Friday, November 16, 2012

How Asset Tests Hinder the Goals of Safety Net Programs

It is common knowledge that the way to economic self-sufficiency involves having a bank account and saving your money—not only so that you can eventually buy a house or fund your children’s education, but also to have an emergency fund (enough money to cover living expenses for three months) in case of job loss, health emergencies or other unexpected costs. It is also how people get out of debt and can start building wealth.

This value, saving, is reflected in many states’ economic programs for people enrolled in the Temporary Assistance for Needy Families (TANF) program. Parenting skills classes and job readiness trainings teach the importance of having a bank account and saving money. However, this value is not always reflected in states’ policy regarding eligibility for TANF. Furthermore, the Supplemental Nutrition Assistance Program (SNAP) also has asset tests, which can be different from those for TANF, adding another layer of complexity and inconsistency.

Not only do asset tests counter one of the major goals of the TANF program, it also creates extra work for state administrators and increases the chances for payment errors. There is no federal mandate for states to adopt asset tests, but of the ones that do, they vary widely in which types of resources count toward their asset limits. These resources may include bank statements, car titles, insurance policies and other relevant documents. In some cases, applicants can self-report their assets; in others, a caseworker must verify the assets based on the submitted documents.

 A new report from the New America Foundation, State Asset Limit Reforms and Implications for Federal Policy, describes how some states have reformed their policy on asset limits in their SNAP and TANF programs. Motivated by increasing program costs, threats to program integrity, and the recognition that asset tests are a barrier to long-term self-sufficiency, many states have eliminated asset tests for TANF and/or SNAP. For example, Colorado estimated that eliminating its TANF asset test would result in additional benefits for 44 families, at a cost of $123,000. However, these costs would be offset by greater administrative efficiency; eliminating the asset test would save caseworkers 10 to 15 minutes per “case interaction”, or up to 90 minute for the five or six interactions that typically occur between a client and a caseworker in the first 45 days. The successful policy reforms in Colorado and other states can serve as a useful model for other policymakers who are considering similar changes.

While asset tests were instituted to ensure that assistance is given to the families who need it the most, research has shown that once asset tests are eliminated, program enrollment did not increase significantly. This is due in part to the fact that families that seek assistance and meet the low income requirements are generally asset poor. In addition, the money that states saved in reduced administrative costs more than made up for the slight uptick in enrollment.  

States benefited from eliminating their asset tests in several key ways:
  •      Caseworkers had more time and attention for other case management duties
  •        Greater administrative efficiency resulted in cost savings
  •        Greater streamlining simplified the process for both families and the agency

Asset tests are an example of a policy that while likely created with good intentions, has had serious unintended consequences for families’ efforts to attain financial success. This policy exemplifies the significance of considering the unintended impact of policy on families and highlights the importance of policymaking with a results focus (ensuring that policy is well aligned with intended outcomes). Eliminating asset tests is an important policy reform that policymakers should consider as a step towards encouraging families on public assistance to move towards financial self-sufficiency.

To learn more about connecting policy to results visit


  1. Assets tests are indeed counterproductive. While this post focuses on TANF, it rightly mentions SNAP, which sets very low asset limits.

    A number of states exempted households from the standard asset test when they adopted categorical eligibility—an option that automatically qualifies households for SNAP when they receive benefits from certain other programs.

    Unfortunately, their laws may be invalidated because the House version of the Farm Bill would eliminate cat-el, With Republicans now insisting that the “fiscal cliff” deal include entitlement reform, we need to be very worried about this provision, I think.

  2. Nice blog, thanks for sharing the information. I will come to look for update. Keep up the good work.

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