By Yuriy Dyudyuk, USCM Intern
February 20, 2006

First passed in 1996, welfare reform legislation, known as The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PL 104-193) or Temporary Assistance for Needy Families (TANF), was reauthorized on February 8 as part of The Budget Reconciliation Act (PL 109-171). The bill expired in 2002, but has operated under a series of continuing resolutions due to Congressional debates over spending levels, required work hours, training and education provisions, marriage promotion initiatives and child care funding. The new legislative provisions reauthorize the TANF state block grant at $16.5 billion through 2010, with a major revision in the caseload reduction credit which could result in penalties for states and families being cut off of TANF.

States are required to have 50 percent of the families receiving TANF assistance participating in some type of work activity for 30 hours per week, 20 hours per week for single parents of children under six. However, under the 1996 law, states have been operating at lower participation rates because they received credit for caseload declines since 1995. The new law will only give credit for declines in caseloads after 2005, which means that many states will have to bring up their participation rates significantly by October 1, 2006, the beginning of fiscal year 2007. The Congressional Research Service estimates that the average participation rate in 2003 was 30 percent, including sixteen states with rates of 25 percent or less. On average participation levels must increase by 69 percent. If states fail to meet the 50 percent participation rate, there is a maximum penalty of five percent of the TANF block grant in the first year, which grows by two percent a year up to 21 percent. States are expected to cope with the federal mandates by reducing caseloads and by imposing new barriers to poor families seeking assistance.

of the TANF block grant in the first year, which grows by two percent a year up to 21 percent. States are expected to cope with the federal mandates by reducing caseloads and by imposing new barriers to poor families seeking assistance.

The bill directs the U.S. Department of Health and Human Services (HHS) to issue regulations no later than June 30, 2006 to define the work activities which are countable toward the participation rate and the method for counting work-hours. It is unclear whether the HHS regulations will be written in a way that will increase state flexibility or not. If the regulations are more restrictive, they could significantly burden states, families and employers and lead to additional financial penalties for states.

The new bill provides $150 million per year for marriage promotion and responsible fatherhood programs. The new bill also provides $1 billion over five years for childcare funding, which is $7.4 billion less than the Congressional Budget Office estimates to be the cost of childcare in order to meet the increased work participation rates. The Center on Budget Policy and Policy Priorities estimates that this will cause “some 255,000 fewer children in low-income working families not on TANF” to receive child assistance than in 2004.