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[House Report 114-644]
[From the U.S. Government Publishing Office]

114th Congress    }                                         {    Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                         {   114-644

======================================================================

 
           TANF ACCOUNTABILITY AND INTEGRITY IMPROVEMENT ACT

                                _______
                                

 June 28, 2016.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

       Mr. Brady of Texas, from the Committee on Ways and Means, 
                        submitted the following

                              R E P O R T

                             together with

                    ADDITIONAL AND DISSENTING VIEWS

                        [To accompany H.R. 2959]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 2959) to prevent States from counting certain 
expenditures as State spending to reduce TANF work 
requirements, having considered the same, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.

                                CONTENTS

                                                                   Page
  I. SUMMARY AND BACKGROUND...........................................2
          A. Purpose and Summary.................................     2
          B. Background and Need for Legislation.................     2
          C. Legislative History.................................     3
 II. EXPLANATION OF THE BILL..........................................4
          Section 1: Short Title.................................     4
          Section 2: No Counting of Third-Party Spending to Meet 
              State Spending.....................................     4
          Section 3: Effective Date..............................     6
III. VOTES OF THE COMMITTEE...........................................6
 IV. NEW BUDGET AUTHORITY AND TAX EXPENDITURES........................6
  V. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET OFFICE........6
 VI. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.......8
          A. Committee Oversight Findings and Recommendations....     8
          B. Statement of General Performance Goals and 
              Objectives.........................................     8
          C. Applicability of House Rule XXI 5(b)................     8
          D. Congressional Earmarks, Limited Tax Benefits, and 
              Limited Tariff Benefits............................     8
          E. Duplication of Federal Programs.....................     8
          F. Disclosure of Directed Rule Makings.................     9
VII. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............9
          A. Text of Existing Law Amended or Repealed by the 
              Bill, as Reported..................................     9
          B. Changes in Existing Law Proposed by the Bill, as 
              Reported...........................................    19
VIII.ADDITIONAL AND DISSENTING VIEWS.................................30

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``TANF Accountability and Integrity 
Improvement Act''.

SEC. 2. LIMIT ON COUNTING OF NONGOVERNMENTAL THIRD-PARTY CONTRIBUTIONS 
                    AS QUALIFIED STATE SPENDING TO MEET STATE SPENDING 
                    REQUIREMENT.

  (a) Limit on Counting Third-party Contributions.--Section 
409(a)(7)(B)(i) of the Social Security Act (42 U.S.C. 609(a)(7)(B)(i)) 
is amended by adding at the end the following:
                                  ``(VI) Limit on counting of third-
                                party contributions.--Such term shall 
                                not include the amount (if any) by 
                                which--
                                          ``(aa) the value of all goods 
                                        and services provided by a 
                                        source other than the State or 
                                        a local government during the 
                                        fiscal year; exceeds
                                          ``(bb) the value of all such 
                                        goods and services claimed by 
                                        the State as qualified State 
                                        expenditures for fiscal year 
                                        2016.''.
  (b) Exclusion of Expenditures for the Provision of Medical 
Services.--Section 409(a)(7)(B)(i) of such Act (42 U.S.C. 
609(a)(7)(B)(i)), as amended by subsection (a) of this section, is 
amended by adding at the end the following:
                                  ``(VII) Exclusion of expenditures for 
                                the provision of medical services.--
                                Such term shall not include any amount 
                                expended for the provision of medical 
                                services.''.

SEC. 3. EFFECTIVE DATE.

  The amendments made by this Act shall take effect on October 1, 2016.

                       I. SUMMARY AND BACKGROUND

                         A. Purpose and Summary

    H.R. 2959 as amended, the ``TANF Accountability and 
Integrity Improvement Act,'' as ordered reported by the 
Committee on Ways and Means on May 11, 2016, would prevent 
states from increasing their counting of outside spending as 
state TANF spending.

                 B. Background and Need for Legislation

    In 1996, Republicans reformed the safety net to better 
support and reward work. As part of these reforms, the failed 
New Deal-era Aid to Families with Dependent Children (AFDC) 
program was replaced with today's Temporary Assistance for 
Needy Families program (TANF), which established strong 
requirements for states to help welfare recipients prepare for 
work and find jobs.
    The number of families receiving cash assistance under the 
TANF program fell by more than 50 percent, and has generally 
remained low over time. Employment rates of single mothers with 
children increased by 15 percent through 2007 compared with 
1995; while their work rates declined as a result of the 2007-
09 recession, they have risen again since 2011 and remain 10 
percent higher than before. Child poverty also declined 
dramatically during this period as more people went to work and 
earnings increased, and poverty among African American 
households with children reached record lows. Poverty among 
female-headed households with children remains lower today than 
before the 1996 reforms--despite two intervening recessions.
    The TANF program has helped shield American families from 
sinking deeper into poverty by providing temporary assistance 
that is also linked to stable employment. But it's been at 
least a decade since any meaningful changes have been made to 
this law.
    Current law requires that states must spend a certain 
amount of state money (based on past state spending on low-
income programs) to receive full federal TANF block grant 
funds, which is called the state ``maintenance of effort'' or 
MOE requirement. States also must engage 50 percent of adults 
in TANF families in work activities, such as employment, job 
training, job search, and vocational education. However, recent 
reports from the nonpartisan Government Accountability Office 
indicate a rising number of states appear to be counting non-
state third-party spending as TANF MOE spending.
    For example, a number of states now count volunteer hours 
as TANF MOE by multiplying volunteer hours by an estimated wage 
rate and then reporting this as ``spending'' in the TANF 
program. This evolution has also resulted in some states 
reporting significant ``excess MOE'' spending, which under a 
1999 regulation allows states to reduce the share of TANF 
recipients expected to work in exchange for TANF benefits. This 
practice also means some states are reducing their state 
investment in TANF, gaming the intent of the law's requirements 
that states continue to invest in the program as a condition of 
receiving federal funds.

                         C. Legislative History

Background

    H.R. 2959, the ``TANF Accountability and Integrity 
Improvement Act,'' was introduced on July 7, 2015, by 
Representative Kristi L. Noem, and was referred to the 
Committee on Ways and Means.

Committee hearings

    The Committee began a bipartisan, comprehensive review of 
the TANF program at the beginning of the Congress, in early 
January 2015. Over the last fifteen months, the Human Resources 
Subcommittee held a series of hearings with witnesses ranging 
from current and former recipients to service providers to 
employers to researchers. Members of the Human Resources 
Subcommittee introduced a series of bills focused on smaller 
provisions within TANF, and then they were compiled into a 
larger, more comprehensive reauthorization draft bill. That 
bipartisan draft was distributed for public comment and dozens 
of stakeholders provided invaluable feedback, some incorporated 
in H.R. 2959.
    On April 30, 2015, the Human Resources Subcommittee held a 
hearing entitled, Next Steps for Welfare Reform: Ideas to 
Improve TANF to Help More Families Find Work and Escape 
Poverty. Specifically, witnesses discussed the need to reform 
the way states used third party spending to count as state 
spending.
    Throughout the Congress, the Human Resources Subcommittee 
held a series of hearings on reforms to TANF, including 
discussions on third party spending by states. Those hearings 
included:
           Challenges Facing Low-Income Individuals and 
        Families in Today's Economy, February 11, 2015
           Expanding Opportunity by Funding What Works: 
        Using Evidence to Help Low-Income Individuals and 
        Families Get Ahead, March 17, 2015
           Protecting the Safety Net from Waste, Fraud, 
        and Abuse, June 3, 2015
           Joint Subcommittee Hearing on How Our 
        Welfare System Can Discourage Work, June 25, 2015
           Welfare Reform Proposals, July 15, 2015
           Better Coordinating Welfare Programs to 
        Serve Families in Need, November 3, 2015
           Moving America's Families Forward: Lessons 
        Learned from Welfare Reform in Other Countries, 
        November 17, 2015
           Getting Incentives Right: Connecting Low-
        Income Individuals with Jobs, March 1, 2016

Committee action

    The Committee on Ways and Means marked up H.R. 2959, the 
``TANF Accountability and Integrity Improvement Act,'' on May 
11, 2016. The bill, H.R. 2959, was ordered favorably reported 
to the House of Representatives as amended by a voice vote 
(with a quorum being present).

                      II. EXPLANATION OF THE BILL

                         Section 1: Short Title

Present law

    No provision.

Explanation of provision

    This section contains the short title of the bill, the 
``TANF Accountability and Integrity Improvement Act.''

Reason for change

    The Committee believes that the short title reflects the 
policy actions included in the legislation.

Effective date

    The provision is effective on October 1, 2016.

