Order Code IB93034
CRS Issue Brief for Congress
Received through the CRS Web
Welfare Reform:
An Issue Overview
Updated March 11, 2004
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
FY2005 Budget Proposals
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 — House-Passed Bill and Senate Finance Version
Work Rules
Other Provisions
Other Pending Bills: S. 5, S. 367, S. 448, and S. 1443
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 (IDAs)
Unspent TANF Funds
Child Support Collections
TANF Bonus Funds
LEGISLATION
FOR ADDITIONAL READING

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Welfare Reform: An Issue Overview
SUMMARY
On March 4, the chairman of the House
raise TANF work participation standards (but,
Ways and Means Human Resources Subcom-
in different ways, permit reduction of those
mittee introduced a temporary TANF exten-
standards), appropriate funds for fatherhood
sion bill (H.R. 3897) that would appropriate
grants as well as marriage promotion, increase
$100 million for marriage promotion activi-
weekly work hours (by different amounts), and
ties for the last half of FY2004. An earlier
allow partial credit for work hours below their
bill of the chairman (H.R. 3848) would mod-
separate and different standards (the Finance
ify the caseload reduction credit to decrease
measure also gives extra credit for hours above
its size. Both bills would extend TANF plus
its standards and increases the list of countable
related programs for another quarter, through
work activities). The House-passed bill raises
June 30, 2004. They propose the 6th tempo-
the work week for TANF recipients to 40 hours
rary extension of the program since the end
(but gives partial credit for hours above 24) and
of FY2002. Previous extensions made no
requires that states eventually engage 70% of
changes from FY2002 funding levels or
recipients in a work activity (up from 50%).
rules. Earmarked marriage promotion grants
The Senate Committee version of H.R. 4
and revision of the caseload reduction credit
lengthens the TANF week — to 34 hours for
are features of the 5-year TANF
single parents without a preschooler (24 hours
reauthorization bill (H.R. 4), passed by the
for those with a child under 6) and 39 hours for
House in February 2003. The Senate Finance
a two-parent family (55 hours if the family
Committee in September approved a substi-
receives federally funded child care). See CRS
tute version of H.R. 4, which now awaits
Report RL32210 for a side-by-side comparison
Senate debate. The Senate bill also provides
of the two bills with current law.
marriage promotion grants, but it repeals the
caseload reduction credit effective October 1,
On March 9 an amendment to H.R. 4
2005, replacing it with an employment credit.
(S.Amdt. 2711) was filed to reduce penalties
against states for failing work participation
The President’s FY2005 budget pro-
rates. During Senate debate, other amendments
poses to increase funding for marriage pro-
are likely regarding work rules, child care
motion beyond the amount provided in the
funding and a state option to give Medicaid to
House-passed version of H.R. 4. The budget
legal immigrants. S. 5, the Senate Republican
requests $240 annually (FY2005-FY2009)
leadership bill, is very similar to the House-
for marriage promotion activities, about $40
passed bill. Two pending Democratic bills (S.
million above the sum in the House bill. It
367 and S. 448) propose to retain the current
also proposes to double overall spending for
work week. A bipartisan bill (S. 1443) would
abstinence education and to increase funding
boost mandatory child care funding by $5.5
for projects in the faith-based initiative.
billion over 5 years and increase TANF work
hours.
The two versions of H.R. 4 revise and
fund the TANF block grant for FY2004-
FY2002 TANF work participation rates
FY2008. The bills also reauthorize and fund
fell slightly, to 33.4% for all families. June
related programs of mandatory child care,
TANF enrollment was slightly bigger than a
transitional medicaid, and state grants for
year before. December food stamp enrollment
abstinence education for these years. Both
was up 13% from a year earlier.
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
On March 4, the chairman of the House Ways and Means Human Resources
Subcommittee introduced a second bill to extend TANF for another quarter, through June
30, 2004 (H.R. 3897). The new bill would appropriate $100 million for marriage promotion
activities for the last half of FY2004. The chairman’s earlier bill (H.R. 3848) would decrease
the caseload reduction credit and, thus, increase effective work participation standards.
