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Vee Burke, Congressional Research Service
Welfare Reform: An Issue Overview
Representatives of state legislatures and public welfare administrators have urged the 107th Congress to extend the program of Temporary Assistance for Needy Families (TANF) for 3 years, through FY2005. The National Governors Association (NGA) also has recommended an extension longer than one year. TANF now is operating under temporary spending authority that expires December 31, 2002 (P. L. 107-229, H. J. Res. 111). Along with NGA, the American Public Human Services Association and the National Conference of State Legislatures (NCSL) say action is needed before the end of this Congress to ensure program continuity. The latter two groups have identified more than 30 provisions that they want in a final bill.
The House has passed a 5-year extension bill (H. R. 4737), but the Senate Finance Committee substitute bill (also H. R. 4737) has not reached the Senate floor. On several key issues, including work hours, work activities, and child care funding, the bills are far apart.
The House bill embodies concepts pro-posed by President Bush in February, including a 40 hour work week for adults. The Senate Committee version maintains the current 30 hour week, but enlarges the list of countable activities. President Bush has charged that the Senate bill is a "retreat from success," with many work loopholes. The House passed its bill on May 17 by a largely partisan vote, 229-197 (14 Democrats voted yes and four Republicans voted no). It raises work participation rates to 70% by FY2007 and increases work hours. In response to arguments that stiffer work rules would raise child care needs, the leadership increased child care funding– by $1 billion each over 5 years for mandatory funding and discretionary funding. The bill extends abstinence-only education and transitional Medicaid and creates marriage promotion grants.
The Senate Finance measure was approved by a vote of 13-8 on June 26 (three Republicans voted yes and Senate Majority Leader Daschle, who wanted more child care funding, voted no). It increases supplemental grants by $122 million yearly (for a total of $441 million). Like the House bill, it raises work participation standards to 70%. It expands the list of countable work activities and continues a 30-hour work week for most adult recipients. It allows states to give federally funded TANF to legal immigrants, regardless of date of entry; extends transitional Medicaid and abstinence-only education for 5 years; and also provides funding for abstinence first. It increases mandatory child care spending by $5.5 billion over 5 years. It creates marriage promotion grants and several other specialized grants. For a side-by-side comparison of the two versions of H. R. 4737 (and current law), see CRS Report RL31541.
HHS reports that TANF work participation rates declined in FY2000, to 34% for all families. After adjustment for caseload reduction, 31 states had a required all-family work rate of zero. However, only 8 of the 34 states with 2-parent families in their TANF program met the participation standard for them, even after caseload reduction credits. Latest TANF caseload data show that in December, enrollment in 30 jurisdictions topped year-earlier levels. In the spring food stamp enrollment climbed to the highest level in almost 4 years.
Enacted 6 years ago, as a replacement for Aid to Families with Dependent Children (AFDC), TANF provides fixed grants ($ 16.5 billion yearly) for time-limited and work-conditioned aid.
MOST RECENT DEVELOPMENTS
On October 4, the National Governors Association sent a letter to Senate and House leaders urging that Congress enact a multi-year extension of TANF to ensure program continuity and to avoid a cutoff of services on January 1, 2003. On September 30 the American Public Human Services Association (APHSA) and the National Conference of State Legislatures (NCSL), in a memorandum sent to the White House, Capitol Hill staffers, the Department of Health and Human Services (HHS), and other interested parties, urged the 107 th Congress, before reaching its end, to enact a three-year TANF extension. The program now is operating under temporary spending authority that expires December 31, 2002 (P. L. 107-229, H. J. Res. 111, enacted September 30). Pending are two bills to revise and continue TANF through FY2007, but on very different terms: H. R. 4737, as passed by the House in May, and H. R. 4737, as approved by the Senate Finance Committee in June. Both versions of H. R. 4737 would raise required work participation rates, but the House bill also would narrow the list of priority work activities and increase weekly work hours. Also, the two bills differ sharply on the level of child care funding. On October 4 HHS announced award of $100 million to 5 states and the Virgin Islands in the fourth annual bonus for reducing nonmarital birth ratios; of 54 jurisdictions, only 7 reduced these ratios from 1997- 1998 to 1999-2000.
