99–010

Calendar No. 216

107TH CONGRESS REPORT

1st Session " ! SENATE 107–94

TANF SUPPLEMENTAL GRANTS ACT OF 2001

NOVEMBER 7, 2001.—Ordered to be printed

Mr. BAUCUS, from the Committee on Finance,

submitted the following

R E P O R T

together with

ADDITIONAL VIEWS

[To accompany S. 942]

[Including cost estimate of the Congressional Budget Office]

The Committee on Finance, having considered legislation (S. 942)

to reauthorize the supplemental grant for population increases in

certain states under the temporary assistance to needy families

program for fiscal year 2002, reports favorably thereon with an

amendment and refers the bill as amended to the full Senate with

a recommendation that the bill do pass.

I. SUMMARY

S. 942 continues, for one year, the supplemental grant portion of

the Temporary Assistance for Needy Families (TANF) program.

The TANF program was created in 1996 to replace the Aid to Families with Dependent Children (AFDC) program. It is a block grant,

replacing the old welfare program with a flexible funding stream.

State allocations of TANF funding are largely based on the

amount of AFDC funds a State received in the years just prior to

1996. AFDC was an entitlement program and States set their own

benefit levels and many of their own eligibility standards. The Federal Government provided a share of the cost of aiding families in

AFDC. This led to wide variation in the amount of AFDC funds

going to each State.

During consideration of the 1996 welfare law, there was substantial discussion about whether to allocate TANF funds on the basis

of historic AFDC spending or whether to shift to some alternate

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formula, such as one based on the number of children in poverty

in a State. The Congress decided to primarily allocate TANF on the

basis of historic AFDC spending. However, a ‘‘supplemental grant’’ funding stream was created to add to the base TANF allocation for

certain States which receive relatively low TANF allocations per

poor child or which had high growth rates.

More specifically, for FY 1998, the first year of the supplemental

grants, States qualified in one of three ways: • FY 1994 Federal welfare expenditures per poor person at or

below 35 percent of the comparable national average per poor

person; • Population growth of more than 10 percent from 1990 to 1994;

or • Having both below average FY 1994 Federal welfare expenditures per poor person and above average population growth

over the most recent 2-year period.

Seventeen States met one of these three criteria and received

TANF supplemental grants. They are: Alabama, Alaska, Arizona,

Arkansas, Colorado, Florida, Georgia, Idaho, Louisiana, Mississippi, Montana, Nevada, New Mexico, North Carolina, Tennessee, Texas, and Utah. These grants represented approximately

2.5 percent of the State’s original TANF allocation.

For FY 1999–FY 2001, every original TANF supplemental State

received a grant. States which met the first or second criteria noted

above received increases of approximately 2.5 percent each year.

Other States only received an increase if they continued to meet

the third criteria. $800 million was provided over the 4 years for

TANF supplemental grants.

TANF supplemental grants received by a State are governed by

the general rules concerning the uses of TANF funds. States have

great flexibility and can use the funds to support traditional cash

welfare assistance, innovative welfare-to-work programs, efforts to

prevent out-of-wedlock childbearing, or many other related purposes.

In the FY 2002 Budget Resolution funding was set aside to continue the TANF supplemental grants at the FY 2001 level of $319

million. On May 23, 2001, Senators Bob Graham (D–FL) and Kay

Bailey Hutchison (R–TX) introduced S. 942, the TANF Supplemental Grants Act of 2001, which reauthorized the program for 1

year. This restoration of funds is needed because, under the 1996

welfare reform law, the TANF supplemental grant funds expire 1

year before the rest of TANF as part of balancing the Federal

budget by 2002. Since then, the Federal fiscal outlook has improved

significantly.

If the TANF supplemental grants are not continued, several

States face an effective 10 percent reduction in their TANF funding. This could require them to lessen their welfare-to-work efforts.

This is of particular concern since States receiving the TANF supplemental grants are among those with the fewest TANF dollars

per poor child. They are the States with the least room to make

cutbacks in their TANF programs.

