Order Code IB93034
CRS Issue Brief for Congress
Received through the CRS Web
Welfare Reform:
An Issue Overview
Updated October 14, 2003
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
Medicaid and TANF
Child Care
Alien Eligibility for Welfare
Food Stamp Revisions
Social Services Block Grants
TANF Reauthorization Bills
H.R. 4 — Comparison of House-Passed and Senate Finance Versions
Senate Democratic Alternatives, S. 367 and S. 448
Bipartisan Bill
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
Waivers
Tax Credits for Hiring Welfare Recipients
Individual Development Accounts (IDEAS)
Unspent TANF Funds
Child Support Collections
TANF Bonus Funds
LEGISLATION
FOR ADDITIONAL READING

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Welfare Reform: An Issue Overview
SUMMARY
President Bush on October 1 signed into
recipients in a work activity (up from 50%).
law (P.L. 108-89) a bill to extend TANF,
The Senate Committee version of H.R. 4
mandatory child care, abstinence education,
lengthens the TANF week — to 34 hours for
and transitional Medicaid, on current terms,
single parents without a preschooler (24 hours
through March 31, 2004 (H.R. 3146). In the
for those with a child under 6) and 39 hours
absence of legislation, authority for these
for a two-parent family (55 hours if the family
programs was to have expired at midnight.
receives federally funded child care).
The new law also continues authority for 6
months for child welfare demonstrations and
Democratic bills pending in the commit-
a national random sample child welfare study
tee (S. 367 and S. 448) proposed to retain the
The Senate Finance Committee on October 3
current work week (30 hours for single adults
reported a comprehensive TANF bill. Enti-
without a child under six, 20 hours for those
tled Personal Responsibility and Individual
with preschoolers). A bipartisan bill (S. 1443)
Development for Everyone (PRIDE), the
proposed to increase work participation stan-
legislation was adopted as a substitute for the
dards, lengthen the TANF work week (to 32
House-passed TANF bill, H.R. 4, and bears
hours) for those without a child under 6), and
the same number. Both versions of H.R. 4
give partial credit for work above 16 hours. It
would revise and extend the above programs
also would have boosted mandatory child care
for 5 years, FY2004 through FY2008. Both
funding by $5.5 billion over 5 years.
would raise TANF work participation stan-
dards, appropriate new funds for marriage
The President’s FY2004 budget proposed
promotion and fatherhood programs, increase
to replace Section 8 housing vouchers for low-
weekly work hours (by different amounts),
income families with a block grant called
and allow partial credit for work hours below
Housing Assistance for Needy Families
their separate and different standards (the
(HANF), permit states to operate foster care
Finance measure also would give extra credit
programs with a block grant, and increase the
for hours above its standards and would in-
child tax credit from $600 per child to $1,000.
crease the list of countable work activities.
(See H.R. 4 Comparison — House-Passed and
HHS reported on September 23 that
Senate Finance Versions).
FY2002 work participation rates fell slightly,
to 33.4% for all families (compared with
The House version of H.R. 4 is almost
34.4% in FY2001). The statutory required
identical to the bill passed by the House last
rate was 50%, but in 21 jurisdictions caseload
year (H.R. 4737), which died at the end of the
reduction credits reduced effective rates to
107th Congress (the Senate Finance Commit-
zero. (In the absence of waivers, the FY2002
tee in 2002 approved a substitute for H.R.
all-family participation rate would have been
4737, but it never reached the floor.)
28.9%.) National TANF enrollment in March
was 2% below that of a year earlier, but in 27
The House-passed H.R. 4 raises the work
states caseloads topped those of last year. July
week for TANF recipients to 40 hours (but
food stamp enrollment, at 22 million persons,
gives partial credit for hours above 24) and
was the highest since June, 1997
requires that states eventually engage 70% of
Congressional Research Service
˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
The Senate Finance Committee on October 3 reported its comprehensive TANF bill
(S.Rept. 108-162).
