New Rules Set Clock Ticking on State Family Aid Funds: Use-It-or-Lose-It Deadlines Start 2026

This bill updates the rules for how states manage federal funds intended for family and children services under the Social Security Act. Starting October 1, 2026, states will face stricter deadlines: they must commit (obligate) these funds by the end of the following fiscal year and actually spend (expend) them by the end of the second fiscal year after receiving them. The goal appears to be ensuring money designated for families gets used more promptly.

The Ticking Clock: Use It or Lose It?

The core change here is the timeline imposed by the amendment to Section 404(e) of the Social Security Act. States essentially get a two-year window (plus the initial year) to fully utilize these specific federal dollars. For state agencies running complex, multi-year programs – think launching a new foster care initiative or expanding childcare subsidies – this creates pressure. They'll need efficient planning and execution to meet these deadlines, potentially favoring quicker, smaller projects over larger, long-term investments if they fear losing the funds. While aiming for timely help, this could challenge states with slower administrative processes or those facing unexpected hurdles.

Saving for a Rainy Day (With Limits)

Recognizing that needs fluctuate, the bill does allow states some wiggle room. States can choose to reserve up to 15% of the funds received in a given year for future use, provided they formally notify the federal government. However, there's a cap: the total amount held in reserve can't exceed 50% of the funds received in the previous fiscal year. This offers some flexibility for states to manage budget uncertainties or save for anticipated needs, but the limits might restrict building larger reserves for significant future projects or major economic downturns. It's a balance between encouraging current spending and allowing modest future planning.