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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 1956 Placed on Calendar Senate (PCS)]

                                                       Calendar No. 494

104th CONGRESS

  2d Session

                                S. 1956

_______________________________________________________________________

                                 A BILL

    To provide for reconciliation pursuant to section 202(a) of the 
       concurrent resolution on the budget for fiscal year 1997.

_______________________________________________________________________

                             July 16, 1996

                 Read twice and placed on the calendar

                                                       Calendar No. 494
104th CONGRESS
  2d Session
                                S. 1956

    To provide for reconciliation pursuant to section 202(a) of the 
       concurrent resolution on the budget for fiscal year 1997.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             July 16, 1996

Mr. Domenici, from the Committee on the Budget, reported the following 
     original bill; which was read twice and placed on the calendar

_______________________________________________________________________

                                 A BILL

 
    To provide for reconciliation pursuant to section 202(a) of the 
       concurrent resolution on the budget for fiscal year 1997.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Personal Responsibility, Work 
Opportunity, and Medicaid Restructuring Act of 1996''.

              TITLE I--AGRICULTURE AND RELATED PROVISIONS

SEC. 1001. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This title may be cited as the ``Agricultural 
Reconciliation Act of 1996''.
    (b) Table of Contents.--The table of contents of this title is as 
follows:

Sec. 1001. Short title; table of contents.
           Subtitle A--Food Stamps and Commodity Distribution

                     Chapter 1--Food Stamp Program

Sec. 1111. Definition of certification period.
Sec. 1112. Definition of coupon.
Sec. 1113. Treatment of children living at home.
Sec. 1114. Adjustment of thrifty food plan.
Sec. 1115. Definition of homeless individual.
Sec. 1116. State option for eligibility standards.
Sec. 1117. Earnings of students.
Sec. 1118. Energy assistance.
Sec. 1119. Deductions from income.
Sec. 1120. Vehicle allowance.
Sec. 1121. Vendor payments for transitional housing counted as income.
Sec. 1122. Simplified calculation of income for the self-employed.
Sec. 1123. Doubled penalties for violating food stamp program 
                            requirements.
Sec. 1124. Disqualification of convicted individuals.
Sec. 1125. Disqualification.
Sec. 1126. Caretaker exemption.
Sec. 1127. Employment and training.
Sec. 1128. Food stamp eligibility.
Sec. 1129. Comparable treatment for disqualification.
Sec. 1130. Disqualification for receipt of multiple food stamp 
                            benefits.
Sec. 1131. Disqualification of fleeing felons.
Sec. 1132. Cooperation with child support agencies.
Sec. 1133. Disqualification relating to child support arrears.
Sec. 1134. Work requirement.
Sec. 1135. Encouragement of electronic benefit transfer systems.
Sec. 1136. Value of minimum allotment.
Sec. 1137. Benefits on recertification.
Sec. 1138. Optional combined allotment for expedited households.
Sec. 1139. Failure to comply with other means-tested public assistance 
                            programs.
Sec. 1140. Allotments for households residing in centers.
Sec. 1141. Condition precedent for approval of retail food stores and 
                            wholesale food concerns.
Sec. 1142. Authority to establish authorization periods.
Sec. 1143. Information for verifying eligibility for authorization.
Sec. 1144. Waiting period for stores that fail to meet authorization 
                            criteria.
Sec. 1145. Operation of food stamp offices.
Sec. 1146. State employee and training standards.
Sec. 1147. Exchange of law enforcement information.
Sec. 1148. Expedited coupon service.
Sec. 1149. Withdrawing fair hearing requests.
Sec. 1150. Income, eligibility, and immigration status verification 
                            systems.
Sec. 1151. Disqualification of retailers who intentionally submit 
                            falsified applications.
Sec. 1152. Disqualification of retailers who are disqualified under the 
                            WIC program.
Sec. 1153. Collection of overissuances.
Sec. 1154. Authority to suspend stores violating program requirements 
                            pending administrative and judicial review.
Sec. 1155. Expanded criminal forfeiture for violations.
Sec. 1156. Limitation on Federal match.
Sec. 1157. Standards for administration.
Sec. 1158. Work supplementation or support program.
Sec. 1159. Waiver authority.
Sec. 1160. Response to waivers.
Sec. 1161. Employment initiatives program.
Sec. 1162. Reauthorization.
Sec. 1163. Simplified food stamp program.
Sec. 1164. State food assistance block grant.
               Chapter 2--Commodity Distribution Programs

Sec. 1171. Emergency food assistance program.
Sec. 1172. Food bank demonstration project.
Sec. 1173. Hunger prevention programs.
Sec. 1174. Report on entitlement commodity processing.
                  Subtitle B--Child Nutrition Programs

         Chapter 1--Amendments to the National School Lunch Act

Sec. 1201. State disbursement to schools.
Sec. 1202. Nutritional and other program requirements.
Sec. 1203. Free and reduced price policy statement.
Sec. 1204. Special assistance.
Sec. 1205. Miscellaneous provisions and definitions.
Sec. 1206. Summer food service program for children.
Sec. 1207. Commodity distribution.
Sec. 1208. Child and adult care food program.
Sec. 1209. Pilot projects.
Sec. 1210. Reduction of paperwork.
Sec. 1211. Information on income eligibility.
Sec. 1212. Nutrition guidance for child nutrition programs.
        Chapter 2--Amendments to the Child Nutrition Act of 1966

Sec. 1251. Special milk program.
Sec. 1252. Free and reduced price policy statement.
Sec. 1253. School breakfast program authorization.
Sec. 1254. State administrative expenses.
Sec. 1255. Regulations.
Sec. 1256. Prohibitions.
Sec. 1257. Miscellaneous provisions and definitions.
Sec. 1258. Accounts and records.
Sec. 1259. Special supplemental nutrition program for women, infants, 
                            and children.
Sec. 1260. Cash grants for nutrition education.
Sec. 1261. Nutrition education and training.
Sec. 1262. Rounding rules.

           Subtitle A--Food Stamps and Commodity Distribution

                     CHAPTER 1--FOOD STAMP PROGRAM

SEC. 1111. DEFINITION OF CERTIFICATION PERIOD.

    Section 3(c) of the Food Stamp Act of 1977 (7 U.S.C. 2012(c)) is 
amended by striking ``Except as provided'' and all that follows and 
inserting the following: ``The certification period shall not exceed 12 
months, except that the certification period may be up to 24 months if 
all adult household members are elderly or disabled. A State agency 
shall have at least 1 contact with each certified household every 12 
months.''.

SEC. 1112. DEFINITION OF COUPON.

    Section 3(d) of the Food Stamp Act of 1977 (7 U.S.C. 2012(d)) is 
amended by striking ``or type of certificate'' and inserting ``type of 
certificate, authorization card, cash or check issued in lieu of a 
coupon, or access device, including an electronic benefit transfer card 
or personal identification number,''.

SEC. 1113. TREATMENT OF CHILDREN LIVING AT HOME.

    The second sentence of section 3(i) of the Food Stamp Act of 1977 
(7 U.S.C. 2012(i)) is amended by striking ``(who are not themselves 
parents living with their children or married and living with their 
spouses)''.

SEC. 1114. ADJUSTMENT OF THRIFTY FOOD PLAN.

    The second sentence of section 3(o) of the Food Stamp Act of 1977 
(7 U.S.C. 2012(o)) is amended--
            (1) by striking ``shall (1) make'' and inserting the 
        following: ``shall--
            ``(1) make'';
            (2) by striking ``scale, (2) make'' and inserting the 
        following: ``scale;
            ``(2) make'';
            (3) by striking ``Alaska, (3) make'' and inserting the 
        following: ``Alaska;
            ``(3) make''; and
            (4) by striking ``Columbia, (4) through'' and all that 
        follows through the end of the subsection and inserting the 
        following: ``Columbia; and
            ``(4) on October 1, 1996, and each October 1 thereafter, 
        adjust the cost of the diet to reflect the cost of the diet in 
        the preceding June, and round the result to the nearest lower 
        dollar increment for each household size, except that on 
        October 1, 1996, the Secretary may not reduce the cost of the 
diet in effect on September 30, 1996.''.

SEC. 1115. DEFINITION OF HOMELESS INDIVIDUAL.

    Section 3(s)(2)(C) of the Food Stamp Act of 1977 (7 U.S.C. 
2012(s)(2)(C)) is amended by inserting ``for not more than 90 days'' 
after ``temporary accommodation''.

SEC. 1116. STATE OPTION FOR ELIGIBILITY STANDARDS.

    Section 5(b) of the Food Stamp Act of 1977 (7 U.S.C. 2014(d)) is 
amended by striking ``(b) The Secretary'' and inserting the following:
    ``(b) Eligibility Standards.--Except as otherwise provided in this 
Act, the Secretary''.

SEC. 1117. EARNINGS OF STUDENTS.

    Section 5(d)(7) of the Food Stamp Act of 1977 (7 U.S.C. 2014(d)(7)) 
is amended by striking ``21'' and inserting ``19''.

SEC. 1118. ENERGY ASSISTANCE.

    (a) In General.--Section 5(d) of the Food Stamp Act of 1977 (7 
U.S.C. 2014(d)) is amended by striking paragraph (11) and inserting the 
following: ``(11) a 1-time payment or allowance made under a Federal or 
State law for the costs of weatherization or emergency repair or 
replacement of an unsafe or inoperative furnace or other heating or 
cooling device,''.
    (b) Conforming Amendments.--
            (1) Section 5(k) of the Food Stamp Act of 1977 (7 U.S.C. 
        2014(k)) is amended--
                    (A) in paragraph (1)--
                            (i) in subparagraph (A), by striking ``plan 
                        for aid to families with dependent children 
                        approved'' and inserting ``program funded''; 
                        and
                            (ii) in subparagraph (B), by striking ``, 
                        not including energy or utility-cost 
                        assistance,'';
                    (B) in paragraph (2), by striking subparagraph (C) 
                and inserting the following:
            ``(C) a payment or allowance described in subsection 
        (d)(11);''; and
                    (C) by adding at the end the following:
            ``(4) Third party energy assistance payments.--
                    ``(A) Energy assistance payments.--For purposes of 
                subsection (d)(1), a payment made under a Federal or 
                State law to provide energy assistance to a household 
                shall be considered money payable directly to the 
                household.
                    ``(B) Energy assistance expenses.--For purposes of 
                subsection (e)(7), an expense paid on behalf of a 
                household under a Federal or State law to provide 
                energy assistance shall be considered an out-of-pocket 
                expense incurred and paid by the household.''.
            (2) Section 2605(f) of the Low-Income Home Energy 
        Assistance Act of 1981 (42 U.S.C. 8624(f)) is amended--
                    (A) by striking ``(f)(1) Notwithstanding'' and 
                inserting ``(f) Notwithstanding'';
                    (B) in paragraph (1), by striking ``food stamps,''; 
                and
                    (C) by striking paragraph (2).

SEC. 1119. DEDUCTIONS FROM INCOME.

    (a) In General.--Section 5 of the Food Stamp Act of 1977 (7 U.S.C. 
2014) is amended by striking subsection (e) and inserting the 
following:
    ``(e) Deductions From Income.--
            ``(1) Standard deduction.--
                    ``(A) In general.--The Secretary shall allow a 
                standard deduction for each household in the 48 
                contiguous States and the District of Columbia, Alaska, 
                Hawaii, Guam, and the Virgin Islands of the United 
                States of--
                            ``(i) for fiscal year 1996, $134, $229, 
                        $189, $269, and $118, respectively;
                            ``(ii) for fiscal year 1997, $132, $225, 
                        $186, $265, and $116, respectively; and
                            ``(iii) for fiscal years 1998 through 2002, 
                        $122, $208, $172, $245, and $107, respectively.
                    ``(B) Adjustment for inflation.--On October 1, 
                2002, and each October 1 thereafter, the Secretary 
                shall adjust the standard deduction to the nearest 
                lower dollar increment to reflect changes in the 
                Consumer Price Index for all urban consumers published 
                by the Bureau of Labor Statistics, for items other than 
                food, for the 12-month period ending the preceding June 
                30.
            ``(2) Earned income deduction.--
                    ``(A) Definition of earned income.--In this 
                paragraph, the term `earned income' does not include--
                            ``(i) income excluded by subsection (d); or
                            ``(ii) any portion of income earned under a 
                        work supplementation or support program, as 
                        defined under section 16(b), that is 
                        attributable to public assistance.
                    ``(B) Deduction.--Except as provided in 
                subparagraph (C), a household with earned income shall 
                be allowed a deduction of 20 percent of all earned 
                income to compensate for taxes, other mandatory 
                deductions from salary, and work expenses.
                    ``(C) Exception.--The deduction described in 
                subparagraph (B) shall not be allowed with respect to 
                determining an overissuance due to the failure of a 
                household to report earned income in a timely manner.
            ``(3) Dependent care deduction.--
                    ``(A) In general.--A household shall be entitled, 
                with respect to expenses (other than excluded expenses 
                described in subparagraph (B)) for dependent care, to a 
                dependent care deduction, the maximum allowable level 
                of which shall be $200 per month for each dependent 
                child under 2 years of age and $175 per month for each 
                other dependent, for the actual cost of payments 
                necessary for the care of a dependent if the care 
                enables a household member to accept or continue 
                employment, or training or education that is 
                preparatory for employment.
                    ``(B) Excluded expenses.--The excluded expenses 
                referred to in subparagraph (A) are--
                            ``(i) expenses paid on behalf of the 
                        household by a third party;
                            ``(ii) amounts made available and excluded, 
                        for the expenses referred to in subparagraph 
                        (A), under subsection (d)(3); and
                            ``(iii) expenses that are paid under 
                        section 6(d)(4).
            ``(4) Deduction for child support payments.--
                    ``(A) In general.--A household shall be entitled to 
                a deduction for child support payments made by a 
                household member to or for an individual who is not a 
                member of the household if the household member is 
                legally obligated to make the payments.
                    ``(B) Methods for determining amount.--The 
                Secretary may prescribe by regulation the methods, 
                including calculation on a retrospective basis, that a 
                State agency shall use to determine the amount of the 
                deduction for child support payments.
            ``(5) Homeless shelter allowance.--Under rules prescribed 
        by the Secretary, a State agency may develop a standard 
        homeless shelter allowance, which shall not exceed $143 per 
        month, for such expenses as may reasonably be expected to be 
        incurred by households in which all members are homeless 
        individuals but are not receiving free shelter throughout the 
        month. A State agency that develops the allowance may use the 
        allowance in determining eligibility and allotments for the 
        households. The State agency may make a household with 
        extremely low shelter costs ineligible for the allowance.
            ``(6) Excess medical expense deduction.--
                    ``(A) In general.--A household containing an 
                elderly or disabled member shall be entitled, with 
                respect to expenses other than expenses paid on behalf 
                of the household by a third party, to an excess medical 
                expense deduction for the portion of the actual costs 
                of allowable medical expenses, incurred by the elderly 
                or disabled member, exclusive of special diets, that 
                exceeds $35 per month.
                    ``(B) Method of claiming deduction.--
                            ``(i) In general.--A State agency shall 
                        offer an eligible household under subparagraph 
                        (A) a method of claiming a deduction for 
                        recurring medical expenses that are initially 
                        verified under the excess medical expense 
                        deduction in lieu of submitting information on, 
                        or verification of, actual expenses on a 
                        monthly basis.
                            ``(ii) Method.--The method described in 
                        clause (i) shall--
                                    ``(I) be designed to minimize the 
                                burden for the eligible elderly or 
                                disabled household member choosing to 
                                deduct the recurrent medical expenses 
                                of the member pursuant to the method;
                                    ``(II) rely on reasonable estimates 
                                of the expected medical expenses of the 
                                member for the certification period 
                                (including changes that can be 
                                reasonably anticipated based on 
                                available information about the medical 
                                condition of the member, public or 
                                private medical insurance coverage, and 
                                the current verified medical expenses 
                                incurred by the member); and
                                    ``(III) not require further 
                                reporting or verification of a change 
                                in medical expenses if such a change 
                                has been anticipated for the 
                                certification period.
            ``(7) Excess shelter expense deduction.--
                    ``(A) In general.--A household shall be entitled, 
                with respect to expenses other than expenses paid on 
                behalf of the household by a third party, to an excess 
                shelter expense deduction to the extent that the 
                monthly amount expended by a household for shelter 
                exceeds an amount equal to 50 percent of monthly 
                household income after all other applicable deductions 
                have been allowed.
                    ``(B) Maximum amount of deduction.--
                            ``(i) Through december 31, 1996.--In the 
                        case of a household that does not contain an 
                        elderly or disabled individual, during the 15-
                        month period ending December 31, 1996, the 
excess shelter expense deduction shall not exceed--
                                    ``(I) in the 48 contiguous States 
                                and the District of Columbia, $247 per 
                                month; and
                                    ``(II) in Alaska, Hawaii, Guam, and 
                                the Virgin Islands of the United 
                                States, $429, $353, $300, and $182 per 
                                month, respectively.
                            ``(i) After december 31, 1996.--In the case 
                        of a household that does not contain an elderly 
                        or disabled individual, after December 31, 
                        1996, the excess shelter expense deduction 
                        shall not exceed--
                                    ``(I) in the 48 contiguous States 
                                and the District of Columbia, $342 per 
                                month; and
                                    ``(II) in Alaska, Hawaii, Guam, and 
                                the Virgin Islands of the United 
                                States, $594, $489, $415, and $252 per 
                                month, respectively.
                    ``(C) Standard utility allowance.--
                            ``(i) In general.--In computing the excess 
                        shelter expense deduction, a State agency may 
                        use a standard utility allowance in accordance 
                        with regulations promulgated by the Secretary, 
                        except that a State agency may use an allowance 
                        that does not fluctuate within a year to 
                        reflect seasonal variations.
                            ``(ii) Restrictions on heating and cooling 
                        expenses.--An allowance for a heating or 
                        cooling expense may not be used in the case of 
                        a household that--
                                    ``(I) does not incur a heating or 
                                cooling expense, as the case may be;
                                    ``(II) does incur a heating or 
                                cooling expense but is located in a 
                                public housing unit that has central 
                                utility meters and charges households, 
                                with regard to the expense, only for 
                                excess utility costs; or
                                    ``(III) shares the expense with, 
                                and lives with, another individual not 
                                participating in the food stamp 
                                program, another household 
                                participating in the food stamp 
                                program, or both, unless the allowance 
                                is prorated between the household and 
                                the other individual, household, or 
                                both.
                            ``(iii) Mandatory allowance.--
                                    ``(I) In general.--A State agency 
                                may make the use of a standard utility 
                                allowance mandatory for all households 
                                with qualifying utility costs if--
                                            ``(aa) the State agency has 
                                        developed 1 or more standards 
                                        that include the cost of 
                                        heating and cooling and 1 or 
                                        more standards that do not 
                                        include the cost of heating and 
                                        cooling; and
                                            ``(bb) the Secretary finds 
                                        that the standards will not 
                                        result in an increased cost to 
                                        the Secretary.
                                    ``(II) Household election.--A State 
                                agency that has not made the use of a 
                                standard utility allowance mandatory 
                                under subclause (I) shall allow a 
                                household to switch, at the end of a 
                                certification period, between the 
                                standard utility allowance and a 
                                deduction based on the actual utility 
                                costs of the household.
                            ``(iv) Availability of allowance to 
                        recipients of energy assistance.--
                                    ``(I) In general.--Subject to 
                                subclause (II), if a State agency 
                                elects to use a standard utility 
                                allowance that reflects heating or 
                                cooling costs, the standard utility 
                                allowance shall be made available to 
                                households receiving a payment, or on 
                                behalf of which a payment is made, 
                                under the Low-Income Home Energy 
                                Assistance Act of 1981 (42 U.S.C. 8621 
                                et seq.) or other similar energy 
                                assistance program, if the household 
                                still incurs out-of-pocket heating or 
                                cooling expenses in excess of any 
                                assistance paid on behalf of the 
                                household to an energy provider.
                                    ``(II) Separate allowance.--A State 
                                agency may use a separate standard 
                                utility allowance for households on 
                                behalf of which a payment described in 
                                subclause (I) is made, but may not be 
                                required to do so.
                                    ``(III) States not electing to use 
                                separate allowance.--A State agency 
                                that does not elect to use a separate 
                                allowance but makes a single standard 
                                utility allowance available to 
                                households incurring heating or cooling 
                                expenses (other than a household 
                                described in subclause (I) or (II) of 
                                clause (ii)) may not be required to 
                                reduce the allowance due to the 
                                provision (directly or indirectly) of 
                                assistance under the Low-Income Home 
                                Energy Assistance Act of 1981 (42 
                                U.S.C. 8621 et seq.).
                                    ``(IV) Proration of assistance.--
                                For the purpose of the food stamp 
                                program, assistance provided under the 
                                Low-Income Home Energy Assistance Act 
                                of 1981 (42 U.S.C. 8621 et seq.) shall 
                                be considered to be prorated over the 
                                entire heating or cooling season for 
                                which the assistance was provided.''.
    (b) Conforming Amendment.--Section 11(e)(3) of the Food Stamp Act 
of 1977 (7 U.S.C. 2020(e)(3)) is amended by striking ``. Under rules 
prescribed'' and all that follows through ``verifies higher expenses''.

SEC. 1120. VEHICLE ALLOWANCE.

    Section 5(g) of the Food Stamp Act of 1977 (7 U.S.C. 2014(g)) is 
amended by striking paragraph (2) and inserting the following:
            ``(2) Included assets.--
                    ``(A) In general.--Subject to the other provisions 
                of this paragraph, the Secretary shall, in prescribing 
                inclusions in, and exclusions from, financial 
                resources, follow the regulations in force as of June 
                1, 1982 (other than those relating to licensed vehicles 
                and inaccessible resources).
                    ``(B) Additional included assets.--The Secretary 
                shall include in financial resources--
                            ``(i) any boat, snowmobile, or airplane 
                        used for recreational purposes;
                            ``(ii) any vacation home;
                            ``(iii) any mobile home used primarily for 
                        vacation purposes;
                            ``(iv) subject to subparagraph (C), any 
                        licensed vehicle that is used for household 
                        transportation or to obtain or continue 
                        employment to the extent that the fair market 
                        value of the vehicle exceeds $4,600 through 
                        September 30, 1996, and $5,100 beginning 
                        October 1, 1996; and
                            ``(v) any savings or retirement account 
                        (including an individual account), regardless 
                        of whether there is a penalty for early 
                        withdrawal.
                    ``(C) Excluded vehicles.--A vehicle (and any other 
                property, real or personal, to the extent the property 
                is directly related to the maintenance or use of the 
                vehicle) shall not be included in financial resources 
                under this paragraph if the vehicle is--
                            ``(i) used to produce earned income;
                            ``(ii) necessary for the transportation of 
                        a physically disabled household member; or
                            ``(iii) depended on by a household to carry 
                        fuel for heating or water for home use and 
                        provides the primary source of fuel or water, 
                        respectively, for the household.''.

SEC. 1121. VENDOR PAYMENTS FOR TRANSITIONAL HOUSING COUNTED AS INCOME.

    Section 5(k)(2) of the Food Stamp Act of 1977 (7 U.S.C. 2014(k)(2)) 
is amended--
            (1) by striking subparagraph (F); and
            (2) by redesignating subparagraphs (G) and (H) as 
        subparagraphs (F) and (G), respectively.

SEC. 1122. SIMPLIFIED CALCULATION OF INCOME FOR THE SELF-EMPLOYED.

    Section 5 of the Food Stamp Act of 1977 (7 U.S.C. 2014) is amended 
by adding at the end the following:
    ``(n) Simplified Calculation of Income for the Self-Employed.--
            ``(1) In general.--Not later than 1 year after the date of 
        enactment of this subsection, the Secretary shall establish a 
        procedure, designed to not increase Federal costs, by which a 
        State may use a reasonable estimate of income excluded under 
        subsection (d)(9) in lieu of calculating the actual cost of 
        producing self-employment income.
            ``(2) Inclusive of all types of income.--The procedure 
        established under paragraph (1) shall allow a State to estimate 
        income for all types of self-employment income.
            ``(3) Differences for different types of income.--The 
        procedure established under paragraph (1) may differ for 
        different types of self-employment income.''.

SEC. 1123. DOUBLED PENALTIES FOR VIOLATING FOOD STAMP PROGRAM 
              REQUIREMENTS.

    Section 6(b)(1) of the Food Stamp Act of 1977 (7 U.S.C. 2015(b)(1)) 
is amended--
            (1) in clause (i), by striking ``six months'' and inserting 
        ``1 year''; and
            (2) in clause (ii), by striking ``1 year'' and inserting 
        ``2 years''.

SEC. 1124. DISQUALIFICATION OF CONVICTED INDIVIDUALS.

    Section 6(b)(1)(iii) of the Food Stamp Act of 1977 (7 U.S.C. 
2015(b)(1)(iii)) is amended--
            (1) in subclause (II), by striking ``or'' at the end;
            (2) in subclause (III), by striking the period at the end 
        and inserting ``; or''; and
            (3) by inserting after subclause (III) the following:
                    ``(IV) a conviction of an offense under subsection 
                (b) or (c) of section 15 involving an item covered by 
                subsection (b) or (c) of section 15 having a value of 
                $500 or more.''.

SEC. 1125. DISQUALIFICATION.

    (a) In General.--Section 6(d) of the Food Stamp Act of 1977 (7 
U.S.C. 2015(d)) is amended by striking ``(d)(1) Unless otherwise 
exempted by the provisions'' and all that follows through the end of 
paragraph (1) and inserting the following:
    ``(d) Conditions of Participation.--
            ``(1) Work requirements.--
                    ``(A) In general.--No physically and mentally fit 
                individual over the age of 15 and under the age of 60 
                shall be eligible to participate in the food stamp 
                program if the individual--
                            ``(i) refuses, at the time of application 
                        and every 12 months thereafter, to register for 
                        employment in a manner prescribed by the 
                        Secretary;
                            ``(ii) refuses without good cause to 
                        participate in an employment and training 
                        program established under paragraph (4), to the 
                        extent required by the State agency;
                            ``(iii) refuses without good cause to 
                        accept an offer of employment, at a site or 
                        plant not subject to a strike or lockout at the 
                        time of the refusal, at a wage not less than 
                        the higher of--
                                    ``(I) the applicable Federal or 
                                State minimum wage; or
                                    ``(II) 80 percent of the wage that 
                                would have governed had the minimum 
                                hourly rate under section 6(a)(1) of 
                                the Fair Labor Standards Act of 1938 
                                (29 U.S.C. 206(a)(1)) been applicable 
                                to the offer of employment;
                            ``(iv) refuses without good cause to 
                        provide a State agency with sufficient 
                        information to allow the State agency to 
                        determine the employment status or the job 
                        availability of the individual;
                            ``(v) voluntarily and without good cause--
                                    ``(I) quits a job; or
                                    ``(II) reduces work effort and, 
                                after the reduction, the individual is 
                                working less than 30 hours per week; or
                            ``(vi) fails to comply with section 20.
                    ``(B) Household ineligibility.--If an individual 
                who is the head of a household becomes ineligible to 
                participate in the food stamp program under 
                subparagraph (A), the household shall, at the option of 
                the State agency, become ineligible to participate in 
                the food stamp program for a period, determined by the 
                State agency, that does not exceed the lesser of--
                            ``(i) the duration of the ineligibility of 
                        the individual determined under subparagraph 
                        (C); or
                            ``(ii) 180 days.
                    ``(C) Duration of ineligibility.--
                            ``(i) First violation.--The first time that 
                        an individual becomes ineligible to participate 
                        in the food stamp program under subparagraph 
                        (A), the individual shall remain ineligible 
                        until the later of--
                                    ``(I) the date the individual 
                                becomes eligible under subparagraph 
                                (A);
                                    ``(II) the date that is 1 month 
                                after the date the individual became 
                                ineligible; or
                                    ``(III) a date determined by the 
                                State agency that is not later than 3 
                                months after the date the individual 
                                became ineligible.
                            ``(ii) Second violation.--The second time 
                        that an individual becomes ineligible to 
                        participate in the food stamp program under 
                        subparagraph (A), the individual shall remain 
                        ineligible until the later of--
                                    ``(I) the date the individual 
                                becomes eligible under subparagraph 
                                (A);
                                    ``(II) the date that is 3 months 
                                after the date the individual became 
                                ineligible; or
                                    ``(III) a date determined by the 
                                State agency that is not later than 6 
                                months after the date the individual 
                                became ineligible.
                            ``(iii) Third or subsequent violation.--The 
                        third or subsequent time that an individual 
                        becomes ineligible to participate in the food 
                        stamp program under subparagraph (A), the 
                        individual shall remain ineligible until the 
                        later of--
                                    ``(I) the date the individual 
                                becomes eligible under subparagraph 
                                (A);
                                    ``(II) the date that is 6 months 
                                after the date the individual became 
                                ineligible;
                                    ``(III) a date determined by the 
                                State agency; or
                                    ``(IV) at the option of the State 
                                agency, permanently.
                    ``(D) Administration.--
                            ``(i) Good cause.--The Secretary shall 
                        determine the meaning of good cause for the 
                        purpose of this paragraph.
                            ``(ii) Voluntary quit.--The Secretary shall 
                        determine the meaning of voluntarily quitting 
                        and reducing work effort for the purpose of 
                        this paragraph.
                            ``(iii) Determination by state agency.--
                                    ``(I) In general.--Subject to 
                                subclause (II) and clauses (i) and 
                                (ii), a State agency shall determine--
                                            ``(aa) the meaning of any 
                                        term used in subparagraph (A);
                                            ``(bb) the procedures for 
                                        determining whether an 
                                        individual is in compliance 
                                        with a requirement under 
                                        subparagraph (A); and
                                            ``(cc) whether an 
                                        individual is in compliance 
                                        with a requirement under 
                                        subparagraph (A).
                                    ``(II) Not less restrictive.--A 
                                State agency may not use a meaning, 
                                procedure, or determination under 
                                subclause (I) that is less restrictive 
                                on individuals receiving benefits under 
                                this Act than a comparable meaning, 
                                procedure, or determination under a 
                                State program funded under part A of 
                                title IV of the Social Security Act (42 
                                U.S.C. 601 et seq.).
                            ``(iv) Strike against the government.--For 
                        the purpose of subparagraph (A)(v), an employee 
                        of the Federal Government, a State, or a 
                        political subdivision of a State, who is 
                        dismissed for participating in a strike against 
                        the Federal Government, the State, or the 
                        political subdivision of the State shall be 
                        considered to have voluntarily quit without 
                        good cause.
                            ``(v) Selecting a head of household.--
                                    ``(I) In general.--For purposes of 
                                this paragraph, the State agency shall 
                                allow the household to select any adult 
                                parent of a child in the household as 
                                the head of the household if all adult 
                                household members making application 
                                under the food stamp program agree to 
                                the selection.
                                    ``(II) Time for making 
                                designation.--A household may designate 
                                the head of the household under 
                                subclause (I) each time the household 
                                is certified for participation in the 
                                food stamp program, but may not change 
                                the designation during a certification 
                                period unless there is a change in the 
                                composition of the household.
                            ``(vi) Change in head of household.--If the 
                        head of a household leaves the household during 
                        a period in which the household is ineligible 
                        to participate in the food stamp program under 
                        subparagraph (B)--
                                    ``(I) the household shall, if 
                                otherwise eligible, become eligible to 
                                participate in the food stamp program; 
                                and
                                    ``(II) if the head of the household 
                                becomes the head of another household, 
                                the household that becomes headed by 
                                the individual shall become ineligible 
                                to participate in the food stamp 
                                program for the remaining period of 
                                ineligibility.''.
    (b) Conforming Amendment.--
            (1) The second sentence of section 17(b)(2) of the Food 
        Stamp Act of 1977 (7 U.S.C. 2026(b)(2)) is amended by striking 
        ``6(d)(1)(i)'' and inserting ``6(d)(1)(A)(i)''.
            (2) Section 20 of the Food Stamp Act of 1977 (7 U.S.C. 
        2029) is amended by striking subsection (f) and inserting the 
        following:
    ``(f) Disqualification.--An individual or a household may become 
ineligible under section 6(d)(1) to participate in the food stamp 
program for failing to comply with this section.''.

SEC. 1126. CARETAKER EXEMPTION.

    Section 6(d)(2) of the Food Stamp Act of 1977 (7 U.S.C. 2015(d)(2)) 
is amended by striking subparagraph (B) and inserting the following: 
``(B) a parent or other member of a household with responsibility for 
the care of (i) a dependent child under the age of 6 or any lower age 
designated by the State agency that is not under the age of 1; or (ii) 
an incapacitated person;''.

SEC. 1127. EMPLOYMENT AND TRAINING.

    (a) In General.--Section 6(d)(4) of the Food Stamp Act of 1977 (7 
U.S.C. 2015(d)(4)) is amended--
            (1) by striking ``(4)(A) Not later than April 1, 1987, 
        each'' and inserting the following:
            ``(4) Employment and training.--
                    ``(A) In general.--
                            ``(i) Implementation.--Each'';
            (2) in subparagraph (A)--
                    (A) by inserting ``work,'' after ``skills, 
                training,''; and
                    (B) by adding at the end the following:
                            ``(ii) Statewide workforce development 
                        system.--Each component of an employment and 
                        training program carried out under this 
paragraph shall be delivered through a statewide workforce development 
system, unless the component is not available locally through such a 
system.'';
            (3) in subparagraph (B)--
                    (A) in the matter preceding clause (i), by striking 
                the colon at the end and inserting the following: ``, 
                except that the State agency shall retain the option to 
                apply employment requirements prescribed under this 
                subparagraph to a program applicant at the time of 
                application:'';
                    (B) in clause (i), by striking ``with terms and 
                conditions'' and all that follows through ``time of 
                application''; and
                    (C) in clause (iv)--
                            (i) by striking subclauses (I) and (II); 
                        and
                            (ii) by redesignating subclauses (III) and 
                        (IV) as subclauses (I) and (II), respectively;
            (4) in subparagraph (D)--
                    (A) in clause (i), by striking ``to which the 
                application'' and all that follows through ``30 days or 
                less'';
                    (B) in clause (ii), by striking ``but with 
                respect'' and all that follows through ``child care''; 
                and
                    (C) in clause (iii), by striking ``, on the basis 
                of'' and all that follows through ``clause (ii)'' and 
                inserting ``the exemption continues to be valid'';
            (5) in subparagraph (E), by striking the third sentence;
            (6) in subparagraph (G)--
                    (A) by striking ``(G)(i) The State'' and inserting 
                ``(G) The State''; and
                    (B) by striking clause (ii);
            (7) in subparagraph (H), by striking ``(H)(i) The 
        Secretary'' and all that follows through ``(ii) Federal funds'' 
        and inserting ``(H) Federal funds'';
            (8) in subparagraph (I)(i)(II), by striking ``, or was in 
        operation,'' and all that follows through ``Social Security 
        Act'' and inserting the following: ``), except that no such 
        payment or reimbursement shall exceed the applicable local 
        market rate'';
            (9)(A) by striking subparagraphs (K) and (L) and inserting 
        the following:
                    ``(K) Limitation on funding.--Notwithstanding any 
                other provision of this paragraph, the amount of funds 
                a State agency uses to carry out this paragraph 
                (including funds used to carry out subparagraph (I)) 
                for participants who are receiving benefits under a 
                State program funded under part A of title IV of the 
                Social Security Act (42 U.S.C. 601 et seq.) shall not 
                exceed the amount of funds the State agency used in 
                fiscal year 1995 to carry out this paragraph for 
                participants who were receiving benefits in fiscal year 
                1995 under a State program funded under part A of title 
                IV of the Act (42 U.S.C. 601 et seq.).''; and
            (B) by redesignating subparagraphs (M) and (N) as 
        subparagraphs (L) and (M), respectively; and
            (10) in subparagraph (L), as so redesignated--
                    (A) by striking ``(L)(i) The Secretary'' and 
                inserting ``(L) The Secretary''; and
                    (B) by striking clause (ii).
    (b) Funding.--Section 16(h) of the Food Stamp Act of 1977 (7 U.S.C. 
2025(h)) is amended by striking ``(h)(1)(A) The Secretary'' and all 
that follows through the end of paragraph (1) and inserting the 
following:
    ``(h) Funding of Employment and Training Programs.--
            ``(1) In general.--
                    ``(A) Amounts.--To carry out employment and 
                training programs, the Secretary shall reserve for 
                allocation to State agencies from funds made available 
                for each fiscal year under section 18(a)(1) the amount 
                of--
                            ``(i) for fiscal year 1996, $75,000,000; 
                        and
                            ``(ii) for each of fiscal years 1997 
                        through 2002, $85,000,000.
                    ``(B) Allocation.--The Secretary shall allocate the 
                amounts reserved under subparagraph (A) among the State 
                agencies using a reasonable formula (as determined by 
                the Secretary) that gives consideration to the 
                population in each State affected by section 6(o).
                    ``(C) Reallocation.--
                            ``(i) Notification.--A State agency shall 
                        promptly notify the Secretary if the State 
                        agency determines that the State agency will 
                        not expend all of the funds allocated to the 
                        State agency under subparagraph (B).
                            ``(ii) Reallocation.--On notification under 
                        clause (i), the Secretary shall reallocate the 
                        funds that the State agency will not expend as 
                        the Secretary considers appropriate and 
                        equitable.
                    ``(D) Minimum allocation.--Notwithstanding 
                subparagraphs (A) through (C), the Secretary shall 
                ensure that each State agency operating an employment 
                and training program shall receive not less than 
                $50,000 for each fiscal year.''.
    (c) Additional Matching Funds.--Section 16(h)(2) of the Food Stamp 
Act of 1977 (7 U.S.C. 2025(h)(2)) is amended by inserting before the 
period at the end the following: ``, including the costs for case 
management and casework to facilitate the transition from economic 
dependency to self-sufficiency through work''.
    (d) Reports.--Section 16(h) of the Food Stamp Act of 1977 (7 U.S.C. 
2025(h)) is amended--
            (1) in paragraph (5)--
                    (A) by striking ``(5)(A) The Secretary'' and 
                inserting ``(5) The Secretary''; and
                    (B) by striking subparagraph (B); and
            (2) by striking paragraph (6).

SEC. 1128. FOOD STAMP ELIGIBILITY.

    The third sentence of section 6(f) of the Food Stamp Act of 1977 (7 
U.S.C. 2015(f)) is amended by inserting ``, at State option,'' after 
``less''.

SEC. 1129. COMPARABLE TREATMENT FOR DISQUALIFICATION.

    (a) In General.--Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 
2015) is amended by adding at the end the following:
    ``(i) Comparable Treatment for Disqualification.--
            ``(1) In general.--If a disqualification is imposed on a 
        member of a household for a failure of the member to perform an 
        action required under a Federal, State, or local law relating 
        to a means-tested public assistance program, the State agency 
        may impose the same disqualification on the member of the 
        household under the food stamp program.
            ``(2) Rules and procedures.--If a disqualification is 
        imposed under paragraph (1) for a failure of an individual to 
        perform an action required under part A of title IV of the 
        Social Security Act (42 U.S.C. 601 et seq.), the State agency 
        may use the rules and procedures that apply under part A of 
        title IV of the Act to impose the same disqualification under 
        the food stamp program.
            ``(3) Application after disqualification period.--A member 
        of a household disqualified under paragraph (1) may, after the 
        disqualification period has expired, apply for benefits under 
        this Act and shall be treated as a new applicant, except that a 
prior disqualification under subsection (d) shall be considered in 
determining eligibility.''.
    (b) State Plan Provisions.--Section 11(e) of the Food Stamp Act of 
1977 (7 U.S.C. 2020(e)) is amended--
            (1) in paragraph (24), by striking ``and'' at the end;
            (2) in paragraph (25), by striking the period at the end 
        and inserting a semicolon; and
            (3) by adding at the end the following:
            ``(26) the guidelines the State agency uses in carrying out 
        section 6(i); and''.
    (c) Conforming Amendment.--Section 6(d)(2)(A) of the Food Stamp Act 
of 1977 (7 U.S.C. 2015(d)(2)(A)) is amended by striking ``that is 
comparable to a requirement of paragraph (1)''.

SEC. 1130. DISQUALIFICATION FOR RECEIPT OF MULTIPLE FOOD STAMP 
              BENEFITS.

    Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as amended 
by section 1129, is amended by adding at the end the following:
    ``(j) Disqualification for Receipt of Multiple Food Stamp 
Benefits.--An individual shall be ineligible to participate in the food 
stamp program as a member of any household for a 10-year period if the 
individual is found by a State agency to have made, or is convicted in 
a Federal or State court of having made, a fraudulent statement or 
representation with respect to the identity or place of residence of 
the individual in order to receive multiple benefits simultaneously 
under the food stamp program.''.

SEC. 1131. DISQUALIFICATION OF FLEEING FELONS.

    Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as amended 
by section 1130, is amended by adding at the end the following:
    ``(k) Disqualification of Fleeing Felons.--No member of a household 
who is otherwise eligible to participate in the food stamp program 
shall be eligible to participate in the program as a member of that or 
any other household during any period during which the individual is--
            ``(1) fleeing to avoid prosecution, or custody or 
        confinement after conviction, under the law of the place from 
        which the individual is fleeing, for a crime, or attempt to 
        commit a crime, that is a felony under the law of the place 
        from which the individual is fleeing or that, in the case of 
        New Jersey, is a high misdemeanor under the law of New Jersey; 
        or
            ``(2) violating a condition of probation or parole imposed 
        under a Federal or State law.''.

SEC. 1132. COOPERATION WITH CHILD SUPPORT AGENCIES.

    Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as amended 
by section 1131, is amended by adding at the end the following:
    ``(l) Custodial Parent's Cooperation With Child Support Agencies.--
            ``(1) In general.--At the option of a State agency, subject 
        to paragraphs (2) and (3), no natural or adoptive parent or 
        other individual (collectively referred to in this subsection 
        as `the individual') who is living with and exercising parental 
        control over a child under the age of 18 who has an absent 
        parent shall be eligible to participate in the food stamp 
        program unless the individual cooperates with the State agency 
        administering the program established under part D of title IV 
        of the Social Security Act (42 U.S.C. 651 et seq.)--
                    ``(A) in establishing the paternity of the child 
                (if the child is born out of wedlock); and
                    ``(B) in obtaining support for--
                            ``(i) the child; or
                            ``(ii) the individual and the child.
            ``(2) Good cause for noncooperation.--Paragraph (1) shall 
        not apply to the individual if good cause is found for refusing 
        to cooperate, as determined by the State agency in accordance 
        with standards prescribed by the Secretary in consultation with 
        the Secretary of Health and Human Services. The standards shall 
        take into consideration circumstances under which cooperation 
        may be against the best interests of the child.
            ``(3) Fees.--Paragraph (1) shall not require the payment of 
        a fee or other cost for services provided under part D of title 
        IV of the Social Security Act (42 U.S.C. 651 et seq.).
    ``(m) Noncustodial Parent's Cooperation With Child Support 
Agencies.--
            ``(1) In general.--At the option of a State agency, subject 
        to paragraphs (2) and (3), a putative or identified 
        noncustodial parent of a child under the age of 18 (referred to 
        in this subsection as `the individual') shall not be eligible 
        to participate in the food stamp program if the individual 
        refuses to cooperate with the State agency administering the 
        program established under part D of title IV of the Social 
        Security Act (42 U.S.C. 651 et seq.)--
                    ``(A) in establishing the paternity of the child 
                (if the child is born out of wedlock); and
                    ``(B) in providing support for the child.
            ``(2) Refusal to cooperate.--
                    ``(A) Guidelines.--The Secretary, in consultation 
                with the Secretary of Health and Human Services, shall 
                develop guidelines on what constitutes a refusal to 
                cooperate under paragraph (1).
                    ``(B) Procedures.--The State agency shall develop 
                procedures, using guidelines developed under 
                subparagraph (A), for determining whether an individual 
                is refusing to cooperate under paragraph (1).
            ``(3) Fees.--Paragraph (1) shall not require the payment of 
        a fee or other cost for services provided under part D of title 
        IV of the Social Security Act (42 U.S.C. 651 et seq.).
            ``(4) Privacy.--The State agency shall provide safeguards 
        to restrict the use of information collected by a State agency 
        administering the program established under part D of title IV 
        of the Social Security Act (42 U.S.C. 651 et seq.) to purposes 
        for which the information is collected.''.

SEC. 1133. DISQUALIFICATION RELATING TO CHILD SUPPORT ARREARS.

    Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as amended 
by section 1132, is amended by adding at the end the following:
    ``(n) Disqualification for Child Support Arrears.--
            ``(1) In general.--At the option of a State agency, no 
        individual shall be eligible to participate in the food stamp 
        program as a member of any household during any month that the 
        individual is delinquent in any payment due under a court order 
        for the support of a child of the individual.
            ``(2) Exceptions.--Paragraph (1) shall not apply if--
                    ``(A) a court is allowing the individual to delay 
                payment; or
                    ``(B) the individual is complying with a payment 
                plan approved by a court or the State agency designated 
                under part D of title IV of the Social Security Act (42 
                U.S.C. 651 et seq.) to provide support for the child of 
                the individual.''.

SEC. 1134. WORK REQUIREMENT.

    (a) In General.--Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 
2015), as amended by section 1133, is amended by adding at the end the 
following:
    ``(o) Work Requirement.--
            ``(1) Definition of work program.--In this subsection, the 
        term `work program' means--
                    ``(A) a program under the Job Training Partnership 
                Act (29 U.S.C. 1501 et seq.);
                    ``(B) a program under section 236 of the Trade Act 
                of 1974 (19 U.S.C. 2296); or
                    ``(C) a program of employment or training operated 
                or supervised by a State or political subdivision of a 
                State that meets standards approved by the Governor of 
                the State, including a program under subsection (d)(4), 
                other than a job search program or a job search 
                training program.
            ``(2) Work requirement.--Subject to the other provisions of 
        this subsection, no individual shall be eligible to participate 
        in the food stamp program as a member of any household if, 
        during the preceding 12-month period, the individual received 
        food stamp benefits for not less than 4 months during which the 
        individual did not--
                    ``(A) work 20 hours or more per week, averaged 
                monthly;
                    ``(B) participate in and comply with the 
                requirements of a work program for 20 hours or more per 
                week, as determined by the State agency;
                    ``(C) participate in and comply with the 
                requirements of a program under section 20 or a 
                comparable program established by a State or political 
                subdivision of a State; or
                    ``(D) receive an exemption under paragraph (6).
            ``(3) Exception.--Paragraph (2) shall not apply to an 
        individual if the individual is--
                    ``(A) under 18 or over 50 years of age;
                    ``(B) medically certified as physically or mentally 
                unfit for employment;
                    ``(C) a parent or other member of a household with 
                responsibility for a dependent child;
                    ``(D) otherwise exempt under subsection (d)(2); or
                    ``(E) a pregnant woman.
            ``(4) Waiver.--
                    ``(A) In general.--On the request of a State 
                agency, the Secretary may waive the applicability of 
                paragraph (2) to any group of individuals in the State 
                if the Secretary makes a determination that the area in 
                which the individuals reside--
                            ``(i) has an unemployment rate of over 10 
                        percent; or
                            ``(ii) does not have a sufficient number of 
                        jobs to provide employment for the individuals.
                    ``(B) Response.--The Secretary shall respond to a 
                request made pursuant to subparagraph (A) not later 
                than 15 days after the State agency makes the request.
                    ``(C) Report.--The Secretary shall report the basis 
                for a waiver under subparagraph (A) to the Committee on 
                Agriculture of the House of Representatives and the 
                Committee on Agriculture, Nutrition, and Forestry of 
                the Senate.
            ``(5) Subsequent eligibility.--
                    ``(A) In general.--An individual shall become 
                eligible to participate in the food stamp program if, 
                during a 30-day period, the individual--
                            ``(i) works 80 or more hours;
                            ``(ii) participates in and complies with 
                        the requirements of a work program for 80 or 
                        more hours, as determined by a State agency; or
                            ``(iii) participates in and complies with 
                        the requirements of a program under section 20 
                        or a comparable program established by a State 
                        or political subdivision of a State.
                    ``(B) After becoming eligible.--An individual shall 
                remain subject to paragraph (2) during any 12-month 
                period subsequent to becoming eligible to participate 
                in the food stamp program under subparagraph (A), 
                except that the term `preceding 12-month period' in 
                paragraph (2) shall mean the preceding period beginning 
                on the date the individual most recently satisfied the 
                requirements of subparagraph (A).
            ``(6) State agency exemptions.--
                    ``(A) In general.--A State agency may exempt an 
                individual for purposes of paragraph (2)(D)--
                            ``(i) by reason of hardship; or
                            ``(ii) if the individual participates in 
                        and complies with the requirements of a program 
                        of job search or job search training under 
                        clauses (i) or (ii) of subsection (d)(4)(B) 
                        that requires an average of not less than 20 
                        hours per week of participation.
                    ``(B) Limitation on hardship exemption.--The 
                average monthly number of individuals receiving 
                benefits due to a hardship exemption granted by a State 
                agency under subparagraph (A)(i) for a fiscal year may 
                not exceed 10 percent of the average monthly number of 
                individuals receiving allotments during the fiscal year 
                in the State who are not exempt from the requirements 
                of this subsection under paragraph (3) or (4).
                    ``(C) Limitation on job search exemption.--A State 
                agency may not exempt an individual under subparagraph 
                (A)(ii) for more than 1 month during any 12-month 
                period.''.
    (b) Transition Provision.--During the 1-year period beginning on 
the date of enactment of this Act, the term ``preceding 12-month 
period'' in section 6(o) of the Food Stamp Act of 1977, as added by 
subsection (a), means the preceding period that begins on the date of 
enactment of this Act.

SEC. 1135. ENCOURAGEMENT OF ELECTRONIC BENEFIT TRANSFER SYSTEMS.

    (a) In General.--Section 7(i) of the Food Stamp Act of 1977 (7 
U.S.C. 2016(i)) is amended--
            (1) by striking paragraph (1) and inserting the following:
            ``(1) Electronic benefit transfers.--
                    ``(A) Implementation.--Not later than October 1, 
                2002, each State agency shall implement an electronic 
                benefit transfer system under which household benefits 
                determined under section 8(a) or 26 are issued from and 
                stored in a central databank, unless the Secretary 
                provides a waiver for a State agency that faces unusual 
                barriers to implementing an electronic benefit transfer 
                system.
                    ``(B) Timely implementation.--Each State agency is 
                encouraged to implement an electronic benefit transfer 
                system under subparagraph (A) as soon as practicable.
                    ``(C) State flexibility.--Subject to paragraph (2), 
                a State agency may procure and implement an electronic 
                benefit transfer system under the terms, conditions, 
                and design that the State agency considers appropriate.
                    ``(D) Operation.--An electronic benefit transfer 
                system should take into account generally accepted 
                standard operating rules based on--
                            ``(i) commercial electronic funds transfer 
                        technology;
                            ``(ii) the need to permit interstate 
                        operation and law enforcement monitoring; and
                            ``(iii) the need to permit monitoring and 
                        investigations by authorized law enforcement 
                        agencies.'';
            (2) in paragraph (2)--
                    (A) by striking ``effective no later than April 1, 
                1992,'';
                    (B) in subparagraph (A)--
                            (i) by striking ``, in any 1 year,''; and
                            (ii) by striking ``on-line'';
                    (C) by striking subparagraph (D) and inserting the 
                following:
                    ``(D)(i) measures to maximize the security of a 
                system using the most recent technology available that 
                the State agency considers appropriate and cost 
                effective and which may include personal identification 
                numbers, photographic identification on electronic 
                benefit transfer cards, and other measures to protect 
                against fraud and abuse; and
                    ``(ii) effective not later than 2 years after the 
                date of enactment of this clause, to the extent 
                practicable, measures that permit a system to 
                differentiate items of food that may be acquired with 
                an allotment from items of food that may not be 
                acquired with an allotment;'';
                    (D) in subparagraph (G), by striking ``and'' at the 
                end;
                    (E) in subparagraph (H), by striking the period at 
                the end and inserting ``; and''; and
                    (F) by adding at the end the following:
            ``(I) procurement standards.''; and
            (3) by adding at the end the following:
            ``(7) Replacement of benefits.--Regulations issued by the 
        Secretary regarding the replacement of benefits and liability 
        for replacement of benefits under an electronic benefit 
        transfer system shall be similar to the regulations in effect 
        for a paper-based food stamp issuance system.
            ``(8) Replacement card fee.--A State agency may collect a 
        charge for replacement of an electronic benefit transfer card 
        by reducing the monthly allotment of the household receiving 
        the replacement card.
            ``(9) Optional photographic identification.--
                    ``(A) In general.--A State agency may require that 
                an electronic benefit card contain a photograph of 1 or 
                more members of a household.
                    ``(B) Other authorized users.--If a State agency 
                requires a photograph on an electronic benefit card 
                under subparagraph (A), the State agency shall 
                establish procedures to ensure that any other 
                appropriate member of the household or any authorized 
                representative of the household may utilize the card.
            ``(10) Applicable law.--Disclosures, protections, 
        responsibilities, and remedies established by the Federal 
        Reserve Board under section 904 of the Electronic Fund Transfer 
        Act (15 U.S.C. 1693b) shall not apply to benefits under this 
        Act delivered through any electronic benefit transfer 
        system.''.
    (b) Sense of Congress.--It is the sense of Congress that a State 
that operates an electronic benefit transfer system under the Food 
Stamp Act of 1977 (7 U.S.C. 2011 et seq.) should operate the system in 
a manner that is compatible with electronic benefit transfer systems 
operated by other States.

SEC. 1136. VALUE OF MINIMUM ALLOTMENT.

    The proviso in section 8(a) of the Food Stamp Act of 1977 (7 U.S.C. 
2017(a)) is amended by striking ``, and shall be adjusted'' and all 
that follows through ``$5''.

SEC. 1137. BENEFITS ON RECERTIFICATION.

    Section 8(c)(2)(B) of the Food Stamp Act of 1977 (7 U.S.C. 
2017(c)(2)(B)) is amended by striking ``of more than one month''.

SEC. 1138. OPTIONAL COMBINED ALLOTMENT FOR EXPEDITED HOUSEHOLDS.

    Section 8(c) of the Food Stamp Act of 1977 (7 U.S.C. 2017(c)) is 
amended by striking paragraph (3) and inserting the following:
            ``(3) Optional combined allotment for expedited 
        households.--A State agency may provide to an eligible 
        household applying after the 15th day of a month, in lieu of 
        the initial allotment of the household and the regular 
        allotment of the household for the following month, an 
        allotment that is equal to the total amount of the initial 
        allotment and the first regular allotment. The allotment shall 
        be provided in accordance with section 11(e)(3) in the case of 
        a household that is not entitled to expedited service and in 
        accordance with paragraphs (3) and (9) of section 11(e) in the 
        case of a household that is entitled to expedited service.''.

SEC. 1139. FAILURE TO COMPLY WITH OTHER MEANS-TESTED PUBLIC ASSISTANCE 
              PROGRAMS.

    Section 8 of the Food Stamp Act of 1977 (7 U.S.C. 2017) is amended 
by striking subsection (d) and inserting the following:
    ``(d) Reduction of Public Assistance Benefits.--
            ``(1) In general.--If the benefits of a household are 
        reduced under a Federal, State, or local law relating to a 
        means-tested public assistance program for the failure of a 
        member of the household to perform an action required under the 
        law or program, for the duration of the reduction--
                    ``(A) the household may not receive an increased 
                allotment as the result of a decrease in the income of 
                the household to the extent that the decrease is the 
                result of the reduction; and
                    ``(B) the State agency may reduce the allotment of 
                the household by not more than 25 percent.
            ``(2) Rules and procedures.--If the allotment of a 
        household is reduced under this subsection for a failure to 
        perform an action required under part A of title IV of the 
        Social Security Act (42 U.S.C. 601 et seq.), the State agency 
        may use the rules and procedures that apply under part A of 
        title IV of the Act to reduce the allotment under the food 
        stamp program.''.

SEC. 1140. ALLOTMENTS FOR HOUSEHOLDS RESIDING IN CENTERS.

    Section 8 of the Food Stamp Act of 1977 (7 U.S.C. 2017) is amended 
by adding at the end the following:
    ``(f) Allotments for Households Residing in Centers.--
            ``(1) In general.--In the case of an individual who resides 
        in a center for the purpose of a drug or alcoholic treatment 
        program described in the last sentence of section 3(i), a State 
        agency may provide an allotment for the individual to--
                    ``(A) the center as an authorized representative of 
                the individual for a period that is less than 1 month; 
                and
                    ``(B) the individual, if the individual leaves the 
                center.
            ``(2) Direct payment.--A State agency may require an 
        individual referred to in paragraph (1) to designate the center 
        in which the individual resides as the authorized 
        representative of the individual for the purpose of receiving 
        an allotment.''.

SEC. 1141. CONDITION PRECEDENT FOR APPROVAL OF RETAIL FOOD STORES AND 
              WHOLESALE FOOD CONCERNS.

    Section 9(a)(1) of the Food Stamp Act of 1977 (7 U.S.C. 2018(a)(1)) 
is amended by adding at the end the following: ``No retail food store 
or wholesale food concern of a type determined by the Secretary, based 
on factors that include size, location, and type of items sold, shall 
be approved to be authorized or reauthorized for participation in the 
food stamp program unless an authorized employee of the Department of 
Agriculture, a designee of the Secretary, or, if practicable, an 
official of the State or local government designated by the Secretary 
has visited the store or concern for the purpose of determining whether 
the store or concern should be approved or reauthorized, as 
appropriate.''.

SEC. 1142. AUTHORITY TO ESTABLISH AUTHORIZATION PERIODS.

    Section 9(a) of the Food Stamp Act of 1977 (7 U.S.C. 2018(a)) is 
amended by adding at the end the following:
            ``(3) Authorization periods.--The Secretary shall establish 
        specific time periods during which authorization to accept and 
        redeem coupons, or to redeem benefits through an electronic 
        benefit transfer system, shall be valid under the food stamp 
        program.''.

SEC. 1143. INFORMATION FOR VERIFYING ELIGIBILITY FOR AUTHORIZATION.

    Section 9(c) of the Food Stamp Act of 1977 (7 U.S.C. 2018(c)) is 
amended--
            (1) in the first sentence, by inserting ``, which may 
        include relevant income and sales tax filing documents,'' after 
        ``submit information''; and
            (2) by inserting after the first sentence the following: 
        ``The regulations may require retail food stores and wholesale 
        food concerns to provide written authorization for the 
        Secretary to verify all relevant tax filings with appropriate 
        agencies and to obtain corroborating documentation from other 
        sources so that the accuracy of information provided by the 
        stores and concerns may be verified.''.

SEC. 1144. WAITING PERIOD FOR STORES THAT FAIL TO MEET AUTHORIZATION 
              CRITERIA.

    Section 9(d) of the Food Stamp Act of 1977 (7 U.S.C. 2018(d)) is 
amended by adding at the end the following: ``A retail food store or 
wholesale food concern that is denied approval to accept and redeem 
coupons because the store or concern does not meet criteria for 
approval established by the Secretary may not, for at least 6 months, 
submit a new application to participate in the program. The Secretary 
may establish a longer time period under the preceding sentence, 
including permanent disqualification, that reflects the severity of the 
basis of the denial.''.

SEC. 1145. OPERATION OF FOOD STAMP OFFICES.

    Section 11 of the Food Stamp Act of 1977 (7 U.S.C. 2020), as 
amended by sections 1119(b) and 1129(b), is amended--
            (1) in subsection (e)--
                    (A) by striking paragraph (2) and inserting the 
                following:
            ``(2)(A) that the State agency shall establish procedures 
        governing the operation of food stamp offices that the State 
        agency determines best serve households in the State, including 
        households with special needs, such as households with elderly 
        or disabled members, households in rural areas with low-income 
        members, homeless individuals, households residing on 
        reservations, and households in areas in which a substantial 
        number of members of low-income households speak a language 
        other than English.
            ``(B) In carrying out subparagraph (A), a State agency--
                    ``(i) shall provide timely, accurate, and fair 
                service to applicants for, and participants in, the 
                food stamp program;
                    ``(ii) shall develop an application containing the 
                information necessary to comply with this Act;
                    ``(iii) shall permit an applicant household to 
                apply to participate in the program on the same day 
                that the household first contacts a food stamp office 
                in person during office hours;
                    ``(iv) shall consider an application that contains 
                the name, address, and signature of the applicant to be 
                filed on the date the applicant submits the 
                application;
                    ``(v) shall require that an adult representative of 
                each applicant household certify in writing, under 
                penalty of perjury, that--
                            ``(I) the information contained in the 
                        application is true; and
                            ``(II) all members of the household are 
                        citizens or are aliens eligible to receive food 
                        stamps under section 6(f);
                    ``(vi) shall provide a method of certifying and 
                issuing coupons to eligible homeless individuals, to 
                ensure that participation in the food stamp program is 
                limited to eligible households; and
                    ``(vii) may establish operating procedures that 
                vary for local food stamp offices to reflect regional 
                and local differences within the State.
            ``(C) Nothing in this Act shall prohibit the use of 
        signatures provided and maintained electronically, storage of 
        records using automated retrieval systems only, or any other 
        feature of a State agency's application system that does not 
        rely exclusively on the collection and retention of paper 
        applications or other records.
            ``(D) The signature of any adult under this paragraph shall 
        be considered sufficient to comply with any provision of 
        Federal law requiring a household member to sign an application 
        or statement.'';
                    (B) in paragraph (3)--
                            (i) by striking ``shall--'' and all that 
                        follows through ``provide each'' and inserting 
                        ``shall provide each''; and
                            (ii) by striking ``(B) assist'' and all 
                        that follows through ``representative of the 
                        State agency;'';
                    (C) by striking paragraphs (14) and (25);
                    (D)(i) by redesignating paragraphs (15) through 
                (24) as paragraphs (14) through (23), respectively; and
                    (ii) by redesignating paragraph (26), as paragraph 
                (24); and
            (2) in subsection (i)--
                    (A) by striking ``(i) Notwithstanding'' and all 
                that follows through ``(2)'' and inserting the 
                following:
    ``(i) Application and Denial Procedures.--
            ``(1) Application procedures.--Notwithstanding any other 
        provision of law,''; and
                    (B) by striking ``; (3) households'' and all that 
                follows through ``title IV of the Social Security Act. 
                No'' and inserting a period and the following:
            ``(2) Denial and termination.--Except in a case of 
        disqualification as a penalty for failure to comply with a 
        public assistance program rule or regulation, no''.

SEC. 1146. STATE EMPLOYEE AND TRAINING STANDARDS.

    Section 11(e)(6) of the Food Stamp Act of 1977 (7 U.S.C. 
2020(e)(6)) is amended--
            (1) by striking ``that (A) the'' and inserting ``that--
                    ``(A) the'';
            (2) by striking ``Act; (B) the'' and inserting ``Act; and
                    ``(B) the'';
            (3) in subparagraph (B), by striking ``United States Civil 
        Service Commission'' and inserting ``Office of Personnel 
        Management''; and
            (4) by striking subparagraphs (C) through (E).

SEC. 1147. EXCHANGE OF LAW ENFORCEMENT INFORMATION.

    Section 11(e)(8) of the Food Stamp Act of 1977 (7 U.S.C. 
2020(e)(8)) is amended--
            (1) by striking ``that (A) such'' and inserting the 
        following: ``that--
                    ``(A) the'';
            (2) by striking ``law, (B) notwithstanding'' and inserting 
        the following: ``law;
                    ``(B) notwithstanding'';
            (3) by striking ``Act, and (C) such'' and inserting the 
        following: ``Act;
                    ``(C) the''; and
            (4) by adding at the end the following:
                    ``(D) notwithstanding any other provision of law, 
                the address, social security number, and, if available, 
                photograph of any member of a household shall be made 
                available, on request, to any Federal, State, or local 
                law enforcement officer if the officer furnishes the 
                State agency with the name of the member and notifies 
                the agency that--
                            ``(i) the member--
                                    ``(I) is fleeing to avoid 
                                prosecution, or custody or confinement 
                                after conviction, for a crime (or 
                                attempt to commit a crime) that, under 
                                the law of the place the member is 
                                fleeing, is a felony (or, in the case 
                                of New Jersey, a high misdemeanor), or 
                                is violating a condition of probation 
                                or parole imposed under Federal or 
                                State law; or
                                    ``(II) has information that is 
                                necessary for the officer to conduct an 
                                official duty related to subclause (I);
                            ``(ii) locating or apprehending the member 
                        is an official duty; and
                            ``(iii) the request is being made in the 
                        proper exercise of an official duty; and
                    ``(E) the safeguards shall not prevent compliance 
                with paragraph (16);''.

SEC. 1148. EXPEDITED COUPON SERVICE.

    Section 11(e)(9) of the Food Stamp Act of 1977 (7 U.S.C. 
2020(e)(9)) is amended--
            (1) in subparagraph (A)--
                    (A) by striking ``five days'' and inserting ``7 
                days''; and
                    (B) by inserting ``and'' at the end;
            (2) by striking subparagraphs (B) and (C);
            (3) by redesignating subparagraph (D) as subparagraph (B); 
        and
            (4) in subparagraph (B), as so redesignated, by striking 
        ``, (B), or (C)''.

SEC. 1149. WITHDRAWING FAIR HEARING REQUESTS.

    Section 11(e)(10) of the Food Stamp Act of 1977 (7 U.S.C. 
2020(e)(10)) is amended by inserting before the semicolon at the end a 
period and the following: ``At the option of a State, at any time prior 
to a fair hearing determination under this paragraph, a household may 
withdraw, orally or in writing, a request by the household for the fair 
hearing. If the withdrawal request is an oral request, the State agency 
shall provide a written notice to the household confirming the 
withdrawal request and providing the household with an opportunity to 
request a hearing''.

SEC. 1150. INCOME, ELIGIBILITY, AND IMMIGRATION STATUS VERIFICATION 
              SYSTEMS.

    Section 11 of the Food Stamp Act of 1977 (7 U.S.C. 2020) is 
amended--
            (1) in subsection (e)(18), as redesignated by section 
        1145(1)(D)--
                    (A) by striking ``that information is'' and 
                inserting ``at the option of the State agency, that 
                information may be''; and
                    (B) by striking ``shall be requested'' and 
                inserting ``may be requested''; and
            (2) by adding at the end the following:
    ``(p) State Verification Option.--Notwithstanding any other 
provision of law, in carrying out the food stamp program, a State 
agency shall not be required to use an income and eligibility or an 
immigration status verification system established under section 1137 
of the Social Security Act (42 U.S.C. 1320b-7).''.

SEC. 1151. DISQUALIFICATION OF RETAILERS WHO INTENTIONALLY SUBMIT 
              FALSIFIED APPLICATIONS.

    Section 12(b) of the Food Stamp Act of 1977 (7 U.S.C. 2021(b)) is 
amended--
            (1) in paragraph (2), by striking ``and'' at the end;
            (2) in paragraph (3), by striking the period at the end and 
        inserting ``; and''; and
            (3) by adding at the end the following:
            ``(4) for a reasonable period of time to be determined by 
        the Secretary, including permanent disqualification, on the 
        knowing submission of an application for the approval or 
        reauthorization to accept and redeem coupons that contains 
        false information about a substantive matter that was a part of 
        the application.''.

SEC. 1152. DISQUALIFICATION OF RETAILERS WHO ARE DISQUALIFIED UNDER THE 
              WIC PROGRAM.

    Section 12 of the Food Stamp Act of 1977 (7 U.S.C. 2021) is amended 
by adding at the end the following:
    ``(g) Disqualification of Retailers Who Are Disqualified Under the 
WIC Program.--
            ``(1) In general.--The Secretary shall issue regulations 
        providing criteria for the disqualification under this Act of 
        an approved retail food store and a wholesale food concern that 
        is disqualified from accepting benefits under the special 
        supplemental nutrition program for women, infants, and children 
        established under section 17 of the Child Nutrition Act of 1966 
        (7 U.S.C. 1786).
            ``(2) Terms.--A disqualification under paragraph (1)--
                    ``(A) shall be for the same length of time as the 
                disqualification from the program referred to in 
                paragraph (1);
                    ``(B) may begin at a later date than the 
                disqualification from the program referred to in 
                paragraph (1); and
                    ``(C) notwithstanding section 14, shall not be 
                subject to judicial or administrative review.''.

SEC. 1153. COLLECTION OF OVERISSUANCES.

    (a) Collection of Overissuances.--Section 13 of the Food Stamp Act 
of 1977 (7 U.S.C. 2022) is amended--
            (1) by striking subsection (b) and inserting the following:
    ``(b) Collection of Overissuances.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, a State agency shall collect any overissuance of 
        coupons issued to a household by--
                    ``(A) reducing the allotment of the household;
                    ``(B) withholding amounts from unemployment 
                compensation from a member of the household under 
                subsection (c);
                    ``(C) recovering from Federal pay or a Federal 
                income tax refund under subsection (d); or
                    ``(D) any other means.
            ``(2) Cost effectiveness.--Paragraph (1) shall not apply if 
        the State agency demonstrates to the satisfaction of the 
        Secretary that all of the means referred to in paragraph (1) 
        are not cost effective.
            ``(3) Maximum reduction absent fraud.--If a household 
        received an overissuance of coupons without any member of the 
        household being found ineligible to participate in the program 
        under section 6(b)(1) and a State agency elects to reduce the 
        allotment of the household under paragraph (1)(A), the State 
        agency shall not reduce the monthly allotment of the household 
        under paragraph (1)(A) by an amount in excess of the greater 
        of--
                    ``(A) 10 percent of the monthly allotment of the 
                household; or
                    ``(B) $10.
            ``(4) Procedures.--A State agency shall collect an 
        overissuance of coupons issued to a household under paragraph 
        (1) in accordance with the requirements established by the 
        State agency for providing notice, electing a means of payment, 
        and establishing a time schedule for payment.''; and
            (2) in subsection (d)--
                    (A) by striking ``as determined under subsection 
                (b) and except for claims arising from an error of the 
                State agency,'' and inserting ``, as determined under 
                subsection (b)(1),''; and
                    (B) by inserting before the period at the end the 
                following: ``or a Federal income tax refund as 
                authorized by section 3720A of title 31, United States 
                Code''.
    (b) Conforming Amendments.--Section 11(e)(8)(C) of the Food Stamp 
Act of 1977 (7 U.S.C. 2020(e)(8)(C)) is amended--
            (1) by striking ``and excluding claims'' and all that 
        follows through ``such section''; and
            (2) by inserting before the semicolon at the end the 
        following: ``or a Federal income tax refund as authorized by 
        section 3720A of title 31, United States Code''.
    (c) Retention Rate.--The proviso of the first sentence of section 
16(a) of the Food Stamp Act of 1977 (7 U.S.C. 2025(a)) is amended by 
striking ``25 percent during the period beginning October 1, 1990'' and 
all that follows through ``error of a State agency'' and inserting the 
following: ``25 percent of the overissuances collected by the State 
agency under section 13, except those overissuances arising from an 
error of the State agency''.

SEC. 1154. AUTHORITY TO SUSPEND STORES VIOLATING PROGRAM REQUIREMENTS 
              PENDING ADMINISTRATIVE AND JUDICIAL REVIEW.

    Section 14(a) of the Food Stamp Act of 1977 (7 U.S.C. 2023(a)) is 
amended--
            (1) by redesignating the first through seventeenth 
        sentences as paragraphs (1) through (17), respectively; and
            (2) by adding at the end the following:
            ``(18) Suspension of stores pending review.--
        Notwithstanding any other provision of this subsection, any 
        permanent disqualification of a retail food store or wholesale 
        food concern under paragraph (3) or (4) of section 12(b) shall 
        be effective from the date of receipt of the notice of 
        disqualification. If the disqualification is reversed through 
        administrative or judicial review, the Secretary shall not be 
        liable for the value of any sales lost during the 
        disqualification period.''.

SEC. 1155. EXPANDED CRIMINAL FORFEITURE FOR VIOLATIONS.

    (a) Forfeiture of Items Exchanged in Food Stamp Trafficking.--The 
first sentence of section 15(g) of the Food Stamp Act of 1977 (7 U.S.C. 
2024(g)) is amended by striking ``or intended to be furnished''.
    (b) Criminal Forfeiture.--Section 15 of the Food Stamp Act of 1977 
(7 U.S.C. 2024) is amended by adding at the end the following:
    ``(h) Criminal Forfeiture.--
            ``(1) In general.--In imposing a sentence on a person 
        convicted of an offense in violation of subsection (b) or (c), 
        a court shall order, in addition to any other sentence imposed 
        under this section, that the person forfeit to the United 
        States all property described in paragraph (2).
            ``(2) Property subject to forfeiture.--All property, real 
        and personal, used in a transaction or attempted transaction, 
        to commit, or to facilitate the commission of, a violation 
        (other than a misdemeanor) of subsection (b) or (c), or 
        proceeds traceable to a violation of subsection (b) or (c), 
        shall be subject to forfeiture to the United States under 
        paragraph (1).
            ``(3) Interest of owner.--No interest in property shall be 
        forfeited under this subsection as the result of any act or 
        omission established by the owner of the interest to have been 
        committed or omitted without the knowledge or consent of the 
        owner.
            ``(4) Proceeds.--The proceeds from any sale of forfeited 
        property and any monies forfeited under this subsection shall 
        be used--
                    ``(A) first, to reimburse the Department of Justice 
                for the costs incurred by the Department to initiate 
                and complete the forfeiture proceeding;
                    ``(B) second, to reimburse the Department of 
                Agriculture Office of Inspector General for any costs 
                the Office incurred in the law enforcement effort 
                resulting in the forfeiture;
                    ``(C) third, to reimburse any Federal or State law 
                enforcement agency for any costs incurred in the law 
                enforcement effort resulting in the forfeiture; and
                    ``(D) fourth, by the Secretary to carry out the 
                approval, reauthorization, and compliance 
                investigations of retail stores and wholesale food 
                concerns under section 9.''.

SEC. 1156. LIMITATION ON FEDERAL MATCH.

    Section 16(a)(4) of the Food Stamp Act of 1977 (7 U.S.C. 
2025(a)(4)) is amended by inserting after the comma at the end the 
following: ``but not including recruitment activities,''.

SEC. 1157. STANDARDS FOR ADMINISTRATION.

    (a) In General.--Section 16 of the Food Stamp Act of 1977 (7 U.S.C. 
2025) is amended by striking subsection (b).
    (b) Conforming Amendments.--
            (1) The first sentence of section 11(g) of the Food Stamp 
        Act of 1977 (7 U.S.C. 2020(g)) is amended by striking ``the 
        Secretary's standards for the efficient and effective 
        administration of the program established under section 
        16(b)(1) or''.
            (2) Section 16(c)(1)(B) of the Food Stamp Act of 1977 (7 
        U.S.C. 2025(c)(1)(B)) is amended by striking ``pursuant to 
        subsection (b)''.

SEC. 1158. WORK SUPPLEMENTATION OR SUPPORT PROGRAM.

    Section 16 of the Food Stamp Act of 1977 (7 U.S.C. 2025), as 
amended by section 1157(a), is amended by inserting after subsection 
(a) the following:
    ``(b) Work Supplementation or Support Program.--
            ``(1) Definition of work supplementation or support 
        program.--In this subsection, the term `work supplementation or 
        support program' means a program under which, as determined by 
        the Secretary, public assistance (including any benefits 
        provided under a program established by the State and the food 
        stamp program) is provided to an employer to be used for hiring 
        and employing a public assistance recipient who was not 
        employed by the employer at the time the public assistance 
        recipient entered the program.
            ``(2) Program.--A State agency may elect to use an amount 
        equal to the allotment that would otherwise be issued to a 
        household under the food stamp program, but for the operation 
        of this subsection, for the purpose of subsidizing or 
        supporting a job under a work supplementation or support 
        program established by the State.
            ``(3) Procedure.--If a State agency makes an election under 
        paragraph (2) and identifies each household that participates 
        in the food stamp program that contains an individual who is 
        participating in the work supplementation or support program--
                    ``(A) the Secretary shall pay to the State agency 
                an amount equal to the value of the allotment that the 
                household would be eligible to receive but for the 
                operation of this subsection;
                    ``(B) the State agency shall expend the amount 
                received under subparagraph (A) in accordance with the 
                work supplementation or support program in lieu of 
                providing the allotment that the household would 
                receive but for the operation of this subsection;
                    ``(C) for purposes of--
                            ``(i) sections 5 and 8(a), the amount 
                        received under this subsection shall be 
                        excluded from household income and resources; 
                        and
                            ``(ii) section 8(b), the amount received 
                        under this subsection shall be considered to be 
                        the value of an allotment provided to the 
                        household; and
                    ``(D) the household shall not receive an allotment 
                from the State agency for the period during which the 
                member continues to participate in the work 
                supplementation or support program.
            ``(4) Other work requirements.--No individual shall be 
        excused, by reason of the fact that a State has a work 
        supplementation or support program, from any work requirement 
        under section 6(d), except during the periods in which the 
        individual is employed under the work supplementation or 
        support program.
            ``(5) Length of participation.--A State agency shall 
        provide a description of how the public assistance recipients 
        in the program shall, within a specific period of time, be 
        moved from supplemented or supported employment to employment 
        that is not supplemented or supported.
            ``(6) Displacement.--A work supplementation or support 
        program shall not displace the employment of individuals who 
        are not supplemented or supported.''.

SEC. 1159. WAIVER AUTHORITY.

    Section 17(b)(1) of the Food Stamp Act of 1977 (7 U.S.C. 
2026(b)(1)) is amended--
            (1) by redesignating subparagraph (B) as subparagraph (C); 
        and
            (2) in subparagraph (A)--
                    (A) in the first sentence, by striking ``benefits 
                to eligible households, including'' and inserting the 
                following: ``benefits to eligible households, and may 
                waive any requirement of this Act to the extent 
                necessary for the project to be conducted.
                    ``(B) Project requirements.--
                            ``(i) Program goal.--The Secretary may not 
                        conduct a project under subparagraph (A) 
                        unless--
                                    ``(I) the project is consistent 
                                with the goal of the food stamp program 
                                of providing food assistance to raise 
                                levels of nutrition among low-income 
                                individuals; and
                                    ``(II) the project includes an 
                                evaluation to determine the effects of 
                                the project.
                            ``(ii) Permissible projects.--The Secretary 
                        may conduct a project under subparagraph (A) 
                        to--
                                    ``(I) improve program 
                                administration;
                                    ``(II) increase the self-
                                sufficiency of food stamp recipients;
                                    ``(III) test innovative welfare 
                                reform strategies; or
                                    ``(IV) allow greater conformity 
                                with the rules of other programs than 
                                would be allowed but for this 
                                paragraph.
                            ``(iii) Restrictions on permissible 
                        projects.--If the Secretary finds that a 
                        project under subparagraph (A) would reduce 
                        benefits by more than 20 percent for more than 
                        15 percent of households in the area subject to 
                        the project (not including any household whose 
                        benefits are reduced due to a failure to comply 
                        with work or other conduct requirements), the 
                        project--
                                    ``(I) may not include more than 15 
                                percent of the State's food stamp 
                                household, unless the Secretary 
                                determines that including a larger 
                                percentage of the food stamp household 
                                is justified by the nature of the 
                                project; and
                                    ``(II) shall continue for not more 
                                than 5 years after the date of 
                                implementation, unless the Secretary 
                                approves an extension requested by the 
                                State agency at any time.
                            ``(iv) Impermissible projects.--The 
                        Secretary may not conduct a project under 
                        subparagraph (A) that--
                                    ``(I) involves the payment of the 
                                value of an allotment in the form of 
                                cash, unless the project was approved 
                                prior to the date of enactment of this 
                                subparagraph;
                                    ``(II) has the effect of 
                                substantially transferring funds made 
                                available under this Act to services or 
                                benefits provided primarily through 
                                another public assistance program, or 
                                using the funds for any purpose other 
                                than the purchase of food, program 
                                administration, or an employment or 
                                training program;
                                    ``(III) is inconsistent with--
                                            ``(aa) the last 2 sentences 
                                        of section 3(i);
                                            ``(bb) the last sentence of 
                                        section 5(a), insofar as a 
                                        waiver denies assistance on the 
                                        basis of nonfinancial criteria 
                                        to an otherwise eligible 
                                        household or individual if the 
                                        household or individual has not 
                                        failed to comply with any work, 
                                        behavioral, or other conduct 
                                        requirement under this or 
                                        another program;
                                            ``(cc) section 5(c)(2);
                                            ``(dd) paragraph (2)(B), 
                                        (4)(F)(i), or (4)(K) of section 
                                        6(d);
                                            ``(ee) section 8(b);
                                            ``(ff) subsection (a), (c), 
                                        (g), (h)(2), or (h)(3) of 
                                        section 16;
                                            ``(gg) this paragraph; or
                                            ``(hh) subsection (a)(1) or 
                                        (g)(1) of section 20; or
                                    ``(IV) is not limited to a specific 
                                time period.
                            ``(v) Additional included projects.--Pilot 
                        or experimental projects may include'';
                    (B) by striking ``to aid to families with dependent 
                children under part A of title IV of the Social 
                Security Act'' and inserting ``are receiving assistance 
                under a State program funded under part A of title IV 
                of the Social Security Act (42 U.S.C. 601 et seq.)''; 
                and
                    (C) by striking ``coupons. The Secretary'' and all 
                that follows through ``Any pilot'' and inserting the 
                following: ``coupons.
                            ``(vi) Cash payment pilot projects.--Any 
                        pilot''.