Entitled Personal Responsibility and Individual Development for
Everyone (PRIDE), the legislation was adopted as a substitute for the House-passed TANF
bill, H.R. 4 and bears the same number. President Bush on October 1 signed into law a bill
to extend TANF, mandatory child care, abstinence education, and transitional Medicaid, on
current terms, through March 31, 2004 (P.L. 108-89). The Department of Health and Human
Services (HHS) on September 23 and September 30 announced award of $400 million in
high performance bonuses for performance years 2001 and 2002. All states except Illinois
and Colorado received bonuses. On September 22, HHS announced award of some $32
million in grants to provide social services from the “compassion capital” fund — $8 million
in 60 new grants and about $24 million in 21 continuing grants. On September 10, the
Senate Finance Committee approved a bill (S. 622) to give families the option to buy
Medicaid coverage for disabled children. HHS reported September 3 that the national TANF
caseload in March was 2 % smaller than a year before. However, caseloads topped year-
earlier levels in more than half the states. Food stamp rolls in July reached 22 million
persons, highest in 6 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 TANF rolls rose in more than half the states during FY2002 and in the first half
of FY2003. The September 2003 caseload held 2.039 million families, compared with 2.081
million one year earlier and with the record peak of 5.084 million in March 1994. (Numbers
exclude some families moved from TANF to state-funded programs.) The 2002 report of
the Council of Economic Advisers (CEA) says research has found that time limits alone
caused more than 10% of the 1993-1999 caseload decline.
The food stamp caseload, steadily rising for two years, reached 22 million persons in
July, the highest number in six years. 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 25.5 million
in FY2002, and the number of enrolled parents climbed from 9 million to 13.9 million. In
the State Children’s Health Insurance program (SCHIP) the number of enrolled children rose
from 0.9 million in FY1999 to 5.3 million in FY2002; SCHIP also served 0.3 million adults.
The Earned Income Tax Credit (EITC) is the largest form of income-tested federal cash aid
for families. In FY2002, it provided an estimated $27.8 billion in Treasury checks to low-
income working families, compared with TANF cash benefits of $13.1 billion. 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: cash and medical aid, 33% each; food aid, 18%, and housing, 15%. (Table 1). In
FY2001 spending on cash food dropped by $0.4 billion (to $50.9 billion) but food outlays
climbed by $1 billion (to $28.5 billion). For a breakdown of FY2000 overall spending on
behalf of all population groups ($437 billion), see CRS Report RL31228.
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Table 1. Estimated Income-Tested Outlays for Children and Their
Families from Selected Major Programs, FY2000 and FY2001
Federal Funds
State-local Funds
Recipientsa
($ in billions)
($ in billions)
(in millions)
FY2000
FY2001
FY2000
FY2001
FY2000
FY2001
Cash aid
$43.7
$44
$7.6
$6.9
—
—
(TANF)b
(6.9)
(6.7)
(7.6)
(6.9)
(5.8)c
(5.5)c
(EITC)d
(31.9)
(32.3)
0
0
(19.3)
(19.3)
(SSI) (children only)
(4.9)
(5.0)
N.A.
N.A.
(0.85)
(0.87)
Food benefits
26.9
27.5
1.0
—
—
—
(Food stamps)e
(14.6)
(15.0)
(1.0)
(1.0)
(13.4)c
(13.5)c
(Subsidized meals)f
(8.3)
(8.4)
N.A.
N.A.
(17.3)
(17.3)
(WIC)
(4.0)
(4.1)
N.A.
N.A.
(7.2)c
(7.3)c
Major medical aid
30.2
32.6
N.A.
N.A.
34.3
36.9
(Medicaid)g
(28.3)
(29.9)
(21.4)
(22.6)
(31.0)c
(32.3)c
(S-CHIP)h
(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)
0i
0i
(3.7)j
(4.0)j
(Rural housing
service programs)k
(4.0)
(4.1)
0
0
(0.1)l
(0.1)l
Note: Figures include 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.
a. 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.
b. Includes basic cash assistance, non-recurring short term aid, refundable tax credits, and contributions to
IDAs. Excludes outlays for work activities, child care, supportive services and other activities to promote
TANF goals.
c. 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.
d. 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.
e. Estimate. Includes Puerto Rico’s nutritional assistance program. Does not include employment/training
spending.
