[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                 STATE TANF SPENDING AND ITS IMPACT ON 
                           WORK REQUIREMENTS 

=======================================================================

                                HEARING

                               before the

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 17, 2012

                               __________

                          Serial No. 112-HR13

                               __________

         Printed for the use of the Committee on Ways and Means

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                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

WALLY HERGER, California             SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas                   CHARLES B. RANGEL, New York
KEVIN BRADY, Texas                   FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
GEOFF DAVIS, Kentucky                XAVIER BECERRA, California
DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
CHARLES W. BOUSTANY, JR., Louisiana  MIKE THOMPSON, California
PETER J. ROSKAM, Illinois            JOHN B. LARSON, Connecticut
JIM GERLACH, Pennsylvania            EARL BLUMENAUER, Oregon
TOM PRICE, Georgia                   RON KIND, Wisconsin
VERN BUCHANAN, Florida               BILL PASCRELL, JR., New Jersey
ADRIAN SMITH, Nebraska               SHELLEY BERKLEY, Nevada
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas
ERIK PAULSEN, Minnesota
KENNY MARCHANT, Texas
RICK BERG, North Dakota
DIANE BLACK, Tennessee
TOM REED, New York

                   Jennifer Safavian, Staff Director

                   Janice Mays, Minority Chief Cousel

                                 ______

                    SUBCOMMITTEE ON HUMAN RESOURCES

                    GEOFF DAVIS, Kentucky, Chairman

ERIK PAULSEN, Minnesota              LLOYD DOGGETT, Texas
RICK BERG, North Dakota              JIM MCDERMOTT, Washington
TOM REED, New York                   JOHN LEWIS, Georgia
TOM PRICE, Georgia                   JOSEPH CROWLEY, New York
DIANE BLACK, Tennessee
CHARLES W. BOUSTANY, JR., Louisiana



                            C O N T E N T S

                               __________

                                                                   Page

Advisory of May 17, 2012, announcing the hearing.................     2

                               WITNESSES

Ms. Kay E. Brown, Director, Education, Workforce, and Income 
  Security, U.S. Government Accountability Office, testimony.....     7
Mr. Grant Collins, Senior Vice President for Workforce Services, 
  ResCare, testimony.............................................    31
Ms. Carol Cartledge, Director, Economic Assistance Policy 
  Division, North Dakota Department of Human Services, testimony.    40
Mr. Peter Palermino, TANF Administrator, Connecticut Department 
  of Social Services, Representing the American Public Human 
  Services Association, testimony................................    49
Dr. LaDonna Pavetti, Ph.D., Vice President for Family Income 
  Support Policy, Center on Budget and Policy Priorities, 
  testimony......................................................    57

                       SUBMISSIONS FOR THE RECORD

The Honorable Erik Paulsen.......................................    77
American Public Human Services Association.......................    85
Boys and Girls Clubs of America, Brian Manderfield...............    88
Center for Fiscal Equity.........................................    91
Center for Law and Social Policy.................................    94
Coalition of CA Welfare Rights Organizations.....................    99
Washington State.................................................   104


        STATE TANF SPENDING AND ITS IMPACT ON WORK REQUIREMENTS

                              ----------                              


                         THURSDAY, MAY 17, 2012

             U.S. House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Human Resources,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 2:55 p.m., in 
Room 1100, Longworth House Office Building, the Honorable Geoff 
Davis [Chairman of the Subcommittee] presiding.
    [The advisory of the hearing follows:]

HEARING ADVISORY

 Davis Announces Hearing on State TANF Spending and Its Impact on Work 
                              Requirements

Thursday, May 17, 2012

    Congressman Geoff Davis (R-KY), Chairman of the Subcommittee on 
Human Resources of the Committee on Ways and Means, today announced 
that the Subcommittee will hold a hearing to review State spending 
requirements in the Temporary Assistance for Needy Families (TANF) 
program and their interaction with TANF work requirements. The hearing 
will take place on Thursday, May 17, 2012 in 1100 Longworth House 
Office Building, beginning at 2:00 P.M.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. 
Witnesses will include a representative from the Government 
Accountability Office (GAO) as well as other public and private sector 
experts on State TANF spending policy and practice. However, any 
individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    The Temporary Assistance for Needy Families (TANF) program is 
designed to end the dependence of needy families on government benefits 
by promoting work, marriage, and personal responsibility. Unlike its 
predecessor, Aid to Families with Dependent Children, which was 
primarily a cash welfare program for poor families with children, the 
1996 welfare reform law created TANF to fund a variety of services to 
help low-income parents get jobs and become self-sufficient.
      
    States are required to engage 50 percent of adults in TANF families 
in work activities such as employment, on-the-job training, job search, 
and vocational education. In addition, States are required to spend a 
certain amount of State money (based on past State spending on low-
income programs) to receive full Federal TANF block grant funds, called 
the State ``maintenance of effort'' or MOE requirement. However, recent 
reports indicate a rising number of States appear to be counting other 
State program spending and even non-State third party spending as TANF 
MOE spending. For example, a number of States now count volunteer hours 
as TANF MOE by multiplying volunteer hours by an estimated wage rate 
and then reporting this as ``spending'' in the TANF program. This 
evolution has also resulted in some States reporting significant 
``excess MOE'' spending, which under a 1999 regulation allows States to 
reduce the share of welfare recipients expected to work in exchange for 
TANF benefits.
      
    According to a September 2011 GAO report, in fiscal year 2009, 32 
states claimed at least some ``excess MOE credits.'' Of those 32 
states, 17 states would have failed to meet their work participation 
requirements without these credits, resulting in the loss of Federal 
TANF funds.
      
    The American Recovery and Reinvestment Act of 2009 (ARRA) created a 
new one-time $5 billion funding stream for States called the TANF 
Emergency Fund, available in FYs 2010 and 2011. Under the Emergency 
Fund, States received 80 percent reimbursement for their increased 
spending on cash assistance, subsidized employment, and one-time 
benefits provided to needy families. The availability of this new 
funding may have been one of the factors that spurred States to 
identify and report further increases in spending, a number of which 
relied on the counting of third-party expenditures as State MOE 
spending to qualify for this funding. Additional factors may have been 
States' desire to increase MOE spending in order to receive funding 
from the TANF contingency fund and to respond to changes in the Deficit 
Reduction Act.
      
