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Human Services Committee Information Alert
"The Personal Responsibility, Work and Family Promotion Act of 2003"

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H.R. 4

H.R. 4 passed the House on February 13, 2003, by a vote of 230 to 192, a largely party-line vote. H.R. 4 proposes to reauthorize the 1996 welfare reform law, the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), which created the Temporary Assistance to Needy Families (TANF) program. The program was due to be reauthorized by October 1, 2002, but Congress failed to complete the process and the program is currently being funded through a continuing budget resolution. H.R. 4 reflects the Bush Administration proposal for welfare reform reauthorization and H.R. 4737, which the House passed in 2002 on vote of 229-197, especially in regard to dramatically increased work requirements for the states. The bill increases the percentage of recipients who must be engaged and the number of hours per week recipients must be engaged in work and other activities. In general, recipients must work 40 hours a week, an especially large increase for parents with a child under six who currently must only meet a 20 hour requirement. The activities defined as work are reduced from the number in current law. If states do not meet these dramatically increased work requirements, they risk significant financial penalties being imposed by the federal government. States would be required to impose full family, full check sanctions on recipients who do not meet their self sufficiency plan requirements or refuses to work after the second month of such failure to comply. The focus of H.R. 4 on work increasing work for those who remain on cash assistance is apparent in the concept of "universal engagement," which envisions that every family has a plan stating the work and other activities leading to self-sufficiency adult recipients will undertake as soon as possible. Under current law, recipients have as long as two years before they are required to be working. The bill does contain some new funding for child care, a positive step, but the amount provided is less that many observers have predicted will be needed. Substantial new financial flexibility for states in the TANF program is included in the legislation. (Note: H.R. 4 was also the bill number for the original 1996 law.)

The overall goal of the TANF program is made to "improve child well-being by increasing" state flexibility to operate a program designed to accomplish the four purposes of TANF. The first goal is changed to "provide assistance and services" to needy families..." The second goal is changed to read "end the dependence of needy families on government benefits and reduce poverty by promoting job preparation, work and marriage." The fourth goal of encouraging the maintenance and formation of two parent families is changed to encourage the maintenance and formation of "healthy, 2-parent married families, and encourage responsible fatherhood." All TANF and MOE spending must meet one of the four purposes.

H.R. 4 reauthorizes the Temporary Assistance to Needy Families (TANF) block grant through FY 2008 at $16.5 billion per year (the current level). Supplemental grants are reauthorized through 2007, and are frozen at the level of $319 million a year. There are no earmarks in the TANF block grant.

The amount of TANF funds that states can transfer into the Child Care and Development Fund is increased from 30% of the TANF grant to 50%. The amount states can transfer into the Social Services Block Grant is increased to 10% from 4.25% through 2008.

The $2 billion contingency fund for an economic downturn is reestablished. States would be permitted to use child care expenditures and all spending in separate state programs to meet the 100% MOE requirement to access the contingency fund. This may help states access a fund that has proven inaccessible to states. A federal loan program for state welfare programs established in the 1996 law is repealed.

H.R. 4 also provides that states can use TANF carried over from previous years to provide services beyond cash assistance and can designate TANF funds as "rainy day" reserve funds without these funds being designated as unspent TANF funds. H.R. 4 defines "assistance" to mean payment to an individual or family to meet a basic need, but not including costs of transportation or child care. This means that child care for unemployed recipients would not start the time clock and would count toward the five year lifetime limit, even if a family did not receive cash. HHS regulations currently define child care and transportation for the unemployed as assistance.

The bill establishes a new bonus fund averaging $100 million a year, funded from existing high performance bonus fund, averaging $100 million a year for FYs 04-09. These funds would reward states or tribal organizations for performance in achieving the goals of employment entry, job retention, and increased earnings for families under TANF, as measured on an absolute basis and on the basis of state progress. A formula for measuring state performance will be developed in consultation with the states. The bonus is capped at 5% of a state's TANF grant. Previously appropriated funds for the evaluation of Welfare to Work programs will be available through FY 2004 for payment of high performance bonuses for bonus year 2003 on terms in effect before the repeal of that bonus.