We have been contacted by a number of State organizations and

individual Governors to express their support for the continued

funding of TANF supplemental grants and the negative impact of

failing to do so. For example, the National Governors Association

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stated (in a letter of September 10, 2001) that ‘‘[c]uts of this magnitude would have a significant effect on continued state implementation of welfare reform.’’ Governor Foster of Louisiana stated (in

a letter of July 19, 2001) that ‘‘[t]hese modest grants were intended

to reduce the very large disparity in TANF funding between poorer

and wealthier states . . .’’ and that they have ‘‘afforded states like

mine a much better opportunity to achieve TANF goals.’’ As the Finance Committee prepares for the reauthorization of

the 1996 welfare law next year, this measure will ‘‘hold harmless’’ States receiving TANF supplemental grants. The committee substitute reauthorizes the TANF supplemental grants for 1 year at

the FY 2001 funding level of $319 million, consistent with the

Budget Resolution. (As originally introduced, S. 942 would have

provided $402 million for TANF supplemental grants, consistent

with the original 1996 formula, which allowed for funding to grow

in States meeting the first two eligibility criteria.) Under the committee substitute no State will receive more TANF funding than in

FY 2001. But no State will receive less. This will allow the committee time to properly review State TANF allocations as part of

the broader welfare reauthorization process in 2002.

To accommodate the requirements of the Budget Resolution, the

committee substitute includes two offsets of FY 2002 spending. The

first prohibits States from drawing down TANF funds on September 30, 2002. The second rescinds $319 million of TANF ‘‘high

performance’’ bonus in FY 2002 and reappropriates it in FY 2003.

This will not affect the next round of ‘‘high performance’’ awards,

currently scheduled to be awarded in December 2001.

On November 1, 2001, the committee approved S. 942, as amended, by voice vote.

II. THE COMMITTEE BILL

Section 1. Short title

The short title of the bill is the ‘‘TANF Supplemental Grants Act

of 2001.’’

Section 2. Reauthorization

Section 2 reauthorizes the TANF supplemental grants for FY

2002 and awards States the same amount of funding they received

in FY 2001.

Section 3. FY 2002 TANF payments

Section 3 delays TANF payments to States from September 30,

2002 to October 1, 2002.

Section 4. TANF ‘‘high performance’’ bonus

Section 4 rescinds in FY 2002 $319 million of the $600 million

yet to be awarded in TANF ‘‘high performance’’ bonuses to States.

It then reappropriates the funds in FY 2003.

III. CONGRESSIONAL ACTION

On May 23, 2001, S. 942 was introduced in the Senate. On May

22, 2001, a companion measure, H.R. 1930 had been introduced in

the House by Representatives Kevin Brady (R–TX) and Lloyd

Doggett (D–TX).

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On July 17, 2001, the Finance Committee scheduled a markup

of S. 942 but was unable to complete it because of unrelated circumstances.

On November 1, 2001, the Finance Committee approved S. 942,

as amended, on a voice vote, and ordered the bill reported to the

full Senate without further amendment.

IV. VOTE OF THE COMMITTEE IN REPORTING THE BILL

In compliance with section 133 of the Legislative Reorganization

Act of 1946, the committee states that S. 942 was ordered favorably

reported, with an amendment, by voice vote with a quorum present

on November 1, 2001.

VI. BUDGETARY IMPACT OF THE BILL

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

S. 942—TANF Supplemental Grants Act of 2001

Summary: S. 942 would extend the Supplemental Grants for

Population Increases under the Temporary Assistance for Needy

Families (TANF) program through 2002. States would receive

grants funded at the 2001 level totaling $319 million. The bill

would delay some other payments to states from 2002 to 2003.

Overall, enacting the bill would reduce direct spending by $20 million in 2002, but would increase such spending by $135 million in

2003 and $315 million over the 2002–2011 period. Because the bill

would affect direct spending, pay-as-you-go procedures would

apply.

