Order Code IB93034
Issue Brief for Congress
Received through the CRS Web
Welfare Reform: An Issue Overview
Updated May 17, 2002
Vee Burke
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Major Programs for Low-Income Families
TANF Trends and Data
The 1996 Welfare Law and Changes to Date
Replacement of AFDC by Temporary Assistance for Needy Families
Medicaid and TANF
Child Care
Alien Eligibility for Welfare
Food Stamp Revisions
Social Services Block Grants
TANF Reauthorization Bills
House-Passed Bill (H.R. 4737)
Work and Time Limit Rules
Child Care Funding
Waiver Authority
Other Provisions
Other TANF Reauthorization Bills
TANF Issues
Definition of “Work Activities” and the Role of Education
Application of Minimum Wage Laws to “Workfare”
Work Participation Rates and Penalties
“Charitable Choice,” Faith-Based Initiative, and Privatization
Welfare-to-Work (WTW) Grants
Transfer of TANF Funds
Victims of Domestic Violence
Transportation for TANF Recipients
Housing Vouchers for TANF Recipients
Tax Credits for Hiring Welfare Recipients
Individual Development Accounts (IDAs)
Unspent TANF Funds
Child Support Collections
TANF Bonus Funds
LEGISLATION
FOR ADDITIONAL READING

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Welfare Reform: An Issue Overview
SUMMARY
The House passed the Republican
Latest TANF caseload data show that in
leadership TANF reauthorization bill (H.R.
September, enrollment in 22 jurisdictions
4737) on May 16 by a partisan vote, 229-197.
topped year-earlier levels. The President’s
The bill reflects the Bush welfare plan an-
FY2003 budget, in accord with his welfare
nounced in late February and incorporates
plan, would reauthorize TANF at the original
TANF provisons adopted on May 2 by the
yearly funding level ($16.5 billion), reestab-
House Ways and Means and Education and
lish supplemental grants ($319 million),
the Workforce Committees (in H.R. 4090 and
create a “more accessible” contingency fund
H.R. 4092, respectively). It also includes
($2 billion), replace the bonus for reducing
provisions to continue abstinence education
out-of-wedlock births with grants to reduce
and transitional Medicaid that were approved
illegitimacy and promote family formation,
earlier by the Energy and Commerce
and provide $135 million for abstinence-only
Committee. Further, it provides extra entitle-
education. The budget also proposes to
ment child care funding (Committee bills gave
restore food stamps to legal immigrants 5
no increase) and additional discretionary
years after their entry.
funding. H.R. 4737 would raise work partici-
pation requirements and increase required
Enacted almost 6 years ago, as a replace-
weekly work hours for most recipients. In
ment for Aid to Families with Dependent
response to arguments that stiffer work rules
Children (AFDC), TANF provides fixed
would raise child care needs, the Republican
grants for time-limited and work-conditioned
leadership added more child care funds to the
aid. To promote work, state programs use
final bill: over 5 years an increase of $1 billion
tougher work sanctions, “Work First” policies,
in appropriations for mandatory funding and
financial work rewards, and diversion of
an increase of $1 billion in authorized discre-
applicants. Favored by a strong economy,
tionary funding. For a comparison showing
family welfare numbers fell 53% since TANF
how the House-passed bill and other pending
was created, work by single mothers has
bills would change the program of Temporary
soared, and poverty of mother-headed fami-
Assistance for Needy Families (TANF), see
lies, although still very high, has dropped.
CRS Report RL31393.
Reauthorization issues include work
HHS reports that work participation rates
requirements, funding, the role of educa-
in TANF declined in FY2000, to 34% for all
tion/training, amount of child care funding,
families. After adjustment for caseload reduc-
marriage promotion, reporting rules, treatment
tion, 31 states had a required all-family work
of domestic violence victims, income supports
rate of zero. However, only 8 of the 34 states
for TANF “leavers,” and the conflict between
with 2-parent families in their TANF program
time limits and work rewards that allow work-
met the participation standard for them, even
ers to stay on TANF with higher earnings.
after caseload reduction credits.

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05-17-02
MOST RECENT DEVELOPMENTS
The House passed the Republican leadership TANF reauthorization bill (H.R. 4737)
on May 16 by a partisan vote, 229 to 197. The bill reflects the Bush welfare plan announced
in late February. The measure retains TANF basic funding at $16.5 billion yearly for
another 5 years, raises work participation standards, requires an average of 40 hours weekly
in constructive activities (24 hours in one of six listed direct work activities). It requires
states to end all cash benefits for a total failure to engage in required activities for at least
two consecutive months. It authorizes new waiver authority to coordinate rules of specified
programs for low-income families (but disallows transfer of program funds from one account
to another) and authorizes five states to replace food stamps with food assistance block grant
demonstration projects. The House-passed bill increases both mandatory and discretionary
funding for child care (not requested by the Administration, but added by the House
Republican leadership), extends abstinence education funding for 5 years, and extends
transitional Medicaid for one year. On May 16 the Senate Finance Committee held a
hearing on TANF Reauthorization: Building Stronger Families. On May 13, the President
signed the farm bill, which adds $5.7/$5.9 billion over 10 years in new spending on food
stamps (see Food Stamps in the CRS Welfare Reform Briefing Book.) Latest data show that
in September, TANF enrollment in 21 states and Guam exceeded year-earlier levels. HHS
reported on February 14 that TANF work participation rates declined in FY2000, to 34%
for all families, compared with 38.3% in FY1999.
BACKGROUND AND ANALYSIS
Major Programs for Low-Income Families
AFDC/TANF national enrollment has been falling since 1994, but the number of
families on cash welfare rose in 22 jurisdictions during the year ended in September 2001.
The September 2001 caseload held 2.103 million families, down 4% from the year-earlier
number and down 59% from the March 1994 record-high level (5.084). Recipients numbered
5.343 million in September, down 6.5% from a year before. The food stamp caseload, which
has been rising steadily since April, reached 18.3 million persons in November, up 8% from
the year-earlier figure. The all-time peak was 28 million in March 1994.