f. Estimate. Includes income-tested parts of school lunch, school breakfast, and child care food programs; also
summer food service program. Excludes cost of commodities.
g. Spending estimates are from the April 2001 and March 2002 baselines of CBO. The federal funding share
is estimated at 57% of total spending.
h. Spending estimates are based on state expenditure reports. Recipient counts represent the number of children
ever enrolled during the year.
i. Localities accept below-tax payments in lieu of property taxes on public housing projects.
j. Based on estimated percentage of households with children: FY2000, public housing, 45%; Section 8, 70%;
FY2001, public housing, 43%; Section 8, 51%.
k. Subsidized loans to low-income persons for homeownership (Section 502) and rental aid (Sections 515/521).
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l. 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
The decline is TANF rolls has slowed to a near halt (see Figure 1). National numbers
in March 2003 were only 41,000 below those of a year before and 56,000 below those of
September 2002. . Numbers fell short of 2002 levels in 24 states. including New York and
California, which have moved into state-funded safety net programs more than 40,000
families (New York) and 45,000 children (California) after they reached the 5-year limit on
federally funded ongoing aid. However, reported TANF enrollment exceeded 2002 levels
in 27 states, including D.C. Rising proportions of minorities are enrolled in TANF, and 37%
of TANF “families” have no adult recipient (child-only cases). The 2002 poverty rate
among children in female-headed families was 39.6%, compared with 39.3% in 2001 and
with 52.9% in 1994, when AFDC numbers peaked.
Figure 1. AFDC/TANF Families, September
Cases,1989-2002
6,000
5,000
4,000
3,000
2,000
Thousands
1,000
0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
The 1996 Welfare Law and Changes to Date
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. (TANF and
related programs have been extended through the first half of FY2003 by continuing
resolutions of Congress.) 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. TANF explicitly allows states to administer benefits and provide services through
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contracts/vouchers with charitable, religious, or private organizations, a provision widely
called Charitable Choice.
The TANF block grant imposes some 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 were required to work (including 90% of families with two parents); statutory
work 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/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
had to extend transitional medical assistance (TMA) for 12 months to those who lost TANF
eligibility because larger earnings lifted their income above July 1996 limits. H.R. 4 extends
TMA for 1 year; the Senate Finance Committee last year voted to extend it 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 Child Care and Development Block
Grant (CCDBG). The combined entitlement and discretionary funding streams are referred
to as the Child Care and Development Fund (CCDF). For fiscal year 2003 (as for 2002),
Congress appropriated $4.8 billion — $2.1 billion in discretionary funds, $2.7 billion in
mandatory funds. 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 FY2004 budget requests $4.8 billion for child care; the House
appropriations bill (H.R. 2660) provides this sum.
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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
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 5 years in this country.
Food Stamp Revisions
The 1996 law expanded states’ food stamp role, added 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 raised benefits for
those with high shelter costs, and the 2002 farm bill increased estimated food stamp spending
by $5.7/$5.9 billion over 10 years. Changes include expanded eligibility for aliens.
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.) The CARE Act (S.
476), approved by the Senate April 9, would increase SSBG funding for FY2003 and
FY2004 (to $1.975 and $2.8 billion, respectively). The House voted on July 16 to provide
this sum $1.7 billion for FY2004 (H.R. 2660).
TANF Reauthorization Bills
(See CRS Report RL31541 for a comparison of the two major bills of 2002)
H.R. 4 — Comparison of House-Passed
and Senate Finance
Versions
Work Rules. The House bill and Senator Grassley’s PRIDE measure both increase the
all-family minimum participation requirement from the current 50% level to 70% by
FY2008, end the separate higher rate for 2-parent families, and require TANF adults to
engage in work or self-sufficiency activities more hours weekly than current law. The House
bill requires an average of 40 hours per week (calculated on the basis of a 160 hour month,
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equivalent to 37 hours weekly) for all recipients except teen parents without a high school
diploma. The Senate Committee bill sets the work week at 34 hours for single adult parents
without a child under 6 (compared with 30 in current law) The House bill allows only a
prescribed list of 6 direct work activities to count toward the required 24 hour week (except
for 3 months within 24, when states could choose any TANF-promoting activity as
countable). The Senate Committee plan retains the existing law’s list of 12 countable
activities and — after 24 hours spent in one of these activities — permits five specified other
activities to be counted. See Table 1. The Senate measure also permits “parents as scholars”
programs for TANF recipients.