SEC. 1160. RESPONSE TO WAIVERS.

    Section 17(b)(1) of the Food Stamp Act of 1977 (7 U.S.C. 
2026(b)(1)), as amended by section 1159, is amended by adding at the 
end the following:
                    ``(D) Response to waivers.--
                            ``(i) Response.--Not later than 60 days 
                        after the date of receiving a request for a 
                        waiver under subparagraph (A), the Secretary 
                        shall provide a response that--
                                    ``(I) approves the waiver request;
                                    ``(II) denies the waiver request 
                                and describes any modification needed 
                                for approval of the waiver request;
                                    ``(III) denies the waiver request 
                                and describes the grounds for the 
                                denial; or
                                    ``(IV) requests clarification of 
                                the waiver request.
                            ``(ii) Failure to respond.--If the 
                        Secretary does not provide a response in 
                        accordance with clause (i), the waiver shall be 
                        considered approved, unless the approval is 
                        specifically prohibited by this Act.
                            ``(iii) Notice of denial.--On denial of a 
                        waiver request under clause (i)(III), the 
                        Secretary shall provide a copy of the waiver 
                        request and a description of the reasons for 
                        the denial to the Committee on Agriculture of 
                        the House of Representatives and the Committee 
                        on Agriculture, Nutrition, and Forestry of the 
                        Senate.''.

SEC. 1161. EMPLOYMENT INITIATIVES PROGRAM.

    Section 17 of the Food Stamp Act of 1977 (7 U.S.C. 2026) is amended 
by striking subsection (d) and inserting the following:
    ``(d) Employment Initiatives Program.--
            ``(1) Election to participate.--
                    ``(A) In general.--Subject to the other provisions 
                of this subsection, a State may elect to carry out an 
                employment initiatives program under this subsection.
                    ``(B) Requirement.--A State shall be eligible to 
                carry out an employment initiatives program under this 
                subsection only if not less than 50 percent of the 
                households in the State that received food stamp 
                benefits during the summer of 1993 also received 
                benefits under a State program funded under part A of 
                title IV of the Social Security Act (42 U.S.C. 601 et 
                seq.) during the summer of 1993.
            ``(2) Procedure.--
                    ``(A) In general.--A State that has elected to 
                carry out an employment initiatives program under 
                paragraph (1) may use amounts equal to the food stamp 
                allotments that would otherwise be issued to a 
                household under the food stamp program, but for the 
                operation of this subsection, to provide cash benefits 
                in lieu of the food stamp allotments to the household 
                if the household is eligible under paragraph (3).
                    ``(B) Payment.--The Secretary shall pay to each 
                State that has elected to carry out an employment 
                initiatives program under paragraph (1) an amount equal 
                to the value of the allotment that each household 
                participating in the program in the State would be 
                eligible to receive under this Act but for the 
                operation of this subsection.
                    ``(C) Other provisions.--For purposes of the food 
                stamp program (other than this subsection)--
                            ``(i) cash assistance under this subsection 
                        shall be considered to be an allotment; and
                            ``(ii) each household receiving cash 
                        benefits under this subsection shall not 
                        receive any other food stamp benefit during the 
                        period for which the cash assistance is 
                        provided.
                    ``(D) Additional payments.--Each State that has 
                elected to carry out an employment initiatives program 
                under paragraph (1) shall--
                            ``(i) increase the cash benefits provided 
                        to each household participating in the program 
                        in the State under this subsection to 
                        compensate for any State or local sales tax 
                        that may be collected on purchases of food by 
                        the household, unless the Secretary determines 
                        on the basis of information provided by the 
                        State that the increase is unnecessary on the 
                        basis of the limited nature of the items 
                        subject to the State or local sales tax; and
                            ``(ii) pay the cost of any increase in cash 
                        benefits required by clause (i).
            ``(3) Eligibility.--A household shall be eligible to 
        receive cash benefits under paragraph (2) if an adult member of 
        the household--
                    ``(A) has worked in unsubsidized employment for not 
                less than the preceding 90 days;
                    ``(B) has earned not less than $350 per month from 
                the employment referred to in subparagraph (A) for not 
                less than the preceding 90 days;
                    ``(C)(i) is receiving benefits under a State 
                program funded under part A of title IV of the Social 
                Security Act (42 U.S.C. 601 et seq.); or
                    ``(ii) was receiving benefits under a State program 
                funded under part A of title IV of the Social Security 
                Act (42 U.S.C. 601 et seq.) at the time the member 
                first received cash benefits under this subsection and 
                is no longer eligible for the State program because of 
                earned income;
                    ``(D) is continuing to earn not less than $350 per 
                month from the employment referred to in subparagraph 
                (A); and
                    ``(E) elects to receive cash benefits in lieu of 
                food stamp benefits under this subsection.
            ``(4) Evaluation.--A State that operates a program under 
        this subsection for 2 years shall provide to the Secretary a 
        written evaluation of the impact of cash assistance under this 
        subsection. The State agency, with the concurrence of the 
        Secretary, shall determine the content of the evaluation.''.

SEC. 1162. REAUTHORIZATION.

    The first sentence of section 18(a)(1) of the Food Stamp Act of 
1977 (7 U.S.C. 2027(a)(1)) is amended by striking ``1991 through 1997'' 
and inserting ``1996 through 2002''.

SEC. 1163. SIMPLIFIED FOOD STAMP PROGRAM.

    (a) In General.--The Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.) 
is amended by adding at the end the following:

``SEC. 26. SIMPLIFIED FOOD STAMP PROGRAM.

    ``(a) Definition of Federal Costs.--In this section, the term 
`Federal costs' does not include any Federal costs incurred under 
section 17.
    ``(b) Election.--Subject to subsection (d), a State may elect to 
carry out a Simplified Food Stamp Program (referred to in this section 
as a `Program'), statewide or in a political subdivision of the State, 
in accordance with this section.
    ``(c) Operation of Program.--If a State elects to carry out a 
Program, within the State or a political subdivision of the State--
            ``(1) only households in which all members receive 
        assistance under a State program funded under part A of title 
        IV of the Social Security Act (42 U.S.C. 601 et seq.) shall 
        receive benefits under the Program;
            ``(2) a household in which all members receive assistance 
        under a State program funded under part A of title IV of the 
        Social Security Act (42 U.S.C. 601 et seq.) shall automatically 
        be eligible to participate in the Program; and
            ``(3) subject to subsection (f), benefits under the Program 
        shall be determined under rules and procedures established by 
        the State under--
                    ``(A) a State program funded under part A of title 
                IV of the Social Security Act (42 U.S.C. 601 et seq.);
                    ``(B) the food stamp program (other than section 
                27); or
                    ``(C) a combination of a State program funded under 
                part A of title IV of the Social Security Act (42 
                U.S.C. 601 et seq.) and the food stamp program (other 
                than section 27).
    ``(d) Approval of Program.--
            ``(1) State plan.--A State agency may not operate a Program 
        unless the Secretary approves a State plan for the operation of 
        the Program under paragraph (2).
            ``(2) Approval of plan.--The Secretary shall approve any 
        State plan to carry out a Program if the Secretary determines 
        that the plan--
                    ``(A) complies with this section; and
                    ``(B) contains sufficient documentation that the 
                plan will not increase Federal costs for any fiscal 
                year.
    ``(e) Increased Federal Costs.--
            ``(1) Determination.--
                    ``(A) In general.--The Secretary shall determine 
                whether a Program being carried out by a State agency 
                is increasing Federal costs under this Act.
                    ``(B) No excluded households.--In making a 
                determination under subparagraph (A), the Secretary 
                shall not require the State agency to collect or report 
                any information on households not included in the 
                Program.
                    ``(C) Alternative accounting periods.--The 
                Secretary may approve the request of a State agency to 
                apply alternative accounting periods to determine if 
                Federal costs do not exceed the Federal costs had the 
                State agency not elected to carry out the Program.
            ``(2) Notification.--If the Secretary determines that the 
        Program has increased Federal costs under this Act for any 
        fiscal year or any portion of any fiscal year, the Secretary 
        shall notify the State not later than 30 days after the 
        Secretary makes the determination under paragraph (1).
            ``(3) Enforcement.--
                    ``(A) Corrective action.--Not later than 90 days 
                after the date of a notification under paragraph (2), 
                the State shall submit a plan for approval by the 
                Secretary for prompt corrective action that is designed 
                to prevent the Program from increasing Federal costs 
                under this Act.
                    ``(B) Termination.--If the State does not submit a 
                plan under subparagraph (A) or carry out a plan 
                approved by the Secretary, the Secretary shall 
                terminate the approval of the State agency operating 
                the Program and the State agency shall be ineligible to 
                operate a future Program.
    ``(f) Rules and Procedures.--
            ``(1) In general.--In operating a Program, a State or 
        political subdivision of a State may follow the rules and 
        procedures established by the State or political subdivision 
        under a State program funded under part A of title IV of the 
        Social Security Act (42 U.S.C. 601 et seq.) or under the food 
        stamp program.
            ``(2) Standardized deductions.--In operating a Program, a 
        State or political subdivision of a State may standardize the 
        deductions provided under section 5(e). In developing the 
        standardized deduction, the State shall consider the work 
        expenses, dependent care costs, and shelter costs of 
        participating households.
            ``(3) Requirements.--In operating a Program, a State or 
        political subdivision shall comply with the requirements of--
                    ``(A) subsections (a) through (g) of section 7;
                    ``(B) section 8(a) (except that the income of a 
                household may be determined under a State program 
                funded under part A of title IV of the Social Security 
                Act (42 U.S.C. 601 et seq.));
                    ``(C) subsection (b) and (d) of section 8;
                    ``(D) subsections (a), (c), (d), and (n) of section 
                11;
                    ``(E) paragraph (3) of section 11(e), to the extent 
                that the paragraph requires that an eligible household 
                be certified and receive an allotment for the period of 
                application not later than 30 days after filing an 
                application;
                    ``(F) paragraphs (8), (12), (16), (18), (20), (24), 
                and (25) of section 11(e);
                    ``(G) section 11(e)(10) (or a comparable 
                requirement established by the State under a State 
                program funded under part A of title IV of the Social 
                Security Act (42 U.S.C. 601 et seq.)); and
                    ``(H) section 16.
            ``(4) Limitation on eligibility.--Notwithstanding any other 
        provision of this section, a household may not receive benefits 
        under this section as a result of the eligibility of the 
        household under a State program funded under part A of title IV 
        of the Social Security Act (42 U.S.C. 601 et seq.), unless the 
        Secretary determines that any household with income above 130 
        percent of the poverty guidelines is not eligible for the 
        program.''.
    (b) State Plan Provisions.--Section 11(e) of the Food Stamp Act of 
1977 (7 U.S.C. 2020(e)), as amended by sections 1129(b) and 1145, is 
amended by adding at the end the following:
            ``(25) if a State elects to carry out a Simplified Food 
        Stamp Program under section 26, the plans of the State agency 
        for operating the program, including--
                    ``(A) the rules and procedures to be followed by 
                the State agency to determine food stamp benefits;
                    ``(B) how the State agency will address the needs 
                of households that experience high shelter costs in 
                relation to the incomes of the households; and
                    ``(C) a description of the method by which the 
                State agency will carry out a quality control system 
                under section 16(c).''.
    (c) Conforming Amendments.--
            (1) Section 8 of the Food Stamp Act of 1977 (7 U.S.C. 
        2017), as amended by section 1140, is amended--
                    (A) by striking subsection (e); and
                    (B) by redesignating subsection (f) as subsection 
                (e).
            (2) Section 17 of the Food Stamp Act of 1977 (7 U.S.C. 
        2026) is amended--
                    (A) by striking subsection (i); and
                    (B) by redesignating subsections (j) through (l) as 
                subsections (i) through (k), respectively.

SEC. 1164. STATE FOOD ASSISTANCE BLOCK GRANT.

    (a) In General.--The Food Stamp Act of 1977 (7 U.S.C. 2011 et 
seq.), as amended by section 1163, is amended by adding at the end the 
following:

``SEC. 27. STATE FOOD ASSISTANCE BLOCK GRANT.

    ``(a) Definitions.--In this section:
            ``(1) Food assistance.--The term `food assistance' means 
        assistance that may be used only to obtain food, as defined in 
        section 3(g).
            ``(2) State.--The term `State' means each of the 50 States, 
        the District of Columbia, Guam, and the Virgin Islands of the 
        United States.
    ``(b) Establishment.--The Secretary shall establish a program to 
make grants to States in accordance with this section to provide--
            ``(1) food assistance to needy individuals and families 
        residing in the State; and
            ``(2) funds for administrative costs incurred in providing 
        the assistance.
    ``(c) Election.--
            ``(1) In general.--A State may annually elect to 
        participate in the program established under subsection (b) if 
        the State--
                    ``(A) has fully implemented an electronic benefit 
                transfer system that operates in the entire State;
                    ``(B) has a payment error rate under section 16(c) 
                that is not more than 6 percent as announced most 
                recently by the Secretary; or
                    ``(C) has a payment error rate in excess of 6 
                percent and agrees to contribute non-Federal funds for 
                the fiscal year of the grant, for benefits and 
                administration of the State's food assistance program, 
                in an amount determined under paragraph (2).
            ``(2) State mandatory contributions.--
                    ``(A) In general.--In the case of a State that 
                elects to participate in the program under paragraph 
                (1)(C), the State shall agree to contribute, for a 
                fiscal year, an amount equal to--
                            ``(i)(I) the food stamp benefits issued in 
                        the State; multiplied by
                            ``(II) the payment error rate of the State 
                        under section 16(c); minus
                            ``(ii)(I) the food stamp benefits issued in 
                        the State; multiplied by
                            ``(II) 6 percent.
                    ``(B) Determination.--Notwithstanding sections 13 
                and 14, the calculation of the contribution shall be 
                based solely on the determination of the Secretary of 
                the payment error rate under section 16(c).
                    ``(C) Data.--For purposes of implementing 
                subparagraph (A) for a fiscal year, the Secretary shall 
                use the data for the most recent fiscal year available.
            ``(3) Election limitation.--
                    ``(A) Re-entering food stamp program.--A State that 
                elects to participate in the program under paragraph 
                (1) may in a subsequent year decline to elect to 
                participate in the program established under subsection 
                (b) and instead participate in the food stamp program 
                in accordance with the other sections of this Act.
                    ``(B) Limitation.--Subsequent to reentering the 
                food stamp program under subparagraph (A), the State 
                shall only be eligible to participate in the food stamp 
                program in accordance with the other sections of this 
                Act and shall not be eligible to elect to participate 
                in the program established under subsection (b).
            ``(4) Program exclusive.--
                    ``(A) In general.--A State that is participating in 
                the program established under subsection (b) shall not 
                be subject to, or receive any benefit under, this Act 
                except as provided in this section.
                    ``(B) Contract with federal government.--Nothing in 
                this section shall prohibit a State from contracting 
                with the Federal Government for the provision of 
                services or materials necessary to carry out a program 
                under this section.
    ``(d) Lead Agency.--A State desiring to receive a grant under this 
section shall designate, in an application submitted to the Secretary 
under subsection (e)(1), an appropriate State agency responsible for 
the administration of the program under this section as the lead 
agency.
    ``(e) Application and Plan.--
            ``(1) Application.--To be eligible to receive assistance 
        under this section, a State shall prepare and submit to the 
        Secretary an application at such time, in such manner, and 
        containing such information as the Secretary shall by 
        regulation require, including--
                    ``(A) an assurance that the State will comply with 
                the requirements of this section;
                    ``(B) a State plan that meets the requirements of 
                paragraph (3); and
                    ``(C) an assurance that the State will comply with 
                the requirements of the State plan under paragraph (3).
            ``(2) Annual plan.--The State plan contained in the 
        application under paragraph (1) shall be submitted for approval 
        annually.
            ``(3) Requirements of plan.--
                    ``(A) Lead agency.--The State plan shall identify 
                the lead agency.
                    ``(B) Use of block grant funds.--The State plan 
                shall provide that the State shall use the amounts 
                provided to the State for each fiscal year under this 
                section--
                            ``(i) to provide food assistance to needy 
                        individuals and families residing in the State, 
                        other than residents of institutions who are 
                        ineligible for food stamps under section 3(i); 
                        and
                            ``(ii) to pay administrative costs incurred 
                        in providing the assistance.
                    ``(C) Groups served.--The State plan shall describe 
                how and to what extent the program will serve specific 
                groups of individuals and families and how the 
                treatment will differ from treatment under the food 
                stamp program under the other sections of this Act of 
                the individuals and families, including--
                            ``(i) elderly individuals and families;
                            ``(ii) migrants or seasonal farmworkers;
                            ``(iii) homeless individuals and families;
                            ``(iv) individuals and families who live in 
                        institutions eligible under section 3(i);
                            ``(v) individuals and families with 
                        earnings; and
                            ``(vi) members of Indian tribes or tribal 
                        organizations.
                    ``(D) Assistance for entire state.--The State plan 
                shall provide that benefits under this section shall be 
                available throughout the entire State.
                    ``(E) Notice and hearings.--The State plan shall 
                provide that an individual or family who applies for, 
                or receives, assistance under this section shall be 
                provided with notice of, and an opportunity for a 
                hearing on, any action under this section that 
                adversely affects the individual or family.
                    ``(F) Assessment of needs.--The State plan shall 
                assess the food and nutrition needs of needy persons 
                residing in the State.
                    ``(G) Eligibility standards.--The State plan shall 
                describe the income, resource, and other eligibility 
                standards that are established for the receipt of 
                assistance under this section.
                    ``(H) Disqualification of fleeing felons.--The 
                State plan shall provide for the disqualification of 
                any individual who would be disqualified from 
                participating in the food stamp program under section 
                6(k).
                    ``(I) Receiving benefits in more than 1 
                jurisdiction.--The State plan shall establish a system 
                for the exchange of information with other States to 
                verify the identity and receipt of benefits by 
                recipients.
                    ``(J) Privacy.--The State plan shall provide for 
                safeguarding and restricting the use and disclosure of 
                information about any individual or family receiving 
                assistance under this section.
                    ``(K) Other information.--The State plan shall 
                contain such other information as may be required by 
                the Secretary.
            ``(4) Approval of application and plan.--The Secretary 
        shall approve an application and State plan that satisfies the 
        requirements of this section.
    ``(f) No Individual or Family Entitlement to Assistance.--Nothing 
in this section--
            ``(1) entitles any individual or family to assistance under 
        this section; or
            ``(2) limits the right of a State to impose additional 
        limitations or conditions on assistance under this section.
    ``(g) Benefits for Aliens.--
            ``(1) Eligibility.--No individual who is an alien shall be 
        eligible to receive benefits under a State plan approved under 
        subsection (e)(4) if the individual is not eligible to 
        participate in the food stamp program due to the alien status 
        of the individual.
            ``(2) Income.--The State plan shall provide that the income 
        of an alien shall be determined in accordance with sections 
        5(i) and 6(f).
    ``(h) Employment and Training.--
            ``(1) Work requirements.--No individual or household shall 
        be eligible to receive benefits under a State plan funded under 
        this section if the individual or household is not eligible to 
        participate in the food stamp program under subsection (d) or 
        (o) of section 6.
            ``(2) Work programs.--Each State shall implement an 
        employment and training program in accordance with the terms 
        and conditions of section 6(d)(4) for individuals under the 
        program and shall be eligible to receive funding under section 
        16(h).
    ``(i) Enforcement.--
            ``(1) Review of compliance with state plan.--The Secretary 
        shall review and monitor State compliance with this section and 
        the State plan approved under subsection (e)(4).
            ``(2) Noncompliance.--
                    ``(A) In general.--If the Secretary, after 
                reasonable notice to a State and opportunity for a 
                hearing, finds that--
                            ``(i) there has been a failure by the State 
                        to comply substantially with any provision or 
                        requirement set forth in the State plan 
                        approved under subsection (e)(4); or
                            ``(ii) in the operation of any program or 
                        activity for which assistance is provided under 
                        this section, there is a failure by the State 
                        to comply substantially with any provision of 
                        this section;
                the Secretary shall notify the State of the finding and 
                that no further grants will be made to the State under 
                this section (or, in the case of noncompliance in the 
                operation of a program or activity, that no further 
                grants to the State will be made with respect to the 
                program or activity) until the Secretary is satisfied 
                that there is no longer any failure to comply or that 
                the noncompliance will be promptly corrected.
                    ``(B) Other penalties.--In the case of a finding of 
                noncompliance made pursuant to subparagraph (A), the 
                Secretary may, in addition to, or in lieu of, imposing 
                the penalties described in subparagraph (A), impose 
                other appropriate penalties, including recoupment of 
                money improperly expended for purposes prohibited or 
                not authorized by this section and disqualification 
                from the receipt of financial assistance under this 
                section.
                    ``(C) Notice.--The notice required under 
                subparagraph (A) shall include a specific 
                identification of any additional penalty being imposed 
                under subparagraph (B).
            ``(3) Issuance of regulations.--The Secretary shall 
        establish by regulation procedures for--
                    ``(A) receiving, processing, and determining the 
                validity of complaints made to the Secretary concerning 
                any failure of a State to comply with the State plan or 
                any requirement of this section; and
                    ``(B) imposing penalties under this section.
    ``(j) Grant.--
            ``(1) In general.--For each fiscal year, the Secretary 
        shall pay to a State that has an application approved by the 
        Secretary under subsection (e)(4) an amount that is equal to 
        the grant of the State under subsection (m) for the fiscal 
        year.
            ``(2) Method of grant.--The Secretary shall make a grant to 
        a State for a fiscal year under this section by issuing 1 or 
        more letters of credit for the fiscal year, with necessary 
        adjustments on account of overpayments or underpayments, as 
        determined by the Secretary.
            ``(3) Spending of grants by state.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a grant to a State determined under 
                subsection (m)(1) for a fiscal year may be expended by 
                the State only in the fiscal year.
                    ``(B) Carryover.--The State may reserve up to 10 
                percent of a grant determined under subsection (m)(1) 
                for a fiscal year to provide assistance under this 
                section in subsequent fiscal years, except that the 
                reserved funds may not exceed 30 percent of the total 
                grant received under this section for a fiscal year.
            ``(4) Food assistance and administrative expenditures.--In 
        each fiscal year, not more than 6 percent of the Federal and 
        State funds required to be expended by a State under this 
        section shall be used for administrative expenses.
            ``(5) Provision of food assistance.--A State may provide 
        food assistance under this section in any manner determined 
        appropriate by the State, such as electronic benefit transfer 
        limited to food purchases, coupons limited to food purchases, 
        or direct provision of commodities.
    ``(k) Quality Control.--Each State participating in the program 
established under this section shall maintain a system in accordance 
with, and shall be subject to, section 16(c), including sanctions and 
eligibility for incentive payment under section 16(c), adjusted for 
State specific characteristics under regulations issued by the 
Secretary.
    ``(l) Nondiscrimination.--
            ``(1) In general.--No person with responsibility for the 
        operation of a program, project, or activity under this section 
        may discriminate with respect to the program, project, or 
        activity because of race, religion, color, national origin, 
        sex, disability, or age.
            ``(2) Enforcement.--The powers, remedies, and procedures 
        set forth in title VI of the Civil Rights Act of 1964 (42 
        U.S.C. 2000d et seq.) may be used by the Secretary to enforce 
        paragraph (1).
    ``(m) Grant Calculation.--
            ``(1) State grant.--
                    ``(A) In general.--Except as provided in this 
                paragraph, from the amounts made available under 
                section 18 for each fiscal year, the Secretary shall 
                provide a grant to each State participating in the 
                program established under this section an amount that 
                is equal to the sum of--
                            ``(i) the greater of, as determined by the 
                        Secretary--
                                    ``(I) the total dollar value of all 
                                benefits issued under the food stamp 
                                program established under this Act by 
                                the State during fiscal year 1994; or
                                    ``(II) the average per fiscal year 
                                of the total dollar value of all 
                                benefits issued under the food stamp 
                                program by the State during each of 
                                fiscal years 1992 through 1994; and
                            ``(ii) the greater of, as determined by the 
                        Secretary--
                                    ``(I) the total amount received by 
                                the State for administrative costs 
                                under section 16(a) (not including any 
                                adjustment under section 16(c)) for 
                                fiscal year 1994; or
                                    ``(II) the average per fiscal year 
                                of the total amount received by the 
                                State for administrative costs under 
                                section 16(a) (not including any 
                                adjustment under section 16(c)) for 
                                each of fiscal years 1992 through 1994.
                    ``(B) Limitation for fiscal year 1997.--No grant to 
                a State that elects to receive funding under this 
                section for fiscal year 1997 shall exceed--
                            ``(i) the sum of--
                                    ``(I) the amount of all benefits 
                                issued under the food stamp program by 
                                the State during fiscal year 1996; and
                                    ``(II) the amount received by the 
                                State for administrative costs under 
                                section 16(a) (not including any 
                                adjustment under section 16(c)) for 
                                fiscal year 1996; multiplied by
                            ``(ii) the ratio (as projected by the 
                        Director of the Congressional Budget Office in 
                        the most recent estimate made prior to the date 
                        of enactment of this section of the effects of 
                        the Agricultural Reconciliation Act of 1996) 
                        of--
                                    ``(I) the cost to the Secretary of 
                                all benefits and administrative 
                                reimbursements under the food stamp 
                                program, as amended by the Agricultural 
                                Reconciliation Act of 1996, for fiscal 
                                year 1997; to
                                    ``(II) such costs and 
                                reimbursements for fiscal year 1996.
                    ``(C) Limitation after fiscal year 1997.--No grant 
                to a State that elects to receive funding under this 
                section for fiscal year 1998 or a subsequent fiscal 
                year shall exceed the cost to the Secretary of all 
                benefits and administrative reimbursements for the 
                State under the food stamp program for fiscal year 
                1997.
                    ``(D) Insufficient funds.--If the Secretary finds 
                that the total amount of grants to which States would 
                otherwise be entitled for a fiscal year under this 
                paragraph will exceed the amount of funds that will be 
                made available to provide the grants for the fiscal 
                year, the Secretary shall reduce the grants made to 
                States under this subsection, on a pro rata basis, to 
the extent necessary.
            ``(2) Reduction.--The Secretary shall reduce the grant of a 
        State by the amount a State has agreed to contribute under 
        subsection (c)(1)(C).''.
    (b) Employment and Training Funding.--Section 16(h) of the Food 
Stamp Act of 1977 (7 U.S.C. 2025(a)), as amended by section 1127(d)(2), 
is amended by adding at the end the following:
            ``(6) Block grant states.--Each State electing to operate a 
        program under section 27 shall--
                    ``(A) in lieu of payments under paragraph (1), 
                receive the greater of--
                            ``(i) the total dollar value of the funds 
                        received under paragraph (1) by the State for 
                        fiscal year 1994; or
                            ``(ii) the average per fiscal year of the 
                        total dollar value of all funds received under 
                        paragraph (1) by the State for each of fiscal 
                        years 1992 through 1994; and
                    ``(B) be eligible to receive funds under paragraph 
                (2), within the limitations established in section 
                6(d)(4)(K).''.
    (c) Research on Optional State Food Assistance Block Grant.--
Section 17 of the Food Stamp Act of 1977 (7 U.S.C. 2026), as amended by 
section 1163(c)(2), is amended by adding at the end the following:
    ``(l) Research on Optional State Food Assistance Block Grant.--The 
Secretary may conduct research on the effects and costs of a State 
program carried out under section 27.''.

               CHAPTER 2--COMMODITY DISTRIBUTION PROGRAMS

SEC. 1171. EMERGENCY FOOD ASSISTANCE PROGRAM.

    (a) Definitions.--Section 201A of the Emergency Food Assistance Act 
of 1983 (Public Law 98-8; 7 U.S.C. 612c note) is amended to read as 
follows:

``SEC. 201A. DEFINITIONS.

    ``In this Act:
            ``(1) Additional commodities.--The term `additional 
        commodities' means commodities made available under section 214 
        in addition to the commodities made available under sections 
        202 and 203D.
            ``(2) Average monthly number of unemployed persons.--The 
        term `average monthly number of unemployed persons' means the 
        average monthly number of unemployed persons in each State 
        during the most recent fiscal year for which information 
        concerning the number of unemployed persons is available, as 
        determined by the Bureau of Labor Statistics of the Department 
        of Labor.
            ``(3) Eligible recipient agency.--The term `eligible 
        recipient agency' means a public or nonprofit organization 
        that--
                    ``(A) administers--
                            ``(i) an emergency feeding organization;
                            ``(ii) a charitable institution (including 
                        a hospital and a retirement home, but excluding 
                        a penal institution) to the extent that the 
                        institution serves needy persons;
                            ``(iii) a summer camp for children, or a 
                        child nutrition program providing food service;
                            ``(iv) a nutrition project operating under 
                        the Older Americans Act of 1965 (42 U.S.C. 3001 
                        et seq.), including a project that operates a 
                        congregate nutrition site and a project that 
                        provides home-delivered meals; or
                            ``(v) a disaster relief program;
                    ``(B) has been designated by the appropriate State 
                agency, or by the Secretary; and
                    ``(C) has been approved by the Secretary for 
                participation in the program established under this 
                Act.
            ``(4) Emergency feeding organization.--The term `emergency 
        feeding organization' means a public or nonprofit organization 
        that administers activities and projects (including the 
        activities and projects of a charitable institution, a food 
        bank, a food pantry, a hunger relief center, a soup kitchen, or 
        a similar public or private nonprofit eligible recipient 
        agency) providing nutrition assistance to relieve situations of 
        emergency and distress through the provision of food to needy 
        persons, including low-income and unemployed persons.
            ``(5) Food bank.--The term `food bank' means a public or 
        charitable institution that maintains an established operation 
        involving the provision of food or edible commodities, or the 
        products of food or edible commodities, to food pantries, soup 
        kitchens, hunger relief centers, or other food or feeding 
        centers that, as an integral part of their normal activities, 
        provide meals or food to feed needy persons on a regular basis.
            ``(6) Food pantry.--The term `food pantry' means a public 
        or private nonprofit organization that distributes food to low-
        income and unemployed households, including food from sources 
        other than the Department of Agriculture, to relieve situations 
        of emergency and distress.
            ``(7) Poverty line.--The term `poverty line' has the 
        meaning provided in section 673(2) of the Community Services 
        Block Grant Act (42 U.S.C. 9902(2)).
            ``(8) Soup kitchen.--The term `soup kitchen' means a public 
        or charitable institution that, as an integral part of the 
        normal activities of the institution, maintains an established 
        feeding operation to provide food to needy homeless persons on 
        a regular basis.
            ``(9) Total value of additional commodities.--The term 
        `total value of additional commodities' means the actual cost 
        of all additional commodities that are paid by the Secretary 
        (including the distribution and processing costs incurred by 
        the Secretary).
            ``(10) Value of additional commodities allocated to each 
        state.--The term `value of additional commodities allocated to 
        each State' means the actual cost of additional commodities 
        allocated to each State that are paid by the Secretary 
        (including the distribution and processing costs incurred by 
        the Secretary).''.
    (b) State Plan.--Section 202A of the Emergency Food Assistance Act 
of 1983 (Public Law 98-8; 7 U.S.C. 612c note) is amended to read as 
follows:

``SEC. 202A. STATE PLAN.

    ``(a) In General.--To receive commodities under this Act, a State 
shall submit a plan of operation and administration every 4 years to 
the Secretary for approval. The plan may be amended at any time, with 
the approval of the Secretary.
    ``(b) Requirements.--Each plan shall--
            ``(1) designate the State agency responsible for 
        distributing the commodities received under this Act;
            ``(2) set forth a plan of operation and administration to 
        expeditiously distribute commodities under this Act;
            ``(3) set forth the standards of eligibility for recipient 
        agencies; and
            ``(4) set forth the standards of eligibility for individual 
        or household recipients of commodities, which shall require--
                    ``(A) individuals or households to be comprised of 
                needy persons; and
                    ``(B) individual or household members to be 
                residing in the geographic location served by the 
                distributing agency at the time of applying for 
                assistance.
    ``(c) State Advisory Board.--The Secretary shall encourage each 
State receiving commodities under this Act to establish a State 
advisory board consisting of representatives of all entities in the 
State, both public and private, interested in the distribution of 
commodities received under this Act.''.
    (c) Authorization of Appropriations for Administrative Funds.--
Section 204(a)(1) of the Emergency Food Assistance Act of 1983 (Public 
Law 98-8; 7 U.S.C. 612c note) is amended--
            (1) in the first sentence, by striking ``for State and 
        local'' and all that follows through ``under this title'' and 
        inserting ``to pay for the direct and indirect administrative 
        costs of the States related to the processing, transporting, 
        and distributing to eligible recipient agencies of commodities 
        provided by the Secretary under this Act and commodities 
        secured from other sources''; and
            (2) by striking the fourth sentence.
    (d) Delivery of Commodities.--Section 214 of the Emergency Food 
Assistance Act of 1983 (Public Law 98-8; 7 U.S.C. 612c note) is 
amended--
            (1) by striking subsections (a) through (e) and (j);
            (2) by redesignating subsections (f) through (i) as 
        subsections (a) through (d), respectively;
            (3) in subsection (b), as redesignated by paragraph (2)--
                    (A) in the first sentence, by striking ``subsection 
                (f) or subsection (j) if applicable,'' and inserting 
                ``subsection (a),''; and
                    (B) in the second sentence, by striking 
                ``subsection (f)'' and inserting ``subsection (a)'';
            (4) by striking subsection (c), as redesignated by 
        paragraph (2), and inserting the following:
    ``(c) Administration.--
            ``(1) In general.--Commodities made available for each 
        fiscal year under this section shall be delivered at reasonable 
        intervals to States based on the grants calculated under 
        subsection (a), or reallocated under subsection (b), before 
        December 31 of the following fiscal year.
            ``(2) Entitlement.--Each State shall be entitled to receive 
        the value of additional commodities determined under subsection 
        (a).''; and
            (5) in subsection (d), as redesignated by paragraph (2), by 
        striking ``or reduce'' and all that follows through ``each 
        fiscal year''.
    (e) Technical Amendments.--The Emergency Food Assistance Act of 
1983 (Public Law 98-8; 7 U.S.C. 612c note) is amended--
            (1) in the first sentence of section 203B(a), by striking 
        ``203 and 203A of this Act'' and inserting ``203A'';
            (2) in section 204(a), by striking ``title'' each place it 
        appears and inserting ``Act'';
            (3) in the first sentence of section 210(e), by striking 
        ``(except as otherwise provided for in section 214(j))''; and
            (4) by striking section 212.
    (f) Report on EFAP.--Section 1571 of the Food Security Act of 1985 
(Public Law 99-198; 7 U.S.C. 612c note) is repealed.
    (g) Availability of Commodities Under the Food Stamp Program.--The 
Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.), as amended by section 
1164(a), is amended by adding at the end the following:

``SEC. 28. AVAILABILITY OF COMMODITIES FOR THE EMERGENCY FOOD 
              ASSISTANCE PROGRAM.

    ``(a) Purchase of Commodities.--From amounts appropriated under 
this Act, for each of fiscal years 1997 through 2002, the Secretary 
shall purchase $100,000,000 of a variety of nutritious and useful 
commodities of the types that the Secretary has the authority to 
acquire through the Commodity Credit Corporation or under section 32 of 
the Act entitled `An Act to amend the Agricultural Adjustment Act, and 
for other purposes', approved August 24, 1935 (7 U.S.C. 612c), and 
distribute the commodities to States for distribution in accordance 
with section 214 of the Emergency Food Assistance Act of 1983 (Public 
Law 98-8; 7 U.S.C. 612c note).
    ``(b) Basis for Commodity Purchases.--In purchasing commodities 
under subsection (a), the Secretary shall, to the extent practicable 
and appropriate, make purchases based on--
            ``(1) agricultural market conditions;
            ``(2) preferences and needs of States and distributing 
        agencies; and
            ``(3) preferences of recipients.''.
    (h) Effective Date.--The amendments made by subsection (d) shall 
become effective on October 1, 1996.

SEC. 1172. FOOD BANK DEMONSTRATION PROJECT.

    Section 3 of the Charitable Assistance and Food Bank Act of 1987 
(Public Law 100-232; 7 U.S.C. 612c note) is repealed.

SEC. 1173. HUNGER PREVENTION PROGRAMS.

    The Hunger Prevention Act of 1988 (Public Law 100-435; 7 U.S.C. 
612c note) is amended--
            (1) by striking section 110;
            (2) by striking subtitle C of title II; and
            (3) by striking section 502.

SEC. 1174. REPORT ON ENTITLEMENT COMMODITY PROCESSING.

    Section 1773 of the Food, Agriculture, Conservation, and Trade Act 
of 1990 (Public Law 101-624; 7 U.S.C. 612c note) is amended by striking 
subsection (f).

                  Subtitle B--Child Nutrition Programs

         CHAPTER 1--AMENDMENTS TO THE NATIONAL SCHOOL LUNCH ACT

SEC. 1201. STATE DISBURSEMENT TO SCHOOLS.

    (a) In General.--Section 8 of the National School Lunch Act (42 
U.S.C. 1757) is amended--
            (1) in the third sentence, by striking ``Nothing'' and all 
        that follows through ``educational agency to'' and inserting 
        ``The State educational agency may'';
            (2) by striking the fourth and fifth sentences;
            (3) by redesignating the first through seventh sentences, 
        as amended by paragraph (2), as subsections (a) through (g), 
        respectively;
            (4) in subsection (b), as redesignated by paragraph (3), by 
        striking ``the preceding sentence'' and inserting ``subsection 
        (a)''; and
            (5) in subsection (d), as redesignated by paragraph (3), by 
        striking ``Such food costs'' and inserting ``Use of funds paid 
        to States''.
    (b) Definition of Child.--Section 12(d) of the National School 
Lunch Act (42 U.S.C. 1760(d)) is amended by adding at the end the 
following:
            ``(9) Child.--
                    ``(A) In general.--The term `child' includes an 
                individual, regardless of age, who--
                            ``(i) is determined by a State educational 
                        agency, in accordance with regulations 
                        prescribed by the Secretary, to have 1 or more 
                        mental or physical disabilities; and
                            ``(ii) is attending any institution, as 
                        defined in section 17(a), or any nonresidential 
                        public or nonprofit private school of high 
                        school grade or under, for the purpose of 
                        participating in a school program established 
                        for individuals with mental or physical 
                        disabilities.
                    ``(B) Relationship to child and adult care food 
                program.--No institution that is not otherwise eligible 
                to participate in the program under section 17 shall be 
                considered eligible because of this paragraph.''.

SEC. 1202. NUTRITIONAL AND OTHER PROGRAM REQUIREMENTS.