The estimated number of children enrolled in Medicaid rose from 21.7 million in
FY1999 to 21.8 million in FY2000, but the estimated number of enrolled parents fell from
9 million to 8.3 million. A TANF family must receive Medicaid only if it would qualify for
AFDC if that program still existed. The EITC is the largest form of income-tested federally
funded cash aid for families. The labor force participation rate of women maintaining
families with children soared 21% from 1994 (62%) to 1999 (75%). In August 1999 the
Council of Economic Advisers estimated that about one-third of the 1996-1998 AFDC-
TANF caseload drop was due to federal and state welfare policy changes, from 8% to 10%
to the strong economy, 10% to the higher minimum wage, and from 1% to 5% to the lower
real value of cash welfare benefits. The 2002 CEA report says research has found that time
limits alone caused more than 10% of the 1993-1999 caseload decline. FY2000 estimated
spending for low-income children and their families by selected major income-tested
programs that give cash, food, medical, and housing aid reached $149.2 billion, up $4.4
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billion (3%) from FY1999 (Table 1). For overall spending on behalf of all population
groups ($437 billion in FY2000) see CRS Report RL31228.
Table 1. Estimated Income-Tested Outlays for Children and Their
Families from Selected Major Programs, FY1999 and FY2000a
Federal Funds
State-local Funds
Recipientsb
($ in billions)
($ in billions)
(in millions)
FY1999
FY2000
FY1999
FY2000
FY1999
FY2000
Cash aid
$44.4
$44.1
$7.9
$7.6
—
—
(TANF)c
(7.9)
(6.9)
(7.9)d
(7.6)d
7.2e
5.8e
(EITC)f
(31.6)
(32.3)
0
0
19.7
19.4
(SSI) (children
only)
(4.9)
(4.9)
N.A.
N.A.
.85
.85
Food benefits
26.9
26.6
1.0
1.0
––-
––-
(Food stamps)g
(14.9)
(14.3)
(1.0)
(1.0)
15.2e
14.4e
(Subsidized meals)h
(8.0)
(8.3)
N.A.
N.A.
17.2
17.6
(WIC)
(4.0)
(4.0)
N.A.
N.A.
7.3e
7.2e
Major medical aid
26.4
29.9
19.2
21.1
32.5
33.4
(Medicaid)i
(25.5)
(28.0)
(19.2)
(21.1)
(30.7)e
(30.1)e
(S-CHIP)j
(0.9)
(1.9)
N.A.
N.A.
(2.0)
(3.3)
Major housing aid
18.4
18.9
0
0
4.8
4.8
(Public housing and
Section 8)
(13.8)
(14.9)
0k
0k
(4.7)
(4.7)
(USDA programs)m
(4.6)
(4.0)
0
0
(0.1)n
(0.1)n
a. Includes administrative costs where available. Excludes education benefits, work and job training programs,
Title XX social services, Child Care and Development Block Grant (CCDBG), energy aid, and numerous
smaller programs.
b. Caution: Average monthly number of individuals, except: subsidized meals, estimated daily average
participation in school meals and child care programs by children from lower-income families; Medicaid,
yearly total estimates of enrollment; EITC, yearly total number of families; SSI, number of children in
December; and housing, number of households at end of year.
c. Excludes outlays for work activities, child care, supportive services and other activities to promote TANF
goals.
d. Spending countable toward the TANF maintenance-of-effort (MOE) requirement except expenditures that
also could be counted toward the CCDBG MOE.
e. Includes parents. Child totals: food stamps, 10 million in FY1999, 9.4 million in FY2000; WIC, 5.6
million in FY1999, 5.4 million in FY2000; TANF, 5.3 million in FY1999, 4.3 million in FY2000;
Medicaid, 21.7 million and 21.8 million, respectively.
f. Credit earned in calendar year preceding the fiscal year (example, CY1999 for FY2000). Direct payments,
$27 billion for CY1999; $ 27.9 billion for CY2000. Reduced tax liability, $4.6 billion and $ 4.4 billion,
respectively. FY2000 spending and recipient data are estimates.
g. Estimate. Includes Puerto Rico’s nutritional assistance program. Does not include employment/training
spending.
h. Estimate. Includes income-tested parts of school lunch, school breakfast, and child care food programs; also
summer food service program. Excludes cost of commodities.
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i. Spending estimates are from the CBO January 2000 and January 2001 baselines. State shares are estimated
at 57% of total spending.
j. Spending estimates are based on state expenditure reports. Recipient counts represent the number of children
ever enrolled during the year.
k. Localities accept below-tax payments in lieu of property taxes on public housing projects.
l. Based on estimated percentage of households with children: FY1999, public housing, 43%; Section 8, 68%;
FY2000, public housing, 45%; Section 8, 70%.
m. Subsidized loans to low-income persons for homeownership (Section 502) and rental aid (Sections 515/521).
n. Represents housing units, each of which generally can accommodate one family. USDA does not collect data
on children in households.
TANF Trends and Data
Nationally (as of September 2001) caseloads continued a decline that began in 1995,
but in half the states enrollment is on the rise. Persons now on the rolls include rising
proportions of long-term recipients and minorities, and TANF “families” include a rising
proportion with no adult recipient (child-only cases). TANF has more than doubled the
fraction of adult recipients with earnings (from 11% in FY1996 to 28% in FY1999 and 24%
in FY2000). Available data indicate that in some states from 50-65% of persons who leave
the rolls have jobs then or a short time later and that the jobs generally pay wages around
$7.00 to $8.00 per hour. See CRS Report 98-369. The 2000 poverty rate among children in
female-headed families (no spouse present) was 39.8%, compared with 49.3% in 1996 and
52.9% in 1994, when AFDC numbers were at a record high. Combined federal/state TANF
spending (excluding state child care funds countable also toward required spending to qualify
for matching funds from the Child Care and Development Block Grant totaled $22.8 billion
in FY2000 (55% from federal funds), up from FY1999 ($21.7 billion), but down 19% from
comparable FY1996 spending for AFDC and related programs ($28.2 billion). At the end
of FY2000, states had an unobligated TANF balance of $3.2 billion.