    In announcing the hearing, Chairman Davis said, ``Welfare reform in 
the 1990s established a new partnership between States and the Federal 
Government to help families move from welfare to work. In exchange for 
flexibility in operating the program, States agreed to meet Federal 
requirements to engage families in work activities and to continue 
investing State dollars for this purpose. However, recent reports 
suggest that these two key principles of reform may not be working as 
intended. The hearing will review this issue to ensure the Federal-
State partnership continues to work toward helping families become 
self-sufficient.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on TANF State MOE spending requirements and 
their interaction with TANF work requirements.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
document, in compliance with the formatting requirements listed below, 
by the close of business on Thursday, May 31, 2012. Finally, please 
note that due to the change in House mail policy, the U.S. Capitol 
Police will refuse sealed-package deliveries to all House Office 
Buildings. For questions, or if you encounter technical problems, 
please call (202) 225-1721 or (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
attachments. Witnesses and submitters are advised that the Committee 
relies on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit materials not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons, 
and/or organizations on whose behalf the witness appears. A 
supplemental sheet must accompany each submission listing the name, 
company, address, telephone, and fax numbers of each witness.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman DAVIS. Good afternoon. Before we get started, I 
want to thank all of our witnesses and our guests for your 
patience. The voting schedule is not always coordinated with 
the Human Resources Subcommittee, and we had a little bit of a 
delay in the last vote series, so thank you for your 
flexibility. Or, as we used to say in the Army, parroting that 
Marine motto, Semper Gumby.
    Our hearing today reviews a key provision of welfare 
reform: State spending requirements and their impact on work 
requirements. As part of welfare reform in 1996, States were 
given a Federal block grant for the Temporary Assistance for 
Needy Families, or TANF, program, which maintains Federal 
spending on welfare--or maintained record Federal spending on 
welfare. At the same time, States were allowed to reduce State 
spending to as little as 75 percent of prior levels under 
maintenance of effort, or MOE, requirements. This requirement 
was meant to ensure continued Federal-State partnership in 
helping families move from welfare to work. But now there is 
cause for concern that in some States, this financial 
partnership is becoming a more one-sided proposition, with 
States no longer matching Federal spending reliably as they 
once did.
    Ironically, recent official data from the Department of 
Health and Human Services, including fiscal year 2011 data 
published yesterday, appears to suggest States have been 
increasing their own TANF spending rapidly. As this graph shows 
on the monitors, since 2005, States have reported spending 
almost one-third more on TANF, including during and after the 
Great Recession; however, what appears to be behind this growth 
is not actual increases in State TANF spending, but rather 
increased State reporting of TANF spending, including spending 
by third parties that States are now claiming as their own.
    Why would States choose to start reporting more TANF 
spending? There are several reasons. First, under 1999 
regulations, States can reduce the share of adults they must 
engage in work if they spend more than required. These, quote, 
``excess MOE credits,'' closed quote, have attracted greater 
State interests since work requirements were strengthened in 
the Deficit Reduction Act signed into law in early 2006.
    The most recent data suggests 16 States used excess MOE 
credits to satisfy work requirements, effectively reducing the 
share of adults on TANF that are expected to work or train in 
order to maintain TANF benefits.
    Second, other sources of Federal TANF spending, the ongoing 
contingency fund and the one-time welfare emergency fund 
created in the 2009 stimulus law, require increased levels of 
State spending. So to get more Federal funds, States had to 
spend more State dollars, or at least report that they were 
doing so.
    This slide, taken from a presentation given to State TANF 
Directors at a December 2006 conference, illustrates how the 
hunt for MOE has been on, and it appears to be behind some 
reported increases in State TANF spending.
    Many States have scoured their budgets to find other 
current spending programs, such as for pre-K, child care, and 
after-school programs, that they could report as TANF spending. 
This went further to, if you will, the salesman working the 
plan to gain maximum advantage within the context, if outside 
the spirit, of the regulation law. Others began counting third-
party spending such as assistance offered by food banks and 
Boys and Girls Clubs as TANF spending. One State even 
apparently found a way to count the value of volunteer hours by 
Girl Scout troop leaders as State TANF spending.
    I want to be clear that this is not illegal, but that 
doesn't make it right. States' ability to claim such a broad 
range of items as TANF spending, as well as the availability of 
excess MOE credits when they do so, have eroded key features of 
the Federal-State partnership in place since 1996.
    Today's hearing will review these issues and consider 
whether the law should be adjusted to ensure TANF continues to 
meet its goal helping low-income parents find and keep jobs.
    We have an excellent panel of witnesses joining us today to 
review these issues, which are colleagues on both sides of the 
aisle. I look forward to working with all of our colleagues and 
invited guests on this as we consider TANF reauthorization 
later this year.
    Chairman DAVIS. With that, I would like to yield to my 
friend and ranking member, Mr. Doggett from Texas, for 5 
minutes.
    Mr. DOGGETT. Thank you, Mr. Chairman.
    As one who supported the 1996 welfare reform legislation, I 
welcome this opportunity to examine how well the States have 
been fulfilling their obligations under that legislation. 
Having seen more than a few examples of mismanagement of 
Federal tax dollars by State officials in my home State of 
Texas, I fully appreciate the value and the necessity of strong 
oversight.
    But we also need to focus on how decisions made here in 
Washington are affecting all of the programs that vulnerable 
Americans depend upon, whether we have a safety net that is so 
frayed that it is all hole and no net.
    TANF is supposed to be a partnership between the Federal 
Government and the States. Unfortunately, both ends of that 
partnership seem to be fraying and, along with it, the 
protection that millions of poor families rely upon.
    Last year, the House Republicans targeted the 17 mostly 
high-poverty States for cuts in TANF by refusing to extend, 
without any justification I ever heard, the so-called 
Supplemental Grant Program. That includes my home State of 
Texas, which already had one of the lowest amounts of Federal 
TANF funding in the entire country relative to the number of 
poor children. The end of these grants amount to a loss of 
about $53 million every year. According to the Center for 
Public Policy Priorities in East Austin, this has meant fewer 
funds were available in Texas for preventing high school 
dropouts and child abuse and neglect.
    All of the Texas miracle stuff that we have heard so much 
about has done very little to those who are caught in poverty. 
Only last week House Republicans enacted from--approved here in 
the House a highly partisan bill that would completely 
eliminate the Social Services Block Grant. That is the loss of 
another $137 million to assist low-income families and protect 
vulnerable children in Texas, as well as senior citizens.
    Today, we are likely to hear that some States also may be 
withdrawing their support. I am sure Texas will withdraw as 
much as it possibly can rather than continue to spend State 
funds to meet TANF maintenance-of-effort requirements.
    Some States do seem to be increasingly counting spending 
that is done from nonprofit insurable organizations. One report 
indicates that nearly half of the funds that one State, 
Georgia, declares as meeting its spending requirement actually 
comes from non-State private sources.
    While we should certainly encourage the tremendous work of 
charitable organizations across the country, allowing States to 
reduce their funding for services for needy families by 
counting existing spending by hard-pressed nonprofits threatens 
to reduce the total amount of support for our poorest children.
    As the chairman just pointed out, changes in how the States 
count spending also impacts work participation rates that the 
States are required to comply with under TANF. I firmly believe 
we should expect States to diligently work with folks to help 
them find meaningful employment. To ensure this outcome, we 
need standards that meet our bottom-line goal of helping 
jobless parents find real work so they can support themselves 
and support their children.
    We will likely hear some concerns today that the current 
work participation standard is too focused on how many TANF 
recipients are in certain activities, rather than on how many 
people are actually moving into real jobs.
    The current performance measure does not account for how 
many jobless parents a State is really helping. For example, a 
State that has 104 unemployed mothers, but only provides 
assistance to 2 of them, that State would meet the current 
Federal work participation if just 1 person was in a work 
activity. If that scenario sounds rather extreme and 
hypothetical, consider the fact that my State of Texas provides 
TANF assistance to only about 5 out of every 100 children that 
are living in poverty today.
    Mr. Chairman, if the Federal Government and the States 
reduce their commitment to our poorest citizens once again, the 
path out of poverty will become even harder and longer for 
millions of our youngest Americans. I stand ready to work with 
you to ensure that both the Congress and the policymakers in 
the State meet their obligations to help these struggling 
families, and I look forward to hearing from all of our 
witnesses today, and thank each one of them for participating.
    Thank you.
    Chairman DAVIS. Thank you very much, Mr. Doggett.
    I would like to remind our witness to limit their oral 
testimony to 5 minutes; however, without objection, all the 
written testimony will be made part of the permanent record.
    On our panel this afternoon, we will be hearing from five 
distinguished individuals: Ms. Kay Brown, Director of 
Education, Workforce, and Income Security with the U.S. 
Government Accountability Office; Mr. Grant Collins, Senior 
Vice President for Workforce Services at ResCare; Ms. Carol 
Cartledge, Director of Economic Assistance Policy Division, 
North Dakota Department of Human Services. Mr. Peter Palermino, 
TANF Administrator, Connecticut Department of Social Services; 
and Dr. LaDonna Pavetti, Vice President for Family Income 
Support Policy with the Center on Budget and Policy Priorities.
    Ms. Brown, please proceed with your testimony.

