Charitable Choice, Faith-Based Initiatives, and TANF

Charitable Choice, Faith-Based Initiatives, and TANF

Order Code RS20712
Updated August 9, 2004
CRS Report for Congress
Received through the CRS Web
Charitable Choice, Faith-Based Initiatives,
and TANF
Vee Burke
Domestic Social Policy Division
Summary
After the death of the Charitable Choice Expansion Act of 2001 (Title II of H.R.
7), President Bush issued an executive order directing several Cabinet departments to
adopt charitable choice rules in their social service programs. These rules seek to
promote the use of religious groups as providers of social services while protecting the
religious freedom of beneficiaries. In response to the order, several departments have
made final regulatory changes, and other departments have proposed changes in rules.
For faith-based initiative projects during FY2004, Congress appropriated $103 million
(P.L. 108-199); and for FY2005, the President’s budget requests $165 million. The
108th Congress resumed efforts to pass tax incentives for private giving (S. 476, passed
by the Senate, and H.R. 7, passed by the House). However, these bills do not contain
basic charitable choice rules. Opposition to charitable choice has brought together a
coalition of religious and secular groups who, for different reasons, want to maintain
separation of church and state — the former to protect their independence and sense of
mission, the latter to guard against use of public funds for religious activities. In two
cases concerning a Wisconsin faith-based program for drug addicts (Faith Works), direct
government funding of religious activity has been found unconstitutional, but indirect
funding (by voucher) has been found constitutional. In a related case, the U.S. District
Court for the District of Columbia on July 2, 2004, found unconstitutional awards made
to AmeriCorps participants who were placed as teachers in sectarian schools and who
engaged in religious instruction and activities during the school day. For legal and
constitutional issues raised by charitable choice, see CRS Report RL32195. This report
will be updated for developments.
Charitable Choice Option in TANF Law. If a state chooses to administer and
provide TANF services or benefits through a contract with a nongovernmental entity or
to provide TANF recipients with certificates or vouchers redeemable with a private entity,
it must allow religious organizations to participate on the same basis as any other
nongovernmental provider without impairing the religious character of the organization
and without diminishing the religious freedom of TANF beneficiaries. The law (Section
104 of P.L. 104-193) imposes the following basic charitable choice rules:
Congressional Research Service ˜ The Library of Congress

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! Direct government aid may not be used for sectarian worship, instruction,
or proselytization (Subsection j);
! Government is barred from discriminating against an organization that
applies to administer and provide services on the basis that it has a
religious character (c);
! The religious organization must implement the benefit/service program
in a manner “consistent with the Establishment Clause of the United
States Constitution” (c);1
! The religious grantee or contractor retains control over the definition,
development, practice, and expression of its religious beliefs (d)(1);
! Government is barred from requiring the organization to alter its form of
governance or to remove religious art and other symbols as a condition
of eligibility (d)(2);
! If a welfare recipient objects to the religious character of an organization
providing services, the state must provide an alternate and accessible
provider (e)(1);
! The religious organization retains freedom to hire on the basis of religion
(the organization’s exemption from Civil Rights Act rules about
employment practices is not affected by its administration of welfare
benefits) (f);
! Except as otherwise provided in law,2 a religious organization shall not
discriminate against a beneficiary on the basis of religion, a religious
belief, or refusal to actively participate in a religious practice (g); and
! Nothing in the charitable choice section of the law shall be construed to
preempt any provision of a state constitution or law that prohibits or
restricts expenditure of state funds in or by religious organizations (k).
Two other provisions are implicit: Religious contractors and grantees may use their
own funds for sectarian worship, instruction, and proselytization (an explicit rule against
using funds for sectarian purposes applies to public funds provided “directly” for welfare
benefits or services, but not to aid received in the form of vouchers). Government may
require religious grantees to be separately incorporated from their sponsoring institution.
P.L. 104-193 also applies charitable choice rules to other programs modified by its
Title I or Title II that permit contracts with organizations to provide services or permit use
of certificates, vouchers or other forms of disbursement to provide aid.3 However, other
provisions of law preclude use of private organizations to perform some basic
1 The First Amendment says that “Congress shall make no law respecting an establishment of
religion, or prohibiting the free exercise thereof ... “It has long been interpreted to allow religious
organizations to participate in publicly funded social service programs. But in the past it has
generally been interpreted to forbid religious activities or proselytizing in the publicly funded
programs and to require religious providers to set up a corporation separate from their religious
sponsor and to remove religious symbols from the premises where services are provided (see
CRS Report RL30388, Charitable Choice: Background and Selected Legal Issues, by David
Ackerman).
2 Legal researchers say they have found no instance of a law providing “otherwise,” but this
phrase is regarded as a loophole by some; an effort to delete it failed during debate on H.R. 4678.
3 These programs are food stamps, Medicaid, and Supplemental Security Income (SSI).

