Note that the extra federal money seems clearly tied to increased welfare caseloads, not increased unemployment or poverty or other measure of need:.
A State meets the requirement of this clause for a quarter if the average monthly assistance caseload of the State for the quarter exceeds the average monthly assistance caseload of the State for the corresponding quarter in the emergency fund base year of the State.
If a state somehow succeeds at placing would-be recipients in jobs, it’s out of luck under this provision. To get the extra federal money, it has to get more people on welfare (though presumably it could count “workfare” participants if it happens to have a workfare program).
(h/t: Glenn Reynolds)