STATEMENT OF KAY E. BROWN, DIRECTOR, EDUCATION, WORKFORCE, AND 
     INCOME SECURITY, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. BROWN. Chairman Davis, Ranking Member Doggett and 
Members of the Subcommittee, I am pleased to be here today to 
discuss our work on State spending requirements for the TANF 
program. My remarks are based on several previously issued GAO 
reports and will focus on two points: the key features of State 
MOE requirements and changes in the role of State MOE spending 
over time.
    First on the MOE requirements. When Congress designed the 
TANF program, it coupled the $16.5 billion block grant with 
what was viewed as strong MOE requirements. This was to ensure 
that States remained solid fiscal partners. States continued to 
be expected to spend a minimum of 75 to 80 percent of the 
amount they spent on welfare-related programs before TANF was 
created. Over the past 15 years, this has amounted to about 40 
percent of the $406 billion in total program spending.
    MOE provisions help ensure that State spending supports 
Federal goals, and that States are limited in the extent to 
which they can replace State funds with Federal funds. To count 
towards MOE, State funds generally must be spent on families 
that meet financial eligibility criteria, be used for 
activities that support one of the four broad TANF goals, and 
be above the prereform spending levels if spent outside 
traditional welfare programs.
    In addition to its own spending, though, a State can count 
towards its MOE certain in-kind or cash expenditures by third 
parties, such as nonprofit organizations that support program 
goal and serve eligible families.
    Turning to changes in the role of MOE spending, during 
2005, State MOE levels remained stable, hovering around the 
required minimum. When States experienced a significant drop in 
caseloads following reform, the MOE provisions facilitated a 
shift away from cash assistance to a broader range of services, 
such as child care, transportation, and child welfare services, 
as long as these services supported TANF goals.
    Then in 2006, the MOE spending levels began to increase 
until they exceeded the minimum requirements by about $4 
billion in fiscal years 2009 and 2010. These increases were 
likely the result of several factors. For example, additional 
Federal funds were made available during the recent recession; 
however, to access these funds, States had to increase their 
MOE spending.
    States also have increased the use of MOE to help meet 
their required work participation rate. States' performance is 
measured in large part by their success in engaging at least 50 
percent of work-related families in allowable activities. 
However, States can turn to certain options instead. For 
example, when States spend in excess of the required MOE 
amount, this spending can be used to help lower their required 
participation rates.
    When Congress tightened these requirements in 2005, some 
States found it difficult to meet them and began to claim this 
excess MOE, an allowable option that had rarely been used 
before. For fiscal year 2009, 32 of the 45 States that met 
their rate claimed excess MOE spending, and 16 would not have 
met their rates without claiming MOE expenditures.
    In conclusion, MOE is now playing an expanded role in TANF 
programs. Some States may be making programmatic decisions and 
budgetary decisions to claim excess MOEs in order to avoid 
penalties for not meeting their work participation 
requirements. It is important to ensure that MOE spending 
reflects the commitment to serve low-income families and 
supports the Federal program goals.
    While we, GAO, have not reviewed HHS's existing efforts to 
monitor MOE, and we do not know how effective they are, we know 
that MOE provisions can be difficult to administer and oversee. 
Yet with appropriate attention to design, implementation and 
monitoring, MOE provisions can be a useful tool to help strike 
a balance between heightened State flexibility and ensuring a 
focus on certain national objectives.
    This concludes my prepared statement. I am happy to answer 
any questions you may have.
    [The prepared statement of Ms. Brown follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman DAVIS. That was actually precisely 5 minutes and 
zero seconds. Thank you for your precision.
    Ms. BROWN. You are welcome.
    Chairman DAVIS. I would like to now introduce Mr. Grant 
Collins, senior vice president for workforce services at 
ResCare, which is based in my home State, the Commonwealth of 
Kentucky. ResCare provides workforce services for individuals 
with barriers to employment, as well as residential and support 
services for people with disabilities.
    Grant was previously the Deputy Director of the Office of 
Family Assistance at HHS, which is the office responsible for 
administering the TANF program at the Federal level. He was 
involved with the drafting of TANF regulations as a result of 
the passage of the Deficit Reduction Act in 2006, and because 
of his involvement, he is very familiar with the issues that we 
are discussing today. He has previously worked on welfare 
reform in both Wisconsin and New York City, and I am very 
pleased that he can join us today.
    Mr. Collins, would you proceed with your testimony.

STATEMENT OF GRANT COLLINS, SENIOR VICE PRESIDENT FOR WORKFORCE 
                       SERVICES, RESCARE

    Mr. COLLINS. Good afternoon, Chairman Davis, Ranking Member 
Doggett, and distinguished Members of the Subcommittee. Thank 
you for inviting me to testify on the impact of State TANF 
spending and TANF work requirements.
    I am currently the senior vice president of ResCare 
Workforce Services. ResCare is a human service company 
dedicated to helping people achieve their highest levels of 
self-sufficiency. However, today I also wish to offer a few 
insights from my role as former Deputy Director of the Office 
Family Assistance, the Federal agency that oversees the 
Temporary Assistance for Needy Families program.
    In particular, I am here to discuss a few specific TANF 
provisions: State spending requirements, known as maintenance-
of-effort, or MOE requirements; the counting of State and 
third-party spending towards MOE requirements; and the impact 
of that State spending on work participation rates.
    Work requirements were a key part of welfare reform in 
1996. States must keep at least 50 percent of adults 
participating in activities like employment, job search, or 
vocational training. States receive credit toward meeting the 
50 percent work rate if they reduce caseloads over time.
    Another key provision of welfare reform is what is called 
maintenance-of-effort, or MOE, requirements. That makes sure 
States continue to invest their own money in the program. The 
goals of the work and MOE requirements were to well ensure that 
the program continued to be a Federal-State partnership, and 
that both parties were financially invested in helping families 
become self-sufficient.
    After welfare reform became law, child poverty declined, 
unmarried birth rates fell, and many recipients went to work. 
As a result caseloads fell dramatically. Because States 
received credit for their work requirements if caseloads 
dropped, it also meant the 50 percent work requirement was near 
zero or near zero in many States.
    To strengthen the work requirement, Congress passed the 
Deficit Reduction Act of 2005. As a result many States 
increased their efforts to find people work. However, States 
also found other ways to meet the Federal requirements, one of 
which became known as ``excess MOE.'' The excess MOE provision 
allows States to reduce their work requirement if they spend 
more than is required. Only one State used excess MOE prior to 
DRA, but today dozens of States report spending more than is 
required.
    This chart shows how spending reported annually by States 
appears to have increased dramatically in the years since the 
DRA was passed. The post-DRA years are shaded in red.
    Why would States begin reporting increases in spending 
during that time? One reason is because excess MOE meant that 
they could reduce their work requirement by reporting 
additional spending. So even though the DRA was intended to 
strengthen work requirements, as there were 19 jurisdictions at 
the time with no work requirements, now there are more, 22, 
that have no work requirement partially due to excess MOE.
    Because of the excess MOE credit, States began looking at 
spending in other departments throughout government that could 
be claimed in the TANF program, as is allowed under current 
program rules. So a State may begin counting new child-care 
programs, prekindergarten classes, or earned income tax credits 
as TANF spending. The State may even count volunteer hours as 
MOE by multiplying the hours by an estimated wage and reporting 
this as TANF spending. States can also report spending by third 
parties as MOE. For example, a State may count the value of 
food given out at food banks as TANF spending.
    In closing, I want to point out that none of these 
practices are illegal. None of them are questionable according 
to current policy. States cannot be blamed for working within 
rules and regulations to meet Federal requirements. However, 
based on my experience as overseeing the TANF program and 
implementing the Deficit Reduction Act regulations, I believe 
that this combination of factors has resulted in weaker work 
requirements, less investment in TANF families, and fewer 
families becoming self-sufficient.
    I appreciate the subcommittee's interest in this issue, and 
I hope that the members of this subcommittee and this panel can 
work together to ensure that TANF is working as intended. I 
look forward to answering any questions that you might have.
    Chairman DAVIS. Thank you very much, Mr. Collins.
    [The prepared statement of Mr. Collins follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman DAVIS. I would like to recognize Mr. Berg from 
North Dakota to introduce the witness from his own State, Mr. 
Cartledge.
    Mr. BERG. Thank you, Mr. Chairman.
    I am really tickled to have Carol Cartledge here from North 
Dakota. She oversees the TANF program in North Dakota, and I 
asked her to come out and share some of the commonsense things 
that they are doing in North Dakota with the committee.
    And so thank you for being here.
    Chairman DAVIS. Thank you, Ms. Cartledge. You may proceed.