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administrative activities (such as eligibility determination for food stamps and Medicaid).
(In 1998 and 2000 Congress extended charitable choice rules to the Community Services
Block Grant and to substance abuse treatment and prevention services under the Public
Health Services Act.).
Funding of Faith-Based Initiative Proposals. President Bush on January 29,
2001, launched a “faith-based initiative” with executive orders that established an Office
of Faith-Based and Community Initiatives (OFBCI) in the White House and directed five
Cabinet departments, Education, Justice, HHS, Labor, and Housing and Urban
Development to set up similar offices, called centers (in December 2002, he directed the
Department of Agriculture and the Agency for International Development also to establish
centers; and in June 2004, he announced creation of three new agency centers — in the
Departments of Commerce and Veterans Affairs, and the Small Business Administration).
This brought the total number of federal agency centers to 10. In his initial call for faith-
based initiatives, the President advocated expansion of charitable choice law, tax
incentives to promote charitable giving, and several specific projects. Although Congress
has not expanded coverage of charitable choice law or established tax incentives for
charitable giving, it has funded four of the latter proposals: It established a new matching
grant program to mentor children of prisoners ($10 million appropriated for FY2003 and
$50 million for FY2004); provided $5 million for an ex-offender pre-release program for
FY2004; appropriated $30 million for FY2002 to create a Compassion Capital fund to
provide technical aid and start-up costs for small groups and increased Compassion
Capital funding to $35 million for FY2003 and to $48 million for FY2004. Congress also
voted to allow state educational agencies to award 21st Century Community Learning
Center grants to groups other than schools, including community based organizations.
The FY2005 budget requests $165 million for four faith-based projects: compassion
capital fund, $100 million; mentoring children of prisoners, $50 million; maternity group
homes, $10 million; and a 5-city pilot project to increase participation of a faith-based and
community organizations in community development programs, $5 million.
Over three years, a total of almost $101 million has been awarded from the
Compassion Capital Fund, and over two years, a total of $45/6 million has been awarded
for mentoring children of prisoners. For guidance to FBOs on partnering with the
government, see [http://www.whitehouse.gov/government/fbci/].
Legislative Action in the 107th Congress. In July 2001, the House passed
H.R. 7 (the Community Solutions Act), which extended charitable choice rules to 9 new
program areas. In the Senate a bipartisan group then introduced S. 1924, the Charity Aid,
Recovery, and Empowerment Act (CARE), which was welcomed by the White House as
representing an agreement “to move a faith-based initiative” out of the Senate. It omitted
the most disputed provisions of H.R. 7 (religious discrimination in employment and
possible “voucherization” of social services). Instead, in a Title called Equal Treatment
for Nongovernmental Providers, it provided that a nongovernmental organization
“involved” in the delivery of a federally funded social service could not be required to
remove art, icons, scripture, or other symbols, or to alter its name, because the symbols
or name were religious, or to alter or remove provisions in its chartering documents that
were religious, or to alter or remove religious qualifications of membership on governing
boards. These equal treatment provisions applied to all social service programs
administered by the federal government (excepting educational assistance under major
federal education acts) or by a state or local government using federal financial assistance