 Section 2: No Counting of Third-Party Spending To Meet State Spending

Present law

    The Personal Responsibility and Work Opportunity 
Reconciliation Act (PRWORA, P.L. 104-193) created the Temporary 
Assistance for Needy Families (TANF) block grant by ending and 
consolidating funding from several predecessor programs. The 
predecessor programs were matching grant programs with their 
costs shared by the federal and state governments. The TANF 
block grant is based on federal funding under the predecessor 
programs. Under TANF, states were required to continue spending 
a minimum amount under a maintenance of effort (MOE) 
requirement. The amount states must spend to meet the MOE 
requirement is based on the state share of expenditures in 
TANF's predecessor programs.
    Under the MOE requirement, states are required to expend 
from their own funds at least 75 percent of spending in 
predecessor programs in FY1994. If a state fails to meet TANF 
work participation standards, the state spending requirement is 
increased to 80 percent of historic state expenditures.
    Expenditures counted toward the MOE requirement must be for 
``eligible families,'' with the following types of expenditures 
countable toward the requirement: cash assistance, including 
child support passed-through to the family; child care 
assistance; educational activities, but restricted to such 
expenditures on eligible families and not available to the 
general population; and administrative costs. Additionally, 
states may count toward the MOE any other expenditure that can 
be reasonably calculated toward meeting TANF's statutory goals.
    The Department of Health and Human Services (HHS) has 
interpreted the TANF MOE as a cost-sharing requirement, subject 
to general rules of what expenditure counts toward meeting 
cost-sharing requirements.\1\ These rules are not in TANF 
statute or regulations, but are in general HHS regulations 
regarding grant management.\2\ Under the general rules for cost 
sharing, states may count both cash donations by non-federal 
third parties as well as the value of third party, in-kind 
contributions. To be counted toward the TANF MOE, such third-
party donations must meet the general rules of TANF MOE 
expenditures: be to or on behalf of eligible families and be of 
the type of expenditure generally countable toward the MOE.
---------------------------------------------------------------------------
    \1\See: U.S. Department of Health and Human Services, 
Administration for Children and Families, Office of Family Assistance, 
Clarification that third party cash or in-kind may count toward a 
State's or Territory's TANF maintenance-of-effort (MOE) Requirement, 
TANF-ACF-PA-2004-01, December 1, 2004.
    \2\See: 45 C.F.R. Sec. 92.24.
---------------------------------------------------------------------------
    Federal law also prohibits states from using federal TANF 
funds to provide medical services. Excluded from this 
prohibition are pre-pregnancy family planning services. While 
federal TANF funds cannot be used for medical services, there 
is no corresponding prohibition on counting medical services 
toward the TANF state spending MOE requirement. Medical 
services may be counted if they are for eligible families and 
otherwise meet the requirements that apply to expenditures 
accounted toward the MOE.

Explanation of provision

    Beginning with Fiscal Year 2017, H.R. 2959 as amended would 
``freeze'' the amount of third-party contributions that a state 
may claim toward meeting its MOE requirement. It would exclude 
from the definition of qualified state expenditures counted 
toward the MOE any third party contributions that exceed the 
value of third party contributions claimed by the state as MOE 
expenditures in fiscal year 2016.
    The Committee bill would also prohibit states from counting 
medical services toward the TANF MOE requirement.

Reason for change

    The Committee believes that, while state practice of 
claiming third party spending toward the TANF MOE requirement 
is not technically in violation of current law, states at a 
minimum should not be able to increase the amount of third 
party spending they can claim towards the MOE requirement.

Effective date

    The provision is effective on October 1, 2016.

                       Section 3: Effective Date

Present law

    No provision.

Explanation of provision

    This section includes an effective date of October 1, 2016.

Reason for change

    The Committee believes it is appropriate to have an 
effective date of October 1, 2016, i.e. the start of the next 
fiscal year.

Effective date

    The provision is effective on October 1, 2016.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of H.R. 2959, the ``TANF Accountability and 
Integrity Improvement Act,'' on May 11, 2016.
    The Committee on Ways and Means marked up H.R. 2959, the 
``TANF Accountability and Integrity Improvement Act,'' on May 
11, 2016. The bill, H.R. 2959, was ordered favorably reported 
to the House of Representatives as amended by a voice vote 
(with a quorum being present).

             IV. NEW BUDGET AUTHORITY AND TAX EXPENDITURES

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new budget authority or tax expenditure budget 
authority.

      V. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET OFFICE

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the Committee sets forth the following 
estimate and comparison prepared by the Director of the 
Congressional Budget Office.
                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 17, 2016.
Hon. Kevin Brady,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2959, the TANF 
Accountability and Integrity Improvement Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susanne S. 
Mehlman.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

H.R. 2959--TANF Accountability and Integrity Improvement Act

    Under the Temporary Assistance for Needy Families (TANF) 
program, states are required to spend a minimum amount of state 
money under the maintenance of effort (MOE) requirement in 
order to receive TANF grants. States that meet certain economic 
criteria and that spend more than the minimum amount can 
receive additional funding from the TANF contingency fund. Cash 
donations and the value of in-kind contributions by nonfederal 
third parties may be counted as state spending for purposes of 
the MOE. Beginning in 2017, H.R. 2959 would freeze the amount 
of third-party contributions that a state may claim toward 
meeting its MOE requirement at the level spent in 2016. This 
legislation also would prohibit states from counting spending 
on medical services toward the MOE.
    Based on information from the Department of Health and 
Human Services, CBO assumes that any state that would be 
affected by the changes under the bill would find other ways to 
meet its MOE requirement. Furthermore, to the extent that a 
state could no longer draw down funds from the TANF contingency 
fund, CBO expects that other states would use those funds 
instead. Thus, CBO estimates that enacting the legislation 
would have no significant effect on direct spending. Because 
enacting this bill could affect direct spending, pay-as-you-go 
procedures apply. Enacting H.R. 2959 would not affect revenues.
    CBO estimates that enacting H.R. 2959 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2027.
    The limitations on the ability of states to use cash and 
in-kind resources from third parties as well as spending for 
medical services to meet MOE requirements would not be 
intergovernmental mandates as defined in the Unfunded Mandates 
Reform Act (UMRA). UMRA includes special rules for identifying 
conditions of aid in large entitlement programs as mandates, 
but only when states lack authority to amend their financial or 
programmatic responsibilities. States have significant 
flexibility in TANF to adjust the structure of the program and 
meet the requirements of the bill. The bill would not prohibit 
the use of third-party expenditures, but would limit them to 
the amount used in 2016. According to the Government 
Accountability Office, 16 states counted third-party 
expenditures toward their MOE requirements in 2015, and in 
recent years as many as 11 states used such expenditures to 
cover more than 10 percent of their MOE requirement.
    The bill contains no private-sector mandates as defined in 
UMRA.
    The CBO staff contact for this estimate is Susanne S. 
Mehlman (for federal costs) and Leo Lex (for state impacts). 
This estimate was approved by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

     VI. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
description portions of this report.

        B. Statement of General Performance Goals and Objectives

    With respect to the requirement of clause 3(c)(4) of rule 
XIII of the Rules of the House of Representatives, the 
performance goals and objectives of this legislation are to 
prevent states from increasing their counting of outside 
spending as state TANF spending.

                C. Applicability of House Rule XXI 5(b)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``A bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase may not be considered as passed or agreed to 
unless so determined by a vote of not less than three-fifths of 
the Members voting, a quorum being present.'' The Committee has 
carefully reviewed the bill, and states that the bill does not 
involve any Federal income tax rate increases within the 
meaning of the rule.

  D. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill, and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                   E. Duplication of Federal Programs

    In compliance with Sec. 3(g)(2) of H. Res. 5 (114th 
Congress), the Committee states that no provision of the bill 
establishes or reauthorizes: (1) a program of the Federal 
Government known to be duplicative of another Federal program; 
(2) a program included in any report from the Government 
Accountability Office to Congress pursuant to section 21 of 
Public Law 111-139; or (3) a program related to a program 
identified in the most recent Catalog of Federal Domestic 
Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

                 F. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), 
the following statement is made concerning directed rule 
makings: The Committee estimates that the bill requires no 
directed rule makings within the meaning of such section.

       VII. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

  A. Text of Existing Law Amended or Repealed by the Bill, as Reported

    In compliance with clause 3(e)(1)(A) of rule XIII of the 
Rules of the House of Representatives, the text of each section 
proposed to be amended or repealed by the bill, as reported, is 
shown below:

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e)(1)(A) of rule XIII of the 
Rules of the House of Representatives, the text of each section 
proposed to be amended or repealed by the bill, as reported, is 
shown below:

                          SOCIAL SECURITY ACT

           *       *       *       *       *       *       *
TITLE IV--GRANTS TO STATES FOR AID AND SERVICES TO NEEDY FAMILIES WITH 
                CHILDREN AND FOR CHILD-WELFARE SERVICES

   PART A--BLOCK GRANTS TO STATES FOR TEMPORARY ASSISTANCE FOR NEEDY 
FAMILIES

           *       *       *       *       *       *       *

SEC. 409. PENALTIES.

