the
former AFDC program and under waivers, the changes made by PRWORA, and the decisions that states
have made concerning each provision. The final section describes the potential for county variation
within states.
Information Sources
Although all states have now replaced their AFDC programs with TANF-funded programs, the
timing of the implementation of new programs has differed across states. Some states are continuing
many of the program elements that had been in place under waivers before the passage of PRWORA. Others have redesigned their cash assistance programs since PRWORA, as reflected
in the TANF plans submitted by the states to the U.S. Department of Health and Human Services
(DHHS). Several states have enacted new state legislation since the time that their state plan was
originally submitted, modifying their existing program or creating an entirely new one.
The information sources used for this paper reflect this variety of ways that state programs have
developed. For all states, TANF plans were obtained from DHHS and reviewed to understand the basic
decisions made by the states. For states maintaining elements of their waivers under TANF, the terms
and conditions of these waivers were used, along with information collected by the Urban Institute
concerning which waiver provisions have been implemented. State legislation and/or regulations
pertaining to TANF-funded programs were used in many cases to further understand state decisions,
especially for states in which legislation was enacted after the submission of the original state plan. In
a number of states, caseworker manuals for cash assistance programs were used to extract more detailed
information about program rules. For the section on child support, information collected by the federal
Office of Child Support Enforcement was used in conjunction with the aforementioned sources.
Finally, a draft version of this paper was sent to TANF administrators in all 50 states and the District
of Columbia for review, and subsequent comments were incorporated into the final paper.
The program rules described in this paper reflect the most recent information available on state
programs as of October 1997.(3) For some states, the program rules described here have already been
implemented; however for other states in which legislation has recently been enacted, the provisions
may not have been implemented yet. We provide information on dates of implementation for different
program rules in tables in each section. For states in which the program is in the process of being
phased in across the state, we describe the program that will be in place once the phase-in is complete.(4)
Under AFDC, families receiving assistance were not allowed to accumulate more than $1,000
in countable resources. This limit excluded the value of certain assets, including the value of a vehicle
up to $1,500. Under waivers, many states increased the asset limit for recipient families, increased the
value of the vehicle exemption, or allowed families to establish restricted savings accounts. Restricted
savings accounts allow recipients to contribute earned income to an account to be used for certain
specified purposes, and the savings accumulated are not counted toward the asset limit.
Under PRWORA, the federal government made no provisions regarding asset limits, including
vehicle exclusions, so states have the flexibility to set their own asset rules. PRWORA did give states
the authority to use TANF funds to create individual development accounts (IDAs), a form of
restricted savings account that allows recipients to accumulate savings to be used for postsecondary
education, homeownership, and business capitalization.
Table 1 shows the asset limits that states have adopted under TANF. Thirty-nine states have
increased the asset limit for recipients above the $1,000 limit allowed under AFDC. Forty-eight states
have increased the vehicle exemption from the $1,500 exemption allowed under AFDC, with 22 states
excluding at least the full value of the first vehicle from consideration. Twenty-two states allow
recipients to accumulate additional savings in a restricted savings account set aside for a specific
purpose allowed by the state.
Table 2 shows the implementation dates for changes in policy regarding the total countable
asset limit. Implementation dates for changes to vehicle exemption and restricted savings account policy
are not shown. The table shows whether current policies were adopted before 1992, between 1992 and
the passage of PRWORA (August 1996), or after the passage of PRWORA. The time period between
1992 and the passage of PRWORA roughly corresponds to the time period in which states were
implementing changes under waivers. However, some waivers that were approved prior to passage of
PRWORA were not implemented until the state began its TANF program.
Twelve states have maintained the asset limit that was set for recipients under the former AFDC
program. Eleven states implemented changes to the AFDC asset limit through a waiver. The remaining 28 states implemented changes to their asset limit after the passage of PRWORA. Of the states that
changed their asset limit, five implemented it in selected counties and later expanded it to cover all counties.
Source: Urban Institute summary of state TANF decisions as of October 1997.
Note: Asset rules may differ for families applying for assistance and for families who are already receiving assistance. This table refers only to asset rules for recipient families.
Source: Urban Institute summary of state TANF decisions as of October 1997.
Note: This table refers only to the implementation of states' asset limits on total countable resources. The table does not reflect implementation dates for vehicle exemption and restricted savings accounts policies.
* Asset limit began in selected countries or with a limited number of cases and later expanded to cover all cases.
Income Eligibility Limits
Under AFDC, recipient families were subject to two income eligibility tests.(6) First, a family's
income before earnings disregards (gross income) had to be less than 185 percent of the state's need standard.
The need standard was based on each state's definition of the cost of meeting basic living needs for
a family of a given size. Second, a family's income after the application of the earned income disregard
(i.e., their net income) had to be less than the payment standard; otherwise the computed benefit would
be less than zero and the family would be ineligible.(7) Under waivers, a few states made changes to
income eligibility tests, such as removing the gross income test or setting income eligibility limits in
relation to the federal poverty level. Changes to income eligibility limits were also made implicitly
whenever states changed need or payment standards or modified earnings disregards under waivers.
PRWORA did not specify the income eligibility tests that states were to use under TANF, and this
implicitly gave them the flexibility to either maintain the AFDC eligibility rules or create new ones.