Both bills provide credits to reduce work participation rates. The House bill provides
a caseload reduction credit (smaller than the one in current law). The Finance bill establishes
a credit for employment of families who leave the rolls. Both cap their credits; the effect is
that the FY2008 statutory rate of 70% cannot be reduced below 50%.
Other Provisions. Both bills maintain funding at current levels for basic block grants,
supplemental grants, and the contingency fund (but ease access to the contingency fund).
Both bills retain current time limit rules. The House bill requires states to end cash aid for
a family for at least one month if the parent fails to engage in required activities for two
months. Both bills end the nonmarital birth bonus and the high performance bonus and
replace the latter with employment achievement bonuses. The House bill allows 50% of
TANF funds to be transferred to the CCDBG (up from 30% in current law). Both bills
establish marriage promotion matching grants ($100 million yearly) and additional research
and technical assistance funds earmarked for marriage promotion activities (both bills
provide $100 million in research funds); the Senate proposal specifies that $80 million is for
marriage promotion, and the House bill says the fund shall be used “primarily” for this
purpose.
The House bill creates new “superwaiver” authority for states to coordinate rules of
specified programs for low-income families. 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 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 would authorize five states to replace food stamps
with demonstrations of food assistance block grant projects. The Senate Committee bill
establishes a demonstration program for up to 10 states to improve integration of TANF,
Social Services Block Grant, and child care assistance funded under Section 418.
Senate Democratic Alternatives, S. 367 and S. 448
S. 367.
Sponsored by Senator Rockefeller, this bill increases TANF basic and
supplemental grants; maintains work participation standards at 50%, expands the list of
countable work activities; permits states to stop the federal time clock during months of work
and certain other activity, allows states, through September 30, 2008, to continue prewelfare
reform waivers scheduled to expire after September 30, 2002. Numerous other provisions.
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Table 2. Selected Work Provisions of House-Passed and
Senate Finance Committee Versions of H.R. 4
House-Passed H.R. 4
Senate Committee H.R. 4 Bill
Required
Rates increased yearly, from 50% in
Same as House bill
participation rates FY2004 to peak of 70% in FY2008
Credits against
Caseload reduction credit. Reduces
Employment credit. Reduces target
participation rate target rate by 1 percentage point for
rate by the percentage of families
each percentage cut in caseload from
who leave cash aid with a job for 2
a moving base year. By FY2007 base consecutive quarters. Caps credit
reaches FY2003.
so that effective target rates cannot
be cut below 50% by FY2008.
Work activities
6 direct work activities (unsubsidized 17 activities, 12 in current law plus
jobs, subsidized private jobs,
5 new ones. Gives credit — after 24
subsidized public jobs, on-the-job
hours weekly in current law
training, supervised work experience, activities — for postsecondary
and supervised community service).* education, adult literacy, substance
Gives credit — after 24 hours weekly abuse services, barrier-removal
in direct work — for any other state-
services, and grandfathered pre-
defined activity leading to self-
TANF waiver programs and
sufficiency. Note: for 3 months any
activities of any state. Also permits
state-chosen activity could be deemed time-limited participation in
to meet 24 hour direct work rule.
specified “rehabilitation” activities.
Work hours
40 hour weekly average — with 24
Single parent — 24 hours if have
“core” hours (direct work). Note:
child under 6 (34 hours otherwise).
retains current law special rule for
Two-parent family — 39 hours (55
teen parents without high school
if receive child care). Like House
diploma. (satisfactory school
bill, retains special rule for teen
attendance or 20 hours of education
parents without high school
directly related to work).
diploma.
Partial credit for
Pro-rated credit for hours above 24
Partial credit for hours below
work hours below but below 40. No credit for hours
standard and extra credit for hours
the standard
below 24.
above standard. For single parents,
no credit for hours below 20. For
two-parent families, no credit for
hours below 16 (below 40 if receive
federally funded child care).
