Order Code IB93034
Issue Brief for Congress
Received through the CRS Web
Welfare Reform: An Issue Overview
Updated July 8, 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 Rules
Other Provisions
Senate Finance Committee TANF Measure
Work Rules
Other Provisions
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
On June 26 the Finance Committee
states to give federally funded TANF to legal
approved its own TANF reauthorization
immigrants, regardless of date of entry; ex-
measure, the Work, Opportunity, and Respon-
tends transitional Medicaid and abstinence-
sibility for Kids (WORK) Act (not yet avail-
only education for 5 years; and also provides
able in legislative form). The Committee vote
funding for abstinence first. It increases
was 13-8, with three Republicans voting yes.
mandatory child care spending by $5.5 billion
Senate Majority Leader Daschle, dissatisfied
over 5 years. For a uniform comparison of
with the child care funding, voted no. The
TANF reauthorization bills with each other
proposed WORK Act has several provisions
and with current law, see CRS Report
opposed by the Bush Administration, includ-
RL31393.
ing an average work week of 30 hours (rather
than 40 hours) for most recipients. Health and
HHS reports that work participation rates
Human Services Secretary Tommy Thompson
in TANF declined in FY2000, to 34% for all
has warned that the White House would con-
families. After adjustment for caseload reduc-
sider extending the $16.5 billion block grant
tion, 31 states had a required all-family work
for one year rather than accepting what it
rate of zero. However, only 8 of the 34 states
considered to be a “bad” bill.
with 2-parent families in their TANF program
met the participation standard for them, even
The House passed its TANF bill by a
after caseload reduction credits. Latest TANF
largely partisan vote, 229-197 (14 Democrats
caseload data show that in December, enroll-
voted for the measure and four Republicans
ment in 30 jurisdictions topped year-earlier
against it). The bill reflects the Bush welfare
levels. In March, food stamp enrollment
plan issued in February. It would raise work
climbed to the highest level in almost 4 years.
participation requirements to 70% by FY2007
and increase required weekly work hours for
Enacted almost 6 years ago, as a replace-
most recipients (from a general 30-hour rule).
ment for Aid to Families with Dependent
In response to arguments that stiffer work
Children (AFDC), TANF provides fixed
rules would raise child care needs, the
grants for time-limited and work-conditioned
Republican leadership added more child care
aid. To promote work, state programs use
funds to the bill: over 5 years an increase of
tougher work sanctions, “Work First” policies,
$1 billion for mandatory funding and an
financial work rewards, and diversion of
increase of $1 billion in authorized discretion-
applicants. Favored by a strong economy,
ary funding. It also extends abstinence-only
family welfare numbers fell 53% since TANF
education and transitional Medicaid.
was created, work by single mothers has
soared, and poverty of mother-headed fami-
The Senate Finance measure increases
lies, although still very high, has dropped.
basic TANF grants to $16.9 billion yearly (by
adding $441 million yearly for supplemental
Reauthorization issues include work
grants to states with relatively low per capita
rules, amount of child care funding, the role of
income and folding them into the basic grant).
education, training, and “rehabilitation,” aid
Like the House bill, it raises work participa-
for the working poor, and the conflict between
tion standards to 70%. It expands the list of
time limits and work rewards that allow work-
countable work activities and adopts a 30-hour
ers to stay on TANF with higher earnings.
work week for most recipients. It allows
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
On July 2 the Department of Health and Human Services announced award of $200
million in bonus payments to 26 states and the District of Columbia for high performance
in FY2000, based on state rankings on four work-related measures. Major TANF extension
bills would end this bonus. On June 26 the Finance Committee approved its own TANF
reauthorization measure, the Work, Opportunity, and Responsibility for Kids (WORK) Act
(not available in legislative form) as a substitute for the House-passed bill, H.R. 4737.
Discussion was based on the Chairman’s Mark document. The Committee vote was 13-8,
with three Republicans voting yes. Senate Majority Leader Thomas Daschle, dissatisfied
with the level of child care funding, voted no. Committee discussion made it clear that major
issues on the Senate floor will include the level of child care funding and the number of
hours of weekly work required of TANF recipients. The Senate Committee adopted a general
30-hour week (with 24 hours in an expanded list of priority activities); the House bill
requires 40 hours (with 24 hours in one of 6 direct work activities), and HHS Secretary
Tommy Thompson has said that President Bush is adamant that the work week be 40 hours.