Earmarked marriage promotion grants and revision of the caseload reduction credit are
features of the 5-year TANF reauthorization bill (H.R. 4), passed by the House in February
2003. On March 3, President Bush announced that competitive grant awards to faith-based
organizations from two major federal departments increased by $144 million, or 15%, in
FY2003. The President’s FY2005 budget assumes reauthorization of TANF through
FY2009. The budget would continue basic and supplemental grants at current levels, but
create new grants for marriage promotion ($240 million annually, about $40 million above
the amount in the House-passed TANF bill). P.L. 108-199, signed on January 23, restores
the 10% cap on transfer of TANF funds to the Social Services Block Grant (SSBG) (earlier
law set a 4.25% limit for FY2004), appropriates $1.7 billion for SSBG and $2.1 billion for
the Child Care and Development Block Grant, and rescinds welfare-to-work (WtW) grant
amounts that were unspent on the date of enactment.
BACKGROUND AND ANALYSIS
Major Programs for Low-Income Families
AFDC/TANF national enrollment, which has fallen more than 50% since 1994, rose
slightly above the year-earlier level in June. The caseload held 2.032.2 million families,
compared with 2.025.3 million one year earlier and with the record peak of 5.084 million in
March 1994. (If families in separate state-funded programs are included, the June total
would be 2,172 million, up 9,000 from the same month of 2002 ) According to the 2002
report of the Council of Economic Advisers (CEA), research has found that time limits alone
caused more than 10% of the 1993-1999 caseload decline. An HHS-funded study concluded
that roughly half of the decline in the caseload during the 1990s was due to decreases in entry
(National Bureau of Economic Research, Working Paper 9472, January 2003).
The food stamp caseload, steadily rising for two years, reached 23.3 million persons in
December, the highest number since February 1997, and up 13.4% from December 2003.
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. FY2002 estimated spending for
low-income children and their families by selected major income-tested programs reached
$169.4 billion, up 10% from the FY2001 amount (Table 1). Spending rose 24% for medical
benefits, 9% for food aid, and 10% for housing subsidies, but dropped 5% for cash help.
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Table 1. Estimated Income-Tested Outlays for Children and Their
Families from Selected Major Programs, FY2001 and FY2002
Federal Funds
State-local Funds
Recipientsa
($ in billions)
($ in billions)
(in millions)
FY2001 FY2002 FY2001 FY2002 FY2001 FY2002
Cash aid
$46.1
$44.7
$6.9
$6.6
—— —— —
(TANF)b
(6.7)
(6.5)
(6.9)
(6.6)
(5.4)c
(5.1)c
(EITC — refunds)d
(29.4)
(27.8)
0
0
(16.8)
n.a.
(Child tax credit — refunds)d
(5.0)
(5.1)
0
0
(18.6)
n.a.
(SSI) (children only)
(5.0)
(5.3)
n.a.
n.a.
(.88)
(.92)
Food benefits
28
30.3
1.0
1.2
—— —— —
(Food stamps)e
(15.0)
(16.3)
(1.0)
(1.2)
(13.5)c
(14.9)c
(Subsidized meals)f
(8.6)
(9.6)
n.a.
n.a.
(17.3)
(18.0)
(WIC)
(4.1)
(4.4)
n.a.
n.a.
(7.3)c
(7.5)c
Major medical aid
32.6
40.5
23.8
29.3
37.1
38.4
(Medicaid)g
(29.9)
(36.7)
(22.6)
(27.7)
(32.3)c
(38.4)c
(SCHIP)h
(2.7)
(3.8)
(1.2)
(1.6)
(4.8)c
(5.6)c
Major housing aid
15.3
16.8
0
0
2.21
2.21
(Public housing)
(3.3)
(3.7)
0i
0i
(0.54)j
(0.538)j
(Section 8)
(7.9)
(8.8)
0
0
(1.57)j
1.58)j
(Rural housing service programs)k
(4.1)
(4.3)
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 and child tax credit, yearly total number of tax filers; 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: TANF, 4.1 million in FY2001, 3.8 million in FY2002; food stamps, 8.8
million in FY2001, 9.7 million in FY2002; WIC, 5.5 million in FY2001, 5.6 million in FY2002;
Medicaid, 22.6 million and 25.5 million, respectively; SCHIP, 4.6 million and 5.2 million, respectively.
d. Credit earned in calendar year preceding the fiscal year (example, CY2001 for FY2002). Excludes tax
“expenditures” (credits used to offset tax liability). FY2002 spending and recipient data are estimates.
e. Estimate. Includes Puerto Rico’s nutritional assistance program. Does not include employment/training
spending.
f. Estimate. Includes commodity assistance and income-tested parts of school lunch, school breakfast, and child
care food programs; also includes summer food service program. Excludes cost of commodities.
g. Spending estimates are from the March 2002 and March 2003 baselines of CBO. The federal funding share
is estimated at 57% of total spending.
h. Spending estimates are based on state expenditure reports.
i. Localities accept below-tax payments in lieu of property taxes on public housing projects.
j. Estimate, based on FY2000 percentages of subsidized households that included children: public housing,
44.5%; Section 8 voucher program, 61%; Section 8 project-based program, 32.6%.