BACKGROUND AND ANALYSIS
Major Programs for Low-Income Families AFDC/ TANF national enrollment has been falling since 1994, but the number of families on cash welfare rose in 30 jurisdictions during the year ended in December 2001 (and in the October-December quarter climbed in all but 13 jurisdictions). The December 2001 caseload held 2.099 million families, down 2.6% from the year-earlier number and down 59% from the March 1994 record-high level (5.084). The food stamp caseload, which has been rising steadily since April 2001, reached 19.3 million persons in May and June, the highest number since June 1998. The all-time peak was 28 million in March 1994.
The number of children enrolled in Medicaid rose from 21.7 million in FY1999 to 21.8 million in FY2000, but the number of enrolled parents fell from 9 million to 8.3 million (numbers are estimates). The EITC is the largest form of income-tested federally funded cash aid for families. In August 1999 the Council of Economic Advisers estimated that about one-third of the 1996-1998 AFDC-TANF caseload drop was due to federal and state welfare policy changes, from 8% to 10% to the strong economy, 10% to the higher minimum wage, and from 1% to 5% to the lower real value of cash welfare benefits. The 2002 CEA report says research has found that time limits alone caused more than 10% of the 1993-1999 caseload decline. FY2000 estimated spending for low-income children and their families by selected major income-tested programs that give cash, food, medical, and housing aid reached $154.3 billion (revised figure). Of the total, $51.3 million (33%) was for cash aid, and $103 million was for noncash aid. The FY2001 figure for cash aid is not yet available, but the amount for noncash aid was $107.6 million, up 4.5% from FY2000. For a breakdown of FY2000 overall spending on behalf of all population groups ($ 437 billion), see CRS Report RL31228.
TANF Trends and Data Nationally (as of December 2001) caseloads continued a decline that began in 1995, but in all but 13 jurisdictions enrollment was on the rise in October-December. Persons now on the rolls include rising proportions of long-term recipients and minorities, and TANF "families" include a rising proportion with no adult recipient (child-only cases). TANF has more than doubled the fraction of adult recipients with earnings (from 11% in FY1996 to 28% in FY1999 and 26% in FY2000). Available data indicate that in some states from 50- 65% of persons who leave the rolls have jobs then or a short time later and that the jobs generally pay wages around $7.00 to $8.00 per hour. (See CRS Report 98-369.) The 2001 poverty rate among children in female-headed families (no spouse present) was 39.3%, compared with 39.8% in 2000, 49. 3% in 1996, and 52.9% in 1994, when AFDC numbers were at a record high. Combined federal/ state TANF spending (excluding state child care funds countable also toward required spending to qualify for matching funds from the Child Care and Development Block Grant totaled $22.8 billion in FY2000 (55% from federal funds), up from FY1999 ($ 21.7 billion), but down 19% from comparable FY1996 spending for AFDC and related programs ($ 28.2 billion). At the end of FY2000, states had an unobligated TANF balance of $3.2 billion.
The 1996 Welfare Law and Changes to Date Replacement of AFDC by Temporary Assistance for Needy Families TANF is a fixed block grant for state-designed programs of time-limited and work-conditioned aid to families with children. Enacted on August 22, 1996 (P. L. 104-193), it repealed AFDC, Emergency Assistance for Needy Families, and the Job Opportunities and Basic Skills Training (JOBS) program and replaced them with TANF. It combines previous funding levels for the three programs into a single block ($ 16.5 billion annually through FY2002) and entitles each state to a fixed annual sum based on pre-TANF funding. It also provides an average of $2.3 billion annually in a new child care block grant. The law appropriates extra funds for loans, contingencies, bonuses for "high performance" and for reducing out-of wedlock births, and supplemental grants for states with historically low federal welfare funding per poor person and/ or rapid population gain. As amended in 1997 (P. L. 105-33), TANF law also provided a $3 billion program in FY1998-FY1999 for welfare-to- work (WtW) grants, most of which required state cost sharing, to help states achieve required work participation rates TANF greatly enlarged state discretion in operating family welfare, and it ended the benefit entitlement of individual families. States decide what kinds of needy families to help and whether to adopt financial rewards for work. TANF explicitly allows states to administer benefits and provide services through contracts/ vouchers with charitable, religious, or private organizations, a provision widely called Charitable Choice.