The House passed its bill on May 16 by a largely partisan vote, 229 to 197. On May 13, the
President signed the farm bill, which adds $5.7/$5.9 billion over 10 years in food stamp
spending (see Food Stamps in the CRS Welfare Reform Briefing Book.) Latest data show
that in December, TANF enrollment in 30 jurisdictions exceeded year-earlier levels.
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 30 jurisdictions during the year ended in December 2001
(and in the October-December quarter climbed in all but 13 jurisdictions). The December
2001 caseload held 2.099 million families, down 2.6% from the year-earlier number and
down 59% from the March 1994 record-high level (5.084). The food stamp caseload, which
has been rising steadily since April 2001, reached 19.2 million persons in March, the highest
number since June 1998. The all-time peak was 28 million in March 1994.
The number of children enrolled in Medicaid rose from 21.7 million in FY1999 to 21.8
million in FY2000, but the number of enrolled parents fell from 9 million to 8.3 million
(numbers are estimates). The EITC is the largest form of income-tested federally funded
cash aid for families. 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 billion (3%) from FY1999 (Table 1). For overall spending
on behalf of all population groups ($437 billion in FY2000), see CRS Report RL31228.
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Table 1. Estimated Income-Tested Outlays for Children and Their
Families from Selected Major Programs, FY1999 and FY2000a
Federal Funds
State-Local Funds
Recipientsb
($ 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
(13.8)
(14.9)
0k
0k
(4.7)
(4.7)
Section 8)
(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.
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.
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TANF Trends and Data
Nationally (as of December 2001) caseloads continued a decline that began in 1995, but
in all but 13 jurisdictions enrollment was on the rise in October-December. 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 26% 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.
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
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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 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, to
offset the cost, reduces the federal share of Medicaid administrative spending. (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) 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 TANF bill includes an extra $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. The Senate Finance TANF bill increases
mandatory funding by $5.5 billion over 5 years.
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
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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. 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.) The 2002 farm bill (P.L. 107-171) grants food stamp
eligibility to noncitizens after their first five years in this country. The Senate Finance
Committee TANF bill permits states to give federally funded TANF to legal aliens,
regardless of their date of entry (and, as amended during Committee markup, to give
Medicaid and S-Chip to pregnant women and children who are immigrants).
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 entitled states to $2.38
billion yearly. 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, and Congress appropriated this amount for
FY2002. (For TANF transfers to SSBG, see Transfer of TANF funds.) In separate measures,
the Senate Finance Committee has voted to increase SSBG funding for FY2003 and FY2004
in the CARE bill (S. 1924) and for FY2005 in the TANF reauthorization bill.
TANF Reauthorization Bills
(See CRS Report RL31393 for uniform comparison of all bills introduced)
\
House-Passed Bill (H.R. 4737)
Work Rules. This bill increases the all-family minimum participation requirement
from the current 50% level to 70% by FY2007, ends the separate higher rate for 2-parent
families, and requires 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
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supervised 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.
Other Provisions. The 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). 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). Programs and activities covered by this waiver provision are
TANF, Welfare-to-Work grants, SSBG, Job Opportunities for Low-Income 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. 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-only education funding for 5 years and extends transitional
Medicaid for one year.
Senate Finance Committee TANF Measure
On June 26 the Senate Finance Committee approved, as a substitute for H.R. 4737, the
Work, Opportunity, and Responsibility for Kids (WORK) Act (not yet available in legislative
form). Based on the Chairman’s Mark and amendments made by the Committee, the
measure extends basic TANF grants at $16.9 billion yearly for 5 years (by adding $441
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million yearly for supplemental grants to states with relatively low per capita income and
folding these funds into the basic grant structure).
Work Rules. Like the House bill, it retains the 5-year limit on federally funded
ongoing aid and raises work participation standards to 70% by FY2007. It replaces the
caseload-reduction credit with an employment credit, expands the list of countable work
activities, and adopts a 30-hour work week for most recipients. It requires that 24 hours
weekly be spent in (an enlarged list of) priority activities, but retains the 20-hour week for
single parents of a child under 6. An amendment adopted during markup permits a state to
exempt 10% of adult recipients from work because of being needed to care for a family
member with a disability or chronic illness.