  (a) In General.--Subject to this section:
          (1) Use of grant in violation of this part.--
                  (A) General penalty.--If an audit conducted 
                under chapter 75 of title 31, United States 
                Code, finds that an amount paid to a State 
                under section 403 for a fiscal year has been 
                used in violation of this part, the Secretary 
                shall reduce the grant payable to the State 
                under section 403(a)(1) for the immediately 
                succeeding fiscal year quarter by the amount so 
                used.
                  (B) Enhanced penalty for intentional 
                violations.--If the State does not prove to the 
                satisfaction of the Secretary that the State 
                did not intend to use the amount in violation 
                of this part, the Secretary shall further 
                reduce the grant payable to the State under 
                section 403(a)(1) for the immediately 
                succeeding fiscal year quarter by an amount 
                equal to 5 percent of the State family 
                assistance grant.
                  (C) Penalty for misuse of competitive 
                welfare-to-work funds.--If the Secretary of 
                Labor finds that an amount paid to an entity 
                under section 403(a)(5)(B) has been used in 
                violation of subparagraph (B) or (C) of section 
                403(a)(5), the entity shall remit to the 
                Secretary of Labor an amount equal to the 
                amount so used.
          (2) Failure to submit required report.--
                  (A) Quarterly reports.--
                          (i) In general.--If the Secretary 
                        determines that a State has not, within 
                        45 days after the end of a fiscal 
                        quarter, submitted the report required 
                        by section 411(a) for the quarter, the 
                        Secretary shall reduce the grant 
                        payable to the State under section 
                        403(a)(1) for the immediately 
                        succeeding fiscal year by an amount 
                        equal to 4 percent of the State family 
                        assistance grant.
                          (ii) Rescission of penalty.--The 
                        Secretary shall rescind a penalty 
                        imposed on a State under clause (i) 
                        with respect to a report if the State 
                        submits the report before the end of 
                        the fiscal quarter that immediately 
                        succeeds the fiscal quarter for which 
                        the report was required.
                  (B) Report on engagement in additional work 
                activities and expenditures for other benefits 
                and services.--
                          (i) In general.--If the Secretary 
                        determines that a State has not 
                        submitted the report required by 
                        section 411(c)(1)(A)(i) by May 31, 
                        2011, or the report required by section 
                        411(c)(1)(A)(ii) by August 31, 2011, 
                        the Secretary shall reduce the grant 
                        payable to the State under section 
                        403(a)(1) for the immediately 
                        succeeding fiscal year by an amount 
                        equal to not more than 4 percent of the 
                        State family assistance grant.
                          (ii) Rescission of penalty.--The 
                        Secretary shall rescind a penalty 
                        imposed on a State under clause (i) 
                        with respect to a report required by 
                        section 411(c)(1)(A) if the State 
                        submits the report not later than--
                                  (I) in the case of the report 
                                required under section 
                                411(c)(1)(A)(i), June 15, 2011; 
                                and
                                  (II) in the case of the 
                                report required under section 
                                411(c)(1)(A)(ii), September 15, 
                                2011.
                          (iii) Penalty based on severity of 
                        failure.--The Secretary shall impose a 
                        reduction under clause (i) with respect 
                        to a fiscal year based on the degree of 
                        noncompliance.
          (3) Failure to satisfy minimum participation rates.--
                  (A) In general.--If the Secretary determines 
                that a State to which a grant is made under 
                section 403 for a fiscal year has failed to 
                comply with section 407(a) for the fiscal year, 
                the Secretary shall reduce the grant payable to 
                the State under section 403(a)(1) for the 
                immediately succeeding fiscal year by an amount 
                equal to the applicable percentage of the State 
                family assistance grant.
                  (B) Applicable percentage defined.--As used 
                in subparagraph (A), the term ``applicable 
                percentage'' means, with respect to a State--
                          (i) if a penalty was not imposed on 
                        the State under subparagraph (A) for 
                        the immediately preceding fiscal year, 
                        5 percent; or
                          (ii) if a penalty was imposed on the 
                        State under subparagraph (A) for the 
                        immediately preceding fiscal year, the 
                        lesser of--
                                  (I) the percentage by which 
                                the grant payable to the State 
                                under section 403(a)(1) was 
                                reduced for such preceding 
                                fiscal year, increased by 2 
                                percentage points; or
                                  (II) 21 percent.
                  (C) Penalty based on severity of failure.--
                The Secretary shall impose reductions under 
                subparagraph (A) with respect to a fiscal year 
                based on the degree of noncompliance, and may 
                reduce the penalty if the noncompliance is due 
                to circumstances that caused the State to 
                become a needy State (as defined in section 
                403(b)(5)) during the fiscal year or if the 
                noncompliance is due to extraordinary 
                circumstances such as a natural disaster or 
                regional recession. The Secretary shall provide 
                a written report to Congress to justify any 
                waiver or penalty reduction due to such 
                extraordinary circumstances.
          (4) Failure to participate in the income and 
        eligibility verification system.--If the Secretary 
        determines that a State program funded under this part 
        is not participating during a fiscal year in the income 
        and eligibility verification system required by section 
        1137, the Secretary shall reduce the grant payable to 
        the State under section 403(a)(1) for the immediately 
        succeeding fiscal year by an amount equal to not more 
        than 2 percent of the State family assistance grant.
          (5) Failure to comply with paternity establishment 
        and child support enforcement requirements under part 
        d.--Notwithstanding any other provision of this Act, if 
        the Secretary determines that the State agency that 
        administers a program funded under this part does not 
        enforce the penalties requested by the agency 
        administering part D against recipients of assistance 
        under the State program who fail to cooperate in 
        establishing paternity or in establishing, modifying, 
        or enforcing a child support order in accordance with 
        such part and who do not qualify for any good cause or 
        other exception established by the State under section 
        454(29), the Secretary shall reduce the grant payable 
        to the State under section 403(a)(1) for the 
        immediately succeeding fiscal year (without regard to 
        this section) by not more than 5 percent.
          (6) Failure to timely repay a federal loan fund for 
        state welfare programs.--If the Secretary determines 
        that a State has failed to repay any amount borrowed 
        from the Federal Loan Fund for State Welfare Programs 
        established under section 406 within the period of 
        maturity applicable to the loan, plus any interest owed 
        on the loan, the Secretary shall reduce the grant 
        payable to the State under section 403(a)(1) for the 
        immediately succeeding fiscal year quarter (without 
        regard to this section) by the outstanding loan amount, 
        plus the interest owed on the outstanding amount. The 
        Secretary shall not forgive any outstanding loan amount 
        or interest owed on the outstanding amount.
          (7) Failure of any state to maintain certain level of 
        historic effort.--
                  (A) In general.--The Secretary shall reduce 
                the grant payable to the State under section 
                403(a)(1) for a fiscal year by the amount (if 
                any) by which qualified State expenditures for 
                the then immediately preceding fiscal year are 
                less than the applicable percentage of historic 
                State expenditures with respect to such 
                preceding fiscal year.
                  (B) Definitions.--As used in this paragraph:
                          (i) Qualified state expenditures.--
                                  (I) In general.--The term 
                                ``qualified State 
                                expenditures'' means, with 
                                respect to a State and a fiscal 
                                year, the total expenditures by 
                                the State during the fiscal 
                                year, under all State programs, 
                                for any of the following with 
                                respect to eligible families:
                                          (aa) Cash assistance, 
                                        including any amount 
                                        collected by the State 
                                        as support pursuant to 
                                        a plan approved under 
                                        part D, on behalf of a 
                                        family receiving 
                                        assistance under the 
                                        State program funded 
                                        under this part, that 
                                        is distributed to the 
                                        family under section 
                                        457(a)(1)(B) and 
                                        disregarded in 
                                        determining the 
                                        eligibility of the 
                                        family for, and the 
                                        amount of, such 
                                        assistance.
                                          (bb) Child care 
                                        assistance.
                                          (cc) Educational 
                                        activities designed to 
                                        increase self-
                                        sufficiency, job 
                                        training, and work, 
                                        excluding any 
                                        expenditure for public 
                                        education in the State 
                                        except expenditures 
                                        which involve the 
                                        provision of services 
                                        or assistance to a 
                                        member of an eligible 
                                        family which is not 
                                        generally available to 
                                        persons who are not 
                                        members of an eligible 
                                        family.
                                          (dd) Administrative 
                                        costs in connection 
                                        with the matters 
                                        described in items 
                                        (aa), (bb), (cc), and 
                                        (ee), but only to the 
                                        extent that such costs 
                                        do not exceed 15 
                                        percent of the total 
                                        amount of qualified 
                                        State expenditures for 
                                        the fiscal year.
                                          (ee) Any other use of 
                                        funds allowable under 
                                        section 404(a)(1).
                                  (II) Exclusion of transfers 
                                from other state and local 
                                programs.--Such term does not 
                                include expenditures under any 
                                State or local program during a 
                                fiscal year, except to the 
                                extent that--
                                          (aa) the expenditures 
                                        exceed the amount 
                                        expended under the 
                                        State or local program 
                                        in the fiscal year most 
                                        recently ending before 
                                        the date of the 
                                        enactment of this 
                                        section; or
                                          (bb) the State is 
                                        entitled to a payment 
                                        under former section 
                                        403 (as in effect 
                                        immediately before such 
                                        date of enactment) with 
                                        respect to the 
                                        expenditures.
                                  (III) Exclusion of amounts 
                                expended to replace penalty 
                                grant reductions.--Such term 
                                does not include any amount 
                                expended in order to comply 
                                with paragraph (12).
                                  (IV) Eligible families.--As 
                                used in subclause (I), the term 
                                ``eligible families'' means 
                                families eligible for 
                                assistance under the State 
                                program funded under this part, 
                                families that would be eligible 
                                for such assistance but for the 
                                application of section 
                                408(a)(7) of this Act, and 
                                families of aliens lawfully 
                                present in the United States 
                                that would be eligible for such 
                                assistance but for the 
                                application of title IV of the 
                                Personal Responsibility and 
                                Work Opportunity Reconciliation 
                                Act of 1996.
                                  (V) Counting of spending on 
                                certain pro-family 
                                activities.--The term 
                                ``qualified State 
                                expenditures'' includes the 
                                total expenditures by the State 
                                during the fiscal year under 
                                all State programs for a 
                                purpose described in paragraph 
                                (3) or (4) of section 401(a).
                          (ii) Applicable percentage.--The term 
                        ``applicable percentage'' means 80 
                        percent (or, if the State meets the 
                        requirements of section 407(a), 75 
                        percent).
                          (iii) Historic state expenditures.--
                        The term ``historic State 
                        expenditures'' means, with respect to a 
                        State, the lesser of--
                                  (I) the expenditures by the 
                                State under parts A and F (as 
                                in effect during fiscal year 
                                1994) for fiscal year 1994; or
                                  (II) the amount which bears 
                                the same ratio to the amount 
                                described in subclause (I) as--
                                          (aa) the State family 
                                        assistance grant, plus 
                                        the total amount 
                                        required to be paid to 
                                        the State under former 
                                        section 403 for fiscal 
                                        year 1994 with respect 
                                        to amounts expended by 
                                        the State for child 
                                        care under subsection 
                                        (g) or (i) of section 
                                        402 (as in effect 
                                        during fiscal year 
                                        1994); bears to
                                          (bb) the total amount 
                                        required to be paid to 
                                        the State under former 
                                        section 403 (as in 
                                        effect during fiscal 
                                        year 1994) for fiscal 
                                        year 1994.
                        Such term does not include any 
                        expenditures under the State plan 
                        approved under part A (as so in effect) 
                        on behalf of individuals covered by a 
                        tribal family assistance plan approved 
                        under section 412, as determined by the 
