Gov. Bill Lee is defending the state's decision not to use a reserve of more than $730 million in federal grant dollars set aside to help poor working families.

Tennessee has amassed a substantial surplus of federal Temporary Assistance for Needy Families block grant funds.

The state receives $190 million each year from the federal government. Last year, Tennessee spent just $71.1 million of that money, the conservative Beacon Center of Tennessee said in a report released this week.

The report, called "Poverty to Prosperity," in part criticizes Tennessee for sitting on the surplus and not putting more of the money to use to help additional families climb the economic ladder.

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"It'll be put to use when the needs are there for those who qualify," Lee told reporters on Thursday, regarding whether he believed the state Department of Human Services should begin using more of the TANF money.

"The department is always looking at ways to serve that population better," Lee said. "That may require funds or not. But we're always looking."

Money helps working poor with families

Through its Families First program, Tennessee receives TANF block grant funds to provide temporary cash assistance, transportation, child care assistance, job training and other support services to help low-income working families.

RESERVE FUNDING:Tennessee's $730M surplus for helping the working poor: What to know about the Families First program

Participating families received an average of $243 in cash assistance in August, according to DHS data. Employed participants in the program make an average of $927 per month.

Lee said his initial thought on the TANF reserve money was that he was glad there has been a reduction in the number of people needing assistance through the program. Membership has declined in recent years.

"It's temporary assistance for needy families, and when the economy is good and we're providing and creating greater jobs, there are less and less families that need this and therefore surpluses build up as a result of that," Lee said.

He said that the funds will be there to use when the economy takes a downturn in the future.

The buildup of TANF funds is approaching the size of the state's general rainy day reserve fund. After a historic deposit of $225 million in this year's budget, the rainy day fund reached $1.1 billion.

Lee: Unlike TANF, put Medicaid block grant surplus to use

Some critics of Lee's plan to pursue block grant funding for the state's Medicaid program, such as Michele Johnson of the Tennessee Justice Center, are pointing to the surplus amount as a reason to avoid the funding approach for healthcare.

Johnson, executive director of the pro-Medicaid expansion organization, said this week that with block grants, public money "can be hoarded or spent on ridiculous stuff" while poverty rates remain high in the state.

But Lee said on Thursday that, while he is in favor of saving up the surplus of TANF block grant funding, he intends to put to use any surplus Medicaid block grant funding, if the federal government grants such an arrangement with the state.

Tennessee is in the process of applying to be the first state in the nation to receive Medicaid funding for its state program, TennCare, in part as a block grant. The Lee administration is asking the Centers for Medicare and Medicaid Services to split some of the money Tennessee has saved the federal government by coming in under CMS spending projections.

Lee said the savings could be used to expand services offered to TennCare members.

"Wouldn't it be great if we got a Medicaid block grant that created a $700 million surplus?" Lee said Thursday. "Then we'd be able to make determinations about were that money is going to be spent."

When asked to clarify whether he would want to save the surplus Medicaid block grant money or spend it, Lee said he would put it to use.

"My initial plan is that we would actually use it on expanding services through our Medicaid population," he said. "I would not want to hold it like the TANF money."

While the governor's office and TennCare have suggested possibly expanding services to TennCare members with the savings — like offering dental benefits to pregnant and new mothers — they have not stated they intend to expand eligibility for the program.

Lee mentioned potentially increasing the pool of those eligible for TennCare as a result of any additional revenue for the program, but has not said that is a goal of the block grant arrangement.

The governor is opposed to expanding Medicaid under the Affordable Care Act, which would allow the state to extend TennCare coverage to 600,000 uninsured Tennesseans.

Gabe Roberts, director of TennCare, said on Thursday that was the most recent figure from the U.S. Census Bureau on the number of people in Tennessee without health insurance.

Reach Natalie Allison at nallison@tennessean.com. Follow her on Twitter at @natalie_allison.

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