Universal
Requires development of a self-
Very similar to House bill
engagement
sufficiency plan for each family with
a work-eligible person. Sets penalty
for failure to establish plans.
Child care
Appropriates $2.9 billion in
Same as House bill
entitlement funds for each of FY2004
through FY2008.
* Direct work activities in House bill exclude 3 activities that have priority status in current law — job search,
vocational educational training, and providing child care for community service participant.
S. 448. This comprehensive “Leave No Child Behind Act,” sponsored by Senator
Dodd, maintains basic grants at current levels through FY2009 and prohibits use of TANF
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funds to supplant other funds. The bill replaces the caseload reduction credit with an
employment credit; stops the federal time clock during a month spent in a priority activity;
provides partial work participation credit for part-time workers; permits a state, without
numerical limit, to continue federally funded benefits beyond 60 months for persons with
severe work barriers; requires states to give extended “earned-back” time for persons in
wage-paying jobs; greatly enlarges child care funding (appropriating $3.8 billion in
entitlement funds for FY2004 and rising amounts for the future (up to $24.2 billion for
FY2013); appropriates $200 million yearly for a poverty reduction bonus; authorizes $500
million over 5 years for matching “Gateways” grants, chiefly to inform working poor about
available help. Numerous other provisions include a rise in the federal minimum wage.
Bipartisan Bill
S. 1443. The “Building on Welfare Success Act,” sponsored by Democratic Senators
Carper, Nelson of Nebraska and GOP Senator Collins, increases work participation rates,
lengthens the TANF work week (to 32 hours) for persons without a child under 6 (requiring
that 24 hours — up from 20 — be in core activities), and provides partial work credit for
part-time work. It allows states to establish parents as scholars programs (and count
participants as engaged in work), doubles the length of countable vocational education,
increases child care funding by $5.5 billion over 5 years. It also provides special grants for
transitional jobs, marriage promotion, teen pregnancy prevention, responsible fatherhood,
transportation access, self-sufficiency, and others. The bill also allows states to extend
transitional medicaid for 24 months. Numerous other provisions.
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.)
Application of Minimum Wage Laws to “Workfare”
The Clinton Administration ruled that most TANF recipients assigned to “workfare,”
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).
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
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(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 would have to boost
cash benefits.
Work Participation Rates and Penalties
HHS reported on September 23, 2003, that work participation rates declined in FY2002
to 33.4% for all families and 49.4% for 2-parent families (compared with 34.3% and 51.1%,
respectively, in FY2001). All jurisdictions exceed Guam met their all-family adjusted
minimum standards, but 5 of the 30 jurisdictions with two-parent families in the TANF
program Failing the 2-person standard were Arkansas, Delaware, Guam, Missouri, and West
Virginia. Participation rates of the states that had continuing waivers were calculated under
work rules of the waivers. In the absence of waivers, national participation rates would have
been lower (28.9% for all families and 44.2% for two-parent families). The statutory
minimum work rates for FY2002 were 50% 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 FY2000. These credits reduced all-family participation standards to zero in 21
states. See [http://www.acf.dhhs.gov/programs/ofa/2002/im2003-2.htm] for state rates. Both
H.R. 4 and the PRIDE proposal of the Senate Finance Committee end the higher two-parent
work rate.
Child Care Funding
The level of child care funding has emerged as a key issue in TANF preauthorization.
House-passed TANF bills in 2002 and 2003 (H.R. 4737 and H.R. 4, respectively) proposed
to increase mandatory child care funding by $1 billion over 5 years and to raise the
discretionary authorization by $200 million annually over 5 years, reaching the level of $3.1
billion in FY2007. The Senate Finance TANF bill in 2002 proposed to increase mandatory
funding by $5.5 billion over 5 years. S. 261 would increase funds for the Child Care
Development and Block Grant (CCDBG) by $11.2 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.
(S. 5 would permit states to “privatize” determination of food stamp eligibility.) The stated
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.) (Final
regulations implementing charitable choice rules for the above programs were issued
September 30, 2003.) Using its new privatization authority, Wisconsin has contracted out
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the administration of TANF in some counties, and a 2002 survey by the General Accounting
Office found that in some locations in three other states (Texas, Arizona, and Florida) the
determination of TANF eligibility is performed by contractors (GAO-02-661).
