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February 3, 2016

Funding Shell Game Hurts Virginians who Struggle the Most

All too often, state budget writers take money meant for one thing and use it for another. That’s the case with money the state gets that’s primarily intended to provide cash assistance, job training, and job-related child care for families struggling to get by. Instead, they’re using a lot of the money to build up a reserve and then diverting it to make grants to various non-profit direct service providers. What’s more, all too often they use those grants as a swap for the state’s regular budget support for those services.

That’s quite a trick. Here’s how they do it.

Currently, state policymakers keep cash assistance and eligibility standards very limited for the federal Temporary Assistance for Needy Families (TANF) safety net program. As a result of the very limited benefits and services – which are below the level needed to provide a reasonable level of stability and opportunity for Virginia’s poorest children – the state spends less than the amount of money that goes into the fund, and the fund balance builds up.

State legislators then use some of this money to provide funding for various nonprofits and direct services, and all too often simultaneously reduce general state support for those nonprofits. This is known as “supplanting,” and it means the nonprofits get no more money than previously, while the amount of money in the TANF fund meant to be used for direct assistance to families is reduced.

In the Governor’s proposed budget, only 69 percent of the $175 million in TANF grant spending for the fiscal year that starts July 1 will be spent on direct cash assistance, job training, and child care for participants in those job training programs. In the following fiscal year, only 68 percent of the $178 million proposed budget will be used for those services.

Many of the nonprofits and other services that will get money are important and deserve funding, but using TANF money reduces the capacity to increase cash assistance essential for so many struggling families. For example, in most years, legislators have refused to provide increases to keep up with the rising cost of food and electricity.

As a result, the value of cash assistance to Virginia’s neediest families has eroded significantly. Today, the maximum benefit for a family of three is $399 per month, which is only 24 percent of what is needed to reach the Federal Poverty Line. In 1996, the benefit was $540 per month in inflation-adjusted dollars, 33 percent of the poverty line.

Not only are benefits lower than in the past, fewer impoverished families receive this essential hand up. In 1996, 56 in 100 poor Virginia families received cash assistance through TANF’s predecessor. By 2014, that number had fallen to 26 in 100. And it’s not because of a lack of resources. As of June 30, 2015, Virginia had $72.7 million in unused TANF funds.

When the only cash benefits for families facing the toughest times is allowed to erode, it has long-term consequences for the children in those families and all of us. Recent research shows that even modest increases in cash income for poor families has positive long-term effects on the children’s later earnings, educational attainment, health, and income.

Several legislators are trying to solve this problem this year. Two bills in the House of Delegates (HB 990; HB 1028) and a Senate resolution (SJ 95) aim to protect Virginia’s safety net and make sure families with kids have at least some money to pay the bills. That would pay off for us all in the long run.

–Laura Goren, Research Director

The Commonwealth Institute

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