Summary: The reauthorization of the Temporary Assistance for Needy Families (TANF) block grant represents an opportunity to re-examine the fiscal balance between the federal government and the states in providing services to needy families. Since the enactment of federal welfare reform, there has been much discussion of the fiscal implications of these sweeping changes in national welfare policy. A particularly contentious issue has been the extent to which states have replaced, rather than supplemented, their own spending with federal TANF dollars, thereby freeing up state funds for other budget priorities. This report reviews (1) the degree to which states have used the flexibility afforded in the federal TANF grant to supplant, rather than supplement, state spending for low-income families; (2) the changes that have occurred in the states' use of different funding sources (including their TANF funds) on programs that help the poor; (3) the effects of state funding choices on the amounts of TANF funds the states have left unspent at the U.S. Treasury; and (4) the measures states are taking to save a portion of the TANF grant or set aside their funds for a rainy day.