    (a) Nutritional Standards.--Section 9(a) of the National School 
Lunch Act (42 U.S.C. 1758(a)) is amended--
            (1) in paragraph (2)--
                    (A) by striking ``(2)(A) Lunches'' and inserting 
                ``(2) Lunches'';
                    (B) by striking subparagraph (B); and
                    (C) by redesignating clauses (i) and (ii) as 
                subparagraphs (A) and (B), respectively;
            (2) by striking paragraph (3); and
            (3) by redesignating paragraph (4) as paragraph (3).
    (b) Eligibility Guidelines.--Section 9(b) of the National School 
Lunch Act (42 U.S.C. 1758(b)) is amended--
            (1) in paragraph (2)--
                    (A) by striking subparagraph (A); and
                    (B) by redesignating subparagraphs (B) and (C) as 
                subparagraphs (A) and (B), respectively;
            (2) in paragraph (5), by striking the third sentence; and
            (3) in paragraph (6)(B), by striking ``paragraph (2)(C)'' 
        and inserting ``paragraph (2)(B)''.
    (c) Utilization of Agricultural Commodities.--Section 9(c) of the 
National School Lunch Act (42 U.S.C. 1758(c)) is amended--
            (1) in the fifth sentence, by striking ``of the provisions 
        of law referred to in the preceding sentence'' and inserting 
        ``provision of law''; and
            (2) by striking the second, fourth, and sixth sentences.
    (d) Conforming Amendment.--The last sentence of section 9(d)(1) of 
the National School Lunch Act (42 U.S.C. 1758(d)(1)) is amended by 
striking ``subsection (b)(2)(C)'' and inserting ``subsection 
(b)(2)(B)''.
    (e) Nutritional Information.--Section 9(f) of the National School 
Lunch Act (42 U.S.C. 1758(f)) is amended--
            (1) by striking paragraph (1);
            (2) by striking ``(2)'';
            (3) by redesignating subparagraphs (A) through (D) as 
        paragraphs (1) through (4), respectively;
            (4) by striking paragraph (1), as redesignated by paragraph 
        (3), and inserting the following:
            ``(1) Nutritional requirements.--Except as provided in 
        paragraph (2), not later than the first day of the 1996-1997 
        school year, each school that is participating in the school 
        lunch or school breakfast program shall serve lunches and 
        breakfasts under the program that--
                    ``(A) are consistent with the goals of the most 
                recent Dietary Guidelines for Americans published under 
                section 301 of the National Nutrition Monitoring and 
                Related Research Act of 1990 (7 U.S.C. 5341); and
                    ``(B) provide, on the average over each week, at 
                least--
                            ``(i) with respect to school lunches, \1/3\ 
                        of the daily recommended dietary allowance 
                        established by the Food and Nutrition Board of 
                        the National Research Council of the National 
                        Academy of Sciences; and
                            ``(ii) with respect to school breakfasts, 
                        \1/4\ of the daily recommended dietary 
                        allowance established by the Food and Nutrition 
                        Board of the National Research Council of the 
                        National Academy of Sciences.'';
            (5) in paragraph (3), as redesignated by paragraph (3)--
                    (A) by redesignating clauses (i) and (ii) as 
                subparagraphs (A) and (B), respectively; and
                    (B) in subparagraph (A), as so redesignated, by 
                redesignating subclauses (I) and (II) as clauses (i) 
                and (ii), respectively; and
            (6) in paragraph (4), as redesignated by paragraph (3)--
                    (A) by redesignating clauses (i) and (ii) as 
                subparagraphs (A) and (B), respectively; and
                    (B) in subparagraph (A), as so redesignated--
                            (i) by redesignating subclauses (I) and 
                        (II) as clauses (i) and (ii), respectively; and
                            (ii) in clause (ii), as so redesignated, by 
                        striking ``subparagraph (C)'' and inserting 
                        ``paragraph (3)''.
    (f) Use of Resources.--Section 9 of the National School Lunch Act 
(42 U.S.C. 1758) is amended by striking subsection (h).

SEC. 1203. FREE AND REDUCED PRICE POLICY STATEMENT.

    Section 9(b)(2) of the National School Lunch Act (42 U.S.C. 
1758(b)(2)), as amended by section 1202(b)(1), is amended by adding at 
the end the following:
                    ``(C) Free and reduced price policy statement.--
                After the initial submission, a school food authority 
                shall not be required to submit a free and reduced 
                price policy statement to a State educational agency 
                under this Act unless there is a substantive change in 
                the free and reduced price policy of the school food 
                authority. A routine change in the policy of a school 
                food authority, such as an annual adjustment of the 
                income eligibility guidelines for free and reduced 
                price meals, shall not be sufficient cause for 
                requiring the school food authority to submit a policy 
                statement.''.

SEC. 1204. SPECIAL ASSISTANCE.

    (a) Extension of Payment Period.--Section 11(a)(1)(D)(i) of the 
National School Lunch Act (42 U.S.C. 1759a(a)(1)(D)(i)) is amended by 
striking ``, on the date of enactment of this subparagraph,''.
    (b) Applicability of Other Provisions.--Section 11 of the National 
School Lunch Act (42 U.S.C. 1759a) is amended--
            (1) by striking subsection (d);
            (2) in subsection (e)(2)--
                    (A) by striking ``The'' and inserting ``On request 
                of the Secretary, the''; and
                    (B) by striking ``each month''; and
            (3) by redesignating subsections (e) and (f) as subsections 
        (d) and (e), respectively.

SEC. 1205. MISCELLANEOUS PROVISIONS AND DEFINITIONS.

    (a) Accounts and Records.--The second sentence of section 12(a) of 
the National School Lunch Act (42 U.S.C. 1760(a)) is amended by 
striking ``at all times be available'' and inserting ``be available at 
any reasonable time''.
    (b) Restriction on Requirements.--Section 12(c) of the National 
School Lunch Act (42 U.S.C. 1760(c)) is amended by striking ``neither 
the Secretary nor the State shall'' and inserting ``the Secretary shall 
not''.
    (c) Definitions.--Section 12(d) of the National School Lunch Act 
(42 U.S.C. 1760(d)), as amended by section 1201(b), is amended--
            (1) in paragraph (1), by striking ``the Trust Territory of 
        the Pacific Islands'' and inserting ``the Commonwealth of the 
        Northern Mariana Islands'';
            (2) by striking paragraphs (3) and (4); and
            (3) by redesignating paragraphs (1), (2), and (5) through 
        (9) as paragraphs (6), (7), (3), (4), (2), (5), and (1), 
        respectively, and rearranging the paragraphs so as to appear in 
        numerical order.
    (d) Adjustments to National Average Payment Rates.--Section 12(f) 
of the National School Lunch Act (42 U.S.C. 1760(f)) is amended by 
striking ``the Trust Territory of the Pacific Islands,''.
    (e) Expedited Rulemaking.--Section 12(k) of the National School 
Lunch Act (42 U.S.C. 1760(k)) is amended--
            (1) by striking paragraphs (1), (2), and (5); and
            (2) by redesignating paragraphs (3) and (4) as paragraphs 
        (1) and (2), respectively.
    (f) Waiver.--Section 12(l) of the National School Lunch Act (42 
U.S.C. 1760(l)) is amended--
            (1) in paragraph (2)(A)--
                    (A) in clause (iii), by adding ``and'' at the end;
                    (B) in clause (iv), by striking the semicolon at 
                the end and inserting a period; and
                    (C) by striking clauses (v) through (vii);
            (2) in paragraph (3)--
                    (A) in subparagraph (A), by striking ``(A)''; and
                    (B) by striking subparagraphs (B) through (D);
            (3) in paragraph (4)--
                    (A) in the matter preceding subparagraph (A), by 
                striking ``of any requirement relating'' and inserting 
                ``that increases Federal costs or that relates'';
                    (B) by striking subparagraph (D);
                    (C) by redesignating subparagraphs (E) through (N) 
                as subparagraphs (D) through (M), respectively; and
                    (D) in subparagraph (L), as redesignated by 
                subparagraph (C), by striking ``and'' at the end and 
                inserting ``or''; and
            (4) in paragraph (6)--
                    (A) by striking ``(A)(i)'' and all that follows 
                through ``(B)''; and
                    (B) by redesignating clauses (i) through (iv) as 
                subparagraphs (A) through (D), respectively.
    (g) Food and Nutrition Projects.--Section 12 of the National School 
Lunch Act (42 U.S.C. 1760) is amended by striking subsection (m).
    (h) Simplified Administration of School Meal and Other Nutrition 
Programs.--Section 12 of the National School Lunch Act (42 U.S.C. 
1760), as amended by subsection (g), is amended by adding at the end 
the following:
    ``(m) Simplified Administration of School Meal and Other Nutrition 
Programs.--Notwithstanding any other provision of law, no assistance or 
benefits provided under the programs established under the following 
provisions of law shall be contingent on the citizenship or immigration 
status of any applicant or recipient:
            ``(1) This Act.
            ``(2) The Child Nutrition Act of 1966 (42 U.S.C. 1771 et 
        seq.);
            ``(3) Section 4 of the Agriculture and Consumer Protection 
        Act of 1973 (Public Law 93-86; 7 U.S.C. 612c note).
            ``(4) The Emergency Food Assistance Act of 1983 (Public Law 
        98-8; 7 U.S.C. 612c note).
            ``(5) The food distribution program on Indian reservations 
        established under section 4(b) of Public Law 88-525 (7 U.S.C. 
        2013(b)).''.

SEC. 1206. SUMMER FOOD SERVICE PROGRAM FOR CHILDREN.

    (a) Establishment of Program.--Section 13(a) of the National School 
Lunch Act (42 U.S.C. 1761(a)) is amended--
            (1) in paragraph (1)--
                    (A) in the first sentence, by striking ``initiate, 
                maintain, and expand'' and inserting ``initiate and 
                maintain''; and
                    (B) in subparagraph (E) of the second sentence, by 
                striking ``the Trust Territory of the Pacific 
                Islands,''; and
            (2) in paragraph (7)(A), by striking ``Except as provided 
        in subparagraph (C), private'' and inserting ``Private''.
    (b) Service Institutions.--Section 13(b) of the National School 
Lunch Act (42 U.S.C. 1761(b)) is amended by striking ``(b)(1)'' and all 
that follows through the end of paragraph (1) and inserting the 
following:
    ``(b) Service Institutions.--
            ``(1) Payments.--
                    ``(A) In general.--Except as otherwise provided in 
                this paragraph, payments to service institutions shall 
                equal the full cost of food service operations (which 
                cost shall include the costs of obtaining, preparing, 
                and serving food, but shall not include administrative 
                costs).
                    ``(B) Maximum amounts.--Subject to subparagraph 
                (C), payments to any institution under subparagraph (A) 
                shall not exceed--
                            ``(i) $1.93 for each lunch and supper 
                        served;
                            ``(ii) $1.13 for each breakfast served; and
                            ``(iii) 46 cents for each meal supplement 
                        served.
                    ``(C) Adjustments.--Amounts specified in 
                subparagraph (B) shall be adjusted on January 1, 1997, 
                and each January 1 thereafter, to the nearest lower 
                cent increment to reflect changes for the 12-month 
                period ending the preceding November 30 in the series 
                for food away from home of the Consumer Price Index for 
                All Urban Consumers published by the Bureau of Labor 
                Statistics of the Department of Labor. Each adjustment 
                shall be based on the unrounded adjustment for the 
                prior 12-month period.''.
    (c) Administration of Service Institutions.--Section 13(b)(2) of 
the National School Lunch Act (42 U.S.C. 1761(b)(2)) is amended--
            (1) in the first sentence, by striking ``four meals'' and 
        inserting ``3 meals, or 2 meals and 1 supplement,''; and
            (2) by striking the second sentence.
    (d) Reimbursements.--Section 13(c)(2) of the National School Lunch 
Act (42 U.S.C. 1761(c)(2)) is amended--
            (1) by striking subparagraphs (A), (C), (D), and (E);
            (2) by striking ``(B)'';
            (3) by striking ``, and such higher education 
        institutions,''; and
            (4) by striking ``without application'' and inserting 
        ``upon showing residence in areas in which poor economic 
        conditions exist or on the basis of income eligibility 
        statements for children enrolled in the program''.
    (e) Advance Program Payments.--Section 13(e)(1) of the National 
School Lunch Act (42 U.S.C. 1761(e)(1)) is amended--
            (1) by striking ``institution: Provided, That (A) the'' and 
        inserting ``institution. The'';
            (2) by inserting ``(excluding a school)'' after ``any 
        service institution''; and
            (3) by striking ``responsibilities, and (B) no'' and 
        inserting ``responsibilities. No''.
    (f) Food Requirements.--Section 13(f) of the National School Lunch 
Act (42 U.S.C. 1761(f)) is amended--
            (1) by redesignating the first through seventh sentences as 
        paragraphs (1) through (7), respectively;
            (2) by striking paragraph (3), as redesignated by paragraph 
        (1);
            (3) in paragraph (4), as redesignated by paragraph (1), by 
        striking ``the first sentence'' and inserting ``paragraph 
        (1)'';
            (4) in subparagraph (B) of paragraph (6), as redesignated 
        by paragraph (1), by striking ``that bacteria levels'' and all 
        that follows through the period at the end and inserting 
        ``conformance with standards set by local health 
        authorities.''; and
            (5) by redesignating paragraphs (4) through (7), as 
        redesignated by paragraph (1), as paragraphs (3) through (6), 
        respectively.
    (g) Permitting Offer Versus Serve.--Section 13(f) of the National 
School Lunch Act (42 U.S.C. 1761(f)), as amended by subsection (f), is 
amended by adding at the end the following:
            ``(7) Offer versus serve.--A school food authority 
        participating as a service institution may permit a child 
        attending a site on school premises operated directly by the 
        authority to refuse 1 or more items of a meal that the child 
        does not intend to consume, under rules that the school uses 
        for school meals programs. A refusal of an offered food item 
        shall not affect the amount of payments made under this section 
        to a school for the meal.''.
    (h) Food Service Management Companies.--Section 13(l) of the 
National School Lunch Act (42 U.S.C. 1761(l)) is amended--
            (1) by striking paragraph (4);
            (2) in paragraph (5), by striking the first sentence; and
            (3) by redesignating paragraph (5) as paragraph (4).
    (i) Records.--The second sentence of section 13(m) of the National 
School Lunch Act (42 U.S.C. 1761(m)) is amended by striking ``at all 
times be available'' and inserting ``be available at any reasonable 
time''.
    (j) Removing Mandatory Notice to Institutions.--Section 13(n)(2) of 
the National School Lunch Act (42 U.S.C. 1761(n)(2)) is amended by 
striking ``, and its plans and schedule for informing service 
institutions of the availability of the program''.
    (k) Plan.--Section 13(n) of the National School Lunch Act (42 
U.S.C. 1761(n)) is amended--
            (1) in paragraph (2), by striking ``including the State's 
        methods of assessing need,'';
            (2) by striking paragraph (3);
            (3) in paragraph (4), by striking ``and schedule''; and
            (4) by redesignating paragraphs (4) through (7) as 
        paragraphs (3) through (6), respectively.
    (l) Monitoring and Training.--Section 13(q) of the National School 
Lunch Act (42 U.S.C. 1761(q)) is amended--
            (1) by striking paragraphs (2) and (4);
            (2) in paragraph (3), by striking ``paragraphs (1) and (2) 
        of this subsection'' and inserting ``paragraph (1)''; and
            (3) by redesignating paragraph (3) as paragraph (2).
    (m) Expired Program.--Section 13 of the National School Lunch Act 
(42 U.S.C. 1761) is amended--
            (1) by striking subsection (p); and
            (2) by redesignating subsections (q) and (r) as subsections 
        (p) and (q), respectively.
    (n) Effective Date.--The amendments made by subsection (b) shall 
become effective on January 1, 1997.

SEC. 1207. COMMODITY DISTRIBUTION.

    (a) Cereal and Shortening in Commodity Donations.--Section 14(b) of 
the National School Lunch Act (42 U.S.C. 1762a(b)) is amended--
            (1) by striking paragraph (1); and
            (2) by redesignating paragraphs (2) and (3) as paragraphs 
        (1) and (2), respectively.
    (b) Impact Study and Purchasing Procedures.--Section 14(d) of the 
National School Lunch Act (42 U.S.C. 1762a(d)) is amended by striking 
the second and third sentences.
    (c) Advisory Council.--Section 14(e) of the National School Lunch 
Act (42 U.S.C. 1762a(e)) is amended by striking ``educational''.
    (d) Cash Compensation for Pilot Project Schools.--Section 14(g) of 
the National School Lunch Act (42 U.S.C. 1762a(g)) is amended by 
striking paragraph (3).

SEC. 1208. CHILD AND ADULT CARE FOOD PROGRAM.

    (a) Establishment of Program.--Section 17 of the National School 
Lunch Act (42 U.S.C. 1766) is amended in the first sentence of 
subsection (a), by striking ``initiate, maintain, and expand'' and 
inserting ``initiate and maintain''.
    (b) Payments to Sponsor Employees.--Paragraph (2) of the last 
sentence of section 17(a) of the National School Lunch Act (42 U.S.C. 
1766(a)) is amended--
            (1) in subparagraph (B), by striking ``and'' at the end;
            (2) in subparagraph (C), by striking the period at the end 
        and inserting ``; and''; and
            (3) by adding at the end the following:
                    ``(D) in the case of a family or group day care 
                home sponsoring organization that employs more than 1 
                employee, the organization does not base payments to an 
                employee of the organization on the number of family or 
                group day care homes recruited.''.
    (c) Technical Assistance.--The last sentence of section 17(d)(1) of 
the National School Lunch Act (42 U.S.C. 1766(d)(1)) is amended by 
striking ``, and shall provide technical assistance'' and all that 
follows through ``its application''.
    (d) Reimbursement of Child Care Institutions.--Section 17(f)(2)(B) 
of the National School Lunch Act (42 U.S.C. 1766(f)(2)(B)) is amended 
by striking ``two meals and two supplements or three meals and one 
supplement'' and inserting ``2 meals and 1 supplement''.
    (e) Improved Targeting of Day Care Home Reimbursements.--
            (1) Restructured day care home reimbursements.--Section 
        17(f)(3) of the National School Lunch Act (42 U.S.C. 
        1766(f)(3)) is amended by striking ``(3)(A) Institutions'' and 
        all that follows through the end of subparagraph (A) and 
        inserting the following:
            ``(3) Reimbursement of family or group day care home 
        sponsoring organizations.--
                    ``(A) Reimbursement factor.--
                            ``(i) In general.--An institution that 
                        participates in the program under this section 
                        as a family or group day care home sponsoring 
                        organization shall be provided, for payment to 
                        a home sponsored by the organization, 
                        reimbursement factors in accordance with this 
                        subparagraph for the cost of obtaining and 
                        preparing food and prescribed labor costs 
                        involved in providing meals under this section.
                            ``(ii) Tier i family or group day care 
                        homes.--
                                    ``(I) Definition of tier i family 
                                or group day care home.--In this 
                                paragraph, the term `tier I family or 
                                group day care home' means--
                                            ``(aa) a family or group 
                                        day care home that is located 
                                        in a geographic area, as 
                                        defined by the Secretary based 
                                        on census data, in which at 
                                        least 50 percent of the 
                                        children residing in the area 
                                        are members of households whose 
                                        incomes meet the income 
                                        eligibility guidelines for free 
                                        or reduced price meals under 
                                        section 9;
                                            ``(bb) a family or group 
                                        day care home that is located 
                                        in an area served by a school 
                                        enrolling elementary students 
                                        in which at least 50 percent of 
                                        the total number of children 
                                        enrolled are certified eligible 
                                        to receive free or reduced 
                                        price school meals under this 
                                        Act or the Child Nutrition Act 
                                        of 1966 (42 U.S.C. 1771 et 
                                        seq.); or
                                            ``(cc) a family or group 
                                        day care home that is operated 
                                        by a provider whose household 
                                        meets the income eligibility 
                                        guidelines for free or reduced 
                                        price meals under section 9 and 
                                        whose income is verified by the 
                                        sponsoring or organization of 
                                        the home under regulations 
                                        established by the Secretary.
                                    ``(II) Reimbursement.--Except as 
                                provided in subclause (III), a tier I 
                                family or group day care home shall be 
                                provided reimbursement factors under 
                                this clause without a requirement for 
                                documentation of the costs described in 
                                clause (i), except that reimbursement 
                                shall not be provided under this 
                                subclause for meals or supplements 
                                served to the children of a person 
                                acting as a family or group day care 
                                home provider unless the children meet 
                                the income eligibility guidelines for 
                                free or reduced price meals under 
                                section 9.
                                    ``(III) Factors.--Except as 
                                provided in subclause (IV), the 
                                reimbursement factors applied to a home 
                                referred to in subclause (II) shall be 
                                the factors in effect on July 1, 1996.
                                    ``(IV) Adjustments.--The 
                                reimbursement factors under this 
                                subparagraph shall be adjusted on July 
                                1, 1997, and each July 1 thereafter, to 
                                reflect changes in the Consumer Price 
                                Index for food at home for the most 
                                recent 12-month period for which the 
                                data are available. The reimbursement 
                                factors under this subparagraph shall 
                                be rounded to the nearest lower cent 
                                increment and based on the unrounded 
                                adjustment in effect on June 30 of the 
                                preceding school year.
                            ``(iii) Tier ii family or group day care 
                        homes.--
                                    ``(I) In general.--
                                            ``(aa) Factors.--Except as 
                                        provided in subclause (II), 
                                        with respect to meals or 
                                        supplements served under this 
                                        clause by a family or group day 
                                        care home that does not meet 
                                        the criteria set forth in 
                                        clause (ii)(I), the 
                                        reimbursement factors shall be 
                                        $1 for lunches and suppers, 30 
                                        cents for breakfasts, and 15 
                                        cents for supplements.
                                            ``(bb) Adjustments.--The 
                                        factors shall be adjusted on 
                                        July 1, 1997, and each July 1 
                                        thereafter, to reflect changes 
                                        in the Consumer Price Index for 
                                        food at home for the most 
                                        recent 12-month period for 
                                        which the data are available. 
                                        The reimbursement factors under 
                                        this item shall be rounded down 
                                        to the nearest lower cent 
                                        increment and based on the 
                                        unrounded adjustment for the 
                                        preceding 12-month period.
                                            ``(cc) Reimbursement.--A 
                                        family or group day care home 
                                        shall be provided reimbursement 
                                        factors under this subclause 
                                        without a requirement for 
                                        documentation of the costs 
                                        described in clause (i), except 
                                        that reimbursement shall not be 
                                        provided under this subclause 
                                        for meals or supplements served 
                                        to the children of a person 
                                        acting as a family or group day 
                                        care home provider unless the 
                                        children meet the income 
                                        eligibility guidelines for free 
                                        or reduced price meals under 
                                        section 9.
                                    ``(II) Other factors.--A family or 
                                group day care home that does not meet 
                                the criteria set forth in clause 
                                (ii)(I) may elect to be provided 
                                reimbursement factors determined in 
                                accordance with the following 
                                requirements:
                                            ``(aa) Children eligible 
                                        for free or reduced price 
                                        meals.--In the case of meals or 
                                        supplements served under this 
                                        subsection to children who are 
                                        members of households whose 
                                        incomes meet the income 
                                        eligibility guidelines for free 
                                        or reduced price meals under 
                                        section 9, the family or group 
                                        day care home shall be provided 
                                        reimbursement factors set by 
                                        the Secretary in accordance 
                                        with clause (ii)(III).
                                            ``(bb) Ineligible 
                                        children.--In the case of meals 
                                        or supplements served under 
                                        this subsection to children who 
                                        are members of households whose 
                                        incomes do not meet the income 
                                        eligibility guidelines, the 
                                        family or group day care home 
                                        shall be provided reimbursement 
                                        factors in accordance with 
                                        subclause (I).
                                    ``(III) Information and 
                                determinations.--
                                            ``(aa) In general.--If a 
                                        family or group day care home 
                                        elects to claim the factors 
                                        described in subclause (II), 
                                        the family or group day care 
                                        home sponsoring organization 
                                        serving the home shall collect 
                                        the necessary income 
                                        information, as determined by 
                                        the Secretary, from any parent 
                                        or other caretaker to make the 
                                        determinations specified in 
                                        subclause (II) and shall make 
                                        the determinations in 
                                        accordance with rules 
                                        prescribed by the Secretary.
                                            ``(bb) Categorical 
                                        eligibility.--In making a 
                                        determination under item (aa), 
                                        a family or group day care home 
                                        sponsoring organization may 
                                        consider a child participating 
                                        in or subsidized under, or a 
                                        child with a parent 
                                        participating in or subsidized 
                                        under, a federally or State 
                                        supported child care or other 
                                        benefit program with an income 
                                        eligibility limit that does not 
                                        exceed the eligibility standard 
                                        for free or reduced price meals 
                                        under section 9 to be a child 
                                        who is a member of a household 
                                        whose income meets the income 
                                        eligibility guidelines under 
                                        section 9.
                                            ``(cc) Factors for children 
                                        only.--A family or group day 
                                        care home may elect to receive 
the reimbursement factors prescribed under clause (ii)(III) solely for 
the children participating in a program referred to in item (bb) if the 
home elects not to have income statements collected from parents or 
other caretakers.
                                    ``(IV) Simplified meal counting and 
                                reporting procedures.--The Secretary 
                                shall prescribe simplified meal 
                                counting and reporting procedures for 
                                use by a family or group day care home 
                                that elects to claim the factors under 
                                subclause (II) and by a family or group 
                                day care home sponsoring organization 
                                that sponsors the home. The procedures 
                                the Secretary prescribes may include 1 
                                or more of the following:
                                            ``(aa) Setting an annual 
                                        percentage for each home of the 
                                        number of meals served that are 
                                        to be reimbursed in accordance 
                                        with the reimbursement factors 
                                        prescribed under clause 
                                        (ii)(III) and an annual 
                                        percentage of the number of 
                                        meals served that are to be 
                                        reimbursed in accordance with 
                                        the reimbursement factors 
                                        prescribed under subclause (I), 
                                        based on the family income of 
                                        children enrolled in the home 
                                        in a specified month or other 
                                        period.
                                            ``(bb) Placing a home into 
                                        1 of 2 or more reimbursement 
                                        categories annually based on 
                                        the percentage of children in 
                                        the home whose households have 
                                        incomes that meet the income 
                                        eligibility guidelines under 
                                        section 9, with each such 
                                        reimbursement category carrying 
                                        a set of reimbursement factors 
                                        such as the factors prescribed 
                                        under clause (ii)(III) or 
                                        subclause (I) or factors 
                                        established within the range of 
                                        factors prescribed under clause 
                                        (ii)(III) and subclause (I).
                                            ``(cc) Such other 
                                        simplified procedures as the 
                                        Secretary may prescribe.
                                    ``(V) Minimum verification 
                                requirements.--The Secretary may 
                                establish any minimum verification 
                                requirements that are necessary to 
                                carry out this clause.''.
            (2) Grants to states to provide assistance to family or 
        group day care homes.--Section 17(f)(3) of the National School 
        Lunch Act (42 U.S.C. 1766(f)(3)) is amended by adding at the 
        end the following:
                    ``(D) Grants to states to provide assistance to 
                family or group day care homes.--
                            ``(i) In general.--
                                    ``(I) Reservation.--From amounts 
                                made available to carry out this 
                                section, the Secretary shall reserve 
                                $5,000,000 of the amount made available 
                                for fiscal year 1997.
                                    ``(II) Purpose.--The Secretary 
                                shall use the funds made available 
                                under subclause (I) to provide grants 
                                to States for the purpose of 
                                providing--
                                            ``(aa) assistance, 
                                        including grants, to family and 
                                        day care home sponsoring 
                                        organizations and other 
                                        appropriate organizations, in 
                                        securing and providing 
                                        training, materials, automated 
                                        data processing assistance, and 
                                        other assistance for the staff 
                                        of the sponsoring 
                                        organizations; and
                                            ``(bb) training and other 
                                        assistance to family and group 
                                        day care homes in the 
                                        implementation of the amendment 
                                        to subparagraph (A) made by 
                                        section 1208(e)(1) of the 
                                        Agricultural Reconciliation Act 
                                        of 1996.
                            ``(ii) Allocation.--The Secretary shall 
                        allocate from the funds reserved under clause 
                        (i)(I)--
                                    ``(I) $30,000 in base funding to 
                                each State; and
                                    ``(II) any remaining amount among 
                                the States, based on the number of 
                                family day care homes participating in 
                                the program in a State during fiscal 
                                year 1995 as a percentage of the number 
                                of all family day care homes 
                                participating in the program during 
                                fiscal year 1995.
                            ``(iii) Retention of funds.--Of the amount 
                        of funds made available to a State for fiscal 
                        year 1997 under clause (i), the State may 
                        retain not to exceed 30 percent of the amount 
                        to carry out this subparagraph.
                            ``(iv) Additional payments.--Any payments 
                        received under this subparagraph shall be in 
                        addition to payments that a State receives 
                        under subparagraph (A).''.
            (3) Provision of data.--Section 17(f)(3) of the National 
        School Lunch Act (42 U.S.C. 1766(f)(3)), as amended by 
        paragraph (2), is amended by adding at the end the following:
                    ``(E) Provision of data to family or group day care 
                home sponsoring organizations.--
                            ``(i) Census data.--The Secretary shall 
                        provide to each State agency administering a 
                        child and adult care food program under this 
                        section data from the most recent decennial 
                        census survey or other appropriate census 
                        survey for which the data are available showing 
                        which areas in the State meet the requirements 
                        of subparagraph (A)(ii)(I)(aa). The State 
                        agency shall provide the data to family or 
                        group day care home sponsoring organizations 
                        located in the State.
                            ``(ii) School data.--
                                    ``(I) In general.--A State agency 
                                administering the school lunch program 
                                under this Act or the school breakfast 
                                program under the Child Nutrition Act 
                                of 1966 (42 U.S.C. 1771 et seq.) shall 
                                provide to approved family or group day 
                                care home sponsoring organizations a 
                                list of schools serving elementary 
                                school children in the State in which 
                                not less than \1/2\ of the children 
                                enrolled are certified to receive free 
                                or reduced price meals. The State 
                                agency shall collect the data necessary 
                                to create the list annually and provide 
                                the list on a timely basis to any 
                                approved family or group day care home 
                                sponsoring organization that requests 
                                the list.
                                    ``(II) Use of data from preceding 
                                school year.--In determining for a 
                                fiscal year or other annual period 
                                whether a home qualifies as a tier I 
                                family or group day care home under 
                                subparagraph (A)(ii)(I), the State 
                                agency administering the program under 
                                this section, and a family or group day 
                                care home sponsoring organization, 
                                shall use the most current available 
                                data at the time of the determination.
                            ``(iii) Duration of determination.--For 
                        purposes of this section, a determination that 
                        a family or group day care home is located in 
                        an area that qualifies the home as a tier I 
                        family or group day care home (as the term is 
                        defined in subparagraph (A)(ii)(I)), shall be 
                        in effect for 3 years (unless the determination 
                        is made on the basis of census data, in which 
                        case the determination shall remain in effect 
                        until more recent census data are available) 
                        unless the State agency determines that the 
                        area in which the home is located no longer 
                        qualifies the home as a tier I family or group 
                        day care home.''.
            (4) Conforming amendments.--Section 17(c) of the National 
        School Lunch Act (42 U.S.C. 1766(c)) is amended by inserting 
        ``except as provided in subsection (f)(3),'' after ``For 
        purposes of this section,'' each place it appears in paragraphs 
        (1), (2), and (3).
    (f) Reimbursement.--Section 17(f) of the National School Lunch Act 
(42 U.S.C. 1766(f)) is amended--
            (1) in paragraph (3)--
                    (A) in subparagraph (B), by striking the third and 
                fourth sentences; and
                    (B) in subparagraph (C)(ii), by striking ``conduct 
                outreach'' and all that follows through ``may become'' 
                and inserting ``assist unlicensed family or group day 
                care homes in becoming''; and
            (2) in the first sentence of paragraph (4), by striking 
        ``shall'' and inserting ``may''.
    (g) Nutritional Requirements.--Section 17(g)(1) of the National 
School Lunch Act (42 U.S.C. 1766(g)(1)) is amended--
            (1) in subparagraph (A), by striking the second sentence; 
        and
            (2) in subparagraph (B), by striking the second sentence.
    (h) Elimination of State Paperwork and Outreach Burden.--Section 17 
of the National School Lunch Act (42 U.S.C. 1766) is amended by 
striking subsection (k) and inserting the following:
    ``(k) Training and Technical Assistance.--A State participating in 
the program established under this section shall provide sufficient 
training, technical assistance, and monitoring to facilitate effective 
operation of the program. The Secretary shall assist the State in 
developing plans to fulfill the requirements of this subsection.''.
    (i) Records.--The second sentence of section 17(m) of the National 
School Lunch Act (42 U.S.C. 1766(m)) is amended by striking ``at all 
times'' and inserting ``at any reasonable time''.
    (j) Information for Parents.--Section 17 of the National School 
Lunch Act (42 U.S.C. 1766) is amended by striking subsection (q) and 
inserting the following:
    ``(q) Information for Parents.--The State agency shall ensure that, 
at least once a year, child care institutions provide written 
information to parents that includes--
            ``(1) basic information on the benefits of the special 
        supplemental nutrition program for women, infants, and children 
        authorized under section 17 of the Child Nutrition Act of 1966 
        (42 U.S.C. 1786);
            ``(2) information on the maximum income limits, according 
        to family size, applicable to the program; and
            ``(3) information on where parents may apply to participate 
        in the program.''.
    (k) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall become effective on the 
        date of enactment of this Act.
            (2) Improved targeting of day care home reimbursements.--
        The amendments made by paragraphs (1) and (4) of subsection (e) 
        shall become effective on July 1, 1997.
            (3) Regulations.--
                    (A) Interim regulations.--Not later than January 1, 
                1997, the Secretary of Agriculture shall issue interim 
                regulations to implement--
                            (i) the amendments made by paragraphs (1), 
                        (3), and (4) of subsection (e); and
                            (ii) section 17(f)(3)(C) of the National 
                        School Lunch Act (42 U.S.C. 1766(f)(3)(C)).
                    (B) Final regulations.--Not later than July 1, 
                1997, the Secretary of Agriculture shall issue final 
                regulations to implement the provisions of law referred 
                to in subparagraph (A).
    (l) Study of Impact of Amendments on Program Participation and 
Family Day Care Licensing.--
            (1) In general.--The Secretary of Agriculture, in 
        conjunction with the Secretary of Health and Human Services, 
        shall study the impact of the amendments made by this section 
        on--
                    (A) the number of family day care homes 
                participating in the child and adult care food program 
                established under section 17 of the National School 
                Lunch Act (42 U.S.C. 1766);
                    (B) the number of day care home sponsoring 
                organizations participating in the program;
                    (C) the number of day care homes that are licensed, 
                certified, registered, or approved by each State in 
                accordance with regulations issued by the Secretary;
                    (D) the rate of growth of the numbers referred to 
                in subparagraphs (A) through (C);
                    (E) the nutritional adequacy and quality of meals 
                served in family day care homes that--
                            (i) received reimbursement under the 
                        program prior to the amendments made by this 
                        section but do not receive reimbursement after 
                        the amendments made by this section; or
                            (ii) received full reimbursement under the 
                        program prior to the amendments made by this 
                        section but do not receive full reimbursement 
                        after the amendments made by this section; and
                    (F) the proportion of low-income children 
                participating in the program prior to the amendments 
                made by this section and the proportion of low-income 
                children participating in the program after the 
                amendments made by this section.
            (2) Required data.--Each State agency participating in the 
        child and adult care food program under section 17 of the 
        National School Lunch Act (42 U.S.C. 1766) shall submit to the 
        Secretary of Agriculture data on--
                    (A) the number of family day care homes 
                participating in the program on June 30, 1997, and June 
                30, 1998;
                    (B) the number of family day care homes licensed, 
                certified, registered, or approved for service on June 
                30, 1997, and June 30, 1998; and
                    (C) such other data as the Secretary may require to 
                carry out this subsection.
            (3) Submission of report.--Not later than 2 years after the 
        date of enactment of this section, the Secretary of Agriculture 
        shall submit the study required under this subsection to the 
        Committee on Economic and Educational Opportunities of the 
        House of Representatives and the Committee on Agriculture, 
        Nutrition, and Forestry of the Senate.

SEC. 1209. PILOT PROJECTS.

    (a) Universal Free Pilot.--Section 18(d) of the National School 
Lunch Act (42 U.S.C. 1769(d)) is amended--
            (1) by striking paragraph (3); and
            (2) by redesignating paragraphs (4) and (5) as paragraphs 
        (3) and (4), respectively.
    (b) Demonstration Project Outside School Hours.--Section 18(e) of 
the National School Lunch Act (42 U.S.C. 1769(e)) is amended--
            (1) in paragraph (1)--
                    (A) in subparagraph (A)--
                            (i) by striking ``(A)''; and
                            (ii) by striking ``shall'' and inserting 
                        ``may''; and
                    (B) by striking subparagraph (B); and
            (2) by striking paragraph (5) and inserting the following:
            ``(5) Authorization of appropriations.--There are 
        authorized to be appropriated to carry out this subsection such 
        sums as are necessary for each of fiscal years 1997 and 
        1998.''.
    (c) Eliminating Projects.--Section 18 of the National School Lunch 
Act (42 U.S.C. 1769) is amended--
            (1) by striking subsections (a) and (g) through (i); and
            (2) by redesignating subsections (b) through (f), as so 
        amended, as subsections (a) through (e), respectively.
    (d) Conforming Amendment.--Section 17B(d)(1)(A) of the National 
School Lunch Act (42 U.S.C. 1766b(d)(1)(A)) is amended by striking 
``18(c)'' and inserting ``18(b)''.

SEC. 1210. REDUCTION OF PAPERWORK.

    Section 19 of the National School Lunch Act (42 U.S.C. 1769a) is 
repealed.

SEC. 1211. INFORMATION ON INCOME ELIGIBILITY.

    Section 23 of the National School Lunch Act (42 U.S.C. 1769d) is 
repealed.

SEC. 1212. NUTRITION GUIDANCE FOR CHILD NUTRITION PROGRAMS.

    Section 24 of the National School Lunch Act (42 U.S.C. 1769e) is 
repealed.

        CHAPTER 2--AMENDMENTS TO THE CHILD NUTRITION ACT OF 1966

SEC. 1251. SPECIAL MILK PROGRAM.

    Section 3(a)(3) of the Child Nutrition Act of 1966 (42 U.S.C. 
1772(a)(3)) is amended by striking ``the Trust Territory of the Pacific 
Islands'' and inserting ``the Commonwealth of the Northern Mariana 
Islands''.

SEC. 1252. FREE AND REDUCED PRICE POLICY STATEMENT.

    Section 4(b)(1) of the Child Nutrition Act of 1966 (42 U.S.C. 
1773(b)(1)) is amended by adding at the end the following:
                    ``(E) Free and reduced price policy statement.--
                After the initial submission, a school food authority 
                shall not be required to submit a free and reduced 
                price policy statement to a State educational agency 
                under this Act unless there is a substantive change in 
                the free and reduced price policy of the school food 
                authority. A routine change in the policy of a school 
                food authority, such as an annual adjustment of the 
                income eligibility guidelines for free and reduced 
                price meals, shall not be sufficient cause for 
                requiring the school food authority to submit a policy 
                statement.''.

SEC. 1253. SCHOOL BREAKFAST PROGRAM AUTHORIZATION.

    (a) Training and Technical Assistance in Food Preparation.--Section 
4(e)(1)(B) of the Child Nutrition Act of 1966 (42 U.S.C. 1773(e)(1)(B)) 
is amended by striking the second sentence.
    (b) Expansion of Program; Startup and Expansion Costs.--
            (1) In general.--Section 4 of the Child Nutrition Act of 
        1966 (42 U.S.C. 1773) is amended by striking subsections (f) 
        and (g).
            (2) Effective date.--The amendments made by paragraph (1) 
        shall become effective on October 1, 1996.

SEC. 1254. STATE ADMINISTRATIVE EXPENSES.

    (a) Use of Funds for Commodity Distribution Administration; 
Studies.--Section 7 of the Child Nutrition Act of 1966 (42 U.S.C. 1776) 
is amended--
            (1) by striking subsections (e) and (h); and
            (2) by redesignating subsections (f), (g), and (i) as 
        subsections (e), (f), and (g), respectively.
    (b) Approval of Changes.--Section 7(e) of the Child Nutrition Act 
of 1966 (42 U.S.C. 1776(e)), as so redesignated, is amended--
            (1) by striking ``each year an annual plan'' and inserting 
        ``the initial fiscal year a plan''; and
            (2) by adding at the end the following: ``After submitting 
        the initial plan, a State shall be required to submit to the 
        Secretary for approval only a substantive change in the 
        plan.''.

SEC. 1255. REGULATIONS.

    Section 10(b) of the Child Nutrition Act of 1966 (42 U.S.C. 
1779(b)) is amended--
            (1) in paragraph (1), by striking ``(1)''; and
            (2) by striking paragraphs (2) through (4).

SEC. 1256. PROHIBITIONS.