  STATEMENT OF CAROL CARTLEDGE, DIRECTOR, ECONOMIC ASSISTANCE 
   POLICY DIVISION, NORTH DAKOTA DEPARTMENT OF HUMAN SERVICES

    Ms. CARTLEDGE. Chairman Davis, members of this 
subcommittee, I am here today to provide you with information 
on North Dakota Temporary Assistance for Needy Families 
program.
    Maintenance of effort is the amount a State must spend in 
order to receive the TANF Block Grant. Excess MOE is in excess 
of the amount that States need to meet the MOE expenditure 
requirements.
    A State may claim as excess MOE existing State and third-
party spending. Using this option allows the State to reduce 
their target work participation rate and operate separate State 
programs to address special needs of families with severe 
barriers to employment.
    Target work participation rate is a percentage of a TANF 
household required to participate in work activities, which may 
be lowered by a caseload reduction credit.
    States must engage 50 percent of the TANF participants who 
are work eligible and 90 percent of two-parent TANF families in 
work activities, or States face financial penalties for failing 
to meet the work participation rate. However, the rates a State 
must actually meet for a Federal fiscal year are reduced by the 
amount of a State's caseload reduction credit. Generally the 
caseload reduction credit equals the number of percentage 
points that a State reduces its overall caseload in the prior 
fiscal year compared to the overall caseload in base year, 
which is 2005. If a State utilizes the excess MOE option, it 
further reduces the caseload reduction credit.
    North Dakota took a serious look at the excess MOE option 
with the implementation of the Deficit Reduction Act. After 
much discussion North Dakota decided not to rely on excess MOE 
as a means of meeting the work participation rate, but instead 
looked at other options under TANF. Taking it a step further, 
we looked at ways to meet the 50 percent work participation 
rate without using the caseload reduction credit to stay within 
the Federal work requirements. In order to achieve this goal, 
North Dakota researched our current policies and procedures.
    In 2006, the North Dakota Department of Human Services 
conducted on-site visits to the counties and State levels to 
determine where improvements could be made. Many of the 
discussions surrounded why TANF clients could not do the work 
activities. Obstacles typically related to mental health, 
family and health issues.
    Based on these visits, we learned we needed to change the 
focus from what clients can't do to what they can do. Further, 
we needed to look at the entities that work with our families 
with multiple barriers and agencies with the skills and the 
expertise to work effectively with various populations in North 
Dakota.
    This led to contracts for case management and employment 
services with three agencies: Community Options, Job Service 
North Dakota, and Tribal Employment and Training. Under TANF, 
adults receiving assistance are expected to engage in work 
activities and develop capacity to support themselves and their 
families.
    We also shifted our focus on the federally defined work 
activities and on how to make the work activities work for us 
instead of against us. North Dakota uses the full array of 
options, with some individuals involved with many activities. 
We have become creative with the work activities such as 
working with our tribal agencies for TANF clients to achieve 
the required hours. One of the examples is during a powwow, 
where we can count some of the hours that some of the 
individuals may be participating in a powwow.
    North Dakota continued to look at the TANF and how we could 
improve the program to better serve our clients and their 
needs. Today North Dakota has regular TANF benefits and these 
additional options: Diversion assistance, which provides short-
term benefits to families that are employed or will be employed 
to help the parent or caregivers remain employed.
    We also have our regular TANF benefits. Within the regular 
TANF benefits we have--it is called Pay After Performance--
work-eligible individuals are required to meet work 
requirements before their needs are met. This means that the 
child-only payment is made, and if the work-eligible individual 
meets the work requirements, we would provide them with a 
supplement benefit. If the work-eligible individual does not 
meet the requirement, a sanction is imposed. The reasons for 
this requirement is so that individuals will become work ready, 
get used to what a paycheck is like.
    We have now entered into a new endeavor, which is called a 
career ladder, where we are allowing individuals to pursue 
secondary education. We have a Kinship Care program, which 
expands the options of placements for children who are in the 
care, custody, and control of the child welfare system. We have 
transition assistance, which promotes job retention by 
providing extended periods of assistance to qualified families. 
And then we have post-TANF, which is once they totally lose 
TANF assistance. We also provide support services to families.
    Implementing these changes to North Dakota has resulted in 
a work participation rate increase. In Federal fiscal year 2005 
without a caseload deduction credit, North Dakota work 
participation rate was 31.45 percent.
    Chairman DAVIS. Ms. Cartledge, would you mind summing up 
briefly? We are over a bit.
    Ms. CARTLEDGE. Of course.
    With these changes, North Dakota has been able to increase 
its work participation rate by 128 percent.
    That concludes my testimony, and I would be happy to answer 
any questions that you may have.
    Chairman DAVIS. Thank you very much.
    [The prepared statement of Ms. Cartledge follows:]

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    Chairman DAVIS. Mr. Palermino.

     STATEMENT OF PETER J. PALERMINO, TANF ADMINISTRATOR, 
  CONNECTICUT DEPARTMENT OF SOCIAL SERVICES, REPRESENTING THE 
           AMERICAN PUBLIC HUMAN SERVICES ASSOCIATION

    Mr. PALERMINO. Good afternoon, Chairman Davis, Ranking 
Member Doggett, distinguished Members of the Committee. My name 
is Peter Palermino. I am the TANF administrator as well as the 
child care administrator for the State of Connecticut. The TANF 
program is operated through the Connecticut Department of 
Social Services. I am here on behalf of the State of 
Connecticut, the National Association of State TANF 
Administrators, and the American Public Human Services 
Association.
    I am pleased to be here to discuss the ongoing partnership 
between the Federal Government and the States, and the ongoing 
effort to support low-income or no-income families to attain 
self-sufficiently. I expect that today's hearing will move us 
forward in an open discussion on how States such as Connecticut 
are faring in their efforts to help families with complicated 
needs, how our State is implementing strategies to help 
families through strategic investment of our State TANF MOE 
dollars, and possible options for improving the system based on 
our experience and experiences of other States across the 
country.
    Let me share a few stats for you for Connecticut. Our TANF 
Block Grant is $267 million, which brings our MOE requirement 
to $183 million, for a total of $450 million. That is a nice 
piece of change to use to help support a lot of families, and 
yet despite that, we still look for more as best we can.
    We currently serve 17,500 with direct cash assistance each 
month. That total is down from a high of 24,000 back in 2005. 
And we also serve several thousand more families with the TANF 
MOE to obtain and maintain self-sufficiency.
    Connecticut has a time limit of 21 months, with up to two 
6-month extensions for mandatory recipients. So our typical 
length of stay for a TANF client is around 33 months.
    Since October of 2010, Connecticut's monthly work 
participation rate has exceeded 50 percent without factoring in 
the caseload reduction credit or any excess MOE credit. Since 
the work participation rate is dependent on so many factors, 
including barriers of individuals' access to jobs, education, 
transportation, and other supports, we are pleased to know that 
the State's additional investments in excess MOE may assist us 
if our rate begins to drop. We have used the caseload reduction 
credit and excess MOE in years past, and we expect we may need 
to in the future.
    States do like the flexibility provided by the TANF Block 
Grant. The ability to design programs and utilize State and 
Federal funds is essential to meet differing needs of our State 
populations and economic variables, and yet still address the 
four TANF purposes. Thus, we urge you to continue to maintain 
this flexibility and honor those provisions that are in the 
TANF regulations.
    A little historical information. In 1996, Connecticut's 
TANF program expanded beyond the Aid to Families with Dependent 
Children population to serve a much broader and diverse 
population to families with incomes less than 75 percent of the 
State median income level.
    We have other programs that are supported by TANF and MOE 
funds, and they include job training, child care, 
transportation. Those are important and critical employment 
support programs for those individuals. These programs do help 
targeting families get to and stay at work and begin the road 
to self-sufficiency.
    In October of 2007, Connecticut did move our two-parent 
cash assistance families to a solely State-funded program. We 
recognized that we could not attain the 90 percent 
participation rate. Hard decision in 2007, similar to other 
States, was eventually recognized by Chairman Davis in a 
statement he made in 2011, which I quote: ``Current welfare 
rules create marriage penalties by expecting a greater share of 
married parents to be working and for more hours. States have 
responded by in effect opting out of such requirements 
altogether,'' quotations closed.
    TANF MOE in Connecticut has been very consistent over 
several years. The excess MOE is an extension of those funds 
that demonstrate the additional commitment of funding by the 
State to these TANF-directed programs. Connecticut has exceeded 
its MOE requirement for several years, and we expect to 
continue to do so.
    We do believe that the work participation rate is limiting, 
and there are a variety of reasons why, but we believe the 
caseload reduction and the application of excess MOE is a 
thoughtful provision for our States.
    In conclusion, I believe Congress and the Department of 
Health and Human Services in the States all desire similar 
results, and we are here today to work with you and will be 
happy to take some questions.
    Thank you.
    Chairman DAVIS. Thank you, Mr. Palermino.
    [The prepared statement of Mr. Palermino follows:]

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    Chairman DAVIS. Dr. Pavetti.