S. 942 contains no intergovernmental or private-sector mandates

as defined in the Unfunded Mandates Reform Act (UMRA). Overall, the bill would authorize an increase in grant funding to states

of $319 million; CBO estimates that most of those funds would be

spent over the 2002–2011 period.

Estimated cost to the Federal Government: The estimated budgetary impact of S. 942 is shown in the following table. The costs

of this legislation fall with budget function 600 (income security).

Seventeen states that had lower-than-average TANF grants per

poor person or had increasing populations received Supplemental

Grants each year for 1998 through 2001. S. 942 would provide Supplemental Grants totaling $319 million to those states in 2002. Because many states have not been spending their entire TANF grant

or have balances from prior years, CBO assumes that states would

not spend the new funds quickly. CBO estimates that states would

spend $90 million in 2002 and $25 million each year thereafter

until the money is spent. We estimate that such spending would

total $190 million over the 2002–2006 period.

By fiscal year, in millions of dollars—

2002 2003 2004 2005 2006

CHANGES IN DIRECT SPENDING

Extend supplemental grants through 2002 at $319 million:

Budget authority .................................................................................. 319 0 0 0 0

Estimated outlays ................................................................................ 90 25 25 25 25

Delay TANF payments to states:

Budget authority .................................................................................. 0 0 0 0 0

Estimated outlays ................................................................................ ¥110 110 0 0 0

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By fiscal year, in millions of dollars—

2002 2003 2004 2005 2006

Rescind $319 million of budget authority for the high-performance bonus

in 2002 and restore it in 2003:

Budget authority .................................................................................. ¥319 319 0 0 0

Estimated outlays ................................................................................ 0 0 0 0 0

Total changes:

Budget authority .................................................................................. 0 319 0 0 0

Estimated outlays ................................................................................ ¥20 135 25 25 25

In addition, the bill specifies that any TANF payments that

would otherwise be sent to states on September 30, 2002, would instead be sent on October 1, 2002. Based on recent spending patterns, CBO estimates that $110 million of payments would be

moved from fiscal year 2002 to fiscal year 2003.

Finally, the bill would rescind $319 million in budget authority

for a TANF bonus to high-performing states in 2002 and re-appropriate the money in 2003. The Personal Responsibility and Work

Opportunity Reconciliation Act of 1996 appropriated $1 billion for

high-performance bonuses for the 1999–2003 period. Based on the

current schedule for awarding grants, $400 million would not be

awarded until 2003 anyway, so this provision would not affect the

level or timing of payments to states.

Pay-as-you-go-considerations: The Balanced Budget and Emergency Deficit Control Act sets up pay-as-you-go procedures for legislation affecting direct spending or receipts. The following table

displays CBO’s estimate of the direct spending effects of S. 942. For

the purposes of enforcing pay-as-you-go procedures, only the effects

in the budget year and the succeeding four years are counted.

By fiscal year, in millions of dollars—

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Changes in outlays ........................................................... ¥20 135 25 25 25 25 25 25 25 25

Changes in receipts .......................................................... Not applicable

Estimated impact on State, local, and tribal governments: S. 942

contains no intergovernmental mandates as defined in UMRA.

Overall, the bill would authorize an increase in grant funding to

states of $319 million; CBO estimates that most of those funds

would be spent over the 2002–2011 period.

Estimated impact on the private sector: S. 942 contains no private-sector mandates as defined in UMRA.

Estimate prepared by: Federal costs: Sheila Dacey; impact on

State, local, and tribal governments: Leo Lex; impact on the private

sector: Bruce Vavrichek.

Estimate approved by: Peter H. Fontaine, Deputy Assistant Director for Budget Analysis.

VII. REGULATORY IMPACT AND OTHER MATTERS

In compliance with paragraph 11(b) of rule XXVI of the Standing

Rules of the Senate, the committee states that the bill will not significantly regulate any individuals or businesses, will not affect the

personal privacy of individuals, and will result in no significant additional paperwork.

