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The Ladder

A Blog from New America's Asset Building Program

Illinois Senate Votes to Eliminate TANF Asset Limit

Published:  May 22, 2013
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On Tuesday, the Illinois Senate voted to become the eighth state to eliminate its TANF asset test—and the second state thus far in 2013. This development reflects a longstanding trend initiated by the states to reform their programs’ asset limits to better support families’ long-term financial stability—while saving time and money in the process. Yet in the current Farm Bill debate happening at the federal level, House Republicans are proposing changes that would completely undermine this wave of progress. Let’s take a look at some key lessons from Illinois about why asset limit reform makes so much sense.

First, the tests are inefficient. Data from the Illinois Department of Human Services confirms one of the key findings from our asset limits report last year: very few applicants are found ineligible due to asset tests, but evaluating each applicant’s resources is costly and time-consuming. In Illinois, “of the 192,000 individual TANF eligibility reviews conducted last year, IDHS found only 8 cases where the family’s assets exceeded [the limit of] $3,000.” Meanwhile, administering the test cost taxpayers nearly a million dollars annually.

Second, the limits are inequitable. Asset tests vary widely across states and programs, often setting conflicting and arbitrary thresholds for financial need. It’s very possible that the eight families found ineligible in Illinois last year had only marginally higher savings than those who qualified—and in around ten other states, they could have received benefits. Presuming Illinois Governor Quinn signs HB 2662, Illinois and its neighbor Indiana will be in sharp contrast with one another: Illinois will have eliminated its asset tests for both SNAP and TANF, while Indiana’s limits are the lowest in the nation – $2000 and $1000, respectively. As a result, struggling families on two different sides of the state line will be set up for very different outcomes, even if they have the exact same financial circumstances.

Finally, the limits are low. Really low. Though there is significant variation, in most states, TANF asset limits compel families to live far below the asset poverty line (currently $4773 per month for a family of three) to access short-term assistance. Without being able to maintain or build up a small savings cushion, these families are highly vulnerable to falling into debt in the event of an emergency or other unexpected expense. The median TANF asset limit is $2000 per household, and nine states restrict families to a mere $1000 in assets. As noted, most families have very little savings when they apply for benefits like SNAP or TANF. Still, a supportive and forward-looking system would enable them to save up enough money to successfully transition off of assistance for good, rather than trapping them in poverty.

The progress in places like Illinois and Hawaii is particularly important because of an ongoing debate about asset limits taking place at the federal level. Currently, House Republicans are seeking to make amendments to the Farm Bill that would eliminate states’ ability to raise or eliminate their SNAP asset test through broad-based categorical eligibility, a policy option that has been in place since welfare reform in 1996. So far, over forty states have taken advantage of this policy to streamline their programs, increase efficiency, and help families bounce back quickly after a job loss. This high take-up rate alone is evidence of its success.

Yet members of the House Agriculture Committee want to reverse this progress and require each one of these states to re-establish a limit of $2000. They claim the policy has caused the program to become too expensive and extend benefits to people who aren’t really in need. In fact, SNAP’s recent growth directly correlates with the increase in unemployment, and CBO estimates that eliminating categorical eligibility would reduce costs by less than 2%. Meanwhile, the SNAP recipients most likely to lose benefits as a result of this retrenchment are working families with children and senior citizens.

Advocates in Illinois have been working on implementing asset limit reform for years, and they are to be commended for their perseverance and success. Let’s hope that their vision for a more effective, sustainable approach to fighting poverty can inform policy discussions here in DC.

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