Attached to the TANF block grant are some federal conditions. States must achieve minimum work participation rates and maintain at least 75% of their "historic" level of state welfare funding, increased to 80% if the state fails the work participation rate. States must require parents and other caretaker recipients to engage in state-defined "work" after a maximum of 24 months of benefits and must impose a general 5-year time limit on federally-funded ongoing basic benefits. They may exempt single parents with a child under age 1 from required work (and from the calculation of work participation rates). In FY2002, 50% of all families with an adult recipient must work (including 90% of families with two parents); these rates are lowered for caseload declines from FY1995 levels. States are forbidden to give TANF aid to unwed parents under 18 unless they live under adult supervision, and, if high school dropouts, attend school. States may continue reforms begun under waivers from AFDC rules even if terms are inconsistent with the new law. (For TANF provisions, as compared to AFDC, see CRS Report 96-720.)
Medicaid and TANF Although the 1996 law ended AFDC, it retains AFDC eligibility limits for Medicaid use. It requires states to give Medicaid coverage to children and parents who would be eligible for AFDC cash (under July 16, 1996 terms) if AFDC still existed. For this purpose, states may lower AFDC income and resource standards to those in effect on May 1, 1988, and may increase them by the percentage rise in the consumer price index since July 16, 1996, and may change the method of determining income and resources. Through FY2002, states must extend medical assistance for 12 months to those who lose TANF eligibility because larger earnings lift their income above July 1996 limits. The House-passed TANF bill, H. R. 4737, extends transitional medicaid for one year (through Sept. 30, 2003), and, to offset the cost, reduces the federal share of Medicaid administrative spending. The Senate Finance version of H. R. 4737 extends transitional Medicaid for 5 years.
Child Care The 1996 welfare law created a mandatory block grant for child care to low-income families. Individual states are entitled to what they received for AFDC work-related child care, transitional child care, and at-risk child care in a base year. States that maintain the higher of their 1994 or 1995 spending on these programs are entitled also to extra funds at the medicaid match rate. Appropriated for the block grant was $13.9 billion over 6 years ($ 2.7 billion for FY2002, the final year). The law also authorized $1 billion annually through FY2002 in discretionary funding under an expanded CCDBG. The combined entitlement and discretionary funding streams are referred to as the Child Care and Development Fund (CCDF) In discretionary funding, Congress appropriated $2.1 billion for FY2002. The FY2003 budget requests $4.8 billion in child care funds–$ 2.1 billion in discretionary funding and $2.7 in entitlement funding. For child care funding/ spending details, see CRS Report RL31274. States may transfer some TANF funds to CCDF; in addition, they use TANF block grants for "direct" child care. FY2000 TANF-funded child care (federal and state dollars) totaled $2.3 billion, exclusive of $2 billion transferred to CCDF and state spending that also could be counted toward sums needed to qualify for matching child care entitlement funds. For current legislative proposals, see Child Care Funding.
Alien Eligibility for Welfare The 1996 law barred most legal immigrants from welfare benefits. It also gave states options (1) to extend TANF, Medicaid, and Title XX social services to legal immigrants who arrived before the 1996 law and (2) to extend these benefits, after their first 5 years of U. S. residence, to persons who arrived later. P. L. 105-33 restored SSI for legal aliens enrolled on August 22, 1996, when the ban was passed, and those who were here then and later become disabled; and P. L. 105-185 restored food stamp eligibility for immigrant children, aged, and disabled aliens here before enactment of the 1996 law. At passage, CBO estimated that the 1996 alien provisions would reduce direct federal outlays over 7 years by $23.7 billion, but P. L. 105-33 and P. L. 105-185 were estimated to restore more than half of this over 5 years ($ 9.5 billion in SSI, $2 billion in Medicaid and $800 million in food stamps). (See CRS Report RL31114 for more details.) The 2002 farm bill (P. L. 107-171) grants food stamp eligibility to noncitizens after their first five years in this country. The Senate Finance Committee TANF bill permits states to give federally funded TANF to legal aliens, regardless of their date of entry and to give Medicaid and S-Chip to pregnant women and children who are immigrants.
Food Stamp Revisions The 1996 law expanded states' food stamp role, added new work rules, restricted benefits, and barred eligibility for most legal aliens. At passage, net federal food stamp outlay savings over 5 years were estimated at $23.3 billion. P. L. 105-33 provided $1.5 billion over 5 years for work programs, and P. L. 105-18 allowed states to pay for food stamps for persons made ineligible for federally financed stamps by the 1996 law. P. L. 106-387 increased benefits for those with high shelter costs. On May 13 the President signed the farm bill, which adds $5.7/$ 5.9 billion over 10 years in new spending on food stamps (see Food Stamps in the CRS Welfare Reform Briefing Book). Changes include expansion of eligibility for some noncitizens.
