Five years ago, a conservative think tank made an explosive revelation: Tennessee leaders had allowed a key anti-poverty program to amass a $730 million surplus —dollars from the federal government that never reached the struggling families for whom they were earmarked.
Fast forward to today: the state currently has a surplus of $717 million in the same federal Temporary Assistance for Needy Families (TANF) program — known in Tennessee as “Families First.” The size of Tennessee’s TANF balance dwarfs every state but one.
Officials with the state’s Department of Humans Services say they are making progress in putting the unspent funds to use.
In the coming years, all but $190 million of the amassed funds will be distributed in the form of multi-year grants to community groups, transferred to a health department nurses for newborns program and paid to IT contractors to overhaul the agency’s aging computer system. New grant awards announcements are expected this spring.
“Over the course of the next three to four years we will see a consistent reduction in those unexpended balances as grant funding is distributed,” said Danielle Cotton, a spokesperson for the Tennessee Department of Human Services, which manages the Families First program.
Critics, however, have questioned the lengthy timeline that has elapsed since the existence of the surplus was first brought to light in 2019, and the consequences of withheld resources for Tennessee’s working poor.
“The goal seems to be to give community grants to organizations when we know that TANF funding can go directly to the people who really need them,” said Sen. Heidi Campbell, a Nashville Democrat who has a bill this year to mandate cost of living increases for the cash payments given to families, similar to the automatic adjustments linked to the governor’s salary.
“These dollars keep piling up when we have one of the most food insecure states in the nation,” Campbell said.
A rising surplus
TANF is a federal program that provides an annual block grant to every state. Its purpose is to help lift families with children out of poverty and towards self-sufficiency. Tennessee receives about $190 million each year. The federal government places no timelines on when states must spend their annual allotment.
There are approximately 29,000 Tennesseans enrolled in the program — more than 23,000 of them children, according to the most recent department data publicly available.
Each state sets its own priorities, but uses a portion of the federal funding to send monthly cash stipends to low income families with kids.Tennessee’s monthly cash payment for a family of three averages $387. It is among the lowest TANF cash payments in the nation.
States may also use the funding to provide grants to community groups that provide services to working parents — services that include child care, transportation and job training.
In 2019, the Beacon Center, a conservative-leaning think tank based in Nashville, revealed the state had routinely failed to spend its annual $190 million allotment for more than a decade, amassing the then-largest surplus in TANF in the nation: $732 million. (The unspent funds are reserved for Tennessee’s use by the federal government: they do not accrue interest for the state.)
An immediate public outcry followed. And after initially defending the program’s spending decisions, Gov. Bill Lee changed course, pledging in early 2021 to make TANF reform one of his top legislative priorities.
The resulting “TANF Opportunity Act” was enacted with bipartisan support later that year. It addressed the accumulated reserves by capping any TANF surplus at $190 million in “unobligated funding.” It also increased the then-average family-of-three payment from $277 per month to the current $387. And it set time limits for the state to spend its annual TANF allotment.
DHS officials noted last week that the current $717 million in reserves are all obligated or in the process of being obligated for specific current and future purposes, in compliance with the law.
“Every dollar of the $717.5 million has a budgeted line item,” Cotton said. Several community grants are “in the contractual process for final obligations.”
A 2021 law imposed new deadlines for TANF expenditures; lawmakers had to amend it
The 2021 legislation also created a Families First community advisory group tasked with recommending reforms and monitoring outcomes of the spending decisions.
DHS Commissioner Clarence Carter, tapped by Gov. Bill Lee to lead the department in January 2021, detailed his ambitious approach at the time.
“We are using the TANF program to redesign Tennessee’s safety net,” Carter said at the advisory group’s first meeting in August 2021.
“Instead of a knee jerk response to, OK, we’ve got $700 million and let’s just get that money out the door, folks came together and were very thoughtful about what’s the most impactful way we can put those dollars into play and really have better results,” Carter said.
At the outset, however, the department faced challenges in distributing the hundreds of millions of dollars accumulated in its reserves.
The goal seems to be to give community grants to organizations when we know that TANF funding can go directly to the people who really need them.
– Sen. Heidi Campbell, D-Nashville
The funding distributed from the TANF reserve to community organizations providing safety net services comes with strict rules that require agencies to follow complex federal mandates as well as show measurable improvements for working families.
Cotton, the DHS spokesperson, said only a few agencies were willing or able to take on the grants.
“There are a limited number of organizations that serve our fellow Tennesseans in the public safety net, and even fewer organizations that want to comply with the requirements and regulations of a federal grant,” said Cotton, the DHS spokesperson.
“As such we have noticed that we are often reaching the same or similar audience with more and more opportunities but very few new participants,” she said.
As a result, earlier this year lawmakers amended the TANF legislation, extending deadlines for DHS to distribute the federal funding.
Instead of a requirement that DHS fully expend its annual $190 million allotment every 12 months, lawmakers extended its spending deadline to 18 months each year.
The law also extended the original legislation’s three-year deadline for the department to develop, implement and evaluate pilot programs with communities organizations from three years to four years, or until the 2026-2027 fiscal years.
And instead of a December 2025 deadline for the advisory group to issue a report on TANF reform progress, the new law gives the group another year, setting a new December 2026 deadline.
“Frankly it took us a little while longer than I anticipated, than the legislation anticipated, to get these organizations up and running,” Rep. David Hawk, who sponsored the law, told a legislative committee last year.
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