Self-Sufficiency Plans

The Administration's model of universal engagement is reflected in the bill. Every work eligible individual is required to start participation in work or alternative self-sufficiency activities immediately. States must complete a self-sufficiency plan that assesses the employability of each work-eligible individual and specifies appropriate activities for each family containing a work-eligible individual. States would have to monitor recipient compliance with the plan and would review and revise plans as appropriate. If recipients are already receiving assistance as of 10/1/2003, states would have 12 months to complete their plans. For recipients coming onto the program after 10/01/03, states would have 60 days to complete the plan. If a state fails to establish a self-sufficiency plan, it will be penalized 5% of its TANF grant.

H.R. 4 mandates that states have full family, full check sanctions for noncompliance with work rates or self-sufficiency plan requirements after two months of failure to meet the requirements. (For the first month of failure, there is pro rata reduction of benefits.) States with constitutional requirements or statutes before 1966 obligating local government to provide assistance to needy parents and children can still get state MOE credit if they choose to provide aid to these families with state funds and receive MOE credit. However, H.R. 4 limits that exemption for one year.

H.R. 4 increases work participation rates- a measure of the percentage of the caseload in a work activity-- that states must meet or face financial penalties for noncompliance. The requirement would rise to having 70% of adult recipients engaged a work activity from the current 50%. The rate increases 5% each year from 50% in FY 04 to 70% in FY 09. The separate work participation rate for two-parent families is eliminated. The number of hours that recipients must participate in a work or other activity is increased from the current 30 hours a week to 40 hours a week. The lower number of hours required for parents with a child under six, currently 20 hours, is eliminated and parents with a child under six would need to meet the 40 hour requirement. States that do not meet these requirements face harsh fiscal penalties-they lose 5% of their federal TANF funds, must "backfill" that amount with state funds, and their MOE requirement is increased by 5%.

The work rate calculation in the current law is based on number of people meeting the work requirement, not number of hours per week. The work rate participation calculation would be based on an average computed on a 160 hours a month (four weeks of forty hour weeks). Over the course of the year, this builds in a "cushion" for sick leave and holidays of four weeks. States have the option of excluding a family from the work participation rate calculation for the first 30 days the family is on the caseload, and states can continue to exclude parents of a child under the age of one from the work participation rates.

In order to meet the 40 hour a week work requirement, a recipient must spend 24 hours in a strictly defined work activity and 16 hours in a more flexible set of activities as defined by the state. Unlike the current rules, neither job search/job readiness or vocational education (currently limited to six weeks for job search and 12 months for 30% of the caseload for vocational education) counts towards the first 24 hours. Activities that count toward the 24 hours are:

• Unsubsidized employment;
• Subsidized private sector employment;
• Subsidized public sector employment;
• On-the-job training;
• Supervised work experience; or
• Supervised community experience.

Again, states define what activities count for the remaining 16 hours.

Recipients could be counted as meeting the 24 hour work requirement if they are engaged in qualified activities as defined by the states-including such activities as substance abuse treatment, rehabilitation treatment, work-related education, and job search/job readiness-for three months any 24 month period. On a case by case basis, states could also count participation in education or training in certain circumstances as meeting the work requirement for four months in any 24 consecutive months.

The bill does continue the caseload reduction credit, which currently gives states credit against the required work rate for reductions in the caseload since FY 95, but it is modified. For many states, the caseload reduction credit has been critical to meeting work participation rates. The "look-back" year for determining the credit is changed. For FY 2004, the credit would be based on the caseload in 1996. For FY 2005, the credit would be based on the caseload in 1998. For FY 2006, the credit would be based on the caseload in 2001. For FY 2007, and any succeeding fiscal year, the credit would be based on the caseload in the fourth preceding fiscal year. A "super achiever" credit is also included, which will give additional credit to states that had 60 percent caseload reduction between FY 1995 and FY 2001. This bill contains no "employment credit" (proposal to give states credit for those who leave welfare for work.

In their state plans, states are required to establish specific numerical performance goals to improve outcomes related to the four purposes of the TANF program. State plans must describe how the state will pursue ending the dependence of needy families on government benefits and reducing poverty by promoting job preparation and work, and describe how the state will encourage the maintenance and maintenance of healthy two-parent families, encourage responsible fatherhood and prevent and reduce the incidence of out-of-wedlock births.