Social Services Block Grants The 1996 Act reduced the $2.8 billion entitlement ceiling for Social Services Block Grants (SSBG) under title XX of the Social Security Act by 15% and entitled states to $2.38 billion yearly. Congress later appropriated $2.5 billion for FY1997, $2.3 billion for FY1998, $1.9 billion for FY1999, and $1.8 billion for FY2000. Beginning in FY2001, P. L. 105-178 reduced the entitlement ceiling to $1.7 billion, and Congress appropriated this amount for FY2002. (For TANF transfers to SSBG, see Transfer of TANF funds.) In separate measures, the Senate Finance Committee has voted to increase SSBG funding for FY2003 and FY2004 in the CARE bill (S. 1924) and for FY2005 in the TANF reauthorization bill.
TANF Reauthorization Bills (See CRS Report RL31541 for a side-by-side comparison of the House-passed and Senate Finance Committee versions of H. R. 4737 and CRS Report RL31393 for a brief comparison of all bills introduced.)
House-Passed Bill (H. R. 4737) Work Rules. This bill increases the all-family minimum participation requirement from the current 50% level to 70% by FY2007, ends the separate higher rate for 2-parent families, and requires TANF adults to engage in work or self-sufficiency activities an average of 40 hours per week, including 24 hours in "work," defined as unsubsidized jobs, subsidized private jobs, subsidized public jobs, on-the-job training, supervised work experience, and supervised community service. States could define any other activity as countable (for the remaining 16 weekly hours) so long as it is consistent with the purposes of TANF. Also, for 3 months within 24 months, persons could be deemed to meet the 24 hour weekly direct work requirement by engaging in activities chosen by the state, and under some circumstances, a fourth month could be credited for education. The bill replaces the fixed base year (FY1995) for the general caseload reduction credit with a moving base, but it includes a new "super-achiever" caseload reduction credit for a state whose caseload falls at least 60% from its FY1995 level (without regard to policy changes that might have lowered caseload size). The bill requires states to end cash aid to a family for at least one month if the parent fails to engage in required activities for two months. It continues the 5- year time limit on federally paid basic assistance, along with the 20% hardship exemption. It provides a state option for TANF to be a mandatory partner with the workforce investment system.
Other Provisions. The bill allows 50% of TANF funds to be transferred to the CCDBG (up from 30% in current law). Further, it appropriates $2.917 yearly in mandatory child care funds through FY2007 (a $1 billion increase over 5 years). It authorizes appropriation of an annual average of $1.7 billion over 5 years for the CCDBG, with the sum rising from $2.3 billion for FY2003 to $3.1 billion for FY2007 (the original Bush proposal provided no child care funding increase). It authorizes new waiver authority to coordinate rules of specified programs for low-income families (but disallows transfer of program funds from one account to another). Programs and activities covered by this waiver provision are TANF, Welfare-to-Work grants, SSBG, Job Opportunities for Low-Income Individuals (JOLI), Title I of WIA (excluding JOB Corps), Adult Education and Family Literacy Act, CCDBG, U. S. Housing Act (excepting Section 8 rental assistance and set-asides for the elderly and disabled), Homeless Assistance Act; and the food stamp program. Specified provisions (including civil rights and labor protections, existing WIA waiver limits, non-financial food stamp rules, any funding restriction in an appropriations act) could not be waived. Funds could not be transferred from one account to another, and projects could not increase federal costs. Waiver approval would be required by each relevant Secretary. The bill also authorizes five states to replace food stamps with demonstrations of food assistance block grant projects. The bill establishes marriage promotion matching grants ($ 100 million yearly) and allows states to use federal TANF funds as the 50% state match. It appropriates $100 million annually for research and demonstration projects and technical assistance and specifies that these funds shall be spent primarily on activities allowed under marriage promotion grants. It establishes fatherhood projects ($ 20 million authorized annually through FY2007). It ends the nonmarital birth bonus. It ends the high performance bonus, replacing it with an employment achievement bonus ($ 500 million appropriated for FY2004 through FY2008). The bill makes improving child well-being the overall TANF purpose and it adds "reducing poverty" to the goal of ending dependence on government benefits. The bill also extends abstinence-only education funding for 5 years and extends transitional Medicaid for one year.
