Order Code RS20712
Updated August 21, 2002
CRS Report for Congress
Received through the CRS Web
Charitable Choice, Faith-Based Initiatives,
and TANF
Vee Burke
Domestic Social Policy Division
Summary
The Senate Finance Committee version of H.R. 7, approved on July 16, 2002, does
not contain the “charitable choice” title of the House-passed H.R. 7; nor does it include
a compromise “faith-based” provision (from S. 1924 as introduced) that sought to assure
equal treatment for nongovernmental providers of almost all federally-funded social
services. Remaining in the Senate Finance bill are tax incentives to promote private
giving. The Charitable Choice Act of 2001 (Title II of the House bill) would apply its
rules, which are significantly different from those in four existing charitable choice laws,
to nine new program areas. The House bill has aroused dispute, especially over possible
“voucherization” of social services and employment discrimination. A large group of
religious, civil rights, civil liberties, and education organizations known as the Coalition
against Religious Discrimination opposes expansion of charitable choice. On January
8, 2002, a federal judge struck down as unconstitutional direct government funding for
a Wisconsin faith-based substance abuse treatment program (Faith Works) that she
found was indoctrinating participants in religion. Later, on July 26, 2002, the judge ruled
on a second issue in the Faith Works case. She held that a contract between the
Wisconsin Department of Corrections (DOC) and Faith Works for residential treatment
services to offenders did not violate the Establishment Clause because government funds
were received only when individual offenders chose to receive treatment there. For
background and selected legal issues on public aid and faith-based organizations, see
CRS Report RL31043. For a summary of the House-passed H.R. 7, see CRS Report
RS20948. This report will be updated for developments.
Charitable Choice Option in TANF Law. If a state chooses to administer and
provide TANF services or benefits through a contract with a nongovernmental entity or
to provide TANF recipients with certificates or vouchers redeemable with a private entity,
it must allow religious organizations to participate on the same basis as any other
nongovernmental provider without impairing the religious character of the organization
and without diminishing the religious freedom of TANF beneficiaries. The law (Section
104 of P.L. 104-193) imposes the following rules:
! Direct government aid may not be used for sectarian worship, instruction,
or proselytization (Subsection j);
Congressional Research Service ˜ The Library of Congress

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! Government is barred from discriminating against an organization that
applies to administer and provide services on the basis that it has a
religious character (c);
! The religious organization must implement the benefit/service program
in a manner “consistent with the Establishment Clause of the United
States Constitution” (c);1
! The religious grantee or contractor retains control over the definition,
development, practice, and expression of its religious beliefs (d)(1);
! Government is barred from requiring the organization to alter its form of
governance or to remove religious art and other symbols as a condition
of eligibility (d)(2);
! If a welfare recipient objects to the religious character of an organization
providing services, the state must provide an alternate and accessible
provider (e)(1);
! The religious organization retains freedom to hire on the basis of religion
(the organization’s exemption from Civil Rights Act rules about
employment practices is not affected by its administration of welfare
benefits) (f);
! Except as otherwise provided in law,2 a religious organization shall not
discriminate against a beneficiary on the basis of religion, a religious
belief, or refusal to actively participate in a religious practice (g); and
! Nothing in the charitable choice section of the law shall be construed to
preempt any provision of a state constitution or law that prohibits or
restricts expenditure of state funds in or by religious organizations (k).
Two other provisions are implicit: Religious contractors and grantees may use their
own funds for sectarian worship, instruction, and proselytization (an explicit rule against
using funds for sectarian purposes applies to public funds provided “directly” for welfare
benefits or services, but not to aid received in the form of vouchers). Government may
require religious grantees to be separately incorporated from their sponsoring institution.
P.L. 104-193 also applies charitable choice rules to other programs modified by its
Title I or Title II that permit contracts with organizations to provide services or permit use
of certificates, vouchers or other forms of disbursement to provide aid.3 However, other
1 The First Amendment says that “Congress shall make no law respecting an establishment of
religion, or prohibiting the free exercise thereof ... “It has long been interpreted to allow religious
organizations to participate in publicly funded social service programs. But in the past it has
generally been interpreted to forbid religious activities or proselytizing in the publicly funded
programs and to require religious providers to set up a corporation separate from their religious
sponsor and to remove religious symbols from the premises where services are provided (see
CRS Report RL30388, Charitable Choice: Background and Selected Legal Issues, by David
Ackerman).