The plan must describe any strategies the state may be using to address employment retention and advancement, efforts to reduce teen pregnancy, services for struggling or noncompliant families, and for clients with special problems, and program integration. The state plan document must also describe strategies to engage faith-based organizations in the delivery of the TANF services, as well as strategies to improve program management and performance. The Secretary of Health and Human Services, in consultation with the states, will develop uniform performance measures designed to assess the degree of effectiveness and degree of improvement of state TANF programs.

States are required to collect monthly and report quarterly, disaggregated data on families receiving TANF and families served by separate state programs. States are required to report on the reason that TANF recipients get assistance for more than 60 months. States would have to report on families that become ineligible for assistance, categorizing the families according to the reason they became ineligible. Data elements are to be defined in consultation with the National Governor's Association, the American Public Human Services Association, the National Conference of State Legislatures and others. States are also required to submit an additional report on characteristics of programs funded with federal TANF and with state MOE funds by July 1^st each year. This report would include the program names, descriptions and purposes, along with eligibility criteria, sources of funding, number of beneficiaries, sanction policies, and any work requirements. This report would be due 90 days after the end of each fiscal year. Monthly reports on the caseload and annual reports on performance improvement would also be required.

TANF programs are made mandatory partners with Workforce Investment Act One-Stop Employment Training Centers, unless the Governor of the state notifies the departments of Health and Human Services and Labor that it is the Governor's decision not to make the state a mandatory partner. Also, for coordination waivers (a "superwavier") involving WIA, WIA boards would have to approve waiver requests by the states in order for them to go forward.

There is no option for states to serve legal immigrants who arrived after 1996 with federal TANF funds. The bar on using federal TANF for legal immigrants is continued for both services, such as English as a Second Language classes (ESL), and cash assistance. States can still use their own funds to provide TANF-like benefits and services and get MOE credits.

Tribal Family Assistance Grants and grants for tribes that received JOBS funds through 2008.

The bill requires that states address in their state plans how they intend to encourage equitable treatment of married, 2-parent families in their TANF programs. In addition, several new grants are established to promote marriage and responsible fatherhood.

Two new funds are established. First, The Secretary of HHS will award competitive grants to states, territories and tribal organizations to develop and implement innovative programs to promote and support healthy, married 2-parent families. Grants could support any of the following activities: public advertising campaigns supporting marriage; high school programs on the value of marriage and skills to build a healthy marriage; marriage education and relationship skills programs for non-married pregnant women and non-married expectant fathers; premarital education and marriage skills training for engaged couples; marriage enhancement and skills training for married couples or individuals; divorce reduction programs; marriage mentoring programs; and programs that reduce the disincentives to marriage in means-tested programs (if combined with other activities described above). This grant program would receive $100,000,000 a year for six fiscal years (FYs 03 through 08). It would be funded by repealing the bonus states currently receive for reducing out-of-wedlock births. This is a matching grant program that would require a 50% match. Federal funds can be used to the match requirement. HHS has said that they will allow in-kind contributions to count in regulations, but that is not specified in the bill.

H.R. 4 also establishes a separate $102,000,000 annual fund for FYs 03 through 08, of which $100 million will be spent to conduct research and demonstration projects and provide technical assistance focused on family formation and maintenance activities. The money would be awarded by the Secretary of Health and Human Services to support projects conducted by public and private entities. (The remaining $2 million will be used for set aside for demonstration projects regarding the coordination of child welfare and TANF services for tribal families at risk of child abuse or neglect.)

The bill also eliminates the requirement that states must create an income eligibility for MOE-funded program to prevent and reduce out-of-wedlock births, to encourage the maintenance and formation of healthy, two-parent families, or to encourage responsible fatherhood. The bill further provides that federal TANF funds used for marriage promotion shall be treated as state matching funds for marriage promotion grants.