Senate Finance Committee TANF Measure On June 26 the Senate Finance Committee approved, as a substitute for H. R. 4737, the Work, Opportunity, and Responsibility for Kids (WORK) Act. The measure augments basic TANF grants of $16.5 billion by appropriating $441 million yearly for supplemental grants (on a new basis) and folding these funds into the basic grant structure. The result is to increase funding for 17 states (7 of which do not receive current supplemental grants) that have below-average per capita income. Another 7 states continue to receive current level supplemental grants.
Work Rules. Like the House bill, it retains the 5-year limit on federally funded ongoing aid and raises work participation standards to 70% by FY2007. It replaces the caseload-reduction credit with an employment credit, expands the list of countable work activities, and adopts a 30-hour work week for most recipients. It requires that 24 hours weekly be spent in (an enlarged list of) priority activities, but retains the 20-hour week for single parents of a child under 6. An amendment adopted during markup permits a state to exempt 10% of adult recipients from work because of being needed to care for a family member with a disability or chronic illness.
Other Provisions. The bill allows states to give federally funded TANF to legal immigrants, regardless of date of entry; and extends transitional Medicaid and abstinence-only education for 5 years. It increases mandatory child care spending by $5.5 billion over 5 years. The bill also establishes grants for marriage promotion, fatherhood, TANF tribal improvement; second chance homes, Business Link partnerships and transitional jobs, at-home infant care demonstrations, and transportation programs. Amendments adopted during Committee markup include permitting states to provide Medicaid and State Children's Health Insurance Program (SCHIP) services to legal immigrant children and pregnant women and requiring the HHS Secretary to approve applications for waiver programs on terms "similar or identical to" those of successful programs. The Committee also adopted amendments to increase funding for the Social Services Block Grant for FY2005 (setting it at $1.952 billion) and to provide $50 million annually for 5 years for abstinence-first or abstinence-plus education (in addition to $50 million yearly for abstinence-only education.)
TANF Issues Definition of "Work Activities" and the Role of Education What activities are countable in calculating a state's work participation rate? In contrast to JOBS, which allowed credit for postsecondary education, TANF law includes only three educational activities: vocational educational training (12 month limit), secondary school attendance and education directly related to employment (adult high school dropouts and teen parents only). The law provides that participation in vocational educational training or completion of high school can account for no more than 30% of the persons credited with work. Although it is not a countable activity, most state TANF programs include postsecondary education, as the sharp caseload drop has cut or ended the risk of penalty for failing work participation rates. (See CRS Report RL30767.) All pending TANF reauthorization bills change rules about countable work activities.
Application of Minimum Wage Laws to "Workfare" The Clinton administration ruled that most TANF recipients in "workfare" arrangements, where recipients work for their benefit, would be classified as "employees" under the Fair Labor Standards Act and, hence, must receive the minimum wage rate (higher of the federal or state rate). The Internal Revenue Service (IRS) said it would not exclude TANF workfare payments from federal income and employment taxes if recipients were required to participate more hours for their benefit than the minimum wage equivalent. Adult TANF recipients generally now must work an average of 30 hours weekly (20 hours if they have a child under 6). At the federal minimum wage ($ 5.15), a 30-hour weekly workfare assignment equates to $154.50 in benefits ($ 669 per month); and in the 11 jurisdictions with higher state minimum wage rates, the required "workfare benefit" would be higher. Only in Alaska, California, New York (Suffolk County), and Wisconsin (Community Service program), are TANF maximum benefits for a 3-person family (as of Jan. 2002) high enough to provide the required amount for 30 hours of work, at the federal minimum wage rate, by a single-parent family. Many states could observe the workfare minimum "wage" by adding food stamps to the calculation, but some states would have to increase cash benefits. (See CRS Report 97-1038.)