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The following information is provided in accordance with section

423 of the Unfunded Mandates Reform Act of 1995 (Pub. L. No.

104–4). The committee has determined that the bill contains no

intergovernmental mandates, as defined in UMRA, and would not

affect the budgets of State, local, or tribal governments.

(7)

VIII. ADDITIONAL VIEWS OF MR. GRAHAM

I am pleased that the Senate Finance Committee approved the

‘‘TANF Supplemental Grants Act of 2001,’’ sponsored by Senator

Kay Bailey Hutchison and me.

The TANF program, created by the 1996 welfare reform law,

gives crucial assistance to 17 States which either receive the least

welfare funds per person or, like Florida, have high rates of population growth.

The extension will mean an estimated $60 million to Florida in

fiscal year 2002 and significant TANF funds for 16 other States including Alaska, Arizona, Arkansas, Louisiana, Mississippi, Montana, New Mexico, Tennessee, Texas and Utah. This program has

been critical to the success of welfare reform in many of these

States.

These grants were included in the 1996 welfare law to reduce the

very large disparity in TANF funding between poorer and wealthier States. When we designed the TANF program to replace Aid for

Families with Dependent Children (AFDC) in 1996, the new grants

were based on peak Federal spending for AFDC and related programs, based on fiscal year 1994 spending levels.

This funding structure reinforced the existing, significant disparities in funding per poor child, which varied from as low as

$400 in some States to more than $2,000 in others. Without a

change in the funding structure, poorer States would have found

themselves unable to provide adequate child care, transportation

and other critical tools needed to help their citizens move from welfare to work.

If this bill is not passed into law, several States will be forced

to scale back their welfare reform efforts, which have shifted in recent years to include support services for low-income working families and efforts to address the multiple barriers to employment that

face a substantial share of the families that remain on welfare.

In these difficult economic times, States will require all available

resources to provide cash assistance and work support services to

low-income families who have been displaced from their jobs. This

bill will give these States the tools necessary to do just that.

(8)

IX. CHANGES IN EXISTING LAW

In compliance with paragraph 12 of rule XXVI of the Standing

Rules of the Senate, changes in existing law made by the bill, as

reported, are shown as follows (existing law proposed to be omitted

is enclosed in black brackets, new matter is printed in italic, existing law in which no change is proposed is shown in roman):

SOCIAL SECURITY ACT

* * * * * * *

TITLE IV—GRANTS TO STATES FOR AID

AND SERVICES TO NEEDY FAMILIES

WITH CHILDREN AND FOR CHILDWELFARE SERVICES

* * * * * * *

PART A—BLOCK GRANTS TO STATES FOR TEMPORARY ASSISTANCE

FOR NEEDY FAMILIES

* * * * * * *

GRANTS TO STATES

SEC. 403. (a) GRANTS.—

(1) FAMILY ASSISTANCE GRANT.—

* * * * * * *

(3) SUPPLEMENTAL GRANTS FOR POPULATION INCREASES IN

CERTAIN STAGES.—

* * * * * * *

(G) BUDGET SCORING.—Notwithstanding section

257(b)(2) of the Balanced Budget and Emergency Deficit

Control Act of 1985, the baseline shall assume that no

grant shall be made under this paragraph after fiscal year

2001.

(H) REAUTHORIZATION OF GRANTS FOR FISCAL YEAR

2002.—Nothwithstanding any other provision of this

paragraph—

(i) any State that was a qualifying State under this

paragraph for fiscal year 2001 or any prior fiscal year

shall be entitled to receive from the Secretary for fiscal

year 2002 a grant in an amount equal to the amount

required to be paid to the State under this paragraph

for the most recent fiscal year in which the State was

a qualifying State;

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(ii) subparagraph (G) shall be applied as if ‘‘2002’’ were substituted for ‘‘2001’’; and

(iii) out of any money in the Treasury of the United

States not otherwise appropriated, there are appropriated for fiscal year 2002 such sums as are necessary

for grants under this subparagraph.

* * * * * * *

Æ