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(not counting tax credits, deductions, or exemptions). The bill also proposed to establish
tax incentives for charitable giving more generous than those of the House bill, establish
a new Individual Development Account (IDA) program financed by business tax credits
to financial institutions, and, in a title called compassion capital fund, authorize $150
million for technical assistance in FY2003 to small nonprofit community groups. Before
scheduled Finance Committee markup in mid-June 2002, the equal treatment title of the
original CARE bill was deleted. The committee then incorporated modified versions of
some of the CARE provisions into its substitute for H.R. 7 and called it Care Act of 2002.
This bill did not reach the Senate floor.
Legislative Activity in the 108th Congress. On April 9, 2003, the Senate
passed a new bill S. 476 (entitled CARE) without provisions that Senator Santorum had
sought to add to require equal treatment of religious and other nongovernmental
organizations as providers of federally funded social services. To win passage of the
CARE Act, which contains tax incentives for charitable giving, increases funding for the
Social Services Block Grant, and establishes new tax credit-financed Individual
Development Accounts, Senator Santorum agreed to a compromise that added technical
assistance (“compassion capital fund”) grants for community-based organizations and
funding for maternity group homes, but lacked the “equal treatment” title.
On September 17, 2003, the House passed a new version of H.R. 7, entitled
Charitable Giving Act. It contains tax incentives for charitable donations, and it
authorizes new Compassion Capital Fund grants and funding for maternity group homes.
It also extends the expiring program of IDAs (under the Assets for Independence Act) for
five years. However, it does not contain charitable choice provisions; nor does it increase
funding for the Social Services Block Grant. In December, the House-passed H.R. 7 was
referred to the Senate Finance Committee. In passing separate bills to reauthorize the
Workforce Investment Act (WIA) and Head Start, the House voted to remove provisions
in current law prohibiting employment discrimination on grounds of religion, but the
Senate-passed WIA bill and the Senate Committee Head Start bill retain current law.
Executive Action to Expand Charitable Choice. On December 12, 2002,
after the death of H.R. 7 in the 107th Congress, President Bush issued Executive Order
13279 stating that all agencies that administer federally funded social service programs
“to the extent permitted by law,” should be guided by fundamental charitable choice
principles. The order directed the Secretaries of Agriculture, Education, Health and
Human Services, Housing and Urban Development, and Labor, the Attorney General, and
the Administrator of the Agency for International Development to review policy policies
and ensure compliance with these principles. It said that an organization that received
a grant or contract to provide federally funded services could not offer “inherently
religious” activities unless they were separated in time or location from other directly
funded services and participation was voluntary for the beneficiary.
Origin of Charitable Choice. In June 1995, the Senate Finance Committee
reported an amended version of the House-passed Personal Responsibility Act, H.R. 4,
which proposed to replace the program of Aid to Families with Dependent Children
(AFDC) with a block grant. The Finance Committee bill added two sentences concerning
religious organizations. They provided that religious organizations who participated in
the new state block grant program were to retain their independence from government and
that the organizations could not deny aid to needy families with children “on the basis of

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religion, a religious belief, or refusal to participate in a religious practice.” This language
was adapted from another AFDC block grant bill (S. 842, sponsored by Senator Ashcroft).
In August, 1995, Senator Dole introduced The Work Opportunity Act, the Republican
leadership alternative to the House-passed H.R. 4. Responding to growing interest in
“privatization” of welfare services,4 the section on provision of aid by religious
organizations was enlarged to deal with “services provided by charitable, religious, or
private organizations.” Also, it stated affirmatively that states had an option to administer
and provide block grant services through contracts with religious organizations and by
means of certificates, vouchers or other forms of disbursement redeemable with them.
Before passage the Senate adopted a two-part amendment proposed by Senator Cohen.
The first added the requirement that programs be implemented consistent with the
Establishment Clause of the Constitution; the second removed a provision that would
have barred government from requiring a religious organization to form a separate
nonprofit corporation in order to be eligible to provide assistance. Senate-House conferees
added a stipulation that religious organizations would not lose their right to consider
religion in their hiring practices because of participating in welfare programs or receiving
funds from them. H.R. 4 was vetoed, but the charitable choice rules of the final 1996
welfare reform law are virtually identical to those of the conference report on H.R. 4.
Use of Charitable Choice in TANF. In their 2000-2001 plans, more than a
dozen jurisdictions mentioned plans to use religious or “faith-based” organizations,
usually along with other groups, in providing services (Arkansas, Delaware, District of
Columbia, Georgia, Indiana, Louisiana, Maryland, Mississippi, North Carolina, South
Carolina, South Dakota, Tennessee, and Washington). Some spoke of service
“partnerships” that included the “faith community” and community based/action agencies.
Congress in 1997 added special welfare — to-work (WtW) formula and competitive
grants to TANF for FY1998 and FY1999. As parts of TANF, the new grants were subject
to charitable choice rules. The Labor Department awarded six competitive WtW grants
(out of 188) to faith-based groups. Most projects were to provide employment services;
some focused on persons with limited English proficiency. The House-passed TANF
reauthorization bill, H.R. 4, requires stateTANF plans to describe strategies and programs
to engage religious organizations in the provision of TANF-funded services.
Dr. Amy Sherman, Hudson Institute, told a research conference of the Roundtable
on Religion and Social Welfare Policy in April 2002 that a survey about implementation
of charitable choice in 15 states found 726 contracts totaling about $124 million. (For nine
states this was a followup survey.) She said more congregations are “getting involved”
in contracting to provide services, that roughly half of the faith-based organizations and
congregations identified in the survey were “new players,” and that some states showed
a dramatic increase in contracting with faith-based groups. The survey found much more
contracting activity with faith-based groups under TANF than in the other programs
covered by charitable choice. She also said the new survey found a decline in the use of
4 The state of Texas then was seeking permission to have a private contractor administer an
integrated state eligibility system for TANF, Medicaid and food stamps, but in May 1997, the
Clinton Administration refused, holding that Medicaid and food stamp law required eligibility
to be determined by a public official A Texas 2003 law requires use of private contractors to
operate call centers to determine eligibility, if cost effective; and in April 2004, Florida requested
waivers from law to permit privatization of eligibility determination across programs..