Work Participation Rates and Penalties HHS reported on February 14, 2002, that work participation rates declined in FY2000 (but all states met their all-family adjusted minimum standards, as did 26 jurisdictions of the 34 with two-parent families in the TANF program ). Nationally, 34% of families with an adult recipient were credited with work in FY2000, compared with 38% in FY1999. The statutory minimum work rates for FY2000 were 40% for all families and 90% for two-parent families, but actual state targets were adjusted downward to give credit for reductions in caseload from FY1995 to FY1999. These credits reduced all-family participation standards to zero in 31 states. Both versions of H. R. 4737 would end the higher participation rate for two-parent families. For FY2000 state rates, see the HHS web site at [http:// www. acf. dhhs. gov/ programs/ opre/ particip/ index. htm# participation].
Child Care Funding The level of child care funding has emerged as a key issue in TANF reauthorization. The House TANF bill includes an extra $1 billion in mandatory child care funding over 5 years and raises the discretionary authorization by $200 million annually over 5 years, reaching the level of $3.1 billion in FY2007. The Senate Finance TANF bill increases mandatory funding by $5.5 billion over 5 years.
"Charitable Choice," Faith-Based Initiative, and Privatization The 1996 welfare law permits states to "administer and provide services" under TANF, food stamps, Medicaid, and some other federal programs through contracts with (or vouchers redeemable with) charitable, religious, or private organizations. However, food stamp and Medicaid law effectively require eligibility to be determined by a public official. The purpose of what has come to be known as "charitable choice" is to allow religious organizations to provide services on the same basis as any other nongovernmental provider "without impairing their religious character" or diminishing the religious freedom of recipients. Since 1996, Congress has enacted other charitable choice provisions– applying them to grants under the Community Services Block Grant (1998) and to substance abuse services under the Public Health Service Act (2000). (See CRS Report RS20712.) Using its new privatization authority, Wisconsin has contracted out the administration of its TANF program (W-2) in some counties.
The House-passed Community Solutions Act (H. R. 7) would apply charitable choice rules to nine new program areas and give tax incentives for charitable giving. S. 1924 (CARE), introduced with the support of President Bush, had provisions seeking to assure equal treatment for nongovernmental providers of virtually all social services. The "equal treatment" title was deleted from the bill approved by the Senate Finance Committee (H. R. 7, entitled CARE), but has been restored in a manager's amendment to the bill. Congress appropriated $30 million for FY2002 to establish a Compassion Capital Fund (CCF), and on June 7, HHS announced terms of CCF grants. On July 1 the Labor Department announced award of three sets of grants totaling $17.5 billion designed "to link faith-based and grassroots community organizations" to the nation's One-Stop Career system under the Workforce Investment Act (WIA).
Welfare-to-Work (WTW) Grants The basic TANF block grant earmarks no funds for any program component, benefits or work programs. In response to a presidential budget proposal, the 1997 Balanced Budget Act established a $3 billion welfare-to-work grant program for FY1998-FY1999, administered by the Secretary of Labor. It required 75% of funds (after set-asides) to be used for 33% state matching formula grants. Remaining funds were to be used for competitive grants. Over the 2 years, formula grants totaled almost $2 billion, and competitive grants, $712 million. As of December 31, 2000, $1.6 billion in WtW funds remained unspent; and, as requested by the President, Congress extended the WtW spending deadline (from 3 years to 5 years from the award date) in P. L. 106-554. As first enacted, 70% of funds had to be used to benefit TANF recipients (and non-custodial parents) with at least two specified barriers to work who themselves (or whose minor children) were long-term recipients (30 months of AFDC/ TANF benefits) or were within 12 months of reaching a time limit. Eligibility was liberalized by P. L. 106-113. States now can help new groups: long-term TANF recipients without specified work barriers, former foster care youths 18 to 24 years old, TANF recipients who are determined by criteria of the local private industry council to have significant barriers to self-sufficiency, and non-TANF custodial parents with below-poverty income who are unemployed, underemployed, or having difficulty paying child support and comply with a personal responsibility contract. (See CRS Report RS20134.)
Transfer of TANF Funds The law allows states to transfer up to 30% of TANF funds to the Child Care and Development Block Grant (CCDBG) and the Title XX social services block grant (SSBG), but sets a limit of 10% on the share that can go to SSBG. P. L. 105-200 allows states to use TANF funds, within the overall 30% transfer limit, as state matching funds for job access grants to provide transportation services to TANF recipients and ex-recipients, noncustodial parents of TANF children, and those at "risk" of becoming eligible for TANF. Cumulative SSBG transfers from TANF awards through FY1999 totaled $6.4 billion, 13.7% of awards.