To carry out the faith-based agenda proposed by President Bush in January 2001, the
House voted (H.R. 7) to extend charitable choice rules to nine new program areas and offer
tax incentives for charitable giving, but the Senate did not pass this legislation. Thereafter,
on December 12, 2002, the President issued an Executive Order (No. 13279) directing 6
Cabinet officers and the Administrator of AID, “to the extent permitted by law,” to adopt
charitable choice principles in social service programs. On September 30, 2003, the
Department of Housing and Urban Development (HUD) issued final regulations, in response
to the executive order, to extend charitable choice principles to eight housing programs. On
September 23, the White House announced that the Departments of Education, Labor, and
Justice, and the Veterans Administration were proposing new regulations or policy changes
to facilitate partnerships of faith-based groups with the federal government. Congress earlier
had acted on four other faith-based initiatives: a matching grant program to help children of
prisoners, prison pre-release pilot programs, a Compassion Capital fund to provide technical
aid and start-up costs for small groups, and competition for 21st Century Community
Learning Center grants. However, Congress took no action on two other faith-based
initiatives: responsible fatherhood grants and second-chance maternity homes. During 2002,
the Administration announced award of almost $25 million in Compassion Capital fund
grants to 21 “intermediary” organizations authorized to issue sub-grants and of $17.5 billion
in funds designed “to link faith-based and grassroots community organizations” to the
nation’s One-Stop Career system under the Workforce Investment Act (WIA). On June 26,
2003, HHS said it planned to award about $4.2 million in competitive matching grants (four
Federal dollars per non-federal dollar) to intermediary organizations for a compassion capital
demonstration program, and on April 4, 2003, the Labor Department said it would award
another $3.75 million to small faith-based and community organizations and intermediary
organizations for the purpose of expanding access to One-Stop centers. The FY2004 budget
requests $100 million for the Compassion Capital fund, $50 million to mentor children of
prisoners, and $10 million for maternity group homes. The House (H.R. 2660) has voted to
appropriate $50 million in FY2004 for the Compassion Capital Fund and $25 million for
mentoring children of prisoners, but the Senate Appropriations Committee bill provides
$34.8 million and $9.9 million, respectively. The CARE Act (S. 476), passed by the Senate
April 9, has no charitable choice provisions; but, in a title called Compassion Capital Fund,
it authorizes $150 million for FY2003 (and “such funds” as needed for FY2004-2007) in
grants to nongovernmental organizations for technical assistance and other support to
community-based organizations. H.R. 7 also provides compassion capital funding.
Welfare-to-Work (WtW) Grants
The basic TANF block grant earmarks no funds for any program component, benefits
or work programs. The 1997 Balanced Budget Act created 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. As of September 30, 2002, a net total of $2.2 billion
had been awarded. 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
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were within 12 months of reaching a time limit. In response to complaints that narrow
eligibility conditions were inhibiting enrollment, Congress liberalized terms in 1999. The
next year it gave states and competitive grantees another two years in which to spend WAW
funds. Eligible for WAW services since July 1, 2001, have been these 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. As of September 30, 2002,
about 19 percent of net WAW awards remained unspent ($293 million in formula grants and
$123 million in competitive grants) (For more background, 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. P.L. 105-178
cut the share of funds that could go to SSBG to 4.25%, effective in FY2001. However,
Congress since has continued it at 10% , year by year, most recently for FY2003 (P.L. 108-
7). The House voted in 2002 (H.R. 4737) and again in 2003 (H.R. 4) to allow 50% of TANF
funds to be transferred to CCDBG. However, on July 10, the House voted (FY2004
appropriation bill) to permit only 5.5% of TANF funds to be transferred to SSBG.
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; all but 10 jurisdictions
have adopted this Family Violence Option (FVO). 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 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.)
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, and for FY2001, $99.780
million (P.L. 106-346). In FY1999, the Federal Transit Administration (FTA) awarded
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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).
The Senate Finance Committee TANF measure (PRIDE) authorizes appropriation of $25
million for each of FYs 2004-2009 for grants for low-income car ownership.