                        Secretary.
                          (iv) Expenditures by the state.--The 
                        term ``expenditures by the State'' does 
                        not include--
                                  (I) any expenditure from 
                                amounts made available by the 
                                Federal Government;
                                  (II) any State funds expended 
                                for the medicaid program under 
                                title XIX;
                                  (III) any State funds which 
                                are used to match Federal funds 
                                provided under section 
                                403(a)(5); or
                                  (IV) any State funds which 
                                are expended as a condition of 
                                receiving Federal funds other 
                                than under this part.
                        Notwithstanding subclause (IV) of the 
                        preceding sentence, such term includes 
                        expenditures by a State for child care 
                        in a fiscal year to the extent that the 
                        total amount of the expenditures does 
                        not exceed the amount of State 
                        expenditures in fiscal year 1994 or 
                        1995 (whichever is the greater) that 
                        equal the non-Federal share for the 
                        programs described in section 
                        418(a)(1)(A).
                          (v) Source of data.--In determining 
                        expenditures by a State for fiscal 
                        years 1994 and 1995, the Secretary 
                        shall use information which was 
                        reported by the State on ACF Form 231 
                        or (in the case of expenditures under 
                        part F) ACF Form 331, available as of 
                        the dates specified in clauses (ii) and 
                        (iii) of section 403(a)(1)(D).
          (8) Noncompliance of state child support enforcement 
        program with requirements of part d.--
                  (A) In general.--If the Secretary finds, with 
                respect to a State's program under part D, in a 
                fiscal year beginning on or after October 1, 
                1997--
                          (i)(I) on the basis of data submitted 
                        by a State pursuant to section 
                        454(15)(B), or on the basis of the 
                        results of a review conducted under 
                        section 452(a)(4), that the State 
                        program failed to achieve the paternity 
                        establishment percentages (as defined 
                        in section 452(g)(2)), or to meet other 
                        performance measures that may be 
                        established by the Secretary;
                          (II) on the basis of the results of 
                        an audit or audits conducted under 
                        section 452(a)(4)(C)(i) that the State 
                        data submitted pursuant to section 
                        454(15)(B) is incomplete or unreliable; 
                        or
                          (III) on the basis of the results of 
                        an audit or audits conducted under 
                        section 452(a)(4)(C) that a State 
                        failed to substantially comply with 1 
                        or more of the requirements of part D 
                        (other than paragraph (24), or 
                        subparagraph (A) or (B)(i) of paragraph 
                        (27), of section 454); and
                          (ii) that, with respect to the 
                        succeeding fiscal year--
                                  (I) the State failed to take 
                                sufficient corrective action to 
                                achieve the appropriate 
                                performance levels or 
                                compliance as described in 
                                subparagraph (A)(i); or
                                  (II) the data submitted by 
                                the State pursuant to section 
                                454(15)(B) is incomplete or 
                                unreliable;
                the amounts otherwise payable to the State 
                under this part for quarters following the end 
                of such succeeding fiscal year, prior to 
                quarters following the end of the first quarter 
                throughout which the State program has achieved 
                the paternity establishment percentages or 
                other performance measures as described in 
                subparagraph (A)(i)(I), or is in substantial 
                compliance with 1 or more of the requirements 
                of part D as described in subparagraph 
                (A)(i)(III), as appropriate, shall be reduced 
                by the percentage specified in subparagraph 
                (B).
                  (B) Amount of reductions.--The reductions 
                required under subparagraph (A) shall be--
                          (i) not less than 1 nor more than 2 
                        percent;
                          (ii) not less than 2 nor more than 3 
                        percent, if the finding is the 2nd 
                        consecutive finding made pursuant to 
                        subparagraph (A); or
                          (iii) not less than 3 nor more than 5 
                        percent, if the finding is the 3rd or a 
                        subsequent consecutive such finding.
                  (C) Disregard of noncompliance which is of a 
                technical nature.--For purposes of this section 
                and section 452(a)(4), a State determined as a 
                result of an audit--
                          (i) to have failed to have 
                        substantially complied with 1 or more 
                        of the requirements of part D shall be 
                        determined to have achieved substantial 
                        compliance only if the Secretary 
                        determines that the extent of the 
                        noncompliance is of a technical nature 
                        which does not adversely affect the 
                        performance of the State's program 
                        under part D; or
                          (ii) to have submitted incomplete or 
                        unreliable data pursuant to section 
                        454(15)(B) shall be determined to have 
                        submitted adequate data only if the 
                        Secretary determines that the extent of 
                        the incompleteness or unreliability of 
                        the data is of a technical nature which 
                        does not adversely affect the 
                        determination of the level of the 
                        State's paternity establishment 
                        percentages (as defined under section 
                        452(g)(2)) or other performance 
                        measures that may be established by the 
                        Secretary.
          (9) Failure to comply with 5-year limit on 
        assistance.--If the Secretary determines that a State 
        has not complied with section 408(a)(7) during a fiscal 
        year, the Secretary shall reduce the grant payable to 
        the State under section 403(a)(1) for the immediately 
        succeeding fiscal year by an amount equal to 5 percent 
        of the State family assistance grant.
          (10) Failure of state receiving amounts from 
        contingency fund to maintain 100 percent of historic 
        effort.--If, at the end of any fiscal year during which 
        amounts from the Contingency Fund for State Welfare 
        Programs have been paid to a State, the Secretary finds 
        that the qualified State expenditures (as defined in 
        paragraph (7)(B)(i) (other than the expenditures 
        described in subclause (I)(bb) of that paragraph)) 
        under the State program funded under this part for the 
        fiscal year are less than 100 percent of historic State 
        expenditures (as defined in paragraph (7)(B)(iii) of 
        this subsection), excluding any amount expended by the 
        State for child care under subsection (g) or (i) of 
        section 402 (as in effect during fiscal year 1994) for 
        fiscal year 1994, the Secretary shall reduce the grant 
        payable to the State under section 403(a)(1) for the 
        immediately succeeding fiscal year by the total of the 
        amounts so paid to the State that the State has not 
        remitted under section 403(b)(6).
          (11) Failure to maintain assistance to adult single 
        custodial parent who cannot obtain child care for child 
        under age 6.--
                  (A) In general.--If the Secretary determines 
                that a State to which a grant is made under 
                section 403 for a fiscal year has violated 
                section 407(e)(2) during the fiscal year, the 
                Secretary shall reduce the grant payable to the 
                State under section 403(a)(1) for the 
                immediately succeeding fiscal year by an amount 
                equal to not more than 5 percent of the State 
                family assistance grant.
                  (B) Penalty based on severity of failure.--
                The Secretary shall impose reductions under 
                subparagraph (A) with respect to a fiscal year 
                based on the degree of noncompliance.
          (12) Requirement to expend additional state funds to 
        replace grant reductions; penalty for failure to do 
        so.--If the grant payable to a State under section 
        403(a)(1) for a fiscal year is reduced by reason of 
        this subsection, the State shall, during the 
        immediately succeeding fiscal year, expend under the 
        State program funded under this part an amount equal to 
        the total amount of such reductions. If the State fails 
        during such succeeding fiscal year to make the 
        expenditure required by the preceding sentence from its 
        own funds, the Secretary may reduce the grant payable 
        to the State under section 403(a)(1) for the fiscal 
        year that follows such succeeding fiscal year by an 
        amount equal to the sum of--
                  (A) not more than 2 percent of the State 
                family assistance grant; and
                  (B) the amount of the expenditure required by 
                the preceding sentence.
          (13) Penalty for failure of state to maintain 
        historic effort during year in which welfare-to-work 
        grant is received.--If a grant is made to a State under 
        section 403(a)(5)(A) for a fiscal year and paragraph 
        (7) of this subsection requires the grant payable to 
        the State under section 403(a)(1) to be reduced for the 
        immediately succeeding fiscal year, then the Secretary 
        shall reduce the grant payable to the State under 
        section 403(a)(1) for such succeeding fiscal year by 
        the amount of the grant made to the State under section 
        403(a)(5)(A) for the fiscal year.
          (14) Penalty for failure to reduce assistance for 
        recipients refusing without good cause to work.--
                  (A) In general.--If the Secretary determines 
                that a State to which a grant is made under 
                section 403 in a fiscal year has violated 
                section 407(e) during the fiscal year, the 
                Secretary shall reduce the grant payable to the 
                State under section 403(a)(1) for the 
                immediately succeeding fiscal year by an amount 
                equal to not less than 1 percent and not more 
                than 5 percent of the State family assistance 
                grant.
                  (B) Penalty based on severity of failure.--
                The Secretary shall impose reductions under 
                subparagraph (A) with respect to a fiscal year 
                based on the degree of noncompliance.
          (15) Penalty for failure to establish or comply with 
        work participation verification procedures.--
                  (A) In general.--If the Secretary determines 
                that a State to which a grant is made under 
                section 403 in a fiscal year has violated 
                section 407(i)(2) during the fiscal year, the 
                Secretary shall reduce the grant payable to the 
                State under section 403(a)(1) for the 
                immediately succeeding fiscal year by an amount 
                equal to not less than 1 percent and not more 
                than 5 percent of the State family assistance 
                grant.
                  (B) Penalty based on severity of failure.--
                The Secretary shall impose reductions under 
                subparagraph (A) with respect to a fiscal year 
                based on the degree of noncompliance.
          (16) Penalty for failure to enforce spending poli-
        cies.--
                  (A) In general.--If, within 2 years after the 
                date of the enactment of this paragraph, any 
                State has not reported to the Secretary on such 
                State's implementation of the policies and 
                practices required by section 408(a)(12), or 
                the Secretary determines, based on the 
                information provided in State reports, that any 
                State has not implemented and maintained such 
                policies and practices, the Secretary shall 
                reduce, by an amount equal to 5 percent of the 
                State family assistance grant, the grant 
                payable to such State under section 403(a)(1) 
                for--
                          (i) the fiscal year immediately 
                        succeeding the year in which such 2-
                        year period ends; and
                          (ii) each succeeding fiscal year in 
                        which the State does not demonstrate 
                        that such State has implemented and 
                        maintained such policies and practices.
                  (B) Reduction of applicable penalty.--The 
                Secretary may reduce the amount of the 
                reduction required under subparagraph (A) based 
                on the degree of noncompliance of the State.
                  (C) State not responsible for individual 
                violations.--Fraudulent activity by any 
                individual in an attempt to circumvent the 
                policies and practices required by section 
                408(a)(12) shall not trigger a State penalty 
                under subparagraph (A).
  (b) Reasonable Cause Exception.--
          (1) In general.--The Secretary may not impose a 
        penalty on a State under subsection (a) with respect to 
        a requirement if the Secretary determines that the 
        State has reasonable cause for failing to comply with 
        the requirement.
          (2) Exception.--Paragraph (1) of this subsection 
        shall not apply to any penalty under paragraph (6), 
        (7), (8), (10), (12), or (13) of subsection (a) and, 
        with respect to the penalty under paragraph (2)(B) of 
        subsection (a), shall only apply to the extent the 
        Secretary determines that the reasonable cause for 
        failure to comply with a requirement of that paragraph 
        is as a result of a one-time, unexpected event, such as 
        a widespread data system failure or a natural or man-
        made disaster.
  (c) Corrective Compliance Plan.--
          (1) In general.--
                  (A) Notification of violation.--Before 
                imposing a penalty against a State under 
                subsection (a) with respect to a violation of 
                this part, the Secretary shall notify the State 
                of the violation and allow the State the 
                opportunity to enter into a corrective 
                compliance plan in accordance with this 
                subsection which outlines how the State will 
                correct or discontinue, as appropriate, the 
                violation and how the State will insure 
                continuing compliance with this part.
                  (B)  60-day period to propose a corrective 
                compliance plan.--During the 60-day period that 
                begins on the date the State receives a notice 
                provided under subparagraph (A) with respect to 
                a violation, the State may submit to the 
                Federal Government a corrective compliance plan 
                to correct or discontinue, as appropriate, the 
                violation.
                  (C) Consultation about modifications.--During 
                the 60-day period that begins with the date the 
                Secretary receives a corrective compliance plan 
                submitted by a State in accordance with 
                subparagraph (B), the Secretary may consult 
                with the State on modifications to the plan.
                  (D) Acceptance of plan.--A corrective 
                compliance plan submitted by a State in 
                accordance with subparagraph (B) is deemed to 
                be accepted by the Secretary if the Secretary 
                does not accept or reject the plan during 60-
                day period that begins on the date the plan is 
                submitted.
          (2) Effect of correcting or discontinuing 
        violation.--The Secretary may not impose any penalty 
        under subsection (a) with respect to any violation 
        covered by a State corrective compliance plan accepted 
        by the Secretary if the State corrects or discontinues, 
        as appropriate, the violation pursuant to the plan.
          (3) Effect of failing to correct or discontinue 
        violation.--The Secretary shall assess some or all of a 
        penalty imposed on a State under subsection (a) with 
        respect to a violation if the State does not, in a 
        timely manner, correct or discontinue, as appropriate, 
        the violation pursuant to a State corrective compliance 
        plan accepted by the Secretary.
          (4) Inapplicability to certain penalties.--This 
        subsection shall not apply to the imposition of a 
        penalty against a State under paragraph (2)(B), (6), 
        (7), (8), (10), (12), (13), or (16) of subsection (a).
  (d) Limitation on Amount of Penalties.--
          (1) In general.--In imposing the penalties described 
        in subsection (a), the Secretary shall not reduce any 
        quarterly payment to a State by more than 25 percent.
          (2) Carryforward of unrecovered penalties.--To the 
        extent that paragraph (1) of this subsection prevents 
        the Secretary from recovering during a fiscal year the 
        full amount of penalties imposed on a State under 
        subsection (a) of this section for a prior fiscal year, 
        the Secretary shall apply any remaining amount of such 
        penalties to the grant payable to the State under 
        section 403(a)(1) for the immediately succeeding fiscal 
        year.