During FY1999, states transferred 17% of 1999 awards (11% to CCDBG and 6% to SSBG). P. L. 105-178 cut the share of funds that could go to SSBG to 4.25%, effective in FY2001, but Congress in December restored the 10% cap for FY2001 only; and in late 2001 ( P. L. 107-116) continued it at 10% for FY2002. The House-passed TANF bill allows 50% of TANF funds to be transferred to CCDBG.
Victims of Domestic Violence The 1996 law allows states to certify in their TANF plans that they have adopted standards to screen and identify TANF recipients with a history of domestic violence, refer them to services, and waive program requirements in some cases. The Senate several times voted to allow unlimited TANF waivers for victims of domestic violence and to disregard these persons in computing a state's work participation rate, but the House has disagreed. Regulations permit a state that has adopted the Family Violence Option (FVO) to receive "reasonable cause" exceptions to penalties for failing work and time limit rules if the state had granted domestic violence waivers that met certain standards. (See CRS Report RS20662.) For legislation, see S. 940/ H. R. 1990, H. R. 2258, and S. 1249.
Transportation for TANF Recipients The 1998 transportation act (P. L. 105-178) authorized $750 million in 50% matching funds over 5 years for matching grants for job access and reverse commute grants for welfare recipients, of which no more than $10 million annually can be for reverse commute projects. It said funds were to be used to develop services for welfare recipients and other low-income persons (income not above 150% of the poverty level). As noted immediately above, states may use TANF funds, within limits, as state matching funds for these grants. Appropriations for FY1999 and 2000 were $75 million annually (half the Clinton budget request). The FY2001 budget again proposed $150 million, but Congress provided $99.780 million (P. L. 106-346). In FY1999, the Federal Transit Administration (FTA) awarded competitive grants to 206 projects, but thereafter Congress designated many projects for funding. For FY2000, about 50% of funds were earmarked for specific projects, and for FY2001, about 75% ($ 21 million was earmarked in FY2001 for five state governments). Observing that earmarking of funds prevented projects to "emerge from a competitive process," FTA proposed on May 3, 2001, to allocate all funds among the states and outlying areas, on the basis of each jurisdiction's share of low-income persons, beginning in FY2002. It requested $125 million for that year and said a formula program would allow states to select grantees on a competitive basis and facilitate multi-year funding. For details of the proposal and information about FY1999-FY2001 awards, see [http:// www. fta. dot. gov/ wtw].
Housing Vouchers for TANF Recipients The President's FY1999 budget proposed tenant-based housing assistance to help eligible TANF families move to work ($ 283 million, sufficient for 50,000 vouchers). Congress included these vouchers in the FY1999 HUD appropriation act (P. L. 105-276) but specified that at least $32 million of the $283 million total be made available for initiatives in eight specified localities. The law made sweeping changes in subsidized housing, including: Reducing the share of units reserved for very poor families in an effort to achieve an income mix; requiring housing agencies to set minimum rents (not above $50 monthly); allowing public housing tenants to choose a flat rent or income-adjusted rent; forbidding housing agencies to increase the rent for one year of TANF recipients (or some other previously unemployed persons) who take a job; and requiring adult public housing residents, for 8 hours monthly, to participate in a self-sufficiency program or in community service. (See CRS Report 98-868.) The FY2000 and FY2001 budgets requested funding for new WtW housing vouchers, but Congress denied the requests, and subsequent budgets (including that for FY2003) have sought no new WtW housing vouchers. For a general discussion of housing for the poor, see CRS Report RL30486.
Tax Credits for Hiring Welfare Recipients In 1997, Congress established a Welfare-to-Work (WtW) Tax Credit for hiring persons who had received AFDC/ TANF for 18 months. It also extended an existing credit called the Work Opportunity Tax Credit (WOTC) for hiring certain persons, including those who had received TANF for 9 months. In late 1999, Congress extended both credits retroactively and through December 31, 2001 (P. L. 106-170). (See CRS Report RL30089.) P. L. 106-554 added "renewal communities" to the areas where a tax credit is offered for hiring resident youth. S. 545, introduced March 15, 2001, would extend WOTC to small business employees working or living in areas of poverty. P. L. 107-147, signed March 9, includes an extension of the WtW tax credit and WOTC through December 31, 2003.