Many states have maintained the income eligibility tests that existed under AFDC, but several
have made changes. Income eligibility rules under TANF are described in detail in table A.1.
The rules themselves do not provide an easy basis for comparison of state policies for a number of
reasons. First, some states compare income to the need or payment standard and others compare it to
the poverty threshold, but without knowing the size of the need or payment standards relative to the
poverty threshold it is difficult to compare eligibility limits. Second, a number of state policy choices--including benefit levels, earned income disregards, and income tests--interact in ways that make it
difficult to understand the ultimate effect of these policies.
For these reasons, we have computed the income eligibility limit for a recipient family of three
with no unearned income or child care expenses, in order to compare state policies.(8) The results of
these calculations as of October 1997 and July 1996 are shown in table 3. Because the earned income disregard, which affects net income, varies over time in some states, we show income eligibility limits in the initial month and in the 13th month of earnings. The income eligibility limits (also
referred to as breakevens) shown in table 3 should be interpreted as the earnings level at which
eligibility ends for a recipient family of three. Families of three with earnings less than the amount
shown would presumably receive a benefit.(9)
The first column shows that in the initial month, income eligibility limits in October 1997 vary
from as high as $1,740 in Alaska to $400 in Texas. In 5 states--Alabama, Kentucky, Mississippi,
Nevada, and New Jersey--all earnings are disregarded in the initial month of earnings and there is no
gross income limit, so there is effectively no earned income limit in the initial month. The limits at the
thirteen month of earnings in October 1997 vary from $1,640 in Hawaii to $210 in Alabama. Income
eligibility limits are lower in the 13th month than in the initial month in the 16 states that phase
out earnings disregards over time.
The middle two columns in table 3 show the income eligibility limits in July 1996, just prior
to the passage of PRWORA.(10) The final two columns in table 3 show how income eligibility limits
have changed for recipients between July 1996 and October 1997. Ten states have made no changes
to their income limits. Twenty-five states have increased the income limits for both the initial month
and the 13th month of earnings, and two have lowered eligibility limits for both time periods. Six
states have made changes to their earnings disregards that have caused the income eligibility limits to
be lower in the initial month than they had been under AFDC but higher in the 13th month.
Alabama has increased income limits in the first month but decreased them in the 13th month.
Three states have increased income limits in the 13th month while the income limits in the first
month remain unchanged, and two states have increased income limits in the first month while the
income limits in the 13th month remain unchanged.(11)
Table 3. Income Eligibility Limits for Recipients in the Initial Month and after One Year of Earnings for a Family of Three with No Unearned Income or Child Care Expenses, October 1997 and July 1996
Source: Urban Institute summary of state TANF decisions as of October 1997.
Notes: The income eligibility limit (also known as the breakeven) refers to the earnings level at which eligibility ends. However, most states do not pay benefits of less than $10, with the result that actual benefit eligibility ends at a slightly lower earnings level in these states. The income eligibility limits shown are for recipients; income eligibility limits may be different for applicant families. For states in which income eligibility levels vary within the state because of variation in benefit levels, the income limit shown is for the area with the largest portion of the state population.
All values have been rounded to the nearest $10. Values in final two columns may not reflect the difference between the 1997 and 1996 values shown due to rounding error.
* There is effectively no income limit because 100 percent of earnings are disregarded in the initial month of earnings.
** Change cannot be determined because there is no income limit in 1997 or TANF and food stamps are issued as a combined benefit in 1997.
*** TANF and food stamps are issued as a combined benefit, with one set of program rules, so eligibility levels reflect both TANF and Food Stamps program rules.
"nc" indicates no change.
Numbers in parentheses indicate a reduction in income eligibility limits.
Diversion Assistance Payments
Diversion assistance payments are offered to families who are eligible for TANF with the intent
of providing assistance to families with short-term needs.(70) By accepting the diversion assistance
payment, the family generally agrees not to reapply for cash assistance for a specified period of time.
Payment may be made in cash or as a vendor payment--that is, a restricted payment made directly to
a third party for a specific purpose such as payment of rent or car repair. Often, diversion payments are
a multiple of the maximum monthly benefit that a family would have received if the family received
TANF. States sometimes provide supportive services such as child care or Medicaid along with
diversion assistance.
Three states (Montana, Utah, and Virginia) began providing diversion assistance payments under
waivers, but under TANF states are free to provide such payments without waivers and a total of 22
states have decided to do so. Table 4 shows the states that are providing diversion payments
statewide under TANF and some of the major policy options they have concerning such payments,
including the maximum payment amount, the form of the payment, the frequency with which a family
is eligible for a payment, and the period of ineligibility following receipt of the diversion assistance
payment. A typical maximum payment for many states is a payment equal to three months of cash
assistance. Of the 21 states in which the method of payment is known, 11 make cash payments, 7 make
cash or vendor payments, 1 (Maine) makes only vendor payments, and 2 (California and Colorado) have
left the method of payment for counties to decide. Of the 16 states in which the frequency of payment
is known, six allow a family to receive only one diversion payment in a lifetime and 10 allow the
possibility of more than one payment to a family. The period of ineligibility for TANF following
receipt of diversion assistance varies across states but is often equal to or greater than the number of
months included in the diversion payment. In six states, there is no initial period of TANF ineligibility,
but each state has a period of time where the diversion payment counts against the benefit.