           *       *       *       *       *       *       *

      B. Changes in Existing Law Proposed by the Bill, as Reported

    In compliance with clause 3(e)(1)(B) of rule XIII of the 
Rules of the House of Representatives, changes in existing law 
proposed 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 italics, existing law in 
which no change is proposed is shown in roman):

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e)(1)(B) of rule XIII of the 
Rules of the House of Representatives, changes in existing law 
proposed by the bill, as reported, are shown as follows (new 
matter is printed in italics and 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 CHILD-WELFARE SERVICES

   PART A--BLOCK GRANTS TO STATES FOR TEMPORARY ASSISTANCE FOR NEEDY 
FAMILIES

           *       *       *       *       *       *       *

SEC. 409. PENALTIES.

  (a) In General.--Subject to this section:
          (1) Use of grant in violation of this part.--
                  (A) General penalty.--If an audit conducted 
                under chapter 75 of title 31, United States 
                Code, finds that an amount paid to a State 
                under section 403 for a fiscal year has been 
                used in violation of this part, the Secretary 
                shall reduce the grant payable to the State 
                under section 403(a)(1) for the immediately 
                succeeding fiscal year quarter by the amount so 
                used.
                  (B) Enhanced penalty for intentional 
                violations.--If the State does not prove to the 
                satisfaction of the Secretary that the State 
                did not intend to use the amount in violation 
                of this part, the Secretary shall further 
                reduce the grant payable to the State under 
                section 403(a)(1) for the immediately 
                succeeding fiscal year quarter by an amount 
                equal to 5 percent of the State family 
                assistance grant.
                  (C) Penalty for misuse of competitive 
                welfare-to-work funds.--If the Secretary of 
                Labor finds that an amount paid to an entity 
                under section 403(a)(5)(B) has been used in 
                violation of subparagraph (B) or (C) of section 
                403(a)(5), the entity shall remit to the 
                Secretary of Labor an amount equal to the 
                amount so used.
          (2) Failure to submit required report.--
                  (A) Quarterly reports.--
                          (i) In general.--If the Secretary 
                        determines that a State has not, within 
                        45 days after the end of a fiscal 
                        quarter, submitted the report required 
                        by section 411(a) for the quarter, the 
                        Secretary shall reduce the grant 
                        payable to the State under section 
                        403(a)(1) for the immediately 
                        succeeding fiscal year by an amount 
                        equal to 4 percent of the State family 
                        assistance grant.
                          (ii) Rescission of penalty.--The 
                        Secretary shall rescind a penalty 
                        imposed on a State under clause (i) 
                        with respect to a report if the State 
                        submits the report before the end of 
                        the fiscal quarter that immediately 
                        succeeds the fiscal quarter for which 
                        the report was required.
                  (B) Report on engagement in additional work 
                activities and expenditures for other benefits 
                and services.--
                          (i) In general.--If the Secretary 
                        determines that a State has not 
                        submitted the report required by 
                        section 411(c)(1)(A)(i) by May 31, 
                        2011, or the report required by section 
                        411(c)(1)(A)(ii) by August 31, 2011, 
                        the Secretary shall reduce the grant 
                        payable to the State under section 
                        403(a)(1) for the immediately 
                        succeeding fiscal year by an amount 
                        equal to not more than 4 percent of the 
                        State family assistance grant.
                          (ii) Rescission of penalty.--The 
                        Secretary shall rescind a penalty 
                        imposed on a State under clause (i) 
                        with respect to a report required by 
                        section 411(c)(1)(A) if the State 
                        submits the report not later than--
                                  (I) in the case of the report 
                                required under section 
                                411(c)(1)(A)(i), June 15, 2011; 
                                and
                                  (II) in the case of the 
                                report required under section 
                                411(c)(1)(A)(ii), September 15, 
                                2011.
                          (iii) Penalty based on severity of 
                        failure.--The Secretary shall impose a 
                        reduction under clause (i) with respect 
                        to a fiscal year based on the degree of 
                        noncompliance.
          (3) Failure to satisfy minimum participation rates.--
                  (A) In general.--If the Secretary determines 
                that a State to which a grant is made under 
                section 403 for a fiscal year has failed to 
                comply with section 407(a) for the fiscal year, 
                the Secretary shall reduce the grant payable to 
                the State under section 403(a)(1) for the 
                immediately succeeding fiscal year by an amount 
                equal to the applicable percentage of the State 
                family assistance grant.
                  (B) Applicable percentage defined.--As used 
                in subparagraph (A), the term ``applicable 
                percentage'' means, with respect to a State--
                          (i) if a penalty was not imposed on 
                        the State under subparagraph (A) for 
                        the immediately preceding fiscal year, 
                        5 percent; or
                          (ii) if a penalty was imposed on the 
                        State under subparagraph (A) for the 
                        immediately preceding fiscal year, the 
                        lesser of--
                                  (I) the percentage by which 
                                the grant payable to the State 
                                under section 403(a)(1) was 
                                reduced for such preceding 
                                fiscal year, increased by 2 
                                percentage points; or
                                  (II) 21 percent.
                  (C) Penalty based on severity of failure.--
                The Secretary shall impose reductions under 
                subparagraph (A) with respect to a fiscal year 
                based on the degree of noncompliance, and may 
                reduce the penalty if the noncompliance is due 
                to circumstances that caused the State to 
                become a needy State (as defined in section 
                403(b)(5)) during the fiscal year or if the 
                noncompliance is due to extraordinary 
                circumstances such as a natural disaster or 
                regional recession. The Secretary shall provide 
                a written report to Congress to justify any 
                waiver or penalty reduction due to such 
                extraordinary circumstances.
          (4) Failure to participate in the income and 
        eligibility verification system.--If the Secretary 
        determines that a State program funded under this part 
        is not participating during a fiscal year in the income 
        and eligibility verification system required by section 
        1137, the Secretary shall reduce the grant payable to 
        the State under section 403(a)(1) for the immediately 
        succeeding fiscal year by an amount equal to not more 
        than 2 percent of the State family assistance grant.
          (5) Failure to comply with paternity establishment 
        and child support enforcement requirements under part 
        d.--Notwithstanding any other provision of this Act, if 
        the Secretary determines that the State agency that 
        administers a program funded under this part does not 
        enforce the penalties requested by the agency 
        administering part D against recipients of assistance 
        under the State program who fail to cooperate in 
        establishing paternity or in establishing, modifying, 
        or enforcing a child support order in accordance with 
        such part and who do not qualify for any good cause or 
        other exception established by the State under section 
        454(29), the Secretary shall reduce the grant payable 
        to the State under section 403(a)(1) for the 
        immediately succeeding fiscal year (without regard to 
        this section) by not more than 5 percent.
          (6) Failure to timely repay a federal loan fund for 
        state welfare programs.--If the Secretary determines 
        that a State has failed to repay any amount borrowed 
        from the Federal Loan Fund for State Welfare Programs 
        established under section 406 within the period of 
        maturity applicable to the loan, plus any interest owed 
        on the loan, the Secretary shall reduce the grant 
        payable to the State under section 403(a)(1) for the 
        immediately succeeding fiscal year quarter (without 
        regard to this section) by the outstanding loan amount, 
        plus the interest owed on the outstanding amount. The 
        Secretary shall not forgive any outstanding loan amount 
        or interest owed on the outstanding amount.
          (7) Failure of any state to maintain certain level of 
        historic effort.--
                  (A) In general.--The Secretary shall reduce 
                the grant payable to the State under section 
                403(a)(1) for a fiscal year by the amount (if 
                any) by which qualified State expenditures for 
                the then immediately preceding fiscal year are 
                less than the applicable percentage of historic 
                State expenditures with respect to such 
                preceding fiscal year.
                  (B) Definitions.--As used in this paragraph:
                          (i) Qualified state expenditures.--
                                  (I) In general.--The term 
                                ``qualified State 
                                expenditures'' means, with 
                                respect to a State and a fiscal 
                                year, the total expenditures by 
                                the State during the fiscal 
                                year, under all State programs, 
                                for any of the following with 
                                respect to eligible families:
                                          (aa) Cash assistance, 
                                        including any amount 
                                        collected by the State 
                                        as support pursuant to 
                                        a plan approved under 
                                        part D, on behalf of a 
                                        family receiving 
                                        assistance under the 
                                        State program funded 
                                        under this part, that 
                                        is distributed to the 
                                        family under section 
                                        457(a)(1)(B) and 
                                        disregarded in 
                                        determining the 
                                        eligibility of the 
                                        family for, and the 
                                        amount of, such 
                                        assistance.
                                          (bb) Child care 
                                        assistance.
                                          (cc) Educational 
                                        activities designed to 
                                        increase self-
                                        sufficiency, job 
                                        training, and work, 
                                        excluding any 
                                        expenditure for public 
                                        education in the State 
                                        except expenditures 
                                        which involve the 
                                        provision of services 
                                        or assistance to a 
                                        member of an eligible 
                                        family which is not 
                                        generally available to 
                                        persons who are not 
                                        members of an eligible 
                                        family.
                                          (dd) Administrative 
                                        costs in connection 