2 Legal researchers say they have found no instance of a law providing “otherwise,” but this
phrase is regarded as a loophole by some; an effort to delete it failed during debate on H.R. 4678.
3 These programs are food stamps, Medicaid, Supplemental Security Income (SSI), and child
support enforcement. In 1996, food stamps and medicaid generally allowed states to use private
organizations, including charitable and religious organizations, in providing services like nursing
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provisions of law preclude use of private organizations to perform some basic
administrative activities. For example, eligibility determinations for food stamps and
Medicaid must be made by government personnel or by persons employed under federally
comparable “merit systems.”
Legislative Action in 2001. Introduced on March 28, 2001 as the Community
Solutions Act, H.R. 7 was referred to the House Committees on the Judiciary (which
acted on Title II on June 28) and on Ways and Means, which acted on Titles I (tax
incentives) and III (Individual Development Accounts) on July 11. House passage
occurred on July 19, without floor amendment. Six hearings (the first ever held on
charitable choice) were conducted in April-June by the House Judiciary subcommittee on
the Constitution, the House Government Reform Subcommittee on Criminal Justice, Drug
Policy, and Human Resources, the Senate Judiciary Committee, and the House Ways and
Means Subcommittees on Human Resources and on Select Revenue (jointly). For
testimony, see the committees’ Web sites. In January 2002, the General Accounting
Office issued a report (GAO-02-337) on use of existing charitable choice laws and the
performance of faith-based organizations in providing federally paid services.
Senate Legislation. The Charity Aid, Recovery, and Empowerment Act (CARE),
introduced in February, 2002, by a bipartisan group, was welcomed by the White House
as representing an agreement “to move a faith-based initiative” out of the Senate. CARE
omits the most disputed provisions of H.R. 7. Instead, in a Title called Equal Treatment
for Nongovernmental Providers, it provides that a nongovernmental organization
“involved” in the delivery of a federally funded social service shall not be required to
remove art, icons, scripture, or other symbols, or to alter its name, because the symbols
or name are religious, or to alter or remove provisions in its chartering documents that are
religious, or to alter or remove religious qualifications of membership on governing
boards. These provisions would apply to all social service programs administered by the
federal government (excepting educational assistance under major federal education acts)
or by a state or local government using federal financial assistance (not counting tax
credits, deductions, or exemptions). The bill also would expedite application for tax-
exempt status of an organization organized and operated for the primary purpose of
providing social services. It would establish tax incentives for charitable giving more
generous than those of the House bill, establish a new Individual Development Account
(IDA) program financed by business tax credits to financial institutions, and authorize
$150 million for FY2003 for technical assistance to small nonprofit community groups.
Before scheduled Finance Committee markup in mid-June, the equal treatment title
of CARE was deleted. Thereafter, the Finance Committee incorporated modified versions
of some of the CARE provisions into its substitute for H.R. 7, approving the bill on July
16 (S.Rept. 107-211). The committee bill includes tax incentives for private giving,
establishment of new tax credit-funded Individual Development Accounts, funding for
the Social Services Block grant, revenue measures, and other tax provisions. It does not
contain provisions to expand charitable choice rules.
3 (...continued)
home care and group living arrangements (Medicaid),outreach and training (food stamps).

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Origin of Charitable Choice. In June, 1995, the Senate Finance Committee
reported an amended version of the House-passed Personal Responsibility Act, H.R. 4,
which proposed to replace the program of Aid to Families with Dependent Children
(AFDC) with a block grant. The Finance Committee bill added two sentences concerning
religious organizations. They provided that religious organizations who participated in
the new state block grant program were to retain their independence from government and
that the organizations could not deny aid to needy families with children “on the basis of
religion, a religious belief, or refusal to participate in a religious practice.” This language
was adapted from another AFDC block grant bill (S. 842, sponsored by Senator Ashcroft).