Individual Development Accounts (IDAs) The 1996 law permits states to use TANF funds to carry out a program of individual development accounts (IDAs) established by (or on behalf of) persons eligible for TANF, with no dollar limit. Accounts are to contain deposits from the recipient's earnings, matched by a contributions from a not-for-profit organization, or a state or local government agency in cooperation with the organization. Withdrawals are allowed only for postsecondary educational expenses, first home purchase, and business capitalization. All means-tested programs must disregard amounts, including accruing interest, in TANF-funded IDEAS. According to HHS, 31 states allow TANF recipients to establish IDAs, including IDAs under the Assets for Independence (AIA) 5-year demonstration program created by Congress in 1998. In the first three years of the AIA program, awards totaling $37.5 million were made to 125 competitively-funded grantees to operate IDA programs for TANF-eligible and certain other low-income persons. In addition, under terms of the law, two states (Indiana and Pennsylvania) with pre-existing programs were awarded just over $5 million for FY1999- 2001. In mid-April, 2002, the Office of Community Services requested applications for FY2002 awards. Deadline for applications was August 5. Appropriations for FY1999 and FY2000 were $10 million each; for FY2001 and FY 2002, $25 million each.
In passing H. R. 7 on July 19, 2001, the House voted to amend and extend the AIA program through FY2008 and to double its authorized funding (Title III), rather than to establish a new IDA program financed by income tax credits to financial institutions, as proposed by the Administration in the original bill. The President's FY2003 budget, S. 1924 (the CARE Act, as introduced), and the Senate Finance Committee version of H. R. 7 renew the proposal to create tax credits for financial institutions with individual development accounts.
Unspent TANF Funds As of September 30, 2000 (latest available data), HHS reports that states had an unspent/ unobligated balance in the U. S. Treasury of $3.2 billion in TANF funds, from FY1997-FY2000 TANF grants. Five states accounted for more than half of the total: New York, $761 million; Minnesota, $232 million; Ohio, $217 million; Michigan, $200 million; and Louisiana, $169 million. Eleven states had no balances: Colorado, Connecticut, Delaware, Illinois, Kansas, Kentucky, Maine, Nevada, New Jersey; Pennsylvania, and South Carolina. States may draw TANF funds from the Treasury only for reimbursement of expenditures. The law sets no fiscal year deadline for expenditure of TANF funds for "assistance," defined as basic ongoing aid. States with balances on October 1, 2002 may use them for continued assistance.
Child Support Collections To receive TANF, parents must assign child support rights to the state. In FY1999, child support enforcement offices collected $6 billion assigned by TANF and former TANF families. Of this sum, $3.8 billion was distributed to former TANF families and $0.1 million to TANF families; most of the rest was used to repay federal and state administrative costs. The House voted last year (H. R. 4678) to require states and localities to distribute more child support to ex-welfare families (with federal funding) and to allow states to give child support collections to TANF families without having to repay the federal government for its share of the money. The bill also proposed "fatherhood" grants to promote marriage and applied Charitable Choice rules to them, but the Senate did not act on counterpart legislation. P. L. 106-553 and P. L. 106-554 appropriated $4 million to two national organizations to promote fatherhood. The House-passed TANF bill (H. R. 4737) and the Senate Finance Committee substitute for this bill include provisions to promote "responsible fatherhood" and distribute more child support directly to families.
TANF Bonus Funds On 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 July 2, 2002, the Department announced award of the third TANF high performance bonus: $200 million to 26 states and D. C., based on state rankings (absolute and relative) in FY2000 on work-related measures — rates of job entry and success in the workforce (job retention and earnings gain). Winners ranked among the top 10 states in at least one category. Bonuses ranged from $0.648 million in Nebraska for improvement in workforce success to $41.7 million in California (also the top winner in the two previous years) for workforce success. For state rankings and high performance bonuses, see [http:// www. acf. dhhs. gov/ programs/ opre/ hpb/ index. htm]. On August 30, 2000, HHS issued final rules for high performance bonuses, effective for awards beginning in FY2002, available on the HHS Web site at [http:// www. acf. dhhs. gov/ programs/ opre/ hpb]. The new rules add four non-work performance measures: family formation and stability, health insurance coverage, food stamp coverage, and child care coverage.
This document is not necessarily endorsed by the Almanac of Policy Issues. It is being preserved in the Policy Archive for historic reasons.