    Section 11(a) of the Child Nutrition Act of 1966 (42 U.S.C. 
1780(a)) is amended by striking ``neither the Secretary nor the State 
shall'' and inserting ``the Secretary shall not''.

SEC. 1257. MISCELLANEOUS PROVISIONS AND DEFINITIONS.

    Section 15 of the Child Nutrition Act of 1966 (42 U.S.C. 1784) is 
amended--
            (1) in paragraph (1), by striking ``the Trust Territory of 
        the Pacific Islands'' and inserting ``the Commonwealth of the 
        Northern Mariana Islands''; and
            (2) in the first sentence of paragraph (3)--
                    (A) in subparagraph (A), by inserting ``and'' at 
                the end; and
                    (B) by striking ``, and (C)'' and all that follows 
                through ``Governor of Puerto Rico''.

SEC. 1258. ACCOUNTS AND RECORDS.

    The second sentence of section 16(a) of the Child Nutrition Act of 
1966 (42 U.S.C. 1785(a)) is amended by striking ``at all times be 
available'' and inserting ``be available at any reasonable time''.

SEC. 1259. SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS, 
              AND CHILDREN.

    (a) Definitions.--Section 17(b) of the Child Nutrition Act of 1966 
(42 U.S.C. 1786(b)) is amended--
            (1) in paragraph (15)(B)(iii), by inserting ``of not more 
        than 365 days'' after ``accommodation''; and
            (2) in paragraph (16)--
                    (A) in subparagraph (A), by adding ``and'' at the 
                end; and
                    (B) in subparagraph (B), by striking ``; and'' and 
                inserting a period; and
                    (C) by striking subparagraph (C).
    (b) Secretary's Promotion of WIC.--Section 17(c) of the Child 
Nutrition Act of 1966 (42 U.S.C. 1786(c)) is amended by striking 
paragraph (5).
    (c) Eligible Participants.--Section 17(d) of the Child Nutrition 
Act of 1966 (42 U.S.C. 1786(d)) is amended by striking paragraph (4).
    (d) Nutrition Education and Drug Abuse Education.--Section 17(e) of 
the Child Nutrition Act of 1966 (42 U.S.C. 1786(e)) is amended--
            (1) in the first sentence of paragraph (1), by striking 
        ``shall ensure'' and all that follows through ``is provided'' 
        and inserting ``shall provide nutrition education and may 
        provide drug abuse education'';
            (2) in paragraph (2), by striking the third sentence;
            (3) in paragraph (4)--
                    (A) in the matter preceding subparagraph (A), by 
                striking ``shall'';
                    (B) by striking subparagraph (A);
                    (C) by redesignating subparagraphs (B) and (C) as 
                subparagraphs (A) and (B), respectively;
                    (D) in subparagraph (A), as so redesignated--
                            (i) by inserting ``shall'' before 
                        ``provide''; and
                            (ii) by striking ``and'' at the end;
                    (E) in subparagraph (B), as so redesignated--
                            (i) by inserting ``shall'' before 
                        ``provide''; and
                            (ii) by striking the period at the end and 
                        inserting ``; and''; and
                    (F) by adding at the end the following:
            ``(C) may provide a local agency with materials describing 
        other programs for which a participant in the program may be 
        eligible.'';
            (4) in paragraph (5), by striking ``The State agency shall 
        ensure that each'' and inserting ``Each''; and
            (5) by striking paragraph (6).
    (e) State Plan.--Section 17(f) of the Child Nutrition Act of 1966 
(42 U.S.C. 1786(f)) is amended--
            (1) in paragraph (1)--
                    (A) in subparagraph (A)--
                            (i) by striking ``annually to the 
                        Secretary, by a date specified by the 
                        Secretary, a'' and inserting ``to the 
                        Secretary, by a date specified by the 
                        Secretary, an initial''; and
                            (ii) by adding at the end the following: 
                        ``After submitting the initial plan, a State 
                        shall be required to submit to the Secretary 
                        for approval only a substantive change in the 
                        plan.'';
                    (B) in subparagraph (C)--
                            (i) by striking clause (iii) and inserting 
                        the following:
            ``(iii) a plan to coordinate operations under the program 
        with other services or programs that may benefit participants 
        in, and applicants for, the program;'';
                            (ii) in clause (vi), by inserting after 
                        ``in the State'' the following: ``(including a 
                        plan to improve access to the program for 
                        participants and prospective applicants who are 
                        employed, or who reside, in rural areas)'';
                            (iii) in clause (vii), by striking ``to 
                        provide program benefits'' and all that follows 
                        through ``emphasis on'' and inserting ``for'';
                            (iv) by striking clauses (ix), (x), and 
                        (xii);
                            (v) in clause (xiii), by striking ``may 
                        require'' and inserting ``may reasonably 
                        require'';
                            (vi) by redesignating clauses (xi) and 
                        (xiii), as so amended, as clauses (ix) and (x), 
                        respectively; and
                            (vii) in clause (ix), as so redesignated, 
                        by adding ``and'' at the end;
                    (C) by striking subparagraph (D); and
                    (D) by redesignating subparagraph (E) as 
                subparagraph (D);
            (2) by striking paragraphs (2), (6), (8), and (22);
            (3) in the second sentence of paragraph (5), by striking 
        ``at all times be available'' and inserting ``be available at 
        any reasonable time'';
            (4) in paragraph (9)(B), by striking the second sentence;
            (5) in the first sentence of paragraph (11), by striking 
        ``, including standards that will ensure sufficient State 
        agency staff'';
            (6) in paragraph (12), by striking the third sentence;
            (7) in paragraph (17), by striking ``and to accommodate'' 
        and all that follows through ``facilities'';
            (8) in paragraph (19), by striking ``shall'' and inserting 
        ``may''; and
            (9) by redesignating paragraphs (3), (4), (5), (7), (9) 
        through (21), (23), and (24) as paragraphs (2), (3), (4), (5), 
        (6) through (18), (19), and (20), respectively.
    (f) Information.--Section 17(g) of the Child Nutrition Act of 1966 
(42 U.S.C. 1786(g)) is amended--
            (1) in paragraph (5), by striking ``the report required 
        under subsection (d)(4)'' and inserting ``reports on program 
        participant characteristics''; and
            (2) by striking paragraph (6).
    (g) Procurement of Infant Formula.--
            (1) In general.--Section 17(h) of the Child Nutrition Act 
        of 1966 (42 U.S.C. 1786(h)) is amended--
                    (A) in paragraph (4)(E), by striking ``and, on'' 
                and all that follows through ``(d)(4)'';
                    (B) in paragraph (8)--
                            (i) by striking subparagraphs (A), (C), and 
                        (M);
                            (ii) in subparagraph (G)--
                                    (I) in clause (i), by striking 
                                ``(i)''; and
                                    (II) by striking clauses (ii) 
                                through (ix);
                            (iii) in subparagraph (I), by striking 
                        ``Secretary--'' and all that follows through 
                        ``(v) may'' and inserting ``Secretary may'';
                            (iv) by redesignating subparagraphs (B) and 
                        (D) through (L) as subparagraphs (A) and (B) 
                        through (J), respectively;
                            (v) in subparagraph (A)(i), as so 
                        redesignated, by striking ``subparagraphs (C), 
                        (D), and (E)(iii), in carrying out subparagraph 
                        (A),'' and inserting ``subparagraphs (B) and 
                        (C)(iii),'';
                            (vi) in subparagraph (B)(i), as so 
                        redesignated, by striking ``subparagraph (B)'' 
                        each place it appears and inserting 
                        ``subparagraph (A)''; and
                            (vii) in subparagraph (C)(iii), as so 
                        redesignated, by striking ``subparagraph (B)'' 
                        and inserting ``subparagraph (A)''; and
                    (C) in paragraph (10)(B)--
                            (i) in clause (i), by adding ``and'' at the 
                        end;
                            (ii) in clause (ii), by striking ``; and'' 
                        and inserting a period; and
                            (iii) by striking clause (iii).
            (2) Application.--The amendments made by paragraph (1) 
        shall not apply to a contract for the procurement of infant 
        formula under section 17(h)(8) of the Child Nutrition Act of 
        1966 (42 U.S.C. 1786(h)(8)) that is in effect on the date of 
        enactment of this subsection.
    (h) National Advisory Council on Maternal, Infant, and Fetal 
Nutrition.--Section 17(k)(3) of the Child Nutrition Act of 1966 (42 
U.S.C. 1786(k)(3)) is amended by striking ``Secretary shall designate'' 
and inserting ``Council shall elect''.
    (i) Completed Study; Community College Demonstration; Grants for 
Information and Data System.--Section 17 of the Child Nutrition Act of 
1966 (42 U.S.C. 1786) is amended by striking subsections (n), (o), and 
(p).
    (j) Disqualification of Vendors Who Are Disqualified Under the Food 
Stamp Program.--Section 17 of the Child Nutrition Act of 1966 (42 
U.S.C. 1786), as amended by subsection (i), is amended by adding at the 
end the following:
    ``(n) Disqualification of Vendors Who Are Disqualified Under the 
Food Stamp Program.--
            ``(1) In general.--The Secretary shall issue regulations 
        providing criteria for the disqualification under this section 
        of an approved vendor that is disqualified from accepting 
        benefits under the food stamp program established under the 
        Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.).
            ``(2) Terms.--A disqualification under paragraph (1)--
                    ``(A) shall be for the same period as the 
                disqualification from the program referred to in 
                paragraph (1);
                    ``(B) may begin at a later date than the 
                disqualification from the program referred to in 
                paragraph (1); and
                    ``(C) shall not be subject to judicial or 
                administrative review.''.

SEC. 1260. CASH GRANTS FOR NUTRITION EDUCATION.

    Section 18 of the Child Nutrition Act of 1966 (42 U.S.C. 1787) is 
repealed.

SEC. 1261. NUTRITION EDUCATION AND TRAINING.

    (a) Findings.--Section 19 of the Child Nutrition Act of 1966 (42 
U.S.C. 1788) is amended--
            (1) in subsection (a), by striking ``that--'' and all that 
        follows through the period at the end and inserting ``that 
        effective dissemination of scientifically valid information to 
        children participating or eligible to participate in the school 
        lunch and related child nutrition programs should be 
        encouraged.''; and
            (2) in the first sentence of subsection (b), by striking 
        ``encourage'' and all that follows through ``establishing'' and 
        inserting ``establish''.
    (b) Use of Funds.--Section 19(f) of the Child Nutrition Act of 1966 
(42 U.S.C. 1788(f)) is amended--
            (1) in paragraph (1)--
                    (A) by striking subparagraph (B); and
                    (B) in subparagraph (A)--
                            (i) by striking ``(A)'';
                            (ii) by striking clauses (ix) through 
                        (xix);
                            (iii) by redesignating clauses (i) through 
                        (viii) and (xx) as subparagraphs (A) through 
                        (H) and (I), respectively;
                            (iv) in subparagraph (I), as so 
                        redesignated, by striking the period at the end 
                        and inserting ``; and''; and
                            (v) by adding at the end the following:
            ``(J) other appropriate related activities, as determined 
        by the State.'';
            (2) by striking paragraphs (2) and (4); and
            (3) by redesignating paragraph (3) as paragraph (2).
    (c) Accounts, Records, and Reports.--The second sentence of section 
19(g)(1) of the Child Nutrition Act of 1966 (42 U.S.C. 1788(g)(1)) is 
amended by striking ``at all times be available'' and inserting ``be 
available at any reasonable time''.
    (d) State Coordinators for Nutrition; State Plan.--Section 19(h) of 
the Child Nutrition Act of 1966 (42 U.S.C. 1788(h)) is amended--
            (1) in the second sentence of paragraph (1)--
                    (A) by striking ``as provided in paragraph (2) of 
                this subsection''; and
                    (B) by striking ``as provided in paragraph (3) of 
                this subsection'';
            (2) in paragraph (2), by striking the second and third 
        sentences; and
            (3) by striking paragraph (3).
    (e) Authorization of Appropriations.--Section 19(i) of the Child 
Nutrition Act of 1966 (42 U.S.C. 1788(i)) is amended--
            (1) in the first sentence of paragraph (2)(A), by striking 
        ``and each succeeding fiscal year'';
            (2) by redesignating paragraphs (3) and (4) as paragraphs 
        (4) and (5), respectively; and
            (3) by inserting after paragraph (2) the following:
            ``(3) Fiscal years 1997 through 2002.--
                    ``(A) In general.--There are authorized to be 
                appropriated to carry out this section $10,000,000 for 
                each of fiscal years 1997 through 2002.
                    ``(B) Grants.--
                            ``(i) In general.--Grants to each State 
                        from the amounts made available under 
                        subparagraph (A) shall be based on a rate of 50 
                        cents for each child enrolled in schools or 
                        institutions within the State, except that no 
                        State shall receive an amount less than $75,000 
                        per fiscal year.
                            ``(ii) Insufficient funds.--If the amount 
                        made available for any fiscal year is 
                        insufficient to pay the amount to which each 
                        State is entitled under clause (i), the amount 
                        of each grant shall be ratably reduced.''.
    (f) Assessment.--Section 19 of the Child Nutrition Act of 1966 (42 
U.S.C. 1788) is amended by striking subsection (j).
    (g) Effective Date.--The amendments made by subsection (e) shall 
become effective on October 1, 1996.

SEC. 1262. ROUNDING RULES.

    (a) Special Milk Price Program Rates.--Section 3(a)(8) of the Child 
Nutrition Act of 1966 (42 U.S.C. 1772(a)(8)) is amended by striking 
``one-fourth cent'' and inserting ``lower cent increment''.
    (b) Reduced Price Breakfast Rates.--Section 4(b) of the Child 
Nutrition Act of 1966 (42 U.S.C. 1773(b)) is amended--
            (1) in the second sentence of paragraph (1)(B), by striking 
        ``one-fourth cent'' and inserting ``lower cent increment''; and
            (2) in paragraph (2)(B)(ii), by striking ``one-fourth 
        cent'' and inserting ``lower cent increment''.
    (c) Commodity Rate.--The second sentence of section 6(e)(1)(B) of 
the National School Lunch Act (42 U.S.C. 1755(e)(1)(B)) is amended by 
striking ``\1/4\ cent'' and inserting ``lower cent increment''.
    (d) Lunch, Breakfast, and Supplement Rates.--The third sentence of 
section 11(a)(3)(B) of the National School Lunch Act (42 U.S.C. 
1759a(a)(3)(B)) is amended by striking ``one-fourth cent'' and 
inserting ``lower cent increment''.
    (e) Effective Date.--The amendments made by this section shall 
become effective on July 1, 1996.

                     TITLE II--COMMITTEE ON FINANCE

                       Subtitle A--Welfare Reform

SEC. 2001. SHORT TITLE OF SUBTITLE.

    This subtitle may be cited as the ``Personal Responsibility and 
Work Opportunity Act of 1996''.

SEC. 2002. TABLE OF CONTENTS OF SUBTITLE.

    The table of contents for this subtitle is as follows:

                       Subtitle A--Welfare Reform

Sec. 2001. Short title.
Sec. 2002. Table of contents.
  Chapter 1--Block Grants for Temporary Assistance for Needy Families

Sec. 2101. Findings.
Sec. 2102. Reference to Social Security Act.
Sec. 2103. Block grants to States.
Sec. 2104. Services provided by charitable, religious, or private 
                            organizations.
Sec. 2105. Census data on grandparents as primary caregivers for their 
                            grandchildren.
Sec. 2106. Report on data processing.
Sec. 2107. Study on alternative outcomes measures.
Sec. 2108. Welfare Formula Fairness Commission.
Sec. 2109. Conforming amendments to the Social Security Act.
Sec. 2110. Conforming amendments to the Food Stamp Act of 1977 and 
                            related provisions.
Sec. 2111. Conforming amendments to other laws.
Sec. 2112. Development of prototype of counterfeit-resistant social 
                            security card required.
Sec. 2113. Disclosure of receipt of Federal funds.
Sec. 2114. Modifications to the job opportunities for certain low-
                            income individuals program.
Sec. 2115. Secretarial submission of legislative proposal for technical 
                            and conforming amendments.
Sec. 2116. Effective date; transition rule.
                Chapter 2--Supplemental Security Income

Sec. 2200. Referesubchapter a--eligibility restrictions
Sec. 2201. Denial of SSI benefits for 10 years to individuals found to 
                            have fraudulently misrepresented residence 
                            in order to obtain benefits simultaneously 
                            in 2 or more States.
Sec. 2202. Denial of SSI benefits for fugitive felons and probation and 
                            parole violators.
Sec. 2203. Treatment of prisoners.
Sec. 2204. Effsubchapter b--benefits for disabled children
Sec. 2211. Definition and eligibility rules.
Sec. 2212. Eligibility redeterminations and continuing disability 
                            reviews.
Sec. 2213. Additional accountability requirements.
Sec. 2214. Reduction in cash benefits payable to institutionalized 
                            individuals whose medical costs are covered 
                            by private insurance.
Sec. 2215. Resubchapter c--additional enforcement provision
Sec. 2221. Installment payment of large past-due supplemental security 
                            income benefits.
Sec. 2222. Regsubchapter d--state supplementation programs
Sec. 2225. Repeal of maintenance of effort requirements applicable to 
                            optional State programs for supplementation 
  subchapter e--studies regarding supplemental security income program
Sec. 2231. Annual report on the supplemental security income program.
Sec. 2232. Study by General Accounting Office.
                        Chapter 3--Child Support

Sec.subchapter a--eligibility for services; distribution of payments
Sec. 2301. State obligation to provide child support enforcement 
                            services.
Sec. 2302. Distribution of child support collections.
Sec. 2303. Privacy safeguards.
Sec. 2304. Rightssubchapter b--locate and case tracking
Sec. 2311. State case registry.
Sec. 2312. Collection and disbursement of support payments.
Sec. 2313. State directory of new hires.
Sec. 2314. Amendments concerning income withholding.
Sec. 2315. Locator information from interstate networks.
Sec. 2316. Expansion of the Federal Parent Locator Service.
Sec. 2317. Collection and use of social security numbers for use in 
        subchapter c--streamlining and uniformity of procedures
Sec. 2321. Adoption of uniform State laws.
Sec. 2322. Improvements to full faith and credit for child support 
                            orders.
Sec. 2323. Administrative enforcement in interstate cases.
Sec. 2324. Use of forms in interstate enforcement.
Sec. 2325. State subchapter d--paternity establishment
Sec. 2331. State laws concerning paternity establishment.
Sec. 2332. Outreach for voluntary paternity establishment.
Sec. 2333. Cooperation by applicants for and recipients of part A 
            subchapter e--program administration and funding
Sec. 2341. Performance-based incentives and penalties.
Sec. 2342. Federal and State reviews and audits.
Sec. 2343. Required reporting procedures.
Sec. 2344. Automated data processing requirements.
Sec. 2345. Technical assistance.
Sec. subchapter f--establishment and modification of support orders
Sec. 2351. Simplified process for review and adjustment of child 
                            support orders.
Sec. 2352. Furnishing consumer reports for certain purposes relating to 
                            child support.
Sec. 2353. Nonliability for financial institutions providing financial 
                            records to State child support enforcement 
              subchapter g--enforcement of support orderses.
Sec. 2361. Internal Revenue Service collection of arrearages.
Sec. 2362. Authority to collect support from Federal employees.
Sec. 2363. Enforcement of child support obligations of members of the 
                            Armed Forces.
Sec. 2364. Voiding of fraudulent transfers.
Sec. 2365. Work requirement for persons owing past-due child support.
Sec. 2366. Definition of support order.
Sec. 2367. Reporting arrearages to credit bureaus.
Sec. 2368. Liens.
Sec. 2369. State law authorizing suspension of licenses.
Sec. 2370. Denial of passports for nonpayment of child support.
Sec. 2371. International support enforcement.
Sec. 2372. Financial institution data matches.
Sec. 2373. Enforcement of orders against paternal or maternal 
                            grandparents in cases of minor parents.
Sec. 2374. Nondischargeability in bankruptcy of certain debts for the 
                     subchapter h--medical support
Sec. 2376. Correction to ERISA definition of medical child support 
                            order.
Sec.subchapter i--enhancing responsibility and opportunity for non-
                          residential parents
Sec. 238subchapter j--effective dates and conforming amendments
Sec. 2391. Effective dates and conforming amendments.
     Chapter 4--Restricting Welfare and Public Benefits for Aliens

Sec. 2400. Statements of national policy concerning welfare and 
             subchapter a--eligibility for federal benefits
Sec. 2401. Aliens who are not qualified aliens ineligible for Federal 
                            public benefits.
Sec. 2402. Limited eligibility of qualified aliens for certain Federal 
                            programs.
Sec. 2403. Five-year limited eligibility of qualified aliens for 
                            Federal means-tested public benefit.
Ssubchapter b--eligibility for state and local public benefits programs
Sec. 2411. Aliens who are not qualified aliens or nonimmigrants 
                            ineligible for State and local public 
                            benefits.
Sec. 2412. State authority to limit eligibility of qualified aliens for 
     subchapter c--attribution of income and affidavits of support
Sec. 2421. Federal attribution of sponsor's income and resources to 
                            alien.
Sec. 2422. Authority for States to provide for attribution of sponsors 
                            income and resources to the alien with 
                            respect to State programs.
Sec. 2423. Requirements for sponsor's affidavit of support.
Sec. 2424. Cosignatusubchapter d--general provisions
Sec. 2431. Definitions.
Sec. 2432. Verification of eligibility for Federal public benefits.
Sec. 2433. Statutory construction.
Sec. 2434. Communication between State and local government agencies 
                            and the Immigration and Naturalization 
                            Service.
Sec.subchapter e--conforming amendments relating to assisted housing
Sesubchapter f--earned income credit denied to unauthorized employees
Sec. 2451. Earned income credit denied to individuals not authorized to 
                            be employed in the United States.
         Chapter 5--Reductions in Federal Government Positions

Sec. 2501. Reductions.
Sec. 2502. Reductions in Federal bureaucracy.
Sec. 2503. Reducing personnel in Washington, D.C. area.
Sec. 2504. Downward adjustment of discretionary spending limits.
                  Chapter 6--Reform of Public Housing

Sec. 2601. Failure to comply with other welfare and public assistance 
                            programs.
Sec. 2602. Fraud under means-tested welfare and public assistance 
                            programs.
 Chapter 7--Technical Amendments Relating to Child Protection Programs

Sec. 2701. Extension of enhanced funding for implementation of 
                            statewide automated child welfare 
                            information systems.
Sec. 2702. Redesignation of section 1123.
                         Chapter 8--Child Care

Sec. 2801. Short title and references.
Sec. 2802. Goals.
Sec. 2803. Authorization of appropriations and entitlement authority.
Sec. 2804. Lead agency.
Sec. 2805. Application and plan.
Sec. 2806. Limitation on State allotments.
Sec. 2807. Activities to improve the quality of child care.
Sec. 2808. Repeal of early childhood development and before- and after-
                            school care requirement.
Sec. 2809. Administration and enforcement.
Sec. 2810. Payments.
Sec. 2811. Annual report and audits.
Sec. 2812. Report by the Secretary.
Sec. 2813. Allotments.
Sec. 2814. Definitions.
Sec. 2815. Repeals.
Sec. 2816. Effective date.
                        Chapter 9--Miscellaneous

Sec. 2901. Appropriation by State legislatures.
Sec. 2902. Sanctioning for testing positive for controlled substances.
Sec. 2903. Reduction in block grants to States for social services.
Sec. 2904. Elimination of housing assistance with respect to fugitive 
                            felons and probation and parole violators.
Sec. 2905. Sense of the Senate regarding enterprise zones.
Sec. 2906. Sense of the Senate regarding the inability of the non-
                            custodial parent to pay child support.
Sec. 2907. Establishing national goals to prevent teenage pregnancies.
Sec. 2908. Sense of the Senate regarding enforcement of statutory rape 
                            laws.
Sec. 2909. Abstinence education.
Sec. 2910. Provisions to encourage electronic benefit transfer systems.
Sec. 2911. Rules relating to denial of earned income credit on basis of 
                            disqualified income.
Sec. 2912. Modification of adjusted gross income definition for earned 
                            income credit.
Sec. 2913. Suspension of inflation adjustments for individuals with no 
                            qualifying children.

  CHAPTER 1--BLOCK GRANTS FOR TEMPORARY ASSISTANCE FOR NEEDY FAMILIES

SEC. 2101. FINDINGS.

    The Congress makes the following findings:
            (1) Marriage is the foundation of a successful society.
            (2) Marriage is an essential institution of a successful 
        society which promotes the interests of children.
            (3) Promotion of responsible fatherhood and motherhood is 
        integral to successful child rearing and the well-being of 
        children.
            (4) In 1992, only 54 percent of single-parent families with 
        children had a child support order established and, of that 54 
        percent, only about one-half received the full amount due. Of 
        the cases enforced through the public child support enforcement 
        system, only 18 percent of the caseload has a collection.
            (5) The number of individuals receiving aid to families 
        with dependent children (in this section referred to as 
        ``AFDC'') has more than tripled since 1965. More than two-
        thirds of these recipients are children. Eighty-nine percent of 
        children receiving AFDC benefits now live in homes in which no 
        father is present.
                    (A)(i) The average monthly number of children 
                receiving AFDC benefits--
                            (I) was 3,300,000 in 1965;
                            (II) was 6,200,000 in 1970;
                            (III) was 7,400,000 in 1980; and
                            (IV) was 9,300,000 in 1992.
                    (ii) While the number of children receiving AFDC 
                benefits increased nearly threefold between 1965 and 
                1992, the total number of children in the United States 
                aged 0 to 18 has declined by 5.5 percent.
                    (B) The Department of Health and Human Services has 
                estimated that 12,000,000 children will receive AFDC 
                benefits within 10 years.
                    (C) The increase in the number of children 
                receiving public assistance is closely related to the 
                increase in births to unmarried women. Between 1970 and 
                1991, the percentage of live births to unmarried women 
                increased nearly threefold, from 10.7 percent to 29.5 
                percent.
            (6) The increase of out-of-wedlock pregnancies and births 
        is well documented as follows:
                    (A) It is estimated that the rate of nonmarital 
                teen pregnancy rose 23 percent from 54 pregnancies per 
                1,000 unmarried teenagers in 1976 to 66.7 pregnancies 
                in 1991. The overall rate of nonmarital pregnancy rose 
                14 percent from 90.8 pregnancies per 1,000 unmarried 
                women in 1980 to 103 in both 1991 and 1992. In 
                contrast, the overall pregnancy rate for married 
                couples decreased 7.3 percent between 1980 and 1991, 
                from 126.9 pregnancies per 1,000 married women in 1980 
                to 117.6 pregnancies in 1991.
                    (B) The total of all out-of-wedlock births between 
                1970 and 1991 has risen from 10.7 percent to 29.5 
                percent and if the current trend continues, 50 percent 
                of all births by the year 2015 will be out-of-wedlock.
            (7) The negative consequences of an out-of-wedlock birth on 
        the mother, the child, the family, and society are well 
        documented as follows:
                    (A) Young women 17 and under who give birth outside 
                of marriage are more likely to go on public assistance 
                and to spend more years on welfare once enrolled. These 
                combined effects of ``younger and longer'' increase 
                total AFDC costs per household by 25 percent to 30 
                percent for 17-year-olds.
                    (B) Children born out-of-wedlock have a 
                substantially higher risk of being born at a very low 
                or moderately low birth weight.
                    (C) Children born out-of-wedlock are more likely to 
                experience low verbal cognitive attainment, as well as 
                more child abuse, and neglect.
                    (D) Children born out-of-wedlock were more likely 
                to have lower cognitive scores, lower educational 
                aspirations, and a greater likelihood of becoming 
                teenage parents themselves.
                    (E) Being born out-of-wedlock significantly reduces 
                the chances of the child growing up to have an intact 
                marriage.
                    (F) Children born out-of-wedlock are 3 times more 
                likely to be on welfare when they grow up.
            (8) Currently 35 percent of children in single-parent homes 
        were born out-of-wedlock, nearly the same percentage as that of 
        children in single-parent homes whose parents are divorced (37 
        percent). While many parents find themselves, through divorce 
        or tragic circumstances beyond their control, facing the 
        difficult task of raising children alone, nevertheless, the 
        negative consequences of raising children in single-parent 
        homes are well documented as follows:
                    (A) Only 9 percent of married-couple families with 
                children under 18 years of age have income below the 
                national poverty level. In contrast, 46 percent of 
                female-headed households with children under 18 years 
                of age are below the national poverty level.
                    (B) Among single-parent families, nearly \1/2\ of 
                the mothers who never married received AFDC while only 
                \1/5\ of divorced mothers received AFDC.
                    (C) Children born into families receiving welfare 
                assistance are 3 times more likely to be on welfare 
                when they reach adulthood than children not born into 
                families receiving welfare.
                    (D) Mothers under 20 years of age are at the 
                greatest risk of bearing low-birth-weight babies.
                    (E) The younger the single parent mother, the less 
                likely she is to finish high school.
                    (F) Young women who have children before finishing 
                high school are more likely to receive welfare 
                assistance for a longer period of time.
                    (G) Between 1985 and 1990, the public cost of 
                births to teenage mothers under the aid to families 
                with dependent children program, the food stamp 
                program, and the medicaid program has been estimated at 
                $120,000,000,000.
                    (H) The absence of a father in the life of a child 
                has a negative effect on school performance and peer 
                adjustment.
                    (I) Children of teenage single parents have lower 
                cognitive scores, lower educational aspirations, and a 
                greater likelihood of becoming teenage parents 
                themselves.
                    (J) Children of single-parent homes are 3 times 
                more likely to fail and repeat a year in grade school 
                than are children from intact 2-parent families.
                    (K) Children from single-parent homes are almost 4 
                times more likely to be expelled or suspended from 
                school.
                    (L) Neighborhoods with larger percentages of youth 
                aged 12 through 20 and areas with higher percentages of 
single-parent households have higher rates of violent crime.
                    (M) Of those youth held for criminal offenses 
                within the State juvenile justice system, only 29.8 
                percent lived primarily in a home with both parents. In 
                contrast to these incarcerated youth, 73.9 percent of 
                the 62,800,000 children in the Nation's resident 
                population were living with both parents.
            (9) Therefore, in light of this demonstration of the crisis 
        in our Nation, it is the sense of the Congress that prevention 
        of out-of-wedlock pregnancy and reduction in out-of-wedlock 
        birth are very important Government interests and the policy 
        contained in part A of title IV of the Social Security Act (as 
        amended by section 2103(a) of this Act) is intended to address 
        the crisis.

SEC. 2102. REFERENCE TO SOCIAL SECURITY ACT.

    Except as otherwise specifically provided, wherever in this chapter 
an amendment is expressed in terms of an amendment to or repeal of a 
section or other provision, the reference shall be considered to be 
made to that section or other provision of the Social Security Act.

SEC. 2103. BLOCK GRANTS TO STATES.

    (a) In General.--Part A of title IV (42 U.S.C. 601 et seq.) is 
amended--
            (1) by striking all that precedes section 418 (as added by 
        section 2803(b)(2) of this Act) and inserting the following:

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

``SEC. 401. PURPOSE.

    ``(a) In General.--The purpose of this part is to increase the 
flexibility of States in operating a program designed to--
            ``(1) provide assistance to needy families so that children 
        may be cared for in their own homes or in the homes of 
        relatives;
            ``(2) end the dependence of needy parents on government 
        benefits by promoting job preparation, work, and marriage;
            ``(3) prevent and reduce the incidence of out-of-wedlock 
        pregnancies and establish annual numerical goals for preventing 
        and reducing the incidence of these pregnancies; and
            ``(4) encourage the formation and maintenance of two-parent 
        families.
    ``(b) No Individual Entitlement.--This part shall not be 
interpreted to entitle any individual or family to assistance under any 
State program funded under this part.

``SEC. 402. ELIGIBLE STATES; STATE PLAN.

    ``(a) In General.--As used in this part, the term `eligible State' 
means, with respect to a fiscal year, a State that, during the 2-year 
period immediately preceding the fiscal year, has submitted to the 
Secretary a plan that the Secretary has found includes the following:
            ``(1) Outline of family assistance program.--
                    ``(A) General provisions.--A written document that 
                outlines how the State intends to do the following:
                            ``(i) Conduct a program, designed to serve 
                        all political subdivisions in the State (not 
                        necessarily in a uniform manner), that provides 
                        assistance to needy families with (or 
                        expecting) children and provides parents with 
                        job preparation, work, and support services to 
                        enable them to leave the program and become 
                        self-sufficient.
                            ``(ii) Require a parent or caretaker 
                        receiving assistance under the program to 
                        engage in work (as defined by the State) once 
                        the State determines the parent or caretaker is 
                        ready to engage in work, or once the parent or 
                        caretaker has received assistance under the 
                        program for 24 months (whether or not 
                        consecutive), whichever is earlier.
                            ``(iii) Ensure that parents and caretakers 
                        receiving assistance under the program engage 
                        in work activities in accordance with section 
                        407.
                            ``(iv) Take such reasonable steps as the 
                        State deems necessary to restrict the use and 
                        disclosure of information about individuals and 
                        families receiving assistance under the program 
                        attributable to funds provided by the Federal 
                        Government.
                            ``(v) Establish goals and take action to 
                        prevent and reduce the incidence of out-of-
                        wedlock pregnancies, with special emphasis on 
                        teenage pregnancies, and establish numerical 
                        goals for reducing the illegitimacy ratio of 
                        the State (as defined in section 403(a)(2)(B)) 
                        for calendar years 1996 through 2005.
                            ``(vi) Determine, on an objective and 
                        equitable basis, the needs of and the amount of 
                        assistance to be provided to needy families, 
                        and, except as provided in subparagraph (B), 
                        treat families of similar needs and 
                        circumstances similarly.
                            ``(vii) Grant an opportunity for a fair 
                        hearing before the appropriate State agency to 
                        any individual to whom assistance under the 
                        program is denied, reduced, or terminated, or 
                        whose request for such assistance is not acted 
                        on with reasonable promptness.
                    ``(B) Special provisions.--
                            ``(i) The document shall indicate whether 
                        the State intends to treat families moving into 
                        the State from another State differently than 
                        other families under the program, and if so, 
                        how the State intends to treat such families 
                        under the program.
                            ``(ii) The document shall indicate whether 
                        the State intends to provide assistance under 
                        the program to individuals who are not citizens 
                        of the United States, and if so, shall include 
                        an overview of such assistance.
            ``(2) Certification that the state will operate a child 
        support enforcement program.--A certification by the chief 
        executive officer of the State that, during the fiscal year, 
        the State will operate a child support enforcement program 
        under the State plan approved under part D.
            ``(3) Certification that the state will operate a foster 
        care and adoption assistance program.--A certification by the 
        chief executive officer of the State that, during the fiscal 
        year, the State will operate a foster care and adoption 
        assistance program under the State plan approved under part E, 
        and that the State will take such actions as are necessary to 
        ensure that children receiving assistance under such part are 
        eligible for medical assistance under the State plan under 
        title XIX (or XV, if applicable).
            ``(4) Certification of the administration of the program.--
        A certification by the chief executive officer of the State 
        specifying which State agency or agencies will administer and 
        supervise the program referred to in paragraph (1) for the 
        fiscal year, which shall include assurances that local 
        governments and private sector organizations--
                    ``(A) have been consulted regarding the plan and 
                design of welfare services in the State so that 
                services are provided in a manner appropriate to local 
                populations; and
                    ``(B) have had at least 45 days to submit comments 
                on the plan and the design of such services.
            ``(5) Certification that the state will provide indians 
        with equitable access to assistance.--A certification by the 
        chief executive officer of the State that, during the fiscal 
        year, the State will provide each Indian who is a member of an 
        Indian tribe in the State that does not have a tribal family 
        assistance plan approved under section 412 with equitable 
access to assistance under the State program funded under this part 
attributable to funds provided by the Federal Government.
            ``(6) Certification of standards and procedures to ensure 
        against program fraud and abuse.--A certification by the chief 
        executive officer of the State that the State has established 
        and is enforcing standards and procedures to ensure against 
        program fraud and abuse, including standards and procedures 
        concerning nepotism, conflicts of interest among individuals 
        responsible for the administration and supervision of the State 
        program, kickbacks, and the use of political patronage.
    ``(b) Public Availability of State Plan Summary.--The State shall 
make available to the public a summary of any plan submitted by the 
State under this section.

``SEC. 403. GRANTS TO STATES.