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indirect financial contracting by way of intermediary organizations. An Urban Institute
study of persons who left AFDC/TANF between 1995-1997 found that 72% did not seek
help from nongovernmental sources. However, of those who did, about one-third used
a faith-based provider, about one-tenth used a secular provider; and the rest relied on
families and friends for help.
Litigation. On June 17, 2004, the Freedom from Religion Foundation, Madison,
Wisconsin, brought suit in a federal court against several Cabinet officers and the director
of the White House Office of Faith-Based and Community Initiatives. The suit charges
that the faith-based initiative, by helping religious groups apply for federal contracts to
deliver social services, has the effect of favoring these groups over secular organizations
in violation of the First Amendment. In July and October 2000, two court suits were filed
challenging the constitutionality of TANF charitable choice programs. One suit charged
that a job training and placement program for TANF recipients funded by the Texas
Department of Human Services and operated by the Jobs Partnership of Washington
County was “permeated” by Protestant evangelical Christianity in violation of both the
state and federal constitution (American Jewish Congress and Texas Civil Rights Project
v. Bost, filed July 24, 2000, but dismissed in February 2001 as moot after Texas
discontinued the program). The second suit, (Freedom from Religion Foundation, Inc.
vs. McCallum, filed October 12, 2000) charged that a job placement and support services
program for drug addicts in Milwaukee, Wisconsin, violated the state and federal
constitutions by giving welfare-to-work funds directly to a “pervasively sectarian”
organization [Faith Works] and using the funds to indoctrinate clients in the Christian
faith. A federal judge on January 8, 2002, ordered Wisconsin to cease this direct funding
as unconstitutional. Later, on July 26, 2002, the judge ruled on a second issue in the Faith
Works case. She found a contract between Faith Works and the Wisconsin Department
of Corrections to be constitutional because the religious organization received public
funds only when offenders chose to receive treatment there.
In a related case (American Jewish Congress vs. Corporation for National and
Community Service and University of Notre Dame),the U.S. District Court for the District
of Columbia on July 2, 2004, found unconstitutional awards made to AmeriCorps
participants who were placed as teachers in sectarian schools and who engaged in
religious instruction and activities with students during the school day.
Conclusion. Advocates of charitable choice maintain that faith-based
organizations have special ability to help persons toward self-respect, healthy family
dynamics and independence. They maintain that existing charitable choice rules give
protection against religious discrimination both to religious organizations providing
welfare services and to beneficiaries of the services. However, many religious spokesmen
have expressed concerns that government grants could diminish their vitality and religious
commitment. For a discussion of areas of agreement and disagreement about charitable
choice issues, see In Good Faith at [http://www.temple.edu/feinsteinctr].