Housing Vouchers for TANF Recipients
In response to President Clinton’s FY1999 request, Congress appropriated funds in
1998 (P.L. 105-276) for tenant-based housing assistance to help eligible TANF families
move to work ($283 million, sufficient for 50,000 Section 8 vouchers). This 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 WAW housing vouchers, but Congress denied
the requests, and subsequent budgets (including that for FY2003) have sought no new WAW
housing vouchers. The FY2004 budget proposes to gradually replace Section 8 housing
vouchers with Housing Assistance for Needy Families (HANF) block grants to states. For
a general discussion of housing for the poor, see CRS Report RL30486.
Waivers
Before passage of TANF, many states received waivers from AFDC rules to undertake
program changes; they were allowed to continue these waivers, even if inconsistent with
TANF rules, until their scheduled expiration. Four states still have waivers in operation
(Montana, Hawaii, Massachusetts, and Tennessee). S. 367 would allow states, through
September 30, 2008, to continue waivers scheduled to expire after September 30, 2002. S.
263 and S. 605 also would permit states to extend waivers. The former bill also would
require HHS approval of some new applications for waivers . H.R. 4, as passed by the House
(and S. 5) would establish a new program of superwaivers to permit coordination of two or
more programs. See “superwaivers” in the welfare reform electronic briefing book. Also,
see discussion under Other Provisions of House-Passed Bill, H.R. 4.
Tax Credits for Hiring Welfare Recipients
In 1997, Congress established a Welfare-to-Work (WAW)Tax Credit for hiring persons
who had received AFDC/TANF for 18 months. It also extended an existing credit called the
Work Opportunity (WOTC)for hiring certain persons, including those who had received
TANF for 9 months. P.L. 106-554 added “renewal communities” to the areas where a tax
credit is offered for hiring resident youth. Both credits are set to expire Dec. 30, 2003. The
FY2004 budget proposes to extend these credits, in combined, modified form, through
December 31, 2005. H. 2047 and S. 1180 would make the credits permanent, in combined
and modified form. See CRS Report RL30089.
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Individual Development Accounts (IDEAS)
The 1996 law permits states to use TANF funds to carry out a program of individual
development accounts (IDEAS) 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 IDEAS, including IDEAS
under the Assets for Independence (AFI) 5-year demonstration program created by Congress
in 1998. In the first 3 years of the AFI 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.
Appropriations for FY1999 and FY2000 were $10 million each; for FY2001 and
FY2002, $25 million each. In mid-June, 2002, the Office of Refugee Resettlement (ORR)
announced that it planned to award about $2.5 million in FY2002 ORR funds for projects
to establish and manage IDA accounts for refugees (a term including asylees, Cuban and
Haitian entrants, and certain Amerasians from Vietnam). Savings in these IDEAS could be
used not only for home ownership, business capitalization, and postsecondary education, but
also for purchase of an automobile or computer. S. 476 , approved by the Senate on April
9, would establish a new IDA program financed with tax credits to financial institutions.
H.R. 7, approved by the Ways and Means Committee September 9, revises some terms of
AFI IDEAS.
Unspent TANF Funds
As of September 30, 2002, HHS reports that states had an unspent/unobligated balance
in the U.S. Treasury of $5.8 billion in TANF funds. Unliquidated obligations totaled $3.1
billion, and unobligated balances, $2.7 billion. Nine states had no balances left to obligate:
California, Colorado, Connecticut, Illinois, Massachusetts, Rhode Island, South Carolina,
Vermont, and Virginia.
States may draw TANF funds from the Treasury only for
reimbursement of expenditures. The law sets no fiscal year deadline for spending TANF
dollars for “assistance,” defined by regulation as basic ongoing aid. The House-passed H.R.
4 would permit carryover of funds for any benefit or service (a provision approved also by
the Senate Finance Committee last year).
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 in 2001 (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. In 2003, both H.R. 4 and the Senate Finance Committee substitute for this bill
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have provisions to promote “responsible fatherhood” and distribute more child support
directly to families.