The bill contains several programs intended to promote responsible fatherhood-competitive grants, multi-city and multi-state projects, and projects of national significance. The authorized funding for all of these projects would be $20 million for each of FYS 2004-08. The project is:

• Two types of competitive grants that the Secretary of Health and Human Services would make for demonstration and services projects. Grants would go to public and nonprofit community entities. Full service projects of broader scope are authorized, as are limited purposes projects (grants under $25,000). In awarding the grants, the Secretary may give preference to projects serving low-income fathers. The match requirement is either 80% or 90% for full service projects and there is no match requirement for limited purpose projects.
• Two multi-city, multi-state projects, one of which tests the use of married couples to deliver services are authorized.
• Projects of national significance are also authorized. These are projects would include efforts to collect and disseminate information, media campaigns, and technical assistance.

Of the total funding available, 15% would be available for multi-city projects, projects of national significance, and evaluations.

Existing TANF waivers are ended. The bill establishes a program of demonstration projects in a state or portion of a state to coordinate multiple public assistance, workforce development, and other programs. The programs that can be part of a waiver to conduct these coordination demonstration projects are:

• TANF
• The Social Services Block Grant (SSBG, or Title XX)
• Workforce Investment Act Title 1 (Adult and Dislocated Worker and Youth) programs, except Job Corps, with some limitations
• Projects authorized under Section 505 of the Family Support Act of 1988 (JOBS programs)
• Wagner-Peyser Act (general employment) activities
• Adult Education and Family Literacy Act activities
• Child Care and Development Block Grant (CCDBG) activities
• Housing programs (not Section 8 rental assistance programs or section 7 programs)
• McKinney-Vento Homeless Assistance Act activities
• The Food Stamp program

State applications for a waiver would have to be submitted jointly by the Secretaries of any agency administering a program included in the waiver. Year to year cost neutrality would be required of a waiver program; however, a state applicant could submit to the Director of the Office of Management and Budget a request to allow the cost neutrality requirement be for the five years the project is in effect. Waivers could not be granted for provisions of law relating to civil rights or prohibition of discrimination, purposes of goals of the program, maintenance of effort requirements, health or safety, Fair Labor Standards Act standards, or environmental protection. Waivers could also not be granted for any funding restriction or limitation in an appropriations act, or if the waiver had the effect of transferring appropriated funds from one appropriations account to another. A waiver could not be granted that would waive a funding restriction not in an appropriations act or if the waiver would have the effect of transferring funds from a program for which there is direct spending to another program. Waivers would be granted for five years. Waivers must be based on program coordination between two or more programs. Applications for waivers would have to be acted on in 90 days.

H.R. 4 also sets up a State Food Assistance Block Grant Demonstration Project. This block grant program would fund food assistance, an employment and job training program for needy individuals, and administrative costs. Five states could receive a waiver to operate such a program for five years. A state would receive the greater of the value of food stamp benefits under the state's food stamp program for FY 02 or the average per fiscal year of food stamp benefit values during FYs 2000 through 2002, plus the greater of the state's FY 02 allocation for administrative costs and employment and training programs or the average of the state's allocation for administrative costs and employment and training programs during FYs 2000 through 2002.

CHILD CARE

H.R. 4 would increase child care funds by $2 billion over five years. However, only $1 billion of the $2 billion is mandatory or guaranteed funds, the rest is subject to the appropriations process. The $1 billion in mandatory funds, due to a current law requirement, would require a state match. Under current federal law, all federal funding increases to the CCDF (Child Care and Development Fund) mandatory funding stream must be matching grants. State match is set as the federal Medicaid assistance percentage (FMAP). The bill also increases the four percent set aside of CCDBF funds for quality to six percent. However, the use of quality funds would not be restricted to CCDF-delivered child care, but to all child care for low-income families.

The child care title of H.R. 4 also includes new state plan requirements regarding the consumer and child care provider information, and coordination with other early child care services. State would have to outline a strategy for addressing the quality of child care service with the CCDBG funds. H.R. 4 eliminates the 85 percent of state median eligibility limit for CCDF and allows states to set eligibility income levels.

H.R. 4 provides federal matching funds for limited pass through of child support payments to families receiving TANF. States would have to disregard child support payments when calculating in determining eligibility for and the amount of TANF assistance for a family. States generally retain child support collected for families on welfare to reimburse the state and federal government for the cost of providing assistance. Under current federal law, a state may give all of the child support collected for a family on welfare to the family, divide the money between the state and the family, or retain the entire state share. If a state chooses to operate a pass-through program, the state must bear the entire cost of the program (both the federal and state share). The amount that states could pass through and receive federal cost-sharing for would be $100. The bill also includes a state option to pass through all child support payments to families that formerly received TANF.

