JBC staff warns TANF reserves shrinking; committee approves smaller food and diaper grant cuts

Tom Dermody, a budget committee staff member, told the Joint Budget Committee on Feb. 21 that the committee’s statutorily required review of Temporary Assistance for Needy Families (TANF) reserves shows rapidly increasing pressure on both county and state balances. Dermody said expenditures are rising while available TANF dollars are essentially fixed, and that recent statutory changes that raise basic cash assistance are contributing to the drawdown.

The committee heard staff figures showing county reserves declined from about $48 million at the end of fiscal 2022–23 to about $35.5 million at the end of 2023–24 and that counties are drawing down roughly $12.1 million per year. Dermody warned that if spending continues at that rate, “they will pull down beyond that minimum floor for the county reserves,” and staff projections show the statewide county reserve could fall to roughly $3.7 million by 2026–27. Staff also presented a summary table projecting that, under flat spending assumptions, the state would be required to backfill county reserves beginning in 2026–27 and the state reserve could itself fall below its minimum in 2027–28, requiring general‑fund backfill assuming the state is above the TABOR cap.

Committee members pressed staff on drivers of the growth in spending. Dermody pointed to statutory changes tied to House Bill 1259 that require periodic adjustments to basic cash assistance tied to a three‑year average of Social Security Administration cost‑of‑living adjustments, and to expanding program expenditures and transfers that have been added to the TANF spending mix. Senator Kirkmeyer reminded the committee there is a federal maintenance‑of‑effort requirement tied to block grants and warned of potential federal changes to contingency funds and the block grant amount.

Several members and staff discussed options to lengthen the fiscal runway, including (1) targeted reductions in state supportive‑services and discretionary state programs, (2) potential transfers of state‑level supportive programs to county block grants, and (3) statutory action to pause future automatic increases to basic cash assistance. Dermody said a pause on the automatic adjustments “would require legislation” and flagged that it would not be retroactive.

The committee also debated staff‑initiated budget reductions for the Office of Economic Security that staff had identified as lower‑risk or discretionary. The original staff motion to adopt the full package, including a one‑time $2.0 million general‑fund refinance with TANF reserves, failed on a tie vote (3–3). Committee members who objected to that motion said they were unwilling to convert or draw down TANF reserves in that way without further study.

A substitute motion by Representative Serota adopted staff’s other bullet‑point reductions but excluded the one‑time refinance and reduced the proposed cuts to two grant programs. The committee approved the substitute motion unanimously (6–0). Under the adopted change the committee cut staff’s proposed food assistance grant appropriation by $1.0 million (half of the previously proposed $2.0 million reduction) and reduced the diaper distribution program cut to $500,000 (about half of the staff recommendation). Committee staff said other smaller program and contract reductions in the staff package remain part of the adopted package; staff and the department described the items as “low‑hanging fruit” that had been reviewed by the governor’s budget office.

Committee members directed staff to continue work on cross‑program analysis and to ask the Colorado Works Allocation Committee and county human services partners for rapid input on priorities. Senator Kirkmeyer told the committee the Works Allocation Committee had already requested an emergency meeting; Dermody said he would send formal requests to the department and to the allocation committee and return to the committee with follow‑up materials.

Votes at a glance • Motion to adopt staff‑initiated Office of Economic Security reductions including $2.0 million TANF refinance — failed 3–3 (Bridges, Taggart, Sarota recorded as objecting). • Substitute motion (exclude $2.0 million TANF refinance; reduce food assistance grant reduction to $1.0 million; reduce diaper distribution reduction to $500,000; adopt other staff items) — passed 6–0.

Why this matters: TANF is a fixed federal block grant; states and counties must balance service needs, maintenance‑of‑effort rules, and statutory triggers that can force state general‑fund backfill. Committee discussion put the issue on the short list for follow‑up: staff will produce a cross‑program mapping and the committee asked county and allocation‑committee leaders to meet quickly so the JBC has more granular county expenditure data before final figure setting.