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 86,590 families in FY2001 and 94,600 in FY2002. The Rural Housing Service does not collect data
on children in households.
FY2005 Budget Proposals
For marriage promotion — $240 million annually proposed for FY2005-FY2009 up
about $40 million from the sum in the House-passed H.R. 4. For abstinence education —
$276 million for FY2005, compared with $137 million for FY2004. The breakdown
(FY2004 figure in parentheses): community-based abstinence education, $186 million ($74
million); grants to states, $50 million ($50 million); national media campaign, $10 million
(zero), and demonstrations and research, $26 million ($13 million). For four faith-based
initiative projects — $165 million for FY2005, compared with $103 million for FY2004.
The breakdown: compassion capital fund, $100 million ($48 million): mentoring children
of prisoners, $50 million ($50 million) maternity group homes $10 million (zero); and 5-city
pilot to increase participation of faith-based and community organizations in community
development programs, $5 million (zero). For FY2004, P.L. 108-199 appropriated $5
million for another element of the faith-based initiative, an offender re-entry program
authorized by P.L. 107-273. Further, the FY2005 budget said that the Departments of
Labor, Housing and Urban Development (HUD), and Justice would be involved in a four-
year $300 million Prisoner Re-Entry Initiative.
TANF Trends and Data
Figure 1. TANF/AFDC Families, June Cases, 1989-2003
6,000.0
5,000.0
4,000.0
3,000.0
thousands
2,000.0
1,000.0
0.0
1989
1991
1993
1995
1997
1999
2001
2003
The decline in TANF rolls has slowed to a near halt (see Figure 1). National numbers
reported by HHS for June 2003 (2.032 million families) were 7,000 below those of March
2003, but 7,000 above those of June, 2002. States in which reported caseloads fell short of
year-earlier levels included New York and California, which have moved into state-funded
safety net programs more than 48,000 families (NY) and more than 65,000 children
(California) after they reached the 5-year limit on federally funded ongoing cash aid. Official
TANF numbers exclude families in separate state programs. Inclusion of families in separate
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state caseloads raises the overall June 2003 total to 2.172 million. See Caseload Trends in
the CRS welfare reform briefing book.
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 these programs into a block ($16.5 billion annually through FY2002 and
entitles each state to a fixed yearly 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 FY2004 by a series of laws) 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 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 (50% of all families, including 90% of two-parent families — but these
standards are lowered for caseload declines from FY1995 levels). States must 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). For single parent families, the law sets a TANF work week of 30 hours
(20 hours if they have a child under 6, as most TANF single parents do). 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
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eligibility because larger earnings lifted their income above July 1996 limits. The House -
passed H.R. 4 extends TMA for 1 year; the Senate Finance H.R. 4 substitute, 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 FY2003 (as for FY2002), 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; also, they use TANF block grants for
“direct” child care. FY2002 TANF-funded child care (federal and state dollars) totaled $2.3
billion, exclusive of $1 billion transferred to CCDF and state spending that also could be
counted toward sums needed to qualify for matching child care entitlement funds. Congress
appropriated $2.1 billion in discretionary funds for FY2004. Mandatory funding for the latter
half of FY2004 awaits action on TANF reauthorization. See CRS Report RL31817.
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) granted food stamp eligibility to noncitizens after
their first 5 years in this country and to alien children regardless of their date of entry or
length of U.S. residence.
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.
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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, proposed to increase SSBG funding for FY2003 and
FY2004 (to $1.975 and $2.8 billion, respectively). However, in the consolidated
appropriations act (P.L. 108-199) Congress appropriated $1.7 billion for FY2004.
TANF Reauthorization Bills
(See CRS Report RL32210 for a side-by-side comparison of the two major bills of 2003.)
H.R. 4 — House-Passed Bill and Senate Finance Version
Work Rules. The House bill, passed on February 13, 2003, and the Senate Finance
Committee version of H.R. 4 (PRIDE), ordered reported on October 3, 2003, both increase
the all-family minimum participation requirement from the current 50% level to 70% by
FY2008 (but, in different ways, permit reduction from the standard), 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, 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, up 4
hours from current law. The House bill allows only a list of 6 direct work activities to count
toward the required 24 hour week (except for 3 months within 24, when states could count
any TANF-promoting activity). 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, including postsecondary education, to be counted. See Table
1. The Senate bill also permits “parents as scholars” programs for some TANF recipients,
whose participation would count as work. 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 creates a credit for employment of families who leave the
rolls; this credit is capped so that effective work targets cannot be reduced below 10% in
FY2004, 20% in FY2005, 30% in FY2006, 40% in FY2007, and 50% in FY2008.
