Order Code IB93034
Issue Brief for Congress
Received through the CRS Web
Welfare Reform: An Issue Overview
Updated September 27, 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
Child Care Funding
“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
Congress on September 26 voted to
The Senate Finance measure was ap-
extend the program of Temporary Assistance
proved by a vote of 13-8 on June 26 (three
for Needy Families (TANF) through Decem-
Republicans voted yes and Senate Majority
ber 31, 2002. This provision, which contin-
Leader Daschle, who wanted more child care
ues TANF at FY2002 spending levels, is
funding, voted no). It increases supplemental
included in H.J.Res. 111, a continuing resolu-
grants by $122 million yearly (for a total of
tion to finance other government operations
$441 million). Like the House bill, it raises
only through October 4. The resolution
work participation standards to 70%. It ex-
passed the House on Thursday night, and the
pands the list of countable work activities and
Senate, by unanimous consent, “deemed” the
continues a 30-hour work week for most adult
measure cleared for the President upon deliv-
recipients. It allows states to give federally
ery from the House. The 3-month TANF
funded TANF to legal immigrants, regardless
extension defers action on a longer term
of date of entry; extends transitional Medicaid
reauthorization. Pending are two bills to
and abstinence-only education for 5 years; and
continue TANF for 5 years on different terms:
also provides funding for abstinence first. It
H.R. 4737, as passed by the House in May,
increases mandatory child care spending by
and H.R. 4737, as approved by the Senate
$5.5 billion over 5 years. It creates marriage
Finance Committee in June.
promotion grants and several other specialized
grants. For a side-by-side comparison of the
The House bill embodies concepts pro-
House reauthorization bill with the Senate
posed by President Bush in February, includ-
Finance Committee bill, see CRS Report
ing a 40 hour work week for adults. The
RL31541.
Senate Committee version of H.R. 4737
maintains the current 30 hour week, but en-
HHS reports that TANF work participa-
larges the list of countable activities. Presi-
tion rates declined in FY2000, to 34% for all
dent Bush has charged that the Senate bill is a
families. After adjustment for caseload reduc-
“retreat from success,” with many work loop-
tion, 31 states had a required all-family work
holes. The House passed its bill on May 17 by
rate of zero. However, only 8 of the 34 states
a largely partisan vote, 229-197 (14 Demo-
with 2-parent families in their TANF program
crats voted yes and four Republicans voted
met the participation standard for them, even
no). It raises work participation rates to 70%
after caseload reduction credits. Latest TANF
by FY2007 and increases work hours. In
caseload data show that in December, enroll-
response to arguments that stiffer work rules
ment in 30 jurisdictions topped year-earlier
would raise child care needs, the leadership
levels. In the spring food stamp enrollment
increased child care funding–by $1 billion
climbed to the highest level in almost 4 years.
each over 5 years for mandatory funding and
discretionary funding. The bill extends
Enacted 6 years ago, as a replacement
abstinence-only education and transitional
for Aid to Families with Dependent Children
Medicaid and creates marriage promotion
(AFDC), TANF provides fixed grants ($16.5
grants.
billion yearly) for time-limited and work-
conditioned aid.
Congressional Research Service ˜ The Library of Congress

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09-27-02
MOST RECENT DEVELOPMENTS
Congress on September 26 voted to extend the program of Temporary Assistance for
Needy Families (TANF) through December 31, 2002. This provision, which continues
TANF at FY2002 spending levels, is included in H.J.Res. 111, a continuing resolution to
finance other government operations only through October 4. The 3-month TANF extension
defers action on a longer term reauthorization. Pending are two bills to revise and continue
TANF for 5 years, but on very different terms: H.R. 4737, as passed by the House in May,
and H.R. 4737, as approved by the Senate Finance Committee in June. Both versions of
H.R. 4737 would raise required work participation rates, but the House bill also would
narrow the list of priority work activities and increase weekly work hours. Also, the two
bills differ sharply on the level of child care funding. On July 31 President Bush charged
that the Senate bill was “a retreat from success,” with many work loopholes. Earlier a
Cabinet officer indicated that the White House would prefer a one-year extension of current
law to passage of a 5-year “bad” bill; but, if Congress fails to reach agreement on how to
amend TANF, states generally favor a longer extension period of current law (at least 3
years).