STATEMENT OF LADONNA PAVETTI, PH.D., VICE PRESIDENT FOR FAMILY 
 INCOME SUPPORT POLICY, CENTER ON BUDGET AND POLICY PRIORITIES

    Ms. PAVETTI. Good afternoon, Chairman Davis, Ranking Member 
Doggett, and distinguished Members of the Subcommittee. Thank 
you for inviting me to testify today.
    The key point I would like to make today is that States 
rely on excess MOE to meet their work rate because of the work 
rate's flaws. If the work rate was replaced with a new measure 
that focused on what States achieve through their TANF work 
programs, the excess MOE issues related to meeting the work 
rates would largely disappear.
    States didn't begin to use excess MOE to help to meet their 
work rate until after the passage of the Deficit Reduction Act, 
which included changes that made it harder for States to meet 
the rate. One important change was moving the base year for the 
caseload reduction credit from 1995 to 2005. This matters 
because as you can see in figure 2 on this screen, by 2005, 
States had already reduced their TANF caseloads far below their 
prereform levels.
    For every 100 families in poverty in 2005, states served 
just 35 families in their TANF programs, down from 68 families 
in 1996.
    In 2009, just eight States met their 50 percent work rate 
without any caseload reduction credit. That is either from 
reducing their TANF caseload or from claiming excess MOE. 
Comparing them to two larger States with much lower work 
participation rates, Washington and California, shows that the 
work rate fails to adequately measure whether States are 
meeting the primary goal of welfare reform, increasing the 
employment among participants while providing a safety net for 
families unable to work.
    As you can see in figure 3, Washington has done quite well 
at getting single mothers employed. In 2009, two-thirds of 
single mothers were employed, a higher share than in 38 of the 
50 States. Yet its performance on the work rate does not paint 
the same picture of success. In 2009, the State achieved a work 
rate of just 23 percent. Without the help of an excess MOE 
claim, It would not have met its work rate.
    California was one of five States that failed to meet its 
work rate in 2009 even with an excess MOE claim. Yet the 
State's low work rate obscures its success. Even with the 
State's unemployment rate at 11.4 percent, 60 percent of single 
mothers were employed. In 2009, almost 90,000 TANF recipients 
met their work requirements, and that was an increase of 40,000 
recipients from 2005, a measure of success by just about any 
standard except the TANF work rate.
    As figure 4 shows, what is even more telling is that for 
every 100 single mothers in California who were unemployed in 
2009, there were 13 TANF recipients, who met their work 
requirement. This ratio was the second highest in the country, 
and higher than the States that achieved a 50 percent work 
rate.
    Mississippi shows the other side of the story. Mississippi 
achieved the highest work rate of 61 percent in 2009, but its 
employment rate among single mothers was among the 10 lowest in 
the country. And for every 100 unemployed single mothers, there 
were just 4 TANF recipients who met their work requirement.
    Moreover, Mississippi was able to achieve a high work rate 
because it served few families in its TANF programs. As figure 
5 shows, for every 100 Mississippi families in poverty, only 10 
received any TANF cash assistance, compared to 66 in California 
and 49 in Washington.
    The weakening of the cash safety net for families has 
resulted in increased numbers of children living in deep 
poverty, and has removed the safety net from the most 
vulnerable families who have the most to gain with the help 
that TANF can provide, those that have physical or mental 
health issues, and those caring for a sick or disabled child.
    The work rate is so terribly flawed that reconsideration of 
it should be central to any TANF reauthorization discussion. In 
the interim, I offer two changes to include in a TANF extension 
that would begin to refocus State aid efforts on what matters: 
getting TANF recipients employed.
    First, allow States to count individuals that leave TANF 
for work in their work rate for up to 12 months; and second, 
ask HHS to initiate a demonstration project to encourage States 
to develop and hold themselves accountable for alternative 
performance measures that focus on outcomes.
    Now, I would like to make a few statements about third-
party MOE, which I believe is a significant problem. States 
have found ways to withdraw State funds from programs and 
services that had been supported with TANF MOE funds and still 
meet their MOE requirement by identifying this third-party MOE.
    Importantly, this practice is not limited to States that 
report excess MOE expenditures. Some States have identified 
third-party spending and have used this spending simply to 
meet, not to exceed, their MOE requirement. This is not what 
Congress intended, and this practice should be stopped.
    These are hard economic times, and many families are 
struggling, and there are two actions--and I am going just do 
those quickly and end--that Congress should also consider that 
are related to MOE. One is redesigning the contingency fund, 
which has very complicated excess MOE provisions and makes it 
difficult for States to meet, and the other is funding the TANF 
supplemental grants, which has taken money out of State 
programs that really they need to be able to meet those 
requirements.
    With that, I will stop and take any questions that you 
might have.
    Chairman DAVIS. Thank you very much, Doctor, for that.
    [The prepared statement of Ms. Pavetti follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman DAVIS. With that, we will move to questions. I 
essentially see two questions today.
    I see some opponents to reform are messing with our sound 
system now.
    The first question that I have--I am going to put two of 
these together and then ask a couple of you to respond. First, 
is the way that we define State spending in the TANF program 
correct, Part 1, the right type of definition of the standard? 
And second, should States be able to reduce the share of adults 
on welfare expected to work if the State spends more than 
expected?
    Mr. Collins, currently States can count spending by non-
State third parties like charitable organizations as if that 
were State welfare spending. Does that policy make sense to 
you, and do you think this potentially allows States to back 
out of their own obligations to the detriment of low-income 
families?
    Mr. COLLINS. Chairman Davis, I have done a lot of thinking 
about this. It is hard for me to understand how an incentive 
can be created when what it ends up doing is having people stay 
dependent on welfare for longer periods of time. So I don't 
believe that it works well in the way that it is set up right 
now. The way we define State spending in the TANF program is 
incorrect.
    Chairman DAVIS. Dr. Pavetti, you have said this practice of 
allowing third-party spending to be counted as State welfare 
spending, quote, ``should be stopped,'' closed quote. Why?
    Ms. PAVETTI. That is third-party MOE, because I don't think 
that that was what the intent was. It has allowed States to 
reduce State spending.
    But I would like to comment on the difference with the work 
rate. I think there are two sides to that, and in your opening 
statement, you basically said States are allowed to use the 
excess MOE, but that doesn't make it right.
    I think you can make exactly the same statement about 
States reducing their caseloads in order to meet the rate or to 
get the credit. That doesn't make it right. In the slides I 
showed, you can see States are not serving families in need, 
and they are not working, so we are not measuring the right 
things.
    So I think it is not an issue about whether or not we want 
TANF recipients to go to work, it is about whether or not we 
are measuring whether or not they are going to work, and that 
is what I think the issue is.
    Chairman DAVIS. I appreciate you sharing that. You know, 
ultimately the issue is making sure that we are measuring the 
right outcomes and also the process is correct.
    And the question of allowing apparently excess State 
welfare spending to reduce work requirements, can anyone on the 
panel explain the logic of this provision to me? Why should we 
reduce work requirements just because a State spends more on 
TANF benefits?
    Before we double back here, I would like to give a--
actually Dr. Pavetti could be a staff member almost with the 
number of times I have seen her here. I appreciate her erudite 
contributions to the subcommittee over the last 18 months that 
I have chaired.
    Mr. Palermino.
    Mr. PALERMINO. What I would like to share is this, is that 
the complexities that we have encountered with some of the 
families, and some of the opportunities that we would like to 
provide based on the way the current rules are set up with 
providing, for example, more adult basic skills type of 
opportunities, we would like to take those risks. I think our 
State legislators want to work with us and want us to take some 
more risk to serve people that won't count towards what the 
work participation rate allows us to be countable.
    So in taking those risks, we would like to think that if 
there is excess MOE, and we have accounted for that, and that 
excess MOE does support the purpose statements, that then if 
the risk we take did not come through, and we were 
unsuccessful, at least at that time, we would be able to still 