The 1996 Welfare Law and Changes to Date
Replacement of AFDC by Temporary Assistance for Needy Families
TANF is a fixed block grant for state-designed programs of time-limited and work-
conditioned aid to families with children. Enacted on August 22, 1996 (P.L. 104-193), it
repealed AFDC, Emergency Assistance for Needy Families, and the Job Opportunities and
Basic Skills Training (JOBS) program and replaced them with TANF. It combines previous
funding levels for the three programs into a single block ($16.5 billion annually through
FY2002) and entitles each state to a fixed annual sum based on pre-TANF funding. It also
provides an average of $2.3 billion annually in a new child care block grant. The law
appropriates extra funds for loans, contingencies, bonuses for “high performance” and for
reducing out-of wedlock births, and supplemental grants for states with historically low
federal welfare funding per poor person and/or rapid population gain. As amended in 1997
(P.L. 105-33), TANF law also provided a $3 billion program in FY1998-FY1999 for welfare-
to-work (WtW) grants, most of which required state cost sharing, to help states achieve
required work participation rates TANF greatly enlarged state discretion in operating family
welfare, and it ended the benefit entitlement of individual families. States decide what kinds
of needy families to help and whether to adopt financial rewards for work. TANF explicitly
allows states to administer benefits and provide services through contracts/vouchers with
charitable, religious, or private organizations, a provision widely called Charitable Choice.
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Attached to the TANF block grant are some federal conditions. States must achieve
minimum work participation rates and maintain at least 75% of their “historic” level of state
welfare funding, increased to 80% if the state fails the work participation rate. States must
require parents and other caretaker recipients to engage in state-defined “work” after a
maximum of 24 months of benefits and must impose a general 5-year time limit on federally-
funded ongoing basic benefits. They may exempt single parents with a child under age 1
from required work (and from the calculation of work participation rates). In FY2002, 50%
of all families with an adult recipient must work (including 90% of families with two
parents); these rates are lowered for caseload declines from FY1995 levels. States are
forbidden to give TANF aid to unwed parents under 18 unless they live under adult
supervision, and, if high school dropouts, attend school. States may continue pre-TANF state
reforms begun under waivers from AFDC rules even if terms are inconsistent with the new
law. (For TANF provisions, as compared to AFDC, see CRS Report 96-720)
Medicaid and TANF
Although the 1996 law ended AFDC, it retains AFDC eligibility limits for Medicaid
use. It requires states to give Medicaid coverage to children and parents who would be
eligible for AFDC cash (under July 16, 1996 terms) if AFDC still existed. For this purpose,
states may lower AFDC income and resource standards to those in effect on May 1, 1988,
and may increase them by the percentage rise in the consumer price index since July 16,
1996, and may change the method of determining income and resources. Through FY2002,
states must extend medical assistance for 12 months to those who lose TANF eligibility
because larger earnings lift their income above July 1996 limits. The House-passed TANF
bill, H.R. 4737, extends transitional medicaid for one year (through Sept.30, 2003), and
reduces the federal share of Medicaid administration costs. See CRS Report RS20552.
Child Care
The 1996 welfare law created a mandatory block grant for child care to low-income
families. Individual states are entitled to what they received for AFDC work-related child
care, transitional child care, and at-risk child care in a base year. States that maintain the
higher of their 1994 or 1995 spending on these programs are entitled also to extra funds at
the medicaid match rate. Appropriated for the block grant was $13.9 billion over 6 years
($2.7 billion for FY2002, the final year). The law also authorized $1 billion annually through
FY2002 in discretionary funding under an expanded CCDBG. The combined entitlement
and discretionary funding streams are referred to as the Child Care and Development Fund
(CCDF). For state CCDF programs, see CRS Report RL30919. In discretionary funding,
Congress appropriated $2.1 billion for FY2002. The FY2003 budget requests $4.8 billion
in child care funds–$2.1 billion in discretionary funding and $2.7 in entitlement funding. For
child care funding/spending details, see CRS Report RL31274. States may transfer some
TANF funds to CCDF; in addition, they use TANF block grants for “direct” child care.
FY2000 TANF-funded child care (federal and state dollars) totaled $2.3 billion, exclusive
of $2 billion transferred to CCDF and state spending that also could be counted toward sums
needed to qualify for matching child care entitlement funds. The House-passed TANF bill
includes an additional $1 billion in mandatory child care funding over 5 years and raises the
discretionary authorization by $200 million annually over 5 years, reaching the level of $3.1
billion in FY2007.
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Alien Eligibility for Welfare
The 1996 law barred most legal immigrants from welfare benefits. It also gave states
options (1) to extend TANF, Medicaid, and Title XX social services to legal immigrants who
arrived before the 1996 law and (2) to extend these benefits, after their first 5 years of U.S.
residence, to persons who arrived later. The 1997 Balanced Budget Act (P.L. 105-33)
restored SSI for legal aliens enrolled on August 22, 1996, when the ban was passed, and
those who were here then and later become disabled; and P.L. 105-185 restored food stamp
eligibility for immigrant children, aged, and disabled aliens here before enactment of the
1996 law. At passage, CBO estimated that the 1996 alien provisions would reduce direct
federal outlays over 7 years by $23.7 billion, but P.L. 105-33 and P.L. 105-185 were
estimated to restore more than half of this over 5 years ($9.5 billion in SSI, $2 billion in
Medicaid and $800 million in food stamps). See CRS Report RL31114 for more details.
noncitizens. The farm bill (P.L. 107-171) grants food stamp eligibility to noncitizens after
their first five years in this country.