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 19.3 million persons in May and June, 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 $154.3 billion (revised figure). Of the total, $51.3 million (33%) was for cash aid,
and $103 million was for noncash aid (Table 1). The FY2001 figure for cash aid is not yet
available, but the amount for noncash aid was $107.6 million, up 4.5% from FY2000. For
a breakdown of FY2000 overall spending on behalf of all population groups ($437 billion),
see CRS Report RL31228.
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Table 1. Estimated Income-Tested Outlays for Children and Their
Families from Selected Major Programs, FY2000 and FY2001a
Federal Funds
State-local Funds
Recipientsb
($ in billions)
($ in billions)
(in millions)
FY2000
FY2001
FY2000
FY2001
FY2000
FY2001
Cash aid
$43.7
N.A
$7.6
N.A.
––
––
(TANF)c
(6.9)
N.A.
(7.6)d
N.A.
(5.8)e
(5.5)e
(EITC)f
(31.9)
(32.3)
0
0
(19.3)
(19.3)
(SSI) (children only)
(4.9)
(5.0)
N.A.
N.A.
(.85)
(.87)
Food benefits
26.9
27.5
1.0
––
––-
––
(Food stamps)g
(14.6)
(15.0)
(1.0)
(1.0)
(13.4)e
(13.5)e
(Subsidized meals)h
(8.3)
(8.4)
N.A.
N.A.
(17.3)
(17.3)
(WIC)
(4.0)
(4.1)
N.A.
N.A.
(7.2)e
(7.3)e
Major medical aid
30.2
32.6
N.A.
N.A.
34.3
36.9
(Medicaid)i
(28.3)
(29.9)
(21.4)
(22.6)
(31.0)e
(32.3)e
(S-CHIP)j
(1.9)
(2.7)
N.A.
N.A.
(3.3)
(4.6)
Major housing aid
23.5
23.9
0
0
3.8
4.1
(Public housing and
Section 8)
(19.5)
(19.8)
0k
0k
(3.7)l
(4.0)l
(Rural housing service
programs)m
(4.0)
(4.1)
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 September,
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, 8.8 million in FY2000, 8.8 million in FY2001; WIC, 5.4
million in FY2000, 5.5 million in FY2001; TANF, 4.3 million in FY2000, 4.0 million in FY2001; Medicaid,
21.9 million and 22.6 million, respectively.
f. Credit earned in calendar year preceding the fiscal year (example, CY1999 for FY2000). Direct payments,
$27.6 billion for FY2000; $ 27.8 billion for FY2001. Reduced tax liability, $4.3 billion and $4.5 billion,
respectively. FY2001 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 April 2001 and March 2002 baselines of CBO. The federal funding share
is 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.
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l. Based on estimated percentage of households with children: FY2000, public housing, 45%; Section 8, 70%;
FY2001, public housing, 43%; Section 8, 51%.
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. Assistance was provided
to 87,423 families in FY2000 and 86,590 in FY2001. The Rural Housing Service does not collect data on
children in households.
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 2001
poverty rate among children in female-headed families (no spouse present) was 39.3%,
compared with 39.8% in 2000, 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 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. The Senate
Finance version of H.R. 4737 extends transitional Medicaid for 5 years.
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. For current legislative proposals, see Child Care Funding.
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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. 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 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 RL31541 for a side-by-side comparison of the House-passed and
Senate Finance Committee versions of H.R. 4737 and CRS Report RL31393 for a brief
comparison of all bills introduced.)
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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
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 for at least one
month if the parent fails to engage in required activities for 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.
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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. The measure augments basic
TANF grants of $16.5 billion by appropriating $441 million yearly for supplemental grants
(on a new basis) and folding these funds into the basic grant structure. The result is to
increase funding for 17 states (7 of which do not receive current supplemental grants) that
have below-average per capita income. Another 7 states continue to receive current level
supplemental grants.
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 and transitional jobs, 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 (SCHIP) 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 $50 million yearly for abstinence-only education.)
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.
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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). 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 Alaska, California, New York (Suffolk County), and Wisconsin
(Community Service program), are TANF maximum benefits for a 3-person family (as of
Jan. 2002) 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.)
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. Both versions of H.R. 4737 would end the higher participation rate for
two-parent families. For FY2000 state rates, see the HHS web site at
[http://www.acf.dhhs.gov/programs/opre/particip/index.htm#participation].