                                        with the matters 
                                        described in items 
                                        (aa), (bb), (cc), and 
                                        (ee), but only to the 
                                        extent that such costs 
                                        do not exceed 15 
                                        percent of the total 
                                        amount of qualified 
                                        State expenditures for 
                                        the fiscal year.
                                          (ee) Any other use of 
                                        funds allowable under 
                                        section 404(a)(1).
                                  (II) Exclusion of transfers 
                                from other state and local 
                                programs.--Such term does not 
                                include expenditures under any 
                                State or local program during a 
                                fiscal year, except to the 
                                extent that--
                                          (aa) the expenditures 
                                        exceed the amount 
                                        expended under the 
                                        State or local program 
                                        in the fiscal year most 
                                        recently ending before 
                                        the date of the 
                                        enactment of this 
                                        section; or
                                          (bb) the State is 
                                        entitled to a payment 
                                        under former section 
                                        403 (as in effect 
                                        immediately before such 
                                        date of enactment) with 
                                        respect to the 
                                        expenditures.
                                  (III) Exclusion of amounts 
                                expended to replace penalty 
                                grant reductions.--Such term 
                                does not include any amount 
                                expended in order to comply 
                                with paragraph (12).
                                  (IV) Eligible families.--As 
                                used in subclause (I), the term 
                                ``eligible families'' means 
                                families eligible for 
                                assistance under the State 
                                program funded under this part, 
                                families that would be eligible 
                                for such assistance but for the 
                                application of section 
                                408(a)(7) of this Act, and 
                                families of aliens lawfully 
                                present in the United States 
                                that would be eligible for such 
                                assistance but for the 
                                application of title IV of the 
                                Personal Responsibility and 
                                Work Opportunity Reconciliation 
                                Act of 1996.
                                  (V) Counting of spending on 
                                certain pro-family 
                                activities.--The term 
                                ``qualified State 
                                expenditures'' includes the 
                                total expenditures by the State 
                                during the fiscal year under 
                                all State programs for a 
                                purpose described in paragraph 
                                (3) or (4) of section 401(a).
                                  (VI) Limit on counting of 
                                third-party contributions.--
                                Such term shall not include the 
                                amount (if any) by which--
                                          (aa) the value of all 
                                        goods and services 
                                        provided by a source 
                                        other than the State or 
                                        a local government 
                                        during the fiscal year; 
                                        exceeds
                                          (bb) the value of all 
                                        such goods and services 
                                        claimed by the State as 
                                        qualified State 
                                        expenditures for fiscal 
                                        year 2016.
                                  (VII) Exclusion of 
                                expenditures for the provision 
                                of medical services.--Such term 
                                shall not include any amount 
                                expended for the provision of 
                                medical services.
                          (ii) Applicable percentage.--The term 
                        ``applicable percentage'' means 80 
                        percent (or, if the State meets the 
                        requirements of section 407(a), 75 
                        percent).
                          (iii) Historic state expenditures.--
                        The term ``historic State 
                        expenditures'' means, with respect to a 
                        State, the lesser of--
                                  (I) the expenditures by the 
                                State under parts A and F (as 
                                in effect during fiscal year 
                                1994) for fiscal year 1994; or
                                  (II) the amount which bears 
                                the same ratio to the amount 
                                described in subclause (I) as--
                                          (aa) the State family 
                                        assistance grant, plus 
                                        the total amount 
                                        required to be paid to 
                                        the State under former 
                                        section 403 for fiscal 
                                        year 1994 with respect 
                                        to amounts expended by 
                                        the State for child 
                                        care under subsection 
                                        (g) or (i) of section 
                                        402 (as in effect 
                                        during fiscal year 
                                        1994); bears to
                                          (bb) the total amount 
                                        required to be paid to 
                                        the State under former 
                                        section 403 (as in 
                                        effect during fiscal 
                                        year 1994) for fiscal 
                                        year 1994.
                        Such term does not include any 
                        expenditures under the State plan 
                        approved under part A (as so in effect) 
                        on behalf of individuals covered by a 
                        tribal family assistance plan approved 
                        under section 412, as determined by the 
                        Secretary.
                          (iv) Expenditures by the state.--The 
                        term ``expenditures by the State'' does 
                        not include--
                                  (I) any expenditure from 
                                amounts made available by the 
                                Federal Government;
                                  (II) any State funds expended 
                                for the medicaid program under 
                                title XIX;
                                  (III) any State funds which 
                                are used to match Federal funds 
                                provided under section 
                                403(a)(5); or
                                  (IV) any State funds which 
                                are expended as a condition of 
                                receiving Federal funds other 
                                than under this part.
                        Notwithstanding subclause (IV) of the 
                        preceding sentence, such term includes 
                        expenditures by a State for child care 
                        in a fiscal year to the extent that the 
                        total amount of the expenditures does 
                        not exceed the amount of State 
                        expenditures in fiscal year 1994 or 
                        1995 (whichever is the greater) that 
                        equal the non-Federal share for the 
                        programs described in section 
                        418(a)(1)(A).
                          (v) Source of data.--In determining 
                        expenditures by a State for fiscal 
                        years 1994 and 1995, the Secretary 
                        shall use information which was 
                        reported by the State on ACF Form 231 
                        or (in the case of expenditures under 
                        part F) ACF Form 331, available as of 
                        the dates specified in clauses (ii) and 
                        (iii) of section 403(a)(1)(D).
          (8) Noncompliance of state child support enforcement 
        program with requirements of part d.--
                  (A) In general.--If the Secretary finds, with 
                respect to a State's program under part D, in a 
                fiscal year beginning on or after October 1, 
                1997--
                          (i)(I) on the basis of data submitted 
                        by a State pursuant to section 
                        454(15)(B), or on the basis of the 
                        results of a review conducted under 
                        section 452(a)(4), that the State 
                        program failed to achieve the paternity 
                        establishment percentages (as defined 
                        in section 452(g)(2)), or to meet other 
                        performance measures that may be 
                        established by the Secretary;
                          (II) on the basis of the results of 
                        an audit or audits conducted under 
                        section 452(a)(4)(C)(i) that the State 
                        data submitted pursuant to section 
                        454(15)(B) is incomplete or unreliable; 
                        or
                          (III) on the basis of the results of 
                        an audit or audits conducted under 
                        section 452(a)(4)(C) that a State 
                        failed to substantially comply with 1 
                        or more of the requirements of part D 
                        (other than paragraph (24), or 
                        subparagraph (A) or (B)(i) of paragraph 
                        (27), of section 454); and
                          (ii) that, with respect to the 
                        succeeding fiscal year--
                                  (I) the State failed to take 
                                sufficient corrective action to 
                                achieve the appropriate 
                                performance levels or 
                                compliance as described in 
                                subparagraph (A)(i); or
                                  (II) the data submitted by 
                                the State pursuant to section 
                                454(15)(B) is incomplete or 
                                unreliable;
                the amounts otherwise payable to the State 
                under this part for quarters following the end 
                of such succeeding fiscal year, prior to 
                quarters following the end of the first quarter 
                throughout which the State program has achieved 
                the paternity establishment percentages or 
                other performance measures as described in 
                subparagraph (A)(i)(I), or is in substantial 
                compliance with 1 or more of the requirements 
                of part D as described in subparagraph 
                (A)(i)(III), as appropriate, shall be reduced 
                by the percentage specified in subparagraph 
                (B).
                  (B) Amount of reductions.--The reductions 
                required under subparagraph (A) shall be--
                          (i) not less than 1 nor more than 2 
                        percent;
                          (ii) not less than 2 nor more than 3 
                        percent, if the finding is the 2nd 
                        consecutive finding made pursuant to 
                        subparagraph (A); or
                          (iii) not less than 3 nor more than 5 
                        percent, if the finding is the 3rd or a 