Food Stamp Revisions
The 1996 law expanded states’ food stamp role, added new work rules, restricted
benefits, and barred eligibility for most legal aliens. At passage, net federal food stamp outlay
savings over 5 years were estimated at $23.3 billion. P.L. 105-33 provided $1.5 billion over
5 years for work programs, and P.L. 105-18 allowed states to pay for food stamps for persons
made ineligible for federally financed stamps by the 1996 law. P.L. 106-387 increased
benefits for those with high shelter costs. On May 13 the President signed the farm bill,
which adds $5.7/$5.9 billion over 10 years in new spending on food stamps (see Food
Stamps in the CRS Welfare Reform Briefing Book). Changes include expansion of
eligibility for some noncitizens.
Social Services Block Grants
The 1996 Act reduced the $2.8 billion entitlement ceiling for Social Services Block
Grants (SSBG) under title XX of the Social Security Act by 15% and entitles states to $2.38
billion annually in FY1997-FY2002. Congress later appropriated $2.5 billion for FY1997,
$2.3 billion for FY1998, $1.9 billion for FY1999, and $1.8 billion for FY2000. Beginning
in FY2001, P.L. 105-178 reduced the entitlement ceiling to $1.7 billion. See CRS Report 94-
953. For FY2002, Congress appropriated $1.7 billion, the budget request, and the FY2003
budget requests the same sum. (For TANF transfers to SSBG, see Transfer of TANF funds.)
TANF Reauthorization Bills
House-Passed Bill (H.R. 4737)
Work and Time Limit Rules. Highlights of this 141-page measure, passed May 26,
include increasing the all-family minimum participation requirement from the current 50%
level to 70% by FY2007, ending the separate higher rate for 2-parent families, and requiring
TANF adults to engage in work or self-sufficiency activities an average of 40 hours per
week, including 24 hours in “work,” defined as unsubsidized jobs, subsidized private jobs,
subsidized public jobs, on-the-job training, supervised work experience, and supervised
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community service. States could define any other activity as countable (for the remaining
16 weekly hours) so long as it is consistent with the purposes of TANF. Also, for 3 months
within 24 months, persons could be deemed to meet the 24 hour weekly direct work
requirement by engaging in activities chosen by the state, and under some circumstances,
a fourth month could be credited for education. The bill replaces the fixed base year
(FY1995) for the general caseload reduction credit with a moving base, but it includes a new
“super-achiever” caseload reduction credit for a state whose caseload falls at least 60% from
its FY1995 level (without regard to policy changes that might have lowered caseload size).
The bill requires states to end cash aid to a family if the parent fails to engage in required
activities for at least two months. It continues the 5-year time limit on federally paid basic
assistance, along with the 20% hardship exemption. It provides a state option for TANF to
be a mandatory partner with the workforce investment system.
Child Care Funding. The House-passed bill allows 50% of TANF funds to be
transferred to the CCDBG (up from 30% in current law). Further, it appropriates $2.917
yearly in mandatory child care funds through FY2007 (a $1 billion increase over 5 years).
It authorizes appropriation of an annual average of $1.7 billion over 5 years for the CCDBG,
with the sum rising from $2.3 billion for FY2003 to $3.1 billion for FY2007 (the original
Bush proposal provided no child care funding increase).
Waiver Authority. The bill authorizes new waiver authority to coordinate rules of
specified programs for low-income families (but disallows transfer of program funds from
one account to another). Programs and activities covered by this waiver provision are TANF,
Welfare-to-Work grants, SSBG, Job Opportunities for Low-Inome Individuals (JOLI), Title
I of WIA (excluding JOB Corps), Adult Education and Family Literacy Act, CCDBG, U.S.
Housing Act (excepting Section 8 rental assistance and set-asides for the elderly and
disabled), Homeless Assistance Act; and the food stamp program. Specified provisions
(including civil rights and labor protections, existing WIA waiver limits, non-financial food
stamp rules, any funding restriction in an appropriations act) could not be waived. Funds
could not be transferred from one account to another, and projects could not increase federal
costs. Waiver approval would be required by each relevant Secretary. The bill also
authorizes five states to replace food stamps with demonstrations of food assistance block
grant projects. (During committee passage of the underlying bill, a proposal to end
unexpired TANF waivers on September 30, 2004 was dropped.)
Other Provisions. The bill establishes marriage promotion matching grants ($100
million yearly) and allows states to use federal TANF funds as the 50% state match. It
appropriates $100 million annually for research and demonstration projects and technical
assistance and specifies that these funds shall be spent primarily on activities allowed under
marriage promotion grants. It establishes fatherhood projects ($20 million authorized
annually through FY2007). It ends the nonmarital birth bonus. It ends the high performance
bonus, replacing it with an employment achievement bonus ($500 million appropriated for
FY2004 through FY2008). The bill makes improving child well-being the overall TANF
purpose and it adds “reducing poverty” to the goal of ending dependence on government
benefits. The bill also extends abstinence education funding for 5 years and extends
transitional Medicaid for one year.
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Other TANF Reauthorization Bills
Eight other bills have been introduced to reauthorize TANF. Three are in the Senate
(all sponsored by Democrats): S. 940 (Dodd), S. 2052 (Rockefeller), and S. 2524 (Bayh).
Two House measures are sponsored by Democrats: H.R. 3133 (Mink) and H.R. 3625
(Cardin). Three other House measures are sponsored by Republicans: H.R. 4210 (Roukema),
H.R. 4090 (Herger), and H.R. 4092 (McKeon). The last two measures were incorporated
into the House-passed bill. Four of the five Democratic bills propose to keep a 50% work
participation standard, but S. 2524 adopts the 70% standard advanced by the Bush
administration. Five bills, including one Republican bill (H.R. 4210) would modify the time
limit. For uniform comparisons of these bills with each other and with current law, see CRS
Report RL31393.
TANF Issues
Definition of “Work Activities” and the Role of Education
What activities are countable in calculating a state’s work participation rate? In contrast
to JOBS, which allowed credit for postsecondary education, TANF law includes only three
educational activities: vocational educational training (12 month limit), secondary school
attendance and education directly related to employment (adult high school dropouts and teen
parents only). The law provides that participation in vocational educational training or
completion of high school can account for no more than 30% of the persons credited with
work. Although it is not a countable activity, most state TANF programs include
postsecondary education, as the sharp caseload drop has cut or ended the risk of penalty for
failing work participation rates. See CRS Report RL30767. All pending TANF
reauthorization bills change rules about countable work activities.
