Congress' debt deal may hinder a new Indiana law to extend TANF benefits to thousands of families

A Republican-led effort in Congress to cut spending amid tense debt ceiling negotiations this month resulted in tighter work requirements for the Temporary Assistance for Needy Families (TANF) program.

Just a few weeks prior, Indiana Republicans passed a state law, SEA 265, to expand the program. Indiana currently has some of the strictest eligibility requirements to get on TANF and simultaneously provides some of the lowest monthly benefits compared to all but a few states.

The law's author, Sen. Jon Ford (R-Terre Haute), tried and failed for years to pass a bill to raise the income threshold to qualify for TANF and increase payments. Those numbers had gone unchanged since the 1980s.

“I think this was the best year for TANF. And I'm not really sure what made it click,” Ford said. “I think some of it was the conversation on cash payments and with inflation in the background of everything we dealt with, I think really people realized that the price of diapers, for example, went up almost 300 percent since 1988.”

Currently, a family of three has to have a net monthly income below about $300 to qualify for TANF. On average, Indiana approved 6.6 percent of the more than 5,000 monthly TANF applications received in calendar year 2022. Other states with a similar number of average monthly applications accepted a much larger share, including Massachusetts (40 percent), Pennsylvania (53 percent) and Nevada (22 percent).

Ford said that family of three would likely have to make less than $1,000 to qualify after the law’s full increase goes into effect in 2028. The maximum monthly payment for a child and one parent or guardian on the program would increase from $225 to $409 initially, followed by yearly cost-of-living adjustments.

Among a few other changes, the law also opens eligibility up to include pregnant women.

New, tighter federal TANF work requirements in the recent debt ceiling deal will take effect just before Indiana expands eligibility, starting with a partial increase in 2026. Ford said it is too early to estimate exactly how the federal change will affect Indiana but added that he is “concerned” the change could undercut the expansion the state just passed.

“We have a great deal of people in poverty and in communities like mine,” he said. “20 percent of the kids in my community are in poverty. I just think that is ridiculous in today's day and age. And I think TANF plays a role in getting these kids out of poverty.”

The changes Congress just passed for TANF’s work requirements are, in some ways, more complicated than the additional work requirements added in the same package to the Supplemental Nutrition Assistance Program (SNAP), also known as “food stamps.”

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At base, every state is federally required to have at least 50 percent of all TANF-receiving households “meet requirements on work activities, including participating in subsidized or unsubsidized employment, job search activities, and training,” according to the Center for American Progress. Failure to do so could mean losing access to funding.

The idea is to allow states some flexibility in how they administer the TANF dollars while still holding them accountable for the money’s use.

In the 2021 fiscal year, Indiana met the federal requirements, but not because half of all its TANF households met the work requirements – only 12 percent did in 2021.

That’s only possible because federal law allows states to reduce the work requirement threshold from 50 percent if they have fewer TANF recipients now compared to 2005. If a state reduces its TANF caseload by 10 percent, then the threshold drops by 10 percent as well.

Indiana and about 30 other states have dropped their TANF caseload so much that the threshold they have to meet was zero percent in 2021. Meaning even if there were no TANF recipients working or receiving training, the states are still in compliance with federal law.

A 2021 analysis by The Center for Law and Social Policy noted that many have a “concern that the caseload reduction credit rewards states for pushing recipients off cash assistance, even if they do not have other sources of support.” Other analyses of the program have noted that concern and Ford said he shares it too.

“ I do think we have to look at [TANF] as getting folks back into the workforce,” Ford said. “Because it helps with their psyche, helps them to believe in themselves and their families. And if we can, when people are ready, help move them back into the workforce, I think there's a lot of positives in that.”

This system existed before the recent changes passed by Congress. But the recently passed debt ceiling deal requires the threshold reduction to be calculated based on the number of households receiving TANF in 2015 instead of 2005. Advocates worry the change means many states will end up forcing more people off the benefits to make up that difference.

“It obviously turned out better than what it could have been,” Ford said, referring to the version of the bill which passed the U.S. House and was watered down by the time it became law.

He does see some positives in the new law, like the provision allowing up to five states to operate a pilot program to base the federal measurements of a state’s success on things like the median wages of TANF recipients or other alternatives. The law also requires all states to track the finiancial outcomes of people after they get off the program.

The proposed and final changes reflect a “difference in philosophy,” Ford said, between state lawmakers like himself and their Republican counterparts in Congress.

“I think at the federal level, they have not been focused on balanced budgets and debt reduction in a long time. And now it's become a hot topic for them. Where, I think at the state level, since I've been in the statehouse, we've always been focused on balanced budgets, living within our means,” he said. “Then I think also, I'm living in a community that has spent hundreds of millions and dollars to try to fight poverty and really have never moved the needle. So I'm looking for ways for us here in Indiana to think outside the box. And having TANF open to more people, I think, is thinking outside the box.”

Adam is our labor and employment reporter. Contact him at arayes@wvpe.org or follow him on Twitter at @arayesIPB.

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