comply with the ultimate goal of the TANF law and then also 
give opportunities for families that may not get it because we 
just didn't have that opportunity.
    Chairman DAVIS. Ms. Cartledge, would you like to comment?
    Ms. CARTLEDGE. Mr. Chairman, Members of the Committee, 
North Dakota has chosen not to use excess MOE, and it has to do 
with not wanting to be reliant on third parties to meet our MOE 
requirements. And also we wanted to be able to look at how we 
can help our families. We do not want to shift people, and we 
knew after going out and doing research, we discussed what were 
some of the issues families were experiencing. Like I said, 
mental health issues, and also health issues, and also some of 
the other things came up as hygiene issues.
    So when we went out and did the research, it was, okay, how 
can we address those things to help our families get to work? 
And a very basic example is one of our first clients that we 
saw when we did a little bit of shifting of the individual had 
very poor hygiene. So it means that, okay, these are some of 
the things we are seeing. This is why they can't become 
employed. We need to take them by the hand and take them to the 
store; here is a toothbrush. We are going to take you in a 
bathroom and show you how to brush your teeth.
    So we chose instead to go to this is how we can help our 
clients, because we felt that was the intent of TANF was to 
take them from where they are and move them into employment. 
And I did include several, a couple, three examples of actually 
how we did move some clients to employment.
    So I am not really an expert on utilizing excess MOEs 
because we chose not to.
    Chairman DAVIS. With that, thank you.
    I am going to recognize Mr. Doggett for 5 minutes.
    Mr. DOGGETT. Thank you very much.
    Mr. Palermino, what is your feeling about what the States 
will do if we bar them from continued use of excess 
maintenance-of-effort credits?
    Mr. PALERMINO. The example that I shared a few minutes ago 
with regard to the one clear example right now is with our 
families with basic skills is that if we are not allowed that 
flexibility to challenge ourselves or challenge our clients, 
then I think we may have to resort to moving those individuals 
out of the TANF Block Grant and make them State-only 
individuals. That would be the way to avoid our not being 
compliant in order to meet the work participation rate.
    So we are very concerned as a State to meet the work 
participation rate. No one wants to be faced with a penalty, 
and Connecticut's penalty would be roughly $13 million if we 
failed to meet that rate.
    Mr. DOGGETT. So the most immediate effect would be to deny 
those individuals participation in the Federal program?
    Mr. PALERMINO. These are the more hard-to-serve individuals 
that are receiving assistance.
    Mr. DOGGETT. Yes.
    Dr. Pavetti, are there features in the current 
regulations--if this Congress does nothing, and that seems to 
be one of the things that we are best at, but if we do nothing, 
will there be provisions in the current regulations that will 
reduce the work participation requirements through special 
credits? In other words, even if Congress doesn't act, aren't 
many States likely to face higher effective work participation 
requirements in TANF starting this year?
    Ms. PAVETTI. They are. One thing that happened was their 
final regulations haven't gotten fully implemented because 
there were ``hold harmless'' provisions that were implemented 
because of the recession, knowing that States were going to 
have difficulty meeting those rates.
    So what will happen this year which is that excess MOE will 
be treated much as it was intended, which is that only the 
share of basic assistance will be counted. So it will be 
constrained. States only spend about 30 percent of their TANF 
dollars on basic assistance. So basically if the State spends 
$100, they will only be able to use $30 of their excess MOE 
spending for caseload reduction credit. So it is going to 
substantially reduce what they can do, and it also gets it back 
to what it was intended, which is that if States spent more on 
basic assistance, they should not be penalized for doing that. 
That was the idea. So if nothing happens, it will already be 
harder for States to meet their work rates.
    Mr. DOGGETT. I gather from the chart you presented in your 
testimony, your response to the chairman's questions, that the 
real problem here is that these TANF requirements don't account 
for what the States are really doing to help poor mothers find 
jobs; basically that the current standards are too focused on 
the process and not enough on the results in terms of women who 
find jobs.
    Ms. PAVETTI. Right. That is very true.
    There are lots of different ways in which this is 
problematic. I would say the biggest problem is that it is a 
rate. Because it is a rate, you can manipulate the denominator, 
by not serving people, which is what many States have done. And 
the other thing is that when you see States like California 
that, since 2005, has increased the number of people in meeting 
their work participation rate by 40,000 people, but they don't 
meet their work rate, something is wrong. They have done a lot 
to engage TANF recipients in work activities. It is the rate 
that creates the problem.
    So unless we fix it, we are always going to be measuring 
the wrong things, and we are not going to be necessarily 
helping families to move forward, which is, I think, what we 
all want to achieve.
    Mr. DOGGETT. Thank you all very much.
    I yield back, Mr. Chairman.
    Chairman DAVIS. I thank you very much.
    And with that, I recognize Mr. Paulsen for 5 minutes.
    Mr. PAULSEN. Thank you, Mr. Chairman, also for holding the 
hearing. And also for all of the witnesses who took the time to 
be here today.
    It was interesting as we heard in the testimony earlier 
about States that are counting third-party spending now as if 
it were spending towards TANF MOE, the requirements, and I am 
trying to get a sense, do we know how many States are, in fact, 
counting third-party spending in this count towards TANF? Do 
you have an idea, Ms. Brown? Do we have an idea of how many of 
the States numerically?
    Ms. BROWN. Although we haven't studied the third-party 
spending issue, we did have a recent discussion with HHS, and 
our understanding is they don't know how many States, nor do 
they know the dollars involved.
    Mr. PAULSEN. Do you think that agents just would have 
adequate oversight to understand State MOE spending or what 
States are reporting as MOE; do they have adequate oversight to 
determine that?
    Ms. BROWN. When I talked about MOE spending, I mentioned 
the things that can make it effective are good design, good 
implementation, and good monitoring. And we have been talking a 
lot about design and implementation today, but monitoring is a 
really key part of that. HHS has some administrative reports 
that come in to them, but they also rely a lot on the Single 
Audit Act, on the single audits that are done on the programs, 
and our work on those audits has shown us that the quality is 
uneven, and they may not catch the kinds of complex policy 
issues that we are talking about here today.
    Mr. PAULSEN. Mr. Palermino, from the association's 
perspective, do they have any information on how many States 
are using third-party spending, or how much they are counting? 
I did note that in a report that the Georgia Budget and Policy 
Institute----
    Mr. PALERMINO. No. At this point there is no formal report 
that has been issued with regard to that specific information.
    Mr. PAULSEN. Okay.
    Mr. PALERMINO. Just to let you know for the record, for 
Connecticut, we have been using primarily State investments, 
and when we report on our excess MOE, we are talking about 
State investments and not necessarily some of the other, I 
think, responses that have been referenced in there, too.
    When we worked with our TANF ECF, we did do, we did work 
with some nonprofits. There are some community-based 
organizations that carry out a lot of similar functions that 
are similar to the TANF purpose statement, so they present 
opportunities because we know that the State government nor the 
Federal Government can handle this alone. In fact, we work very 
closely with private foundations in order to encourage them to 
look at investing some of their dollars. And that was 
attractive, as I am sure you would expect, for them to invest 
private dollars when they knew they could leverage some of the 
Federal funds.
    Mr. PAULSEN. I am just trying to get a sense, because it 
sounds like there is a report that Georgia Budget and Policy 
Institute, noting that about half of Georgia's MOE spending is 
from third parties. And, you know, from my perspective--now we 
heard the reference to at least one State counting a Girl Scout 
troop leader's time as State spending in the TANF program. Is 
that something that is sort of common knowledge out there? Has 
anyone else on the panel heard about that, or could anyone 
explain how a Girl Scout leader's volunteer time or troop time 
would meet TANF's purposes, program purposes?
    Mr. COLLINS. The opportunities to amass this type of third-
party spending is quite vast actually, particularly in 
organizations that deal with youth, because that particular 
group fits purpose 3, and it allows the TANF agency to go in 
and find the program, establish the TANF purpose. Once you do 
that, the organization can sign an agreement, and once that has 
happened, you can then use the actual expenditures as TANF 
spending. In some cases you can use the volunteer hours in a 