Application of Minimum Wage Laws to “Workfare”
The Clinton administration ruled that most TANF recipients in “workfare”
arrangements, where recipients work for their benefit, would be classified as “employees”
under the Fair Labor Standards Act and, hence, must receive the minimum wage rate (higher
of the federal or state rate). In calculating a recipient’s workfare “wage,” it said the value of
food stamp benefits could be counted under some work programs, but that credit could not
be taken for health insurance or other benefits excluded under the FLSA. The Internal
Revenue Service (IRS) said it would not exclude TANF workfare payments from federal
income and employment taxes if recipients were required to participate more hours for their
benefit than the minimum wage equivalent. Adult TANF recipients generally now must
work an average of 30 hours weekly (20 hours if they have a child under 6). At the federal
minimum wage ($5.15), a 30-hour weekly workfare assignment equates to $154.50 in
benefits ($669 per month); and in the 11 jurisdictions with higher state minimum wage rates,
the required “workfare benefit” would be higher. Only in New York (in Suffolk County),
Alaska, and Wisconsin (Community Service program), are TANF maximum benefits for a
3-person family (as of July 1, 2001) high enough to provide the required amount for 30 hours
of work, at the federal minimum wage rate, by a single-parent family. Many states could
observe the workfare minimum “wage” by adding food stamps to the calculation, but some
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states would have to increase cash benefits. See CRS Report 97-1038. S. 2524 stipulates that
workplace laws shall apply to TANF recipients in the same manner as to other workers.
Work Participation Rates and Penalties
HHS reported on February 14, 2002, that work participation rates declined in FY2000
(but all states met their all-family adjusted minimum standards, as did 26 jurisdictions of the
34 with two-parent families in the TANF program ). Nationally, 34% of families with an
adult recipient were credited with work in FY2000 (and 48.9% of two-parent families in the
caseload) by engaging in a recognized work activity for a general weekly average of 30 hours
weekly. The FY2000 rates fell short of those for FY1999– 38.3% and 54.7%, respectively.
In FY2000, 20 states had no two-parent families in TANF. Of these, 18 served two-parent
families in separate state-funded programs, which are free of TANF minimum work targets
and time limits (North Dakota restricts its program to one-parent families, and Vermont’s
2000 program was operated under waiver rules.) The statutory minimum work rates for
FY2000 were 40% for all families and 90% for two-parent families, but actual state targets
were adjusted downward to give credit for reductions in caseload from FY1995 to FY1999.
These credits reduced all-family participation standards to zero in 31 states. All jurisdictions
except Guam and the Virgin Islands achieved their adjusted all-family work rate, but 8
jurisdictions failed adjusted standards for 2-parent families. For FY2000 state rates, see
[http://www.acf.dhhs.gov/programs/opre/particip/index.htm#participation].
“Charitable Choice,” Faith-Based Initiative, and Privatization
The 1996 welfare law permits states to “administer and provide services” under TANF,
food stamps, Medicaid, and some other federal programs through contracts with (or
vouchers redeemable with) charitable, religious, or private organizations. However, food
stamp and Medicaid law effectively require eligibility to be determined by a public official.
The purpose of what has come to be known as “charitable choice” is to allow religious
organizations to provide services on the same basis as any other nongovernmental provider
“without impairing their religious character” or diminishing the religious freedom of
recipients. Since 1996, Congress has enacted other charitable choice provisions–applying
them to grants under the Community Services Block Grant (1998) and to substance abuse
services under the Public Health Service Act (2000). See CRS Report RS20712. Using its
new privatization authority, Wisconsin has contracted out the administration of its TANF
program (W-2) in some counties.
President Bush on January 29, 2001 established an Office of Faith-Based and
Community Initiatives and directed five Cabinet departments to set up similar offices. As
outlined in a White House brochure, the President’s faith-based agenda includes expanding
charitable choice rules to new programs, expanding private giving through tax deductions
and other initiatives, setting up a Compassion Capital Fund, and piloting new partnerships
between government and faith-based and community groups in providing various services.
The House-passed Community Solutions Act (H.R. 7) would apply charitable choice rules
to nine new program areas (Title II) and give tax incentives for charitable giving (Title I).
For Title II provisions, see CRS Report RS20948. The General Accounting Office (GAO)
on January 18, 2002 issued a study about the implementation and effect of existing charitable
choice laws (GAO-02-337). Title III of S. 1924, introduced February 8, 2002, with the
support of President Bush, has provisions that seek to assure equal treatment for
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nongovernmental providers of virtually all social services. Congress appropriated $30
million for FY2002 to establish a Compassion Capital Fund, and on February 26, HHS
requested public comments on what factors it should consider in making awards. For
charitable choice history and overview, see CRS Report RS20712. For background and legal
issues, see CRS Report RL31043.
Welfare-to-Work (WTW) Grants
The basic TANF block grant earmarks no funds for any program component, benefits
or work programs. In response to a presidential budget proposal, the 1997 Balanced Budget
Act established a $3 billion welfare-to-work grant program for FY1998-FY1999,
administered by the Secretary of Labor. It required 75% of funds (after set-asides) to be used
for 33% state matching formula grants and required the remaining 25% of WtW funds to be
used for competitive grants. Over the 2 years, formula grants totaled almost $2 billion, and
competitive grants, $712 million. As of December 31, 2000, $1.6 billion in WtW funds
remained unspent; and, as requested by the President, Congress extended the WtW spending
deadline (from 3 years to 5 years from the award date) in P.L. 106-554. As first enacted,
70% of funds had to be used to benefit TANF recipients (and non-custodial parents) with at
least two specified barriers to work who themselves (or whose minor children) were long-
term recipients (30 months of AFDC/TANF benefits) or were within 12 months of reaching
a time limit. Eligibility was liberalized by P.L. 106-113. States now can help new groups:
long-term TANF recipients without specified work barriers, former foster care youths 18 to
24 years old, TANF recipients who are determined by criteria of the local private industry
council to have significant barriers to self-sufficiency, and non-TANF custodial parents with
below-poverty income. For WtW eligibility, the 1999 law requires that noncustodial parents
be unemployed, underemployed, or having difficulty paying child support and comply with
a personal responsibility contract; also, their minor child must meet certain standards. See
CRS Report RS20134.