In August, 1995, Senator Dole introduced The Work Opportunity Act, the Republican
leadership alternative to the House-passed H.R. 4. Responding to growing interest in
“privatization” of welfare services,4 the section on provision of aid by religious
organizations was enlarged to deal with “services provided by charitable, religious, or
private organizations.” Also, it stated affirmatively that states had an option to administer
and provide block grant services through contracts with religious organizations and by
means of certificates, vouchers or other forms of disbursement redeemable with them.
Before passage the Senate adopted a two-part amendment proposed by Senator Cohen.
The first added the requirement that programs be implemented consistent with the
Establishment Clause of the Constitution; the second removed a provision that would
have barred government from requiring a religious organization to form a separate
nonprofit corporation in order to be eligible to provide assistance. Senate-House conferees
added a stipulation that religious organizations would not lose their right to consider
religion in their hiring practices because of participating in welfare programs or receiving
funds from them. H.R. 4 was vetoed, but the charitable choice rules of the final 1996
welfare reform law are virtually identical to those of the conference report on H.R. 4.
State Use of Contractors under JOBS. Under AFDC, state agencies
determined eligibility and administered benefits. However, AFDC agencies were
authorized to carry out programs of education, work, and training (Job Opportunities and
Basic Skills [JOBS] training program) directly or through arrangements or under
contracts. JOBS law allowed contracts with administrative entities under the Job Training
Partnership Act (JTPA) and with other public agencies or private organizations, including
community-based organizations as defined in JTPA. The JTPA definition of community-
based organizations did not include religious organizations.
Use of Charitable Choice in TANF. TANF state plans are not required to
provide charitable choice information. However, in their 2000-2001 plans more than a
dozen jurisdictions mentioned plans to use religious or “faith-based” organizations,
usually along with other groups, in providing services (Arkansas, Delaware, District of
Columbia, Georgia, Indiana, Louisiana, Maryland, Mississippi, North Carolina, South
Carolina, South Dakota, Tennessee, and Washington). Some spoke of service
“partnerships” that included the “faith community” and community based/action agencies.
4 A major proposal to “privatize” welfare administration emerged in Texas; the state developed
a plan for administration by a private contractor of an integrated state eligibility system for
TANF, Medicaid and food stamps. However, in May, 1997, the Clinton Administration held that
law required eligibility for Medicaid and food stamps to be determined by a public official.

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Dr. Amy Sherman, Hudson Institute, recently concluded a survey about
implementation of charitable choice in 15 states (for 9 states, this was a followup survey).
She told a research conference of the Roundtable on Religion and Social Welfare Policy
in April, 2002, that the survey found 726 contracts totaling about $124 million. She said
more congregations are “getting involved” in contracting to provide services, that roughly
half of the faith-based organizations and congregations identified in the survey were “new
players,” and that some states showed a dramatic increase in contracting with faith-based
groups (for example, she said Michigan gave 129 contracts in the recent survey period,
compared with 9 in a survey ended in 1999). The survey found much more contracting
activity with faith-based groups under TANF than in the other programs covered by
charitable choice. She also said the new survey found a decline in the use of indirect
financial contracting by way of intermediary organizations.
An Urban Institute study of persons who left AFDC/TANF between 1995-1997
found that 72% did not seek help from nongovernmental sources. However, of those who
did, about one-third used a faith-based provider, about one-tenth used a secular provider;
and the rest relied on families and friends for help.
Welfare-to-Work TANF Grants. Congress in 1997 added special welfare–to-
work (WtW) formula and competitive grants to TANF for FY1998 and FY1999. As parts
of TANF, the new grants were subject to charitable choice rules. Further, regulations
issued by the Department of Labor (DoL) stated that “faith based organizations” were
eligible to bid for competitive grants. The Department of Labor awarded six competitive
grants (out of a total of 188) to faith-based groups. Most projects were to provide
employment services; some concentrated on persons with limited English proficiency.
