This bill reduces the percentage of federal funds states can use for administrative expenses under the TANF program and imposes penalties for non-compliance.
Rudy Yakym
Representative
IN-2
The Reduce Bureaucracy to Uplift Families Act aims to ensure more federal funds directly benefit families by lowering the maximum percentage states can spend on administrative costs for certain programs from 15% to 10%. This legislation also clarifies that case management services count toward this new administrative spending cap. States failing to comply with these new limitations face a potential penalty of up to a 5% reduction in their federal grant funding the following year. All provisions of this Act are scheduled to take effect on October 1, 2026.
New Bill Cuts State Welfare Admin Budgets from 15% to 10%, Risking Case Manager Layoffs Starting 2026
The “Reduce Bureaucracy to Uplift Families Act” is taking a cleaver to how states can spend federal welfare dollars, specifically those tied to the Temporary Assistance for Needy Families (TANF) program. Starting October 1, 2026, this bill mandates a significant cut in the operational budget states use to run these programs. Currently, states can use up to 15% of their federal grant money for administrative expenses. This bill slashes that maximum down to 10% (Sec. 2).
The Case Manager Conundrum
Here’s where the rubber meets the road for families using these services: The bill specifically clarifies that case management services—the staff who help individuals create their mandated “individual responsibility plans”—now count toward that new, lower 10% administrative cap (Sec. 2). Think about it: Case managers are the people who actually guide folks through the system, helping them access job training, childcare, and other critical resources. By explicitly lumping their salaries and operational costs into the overhead cap, states are going to be forced to choose between keeping the lights on in the agency or keeping the essential staff who provide direct help. For a state agency, that 5% cut in administrative funds could translate directly into fewer staff helping people navigate the system, potentially slowing down access to assistance for families who need it most.
More Pain, Less Gain for States
This bill doesn't just limit how much federal money states can spend on admin; it also makes it harder for states to meet their own funding requirements. To get the full federal TANF grant, states have to spend a certain amount of their own money—this is called “maintenance of effort.” Previously, states could count up to 15% of their administrative expenses toward meeting this required state spending. This bill lowers that allowance to 10% (Sec. 3). This means states must now shift more of their own budget away from operational costs and into direct services to meet the federal requirement, putting a double squeeze on their administrative budgets.
The Mandatory Penalty Trap
Perhaps the biggest headache for state officials is the new penalty structure. If the Secretary of Health and Human Services determines that a state didn't follow the new 10% administrative spending limit in a given year, the state must be penalized. The penalty is a mandatory reduction of up to 5% of their entire federal family assistance grant the very next year (Sec. 4). This isn't a slap on the wrist; a 5% cut to a state’s total grant is a massive loss of funding. Because the penalty is mandatory, any small, technical accounting error or miscalculation in administrative spending could trigger a huge, punitive cut, creating significant financial risk for states trying to run complex programs on tight budgets.