Transfer of TANF Funds
The law allows states to transfer up to 30% of TANF funds to the Child Care and
Development Block Grant (CCDBG) and the Title XX social services block grant (SSBG),
but sets a limit of 10% on the share that can go to SSBG. P.L. 105-200 allows states to use
TANF funds, within the overall 30% transfer limit, as state matching funds for job access
grants to provide transportation services to TANF recipients and ex-recipients, noncustodial
parents of TANF children, and those at “risk” of becoming eligible for TANF. Cumulative
SSBG transfers from TANF awards through FY1999 totaled $6.4 billion, 13.7% of awards.
During FY1999, states transferred 17% of 1999 awards (11% to CCDBG and 6% to SSBG).
P.L. 105-178 cut the share of funds that could go to SSBG to 4.25%, effective in FY2001,
but Congress in December restored the 10% cap for FY2001 only; and in late 2001 ( P.L.
107-116) continued it at 10% for FY2002. The House-passed TANF bill allows 50% of
TANF funds to be transferred to CCDBG.
Victims of Domestic Violence
The 1996 law allows states to certify in their TANF plans that they have adopted
standards to screen and identify TANF recipients with a history of domestic violence, refer
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them to services, and waive program requirements in some cases. The Senate several times
voted to allow unlimited TANF waivers for victims of domestic violence and to disregard
these persons in computing a state’s work participation rate, but the House has disagreed.
Regulations permit a state that has adopted the Family Violence Option (FVO) to receive
“reasonable cause” exceptions to penalties for failing work and time limit rules if the state
had granted domestic violence waivers that met certain standards. See CRS Report RS20662.
For legislation, see S. 940/H.R. 1990, H.R. 2258, and S. 1249.
Transportation for TANF Recipients
The 1998 transportation act (P.L. 105-178) authorized $750 million in 50% matching
funds over 5 years for matching grants for job access and reverse commute grants for welfare
recipients, of which no more than $10 million annually can be for reverse commute projects.
It said funds were to be used to develop services for welfare recipients and other low-income
persons (income not above 150% of the poverty level). As noted immediately above, states
may use TANF funds, within limits, as state matching funds for these grants. Appropriations
for FY1999 and 2000 were $75 million annually (half the Clinton budget request). The
FY2001 budget again proposed $150 million, but Congress provided $99.780 million (P.L.
106-346). In FY1999, the Federal Transit Administration (FTA) awarded competitive grants
to 206 projects, but thereafter Congress designated many projects for funding. For FY2000,
about 50% of funds were earmarked for specific projects, and for FY2001, about 75% ($21
million was earmarked in FY2001 for five state governments). Observing that earmarking
of funds prevented projects to “emerge from a competitive process,” FTA proposed on May
3, 2001, to allocate all funds among the states and outlying areas, on the basis of each
jurisdiction’s share of low-income persons, beginning in FY2002. It requested $125 million
for that year and said a formula program would allow states to select grantees on a
competitive basis and facilitate multi-year funding. For details of the proposal and
information about FY1999-FY2001 awards, see [http://www.fta.dot.gov/wtw].
Housing Vouchers for TANF Recipients
The President’s FY1999 budget proposed tenant-based housing assistance to help
eligible TANF families move to work ($283 million, sufficient for 50,000 vouchers).
Congress included these vouchers in the FY1999 HUD appropriation act (P.L. 105-276) but
specified that at least $32 million of the $283 million total be made available for initiatives
in eight specified localities. The law made sweeping changes in subsidized housing,
including: Reducing the share of units reserved for very poor families in an effort to achieve
an income mix; requiring housing agencies to set minimum rents (not above $50 monthly);
allowing public housing tenants to choose a flat rent or income-adjusted rent; forbidding
housing agencies to increase the rent for one year of TANF recipients (or some other
previously unemployed persons) who take a job; and requiring adult public housing
residents, for 8 hours monthly, to participate in a self-sufficiency program or in community
service. See CRS Report 98-868. The FY2000 and FY2001 budgets requested funding for
new WtW housing vouchers, but Congress denied the requests, and subsequent budgets
(including that for FY2003) have sought no new WtW housing vouchers. For a general
discussion of housing for the poor, see CRS Report RL30486.
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Tax Credits for Hiring Welfare Recipients
In 1997, Congress established a Welfare-to-Work (WtW)Tax Credit for hiring persons
who had received AFDC/TANF for 18 months. It also extended an existing credit called the
Work Opportunity Tax Credit (WOTC)for hiring certain persons, including those who had
received TANF for 9 months. In late 1999, Congress extended both credits retroactively and
through December 31, 2001 (P.L. 106-170). See CRS Report RL30089. P.L. 106-554 added
“renewal communities” to the areas where a tax credit is offered for hiring resident youth.
S. 545, introduced March 15, 2001, would extend WOTC to small business employees
working or living in areas of poverty. P.L. 107-147, signed March 9, includes an extension
of the WtW tax credit and WOTC through December 31, 2003.
Individual Development Accounts (IDAs)
The 1996 law permits states to use TANF funds to carry out a program of individual
development accounts (IDAs) established by (or on behalf of) persons eligible for TANF,
with no dollar limit. Accounts are to contain deposits from the recipient’s earnings, matched
by a contributions from a not-for-profit organization, or a state or local government agency
in cooperation with the organization. Withdrawals are allowed only for postsecondary
educational expenses, first home purchase, and business capitalization. All means-tested
programs must disregard amounts, including accruing interest, in TANF-funded IDEAS.
