Last Updated: August 2023
Making recurring adjustments to TANF benefit levels to keep pace with inflation, such as through a statutory cost-of-living adjustment (COLA), maintains families’ purchasing power and helps them meet basic needs.
TANF benefit levels have not kept pace with rising costs. In July 2022, TANF benefits had lost value in 44 states and DC compared to 1996 levels due to inflation. In some states, benefit levels have not been changed since the days of AFDC. Overall, families who are receiving TANF cash assistance are losing purchasing power, harming their ability to afford basic necessities and provide for their children. Low-income families, who are disproportionately families of color, are also more impacted by inflation. This worsens existing racial disparities—Black children and are also much more likely than white children to live in states with the lowest benefits.
COLAs, either through statute or administrative action, provide a key mechanism for helping families to meet rising costs. When possible, COLAs should be paired with one-time or gradual benefit increases of a larger scale in order to restore value lost to inflation, as a COLA only prevents future erosion to inflation. While benefit levels were too low to meet a family’s needs in most states in 1996, it may be a reasonable goal to set a target of restoring the value lost since TANF’s creation and implementing a COLA to prevent future loss, especially in the states that have not increased or cut benefits since 1996.
When setting a COLA by tying benefits to a Standard of Need or to a share of the federal poverty guidelines, it is critical to make sure that the level set is not too low. For example, South Carolina and Texas make small adjustments to their benefit levels so that they remain around 17 percent of the poverty line—this leaves families with far too few resources even though benefits have nearly kept pace with inflation.
Key Resources:
CBPP’s annual benefits paper: The CBPP annual benefits paper reports benefit levels in the 50 states and DC as of July 1st. The paper also includes analysis comparing benefit levels to the federal poverty line, to inflation (since 1996), and to housing costs. The paper also includes some analysis on the disproportionate impact low benefits have on Black children, and some of the racist history in AFDC that led to where we are today. The paper may not have the most recent data available. If you need more recent data, please reach out to CBPP staff to see if updated data is available.
This document, State Approaches to Indexing TANF Benefits for Inflation, provides a quick summary of state approaches to COLAs along with text from and links to the state statutes that established the COLAs.
This document, COLA Talking Points, provides information that you can use to make the case for why increasing benefits annually is a good policy that can help reduce poverty and reduce racial inequities.
This paper from the Century Foundation provides a rationale for why indexing benefits (and wages) for inflation is an important strategy for reducing poverty: Keeping Up with Inflation (tcf.org).