Proposed Fatherhood Grants under TANF. In the 106th Congress, the House
twice voted (Fathers Count Act, H.R. 3073, and Child Support Distribution Amendments,
H.R. 4678) to establish grants under TANF to promote marriage and “successful
parenting,” but the Senate did not act on its companion bill (S. 3189). As parts of TANF,
the new grants would have been subject to charitable choice rules. During House debate,
amendments were defeated to disallow fatherhood grants to any “pervasively sectarian”
faith-based institution (Congressional Record, November 10, 1999. H11895) and to forbid
a fatherhood grantee from subjecting “a participant in a program assisted with the grant
to sectarian worship, instruction, or proselytization” (Congressional Record, September
7, 2000. H7316). Also defeated was a proposal to forbid religious organizations from
discriminating in their hiring on the basis of religion. The proposal for TANF fatherhood
grants (under the charitable choice rules of ;the 1996 law) has been reintroduced and
passed by the House as a provision of the TANF reauthorization bill (H.R. 4737). The
Senate Finance Committee version of H.R. 4737 also includes fatherhood grants, but it
does not make them subject to charitable choice rules.
Faith-Based Initiative of President George W. Bush. President Bush on
January 29, 2001, launched his faith-based initiative with an executive order that
established Offices of Faith-Based and Community Initiatives in the White House and in
five Cabinet departments (Education, Justice, HHS, Labor, and Housing and Urban
Development). The President advocated expansion of charitable choice, tax incentives
to promote charitable giving and some specific faith-based projects, including creation of
a Compassion Capital fund.

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On July 1, 2002, the Labor Department announced award of three sets of grants
designed “to link faith-based and grassroots community organizations” to the nation’s
One-Stop Career system under the Workforce Investment Act (WIA). $12 million was
awarded to 12 states to create partnerships with faith-based and community groups, $5
million to 9 non-profit intermediary organizations, and $500,000 to 20 small
organizations. Also, in June, HHS announced plans for the Compassion Capital Fund
Demonstration Program, for which Congress appropriated $30 million for FY2002. (For
information about the HHS Center for Faith-Based and Community Initiatives, see
[http//www.gov/faith]
Constitutional Challenges. In July and October 2000, two court suits were filed
challenging the constitutionality of TANF charitable choice programs. One suit charged
that a job training and placement program for TANF recipients funded by the Texas
Department of Human Services and operated by the Jobs Partnership of Washington
County was “permeated” by Protestant evangelical Christianity in violation of both the
state and federal constitution (American Jewish Congress and Texas Civil Rights Project
v. Bost, filed July 24, 2000, but dismissed in February 2001 as moot after Texas
discontinued the program). However, a remaining issue is yet to be decided – whether the
training program should be required to return the funds it received. The second suit,
which resulted in an order to cease direct funding, charged that a job placement and
support services program for drug addicts in Milwaukee, Wisconsin, violated the state and
federal constitutions by giving welfare-to-work funds directly to a “pervasively sectarian”
organization [Faith Works] and using the funds to indoctrinate clients in the Christian
faith (Freedom from Religion Foundation, Inc. vs. McCallum, filed October 12, 2000.)
A federal judge on January 8, 2002 ordered Wisconsin to cease this direct funding as
unconstitutional, but she said her ruling did not deal with constitutionality of the 1996
charitable choice law, which does not authorize direct funding of religious activities.
Later, on July 26, 2002, the judge ruled on a second issue in the Faith Works case –
constitutionality of a contract with the Wisconsin Department of Corrections (DOC)
under which Faith Works provides residential treatment services. The judge found that
Faith Works receives government funds only when individual offenders choose to receive
treatment there. She held that the contract did not violate the Establishment clause
because this private choice “breaks the circuit” between government and the faith-
intensive program. Plaintiffs have appealed the decision.
Conclusion. Advocates of charitable choice maintain that faith-based
organizations have special ability to help persons toward self-respect, healthy family
dynamics and independence. They maintain that existing charitable choice rules give
protection against religious discrimination both to religious organizations providing
welfare services and to beneficiaries of the services. However, many religious spokesmen
have expressed concerns that government grants could diminish their vitality and religious
commitment. Proposed expansions of charitable choice are likely to cause Congress to
examine again the balance between the religious freedom of service providers and that of
welfare recipients, along with the relationship of charitable choice to the Establishment
clause of the First Amendment. For a discussion of areas of agreement and disagreement
about charitable choice issues, see In Good Faith at [http://www.temple.edu/feinsteinctr].

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