TANF Bonus Funds
On October 4, 2002, HHS announced award of $100 million in bonuses to 6 of the 7
jurisdictions that achieved reductions in the percentages of births to unwed women between
1997-98 and 1996-00. Bonuses went to Alabama, Colorado, D.C., Michigan,, Texas, and
the Virgin Islands. On September 23, 2003 and September 30, 2003, the Department
announced award of the fourth and fifth TANF high performance bonuses: $400 million,
based on state rankings (absolute and relative) on various measures. About $278 million
(70% of bonuses) was based on work measures (job entry and success in the workforce) and
$128 million was based on other measures — participation in food stamps, coverage by
Medicaid/SChip, child care subsidies, and percentage of children in 2-parent families. (H.R.
4 and PRIDE would eliminate nonwork measures from bonus award.) All states except
Colorado and Illinois received a bonus for 2001 or 2002 performance. For state rankings and
high performance bonuses, see [http://www.acf.dhhs.gov/programs/opre/hpb/index.htm].
LEGISLATION
Note: All Senate bills shown were referred to the Senate Finance Committee.
H.R. 4 (Pryce)
Reauthorizes TANF, on new terms, for 5 years. Almost identical to H.R. 4737, as
passed by House in 2002. See text above. Passed House February 13, 2003.
H.R. 4 (Grassley)
Reauthorizes TANF, on new terms, for 5 years. See text above. Introduced October 3.
H.R. 624 (Stark)
TANF. Credits work-barrier removal as work. Introduced February 5, 2003; referred
to Ways and Means Committee. See also S. 316 (Corzine)
H.R. 2047 (Houghton)
Employer tax credits. Combines welfare-to-work and work opportunity credits and
makes them permanent. Introduced May 9. Senate companion: S. 1180.
H.R. 2770 (Pallone)
TANF and Indians. Provides special funding for tribal programs. Introduced July 17;
referred to several committees.
S. 5 (Talent)
TANF preauthorization. Very similar to House-passed H.R. 4, but increases marriage
funds and contains new anti-fraud and food stamp provisions. Introduced February 14.
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S. 261 (Bingaman)
TANF. Children First Act. Increases CCDBG funding by $11.2 billion over 5 years;
excludes months of TANF-funded child care benefits from federal 5-year assistance limit.
Other provisions. Introduced January 30, 2003.
S. 262 (Bingaman)
TANF. Removes limit on percentage of recipients who may be credited with work by
virtue of educational activity. Stops federal time clock for months when ex-recipients who
work or study receive child care or transportation aid. Introduced January 30, 2003.
S. 263 (Bingaman)
TANF and waivers. Allows states to continue (through September 30, 2007) waivers
scheduled to expire between Oct. 1, 2002 and September 30, 2007. Requires approval of
applications for waivers similar to those continued above. Introduced January 30.
S. 327 (Levin)
TANF. Allows vocational educational training to be counted as a TANF work activity
for 24 months. Introduced February 6, 2003.
S. 367 (Rockefeller)
TANF preauthorization. See text above. Introduced February 12, 2003.
S. 448 (Dodd)
TANF preauthorization. See text above. Introduced February 26.
S. 574 (Corzine)
TANF. Stops the federal time clock for months of assistance received during periods
of high unemployment. Introduced March 7.
S. 605 (Smith)
TANF waivers. Gives states the option to continue current pre-TANF waivers (and
those expiring after January 1, 2002) through September 2008. Introduced March 12.
S. 657 (Bayh)
TANF. Provides fatherhood grants within TANF. Introduced March 19.
S. 669 (Snowe)
Child support. Provides more support for ex-welfare families. Introduced March 19.
S. 770 (Feingold)
TANF. Sets due process rules and new reporting requirements. Introduced April 2
S. 786 (Bingaman)
TANF. Provides grants for transitional jobs programs. Introduced April 3.
S. 813 (Corzine)
TANF. Requires states to promote financial education and treat it as a countable work
activity. Introduced April 8.
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S. 1443 (Carper, Nelson of Nebraska, and Collins)
TANF preauthorization. Comprehensive bill. See text. Introduced July 22.
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 Preauthorization, 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 RL31541. TANF Preauthorization: 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 97-509. Welfare Reform: Education as a Work Activity, 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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