Some states mention IDAs in their TANF plans. In 1998, Congress established a 5-year
program of IDA demonstration projects (Assets for Independence Act [AIA], Title IV of
P.L. 105-285) for TANF-eligible persons and certain other low-income workers.
Appropriations for FY1999 and FY2000 were $10 million each; for FY2001, $25 million
(budget request) was appropriated (P.L. 106-554), and the House has voted $25 million for
FY2002 (H.R. 3061). Announced at the end of September 2000 were second year awards
of $8.3 million for AIA demonstration projects ($4.5 million to 25 new grantees, $2.1 million
in supplements to 14 previous grantees, and $1.7 million to state departments in Indiana and
Pennsylvania that had begun IDAs before AIA was passed). It is estimated that during the
15 months ended Dec. 31, 2000, 2,700 persons opened IDAs under the demonstration
program. Generally they received a matching contribution of at least two dollars for each
dollar deposited. See CRS Report RS20534. In passing H.R. 7 on July 19, the House voted
to amend and extend the AIA program through FY2008 and to double its authorized funding
(Title III), rather than to establish a new IDA program financed by income tax credits to
financial institutions, as proposed by the Administration in the original bill. The President’s
FY2003 budget and S. 1924 renew the proposal to create tax credits for financial institutions
with individual development accounts. S. 592 contains a version of the Administration’s
original IDA proposal.
Unspent TANF Funds
As of September 30, 2000, HHS reports that states had an unspent/unobligated balance
in the U.S. Treasury of $3.2 billion in TANF funds, from FY1997-FY2000 TANF grants.
Five states accounted for more than half of the total: New York, $761 million; Minnesota,
$232 million; Ohio, $217 million; Michigan, $200 million; and Louisiana, $169 million.
Eleven states had no balances: Colorado, Connecticut, Delaware, Illinois, Kansas, Kentucky,
Maine, Nevada, New Jersey; Pennsylvania, and South Carolina. States may draw TANF
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funds from the Treasury only for reimbursement of expenditures. The law sets no fiscal year
deadline for expenditure of TANF funds for “assistance,” defined as basic ongoing aid.
Child Support Collections
To receive TANF, parents must assign child support rights to the state. In FY1999,
child support enforcement offices collected $6 billion assigned by TANF and former TANF
families. Of this sum, $3.8 billion was distributed to former TANF families and $0.1 million
to TANF families; most of the rest was used to repay federal and state administrative costs.
The House voted last year (H.R. 4678) to require states and localities to distribute more child
support to ex-welfare families (with federal funding) and to allow states to give child support
collections to TANF families without having to repay the federal government for its share
of the money. The bill also proposed “fatherhood” grants to promote marriage and applied
Charitable Choice rules to them, but the Senate did not act on counterpart legislation. P.L.
106-553 and P.L. 106-554 appropriated $4 million to two national organizations to promote
fatherhood. The House-passed TANF bill (H.R. 4737) includes provisions to promote
“responsible fatherhood” and distribute child support directly to families.
TANF Bonus Funds
On September 21, 2001, HHS announced award of $75 million in bonuses to the only
jurisdictions (D.C., Alabama, and Michigan) that achieved reductions in the percentages of
births to unwed women between 1996-97 and 1998-99; elsewhere non-marital birth ratios
increased. On December 16, 2000, HHS announced award of the second TANF high
performance bonus: $200 million to 28 states, based on state rankings (absolute and relative)
in FY1999 on work-related measures rates of job entry and success in the workforce (job
retention and earnings gain). Winners ranked among the top 10 states in at least one
category. Bonuses ranged from $0.6 million in South Dakota for improvement in workforce
success to $36.1 million in California (also the top FY1998 winner) for workforce success.
On August 30, 2000, HHS issued final rules for high performance bonuses, effective for
awards beginning in FY2002, available at [http://www.acf.dhhs.gov/programs/opre/hpb].
The new rules add four non-work performance measures: “family formation and stability —
percentage of children in married couple families; health insurance coverage — percentage
of TANF leavers with health insurance (Medicaid or S-CHIP); food stamp coverage —
enrollment percentage among households with children, earnings equal to half-time year
round minimum wage ($5,396 in 2000) and income below 130% of the poverty guideline);
and child care coverage — percentage of eligibles served plus affordability.
LEGISLATION
H.R. 7 (and identical bill, H.R. 1284) (Watts)
Numerous social programs. Title I provides tax incentives for private giving; Title II
expands charitable choice to cover 9 new program areas. Introduced March 29; referred to
two committees, which made amendments. Passed House July 19, 2001. See also H.R. 3599
and S. 1924 (to promote charitable giving and for other purposes).
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H.R. 2018 (Hart)
TANF. Allows TANF funds to be used for infant safe haven program. Introduced May
25, 2001; referred to two committees.
H.R. 2166 (Stark)
TANF. Child Poverty Reduction Act. Makes reduction of child poverty a TANF goal
and appropriates $150 million annually for bonuses to states that reduce poverty rates and
do not increase the average “depth” of child poverty. Introduced June 13, 2001; referred to
Ways and Means Committee. Senate companion: S. 1027. (Provisions are in H.R. 3625).
H.R. 2258 (Levin)
TANF and other programs. Allows eligibility for certain non-citizens suffering from
domestic abuse. Introduced June 20, 2001; referred to several committees.
H.R. 3113 (Mink)
TANF reauthorization. Introduced October 12, 2001; referred to Ways and Means
Committee.
H. R. 3541 (Green of Wisconsin)
Housing. Explicitly authorizes religious organization to participate in certain housing
programs. Introduced December 19, referred to Committee on Financial Services. See also
H.R. 3995.
H.R. 3625 (Cardin)
TANF, child support. Reauthorizes TANF and makes extensive changes. See TANF
Reauthorization Bills above. Introduced January 24, 2002; referred to Ways and Means
Committee.
