TANF and Work: The Caseload Reduction Credit and How States Exploit It

Issue Brief - July 2026

Key Points

• TANF’s work requirement is not meaningful when most states face no target. In fiscal year (FY) 2024, 39 states had a zero percent adjusted work participation rate target. Without the caseload reduction credit, only seven states would have met the statutory 50 percent target.
• The credit creates the right incentive, but loopholes undermine it. The caseload reduction credit appropriately rewards states for moving families from welfare to work. However, loopholes such as excess maintenance-of-effort (referred to as “excess MOE”) allow states to achieve zero percent targets through accounting maneuvers rather than work engagement.
• Excess MOE allows states to bypass work requirements without additional investment. States generate large credits by identifying existing spending that meets a TANF purpose to count as MOE. Reported MOE jumped from $11.4 billion in FY2005 to $22 billion in FY2025 largely due to these practices.
• The Fiscal Responsibility Act of 2023 (FRA) base year change did little to strengthen work requirements. Despite recalibrating the base year to FY2015, an estimated 37 states will have zero percent targets in FY2026.

Read the issue brief: TANF and Work: The Caseload Reduction Credit and How States Exploit It