                        subsequent consecutive such finding.
                  (C) Disregard of noncompliance which is of a 
                technical nature.--For purposes of this section 
                and section 452(a)(4), a State determined as a 
                result of an audit--
                          (i) to have failed to have 
                        substantially complied with 1 or more 
                        of the requirements of part D shall be 
                        determined to have achieved substantial 
                        compliance only if the Secretary 
                        determines that the extent of the 
                        noncompliance is of a technical nature 
                        which does not adversely affect the 
                        performance of the State's program 
                        under part D; or
                          (ii) to have submitted incomplete or 
                        unreliable data pursuant to section 
                        454(15)(B) shall be determined to have 
                        submitted adequate data only if the 
                        Secretary determines that the extent of 
                        the incompleteness or unreliability of 
                        the data is of a technical nature which 
                        does not adversely affect the 
                        determination of the level of the 
                        State's paternity establishment 
                        percentages (as defined under section 
                        452(g)(2)) or other performance 
                        measures that may be established by the 
                        Secretary.
          (9) Failure to comply with 5-year limit on 
        assistance.--If the Secretary determines that a State 
        has not complied with section 408(a)(7) during a fiscal 
        year, the Secretary shall reduce the grant payable to 
        the State under section 403(a)(1) for the immediately 
        succeeding fiscal year by an amount equal to 5 percent 
        of the State family assistance grant.
          (10) Failure of state receiving amounts from 
        contingency fund to maintain 100 percent of historic 
        effort.--If, at the end of any fiscal year during which 
        amounts from the Contingency Fund for State Welfare 
        Programs have been paid to a State, the Secretary finds 
        that the qualified State expenditures (as defined in 
        paragraph (7)(B)(i) (other than the expenditures 
        described in subclause (I)(bb) of that paragraph)) 
        under the State program funded under this part for the 
        fiscal year are less than 100 percent of historic State 
        expenditures (as defined in paragraph (7)(B)(iii) of 
        this subsection), excluding any amount expended by the 
        State for child care under subsection (g) or (i) of 
        section 402 (as in effect during fiscal year 1994) for 
        fiscal year 1994, the Secretary shall reduce the grant 
        payable to the State under section 403(a)(1) for the 
        immediately succeeding fiscal year by the total of the 
        amounts so paid to the State that the State has not 
        remitted under section 403(b)(6).
          (11) Failure to maintain assistance to adult single 
        custodial parent who cannot obtain child care for child 
        under age 6.--
                  (A) In general.--If the Secretary determines 
                that a State to which a grant is made under 
                section 403 for a fiscal year has violated 
                section 407(e)(2) during the fiscal year, the 
                Secretary shall reduce the grant payable to the 
                State under section 403(a)(1) for the 
                immediately succeeding fiscal year by an amount 
                equal to not more than 5 percent of the State 
                family assistance grant.
                  (B) Penalty based on severity of failure.--
                The Secretary shall impose reductions under 
                subparagraph (A) with respect to a fiscal year 
                based on the degree of noncompliance.
          (12) Requirement to expend additional state funds to 
        replace grant reductions; penalty for failure to do 
        so.--If the grant payable to a State under section 
        403(a)(1) for a fiscal year is reduced by reason of 
        this subsection, the State shall, during the 
        immediately succeeding fiscal year, expend under the 
        State program funded under this part an amount equal to 
        the total amount of such reductions. If the State fails 
        during such succeeding fiscal year to make the 
        expenditure required by the preceding sentence from its 
        own funds, the Secretary may reduce the grant payable 
        to the State under section 403(a)(1) for the fiscal 
        year that follows such succeeding fiscal year by an 
        amount equal to the sum of--
                  (A) not more than 2 percent of the State 
                family assistance grant; and
                  (B) the amount of the expenditure required by 
                the preceding sentence.
          (13) Penalty for failure of state to maintain 
        historic effort during year in which welfare-to-work 
        grant is received.--If a grant is made to a State under 
        section 403(a)(5)(A) for a fiscal year and paragraph 
        (7) of this subsection requires the grant payable to 
        the State under section 403(a)(1) to be reduced for the 
        immediately succeeding fiscal year, then the Secretary 
        shall reduce the grant payable to the State under 
        section 403(a)(1) for such succeeding fiscal year by 
        the amount of the grant made to the State under section 
        403(a)(5)(A) for the fiscal year.
          (14) Penalty for failure to reduce assistance for 
        recipients refusing without good cause to work.--
                  (A) In general.--If the Secretary determines 
                that a State to which a grant is made under 
                section 403 in a fiscal year has violated 
                section 407(e) during the fiscal year, the 
                Secretary shall reduce the grant payable to the 
                State under section 403(a)(1) for the 
                immediately succeeding fiscal year by an amount 
                equal to not less than 1 percent and not more 
                than 5 percent of the State family assistance 
                grant.
                  (B) Penalty based on severity of failure.--
                The Secretary shall impose reductions under 
                subparagraph (A) with respect to a fiscal year 
                based on the degree of noncompliance.
          (15) Penalty for failure to establish or comply with 
        work participation verification procedures.--
                  (A) In general.--If the Secretary determines 
                that a State to which a grant is made under 
                section 403 in a fiscal year has violated 
                section 407(i)(2) during the fiscal year, the 
                Secretary shall reduce the grant payable to the 
                State under section 403(a)(1) for the 
                immediately succeeding fiscal year by an amount 
                equal to not less than 1 percent and not more 
                than 5 percent of the State family assistance 
                grant.
                  (B) Penalty based on severity of failure.--
                The Secretary shall impose reductions under 
                subparagraph (A) with respect to a fiscal year 
                based on the degree of noncompliance.
          (16) Penalty for failure to enforce spending poli-
        cies.--
                  (A) In general.--If, within 2 years after the 
                date of the enactment of this paragraph, any 
                State has not reported to the Secretary on such 
                State's implementation of the policies and 
                practices required by section 408(a)(12), or 
                the Secretary determines, based on the 
                information provided in State reports, that any 
                State has not implemented and maintained such 
                policies and practices, the Secretary shall 
                reduce, by an amount equal to 5 percent of the 
                State family assistance grant, the grant 
                payable to such State under section 403(a)(1) 
                for--
                          (i) the fiscal year immediately 
                        succeeding the year in which such 2-
                        year period ends; and
                          (ii) each succeeding fiscal year in 
                        which the State does not demonstrate 
                        that such State has implemented and 
                        maintained such policies and practices.
                  (B) Reduction of applicable penalty.--The 
                Secretary may reduce the amount of the 
                reduction required under subparagraph (A) based 
                on the degree of noncompliance of the State.
                  (C) State not responsible for individual 
                violations.--Fraudulent activity by any 
                individual in an attempt to circumvent the 
                policies and practices required by section 
                408(a)(12) shall not trigger a State penalty 
                under subparagraph (A).
  (b) Reasonable Cause Exception.--
          (1) In general.--The Secretary may not impose a 
        penalty on a State under subsection (a) with respect to 
        a requirement if the Secretary determines that the 
        State has reasonable cause for failing to comply with 
        the requirement.
          (2) Exception.--Paragraph (1) of this subsection 
        shall not apply to any penalty under paragraph (6), 
        (7), (8), (10), (12), or (13) of subsection (a) and, 
        with respect to the penalty under paragraph (2)(B) of 
        subsection (a), shall only apply to the extent the 
        Secretary determines that the reasonable cause for 
        failure to comply with a requirement of that paragraph 
        is as a result of a one-time, unexpected event, such as 
        a widespread data system failure or a natural or man-
        made disaster.
  (c) Corrective Compliance Plan.--
          (1) In general.--
                  (A) Notification of violation.--Before 
                imposing a penalty against a State under 
                subsection (a) with respect to a violation of 
                this part, the Secretary shall notify the State 
                of the violation and allow the State the 
                opportunity to enter into a corrective 
                compliance plan in accordance with this 
                subsection which outlines how the State will 
                correct or discontinue, as appropriate, the 
                violation and how the State will insure 
                continuing compliance with this part.
                  (B)  60-day period to propose a corrective 
                compliance plan.--During the 60-day period that 
                begins on the date the State receives a notice 
                provided under subparagraph (A) with respect to 
                a violation, the State may submit to the 
                Federal Government a corrective compliance plan 
                to correct or discontinue, as appropriate, the 
                violation.
                  (C) Consultation about modifications.--During 
                the 60-day period that begins with the date the 
                Secretary receives a corrective compliance plan 
                submitted by a State in accordance with 
                subparagraph (B), the Secretary may consult 
                with the State on modifications to the plan.
                  (D) Acceptance of plan.--A corrective 
                compliance plan submitted by a State in 
                accordance with subparagraph (B) is deemed to 
                be accepted by the Secretary if the Secretary 
                does not accept or reject the plan during 60-
                day period that begins on the date the plan is 
                submitted.
          (2) Effect of correcting or discontinuing 
        violation.--The Secretary may not impose any penalty 
        under subsection (a) with respect to any violation 
        covered by a State corrective compliance plan accepted 
        by the Secretary if the State corrects or discontinues, 
        as appropriate, the violation pursuant to the plan.
          (3) Effect of failing to correct or discontinue 
        violation.--The Secretary shall assess some or all of a 
        penalty imposed on a State under subsection (a) with 
        respect to a violation if the State does not, in a 
        timely manner, correct or discontinue, as appropriate, 
        the violation pursuant to a State corrective compliance 
        plan accepted by the Secretary.
          (4) Inapplicability to certain penalties.--This 
        subsection shall not apply to the imposition of a 
        penalty against a State under paragraph (2)(B), (6), 
        (7), (8), (10), (12), (13), or (16) of subsection (a).
  (d) Limitation on Amount of Penalties.--
          (1) In general.--In imposing the penalties described 
        in subsection (a), the Secretary shall not reduce any 
        quarterly payment to a State by more than 25 percent.
          (2) Carryforward of unrecovered penalties.--To the 
        extent that paragraph (1) of this subsection prevents 
        the Secretary from recovering during a fiscal year the 
        full amount of penalties imposed on a State under 
        subsection (a) of this section for a prior fiscal year, 
        the Secretary shall apply any remaining amount of such 
        penalties to the grant payable to the State under 
        section 403(a)(1) for the immediately succeeding fiscal 
        year.