H.R. 3459 (Velazquez)
TANF. Repeals 5-year time limit, repeals 5-year ban on TANF for immigrants, adjusts
block grant for inflation, requires translation services for non-English speakers. Introduced
December 11, referred to Ways and Means Committee.
H.R. 3667 (Woolsey)
TANF. Requires state TANF plans to include self-sufficiency standards and offers a
bonus to states with an increase in the self-sufficiency score of leaver families. Introduced
January 29, 2002, referred to Ways and Means Committee.
H.R. 3730 (Woolsey)
TANF. Allows 48 months of postsecondary or vocational educational training as TANF
work activity. Other provisions. Introduced February 12, 2002, referred to two committees.
H.R. 4057 (Levin)
TANF. Replaces the caseload reduction credit with an employment credit. Introduced
March 20, 2002. Companion bill: S. 2058
H.R. 4090 (Herger)
TANF reauthorization. Introduced April 9, 2002, referred to Ways and Means
Committee. Incorporated in House-passed H.R. 4737.
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H.R. 4092 (McKeon)
TANF, child care. Introduced April 9, referred to committees. Incorporated in House-
passed H.R. 4737.
H.R. 4236 (Acevedo-Vila)
TANF. Makes the territories eligible for supplemental TANF grants and contingency
fund. Other provisions. Introduced April 16, 2002, referred to two committees.
H.R. 4210 (Roukema)
TANF reauthorization. Introduced April 11, referred to Ways and Means.
H.R. 4655 (Mrs. Maloney)
Domestic violence. Requires States to ensure that TANF progams take action to help
victims. Introduced May 2, referred to Ways and Means.
H.R. 4737 (Pryce)
TANF, child care, child support, abstinence education, transitional Medicaid. See
TANF Reauthorization Bills in text above. Introduced May 16, passed by House May 17
(originally introduced as H.R. 4700 on May 9).
S. 545 (Frist)
Work Opportunity Tax Credit. Extends credit to small business employees working or
living in poverty areas. Introduced March 15, 2001; referred to Finance Committee.
S. 685 (Bayh)
Child support, EITC, SSBG, others. Strengthening Working Families Act. Provisions
include: promotion of responsible fatherhood, distribution of child support to families,
expansion of EITC, restoration of SSBG ceiling. Introduced April 3, 2001; referred to
Finance Committee. See also H.R. 1470, H.R. 2893 (fatherhood only), S. 916, and S. 918.
S. 770 (Levin)
TANF. Allows vocational educational training to be counted as a TANF work activity
for 24 months. Introduced April 24, 2001; referred to Finance Committee.
S. 940 (Dodd)
TANF and numerous others. Leave No Child Behind Act. For TANF provisions, see
TANF Reauthorization Bills above. Introduced May 23, 2001; referred to Finance
Committee. Almost identical bill, H.R. 1990, introduced May 24; referred to six
committees.
S. 981 (Rockefeller)
TANF. Low-Income Gasoline Assistance. Establishes grant program for stipends to
TANF recipients and other low-income working families who must drive a certain distance.
Introduced May 26, 2001; referred to Finance Committee. See also H.R. 2427.
S. 1249 (Wellstone)
TANF. Entitles victims of domestic/sexual violence to emergency leave for various
kinds of help, allows use of TANF funds for emergency aid to persons taking this leave.
Introduced July 25, 2001; referred to Finance Committee. Companion bill: H.R. 2670.
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S. 2052 (Rockefeller)
TANF reauthorization.. Introduced March 21, 2002, referred to Finance. Committee.
S. 2058 (Lincoln)
TANF. Replaces the TANF caseload reduction credit with an employment credit.
Introduced March 21, 2002, referred to Finance Committee.
S.2116 (Kerry)
TANF and housing. Several provisions to facilitate use of TANF funds for housing.
Introduced April 11, 2002, referred to Finance Committee.
S. 2484 (Baucus)
TANF for Indians. Introduced May 8, 2002, referred to Finance Committee.
S. 2524 (Bayh)
TANF reauthorization. Introduced May 15, 2002, referred to Finance Committee.
FOR ADDITIONAL READING
(See also the CRS Welfare Reform Briefing Book, at
[http://www.congress.gov/brbk/html/ebwlf1.shtml])
CRS Report RL31228. Cash and Noncash Benefits for Persons with Limited Income:
Eligibility Rules, Recipient and Expenditure Data, FY1998-FY2000, by Vee Burke.
CRS Report RS20948. Charitable Choice Provisions of H.R. 7, by Vee Burke.
CRS Report RL31371. Comments from the Public on TANF Reauthorization, by Vee Burke,
Gene Falk, Melinda Gish, Shannon Harper, Carmen Solomon-Fears, Karen Spar, and
Emilie Stoltzfus
CRS Report RL31393. TANF: Brief Comparison of Reauthorization Bills, by Vee Burke
CRS Report 97-86. Indian Tribes and Welfare Reform, by Vee Burke.
CRS Report RL31106. Welfare Reform Financing Issues: An Analysis of Funding
Available in Case of Recession, by Gene Falk.
CRS Report RL31087. Welfare Reform: FY2000 TANF Spending and Recent Spending
Trends, by Gene Falk.
CRS Report 97-509. Welfare Reform: Role of Education, by Vee Burke.
CRS Report 98-369. Welfare Reform: TANF Trends and Data, by Vee Burke.
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CRS Report RS21079. TANF Time Limits: Basic Facts and Implications, by Gene Falk, Vee
Burke, and Shannon Harper.
CRS Report RL30724. Welfare Reform Research: What Have We Learned Since the Family
Support Act of 1988? by Christine Devere, Gene Falk, and Vee Burke.
CRS Report RL30882. Welfare Reform Research: What Do We Know about Those Who
Leave Welfare? by Christine Devere.
CRS Report RS21069. TANF Sanctions–Brief Summary, by Vee Burke and Gene Falk.
CRS Report 96-882. The Wisconsin Works Welfare Program: Concept and Experience, by
Vee Burke.
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