    ``(a) Grants.--
            ``(1) Family assistance grant.--
                    ``(A) In general.--Each eligible State shall be 
                entitled to receive from the Secretary, for each of 
                fiscal years 1996, 1997, 1998, 1999, 2000, and 2001 a 
                grant in an amount equal to the State family assistance 
                grant.
                    ``(B) State family assistance grant defined.--As 
                used in this part, the term `State family assistance 
                grant' means the greatest of--
                            ``(i) \1/3\ of the total amount required to 
                        be paid to the State under former section 403 
                        (as in effect on September 30, 1995) for fiscal 
                        years 1992, 1993, and 1994 (other than with 
                        respect to amounts expended by the State for 
                        child care under subsection (g) or (i) of 
                        former section 402 (as so in effect));
                            ``(ii)(I) the total amount required to be 
                        paid to the State under former section 403 for 
                        fiscal year 1994 (other than with respect to 
                        amounts expended by the State for child care 
                        under subsection (g) or (i) of former section 
                        402 (as so in effect)); plus
                            ``(II) an amount equal to 85 percent of the 
                        amount (if any) by which the total amount 
                        required to be paid to the State under former 
                        section 403(a)(5) for emergency assistance for 
                        fiscal year 1995 exceeds the total amount 
                        required to be paid to the State under former 
                        section 403(a)(5) for fiscal year 1994, if, 
                        during fiscal year 1994 or 1995, the Secretary 
                        approved under former section 402 an amendment 
                        to the former State plan to allow the provision 
                        of emergency assistance in the context of 
                        family preservation; or
                            ``(iii) \4/3\ of the total amount required 
                        to be paid to the State under former section 
                        403 (as in effect on September 30, 1995) for 
                        the 1st 3 quarters of fiscal year 1995 (other 
                        than with respect to amounts expended by the 
                        State under the State plan approved under part 
                        F (as so in effect) or for child care under 
                        subsection (g) or (i) of former section 402 (as 
                        so in effect)), plus the total amount required 
                        to be paid to the State for fiscal year 1995 
                        under former section 403(l) (as so in effect).
                    ``(C) Total amount required to be paid to the state 
                under former section 403 defined.--As used in this 
                part, the term `total amount required to be paid to the 
                State under former section 403' means, with respect to 
                a fiscal year--
                            ``(i) in the case of a State to which 
                        section 1108 does not apply, the sum of--
                                    ``(I) the Federal share of 
                                maintenance assistance expenditures for 
                                the fiscal year, before reduction 
                                pursuant to subparagraph (B) or (C) of 
                                section 403(b)(2) (as in effect on 
                                September 30, 1995), as reported by the 
                                State on ACF Form 231;
                                    ``(II) the Federal share of 
                                administrative expenditures (including 
                                administrative expenditures for the 
                                development of management information 
                                systems) for the fiscal year, as 
                                reported by the State on ACF Form 231;
                                    ``(III) the Federal share of 
                                emergency assistance expenditures for 
                                the fiscal year, as reported by the 
                                State on ACF Form 231;
                                    ``(IV) the Federal share of 
                                expenditures for the fiscal year with 
                                respect to child care pursuant to 
                                subsections (g) and (i) of former 
                                section 402 (as in effect on September 
                                30, 1995), as reported by the State on 
                                ACF Form 231; and
                                    ``(V) the aggregate amount required 
                                to be paid to the State for the fiscal 
                                year with respect to the State program 
                                operated under part F (as in effect on 
                                September 30, 1995), as determined by 
                                the Secretary, including additional 
                                obligations or reductions in 
                                obligations made after the close of the 
                                fiscal year; and
                            ``(ii) in the case of a State to which 
                        section 1108 applies, the lesser of--
                                    ``(I) the sum described in clause 
                                (i); or
                                    ``(II) the total amount certified 
                                by the Secretary under former section 
                                403 (as in effect during the fiscal 
                                year) with respect to the territory.
                    ``(D) Information to be used in determining 
                amounts.--
                            ``(i) For fiscal years 1992 and 1993.--
                                    ``(I) In determining the amounts 
                                described in subclauses (I) through 
                                (IV) of subparagraph (C)(i) for any 
                                State for each of fiscal years 1992 and 
                                1993, the Secretary shall use 
                                information available as of April 28, 
                                1995.
                                    ``(II) In determining the amount 
                                described in subparagraph (C)(i)(V) for 
                                any State for each of fiscal years 1992 
                                and 1993, the Secretary shall use 
                                information available as of January 6, 
                                1995.
                            ``(ii) For fiscal year 1994.--In 
                        determining the amounts described in 
                        subparagraph (C)(i) for any State for fiscal 
                        year 1994, the Secretary shall use information 
                        available as of April 28, 1995.
                            ``(iii) For fiscal year 1995.--
                                    ``(I) In determining the amount 
                                described in subparagraph (B)(ii)(II) 
                                for any State for fiscal year 1995, the 
                                Secretary shall use the information 
                                which was reported by the States and 
                                estimates made by the States with 
                                respect to emergency assistance 
                                expenditures and was available as of 
                                August 11, 1995.
                                    ``(II) In determining the amounts 
                                described in subclauses (I) through 
                                (III) of subparagraph (C)(i) for any 
                                State for fiscal year 1995, the 
                                Secretary shall use information 
                                available as of October 2, 1995.
                                    ``(III) In determining the amount 
                                described in subparagraph (C)(i)(IV) 
                                for any State for fiscal year 1995, the 
                                Secretary shall use information 
                                available as of February 28, 1996.
                                    ``(IV) In determining the amount 
                                described in subparagraph (C)(i)(V) for 
                                any State for fiscal year 1995, the 
                                Secretary shall use information 
                                available as of October 5, 1995.
                    ``(E) Appropriation.--Out of any money in the 
                Treasury of the United States not otherwise 
                appropriated, there are appropriated for fiscal years 
                1996, 1997, 1998, 1999, 2000, and 2001 such sums as are 
                necessary for grants under this paragraph.
            ``(2) Grant to reward states that reduce out-of-wedlock 
        births.--
                    ``(A) In general.--Each eligible State shall be 
                entitled to receive from the Secretary for fiscal year 
                1998 or any succeeding fiscal year, a grant in an 
                amount equal to the State family assistance grant 
                multiplied by--
                            ``(i) 5 percent if--
                                    ``(I) the illegitimacy ratio of the 
                                State for the fiscal year is at least 1 
                                percentage point lower than the 
                                illegitimacy ratio of the State for 
                                fiscal year 1995; and
                                    ``(II) the rate of induced 
                                pregnancy terminations in the State for 
                                the fiscal year is less than the rate 
                                of induced pregnancy terminations in 
                                the State for fiscal year 1995; or
                            ``(ii) 10 percent if--
                                    ``(I) the illegitimacy ratio of the 
                                State for the fiscal year is at least 2 
                                percentage points lower than the 
                                illegitimacy ratio of the State for 
                                fiscal year 1995; and
                                    ``(II) the rate of induced 
                                pregnancy terminations in the State for 
                                the fiscal year is less than the rate 
                                of induced pregnancy terminations in 
                                the State for fiscal year 1995.
                    ``(B) Illegitimacy ratio.--As used in this 
                paragraph, the term `illegitimacy ratio' means, with 
                respect to a State and a fiscal year--
                            ``(i) the number of out-of-wedlock births 
                        that occurred in the State during the most 
                        recent fiscal year for which such information 
                        is available; divided by
                            ``(ii) the number of births that occurred 
                        in the State during the most recent fiscal year 
                        for which such information is available.
                    ``(C) Disregard of changes in data due to changed 
                reporting methods.--For purposes of subparagraph (A), 
                the Secretary shall disregard--
                            ``(i) any difference between the 
                        illegitimacy ratio of a State for a fiscal year 
                        and the illegitimacy ratio of the State for 
                        fiscal year 1995 which is attributable to a 
                        change in State methods of reporting data used 
                        to calculate the illegitimacy ratio; and
                            ``(ii) any difference between the rate of 
                        induced pregnancy terminations in a State for a 
                        fiscal year and such rate for fiscal year 1995 
                        which is attributable to a change in State 
                        methods of reporting data used to calculate 
                        such rate.
                    ``(D) Appropriation.--Out of any money in the 
                Treasury of the United States not otherwise 
                appropriated, there are appropriated for fiscal year 
                1998 and for each succeeding fiscal year such sums as 
                are necessary for grants under this paragraph.
            ``(3) Supplemental grant for population increases in 
        certain states.--
                    ``(A) In general.--Each qualifying State shall, 
                subject to subparagraph (F), be entitled to receive 
                from the Secretary--
                            ``(i) for fiscal year 1998 a grant in an 
                        amount equal to 2.5 percent of 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; and
                            ``(ii) for each of fiscal years 1999, 2000, 
                        and 2001, a grant in an amount equal to the sum 
                        of--
                                    ``(I) the amount (if any) required 
                                to be paid to the State under this 
                                paragraph for the immediately preceding 
                                fiscal year; and
                                    ``(II) 2.5 percent of the sum of--
                                            ``(aa) 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; and
                                            ``(bb) the amount (if any) 
                                        required to be paid to the 
                                        State under this paragraph for 
                                        the fiscal year preceding the 
                                        fiscal year for which the grant 
                                        is to be made.
                    ``(B) Preservation of grant without increases for 
                states failing to remain qualifying states.--Each State 
                that is not a qualifying State for a fiscal year 
                specified in subparagraph (A)(ii) but was a qualifying 
                State for a prior fiscal year shall, subject to 
                subparagraph (F), be entitled to receive from the 
                Secretary for the specified fiscal year, a grant in an 
                amount equal to the amount required to be paid to the 
                State under this paragraph for the most recent fiscal 
                year for which the State was a qualifying State.
                    ``(C) Qualifying state.--
                            ``(i) In general.--For purposes of this 
                        paragraph, a State is a qualifying State for a 
                        fiscal year if--
                                    ``(I) the level of welfare spending 
                                per poor person by the State for the 
                                immediately preceding fiscal year is 
                                less than the national average level of 
                                State welfare spending per poor person 
                                for such preceding fiscal year; and
                                    ``(II) the population growth rate 
                                of the State (as determined by the 
                                Bureau of the Census) for the most 
                                recent fiscal year for which 
                                information is available exceeds the 
                                average population growth rate for all 
                                States (as so determined) for such most 
                                recent fiscal year.
                            ``(ii) State must qualify in fiscal year 
                        1998.--Notwithstanding clause (i), a State 
                        shall not be a qualifying State for any fiscal 
                        year after 1998 by reason of clause (i) if the 
                        State is not a qualifying State for fiscal year 
                        1998 by reason of clause (i).
                            ``(iii) Certain states deemed qualifying 
                        states.--For purposes of this paragraph, a 
                        State is deemed to be a qualifying State for 
                        fiscal years 1998, 1999, 2000, and 2001 if--
                                    ``(I) the level of welfare spending 
                                per poor person by the State for fiscal 
                                year 1997 is less than 35 percent of 
                                the national average level of State 
                                welfare spending per poor person for 
                                fiscal year 1996; or
                                    ``(II) the population of the State 
                                increased by more than 10 percent from 
                                April 1, 1990 to July 1, 1994, 
                                according to the population estimates 
                                in publication CB94-204 of the Bureau 
                                of the Census.
                    ``(D) Definitions.--As used in this paragraph:
                            ``(i) Level of welfare spending per poor 
                        person.--The term `level of State welfare 
                        spending per poor person' means, with respect 
                        to a State and a fiscal year--
                                    ``(I) the sum of--
                                            ``(aa) 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; and
                                            ``(bb) the amount (if any) 
                                        paid to the State under this 
                                        paragraph for the immediately 
                                        preceding fiscal year; divided 
                                        by
                                    ``(II) the number of individuals, 
                                according to the 1990 decennial census, 
                                who were residents of the State and 
                                whose income was below the poverty 
                                line.
                            ``(ii) National average level of state 
                        welfare spending per poor person.--The term 
                        `national average level of State welfare 
                        spending per poor person' means, with respect 
                        to a fiscal year, an amount equal to--
                                    ``(I) the total amount required to 
                                be paid to the States under former 
                                section 403 (as in effect during fiscal 
                                year 1994) for fiscal year 1994; 
                                divided by
                                    ``(II) the number of individuals, 
                                according to the 1990 decennial census, 
                                who were residents of any State and 
                                whose income was below the poverty 
                                line.
                            ``(iii) State.--The term `State' means each 
                        of the 50 States of the United States and the 
                        District of Columbia.
                    ``(E) Appropriation.--Out of any money in the 
                Treasury of the United States not otherwise 
                appropriated, there are appropriated for fiscal years 
                1998, 1999, 2000, and 2001 such sums as are necessary 
                for grants under this paragraph, in a total amount not 
                to exceed $800,000,000.
                    ``(F) Grants reduced pro rata if insufficient 
                appropriations.--If the amount appropriated pursuant to 
                this paragraph for a fiscal year is less than the total 
                amount of payments otherwise required to be made under 
                this paragraph for the fiscal year, then the amount 
                otherwise payable to any State for the fiscal year 
                under this paragraph shall be reduced by a percentage 
                equal to the amount so appropriated divided by such 
                total amount.
                    ``(G) Budget scoring.--Notwithstanding section 
                257(b)(2) of the Balanced Budget and Emergency Deficit 
                Control Act of 1985, the baseline shall assume that no 
                grant shall be made under this paragraph after fiscal 
                year 2000.
            ``(4) Bonus to reward high performance states.--
                    ``(A) In general.--The Secretary shall make a grant 
                pursuant to this paragraph to each State for each bonus 
                year for which the State is a high performing State.
                    ``(B) Amount of grant.--
                            ``(i) In general.--Subject to clause (ii) 
                        of this subparagraph, the Secretary shall 
                        determine the amount of the grant payable under 
                        this paragraph to a high performing State for a 
                        bonus year, which shall be based on the score 
                        assigned to the State under subparagraph (D)(i) 
                        for the fiscal year that immediately precedes 
                        the bonus year.
                            ``(ii) Limitation.--The amount payable to a 
                        State under this paragraph for a bonus year 
                        shall not exceed 5 percent of the State family 
                        assistance grant.
                    ``(C) Formula for measuring state performance.--Not 
                later than 1 year after the date of the enactment of 
                the Personal Responsibility and Work Opportunity Act of 
                1996, the Secretary, in consultation with the National 
                Governors' Association and the American Public Welfare 
                Association, shall develop a formula for measuring 
                State performance in operating the State program funded 
                under this part so as to achieve the goals set forth in 
                section 401(a). Such formula shall emphasize the extent 
                to which the State increases the number of families 
                that become ineligible for assistance under the State 
                program funded under this part as a result of 
                unsubsidized employment.
                    ``(D) Scoring of state performance; setting of 
                performance thresholds.--For each bonus year, the 
                Secretary shall--
                            ``(i) use the formula developed under 
                        subparagraph (C) to assign a score to each 
                        eligible State for the fiscal year that 
                        immediately precedes the bonus year; and
                            ``(ii) prescribe a performance threshold in 
                        such a manner so as to ensure that--
                                    ``(I) the average annual total 
                                amount of grants to be made under this 
                                paragraph for each bonus year equals 
                                the amount specified for such bonus 
year in subparagraph (E)(ii); and
                                    ``(II) the total amount of grants 
                                to be made under this paragraph for all 
                                bonus years equals $1,000,000,000.
                    ``(E) Definitions.--As used in this paragraph:
                            ``(i) Bonus year.--The term `bonus year' 
                        means fiscal years 1999, 2000, 2001, 2002, and 
                        2003.
                            ``(ii) The amount specified for such bonus 
                        year.--The term `the amount specified for such 
                        bonus year' means the following:
                                    ``(I) For fiscal years 1999, 2000, 
                                2001, and 2002, $175,000,000.
                                    ``(II) For fiscal year 2003, 
                                $300,000,000.
                            ``(iii) High performing state.--The term 
                        `high performing State' means, with respect a 
                        bonus year, an eligible State whose score 
                        assigned pursuant to subparagraph (D)(i) for 
                        the fiscal year immediately preceding the bonus 
                        year equals or exceeds the performance 
                        threshold prescribed under subparagraph (D)(ii) 
                        for such preceding fiscal year.
                    ``(F) Appropriation.--Out of any money in the 
                Treasury of the United States not otherwise 
                appropriated, there are appropriated for fiscal years 
                1999 through 2003 $1,000,000,000 for grants under this 
                paragraph.
    ``(b) Contingency Fund.--
            ``(1) Establishment.--There is hereby established in the 
        Treasury of the United States a fund which shall be known as 
        the `Contingency Fund for State Welfare Programs' (in this 
        section referred to as the `Fund').
            ``(2) Deposits into fund.--Out of any money in the Treasury 
        of the United States not otherwise appropriated, there are 
        appropriated for fiscal years 1998, 1999, 2000, and 2001 such 
        sums as are necessary for payment to the Fund in a total amount 
        not to exceed $2,000,000,000.
            ``(3) Grants.--
                    ``(A) Provisional payments.--If an eligible State 
                submits to the Secretary a request for funds under this 
                paragraph during an eligible month, the Secretary 
                shall, subject to this paragraph, pay to the State, 
                from amounts appropriated pursuant to paragraph (2), an 
                amount equal to the amount of funds so requested.
                    ``(B) Payment priority.--The Secretary shall make 
                payments under subparagraph (A) in the order in which 
                the Secretary receives requests for such payments.
                    ``(C) Limitations.--
                            ``(i) Monthly payment to a state.--The 
                        total amount paid to a single State under 
                        subparagraph (A) during a month shall not 
                        exceed \1/12\ of 20 percent of the State family 
                        assistance grant.
                            ``(ii) Payments to all states.--The total 
                        amount paid to all States under subparagraph 
                        (A) during fiscal years 1998 through 2001 shall 
                        not exceed the total amount appropriated 
                        pursuant to paragraph (2).
            ``(4) Annual reconciliation.--Notwithstanding paragraph 
        (3), at the end of each fiscal year, each State shall remit to 
        the Secretary an amount equal to the amount (if any) by which 
        the total amount paid to the State under paragraph (3) during 
        the fiscal year exceeds--
                    ``(A) the Federal medical assistance percentage for 
                the State for the fiscal year (as defined in section 
                1905(b), as in effect on September 30, 1995) of the 
                amount (if any) by which the expenditures under the 
                State program funded under this part for the fiscal 
                year exceed historic State expenditures (as defined in 
                section 409(a)(7)(B)(iii)); multiplied by
                    ``(B) \1/12\ times the number of months during the 
                fiscal year for which the Secretary makes a payment to 
                the State under this subsection.
            ``(5) Eligible month.--As used in paragraph (3)(A), the 
        term `eligible month' means, with respect to a State, a month 
        in the 2-month period that begins with any month for which the 
        State is a needy State.
            ``(6) Needy state.--For purposes of paragraph (5), a State 
        is a needy State for a month if--
                    ``(A) the average rate of--
                            ``(i) total unemployment in such State 
                        (seasonally adjusted) for the period consisting 
                        of the most recent 3 months for which data for 
                        all States are published equals or exceeds 6.5 
                        percent; and
                            ``(ii) total unemployment in such State 
                        (seasonally adjusted) for the 3-month period 
                        equals or exceeds 110 percent of such average 
                        rate for either (or both) of the corresponding 
                        3-month periods ending in the 2 preceding 
                        calendar years; or
                    ``(B) as determined by the Secretary of Agriculture 
                (in the discretion of the Secretary of Agriculture), 
                the monthly average number of individuals (as of the 
                last day of each month) participating in the food stamp 
                program in the State in the then most recently 
                concluded 3-month period for which data are available 
                exceeds by not less than 10 percent the lesser of--
                            ``(i) the monthly average number of 
                        individuals (as of the last day of each month) 
                        in the State that would have participated in 
                        the food stamp program in the corresponding 3-
                        month period in fiscal year 1994 if the 
                        amendments made by chapter 4 of the Personal 
                        Responsibility and Work Opportunity Act of 1996 
                        and the amendments made by chapter 1 of 
                        subtitle A of title I of the Agricultural 
                        Reconciliation Act of 1996 had been in effect 
                        throughout fiscal year 1994; or
                            ``(ii) the monthly average number of 
                        individuals (as of the last day of each month) 
                        in the State that would have participated in 
                        the food stamp program in the corresponding 3-
                        month period in fiscal year 1995 if the 
                        amendments made by chapter 4 of the Personal 
                        Responsibility and Work Opportunity Act of 1996 
                        and the amendments made by chapter 1 of 
                        subtitle A of title I of the Agricultural 
                        Reconciliation Act of 1996 had been in effect 
                        throughout fiscal year 1995.
            ``(7) Other terms defined.--As used in this subsection:
                    ``(A) State.--The term `State' means each of the 50 
                States of the United States and the District of 
                Columbia.
                    ``(B) Secretary.--The term `Secretary' means the 
                Secretary of the Treasury.
            ``(8) Annual reports.--The Secretary shall annually report 
        to the Congress on the status of the Fund.
            ``(9) Budget scoring.--Notwithstanding section 257(b)(2) of 
        the Balanced Budget and Emergency Deficit Control Act of 1985, 
        the baseline shall assume that no grant shall be made under 
        this subsection after fiscal year 2001.

``SEC. 404. USE OF GRANTS.

    ``(a) General Rules.--Subject to this part, a State to which a 
grant is made under section 403 may use the grant--
            ``(1) in any manner that is reasonably calculated to 
        accomplish the purpose of this part, including to provide low 
        income households with assistance in meeting home heating and 
        cooling costs; or
            ``(2) in any manner that the State was authorized to use 
        amounts received under part A or F, as such parts were in 
        effect on September 30, 1995.
    ``(b) Limitation on Use of Grant for Administrative Purposes.--
            ``(1) Limitation.--A State to which a grant is made under 
        section 403 shall not expend more than 15 percent of the grant 
        for administrative purposes.
            ``(2) Exception.--Paragraph (1) shall not apply to the use 
        of a grant for information technology and computerization 
needed for tracking or monitoring required by or under this part.
    ``(c) Authority To Treat Interstate Immigrants Under Rules of 
Former State.--A State operating a program funded under this part may 
apply to a family the rules (including benefit amounts) of the program 
funded under this part of another State if the family has moved to the 
State from the other State and has resided in the State for less than 
12 months.
    ``(d) Authority To Use Portion of Grant for Other Purposes.--
            ``(1) In general.--A State may use not more than 30 percent 
        of the amount of the grant made to the State under section 403 
        for a fiscal year to carry out a State program pursuant to the 
        Child Care and Development Block Grant Act of 1990.
            ``(2) Applicable rules.--Any amount paid to the State under 
        this part that is used to carry out a State program pursuant to 
        a provision of law specified or described in paragraph (1) 
        shall not be subject to the requirements of this part, but 
        shall be subject to the requirements that apply to Federal 
        funds provided directly under the provision of law to carry out 
        the program.
    ``(e) Authority To Reserve Certain Amounts for Assistance.--A State 
may reserve amounts paid to the State under this part for any fiscal 
year for the purpose of providing, without fiscal year limitation, 
assistance under the State program funded under this part.
    ``(f) Authority To Operate Employment Placement Program.--A State 
to which a grant is made under section 403 may use the grant to make 
payments (or provide job placement vouchers) to State-approved public 
and private job placement agencies that provide employment placement 
services to individuals who receive assistance under the State program 
funded under this part.
    ``(g) Implementation of Electronic Benefit Transfer System.--A 
State to which a grant is made under section 403 is encouraged to 
implement an electronic benefit transfer system for providing 
assistance under the State program funded under this part, and may use 
the grant for such purpose.

``SEC. 405. ADMINISTRATIVE PROVISIONS.

    ``(a) Quarterly.--The Secretary shall pay each grant payable to a 
State under section 403 in quarterly installments.
    ``(b) Notification.--Not later than 3 months before the payment of 
any such quarterly installment to a State, the Secretary shall notify 
the State of the amount of any reduction determined under section 
412(a)(1)(B) with respect to the State.
    ``(c) Computation and Certification of Payments to States.--
            ``(1) Computation.--The Secretary shall estimate the amount 
        to be paid to each eligible State for each quarter under this 
        part, such estimate to be based on a report filed by the State 
        containing an estimate by the State of the total sum to be 
        expended by the State in the quarter under the State program 
        funded under this part and such other information as the 
        Secretary may find necessary.
            ``(2) Certification.--The Secretary of Health and Human 
        Services shall certify to the Secretary of the Treasury the 
        amount estimated under paragraph (1) with respect to a State, 
        reduced or increased to the extent of any overpayment or 
        underpayment which the Secretary of Health and Human Services 
        determines was made under this part to the State for any prior 
        quarter and with respect to which adjustment has not been made 
        under this paragraph.
    ``(d) Payment Method.--Upon receipt of a certification under 
subsection (c)(2) with respect to a State, the Secretary of the 
Treasury shall, through the Fiscal Service of the Department of the 
Treasury and before audit or settlement by the General Accounting 
Office, pay to the State, at the time or times fixed by the Secretary 
of Health and Human Services, the amount so certified.
    ``(e) Collection of State Overpayments to Families From Federal Tax 
Refunds.--
            ``(1) In general.--Upon receiving notice from the Secretary 
        of Health and Human Services that a State agency administering 
        a program funded under this part has notified the Secretary 
        that a named individual has been overpaid under the State 
        program funded under this part, the Secretary of the Treasury 
        shall determine whether any amounts as refunds of Federal taxes 
        paid are payable to such individual, regardless of whether the 
        individual filed a tax return as a married or unmarried 
        individual. If the Secretary of the Treasury finds that any 
        such amount is so payable, the Secretary shall withhold from 
        such refunds an amount equal to the overpayment sought to be 
        collected by the State and pay such amount to the State agency.
            ``(2) Regulations.--The Secretary of the Treasury shall 
        issue regulations, after review by the Secretary of Health and 
        Human Services, that provide--
                    ``(A) that a State may only submit under paragraph 
                (1) requests for collection of overpayments with 
                respect to individuals--
                            ``(i) who are no longer receiving 
                        assistance under the State program funded under 
                        this part;
                            ``(ii) with respect to whom the State has 
                        already taken appropriate action under State 
                        law against the income or resources of the 
                        individuals or families involved to collect the 
                        past-due legally enforceable debt; and
                            ``(iii) to whom the State agency has given 
                        notice of its intent to request withholding by 
                        the Secretary of the Treasury from the income 
                        tax refunds of such individuals;
                    ``(B) that the Secretary of the Treasury will give 
                a timely and appropriate notice to any other person 
                filing a joint return with the individual whose refund 
                is subject to withholding under paragraph (1); and
                    ``(C) the procedures that the State and the 
                Secretary of the Treasury will follow in carrying out 
                this subsection which, to the maximum extent feasible 
                and consistent with the provisions of this subsection, 
                will be the same as those issued pursuant to section 
                464(b) applicable to collection of past-due child 
                support.

``SEC. 406. FEDERAL LOANS FOR STATE WELFARE PROGRAMS.

    ``(a) Loan Authority.--
            ``(1) In general.--The Secretary shall make loans to any 
        loan-eligible State, for a period to maturity of not more than 
        3 years.
            ``(2) Loan-eligible state.--As used in paragraph (1), the 
        term `loan-eligible State' means a State against which a 
        penalty has not been imposed under section 409(a)(1).
    ``(b) Rate of Interest.--The Secretary shall charge and collect 
interest on any loan made under this section at a rate equal to the 
current average market yield on outstanding marketable obligations of 
the United States with remaining periods to maturity comparable to the 
period to maturity of the loan.
    ``(c) Use of Loan.--A State shall use a loan made to the State 
under this section only for any purpose for which grant amounts 
received by the State under section 403(a) may be used, including--
            ``(1) welfare anti-fraud activities; and
            ``(2) the provision of assistance under the State program 
        to Indian families that have moved from the service area of an 
        Indian tribe with a tribal family assistance plan approved 
        under section 412.
    ``(d) Limitation on Total Amount of Loans to a State.--The 
cumulative dollar amount of all loans made to a State under this 
section during fiscal years 1997 through 2001 shall not exceed 10 
percent of the State family assistance grant.
    ``(e) Limitation on Total Amount of Outstanding Loans.--The total 
dollar amount of loans outstanding under this section may not exceed 
$1,700,000,000.
    ``(f) Appropriation.--Out of any money in the Treasury of the 
United States not otherwise appropriated, there are appropriated such 
sums as may be necessary for the cost of loans under this section.

``SEC. 407. MANDATORY WORK REQUIREMENTS.

    ``(a) Participation Rate Requirements.--
            ``(1) All families.--A State to which a grant is made under 
        section 403 for a fiscal year shall achieve the minimum 
        participation rate specified in the following table for the 
        fiscal year with respect to all families receiving assistance 
        under the State program funded under this part:

                    
                                                            The minimum
                    
                                                          participation
                    ``If the fiscal year is:
                                                               rate is:
                          1996.......................             15   
                          1997.......................             25   
                          1998.......................             30   
                          1999.......................             35   
                          2000.......................             40   
                          2001.......................             45   
                          2002 and thereafter........             50.  

            ``(2) 2-parent families.--A State to which a grant is made 
        under section 403 for a fiscal year shall achieve the minimum 
        participation rate specified in the following table for the 
        fiscal year with respect to 2-parent families receiving 
        assistance under the State program funded under this part:

                    
                                                            The minimum
                    
                                                          participation
                    ``If the fiscal year is:
                                                               rate is:
                          1996.......................             50   
                          1997.......................             75   
                          1998.......................             75   
                          1999 and thereafter........             90.  

    ``(b) Calculation of Participation Rates.--
            ``(1) All families.--
                    ``(A) Average monthly rate.--For purposes of 
                subsection (a)(1), the participation rate for all 
                families of a State for a fiscal year is the average of 
                the participation rates for all families of the State 
                for each month in the fiscal year.
                    ``(B) Monthly participation rates.--The 
                participation rate of a State for all families of the 
                State for a month, expressed as a percentage, is--
                            ``(i) the number of families receiving 
                        assistance under the State program funded under 
                        this part that include an adult who is engaged 
                        in work for the month; divided by
                            ``(ii) the amount by which--
                                    ``(I) the number of families 
                                receiving such assistance during the 
                                month that include an adult receiving 
                                such assistance; exceeds
                                    ``(II) the number of families 
                                receiving such assistance that are 
                                subject in such month to a penalty 
                                described in subsection (e)(1) but have 
                                not been subject to such penalty for 
                                more than 3 months within the preceding 
                                12-month period (whether or not 
                                consecutive).
            ``(2) 2-parent families.--
                    ``(A) Average monthly rate.--For purposes of 
                subsection (a)(2), the participation rate for 2-parent 
                families of a State for a fiscal year is the average of 
                the participation rates for 2-parent families of the 
                State for each month in the fiscal year.
                    ``(B) Monthly participation rates.--The 
                participation rate of a State for 2-parent families of 
                the State for a month shall be calculated by use of the 
                formula set forth in paragraph (1)(B), except that in 
                the formula the term `number of 2-parent families' 
                shall be substituted for the term `number of families' 
                each place such latter term appears.
            ``(3) Pro rata reduction of participation rate due to 
        caseload reductions not required by federal law.--
                    ``(A) In general.--The Secretary shall prescribe 
                regulations for reducing the minimum participation rate 
                otherwise required by this section for a fiscal year by 
the number of percentage points equal to the number of percentage 
points (if any) by which--
                            ``(i) the average monthly number of 
                        families receiving assistance during the fiscal 
                        year under the State program funded under this 
                        part is less than
                            ``(ii) the average monthly number of 
                        families that received aid under the State plan 
                        approved under part A (as in effect on 
                        September 30, 1995) during fiscal year 1995.
                The minimum participation rate shall not be reduced to 
                the extent that the Secretary determines that the 
                reduction in the number of families receiving such 
                assistance is required by Federal law.
                    ``(B) Eligibility changes not counted.--The 
                regulations described in subparagraph (A) shall not 
                take into account families that are diverted from a 
                State program funded under this part as a result of 
                differences in eligibility criteria under a State 
                program funded under this part and eligibility criteria 
                under the State program operated under the State plan 
                approved under part A (as such plan and such part were 
                in effect on September 30, 1995). Such regulations 
                shall place the burden on the Secretary to prove that 
                such families were diverted as a direct result of 
                differences in such eligibility criteria.
            ``(4) State option to include individuals receiving 
        assistance under a tribal family assistance plan.--For purposes 
        of paragraphs (1)(B) and (2)(B), a State may, at its option, 
        include families receiving assistance under a tribal family 
        assistance plan approved under section 412.
            ``(5) State option for participation requirement 
        exemptions.--
                    ``(A) In general.--For any fiscal year, a State 
                may, at its option, not require an individual who is a 
                single custodial parent caring for a child who has not 
                attained 12 months of age to engage in work and may 
                disregard such an individual in determining the 
                participation rates under subsection (a).
                    ``(B) Limitation.--The exemption described in 
                subparagraph (A) may only be applied to a single 
                custodial parent for a total of 12 months (whether or 
                not consecutive).
    ``(c) Engaged in Work.--
            ``(1) All families.--For purposes of subsection 
        (b)(1)(B)(i), a recipient is engaged in work for a month in a 
        fiscal year if the recipient is participating in work 
        activities for at least the minimum average number of hours per 
        week specified in the following table during the month, not 
        fewer than 20 hours per week of which are attributable to an 
        activity described in paragraph (1), (2), (3), (4), (5), (6), 
        (7), or (8) of subsection (d):

                   
                                                            The minimum
                  ``If the month is
                                                      average number of
                    in fiscal year:
                                                     hours per week is:
                          1996.......................             20   
                          1997.......................             20   
                          1998.......................             20   
                          1999.......................             25   
                          2000.......................             30   
                          2001.......................             30   
                          2002 and thereafter........             35.  

            ``(2) 2-parent families.--For purposes of subsection 
        (b)(2)(B)(i)--
                    ``(A) an adult is engaged in work for a month in a 
                fiscal year if the adult is making progress in work 
                activities for at least 35 hours per week during the 
                month, not fewer than 30 hours per week of which are 
                attributable to an activity described in paragraph (1), 
                (2), (3), (4), (5), (6), (7), or (8) of subsection (d); 
                and
                    ``(B) if the family of such adult receives 
                federally-funded child care assistance, if the adult's 
                spouse is making progress in work activities for at 
                least 20 hours per week during the month which are 
                attributable to an activity described in paragraph (1), 
                (2), (3), (4), (5), or (7) of subsection (d).
            ``(3) Limitation on number of weeks for which job search 
        counts as work.--Notwithstanding paragraphs (1) and (2), an 
        individual shall not be considered to be engaged in work by 
        virtue of participation in an activity described in subsection 
        (d)(6), after the individual has participated in such an 
        activity for 4 weeks (except if the unemployment rate in the 
        State is above the national average, in which case, 12 weeks) 
        in a fiscal year. An individual shall be considered to be 
        participating in such an activity for a week if the individual 
        participates in such an activity at any time during the week.
            ``(4) Limitation on vocational education activities counted 
        as work.--For purposes of determining monthly participation 
        rates under paragraphs (1)(B)(i) and (2)(B)(i) of subsection 
        (b), not more than 20 percent of adults in all families and in 
        2-parent families determined to be engaged in work in the State 
        for a month may meet the work activity requirement through 
        participation in vocational educational training.
            ``(5) Single parent with child under age 6 deemed to be 
        meeting work participation requirements if parent is engaged in 
        work for 20 hours per week.--For purposes of determining 
        monthly participation rates under subsection (b)(1)(B)(i), a 
        recipient in a 1-parent family who is the parent of a child who 
        has not attained 6 years of age is deemed to be engaged in work 
        for a month if the recipient is engaged in work for an average 
        of at least 20 hours per week during the month.
            ``(6) Teen head of household who maintains satisfactory 
        school attendance deemed to be meeting work participation 
        requirements.--For purposes of determining monthly 
        participation rates under subsection (b)(1)(B)(i), a recipient 
        who is a single head of household and has not attained 20 years 
        of age is deemed to be engaged in work for a month in a fiscal 
        year if the recipient--
                    ``(A) maintains satisfactory attendance at 
                secondary school or the equivalent during the month; or
                    ``(B) participates in education directly related to 
                employment for at least the minimum average number of 
                hours per week specified in the table set forth in 
                paragraph (1).
    ``(d) Work Activities Defined.--As used in this section, the term 
`work activities' means--
            ``(1) unsubsidized employment;
            ``(2) subsidized private sector employment;
            ``(3) subsidized public sector employment;
            ``(4) work experience (including work associated with the 
        refurbishing of publicly assisted housing) if sufficient 
        private sector employment is not available;
            ``(5) on-the-job training;
            ``(6) job search and job readiness assistance;
            ``(7) community service programs;
            ``(8) vocational educational training (not to exceed 12 
        months with respect to any individual);
            ``(9) job skills training directly related to employment;
            ``(10) education directly related to employment, in the 
        case of a recipient who has not attained 20 years of age, and 
        has not received a high school diploma or a certificate of high 
        school equivalency; and
            ``(11) satisfactory attendance at secondary school, in the 
        case of a recipient who--
                    ``(A) has not completed secondary school; and
                    ``(B) is a dependent child, or a head of household 
                who has not attained 20 years of age.
    ``(e) Penalties Against Individuals.--
            ``(1) In general.--Except as provided in paragraph (2), if 
        an adult in a family receiving assistance under the State 
        program funded under this part refuses to engage in work 
        required in accordance with this section, the State shall--
                    ``(A) reduce the amount of assistance otherwise 
                payable to the family pro rata (or more, at the 
option of the State) with respect to any period during a month in which 
the adult so refuses; or
                    ``(B) terminate such assistance,
        subject to such good cause and other exceptions as the State 
        may establish.
            ``(2) Exception.--
                    ``(A) In general.--Notwithstanding paragraph (1), a 
                State may not reduce or terminate assistance under the 
                State program funded under this part based on a refusal 
                of an adult to work if the adult is a single custodial 
                parent caring for a child who has not attained 11 years 
                of age, and the adult proves that the adult has a 
                demonstrated inability (as determined by the State) to 
                obtain needed child care, for 1 or more of the 
                following reasons:
                            ``(i) Unavailability of appropriate child 
                        care within a reasonable distance from the 
                        individual's home or work site.
                            ``(ii) Unavailability or unsuitability of 
                        informal child care by a relative or under 
                        other arrangements.
                            ``(iii) Unavailability of appropriate and 
                        affordable formal child care arrangements.
                    ``(B) Included in determination of participation 
                rates.--A State may not disregard an adult for which 
                the exception described in subparagraph (A) applies 
                from determination of the participation rates under 
                subsection (a).
    ``(f) Nondisplacement in Work Activities.--
            ``(1) In general.--Subject to paragraph (2), an adult in a 
        family receiving assistance under a State program funded under 
        this part attributable to funds provided by the Federal 
        Government may fill a vacant employment position in order to 
        engage in a work activity described in subsection (d).
            ``(2) No filling of certain vacancies.--No work assignment 
        to an adult in a family receiving assistance under a State 
        program funded under this part shall result in--
                    ``(A) the displacement of any currently employed 
                worker (including any partial displacement of such 
                worker through such matters as a reduction in the hours 
                of overtime work, wages, or employment benefits), or in 
                the impairment of any contract for services in 
                existence as of the date of the enactment of the 
                Personal Responsibility and Work Opportunity Act of 
                1996, or in the impairment of any collective bargaining 
                agreement in existence as of such date; and
                    ``(B) the termination of the employment of any 
                regular employee or any other involuntary reduction of 
                an employer's workforce in order to fill the vacancy so 
                created with an adult described in paragraph (1).
            ``(3) Grievance procedure.--A State with a program funded 
        under this part shall establish and maintain a grievance 
        procedure for resolving complaints of alleged violations of the 
        provisions of paragraph (2) and for providing adequate remedies 
        for any such violations established. The grievance procedure 
        established under this paragraph shall include an opportunity 
        for a hearing.
            ``(4) No preemption.--Nothing in this subsection shall 
        preempt or supersede any provision of State or local law that 
        provides greater protection for employees from displacement.
    ``(g) Sense of the Congress.--It is the sense of the Congress that 
in complying with this section, each State that operates a program 
funded under this part is encouraged to assign the highest priority to 
requiring adults in 2-parent families and adults in single-parent 
families that include older preschool or school-age children to be 
engaged in work activities.
    ``(h) Sense of the Congress That States Should Impose Certain 
Requirements on Noncustodial, Nonsupporting Minor Parents.--It is the 
sense of the Congress that the States should require noncustodial, 
nonsupporting parents who have not attained 18 years of age to fulfill 
community work obligations and attend appropriate parenting or money 
management classes after school.

``SEC. 408. PROHIBITIONS; REQUIREMENTS.

