Will Stricter Federal Rules Strengthen TANF Work Requirements Across All States?

This study examines how the Fiscal Responsibility Act of 2023 (FRA) will affect state compliance with federal work requirements under the Temporary Assistance for Needy Families (TANF) program. Using administrative data from the U.S. Department of Health and Human Services and state-submitted reports, the authors forecast that FRA will increase work requirement stringency in 23 states and cause 5 states to fall out of compliance. They identify six state strategies for meeting requirements, most of which do not promote actual employment. The study concludes that while FRA strengthens requirements in some states, it weakens them in others, undermining uniform reform.

Full Citation and Link to Article

Nadal-Fernandez, J. M., Pepin, G., & Schrader, K. (2025). Strengthening work requirements? Forecasting impacts of reforming cash assistance rules. Journal of Policy Analysis and Management, 1–11. https://doi.org/10.1002/pam.22668

Extended Summary

Central Research Question

This article addresses a timely and policy-relevant question: How will the Fiscal Responsibility Act of 2023 (FRA)—which tightens work requirement rules in the Temporary Assistance for Needy Families (TANF) program—impact state compliance and program implementation? Specifically, the authors investigate whether the FRA will strengthen states’ adherence to federal work requirements and what strategies states may employ in response. Since TANF rules are administered at the state level, and compliance mechanisms allow for flexibility, the paper asks whether a uniform federal policy change can produce consistent effects across diverse state contexts, and whether those changes promote actual employment among low-income families or merely trigger accounting maneuvers that sidestep the spirit of the law.

Previous Literature

The study builds on multiple strands of social policy research. Prior literature on TANF has shown that work requirements have mixed impacts. On the one hand, they are intended to promote employment and self-sufficiency. On the other hand, they can limit access to aid for the most disadvantaged families—particularly single mothers facing barriers such as low education, child care responsibilities, or limited job opportunities (Danziger et al., 2000).

Previous reforms, especially the Deficit Reduction Act (DRA) of 2005, offer insights into how states respond to changes in federal rules. Several studies (e.g., Hahn et al., 2012; Pavetti et al., 2009) documented how states used administrative and fiscal maneuvers—such as shifting families into state-funded programs or inflating caseload numbers—to maintain compliance without necessarily increasing employment. Additionally, more recent critiques (Pavetti et al., 2021) argue that TANF has become a weakened safety net, serving fewer families in poverty and focusing too little on long-term outcomes.

This article extends these discussions by forecasting how the new FRA rules will change state incentives and behaviors, incorporating both historical data and forward-looking modeling.

Data

The analysis uses a combination of administrative and self-reported data:

1. TANF administrative data from the U.S. Department of Health and Human Services (HHS), including monthly caseloads, work participation rates, maintenance-of-effort (MOE) expenditures, and the number of work-eligible individuals. These data span fiscal years (FY) 2005 to 2022.

2. ACF-202 reports, which states file with HHS annually to claim credits for caseload reduction. These reports include descriptions of policy changes, estimated impacts on TANF caseloads, and methodology used to produce these estimates.

3. Forecasted state caseload trajectories, which the authors estimate based on recent trends to project TANF caseloads through FY 2025. These projections are necessary because FRA takes effect in FY 2026 and the caseload reduction credit will be based on caseload changes since FY 2015.

The richness of the dataset allows for a nuanced analysis of how states currently achieve compliance, how they might be affected by FRA, and how policy mechanisms—like the caseload reduction credit and MOE adjustments—interact.

Methods

The authors use a combination of descriptive analysis and forecasting to simulate the effects of FRA on state compliance with work requirements. Key components of the methodology include:

1. Caseload reduction credit recalculation: Under the FRA, states’ work requirement adjustments will be based on caseload changes since FY 2015 (rather than FY 2005). The authors use observed caseloads from 2015 to 2022 and projected caseloads for 2023–2025 to estimate the caseload reduction credit for each state in FY 2026.

2. Estimating adjusted work requirements: The authors combine projected caseload reduction credits with data on excess MOE spending and policy-based case exclusions (from ACF-202 reports) to compute each state’s effective adjusted work participation requirement under the FRA.

3. Comparing compliance: Finally, the authors compare each state’s actual work participation rate (as of FY 2022) to its projected adjusted requirement (as of FY 2026) to identify which states will fall short under the new rules.

Throughout, the authors assume that other inputs—such as work participation rates and excess MOE spending—remain constant from 2022 through 2025, though they test sensitivity to changes in these assumptions.

Findings/Size Effects

The analysis produces several important and nuanced findings:

1. FRA increases stringency for many states: The authors estimate that FRA will increase the effective work requirement in 23 states and reduce it in 22 states. Five states that are currently compliant—Georgia, Kansas, Montana, North Carolina, and Rhode Island—are expected to fall out of compliance under the new rules. Two others (Oregon and Washington, DC) are already noncompliant and are projected to remain so.

2. States rely heavily on accounting strategies to meet requirements: Although most states currently appear compliant, this is often achieved through mechanisms that do not actually promote employment. Specifically:

   
   

   • 32 states rely on caseload reduction credits due to falling TANF rolls.

   • Several states use excess MOE spending to lower their effective work requirements.

   • Only 6 states meet the federal standard based on work participation alone.

   
   

3. Six compliance strategies are widely used: The authors identify six methods states use to meet TANF work requirements:

   
   

   • Reducing caseloads (e.g., stricter eligibility)

   • Imposing stricter sanctions (e.g., case closures)

   • Increasing MOE spending on loosely related programs

   • Adding employed families to the rolls via small in-kind benefits

   • Shifting nonworking families into state-only assistance programs

   • Expanding subsidized employment programs

   
   

   Of these, only the last actually promotes employment among nonworking recipients. The others amount to administrative maneuvers that inflate participation rates or reduce the denominator of the work participation calculation.

4. Uneven effects across states: States differ significantly in how close they are to the federal requirement. In 2022, some exceeded it by over 50 percentage points, while others barely cleared the bar. FRA’s new baseline year (2015) favors states with more recent caseload declines, creating unequal burdens. For example, a state that already reduced its TANF rolls before 2015 receives less credit than one with more recent cuts.

5. Policy misalignment: Despite FRA’s goal of strengthening work requirements, the change is not uniformly binding. It will loosen requirements in roughly half of states—contrary to expectations—highlighting the difficulty of designing a single federal standard that functions equally across diverse local contexts.

Conclusion

This study provides a detailed and policy-relevant analysis of how the Fiscal Responsibility Act of 2023 is likely to reshape state-level implementation of TANF work requirements. The findings suggest that while FRA will make compliance harder for some states, it will ease the burden for others, producing mixed effects nationwide.

The study’s key contribution lies in identifying that many states use indirect and sometimes counterproductive strategies to meet federal benchmarks—strategies that often do not support TANF’s stated goal of promoting long-term employment and self-sufficiency. Because states face penalties for failing to meet participation rates, but no rewards for helping recipients secure stable jobs or exit poverty, they are incentivized to game the system rather than invest in substantive work supports.

The authors argue for more meaningful reforms that tie performance metrics to recipients’ post-TANF outcomes, such as employment and earnings. They also suggest narrowing the definitions of MOE expenditures and “families receiving assistance” to prevent strategic inflation. Increasing federal funding for high-quality subsidized employment programs could be a more effective strategy for achieving TANF’s objectives.

In sum, the article reveals how technical design elements—like the choice of a baseline year or the flexibility of compliance metrics—can substantially affect the outcomes of federal legislation. Policymakers should heed these findings when crafting reforms that aim not just to increase work rates on paper, but to genuinely support low-income families in achieving economic independence.