similar sort of way.
    So there are a number of ways to get third-party 
expenditures to count as TANF spending. I think the 
opportunities are far greater than actually what we know.
    Mr. PAULSEN. So if the opportunities are far greater than 
what we know, I mean, do you believe or does anyone on the 
panel believe that we should be counting a Girl Scout troop 
leader's volunteer time towards excess MOE counts or spending? 
I mean, to me it just seems a little crazy.
    Mr. COLLINS. The challenge that I have with it is until 
someone can show me how it directly impacts more welfare 
recipients going in to work and how that actually comports with 
the intent of TANF, then I think no, I don't think it makes a 
lot of sense at all actually.
    Mr. PAULSEN. Right.
    Mr. Chairman, if I could, just for the record, put an 
article or position paper that identifies the Girl Scout leader 
issue in--the State of Hawaii I believe was the State--into the 
record.
    Chairman DAVIS. Without objection.
    [The information follows, The Honorable Erik Paulsen:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman DAVIS. And the gentleman's time has expired. I 
thank the gentleman.
    Mr. Berg from North Dakota is recognized for 5 minutes.
    Mr. BERG. Thank you, Mr. Chairman.
    And thank you, Ms. Cartledge, for being here. You know, one 
of the things in your testimony that really jumped out at me is 
since 2005 where our work participation rate was 31 percent, 
and it has gone up to 72 percent in 2012. I mean, I just want 
to commend you for digging into these, each cases, and helping 
people. We didn't get to it, but there are some great stories 
at the end of your testimony and really putting people back to 
work and helping them both with work as well as education.
    Two quick questions, and then I have a question for Mr. 
Collins. The first question is why did North Dakota decide not 
to count this outside money? What was that thinking? Why was 
that decision made?
    Ms. CARTLEDGE. Mr. Chairman, Members of the Committee, the 
reason North Dakota decided not to is we didn't want to be 
dependent on a third party to meet our MOE requirement or have 
to do like a chase to get the requirement. So we preferred to 
be independent and wanted to meet our requirements by using our 
general funds or also other means.
    Mr. BERG. So it really creates more stability for the 
program----
    Ms. CARTLEDGE. Right.
    Mr. BERG [continuing]. Rather than have some third party 
that may be there one year and gone the next?
    Ms. CARTLEDGE. Correct.
    Mr. BERG. The other question was brought up today that it 
may be easier for small, rural States to meet the work 
participation requirements, and that States like North Dakota 
have a very weak safety net for families in need. And I guess I 
would just like to--I mean, how do you feel about that? To me, 
it seems like North Dakota has a very strong safety net. Could 
you respond to that?
    Ms. CARTLEDGE. Yes. Mr. Chairman, Members of the Committee, 
North Dakota does have a strong safety net for our children. As 
one of the example of our TANF families, the TANF program 
itself has like a pre- and postprogram, so it tries to avoid 
the cliffhanger effect that once they become employed, they are 
done, they are gone.
    What we did was we have the transition assistance for 6 
months. We give them a smaller TANF benefit, and we keep them 
with supportive services. Once that ends after 6 months, then 
they can get additional 6 months with transportation allowance. 
Those are not counted as part of meeting our work requirement, 
as also those who go beyond the educational point.
    So we are taking additional steps like the educational 
ladder, the career ladder, is to move people out of, further 
out of, poverty by giving them the educational skills to also 
work themselves totally off of the TANF benefits.
    Mr. BERG. Thank you very much.
    Mr. Collins, I have a question for you, and just to follow 
up on the chairman, I am having trouble with the underlying 
logic here if our goal is to put people back to work, and we 
are saying, gee, if a State spends more money, then you can 
have fewer people working. I mean, if we believe more money is 
the right program and doing the right thing, if a State has a 
higher maintenance of effort, it should, in fact, have more 
people working, not fewer.
    And so to me it seems like on the fundamental core here, 
the incentives and consequences are somehow twisted around and 
backwards. Could you just help me either figure out why it is 
the right thing, or what the alternative should be?
    Mr. COLLINS. Well, what is interesting is, you know, when 
the provision was created, it was in the 1990s. We have 
evolved. We have gone through the deficit reduction act (DRA); 
things have changed. So it is a fair statement to rethink 
really what we are doing with this particular incentive, 
because it seems to be the opposite of what it is that you 
would want to do.
    A couple of things. One, if you cannot tie it directly to 
more single parents moving into paid employment or 
participating in work activities, I am struggling with what the 
reward would be. That would be necessary.
    And, second, to be fair, a lot of this happened because the 
Deficit Reduction Act created a stronger work requirement, and 
States found a way around it, and they used the excess MOE to 
do that.
    I would argue that the best and safest way to guard 
yourself against penalties is to do what North Dakota did, 
engage your caseload; figure out what they are doing, where 
they are at, and make sure that they make progress.
    And the last piece I would add to that is it is about what 
you can do, not what you can't do. There are 12 different work 
activities that people can do. If there are no paid employment 
opportunities right now, people need to get ready for when that 
opportunity comes around in the future. Sitting at home and 
waiting is not a strategy. Hope is not a strategy.
    Mr. BERG. Thank you.
    I will yield back, Mr. Chairman.
    Chairman DAVIS. I thank the gentleman.
    Mrs. Black is recognized for 5 minutes.
    Mrs. BLACK. Thank you, Mr. Chairman.
    First of all, Ms. Cartledge, I want to commend you in North 
Dakota for what you are doing. It seems to me that you are 
doing a very commonsense thing. You recognize that your role is 
to get people back to work and to help them to become self-
sufficient, and I commend you for what you have done in going 
out and actually meeting with folks and figuring out why it is 
that they are having a hard time getting employed, and really 
giving them the opportunity for upward mobility.
    That is truly what this is about, and it saddens me that we 
get to that position where States will do things to try to 
twist and turn and almost cover up what they are really doing, 
what they are putting into the program in order for it to be 
successful. It really does bother me.
    But let me ask you, Ms. Brown, because you are the person 
who looks at the statistics and so on, in your testimony about 
the States that can count this third-party spending as if it 
were spending toward their maintenance of effort, do you know 
how many States are doing so today and how much in the third-
party spending they can count in that State spending?
    Ms. BROWN. The information I gave on 2009 is the most 
recent that we have. It is not something that you can just look 
at a set of data and figure it out. It requires quite a bit of 
calculating to determine how much of someone's caseload 
reduction credit is due to different factors.
    Mrs. BLACK. And why is that so complicated? It would seem 
to me there would be categories that say, okay, here is how 
much the State actually puts in, dollar number; here is how 
much the State gets from volunteer hours; and here is how we 
figure it. Is that not what gets reported, or how does it get 
reported?
    Ms. BROWN. Well, you know, we have also gone on record 
about the problems with the work participation rate and don't 
believe that it is achieving the goals that it should be. But 
beyond that, that is really the primary metric that they use to 
gauge the success of the program. And so as the caseloads have 
gone down since the beginning, since welfare reform, many more 
funds are being devoted to other types of activities, and we 
don't know enough about what those are. We actually have some 
work ongoing right now where we are trying to figure some more 
of that out.
    Mrs. BLACK. And I note that in the Congressional Research 
report on page 9 where we have the pie chart, and when I look 
at how the money is being used, there is 16 percent of the 
money that is being used in the ``other'' category. That is a 
pretty large percent, especially when you compare that to the 
capability of using the two-parent family formation and 
pregnancy prevention, which seems to me if we were looking at 
it from that end of making sure that people are keeping solid 
relationships and not getting into the situation to begin with, 
because obviously prevention is the best medicine there. But we 
have got 16 percent that is in the ``other'' category.
    Ms. BROWN. Yes. And the tricky part about that is what we 
don't really know--in addition to not knowing enough about 
every activity is in that ``other,'' we don't know how many 
people are actually getting served, and we don't know if it is 
effective or not.
    Mrs. BLACK. So obviously the point is being made that if 
this program really is a temporary assistance for needy 
families, and we call it TANF, which we talk about as an 
acronym, but don't really talk about what its real mission is, 