Child Care Funding
The level of child care funding has emerged as a key issue in TANF reauthorization.
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.
“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
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“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 and give tax incentives for charitable giving. Title III of S.
1924, introduced with the support of President Bush, had provisions seeking to assure equal
treatment for nongovernmental providers of virtually all social services, but this title was
removed before the Finance Committee marked up the bill in mid-June and is missing from
the bill ultimately approved by the Committee (its version of H.R. 7). Congress appropriated
$30 million for FY2002 to establish a Compassion Capital Fund (CCF), and on June 7, HHS
announced terms of CCF grants. On July 1 the Labor Department announced award of three
sets of grants totaling $17.5 billion designed “to link faith-based and grassroots community
organizations” to the nation’s One-Stop Career system under the Workforce Investment Act
(WIA).
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.
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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.
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);
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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
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.
According to HHS, 31 states allow TANF recipients to establish IDAs, including IDAs under
the Assets for Independence (AIA) 5-year demonstration program created by Congress in
1998. In the first three years of the AIA program, awards totaling $37.5 million were made
to 125 competitively-funded grantees to operate IDA programs for TANF-eligible and certain
other low-income persons. In addition, under terms of the law, two states (Indiana and
Pennsylvania) with pre-existing programs were awarded just over $5 million for FY1999-
2001. In mid-April, 2002, the Office of Community Services requested applications for
FY2002 awards. Deadline for applications was August 5. Appropriations for FY1999 and
FY2000 were $10 million each; for FY2001 and FY 2002, $25 million each.
In passing H.R. 7 on July 19, 2001, 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, S. 1924
(the CARE Act, as introduced), and the Senate Finance Committee version of H.R. 7 renew
the proposal to create tax credits for financial institutions with individual development
accounts.
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Unspent TANF Funds
As of September 30, 2000 (latest available data), 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. States with balances on October 1, 2002 may
use them for continued assistance.
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. For state rankings and high performance bonuses, see
[http://www.acf.dhhs.gov/programs/opre/hpb/index.htm]. 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
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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).
H.R. 2018 (Hart)
TANF. Allows TANF funds to be used for infant safe haven program. Introduced May
25, 2001 and referred to two committees.
H.R. 2166 (Stark)
TANF. Child Poverty Reduction Act. 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. 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. Rejected by House vote as substitute for H.R. 4737.
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, provides
bonus to states with an increase in the self-sufficiency score of leaver families. Introduced
January 29, 2002, referred to Ways and Means Committee.
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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 caseload reduction credit with employment credit. Introduced March
20, 2002. Companion bill: S. 2058. Concept included in Finance version of HR. 4737.
H.R. 4090 (Herger)
TANF reauthorization. Introduced April 9, 2002, referred to Ways and Means
Committee. 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).
H.R. 5344 (Stark)
TANF. Treats efforts to overcome work barriers as a countable work activity.
Introduced September 9, referred to Ways and Means.
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: fatherhood projects, child support distribution, EITC expansion. 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. Introduced May 23, 2001;
referred to Finance Committee. Almost identical bill, H.R. 1990, introduced May 24;
referred to six committees.
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S. 1249 (Wellstone)
TANF. Entitles victims of domestic/sexual violence to emergency leave for various
kinds of help. 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.)
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 Finance version of H.R. 4737.
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.
Incorporated in Finance version of H.R. 4737.
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.
Incorporated in Finance version of H.R. 4737.
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.
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S. 2876 (Murray)
TANF. Suspends federal time limit during months in school, exempts kinship care
families from time limits and work rules. Other provisions. Introduced August 1.
S. 2878 (Feingold)
TANF. Establishes sanction and due process rules. Introduced August 1.
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 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 97-86. Indian Tribes and Welfare Reform, by Vee Burke.
CRS Report RL31393. TANF: Brief Comparison of Reauthorization Bills, by Vee Burke
CRS Report RL31541. TANF Reauthorization: Side-by-Side Comparison of Current Law
and Two Versions of H.R. 4737, by Vee Burke
CRS Report RS21070. TANF Sanctions–Brief Summary, by Vee Burke and Gene Falk.
CRS Report RS21069. TANF Time Limits: Basic Facts and Implications, by Gene Falk, Vee
Burke, and Shannon Harper.
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 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 96-882. The Wisconsin Works Welfare Program: Concept and Experience, by
Vee Burke.
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