Child support orders for TANF families would have to be reviewed every three years. The bill requires states to charge a mandatory fee for successful collection of child support for families that have never been on TANF. The fee would be $25, and would be charged when states had collected at least $500 of support. Additional child support provisions of H.R. 4 include: allowing the use of Directory of New Hire information in the Unemployment Insurance program; increasing the amount of child support arrearages which trigger passport denial from $5,000 to $2,500; and allowing the use of the tax refund intercept program to collect past-due child support on behalf of children who are not minors. Technical assistance funding and federal parent locator service funding are maintained. Child support provisions in the bill would apply to amounts distributed on or after October 1, 2005.

The bill extends the authority of HHS to approve child welfare waivers through 2008. Currently, only 10 waivers can be granted; the bill eliminates that number. The bill also eliminates the limit on the number of states that may be granted waivers to conduct demonstration projects on the same topic and eliminates the number of waivers that may be granted to a single state for a demonstration project. H.R. 4 also requires the Secretary of Health and Human Services to develop a streamlined process for consideration of amendments to and extensions of waivers.

H.R. 4 requires the Commissioner of Social Security to review state agency determinations granting benefits due to blindness and disability. The Commissioner will review at least 20% of the determinations made in FY 03, at least 40% of the determinations made in FY 04, and at least 50% of the determinations made in FY 05 and subsequent years. Under current law, the Social Security Administration (SSA) is required to review 65 percent of favorable disability determinations for the Social Security Disability Insurance (SSDI) program. The proposal would extend this requirement to the SSI program. The Commissioner is directed, to the extent possible, to review determinations that are likely to be incorrect. Federal savings will be credited to the Medicaid program.

Current funding for abstinence education programs is continued at the level of $50 million a year through FY 2007. There is new language regarding allotment and reallotment of the funds that gives the Secretary of HHS more authority over the process.

The ability of states to provide transitional Medicaid assistance to those who leave welfare for work is extended through FY 04 in H.R. 4. This is paid for by cutting state Medicaid administrative funds. The bill applies cost-allocation to Medicaid, reducing the amount that states are paid for administering the current year Medicaid program. It would use the funds not given to states to pay the federal government back for administrative funds for Medicaid that were in their view, improperly included in the TANF block grant. When Congress created Medicaid and Food Stamps, it assumed that large portions of the administrative work for households that received AFDC was already done for AFDC and that these newer programs could piggy-back on that work. As a result, in most states, in AFDC, all costs that were identified as shared costs with Medicaid were allocated to AFDC. This is called the "primary program" approach. For cases that received AFDC, Food Stamps, and Medicaid, the Food Stamp and Medicaid programs paid only the cost of the work that was over and above what was required for AFDC. When Congress replaced AFDC with TANF, it failed to specify how shared costs were to be treated under the new program. The funding included in the TANF block grant, based on pre-1996 spending, was predicated on the method of cost allocation where AFDC paid for the administrative costs that benefited all the various programs. Some federal officials believed that states would maximize the administrative costs attributed to Medicaid or Food Stamps, where 50 percent matching funds were still available, and minimize administrative costs allocated to TANF that was no longer eligible for federal matching payments, freeing TANF block grant funds for other purposes. There is no cut in federal Medicaid administrative funds for Iowa, Pennsylvania, Missouri, Texas and Virginia-these states used a "benefitting" approach to allocating costs.

The same proposal was in last year's House bill, H.R. 4737. TMA was extended in the Senate Finance Committee version of the bill, but the bill did not include the cost allocation offset. This year, unlike last year, the Administration's proposed budget includes savings attributed to cost allocations in the Medicaid budget baseline amounting to a $2.35 billion reduction in Medicaid administrative funds over five years.

Except as otherwise provided, amendments made by this act are effective on the date of enactment of this legislation. If the Secretary of Health and Human Services determines that state legislation is necessary to implement requirements made by the act, the effective date is three months after the first day of the first calendar quarter beginning after the close of the first regular session of the legislature that begins after the date of enactment.