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 (the House bill
says that a $100 research fund/technical assistance fund must be used “primarily” for
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marriage promotion activities; the Senate bill earmarks $80 million for this purpose). Both
bills extend abstinence education grants for 5 years ($50 million yearly). The House bill
creates new “superwaiver” authority for states to coordinate rules of 9 specified programs
(including food stamps) for low-income families.
Other Pending Bills: S. 5, S. 367, S. 448, and S. 1443
The Senate Republican leadership bill, S. 5 (Talent), is very similar to the House-passed
bill. However, it adds new anti-fraud rules, permits states to contract out the determination
of food stamp eligibility, disallows a super-waiver that would reduce or eliminate TANF
work participation rates, and doubles funding for healthy marriage promotion matching
grants. It also indexes funding (at one-half the rate of inflation) for the food assistance block
grant projects proposed in H.R. 4. A Democratic bill, S. 367 (Rockefeller), increases TANF
basic and supplemental grants; maintains work participation standards at 50%, adds new
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. Another Democratic bill, S.
448 (Dodd), prohibits use of TANF funds to supplant other funds, stops the federal time
clock during priority activity; provides partial work 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 time to persons in wage-
paying jobs; greatly enlarges child care funding (up to $24.2 billion for FY2013); provides
$200 million yearly for a poverty reduction bonus; and increases the federal minimum wage.
A bipartisan bill, S. 1443 (Carper, Nelson of Nebraska and Collins) 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, doubles the length of countable
vocational education, and increases child care funding by $5.5 billion over 5 years. It also
provides numerous special grants.
TANF Issues
Definition of “Work Activities” and the Role of Education
What activities are countable in calculating a state’s work participation rate? 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). Participation in vocational educational training or
completion of high school can account for no more than 30% of 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.)
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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 26 (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.
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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
(Community Service program), are TANF maximum benefits for a 3-person family (as of
Jan. 2003) high enough to provide the required sum for 30 hours of work, at the federal
minimum wage rate. 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 except 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
versions of H.R. 4 (the House-passed bill and the Finance Committee substitute) end the
higher two-parent work rate.
Child Care Funding
The level of child care funding has emerged as a key issue in TANF reauthorization.
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.
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(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
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). Florida plans
to have private contractors make a “preliminary” decision about eligibility for food stamps
and Medicaid, along with TANF, but to have state officials make the official determination
for food stamps and Medicaid.
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. (In his 2004 State of the Union
address, the President asked Congress “to codify” the executive orders into law.) 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. In the consolidated appropriations
law for FY2004 (P.L. 108-199) Congress provided $48 million for the Compassion Capital
fund (compared with $100 million budget request),$50 million to mentor children of
prisoners, and $5 million for an ex-offender re-entry program. In his 2004 State of the Union
address, President Bush proposed a 4-year $300 million prisoner re-entry initiative to expand
job training and placement services and provide transitional housing and mentoring services
for newly released prisoners. For faith-based projects proposed in the budget, see FY2005
Budget Proposals above. 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. President Bush
announced on March 3 that competitive grant awards to faith-based organizations from the
Departments of Health and Human Services (HHS) and Housing and Urban Development
(HUD) increased by $144 million, or 15%, in FY2003 to reach a total of $1.1 billion
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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
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 WtW
funds. Eligible for WtW 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% of net WtW awards remained unspent ($293 million in formula grants and $123 million
in competitive grants) The FY2004 consolidated appropriations act (P.L. 108-199) 2673)
rescinds any WtW amounts allotted to states from funds appropriated for FY1999 that were
unspent on January 23, except for certain close-out costs. (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).
On July 10, the House voted (FY2004 appropriations bill, H.R. 2660) to allow only 5.5% of
TANF funds to be transferred to SSBG. The House has twice voted (H.R. 4737 in 2002 and
H.R. 4 in 2003) to allow states to transfer 50% of TANF funds to CCDBG. H.R. 2673, signed
January 23, 2004, sets the transfer limit to SSBG at 10%.