    ``(a) In General.--
            ``(1) No assistance for families without a minor child.--A 
        State to which a grant is made under section 403 shall not use 
        any part of the grant to provide assistance to a family--
                    ``(A) unless the family includes--
                            ``(i) a minor child who resides with a 
                        custodial parent or other adult caretaker 
                        relative of the child; or
                            ``(ii) a pregnant individual; and
                    ``(B) if such family includes an adult who has 
                received assistance under any State program funded 
                under this part attributable to funds provided by the 
                Federal Government, for 60 months (whether or not 
                consecutive) after the date the State program funded 
                under this part commences (unless an exception 
                described in subparagraph (B) or (C) of paragraph (8) 
                applies).
            ``(2) No additional cash assistance for children born to 
        families receiving assistance.--
                    ``(A) General rule.--A State to which a grant is 
                made under section 403 shall not use any part of the 
                grant to provide cash benefits for a minor child who is 
                born to--
                            ``(i) a recipient of assistance under the 
                        program operated under this part; or
                            ``(ii) a person who received such 
                        assistance at any time during the 10-month 
                        period ending with the birth of the child.
                    ``(B) Exception for children born into families 
                with no other children.--Subparagraph (A) shall not 
                apply to a minor child who is born into a family that 
                does not include any other children.
                    ``(C) Exception for rape or incest.--Subparagraph 
                (A) shall not apply with respect to a child who is born 
                as a result of rape or incest.
                    ``(D) State election to opt out.--Subparagraph (A) 
                shall not apply to a State if State law specifically 
                exempts the State program funded under this part from 
                the application of subparagraph (A).
                    ``(E) Substitution of family caps in effect under 
                waivers or current state law.--Subparagraph (A) shall 
                not apply to a State--
                            ``(i) if, not earlier than 2 years prior to 
                        the date of the enactment of this part, the 
                        State enacted a law permitting the State to 
                        deny aid or assistance to a family by reason of 
                        the birth of a child to a family member 
                        otherwise eligible for such aid or assistance; 
                        or
                            ``(ii) if, as of the date of the enactment 
                        of this part--
                                    ``(I) the State has in effect a 
                                waiver approved by the Secretary under 
                                section 1115 which permits the State to 
                                deny aid under the State plan approved 
                                under part A of this title (as in 
                                effect without regard to the amendments 
                                made by chapter 1 of the Personal 
                                Responsibility and Work Opportunity Act 
                                of 1996) to a family by reason of the 
                                birth of a child to a family member 
                                otherwise eligible for such aid; and
                                    ``(II) the State continues to 
                                implement such policy under the State 
                                program funded under this part 
                                (regardless of the expiration of the 
                                waiver), under rules prescribed by the 
                                State.
            ``(3) Reduction or elimination of assistance for 
        noncooperation in establishing paternity or obtaining child 
        support.--If the agency responsible for administering the State 
        plan approved under part D determines that an individual is not 
cooperating with the State in establishing paternity or in 
establishing, modifying, or enforcing a support order with respect to a 
child of the individual, and the individual does not qualify for any 
good cause or other exception established by the State pursuant to 
section 454(29), then the State--
                    ``(A) shall deduct not less than 25 percent of the 
                assistance that would otherwise be provided to the 
                family of the individual under the State program funded 
                under this part; and
                    ``(B) may deny the family any assistance under the 
                State program.
            ``(4) No assistance for families not assigning certain 
        support rights to the state.--
                    ``(A) In general.--A State to which a grant is made 
                under section 403 shall require, as a condition of 
                providing assistance to a family under the State 
                program funded under this part, that a member of the 
                family assign to the State any rights the family member 
                may have (on behalf of the family member or of any 
                other person for whom the family member has applied for 
                or is receiving such assistance) to support from any 
                other person, not exceeding the total amount of 
                assistance so provided to the family, which accrue (or 
                have accrued) before the date the family leaves the 
                program, which assignment, on and after the date the 
                family leaves the program, shall not apply with respect 
                to any support (other than support collected pursuant 
                to section 464) which accrued before the family 
                received such assistance and which the State has not 
                collected by--
                            ``(i) September 30, 2000, if the assignment 
                        is executed on or after October 1, 1997, and 
                        before October 1, 2000; or
                            ``(ii) the date the family leaves the 
                        program, if the assignment is executed on or 
                        after October 1, 2000.
                    ``(B) Limitation.--A State to which a grant is made 
                under section 403 shall not require, as a condition of 
                providing assistance to any family under the State 
                program funded under this part, that a member of the 
                family assign to the State any rights to support 
                described in subparagraph (A) which accrue after the 
                date the family leaves the program.
            ``(5) No assistance for teenage parents who do not attend 
        high school or other equivalent training program.--A State to 
        which a grant is made under section 403 shall not use any part 
        of the grant to provide assistance to an individual who has not 
        attained 18 years of age, is not married, has a minor child at 
        least 12 weeks of age in his or her care, and has not 
        successfully completed a high-school education (or its 
        equivalent), if the individual does not participate in--
                    ``(A) educational activities directed toward the 
                attainment of a high school diploma or its equivalent; 
                or
                    ``(B) an alternative educational or training 
                program that has been approved by the State.
            ``(6) No assistance for teenage parents not living in 
        adult-supervised settings.--
                    ``(A) In general.--
                            ``(i) Requirement.--Except as provided in 
                        subparagraph (B), a State to which a grant is 
                        made under section 403 shall not use any part 
                        of the grant to provide assistance to an 
                        individual described in clause (ii) of this 
                        subparagraph if the individual and the minor 
                        child referred to in clause (ii)(II) do not 
                        reside in a place of residence maintained by a 
                        parent, legal guardian, or other adult relative 
                        of the individual as such parent's, guardian's, 
                        or adult relative's own home.
                            ``(ii) Individual described.--For purposes 
                        of clause (i), an individual described in this 
                        clause is an individual who--
                                    ``(I) has not attained 18 years of 
                                age; and
                                    ``(II) is not married, and has a 
                                minor child in his or her care.
                    ``(B) Exception.--
                            ``(i) Provision of, or assistance in 
                        locating, adult-supervised living 
                        arrangement.--In the case of an individual who 
                        is described in clause (ii), the State agency 
                        referred to in section 402(a)(4) shall provide, 
                        or assist the individual in locating, a second 
                        chance home, maternity home, or other 
                        appropriate adult-supervised supportive living 
                        arrangement, taking into consideration the 
                        needs and concerns of the individual, and 
                        thereafter shall require that the individual 
                        and the minor child referred to in subparagraph 
                        (A)(ii)(II) reside in such living arrangement 
                        as a condition of the continued receipt of 
                        assistance under the State program funded under 
                        this part attributable to funds provided by the 
                        Federal Government (or in an alternative 
                        appropriate arrangement, should circumstances 
                        change and the current arrangement cease to be 
                        appropriate).
                            ``(ii) Individual described.--For purposes 
                        of clause (i), an individual is described in 
                        this clause if the individual is described in 
                        subparagraph (A)(ii), and--
                                    ``(I) the individual has no parent, 
                                legal guardian or other appropriate 
                                adult relative described in subclause 
                                (II) of his or her own who is living or 
                                whose whereabouts are known;
                                    ``(II) no living parent, legal 
                                guardian, or other appropriate adult 
                                relative, who would otherwise meet 
                                applicable State criteria to act as the 
                                individual's legal guardian, of such 
                                individual allows the individual to 
                                live in the home of such parent, 
                                guardian, or relative;
                                    ``(III) the State agency determines 
                                that--
                                            ``(aa) the individual or 
                                        the minor child referred to in 
                                        subparagraph (A)(ii)(II) is 
                                        being or has been subjected to 
                                        serious physical or emotional 
                                        harm, sexual abuse, or 
                                        exploitation in the residence 
                                        of the individual's own parent 
                                        or legal guardian; or
                                            ``(bb) substantial evidence 
                                        exists of an act or failure to 
                                        act that presents an imminent 
                                        or serious harm if the 
                                        individual and the minor child 
                                        lived in the same residence 
                                        with the individual's own 
                                        parent or legal guardian; or
                                    ``(IV) the State agency otherwise 
                                determines that it is in the best 
                                interest of the minor child to waive 
                                the requirement of subparagraph (A) 
                                with respect to the individual or the 
                                minor child.
                            ``(iii) Second-chance home.--For purposes 
                        of this subparagraph, the term `second-chance 
                        home' means an entity that provides individuals 
                        described in clause (ii) with a supportive and 
                        supervised living arrangement in which such 
                        individuals are required to learn parenting 
                        skills, including child development, family 
                        budgeting, health and nutrition, and other 
                        skills to promote their long-term economic 
                        independence and the well-being of their 
                        children.
            ``(7) No medical services.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a State to which a grant is made 
                under section 403 shall not use any part of the grant 
                to provide medical services.
                    ``(B) Exception for family planning services.--As 
                used in subparagraph (A), the term `medical services' 
                does not include family planning services.
            ``(8) No assistance for more than 5 years.--
                    ``(A) In general.--Except as provided in 
                subparagraphs (B) and (C), a State to which a grant is 
                made under section 403 shall not use any part of the 
                grant to provide assistance to a family that includes 
                an adult who has received assistance under any State 
                program funded under this part attributable to funds 
                provided by the Federal Government, for 60 months 
                (whether or not consecutive) after the date the State 
                program funded under this part commences.
                    ``(B) Minor child exception.--In determining the 
                number of months for which an individual who is a 
                parent or pregnant has received assistance under the 
                State program funded under this part, the State shall 
                disregard any month for which such assistance was 
                provided with respect to the individual and during 
                which the individual was--
                            ``(i) a minor child; and
                            ``(ii) not the head of a household or 
                        married to the head of a household.
                    ``(C) Hardship exception.--
                            ``(i) In general.--The State may exempt a 
                        family from the application of subparagraph (A) 
                        of this paragraph, or subparagraph (B) of 
                        paragraph (1), by reason of hardship or if the 
                        family includes an individual who has been 
                        battered or subjected to extreme cruelty.
                            ``(ii) Limitation.--The number of families 
                        with respect to which an exemption made by a 
                        State under clause (i) is in effect for a 
                        fiscal year shall not exceed 20 percent of the 
                        average monthly number of families to which 
                        assistance is provided under the State program 
                        funded under this part.
                            ``(iii) Battered or subject to extreme 
                        cruelty defined.--For purposes of clause (i), 
                        an individual has been battered or subjected to 
                        extreme cruelty if the individual has been 
                        subjected to--
                                    ``(I) physical acts that resulted 
                                in, or threatened to result in, 
                                physical injury to the individual;
                                    ``(II) sexual abuse;
                                    ``(III) sexual activity involving a 
                                dependent child;
                                    ``(IV) being forced as the 
                                caretaker relative of a dependent child 
                                to engage in nonconsensual sexual acts 
                                or activities;
                                    ``(V) threats of, or attempts at, 
                                physical or sexual abuse;
                                    ``(VI) mental abuse; or
                                    ``(VII) neglect or deprivation of 
                                medical care.
                    ``(D) Rule of interpretation.--Subparagraph (A) of 
                this paragraph and subparagraph (B) of paragraph (1) 
                shall not be interpreted to require any State to 
                provide assistance to any individual for any period of 
                time under the State program funded under this part.
            ``(9) Denial of assistance for 10 years to a person found 
        to have fraudulently misrepresented residence in order to 
        obtain assistance in 2 or more states.--A State to which a 
        grant is made under section 403 shall not use any part of the 
        grant to provide cash assistance to an individual during the 
        10-year period that begins on the date the individual is 
        convicted in Federal or State court of having made a fraudulent 
        statement or representation with respect to the place of 
        residence of the individual in order to receive assistance 
        simultaneously from 2 or more States under programs that are 
        funded under this title, title XV or XIX, or the Food Stamp Act 
        of 1977, or benefits in 2 or more States under the supplemental 
        security income program under title XVI. The preceding sentence 
        shall not apply with respect to a conviction of an individual, 
        for any month beginning after the President of the United 
States grants a pardon with respect to the conduct which was the 
subject of the conviction.
            ``(10) Denial of assistance for fugitive felons and 
        probation and parole violators.--
                    ``(A) In general.--A State to which a grant is made 
                under section 403 shall not use any part of the grant 
                to provide assistance to any individual who is--
                            ``(i) fleeing to avoid prosecution, or 
                        custody or confinement after conviction, under 
                        the laws of the place from which the individual 
                        flees, for a crime, or an attempt to commit a 
                        crime, which is a felony under the laws of the 
                        place from which the individual flees, or 
                        which, in the case of the State of New Jersey, 
                        is a high misdemeanor under the laws of such 
                        State; or
                            ``(ii) violating a condition of probation 
                        or parole imposed under Federal or State law.
                The preceding sentence shall not apply with respect to 
                conduct of an individual, for any month beginning after 
                the President of the United States grants a pardon with 
                respect to the conduct.
                    ``(B) Exchange of information with law enforcement 
                agencies.--If a State to which a grant is made under 
                section 403 establishes safeguards against the use or 
                disclosure of information about applicants or 
                recipients of assistance under the State program funded 
                under this part, the safeguards shall not prevent the 
                State agency administering the program from furnishing 
                a Federal, State, or local law enforcement officer, 
                upon the request of the officer, with the current 
                address of any recipient if the officer furnishes the 
                agency with the name of the recipient and notifies the 
                agency that--
                            ``(i) the recipient--
                                    ``(I) is described in subparagraph 
                                (A); or
                                    ``(II) has information that is 
                                necessary for the officer to conduct 
                                the official duties of the officer; and
                            ``(ii) the location or apprehension of the 
                        recipient is within such official duties.
            ``(11) Denial of assistance for minor children who are 
        absent from the home for a significant period.--
                    ``(A) In general.--A State to which a grant is made 
                under section 403 shall not use any part of the grant 
                to provide assistance for a minor child who has been, 
                or is expected by a parent (or other caretaker 
                relative) of the child to be, absent from the home for 
                a period of 45 consecutive days or, at the option of 
                the State, such period of not less than 30 and not more 
                than 180 consecutive days as the State may provide for 
                in the State plan submitted pursuant to section 402.
                    ``(B) State authority to establish good cause 
                exceptions.--The State may establish such good cause 
                exceptions to subparagraph (A) as the State considers 
                appropriate if such exceptions are provided for in the 
                State plan submitted pursuant to section 402.
                    ``(C) Denial of assistance for relative who fails 
                to notify state agency of absence of child.--A State to 
                which a grant is made under section 403 shall not use 
                any part of the grant to provide assistance for an 
                individual who is a parent (or other caretaker 
                relative) of a minor child and who fails to notify the 
                agency administering the State program funded under 
                this part of the absence of the minor child from the 
                home for the period specified in or provided for 
                pursuant to subparagraph (A), by the end of the 5-day 
                period that begins with the date that it becomes clear 
                to the parent (or relative) that the minor child will 
                be absent for such period so specified or provided for.
            ``(12) Medical assistance required to be provided for 1 
        year for families becoming ineligible for assistance under this 
        part due to increased earnings from employment or collection of 
        child support.--
                    ``(A) In general.--A State to which a grant is made 
                under section 403 shall take such action as may be 
                necessary to ensure that, if any family becomes 
                ineligible to receive assistance under the State 
                program funded under this part as a result of--
                            ``(i) increased earnings from employment;
                            ``(ii) the collection or increased 
                        collection of child or spousal support;
                            ``(iii) a combination of the matters 
                        described in clauses (i) and (ii); or
                            ``(iv) during the 1-year period that begins 
                        on July 1, 1997 (or the date described in 
                        section 2116(b)(1)(A) of the Personal 
                        Responsibility and Work Opportunity Act of 
                        1996, if earlier), as a result of the State 
                        revising the standards and criteria under the 
                        State plan for determining eligibility for 
                        assistance under this part,
                and such family received such assistance in at least 3 
                of the 6 months immediately preceding the month in 
                which such ineligibility begins, the family shall be 
                eligible for medical assistance under the State's plan 
                approved under title XIX (or, if applicable, title XV) 
                during the immediately succeeding 12-month period for 
                so long as family income (as defined by the State), 
                excluding any refund of Federal income taxes made by 
                reason of section 32 of the Internal Revenue Code of 
                1986 (relating to earned income tax credit) and any 
                payment made by an employer under section 3507 of such 
                Code (relating to advance payment of earned income 
                credit), is less than the poverty line, and that the 
                family will be appropriately notified of such 
                eligibility.
                    ``(B) Exception.--No medical assistance may be 
                provided under subparagraph (A) to any family that 
                contains an individual who has had all or part of any 
                assistance provided under this part withheld, deducted, 
                or denied as a result of the application of--
                            ``(i) a preceding paragraph of this 
                        subsection;
                            ``(ii) section 407(e)(1); or
                            ``(iii) in the case of a family described 
                        in clause (iv) of subparagraph (A), a sanction 
                        imposed under the State plan under this part 
                        (as in effect on June 30, 1997 (or the day 
                        before the date described in section 
                        2116(b)(1)(A) of the Personal Responsibility 
                        and Work Opportunity Act of 1996, if earlier)).
    ``(b) Aliens.--For special rules relating to the treatment of 
aliens, see section 2402 of the Personal Responsibility and Work 
Opportunity Act of 1996.
    ``(c) Nondiscrimination Provisions.--Any program or activity that 
receives funds under this part shall be subject to enforcement 
authorized under the following provisions of law:
            ``(1) The Age Discrimination Act of 1975 (42 U.S.C. 6101 et 
        seq.).
            ``(2) Section 504 of the Rehabilitation Act of 1973 (29 
        U.S.C. 794).
            ``(3) The Americans with Disabilities Act of 1990 (42 
        U.S.C. 12101 et seq.).
            ``(4) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 
        2000d et seq.).

``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.
            ``(2) Failure to submit required report.--
                    ``(A) In general.--If the Secretary determines that 
                a State has not, within 1 month 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.
                    ``(B) Rescission of penalty.--The Secretary shall 
                rescind a penalty imposed on a State under subparagraph 
                (A) 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.
            ``(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 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) based on the degree of noncompliance.
                    ``(C) Additional penalty for consecutive 
                noncompliance.--Notwithstanding the limitation 
                described in subparagraph (A), the Secretary shall 
                reduce the grant payable to the State under section 
                403(a)(1) for a fiscal year, in addition to the 
                reduction imposed under subparagraph (A), by an amount 
                equal to 5 percent of the State family assistance 
                grant, if the Secretary determines that the State 
                failed to comply with section 407(a) for 2 or more 
                consecutive preceding fiscal years.
            ``(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 
                fiscal year 1998, 1999, 2000, 2001, or 2002 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.
                                            ``(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) such 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 the 
                                        Personal Responsibility and 
                                        Work Opportunity Act of 1996; 
                                        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 such expenditures.
                                    ``(III) Eligible families.--As used 
                                in subclause (I), the term `eligible 
                                families' means families eligible for 
                                assistance under the State program 
                                funded under this part, and families 
                                that would be eligible for such 
                                assistance but for the application of 
                                section 408(a)(8) of this Act or 
                                section 2402 of the Personal 
                                Responsibility and Work Opportunity Act 
                                of 1996.
                            ``(ii) Applicable percentage.--The term 
                        `applicable percentage' means for fiscal years 
                        1997 through 2001, 80 percent reduced (if 
appropriate) in accordance with subparagraph (C)(ii).
                            ``(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 expenditures from amounts 
                                made available by the Federal 
                                Government;
                                    ``(II) State funds expended for the 
                                medicaid program under title XV or XIX; 
                                or
                                    ``(III) any State funds which are 
                                used to match Federal funds or are 
                                expended as a condition of receiving 
                                Federal funds under Federal programs 
                                other than under this part.
                    ``(C) Applicable percentage reduced for high 
                performance states.--
                            ``(i) Determination of high performance 
                        states.--The Secretary shall use the formula 
                        developed under section 403(a)(4)(C) to assign 
                        a score to each eligible State that represents 
                        the performance of the State program funded 
                        under this part for each fiscal year, and shall 
                        prescribe a performance threshold which the 
                        Secretary shall use to determine whether to 
                        reduce the applicable percentage with respect 
                        to any eligible State for a fiscal year.
                            ``(ii) Reduction proportional to 
                        performance.--The Secretary shall reduce the 
                        applicable percentage for a fiscal year with 
                        respect to each eligible State by an amount 
                        which is directly proportional to the amount 
                        (if any) by which the score assigned to the 
                        State under clause (i) for the immediately 
                        preceding fiscal year exceeds the performance 
                        threshold prescribed under clause (i) for such 
                        preceding fiscal year, subject to clause (iii).
                            ``(iii) Limitation on reduction.--The 
                        applicable percentage for a fiscal year with 
                        respect to a State may not be reduced by more 
                        than 8 percentage points under this 
                        subparagraph.
            ``(8) Substantial noncompliance of state child support 
        enforcement program with requirements of part d.--
                    ``(A) In general.--If a State program operated 
                under part D is found as a result of a review conducted 
                under section 452(a)(4) not to have complied 
                substantially with the requirements of such part for 
                any quarter, and the Secretary determines that the 
                program is not complying substantially with such 
                requirements at the time the finding is made, the 
                Secretary shall reduce the grant payable to the State 
under section 403(a)(1) for the quarter and each subsequent quarter 
that ends before the 1st quarter throughout which the program is found 
to be in substantial compliance with such requirements by--
                            ``(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 
                        such finding made as a result of such a review; 
                        or
                            ``(iii) not less than 3 nor more than 5 
                        percent, if the finding is the 3rd or a 
                        subsequent consecutive such finding made as a 
                        result of such a review.
                    ``(B) Disregard of noncompliance which is of a 
                technical nature.--For purposes of subparagraph (A) and 
                section 452(a)(4), a State which is not in full 
                compliance with the requirements of this part shall be 
                determined to be in substantial compliance with such 
                requirements only if the Secretary determines that any 
                noncompliance with such requirements is of a technical 
                nature which does not adversely affect the performance 
                of the State's program operated under part D.
            ``(9) 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 expenditures 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), 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.
            ``(10) Failure to comply with provisions of this part or 
        the state plan.--If, after reasonable notice and opportunity 
        for hearing, the Secretary determines that during a fiscal year 
        a State has not substantially complied with any provision of 
        this part or of the State plan, the Secretary shall, if a 
        preceding paragraph of this subsection does not apply to such 
        noncompliance, 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, and shall continue to impose such reduction 
        during each succeeding fiscal year until the Secretary 
        determines that the State no longer is in noncompliance with 
        such provision.
            ``(11) Failure to comply with 5-year limit on assistance.--
        If the Secretary determines that during a fiscal year a State 
        has not complied with the provisions of section 408(a)(1)(B), 
        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.
            ``(12) Required replacement of grant fund reductions caused 
        by penalties.--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.
    ``(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) or (7) of 
        subsection (a).
    ``(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 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 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 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 the violation 
        pursuant to the plan.
            ``(3) Effect of failing to correct 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 the violation 
        pursuant to a State corrective compliance plan accepted by the 
        Secretary.
            ``(4) Inapplicability to failure to timely repay a federal 
        loan fund for a state welfare program.--This subsection shall 
        not apply to the imposition of a penalty against a State under 
        subsection (a)(6).
    ``(d) Limitation on Amount of Penalty.--
            ``(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.

``SEC. 410. APPEAL OF ADVERSE DECISION.

    ``(a) In General.--Within 5 days after the date the Secretary takes 
any adverse action under this part with respect to a State, the 
Secretary shall notify the chief executive officer of the State of the 
adverse action, including any action with respect to the State plan 
submitted under section 402 or the imposition of a penalty under 
section 409.
    ``(b) Administrative Review.--
            ``(1) In general.--Within 60 days after the date a State 
        receives notice under subsection (a) of an adverse action, the 
        State may appeal the action, in whole or in part, to the 
        Departmental Appeals Board established in the Department of 
        Health and Human Services (in this section referred to as the 
        `Board') by filing an appeal with the Board.
            ``(2) Procedural rules.--The Board shall consider an appeal 
        filed by a State under paragraph (1) on the basis of such 
        documentation as the State may submit and as the Board may 
        require to support the final decision of the Board. In deciding 
whether to uphold an adverse action or any portion of such an action, 
the Board shall conduct a thorough review of the issues and take into 
account all relevant evidence. The Board shall make a final 
determination with respect to an appeal filed under paragraph (1) not 
less than 60 days after the date the appeal is filed.
    ``(c) Judicial Review of Adverse Decision.--
            ``(1) In general.--Within 90 days after the date of a final 
        decision by the Board under this section with respect to an 
        adverse action taken against a State, the State may obtain 
        judicial review of the final decision (and the findings 
        incorporated into the final decision) by filing an action in--
                    ``(A) the district court of the United States for 
                the judicial district in which the principal or 
                headquarters office of the State agency is located; or
                    ``(B) the United States District Court for the 
                District of Columbia.
            ``(2) Procedural rules.--The district court in which an 
        action is filed under paragraph (1) shall review the final 
        decision of the Board on the record established in the 
        administrative proceeding, in accordance with the standards of 
        review prescribed by subparagraphs (A) through (E) of section 
        706(2) of title 5, United States Code. The review shall be on 
        the basis of the documents and supporting data submitted to the 
        Board.

``SEC. 411. DATA COLLECTION AND REPORTING.

    ``(a) Quarterly Reports by States.--
            ``(1) General reporting requirement.--
                    ``(A) Contents of report.--Each eligible State 
                shall collect on a monthly basis, and report to the 
                Secretary on a quarterly basis, the following 
                disaggregated case record information on the families 
                receiving assistance under the State program funded 
                under this part:
                            ``(i) The county of residence of the 
                        family.
                            ``(ii) Whether a child receiving such 
                        assistance or an adult in the family is 
                        disabled.
                            ``(iii) The ages of the members of such 
                        families.
                            ``(iv) The number of individuals in the 
                        family, and the relation of each family member 
                        to the youngest child in the family.
                            ``(v) The employment status and earnings of 
                        the employed adult in the family.
                            ``(vi) The marital status of the adults in 
                        the family, including whether such adults have 
                        never married, are widowed, or are divorced.
                            ``(vii) The race and educational status of 
                        each adult in the family.
                            ``(viii) The race and educational status of 
                        each child in the family.
                            ``(ix) Whether the family received 
                        subsidized housing, medical assistance under 
                        the State plan under title XV or the State plan 
                        approved under title XIX, food stamps, or 
                        subsidized child care, and if the latter 2, the 
                        amount received.
                            ``(x) The number of months that the family 
                        has received each type of assistance under the 
                        program.
                            ``(xi) If the adults participated in, and 
                        the number of hours per week of participation 
                        in, the following activities:
                                    ``(I) Education.
                                    ``(II) Subsidized private sector 
                                employment.
                                    ``(III) Unsubsidized employment.
                                    ``(IV) Public sector employment, 
                                work experience, or community service.
                                    ``(V) Job search.
                                    ``(VI) Job skills training or on-
                                the-job training.
                                    ``(VII) Vocational education.
                            ``(xii) Information necessary to calculate 
                        participation rates under section 407.
                            ``(xiii) The type and amount of assistance 
                        received under the program, including the 
                        amount of and reason for any reduction of 
                        assistance (including sanctions).
                            ``(xiv) Any amount of unearned income 
                        received by any member of the family.
                            ``(xv) The citizenship of the members of 
                        the family.
                            ``(xvi) From a sample of closed cases, 
                        whether the family left the program, and if so, 
                        whether the family left due to--
                                    ``(I) employment;
                                    ``(II) marriage;
                                    ``(III) the prohibition set forth 
                                in section 408(a)(8);
                                    ``(IV) sanction; or
                                    ``(V) State policy.
                    ``(B) Use of estimates.--
                            ``(i) Authority.--A State may comply with 
                        subparagraph (A) by submitting an estimate 
                        which is obtained through the use of 
                        scientifically acceptable sampling methods 
                        approved by the Secretary.
                            ``(ii) Sampling and other methods.--The 
                        Secretary shall provide the States with such 
                        case sampling plans and data collection 
                        procedures as the Secretary deems necessary to 
                        produce statistically valid estimates of the 
                        performance of State programs funded under this 
                        part. The Secretary may develop and implement 
                        procedures for verifying the quality of data 
                        submitted by the States.
            ``(2) Report on use of federal funds to cover 
        administrative costs and overhead.--The report required by 
        paragraph (1) for a fiscal quarter shall include a statement of 
        the percentage of the funds paid to the State under this part 
        for the quarter that are used to cover administrative costs or 
        overhead.
            ``(3) Report on state expenditures on programs for needy 
        families.--The report required by paragraph (1) for a fiscal 
        quarter shall include a statement of the total amount expended 
        by the State during the quarter on programs for needy families.
            ``(4) Report on noncustodial parents participating in work 
        activities.--The report required by paragraph (1) for a fiscal 
        quarter shall include the number of noncustodial parents in the 
        State who participated in work activities (as defined in 
        section 407(d)) during the quarter.
            ``(5) Report on transitional services.--The report required 
        by paragraph (1) for a fiscal quarter shall include the total 
        amount expended by the State during the quarter to provide 
        transitional services to a family that has ceased to receive 
        assistance under this part because of employment, along with a 
        description of such services.
            ``(6) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to define the data elements 
        with respect to which reports are required by this subsection.
    ``(b) Annual Reports to the Congress by the Secretary.--Not later 
than 6 months after the end of fiscal year 1997, and each fiscal year 
thereafter, the Secretary shall transmit to the Congress a report 
describing--
            ``(1) whether the States are meeting--
                    ``(A) the participation rates described in section 
                407(a); and
                    ``(B) the objectives of--
                            ``(i) increasing employment and earnings of 
                        needy families, and child support collections; 
                        and
                            ``(ii) decreasing out-of-wedlock 
                        pregnancies and child poverty;
            ``(2) the demographic and financial characteristics of 
        families applying for assistance, families receiving 
        assistance, and families that become ineligible to receive 
        assistance;
            ``(3) the characteristics of each State program funded 
        under this part; and
            ``(4) the trends in employment and earnings of needy 
        families with minor children living at home.

``SEC. 412. DIRECT FUNDING AND ADMINISTRATION BY INDIAN TRIBES.

    ``(a) Grants for Indian Tribes.--
            ``(1) Tribal family assistance grant.--
                    ``(A) In general.--For each of fiscal years 1997, 
                1998, 1999, 2000, and 2001, the Secretary shall pay to 
                each Indian tribe that has an approved tribal family 
                assistance plan a tribal family assistance grant for 
                the fiscal year in an amount equal to the amount 
                determined under subparagraph (B), and shall reduce the 
                grant payable under section 403(a)(1) to any State in 
                which lies the service area or areas of the Indian 
                tribe by that portion of the amount so determined that 
                is attributable to expenditures by the State.
                    ``(B) Amount determined.--
                            ``(i) In general.--The amount determined 
                        under this subparagraph is an amount equal to 
                        the total amount of the Federal payments to a 
                        State or States under section 403 (as in effect 
                        during such fiscal year) for fiscal year 1994 
                        attributable to expenditures (other than child 
                        care expenditures) by the State or States under 
                        parts A and F (as so in effect) for fiscal year 
                        1994 for Indian families residing in the 
                        service area or areas identified by the Indian 
                        tribe pursuant to subsection (b)(1)(C) of this 
                        section.
                            ``(ii) Use of state submitted data.--
                                    ``(I) In general.--The Secretary 
                                shall use State submitted data to make 
                                each determination under clause (i).
                                    ``(II) Disagreement with 
                                determination.--If an Indian tribe or 
                                tribal organization disagrees with 
                                State submitted data described under 
                                subclause (I), the Indian tribe or 
                                tribal organization may submit to the 
                                Secretary such additional information 
                                as may be relevant to making the 
                                determination under clause (i) and the 
                                Secretary may consider such information 
                                before making such determination.
            ``(2) Grants for indian tribes that received jobs funds.--
                    ``(A) In general.--The Secretary shall pay to each 
                eligible Indian tribe for each of fiscal years 1996, 
                1997, 1998, 1999, 2000, and 2001 a grant in an amount 
                equal to the amount received by the Indian tribe in 
                fiscal year 1994 under section 482(i) (as in effect 
                during fiscal year 1994).
                    ``(B) Eligible indian tribe.--For purposes of 
                subparagraph (A), the term `eligible Indian tribe' 
                means an Indian tribe or Alaska Native organization 
                that conducted a job opportunities and basic skills 
                training program in fiscal year 1995 under section 
                482(i) (as in effect during fiscal year 1995).
                    ``(C) Use of grant.--Each Indian tribe to which a 
                grant is made under this paragraph shall use the grant 
                for the purpose of operating a program to make work 
                activities available to members of the Indian tribe.
                    ``(D) Appropriation.--Out of any money in the 
                Treasury of the United States not otherwise 
                appropriated, there are appropriated $7,638,474 for 
                each fiscal year specified in subparagraph (A) for 
                grants under subparagraph (A).
    ``(b) 3-Year Tribal Family Assistance Plan.--
            ``(1) In general.--Any Indian tribe that desires to receive 
        a tribal family assistance grant shall submit to the Secretary 
        a 3-year tribal family assistance plan that--
                    ``(A) outlines the Indian tribe's approach to 
                providing welfare-related services for the 3-year 
                period, consistent with this section;
                    ``(B) specifies whether the welfare-related 
                services provided under the plan will be provided by 
                the Indian tribe or through agreements, contracts, or 
                compacts with intertribal consortia, States, or other 
                entities;
                    ``(C) identifies the population and service area or 
                areas to be served by such plan;
                    ``(D) provides that a family receiving assistance 
                under the plan may not receive duplicative assistance 
                from other State or tribal programs funded under this 
                part;
                    ``(E) identifies the employment opportunities in or 
                near the service area or areas of the Indian tribe and 
                the manner in which the Indian tribe will cooperate and 
                participate in enhancing such opportunities for 
                recipients of assistance under the plan consistent with 
                any applicable State standards; and
                    ``(F) applies the fiscal accountability provisions 
                of section 5(f)(1) of the Indian Self-Determination and 
                Education Assistance Act (25 U.S.C. 450c(f)(1)), 
                relating to the submission of a single-agency audit 
                report required by chapter 75 of title 31, United 
                States Code.
            ``(2) Approval.--The Secretary shall approve each tribal 
        family assistance plan submitted in accordance with paragraph 
        (1).
            ``(3) Consortium of tribes.--Nothing in this section shall 
        preclude the development and submission of a single tribal 
        family assistance plan by the participating Indian tribes of an 
        intertribal consortium.
    ``(c) Minimum Work Participation Requirements and Time Limits.--The 
Secretary, with the participation of Indian tribes, shall establish for 
each Indian tribe receiving a grant under this section minimum work 
participation requirements, appropriate time limits for receipt of 
welfare-related services under the grant, and penalties against 
individuals--
            ``(1) consistent with the purposes of this section;
            ``(2) consistent with the economic conditions and resources 
        available to each tribe; and
            ``(3) similar to comparable provisions in section 407(d).
    ``(d) Emergency Assistance.--Nothing in this section shall preclude 
an Indian tribe from seeking emergency assistance from any Federal loan 
program or emergency fund.
    ``(e) Accountability.--Nothing in this section shall be construed 
to limit the ability of the Secretary to maintain program funding 
accountability consistent with--
            ``(1) generally accepted accounting principles; and
            ``(2) the requirements of the Indian Self-Determination and 
        Education Assistance Act (25 U.S.C. 450 et seq.).
    ``(f) Penalties.--
            ``(1) Subsections (a)(1), (a)(6), and (b) of section 409, 
        shall apply to an Indian tribe with an approved tribal 
        assistance plan in the same manner as such subsections apply to 
        a State.
            ``(2) Section 409(a)(3) shall apply to an Indian tribe with 
        an approved tribal assistance plan by substituting `meet 
        minimum work participation requirements established under 
        section 412(c)' for `comply with section 407(a)'.
    ``(g) Data Collection and Reporting.--Section 411 shall apply to an 
Indian tribe with an approved tribal family assistance plan.
    ``(h) Special Rule for Indian Tribes in Alaska.--
            ``(1) In general.--Notwithstanding any other provision of 
        this section, and except as provided in paragraph (2), an 
        Indian tribe in the State of Alaska that receives a tribal 
        family assistance grant under this section shall use the grant 
        to operate a program in accordance with requirements comparable 
        to the requirements applicable to the program of the State of 
        Alaska funded under this part. Comparability of programs shall 
        be established on the basis of program criteria developed by 
        the Secretary in consultation with the State of Alaska and such 
        Indian tribes.
            ``(2) Waiver.--An Indian tribe described in paragraph (1) 
        may apply to the appropriate State authority to receive a 
        waiver of the requirement of paragraph (1).

``SEC. 413. RESEARCH, EVALUATIONS, AND NATIONAL STUDIES.

    ``(a) Research.--The Secretary shall conduct research on the 
benefits, effects, and costs of operating different State programs 
funded under this part, including time limits relating to eligibility 
for assistance. The research shall include studies on the effects of 
different programs and the operation of such programs on welfare 
dependency, illegitimacy, teen pregnancy, employment rates, child well-
being, and any other area the Secretary deems appropriate. The 
Secretary shall also conduct research on the costs and benefits of 
State activities under section 409.
    ``(b) Development and Evaluation of Innovative Approaches To 
Reducing Welfare Dependency and Increasing Child Well-Being.--
            ``(1) In general.--The Secretary may assist States in 
        developing, and shall evaluate, innovative approaches for 
        reducing welfare dependency and increasing the well-being of 
        minor children living at home with respect to recipients of 
        assistance under programs funded under this part. The Secretary 
        may provide funds for training and technical assistance to 
        carry out the approaches developed pursuant to this paragraph.
            ``(2) Evaluations.--In performing the evaluations under 
        paragraph (1), the Secretary shall, to the maximum extent 
        feasible, use random assignment as an evaluation methodology.
    ``(c) Dissemination of Information.--The Secretary shall develop 
innovative methods of disseminating information on any research, 
evaluations, and studies conducted under this section, including the 
facilitation of the sharing of information and best practices among 
States and localities through the use of computers and other 
technologies.
    ``(d) Annual Ranking of States and Review of Most and Least 
Successful Work Programs.--
            ``(1) Annual ranking of states.--The Secretary shall rank 
        annually the States to which grants are paid under section 403 
        in the order of their success in placing recipients of 
        assistance under the State program funded under this part into 
        long-term private sector jobs, reducing the overall welfare 
        caseload, and, when a practicable method for calculating this 
        information becomes available, diverting individuals from 
        formally applying to the State program and receiving 
        assistance. In ranking States under this subsection, the 
        Secretary shall take into account the average number of minor 
        children living at home in families in the State that have 
        incomes below the poverty line and the amount of funding 
        provided each State for such families.
            ``(2) Annual review of most and least successful work 
        programs.--The Secretary shall review the programs of the 3 
        States most recently ranked highest under paragraph (1) and the 
        3 States most recently ranked lowest under paragraph (1) that 
        provide parents with work experience, assistance in finding 
        employment, and other work preparation activities and support 
        services to enable the families of such parents to leave the 
        program and become self-sufficient.
    ``(e) Annual Ranking of States and Review of Issues Relating to 
Out-of-Wedlock Births.--
            ``(1) Annual ranking of states.--
                    ``(A) In general.--The Secretary shall annually 
                rank States to which grants are made under section 403 
                based on the following ranking factors:
                            ``(i) Absolute out-of-wedlock ratios.--The 
                        ratio represented by--
                                    ``(I) the total number of out-of-
                                wedlock births in families receiving 
                                assistance under the State program 
                                under this part in the State for the 
                                most recent fiscal year for which 
                                information is available; over
                                    ``(II) the total number of births 
                                in families receiving assistance under 
                                the State program under this part in 
                                the State for such year.
                            ``(ii) Net changes in the out-of-wedlock 
                        ratio.--The difference between the ratio 
                        described in subparagraph (A)(i) with respect 
                        to a State for the most recent fiscal year for 
                        which such information is available and the 
                        ratio with respect to the State for the 
                        immediately preceding year.
            ``(2) Annual review.--The Secretary shall review the 
        programs of the 5 States most recently ranked highest under 
        paragraph (1) and the 5 States most recently ranked the lowest 
        under paragraph (1).
    ``(f) State-Initiated Evaluations.--A State shall be eligible to 
receive funding to evaluate the State program funded under this part 
if--
            ``(1) the State submits a proposal to the Secretary for the 
        evaluation;
            ``(2) the Secretary determines that the design and approach 
        of the evaluation is rigorous and is likely to yield 
        information that is credible and will be useful to other 
        States; and
            ``(3) unless otherwise waived by the Secretary, the State 
        contributes to the cost of the evaluation, from non-Federal 
        sources, an amount equal to at least 10 percent of the cost of 
        the evaluation.
    ``(g) Funding of Studies and Demonstrations.--
            ``(1) In general.--Out of any money in the Treasury of the 
        United States not otherwise appropriated, there are 
        appropriated $15,000,000 for each of fiscal years 1998 through 
        2001, for the purpose of paying--
                    ``(A) the cost of conducting the research described 
                in subsection (a);
                    ``(B) the cost of developing and evaluating 
                innovative approaches for reducing welfare dependency 
                and increasing the well-being of minor children under 
                subsection (b);
                    ``(C) the Federal share of any State-initiated 
                study approved under subsection (f); and
                    ``(D) an amount determined by the Secretary to be 
                necessary to operate and evaluate demonstration 
                projects, relating to this part, that are in effect or 
                approved under section 1115 as of September 30, 1995, 
                and are continued after such date.
            ``(2) Allocation.--Of the amount appropriated under 
        paragraph (1) for a fiscal year--
                    ``(A) 50 percent shall be allocated for the 
                purposes described in subparagraphs (A) and (B) of 
                paragraph (1), and
                    ``(B) 50 percent shall be allocated for the 
                purposes described in subparagraphs (C) and (D) of 
                paragraph (1).
            ``(3) Demonstrations of innovative strategies.--The 
        Secretary may implement and evaluate demonstrations of 
        innovative and promising strategies which--
                    ``(A) provide one-time capital funds to establish, 
                expand, or replicate programs;
                    ``(B) test performance-based grant-to-loan 
                financing in which programs meeting performance targets 
                receive grants while programs not meeting such targets 
                repay funding on a prorated basis; and
                    ``(C) test strategies in multiple States and types 
                of communities.

``SEC. 414. STUDY BY THE CENSUS BUREAU.

    ``(a) In General.--The Bureau of the Census shall expand the Survey 
of Income and Program Participation as necessary to obtain such 
information as will enable interested persons to evaluate the impact of 
the amendments made by chapter 1 of the Personal Responsibility and 
Work Opportunity Act of 1996 on a random national sample of recipients 
of assistance under State programs funded under this part and (as 
appropriate) other low income families, and in doing so, shall pay 
particular attention to the issues of out-of-wedlock birth, welfare 
dependency, the beginning and end of welfare spells, and the causes of 
repeat welfare spells.
    ``(b) Appropriation.--Out of any money in the Treasury of the 
United States not otherwise appropriated, there are appropriated 
$10,000,000 for each of fiscal years 1998, 1999, 2000, 2001, and 2002 
for payment to the Bureau of the Census to carry out subsection (a).

``SEC. 415. WAIVERS.

