States save federal funds meant for needy families instead of distributing the money—too much, some say

In 1996, the federal government replaced traditional welfare with a block grant program called Temporary Assistance for Needy Families. Federal law allows states to bank unused TANF money for recessions or natural disasters, but some say states are holding onto too much money that could go to families in need.

"Between 2015 and 2018, the 38 states holding back welfare money boosted their TANF reserves by 41%, according to the Congressional Research Service. One reason is the historically low unemployment rate. But tighter state requirements also have reduced caseloads," Teresa Wiltz reports for Stateline. "Tennessee’s 2019 welfare surplus is the largest in the country, according to a recent report by the Beacon Center of Tennessee, a fiscally conservative think tank. Last year, Tennessee spent only $71 million of the $191 million it got from the federal government." The state-level numbers can be found in the Appendix of the CRS report, linked above.

The issue came to a head in Tennessee recently, where nearly 1 in 6 residents live in poverty. U.S. Rep. Steve Cohen, a Democrat from Memphis, sent the state's Republican governor, Bill Lee, an open letter demanding to know why the state wasn't spending more of its funding, Wiltz reports. "When 15.3 percent of Tennesseans are living in poverty, it is inexcusable for the state to withhold millions of federal dollars allocated to help this exact population," Cohen wrote.

"When Tennessee’s surplus first came to light, state officials said they were being fiscally prudent. They also noted that earlier this year, they increased monthly cash assistance by a fifth," Wiltz reports. "But last week, Lee told reporters the state was working on a plan to spend more of its welfare reserves."