that if we don't know how the dollars are being spent in order 
to help someone to become self-sufficient, it is hard to say 
that the dollars are really being spent for the mission of the 
program.
    I want to go also to the child care category, because 17 
percent of the money is being spent on child care. Is there any 
way that we can tell whether the folks who are using the child 
care and the expenditures on that are being used for parents 
being in school, in programs that are actually working, or do 
we know that?
    Ms. BROWN. Well, we have done some work looking at the 
multiple funding streams that go into funding child care in 
States, and in addition to TANF and some of the Child Care 
Block Grants, there is also Social Service Block Grant funding. 
Those go into a pool to be provided for services for people who 
are determined eligible. And the States actually set their own 
specific eligibility requirements, but they are often things 
that are related to needing child care because you are low 
income and you are trying to work, or you are doing other 
activities that are acceptable to the State.
    Mrs. BLACK. I see that I am on the yellow, which means I am 
going to turn red--oh, right now I turned red, so I am going to 
be out of time, but what I would ask is if I had the 
opportunity and the time to ask one more question, I would ask 
each of you how it is that we can fix this program, both in 
meeting the mission and, second, in the requirements that we 
should have in the reporting to make sure that what is being 
spent and the way it is being done is really ultimately meeting 
the mission of getting people to work so they can fulfill their 
dreams.
    So thank you for that.
    Chairman DAVIS. Thank you, Mrs. Black.
    The chair now recognizes Mr. Reed from New York.
    Mr. REED. Well, thank you, Mr. Chairman, and I will be as 
kind as I can for the lady from Tennessee and go with her 
question to the panel first and use up some of my time to 
answer her question. Hope you were listening to that question. 
Anyone want to take a stab at that? Mr. Collins? Oh, no, Dr. 
Pavetti, you jumped up. Please. We haven't heard much from you 
today.
    Ms. PAVETTI. I think the single most important thing we 
could do is to fix the work rate. I would just like to say I 
have the numbers. I looked to compare the numbers from 2005 to 
2009, and Ms. Cartledge gave her rate and how it increased, but 
the numbers of people meeting the work rate requirement are 
pretty much the same. And so I think that we just don't know 
how to measure whether States are doing the work to get 
recipients to work. So I think we need to really give States 
the opportunity to try different ways of saying, this is what I 
am doing, and this is how I think I should be held accountable. 
So that is one thing on the work rate.
    On the spending, I think that there are very detailed 
reports. We did--there was a report on the ``other,'' and I 
think States should be required to do more detail than they are 
now so that we do have a better accounting. And I think that, 
again, you can constrain the MOE spending without putting 
States at risk of not serving people because of the way it 
relates to the work rate.
    Mr. REED. Well, thank you very much.
    Mr. Collins, you wanted to offer something?
    Mr. COLLINS. Yes.
    My answer would be to do what North Carolina and the other 
eight States did that were able to meet the 50 percent work 
participation rate of which over 65 percent are in paid 
employment. Get dirty. Get in there and work with people. Get 
in there and build a fully comprehensive program, all 12 work 
activities. There are people who can work today, and there is 
going to be people who need help so they can work tomorrow, and 
we shouldn't let the one overshadow the other. Every one of 
them needs help, and what we should do is focus on what people 
can do. Now. Today.
    So this isn't about work participation hours. This is not 
about really meeting the rate. What it is about is engaging 
people and making sure that their government provides a service 
while they are on time-limited assistance. It is called 
Temporary Assistance for Needy Families. It has a time limit 
associated with it. I think you can start to understand really 
what the intent of the program is, and we should not let people 
sit, and we should not let them wait.
    I am referring to the fact that even before the DRA was 
passed, more than half of all TANF recipients who had a 
requirement for work activities had no hour in a single 
activity for the entire year, and I am suggesting, whether it 
is excess MOE or not, that we can do significantly better than 
that.
    Clearly, there could be other reports that would shed a 
light as to how these credits are put together, but I think 
that what we are doing is we are diverting ourselves from what 
I think the real work needs to be. You don't want a penalty? 
Build a really robust program, and it will never happen to you.
    Mr. REED. I appreciate that sentiment, Mr. Collins.
    Mr. Palermino, I want to direct my next inquiry to you 
because it is along what Mr. Collins was talking about, because 
when I read the testimony in preparing for today, the excess 
MOE issue, I know in 2008 you took a stance, or your 
organization may have taken a stance, that we should not repeal 
that, we need to continue it, encourage the State investments, 
spending investments and things.
    Do you still feel that same way? Does your organization 
still feel that same way if the repeal of excess MOE was put 
onto the table, given what everyone is talking about here 
today?
    Mr. PALERMINO. I think that we want to be working together 
to examine what the best strategies would be, and I think the 
work participation rate is one. I think reviewing what the 
purpose is, if we are going to change the purpose, and who the 
partners will be I think may lend itself to maybe what that 
decision would be.
    Mr. REED. Well, I guess I am truly focusing on the excess 
MOE issue. You think that should continue the way it is, or is 
there any need to reform that?
    Mr. PALERMINO. Well, we have seen some value with it, and 
not to the extent of some of the examples, I think, that have 
been used here, but I think we have seen some value with it, 
with giving us an opportunity to be flexible within our State, 
being able to--and we are not trying to move against families 
in getting adults in to work because ultimately they need to 
get a high school diploma before they can move to getting a 
good job, and that is some of the target populations we want to 
work to move there.
    So if we change some of the thought process around what the 
true output should be, and if we recognize that we do have 
partners beyond just the government--now, most of our excess 
MOE is within the State government. We do have records and 
data, and we do track to make sure it fits the purpose and all 
that so we can report about that. But I think to the extent 
that there are other viable partners to work with, maybe that 
is a way of rethinking how we revisit what the purpose 
statements are and who should participate with us.
    Mr. REED. I appreciate that.
    My time has expired, but I just have to put on the record, 
Mr. Chairman, if I could have the courtesy of 30 more seconds--
--
    Chairman DAVIS. Without objection.
    Mr. REED [continuing]. The focus of the effort must be, in 
my opinion, to put people to work and provide an opportunity 
for people getting to work, not the policy initiative of 
encouraging folks just to spend money at the State level for 
the sake of making the policy initiative of spending more 
money. It just doesn't make any sense to me, and I echo the 
sentiments of my colleague from North Dakota and the chairman 
himself. It just seems to me counterintuitive. What we should 
be focusing on is getting people to work and providing them 
with the tools that they can go into this competitive workplace 
sooner than later.
    And with that, I will yield back. Thank you, Mr. Chairman.
    Chairman DAVIS. Thank you very much.
    I would like to thank, again, all of our witnesses for 
joining us today. We appreciate your input. Your different 
perspectives have all added value to this discussion. We hope 
you will continue to share your thoughts.
    We have discussed some opaque provisions of the TANF 
program, how they work, and some of the troubling consequences 
of how they have been used in recent years to weaken both work 
requirements and State spending requirements. I appreciate your 
help.
    If Members have additional questions, they will submit them 
to you in writing. What we would ask is that you share your 
responses with us on the committee for the record so all will 
have access to that information.
    Thank you again, and with that, the committee stands 
adjourned.
    [Whereupon, at 4:07 p.m., the subcommittee was adjourned.]
    [Submissions for the Record follow:]

                                 
               American Public Human Services Association

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          Boys and Girls Clubs of America, Brian Manderfield 

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                       Center for Fiscal Equity 

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                    Center for Law and Social Policy

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             Coalition of CA Welfare Rights Organizations 

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                            Washington State

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