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
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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 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 authorizes appropriation of $25 million for each of FY2004-
FY2009 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
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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 expired on Dec. 30, 2003. H. 2047
and S. 1180 would make the credits permanent, in combined and modified form. See CRS
Report RL30089.
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 IDAs.
According to HHS, 31 states allow TANF recipients to establish IDAs, including IDAs 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 IDAs 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,
passed by the House in September, continues the existing AFI IDA program for 5 years. The
consolidated appropriations act for FY2004 (H.R. 2673) provides $24.9 million for the
(ongoing) IDA program
Unspent TANF Funds
As of September 30, 2002, HHS reports that states had an unspent and unobligated
balance in the U.S. Treasury of $2.7 billion in TANF funds. In addition, unliquidated
obligations totaled $3.1 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
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“assistance,” defined by regulation as basic ongoing aid. The House-passed H.R. 4 and the
Finance Committee H.R. 4 both would permit carryover of funds for any benefit or service.
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. Both H.R. 4 and the Finance Committee substitute for this bill have provisions
to promote “responsible fatherhood” and distribute more child support directly to families.
TANF Bonus Funds
On September 26, 2003, HHS announced award of $100 million in bonuses to 6 of the
9 jurisdictions that achieved reductions in the percentages of births to unwed women between
1998-1999 and 2000-2001. Bonuses went to Colorado, D.C., Maryland, Texas, Wyoming,
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. All
states except Colorado and Illinois received a bonus for 2001 or 2002 performance. H.R. 4
and PRIDE would eliminate nonwork measures from high performance bonus award. (and
would eliminate non-marital birth bonuses). 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. See text above. Passed House February
13, 2003. Senate Finance Committee rewrote the bill and ordered it reported on October 3
(S.Rept. 108-162). See text above.
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, 2003. Senate companion: S. 1180.
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H.R. 2770 (Pallone)
TANF and Indians. Provides special funding for tribal programs. Introduced July 17;
2003, referred to several committees.
H.R. 3848 (Herger)
TANF and related programs. Extends programs through June 30, 2004. Modifies the
caseload reduction credit reducing its size. Introduced February 26. 2004
H.R. 3897 (Herger)
TANF and related programs. Provides $100 million for marriage promotion activities
in last half of FY2004.. Introduced March 4, 2004.
S. 5 (Talent)
TANF reauthorization. Very similar to House-passed H.R. 4, but increases marriage
funds and contains new anti-fraud and food stamp provisions. Introduced February 14, 2003.
S. 261 (Bingaman)
TANF. Children First Act. Increases CCDBG funding by $11.2 billion over 5 years;
excludes months of TANF-funded child care from time limit. Introduced January 30, 2003.
S. 262 (Bingaman)
TANF. Removes percentage limit on recipients who may receive work credit for
educational activity. Stops time clock for certain activity. Introduced January 30, 2003.
S. 263 (Bingaman)
TANF and waivers. Allows states to continue 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, 2003.
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 reauthorization. See text above. Introduced February 12, 2003.
S. 448 (Dodd)
TANF reauthorization. See text above. Introduced February 26, 2003.
S. 574 (Corzine)
TANF. Stops the federal time clock for months of assistance received during periods of
high unemployment. Introduced March 7, 2003.
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, 2003.
S. 657 (Bayh)
TANF. Provides fatherhood grants within TANF. Introduced March 19, 2003.
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S. 669 (Snowe)
Child support. Provides more help for ex-welfare families. Introduced March 19, 2003.
S. 770 (Feingold)
TANF. Sets due process rules and reporting rules. Introduced April 2, 2003.
S. 786 (Bingaman)
TANF. Provides grants for transitional jobs programs. Introduced April 3, 2003. See
also H.R. 3560.
S. 813 (Corzine)
TANF. Requires states to promote financial education and treat it as a countable work
activity. Introduced April 8, 2003.
S. 1443 (Carper, Nelson of Nebraska, and Collins)
TANF reauthorization. Comprehensive bill. See text. Introduced July 22, 2003.
FOR ADDITIONAL READING
(See also the CRS Welfare Reform Briefing Book, at
[http://www.congress.gov/brbk/html/ebwlf1.shtml])
CRS Report RL32233. Cash and Noncash Benefits for Persons with Limited Income:
Eligibility Rules, Recipient and Expenditure Data, FY2000-FY2002, compiled 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 RL32210. TANF Reauthorization: Side-by-Side Comparison of Current Law and
Two Versions of H.R. 4, by Vee Burke and Gene Falk.
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 96-882. The Wisconsin Works Welfare Program: Concept and Experience, by
Vee Burke.
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