Advocates seek better use of $126 million in excess federal funds for needy families

LINCOLN — Newly divorced and trying to put her life back together as a single parent raising a child, Katie Nungesser turned to government assistance years ago to make ends meet.

But Nungesser came to discover that taking Aid to Dependent Children assistance came with a catch: Child support funds paid by her ex-husband would be captured by the state, which resulted in her receiving less money to care for her child than if she hadn’t received ADC.

On Friday, she told a legislative committee that the “cost recovery” system used by the state resulted in Nebraska collecting $5,400 over six months compared to the $1,686 she got to care for her child.

That just doesn’t make sense for struggling families, Nungesser said, and especially when Nebraska has nearly $126 million in excess federal funds that could be spent to bolster help for needy families.

“The actual result is the state is making money off families living in extreme poverty, while sitting on a rainy-day fund with millions of dollars in it,” said Nungesser, now a policy coordinator for Voices for Children Nebraska, a nonprofit that advocates for families in poverty.

‘That’s ridiculous’

“That’s a ridiculous situation,” said State Sen. Rob Clements of Elmwood, after hearing Nungesser’s personal experience with ADC.

On Friday, Clements and other members of the Legislature’s Appropriations Committee were urged to make changes in state policies concerning the Temporary Assistance for Needy Families program, federal funds that finance ADC, among other things.

The state gets about $56.6 million a year from the feds for TANF, but until last year, has not come close to spending its annual allocation, which has resulted in nearly $126 million sitting unallocated in a reserve or “rainy day” fund.

Lincoln Sen. Danielle Conrad, who called for an interim study on the excess TANF funds, said that Nebraska is now using only about 30% of its available funds as direct aid for needy families and that those funds would be better used as they were intended, to help families get out of poverty.

She urged the committee to support efforts to get more of the TANF money directly in the hands of needy families, as has been done in other states.

Issue has ‘languished’

“This is an issue that has languished in Nebraska too long,” Conrad told committee members.

Nungesser, in comments later, said she would support changes proposed in the Legislature, particularly Legislative Bill 233, introduced by Omaha Sen. John Cavanaugh. It would exclude child support payments when determining whether someone should get ADC. Thus, it would end the practice of the state clawing back child support payments and leave more money with needy families.

Two other bills are currently pending in the Legislature.

Conrad’s LB 310 would increase the maximum ADC payment from 55% of a family’s standard of need to 85%.

A third proposal, LB 290 from Omaha Sen. Machaela Cavanaugh, would make more recipients eligible for ADC and increase what they could get.

State Auditor Mike Foley testified Friday that Nebraska is an outlier in the large size of its TANF rainy day fund.

Its excess funds are higher than any neighboring state, he said, and higher percentage wise than all but three states in the nation.

‘A number of options’

“This presents you policymakers with a number of options,” Foley, a former state senator, told the committee.

Over the years, the number of ADC recipients in Nebraska has shrunk, from 15,000 when the program began in 1994, to about 5,200 in 2018, to about 3,000 now.

Nungesser said part of the problem is that many applicants — about 90% in 2020 — are turned down. She said Nebraska is among the top five states in rejecting applications.

Meanwhile, a representative of the Nebraska Department of Health and Human Services, told committee members that, based on the agency’s planned and pending spending on programs, the TANF rainy day fund will be fully expended by 2028.

John Neals, the agency’s chief financial officer, said one of those programs, the Fatherhood Initiative, is currently training 170 fathers to become better parents. Another program, the Jobs for America’s Graduates program, is teaching skills to 1,000 children and has a 98.5% high school graduation rate for participants.

TANF spending rose in 2023

Together, those two programs cost about $3 million of the $62 million in TANF spending approved by DHHS in fiscal year 2023, which was double what was spent in 2022 and about $20 million more than spent in 2020 and 2021.

Later Friday, DHHS announced its plan to spend down the excess TANF funds, which includes $17 million in additional expenditures awaiting federal approval for fiscal year 2025.

The plan includes grants to food banks, to the Court Appointed Special Advocates program for foster kids and to a nonprofit to help pregnant and parenting teens.

Nungesser said that while giving money to food banks and mentoring programs is not a bad idea, needy families might not need that help and would be better off getting increased ADC payments.

Conrad said the TANF funds would be best used by sending them directly to families, who know best what their needs are.

For instance, the senator said, a flat tire is a major financial problem for a family “living on the edge,” and ADC funds — unlike money from other assistance programs — can be used for such expenses.

When asked about the TANF funds running out, Conrad, who has served nine years in the Unicameral, said DHHS’s estimate was an example of the agency’s “very conservative approach,” and its projections haven’t always come to fruition.

Nungesser said the ADC program guidelines haven’t been updated for several years. One improvement, she said, would be focusing the ADC work requirement on jobs that lead to a sustainable wage, instead of minimum-wage work in places like fast-food restaurants.

She said her required work, back when she was on ADC, was shredding documents for a local hospital for 30 hours a week in what employees called “the dead room.”

“The (ADC) program is broken on so many levels,” she said.