During the original Welfare Reform of 1995, there was great concern that states would have difficulty administering TANF during a recession, due to the fixed nature of the block grant. Because of these concerns, the Emergency Contingency Fund of $2 billion was developed, which would provide states with additional federal funds of up to 20% of their block grant amount if they indicated that they were facing a recession or trigger (rising unemployment or rising food stamps). In 2007, for the first time since it was created, states started to qualify for the Contingency Fund as the economy and state budgets started to decline. By 2009, the Congressional Budget Office estimated that the fund would be spent, and as a result, a new emergency fund was established in the American Recovery and Reinvestment Act (ARRA). The newly-created emergency fund provides 80% reimbursement to states for increases in TANF-related expenditures in specified areas, including subsidized employment.
The TANF Contingency Fund has been used to support jobs in more than 30 states and Washington DC, particularly for populations with high unemployment rates and great need. The fund not only provides fiscal relief to states, but has helped small businesses in the troubled economy. By subsidizing employee wages, the TANF Emergency Fund has enabled small businesses throughout the country to add staff they could otherwise not afford. In total, the TANF Emergency Fund has directly created over 180,000 jobs (Center on Budget and Policy Priorities). The TANF Emergency Fund has also allowed states to address growing needs among low-income families.