Other Provisions. The bill allows states to give federally funded TANF to legal
immigrants, regardless of date of entry; and extends transitional Medicaid and abstinence-
only education for 5 years. It increases mandatory child care spending by $5.5 billion over
5 years. The bill also establishes grants for marriage promotion, fatherhood, TANF tribal
improvement; second chance homes, Business Link partnerships, at-home infant care
demonstrations, and transportation programs. Amendments adopted during Committee
markup include permitting states to provide Medicaid and State Children’s Health Insurance
Program (S-CHIP) services to legal immigrant children and pregnant women and requiring
the HHS Secretary to approve applications for waiver programs on terms “similar or identical
to” those of successful programs. The Committee also adopted amendments to increase
funding for the Social Services Block Grant for FY2005 (setting it at $1.952 billion) and to
provide $50 million annually for 5 years for abstinence-first or abstinence-plus education (in
addition to abstinence-only funds in the Chairman’s Mark).
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
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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
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, compared with 38% in FY1999. 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. For FY2000 state rates on the Internet, see the HHS web site at
[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.
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, as introduced February 8, 2002,
with the support of President Bush, had provisions seeking to assure equal treatment for
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nongovernmental providers of virtually all social services, but this title was removed before
the Finance Committee marked up the bill in mid-June. Congress appropriated $30 million
for FY2002 to establish a Compassion Capital Fund (CCF), and on June 7, HHS announced
terms of CCF grants. 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. Remaining funds were 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 who are unemployed, underemployed, or having difficulty paying child
support and comply with a personal responsibility contract. (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
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.
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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.
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
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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 (the CARE Act) 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
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.
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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) and the Senate Finance Committee
substitute for this bill include provisions to promote “responsible fatherhood” and distribute
more 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 July 2, 2002, the Department announced award of the third TANF high
performance bonus: $200 million to 26 states and D.C., based on state rankings (absolute and
relative) in FY2000 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 $0.648 million in Nebraska for improvement in workforce
success to $41.7 million in California (also the top winner in the two previous years) for
workforce success. On August 30, 2000, HHS issued final rules for high performance
bonuses, effective for awards beginning in FY2002, available on the HHS Web site 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
Note: All Senate bills shown were referred to the Senate Finance Committee.
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 reauthorization, child support. 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 programs 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.
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. 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.
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. 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. Companion bill: H.R. 2670.
S. 2052 (Rockefeller)
TANF reauthorization. Introduced March 21, 2002. (Some provisions incorporated in
Finance Committee TANF reauthorization bill.)
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S. 2058 (Lincoln)
TANF. Replaces the TANF caseload reduction credit with an employment credit.
Introduced March 21, 2002. (Credit incorporated in Finance Committee’s TANF bill.)
S. 2116 (Kerry)
TANF and housing. Several provisions to facilitate use of TANF funds for housing.
Introduced April 11, 2002. (Some provisions incorporated in in Finance Committee TANF
reauthorization bill.)
S. 2484 (Baucus)
TANF for Indians. Introduced May 8, 2002 (Some provisions incorporated in in
Finance Committee TANF reauthorization bill.)
S. 2524 (Bayh)
TANF reauthorization. Introduced May 15, 2002.
S. 2548 (Bingaman)
TANF. Liberalizes education and job training in TANF. Introduced May 22, 2002.
S. 2610 (Wellstone)
TANF. Allows states to count “barrier-removal” activities as work for a limited time.
Introduced June 11.
S. 2624 (Bingaman)
TANF. Requires a strategic plan for TANF recipients. Introduced June 14.
S. 2628 (Corzine)
TANF. Requires states to promote financial education for TANF families. Introduced
June 17.
S. 2631 (Bingaman)
TANF. Provides grants for transitional jobs programs. Introduced June 18.
S. 2648 (Mr. Hutchinson)
TANF reauthorization. Based on President’s February plan. Introduced June 20.
S. 2669 (Corzine)
TANF. Suspends time limit in a state with high unemployment. Introduced June 24.
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.
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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 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.
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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