           *       *       *       *       *       *       *

                 VIII. ADDITIONAL AND DISSENTING VIEWS

                            ADDITIONAL VIEWS

    This legislation represents a missed opportunity to 
seriously address the ongoing challenge of poverty in America.
    Over the past 50 years, Congress has enacted laws that 
lifted tens of millions of Americans out of poverty, making our 
anti-poverty programs ten times more effective than they were 
when the War on Poverty began.
    But nearly 47 million Americans are still living in 
poverty, including one in five children. These families, and 
the millions of families at risk of falling into poverty, face 
impossible choices every day: transportation to work, child 
care, school supplies, food for dinner, and a place to live. 
They worry about what they will do if they or their children 
get sick and they have no paid leave at work, or how they will 
get to work if the car breaks down. And they have nothing left 
at the end of the month to save for college or retirement.
    A serious attempt to fight poverty would include action on 
the basic supports needed to support work and sustain 
employment--paid leave, access to quality child care, equal pay 
for women and a decent minimum wage, and an Earned Income Tax 
Credit that reaches all workers who need it.
    A serious attempt to fight poverty would include action on 
affordable housing, access to early childhood education, and an 
effort to make college more affordable to help struggling 
families raise their children and help them toward a better 
life.
    A serious attempt to fight poverty would build on 
successful programs like the Supplemental Nutrition Assistance 
Program (SNAP), which lifts nearly 10 million Americans out of 
poverty, and the Social Services Block Grant (SSBG), which 
provides critical help to nearly 30 million Americans. And it 
would build on the Affordable Health Care, which has given 
families long-awaited peace of mind about high medical bills.
    The millions of families that are struggling deserve more 
than this legislation.
                                           Sander M. Levin,
                                                    Ranking Member.

                            DISSENTING VIEWS

    What began as a legislative step forward has become a step 
backward. What did some modest good, now does harm. As 
introduced, the TANF Accountability and Integrity Improvement 
Act (H.R. 2959) would have closed a loophole that a few states 
have created and exploited to avoid providing their state match 
for the federal TANF block grant. This loophole unfairly 
misapplies third-party spending as if it were state spending.
    The non-partisan General Accountability Office (GAO) has 
criticized this wrongful approach, which shortchanges poor 
children and their parents. I fully support the bill's complete 
closure of this loophole that only a few states exploit to 
avoid providing their fair share of support for moving their 
impoverished residents from welfare to work.
    Unfortunately, only hours prior to the Committee markup, 
this bill was amended to do the opposite of what it originally 
would have accomplished. As amended, it legalizes this unfair 
loophole by grandfathering in current offenders. Now it does 
little more than prevent other states from following the 
leadership of a few pioneers in abuse. Why reward those states 
who balance their books on the backs of those least able to 
bear the burden?
    According to the GAO, Georgia is the chief offender, with 
nearly 60 percent of its TANF contributions coming from private 
entities. Not only is it not making its proper match to access 
federal funds, but Georgia also consistently ignores the needs 
of its poorest citizens. For every TANF dollar, Georgia uses 80 
cents for in ways that ignore the core purposes of TANF--work, 
direct assistance and child care.
    The Department of Health and Human Services (HHS) should 
have already initiated action to close this unjustified 
loophole. As amended, the bill would now prevent HHS from 
correcting this abuse. It should be rejected.
                                   Lloyd Doggett.
                                   Jim McDermott.
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