    ``(a) Continuation of Waivers.--
            ``(1) Waivers in effect on date of enactment of welfare 
        reform.--Except as provided in paragraph (3), if any waiver 
        granted to a State under section 1115 or otherwise which 
        relates to the provision of assistance under a State plan under 
        this part (as in effect on September 30, 1996) is in effect as 
        of the date of the enactment of the Personal Responsibility and 
        Work Opportunity Act of 1996, the amendments made by such Act 
        (other than by section 2103(d) of such Act) shall not apply 
        with respect to the State before the expiration (determined 
        without regard to any extensions) of the waiver to the extent 
        such amendments are inconsistent with the waiver.
            ``(2) Waivers granted subsequently.--Except as provided in 
        paragraph (3), if any waiver granted to a State under section 
        1115 or otherwise which relates to the provision of assistance 
        under a State plan under this part (as in effect on September 
        30, 1996) is submitted to the Secretary before the date of the 
        enactment of the Personal Responsibility and Work Opportunity 
        Act of 1996 and approved by the Secretary on or before July 1, 
        1997, and the State demonstrates to the satisfaction of the 
        Secretary that the waiver will not result in Federal 
        expenditures under title IV of this Act (as in effect without 
        regard to the amendments made by the Personal Responsibility 
        and Work Opportunity Act of 1996) that are greater than would 
        occur in the absence of the waiver, the amendments made by the 
        Personal Responsibility and Work Opportunity Act of 1996 (other 
        than by section 2103(d) of such Act) shall not apply with 
        respect to the State before the expiration (determined without 
        regard to any extensions) of the waiver to the extent the 
        amendments made by the Personal Responsibility and Work 
        Opportunity Act of 1996 are inconsistent with the waiver.
            ``(3) Financing limitation.--Notwithstanding any other 
        provision of law, beginning with fiscal year 1996, a State 
        operating under a waiver described in paragraph (1) shall be 
        entitled to payment under section 403 for the fiscal year, in 
        lieu of any other payment provided for in the waiver.
    ``(b) State Option To Terminate Waiver.--
            ``(1) In general.--A State may terminate a waiver described 
        in subsection (a) before the expiration of the waiver.
            ``(2) Report.--A State which terminates a waiver under 
        paragraph (1) shall submit a report to the Secretary 
        summarizing the waiver and any available information concerning 
        the result or effect of the waiver.
            ``(3) Hold harmless provision.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law, a State that, not later than the date 
                described in subparagraph (B), submits a written 
                request to terminate a waiver described in subsection 
                (a) shall be held harmless for accrued cost neutrality 
                liabilities incurred under the waiver.
                    ``(B) Date described.--The date described in this 
                subparagraph is 90 days following the adjournment of 
                the first regular session of the State legislature that 
                begins after the date of the enactment of the Personal 
                Responsibility and Work Opportunity Act of 1996.
    ``(c) Secretarial Encouragement of Current Waivers.--The Secretary 
shall encourage any State operating a waiver described in subsection 
(a) to continue the waiver and to evaluate, using random sampling and 
other characteristics of accepted scientific evaluations, the result or 
effect of the waiver.
    ``(d) Continuation of Individual Waivers.--A State may elect to 
continue 1 or more individual waivers described in subsection (a).

``SEC. 416. ADMINISTRATION.

    ``The programs under this part and part D shall be administered by 
an Assistant Secretary for Family Support within the Department of 
Health and Human Services, who shall be appointed by the President, by 
and with the advice and consent of the Senate, and who shall be in 
addition to any other Assistant Secretary of Health and Human Services 
provided for by law, and the Secretary shall reduce the Federal 
workforce within the Department of Health and Human Services by an 
amount equal to the sum of 75 percent of the full-time equivalent 
positions at such Department that relate to any direct spending 
program, or any program funded through discretionary spending, that has 
been converted into a block grant program under the Personal 
Responsibility and Work Opportunity Act of 1996 and the amendments made 
by such Act, and by an amount equal to 75 percent of that portion of 
the total full-time equivalent departmental management positions at 
such Department that bears the same relationship to the amount 
appropriated for any direct spending program, or any program funded 
through discretionary spending, that has been converted into a block 
grant program under the Personal Responsibility and Work Opportunity 
Act of 1996 and the amendments made by such Act, as such amount relates 
to the total amount appropriated for use by such Department, and, 
notwithstanding any other provision of law, the Secretary shall take 
such actions as may be necessary, including reductions in force 
actions, consistent with sections 3502 and 3595 of title 5, United 
States Code, to reduce the full-time equivalent positions within the 
Department of Health and Human Services by 245 full-time equivalent 
positions related to the program converted into a block grant under the 
amendment made by section 2103 of the Personal Responsibility and Work 
Opportunity Act of 1996, and by 60 full-time equivalent managerial 
positions in the Department.

``SEC. 417. LIMITATION ON FEDERAL AUTHORITY.

    ``No officer or employee of the Federal Government may regulate the 
conduct of States under this part or enforce any provision of this 
part, except to the extent expressly provided in this part.''; and
            (2) by inserting after such section 418 the following:

``SEC. 419. DEFINITIONS.

    ``As used in this part:
            ``(1) Adult.--The term `adult' means an individual who is 
        not a minor child.
            ``(2) Minor child.--The term `minor child' means an 
        individual who--
                    ``(A) has not attained 18 years of age; or
                    ``(B) has not attained 19 years of age and is a 
                full-time student in a secondary school (or in the 
                equivalent level of vocational or technical training).
            ``(3) Fiscal year.--The term `fiscal year' means any 12-
        month period ending on September 30 of a calendar year.
            ``(4) Indian, indian tribe, and tribal organization.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the terms `Indian', `Indian tribe', 
                and `tribal organization' have the meaning given such 
                terms by section 4 of the Indian Self-Determination and 
                Education Assistance Act (25 U.S.C. 450b).
                    ``(B) Special rule for indian tribes in alaska.--
                The term `Indian tribe' means, with respect to the 
                State of Alaska, only the Metlakatla Indian Community 
                of the Annette Islands Reserve and the following Alaska 
                Native regional nonprofit corporations:
                            ``(i) Arctic Slope Native Association.
                            ``(ii) Kawerak, Inc.
                            ``(iii) Maniilaq Association.
                            ``(iv) Association of Village Council 
                        Presidents.
                            ``(v) Tanana Chiefs Conference.
                            ``(vi) Cook Inlet Tribal Council.
                            ``(vii) Bristol Bay Native Association.
                            ``(viii) Aleutian and Pribilof Island 
                        Association.
                            ``(ix) Chugachmuit.
                            ``(x) Tlingit Haida Central Council.
                            ``(xi) Kodiak Area Native Association.
                            ``(xii) Copper River Native Association.
            ``(5) State.--
                    ``(A) In general.--Except as otherwise specifically 
                provided, the term `State' means the 50 States of the 
                United States, the District of Columbia, the 
                Commonwealth of Puerto Rico, the United States Virgin 
                Islands, Guam, and American Samoa.
                    ``(B) State option to contract to provide 
                services.--The term `State' includes the--
                            ``(i) administration and provision of 
                        services under the program funded under this 
                        part, or under the programs funded under parts 
                        B and E of this title, through contracts with 
                        charitable, religious, or private 
                        organizations; and
                            ``(ii) provision to beneficiaries of 
                        assistance under such programs with 
                        certificates, vouchers, or other forms of 
                        disbursement which are redeemable with such 
                        organizations.''.
    (b) Grants to Outlying Areas.--Section 1108 (42 U.S.C. 1308) is 
amended--
            (1) by redesignating subsection (c) as subsection (g);
            (2) by striking all that precedes subsection (c) and 
        inserting the following:

``SEC. 1108. ADDITIONAL GRANTS TO PUERTO RICO, THE VIRGIN ISLANDS, 
              GUAM, AND AMERICAN SAMOA; LIMITATION ON TOTAL PAYMENTS.

    ``(a) Limitation on Total Payments to Each Territory.--
Notwithstanding any other provision of this Act, the total amount 
certified by the Secretary of Health and Human Services under titles I, 
X, XIV, and XVI, under parts A and E of title IV, and under subsection 
(b) of this section, for payment to any territory for a fiscal year 
shall not exceed the ceiling amount for the territory for the fiscal 
year.
    ``(b) Entitlement to Matching Grant.--
            ``(1) In general.--Each territory shall be entitled to 
        receive from the Secretary for each fiscal year a grant in an 
        amount equal to 75 percent of the amount (if any) by which--
                    ``(A) the total expenditures of the territory 
                during the fiscal year under the territory programs 
                funded under parts A and E of title IV; exceeds
                    ``(B) the sum of--
                            ``(i) the total amount required to be paid 
                        to the territory (other than with respect to 
                        child care) under former section 403 (as in 
                        effect on September 30, 1995) for fiscal year 
                        1995, which shall be determined by applying 
                        subparagraphs (C) and (D) of section 403(a)(1) 
                        to the territory;
                            ``(ii) the total amount required to be paid 
                        to the territory under former section 434 (as 
                        so in effect) for fiscal year 1995; and
                            ``(iii) the total amount expended by the 
                        territory during fiscal year 1995 pursuant to 
                        parts A and F of title IV (as so in effect), 
                        other than for child care.
            ``(2) Use of grant.--Any territory to which a grant is made 
        under paragraph (1) may expend the amount under any program 
        operated or funded under any provision of law specified in 
        subsection (a).
    ``(c) Definitions.--As used in this section:
            ``(1) Territory.--The term `territory' means Puerto Rico, 
        the Virgin Islands, Guam, and American Samoa.
            ``(2) Ceiling amount.--The term `ceiling amount' means, 
        with respect to a territory and a fiscal year, the mandatory 
        ceiling amount with respect to the territory, reduced for the 
        fiscal year in accordance with subsection (e).
            ``(3) Mandatory ceiling amount.--The term `mandatory 
        ceiling amount' means--
                    ``(A) $102,040,000 with respect to for Puerto Rico;
                    ``(B) $4,683,000 with respect to Guam;
                    ``(C) $3,554,000 with respect to the Virgin 
                Islands; and
                    ``(D) $1,000,000 with respect to American Samoa.
            ``(4) Total amount expended by the territory.--The term 
        `total amount expended by the territory'--
                    ``(A) does not include expenditures during the 
                fiscal year from amounts made available by the Federal 
                Government; and
                    ``(B) when used with respect to fiscal year 1995, 
                also does not include--
                            ``(i) expenditures during fiscal year 1995 
                        under subsection (g) or (i) of section 402 (as 
                        in effect on September 30, 1995); or
                            ``(ii) any expenditures during fiscal year 
                        1995 for which the territory (but for section 
                        1108, as in effect on September 30, 1995) would 
                        have received reimbursement from the Federal 
                        Government.
    ``(d) Authority to Transfer Funds Among Programs.--Notwithstanding 
any other provision of this Act, any territory to which an amount is 
paid under any provision of law specified in subsection (a) may use 
part or all of the amount to carry out any program operated by the 
territory, or funded, under any other such provision of law.
    ``(e) Maintenance of Effort.--The ceiling amount with respect to a 
territory shall be reduced for a fiscal year by an amount equal to the 
amount (if any) by which--
            ``(1) the total amount expended by the territory under all 
        programs of the territory operated pursuant to the provisions 
        of law specified in subsection (a) (as such provisions were in 
        effect for fiscal year 1995) for fiscal year 1995; exceeds
            ``(2) the total amount expended by the territory under all 
        programs of the territory that are funded under the provisions 
        of law specified in subsection (a) for the fiscal year that 
        immediately precedes the fiscal year referred to in the matter 
        preceding paragraph (1).''; and
            (3) by striking subsections (d) and (e).
    (c) Repeal of Provisions Requiring Reduction of Medicaid Payments 
to States That Reduce Welfare Payment Levels.--
            (1) Section 1903(i) (42 U.S.C. 1396b(i)) is amended by 
        striking paragraph (9).
            (2) Section 1902 (42 U.S.C. 1396a) is amended by striking 
        subsection (c).
    (d) Elimination of Child Care Programs Under the Social Security 
Act.--
            (1) AFDC and transitional child care programs.--Section 402 
        (42 U.S.C. 602) is amended by striking subsection (g).
            (2) At-risk child care program.--
                    (A) Authorization.--Section 402 (42 U.S.C. 602) is 
                amended by striking subsection (i).
                    (B) Funding provisions.--Section 403 (42 U.S.C. 
                603) is amended by striking subsection (n).

SEC. 2104. SERVICES PROVIDED BY CHARITABLE, RELIGIOUS, OR PRIVATE 
              ORGANIZATIONS.

    (a) In General.--
            (1) State options.--A State may--
                    (A) administer and provide services under the 
                programs described in subparagraphs (A) and (B)(i) of 
                paragraph (2) through contracts with charitable, 
                religious, or private organizations; and
                    (B) provide beneficiaries of assistance under the 
                programs described in subparagraphs (A) and (B)(ii) of 
                paragraph (2) with certificates, vouchers, or other 
                forms of disbursement which are redeemable with such 
                organizations.
            (2) Programs described.--The programs described in this 
        paragraph are the following programs:
                    (A) A State program funded under part A of title IV 
                of the Social Security Act (as amended by section 
                2103(a) of this Act).
                    (B) Any other program established or modified under 
                chapter 1 or 2 of this subtitle, that--
                            (i) permits contracts with organizations; 
                        or
                            (ii) permits certificates, vouchers, or 
                        other forms of disbursement to be provided to 
                        beneficiaries, as a means of providing 
                        assistance.
    (b) Religious Organizations.--The purpose of this section is to 
allow States to contract with religious organizations, or to allow 
religious organizations to accept certificates, vouchers, or other 
forms of disbursement under any program described in subsection (a)(2), 
on the same basis as any other nongovernmental provider without 
impairing the religious character of such organizations, and without 
diminishing the religious freedom of beneficiaries of assistance funded 
under such program.
    (c) Nondiscrimination Against Religious Organizations.--In the 
event a State exercises its authority under subsection (a), religious 
organizations are eligible, on the same basis as any other private 
organization, as contractors to provide assistance, or to accept 
certificates, vouchers, or other forms of disbursement, under any 
program described in subsection (a)(2) so long as the programs are 
implemented consistent with the Establishment Clause of the United 
States Constitution. Except as provided in subsection (k), neither the 
Federal Government nor a State receiving funds under such programs 
shall discriminate against an organization which is or applies to be a 
contractor to provide assistance, or which accepts certificates, 
vouchers, or other forms of disbursement, on the basis that the 
organization has a religious character.
    (d) Religious Character and Freedom.--
            (1) Religious organizations.--A religious organization with 
        a contract described in subsection (a)(1)(A), or which accepts 
        certificates, vouchers, or other forms of disbursement under 
        subsection (a)(1)(B), shall retain its independence from 
        Federal, State, and local governments, including such 
        organization's control over the definition, development, 
        practice, and expression of its religious beliefs.
            (2) Additional safeguards.--Neither the Federal Government 
        nor a State shall require a religious organization to--
                    (A) alter its form of internal governance; or
                    (B) remove religious art, icons, scripture, or 
                other symbols;
        in order to be eligible to contract to provide assistance, or 
        to accept certificates, vouchers, or other forms of 
        disbursement, funded under a program described in subsection 
        (a)(2).
    (e) Rights of Beneficiaries of Assistance.--
            (1) In general.--If an individual described in paragraph 
        (2) has an objection to the religious character of the 
        organization or institution from which the individual receives, 
        or would receive, assistance funded under any program described 
        in subsection (a)(2), the State in which the individual resides 
        shall provide such individual (if otherwise eligible for such 
        assistance) within a reasonable period of time after the date 
        of such objection with assistance from an alternative provider 
        that is accessible to the individual and the value of which is 
        not less than the value of the assistance which the individual 
        would have received from such organization.
            (2) Individual described.--An individual described in this 
        paragraph is an individual who receives, applies for, or 
        requests to apply for, assistance under a program described in 
        subsection (a)(2).
    (f) Employment Practices.--A religious organization's exemption 
provided under section 702 of the Civil Rights Act of 1964 (42 U.S.C. 
2000e-1a) regarding employment practices shall not be affected by its 
participation in, or receipt of funds from, programs described in 
subsection (a)(2).
    (g) Nondiscrimination Against Beneficiaries.--Except as otherwise 
provided in law, a religious organization shall not discriminate 
against an individual in regard to rendering assistance funded under 
any program described in subsection (a)(2) on the basis of religion, a 
religious belief, or refusal to actively participate in a religious 
practice.
    (h) Fiscal Accountability.--
            (1) In general.--Except as provided in paragraph (2), any 
        religious organization contracting to provide assistance funded 
        under any program described in subsection (a)(2) shall be 
        subject to the same regulations as other contractors to account 
        in accord with generally accepted auditing principles for the 
        use of such funds provided under such programs.
            (2) Limited audit.--If such organization segregates Federal 
        funds provided under such programs into separate accounts, then 
        only the financial assistance provided with such funds shall be 
        subject to audit.
    (i) Compliance.--Any party which seeks to enforce its rights under 
this section may assert a civil action for injunctive relief 
exclusively in an appropriate State court against the entity or agency 
that allegedly commits such violation.
    (j) Limitations on Use of Funds for Certain Purposes.--No funds 
provided directly to institutions or organizations to provide services 
and administer programs under subsection (a)(1)(A) shall be expended 
for sectarian worship, instruction, or proselytization.
    (k) Preemption.--Nothing in this section shall be construed to 
preempt any provision of a State constitution or State statute that 
prohibits or restricts the expenditure of State funds in or by 
religious organizations.

SEC. 2105. CENSUS DATA ON GRANDPARENTS AS PRIMARY CAREGIVERS FOR THEIR 
              GRANDCHILDREN.

    (a) In General.--Not later than 90 days after the date of the 
enactment of this Act, the Secretary of Commerce, in carrying out 
section 141 of title 13, United States Code, shall expand the data 
collection efforts of the Bureau of the Census (in this section 
referred to as the ``Bureau'') to enable the Bureau to collect 
statistically significant data, in connection with its decennial census 
and its mid-decade census, concerning the growing trend of grandparents 
who are the primary caregivers for their grandchildren.
    (b) Expanded Census Question.--In carrying out subsection (a), the 
Secretary of Commerce shall expand the Bureau's census question that 
details households which include both grandparents and their 
grandchildren. The expanded question shall be formulated to distinguish 
between the following households:
            (1) A household in which a grandparent temporarily provides 
        a home for a grandchild for a period of weeks or months during 
        periods of parental distress.
            (2) A household in which a grandparent provides a home for 
        a grandchild and serves as the primary caregiver for the 
        grandchild.

SEC. 2106. REPORT ON DATA PROCESSING.

    (a) In General.--Within 6 months after the date of the enactment of 
this Act, the Secretary of Health and Human Services shall prepare and 
submit to the Congress a report on--
            (1) the status of the automated data processing systems 
        operated by the States to assist management in the 
        administration of State programs under part A of title IV of 
        the Social Security Act (whether in effect before or after 
        October 1, 1995); and
            (2) what would be required to establish a system capable 
        of--
                    (A) tracking participants in public programs over 
                time; and
                    (B) checking case records of the States to 
                determine whether individuals are participating in 
                public programs of 2 or more States.
    (b) Preferred Contents.--The report required by subsection (a) 
should include--
            (1) a plan for building on the automated data processing 
        systems of the States to establish a system with the 
        capabilities described in subsection (a)(2); and
            (2) an estimate of the amount of time required to establish 
        such a system and of the cost of establishing such a system.

SEC. 2107. STUDY ON ALTERNATIVE OUTCOMES MEASURES.

    (a) Study.--The Secretary shall, in cooperation with the States, 
study and analyze outcomes measures for evaluating the success of the 
States in moving individuals out of the welfare system through 
employment as an alternative to the minimum participation rates 
described in section 407 of the Social Security Act. The study shall 
include a determination as to whether such alternative outcomes 
measures should be applied on a national or a State-by-State basis and 
a preliminary assessment of the effects of section 409(a)(7)(C) of such 
Act.
    (b) Report.--Not later than September 30, 1998, the Secretary shall 
submit to the Committee on Finance of the Senate and the Committee on 
Ways and Means of the House of Representatives a report containing the 
findings of the study required by subsection (a).

SEC. 2108. WELFARE FORMULA FAIRNESS COMMISSION.

    (a) Establishment.--There is established a commission to be known 
as the Welfare Formula Fairness Commission (in this section referred to 
as the ``Commission'').
    (b) Membership.--
            (1) Composition.--The Commission shall be composed of 13 
        members, of whom--
                    (A) 3 shall be appointed by the President, of whom 
                not more than 2 shall be of the same political party;
                    (B) 3 shall be appointed by the Majority Leader of 
                the Senate;
                    (C) 2 shall be appointed by the Minority Leader of 
                the Senate;
                    (D) 3 shall be appointed by the Speaker of the 
                House of Representatives; and
                    (E) 2 shall be appointed by the Minority Leader of 
                the House of Representatives.
            (2) Date.--The appointments of the members of the 
        Commission shall be made not later than 30 days after the date 
        of the enactment of this Act.
    (c) Period of Appointment; Vacancies.--Members shall be appointed 
for the life of the Commission. Any vacancy in the Commission shall not 
affect its powers, but shall be filled in the same manner as the 
original appointment.
    (d) Initial Meeting.--Not later than 30 days after the date on 
which all members of the Commission have been appointed, the Commission 
shall hold its first meeting.
    (e) Meetings.--The Commission shall meet at the call of the Chair.
    (f) Quorum.--A majority of the members of the Commission shall 
constitute a quorum, but a lesser number of members may hold hearings.
    (g) Chair and Vice Chair.--The Commission shall select a Chair and 
Vice Chair from among its members.
    (h) Duties of the Commission.--
            (1) Study.--The Commission shall study--
                    (A) the temporary assistance for needy families 
                block grant program established under part A of title 
                IV of the Social Security Act, as amended by section 
                2103 of this Act; and
                    (B) the funding formulas applied, the bonus 
                payments provided, and the work requirements 
                established under such program.
            (2) Report.--Not later than September 1, 1998, the 
        Commission shall submit a report to the Congress on the matters 
        studied under paragraph (1).
    (i) Powers of the Commission.--
            (1) Hearings.--The Commission may hold such hearings, sit 
        and act at such times and places, take such testimony, and 
receive such evidence as the Commission considers advisable to carry 
out the purposes of this section.
            (2) Information from federal agencies.--The Commission may 
        secure directly from any Federal department or agency such 
        information as the Commission considers necessary to carry out 
        the provisions of this section. Upon request of the Chair of 
        the Commission, the head of such department or agency shall 
        furnish such information to the Commission.
            (3) Postal services.--The Commission may use the United 
        States mails in the same manner and under the same conditions 
        as other departments and agencies of the Federal Government.
            (4) Gifts.--The Commission may accept, use, and dispose of 
        gifts or donations of services or property.
    (j) Personnel Matters.--
            (1) Compensation of members.--Each member of the Commission 
        who is not an officer or employee of the Federal Government 
        shall be compensated at a rate equal to the daily equivalent of 
        the annual rate of basic pay prescribed for level IV of the 
        Executive Schedule under section 5315 of title 5, United States 
        Code, for each day (including travel time) during which such 
        member is engaged in the performance of the duties of the 
        Commission. All members of the Commission who are officers or 
        employees of the United States shall serve without compensation 
        in addition to that received for their services as officers or 
        employees of the United States.
            (2) Travel expenses.--The members of the Commission shall 
        be allowed travel expenses, including per diem in lieu of 
        subsistence, at rates authorized for employees of agencies 
        under subchapter I of chapter 57 of title 5, United States 
        Code, while away from their homes or regular places of business 
        in the performance of services for the Commission.
            (3) Staff.--
                    (A) In general.--The Chair of the Commission may, 
                without regard to the civil service laws and 
                regulations, appoint and terminate an executive 
                director and such other additional personnel as may be 
                necessary to enable the Commission to perform its 
                duties. The employment of an executive director shall 
                be subject to confirmation by the Commission.
                    (B) Compensation.--The Chair of the Commission may 
                fix the compensation of the executive director and 
                other personnel without regard to the provisions of 
                chapter 51 and subchapter III of chapter 53 of title 5, 
                United States Code, relating to classification of 
                positions and General Schedule pay rates, except that 
                the rate of pay for the executive director and other 
                personnel may not exceed the rate payable for level V 
                of the Executive Schedule under section 5316 of such 
                title.
            (4) Detail of government employees.--Any Federal Government 
        employee may be detailed to the Commission without 
        reimbursement, and such detail shall be without interruption or 
        loss of civil service status or privilege.
            (5) Procurement of temporary and intermittent services.--
        The Chair of the Commission may procure temporary and 
        intermittent services under section 3109(b) of title 5, United 
        States Code, at rates for individuals which do not exceed the 
        daily equivalent of the annual rate of basic pay prescribed for 
        level V of the Executive Schedule under section 5316 of such 
        title.
    (k) Termination of the Commission.--The Commission shall terminate 
not later than December 31, 1998.
    (l) Authorization of Appropriations.--There is authorized to be 
appropriated to the Commission such sums as are necessary to carry out 
the purposes of this section.

SEC. 2109. CONFORMING AMENDMENTS TO THE SOCIAL SECURITY ACT.

    (a) Amendments to Part D of Title IV.--
            (1) Section 451 (42 U.S.C. 651) is amended by striking 
        ``aid'' and inserting ``assistance under a State program 
        funded''.
            (2) Section 452(a)(10)(C) (42 U.S.C. 652(a)(10)(C)) is 
        amended--
                    (A) by striking ``aid to families with dependent 
                children'' and inserting ``assistance under a State 
                program funded under part A'';
                    (B) by striking ``such aid'' and inserting ``such 
                assistance''; and
                    (C) by striking ``under section 402(a)(26) or'' and 
                inserting ``pursuant to section 408(a)(4) or under 
                section''.
            (3) Section 452(a)(10)(F) (42 U.S.C. 652(a)(10)(F)) is 
        amended--
                    (A) by striking ``aid under a State plan approved'' 
                and inserting ``assistance under a State program 
                funded''; and
                    (B) by striking ``in accordance with the standards 
                referred to in section 402(a)(26)(B)(ii)'' and 
                inserting ``by the State''.
            (4) Section 452(b) (42 U.S.C. 652(b)) is amended in the 
        first sentence by striking ``aid under the State plan approved 
        under part A'' and inserting ``assistance under the State 
        program funded under part A''.
            (5) Section 452(d)(3)(B)(i) (42 U.S.C. 652(d)(3)(B)(i)) is 
        amended by striking ``1115(c)'' and inserting ``1115(b)''.
            (6) Section 452(g)(2)(A)(ii)(I) (42 U.S.C. 
        652(g)(2)(A)(ii)(I)) is amended by striking ``aid is being paid 
        under the State's plan approved under part A or E'' and 
        inserting ``assistance is being provided under the State 
        program funded under part A''.
            (7) Section 452(g)(2)(A) (42 U.S.C. 652(g)(2)(A)) is 
        amended in the matter following clause (iii) by striking ``aid 
        was being paid under the State's plan approved under part A or 
        E'' and inserting ``assistance was being provided under the 
        State program funded under part A''.
            (8) Section 452(g)(2) (42 U.S.C. 652(g)(2)) is amended in 
        the matter following subparagraph (B)--
                    (A) by striking ``who is a dependent child'' and 
                inserting ``with respect to whom assistance is being 
                provided under the State program funded under part A'';
                    (B) by inserting ``by the State'' after ``found''; 
                and
                    (C) by striking ``to have good cause for refusing 
                to cooperate under section 402(a)(26)'' and inserting 
                ``to qualify for a good cause or other exception to 
                cooperation pursuant to section 454(29)''.
            (9) Section 452(h) (42 U.S.C. 652(h)) is amended by 
        striking ``under section 402(a)(26)'' and inserting ``pursuant 
        to section 408(a)(4)''.
            (10) Section 453(c)(3) (42 U.S.C. 653(c)(3)) is amended by 
        striking ``aid under part A of this title'' and inserting 
        ``assistance under a State program funded under part A''.
            (11) Section 454(5)(A) (42 U.S.C. 654(5)(A))) is amended--
                    (A) by striking ``under section 402(a)(26)'' and 
                inserting ``pursuant to section 408(a)(4)''; and
                    (B) by striking ``; except that this paragraph 
                shall not apply to such payments for any month 
                following the first month in which the amount collected 
                is sufficient to make such family ineligible for 
                assistance under the State plan approved under part 
                A;'' and inserting a comma.
            (12) Section 454(6)(D) (42 U.S.C. 654(6)(D)) is amended by 
        striking ``aid under a State plan approved'' and inserting 
        ``assistance under a State program funded''.
            (13) Section 456(a)(1) (42 U.S.C. 656(a)(1)) is amended by 
        striking ``under section 402(a)(26)''.
            (14) Section 466(a)(3)(B) (42 U.S.C. 666(a)(3)(B)) is 
        amended by striking ``402(a)(26)'' and inserting ``408(a)(3)''.
            (15) Section 466(b)(2) (42 U.S.C. 666(b)(2)) is amended by 
        striking ``aid'' and inserting ``assistance under a State 
        program funded''.
            (16) Section 469(a) (42 U.S.C. 669(a)) is amended--
                    (A) by striking ``aid under plans approved'' and 
                inserting ``assistance under State programs funded''; 
                and
                    (B) by striking ``such aid'' and inserting ``such 
                assistance''.
    (b) Repeal of Part F of Title IV.--Part F of title IV (42 U.S.C. 
681-687) is repealed.
    (c) Amendment to Title X.--Section 1002(a)(7) (42 U.S.C. 
1202(a)(7)) is amended by striking ``aid to families with dependent 
children under the State plan approved under section 402 of this Act'' 
and inserting ``assistance under a State program funded under part A of 
title IV''.
    (d) Amendments to Title XI.--
            (1) Section 1109 (42 U.S.C. 1309) is amended by striking 
        ``or part A of title IV,''.
            (2) Section 1115 (42 U.S.C. 1315) is amended--
                    (A) in subsection (a)(2)--
                            (i) by inserting ``(A)'' after ``(2)'';
                            (ii) by striking ``403,'';
                            (iii) by striking the period at the end and 
                        inserting ``, and''; and
                            (iv) by adding at the end the following new 
                        subparagraph:
            ``(B) costs of such project which would not otherwise be a 
        permissible use of funds under part A of title IV and which are 
        not included as part of the costs of projects under section 
        1110, shall to the extent and for the period prescribed by the 
        Secretary, be regarded as a permissible use of funds under such 
        part.''; and
                    (B) in subsection (c)(3), by striking ``the program 
                of aid to families with dependent children'' and 
                inserting ``part A of such title''.
            (3) Section 1116 (42 U.S.C. 1316) is amended--
                    (A) in each of subsections (a)(1), (b), and (d), by 
                striking ``or part A of title IV,''; and
                    (B) in subsection (a)(3), by striking ``404,''.
            (4) Section 1118 (42 U.S.C. 1318) is amended--
                    (A) by striking ``403(a),'';
                    (B) by striking ``and part A of title IV,''; and
                    (C) by striking ``, and shall, in the case of 
                American Samoa, mean 75 per centum with respect to part 
                A of title IV''.
            (5) Section 1119 (42 U.S.C. 1319) is amended--
                    (A) by striking ``or part A of title IV''; and
                    (B) by striking ``403(a),''.
            (6) Section 1133(a) (42 U.S.C. 1320b-3(a)) is amended by 
        striking ``or part A of title IV,''.
            (7) Section 1136 (42 U.S.C. 1320b-6) is repealed.
            (8) Section 1137 (42 U.S.C. 1320b-7) is amended--
                    (A) in subsection (b), by striking paragraph (1) 
                and inserting the following:
            ``(1) any State program funded under part A of title IV of 
        this Act;''; and
                    (B) in subsection (d)(1)(B)--
                            (i) by striking ``In this subsection--'' 
                        and all that follows through ``(ii) in'' and 
                        inserting ``In this subsection, in'';
                            (ii) by redesignating subclauses (I), (II), 
                        and (III) as clauses (i), (ii), and (iii); and
                            (iii) by moving such redesignated material 
                        2 ems to the left.
    (e) Amendment to Title XIV.--Section 1402(a)(7) (42 U.S.C. 
1352(a)(7)) is amended by striking ``aid to families with dependent 
children under the State plan approved under section 402 of this Act'' 
and inserting ``assistance under a State program funded under part A of 
title IV''.
    (f) Amendment to Title XVI as in Effect With Respect to the 
Territories.--Section 1602(a)(11), as in effect without regard to the 
amendment made by section 301 of the Social Security Amendments of 1972 
(42 U.S.C. 1382 note), is amended by striking ``aid under the State 
plan approved'' and inserting ``assistance under a State program 
funded''.
    (g) Amendment to Title XVI as in Effect With Respect to the 
States.--Section 1611(c)(5)(A) (42 U.S.C. 1382(c)(5)(A)) is amended to 
read as follows: ``(A) a State program funded under part A of title 
IV,''.
    (h) Amendment to Title XIX.--Section 1902(j) (42 U.S.C. 1396a(j)) 
is amended by striking ``1108(c)'' and inserting ``1108(g)''.

SEC. 2110. CONFORMING AMENDMENTS TO THE FOOD STAMP ACT OF 1977 AND 
              RELATED PROVISIONS.

    (a) Section 5 of the Food Stamp Act of 1977 (7 U.S.C. 2014) is 
amended--
            (1) in the second sentence of subsection (a), by striking 
        ``plan approved'' and all that follows through ``title IV of 
        the Social Security Act'' and inserting ``program funded under 
        part A of title IV of the Social Security Act (42 U.S.C. 601 et 
        seq.)'';
            (2) in subsection (d)--
                    (A) in paragraph (5), by striking ``assistance to 
                families with dependent children'' and inserting 
                ``assistance under a State program funded''; and
                    (B) by striking paragraph (13) and redesignating 
                paragraphs (14), (15), and (16) as paragraphs (13), 
                (14), and (15), respectively;
            (3) in subsection (j), by striking ``plan approved under 
        part A of title IV of such Act (42 U.S.C. 601 et seq.)'' and 
        inserting ``program funded under part A of title IV of the Act 
        (42 U.S.C. 601 et seq.)''; and
            (4) by striking subsection (m) and redesignating subsection 
        (n), as added by section 1122, as subsection (m).
    (b) Section 6 of such Act (7 U.S.C. 2015) is amended--
            (1) in subsection (c)(5), by striking ``the State plan 
        approved'' and inserting ``the State program funded''; and
            (2) in subsection (e)(6), by striking ``aid to families 
        with dependent children'' and inserting ``benefits under a 
        State program funded''.
    (c) Section 16(g)(4) of such Act (7 U.S.C. 2025(g)(4)) is amended 
by striking ``State plans under the Aid to Families with Dependent 
Children Program under'' and inserting ``State programs funded under 
part A of''.
    (d) Section 17(b)(3) of such Act (7 U.S.C. 2026(b)(3)) is amended 
by adding at the end the following new subparagraph:
    ``(I) The Secretary may not grant a waiver under this paragraph on 
or after October 1, 1995. Any reference in this paragraph to a 
provision of title IV of the Social Security Act shall be deemed to be 
a reference to such provision as in effect on September 30, 1995.''.
    (e) Section 20 of such Act (7 U.S.C. 2029) is amended--
            (1) in subsection (a)(2)(B) by striking ``operating--'' and 
        all that follows through ``(ii) any other'' and inserting 
        ``operating any''; and
            (2) in subsection (b)--
                    (A) in paragraph (1)--
                            (i) by striking ``(b)(1) A household'' and 
                        inserting ``(b) A household''; and
                            (ii) in subparagraph (B), by striking 
                        ``training program'' and inserting 
                        ``activity'';
                    (B) by striking paragraph (2); and
                    (C) by redesignating subparagraphs (A) through (F) 
                as paragraphs (1) through (6), respectively.
    (f) Section 5(h)(1) of the Agriculture and Consumer Protection Act 
of 1973 (Public Law 93-186; 7 U.S.C. 612c note) is amended by striking 
``the program for aid to families with dependent children'' and 
inserting ``the State program funded''.
    (g) Section 9 of the National School Lunch Act (42 U.S.C. 1758) is 
amended--
            (1) in subsection (b)--
                    (A) in paragraph (2)(B)(ii)(II), as amended by 
                section 1202(b)--
                            (i) by striking ``program for aid to 
                        families with dependent children'' and 
                        inserting ``State program funded''; and
                            (ii) by inserting before the period at the 
                        end the following: ``(42 U.S.C. 601 et seq.) 
                        that the Secretary determines complies with 
                        standards established by the Secretary that 
                        ensure that the standards under the State 
                        program are comparable to or more restrictive 
                        than those in effect on June 1, 1995''; and
                    (B) in paragraph (6)--
                            (i) in subparagraph (A)(ii)--
                                    (I) by striking ``an AFDC 
                                assistance unit (under the aid to 
                                families with dependent children 
                                program authorized'' and inserting ``a 
                                family (under the State program 
                                funded''; and
                                    (II) by striking ``, in a State'' 
                                and all that follows through 
                                ``9902(2)))'' and inserting ``that the 
                                Secretary determines complies with 
                                standards established by the Secretary 
                                that ensure that the standards under 
                                the State program are comparable to or 
                                more restrictive than those in effect 
                                on June 1, 1995''; and
                            (ii) in subparagraph (B), by striking ``aid 
                        to families with dependent children'' and 
                        inserting ``assistance under the State program 
                        funded under part A of title IV of the Social 
                        Security Act (42 U.S.C. 601 et seq.) that the 
                        Secretary determines complies with standards 
                        established by the Secretary that ensure that 
                        the standards under the State program are 
                        comparable to or more restrictive than those in 
                        effect on June 1, 1995''; and
            (2) in subsection (d)(2)(C)--
                    (A) by striking ``program for aid to families with 
                dependent children'' and inserting ``State program 
                funded''; and
                    (B) by inserting before the period at the end the 
                following: ``(42 U.S.C. 601 et seq.) that the Secretary 
                determines complies with standards established by the 
                Secretary that ensure that the standards under the 
                State program are comparable to or more restrictive 
                than those in effect on June 1, 1995''.
    (h) Section 17(d)(2)(A)(ii)(II) of the Child Nutrition Act of 1966 
(42 U.S.C. 1786(d)(2)(A)(ii)(II)) is amended--
            (1) by striking ``program for aid to families with 
        dependent children established'' and inserting ``State program 
        funded''; and
            (2) by inserting before the semicolon the following: ``(42 
        U.S.C. 601 et seq.) that the Secretary determines complies with 
        standards established by the Secretary that ensure that the 
        standards under the State program are comparable to or more 
        restrictive than those in effect on June 1, 1995''.

SEC. 2111. CONFORMING AMENDMENTS TO OTHER LAWS.

    (a) Subsection (b) of section 508 of the Unemployment Compensation 
Amendments of 1976 (42 U.S.C. 603a; Public Law 94-566; 90 Stat. 2689) 
is amended to read as follows:
    ``(b) Provision for Reimbursement of Expenses.--For purposes of 
section 455 of the Social Security Act, expenses incurred to reimburse 
State employment offices for furnishing information requested of such 
offices--
            ``(1) pursuant to the third sentence of section 3(a) of the 
        Act entitled `An Act to provide for the establishment of a 
        national employment system and for cooperation with the States 
        in the promotion of such system, and for other purposes', 
        approved June 6, 1933 (29 U.S.C. 49b(a)), or
            ``(2) by a State or local agency charged with the duty of 
        carrying a State plan for child support approved under part D 
        of title IV of the Social Security Act,
shall be considered to constitute expenses incurred in the 
administration of such State plan.''.
    (b) Section 9121 of the Omnibus Budget Reconciliation Act of 1987 
(42 U.S.C. 602 note) is repealed.
    (c) Section 9122 of the Omnibus Budget Reconciliation Act of 1987 
(42 U.S.C. 602 note) is repealed.
    (d) Section 221 of the Housing and Urban-Rural Recovery Act of 1983 
(42 U.S.C. 602 note), relating to treatment under AFDC of certain 
rental payments for federally assisted housing, is repealed.
    (e) Section 159 of the Tax Equity and Fiscal Responsibility Act of 
1982 (42 U.S.C. 602 note) is repealed.
    (f) Section 202(d) of the Social Security Amendments of 1967 (81 
Stat. 882; 42 U.S.C. 602 note) is repealed.
    (g) Section 903 of the Stewart B. McKinney Homeless Assistance 
Amendments Act of 1988 (42 U.S.C. 11381 note), relating to 
demonstration projects to reduce number of AFDC families in welfare 
hotels, is amended--
            (1) in subsection (a), by striking ``aid to families with 
        dependent children under a State plan approved'' and inserting 
        ``assistance under a State program funded''; and
            (2) in subsection (c), by striking ``aid to families with 
        dependent children in the State under a State plan approved'' 
        and inserting ``assistance in the State under a State program 
        funded''.
    (h) The Higher Education Act of 1965 (20 U.S.C. 1001 et seq.) is 
amended--
            (1) in section 404C(c)(3) (20 U.S.C. 1070a-23(c)(3)), by 
        striking ``(Aid to Families with Dependent Children)''; and
            (2) in section 480(b)(2) (20 U.S.C. 1087vv(b)(2)), by 
        striking ``aid to families with dependent children under a 
        State plan approved'' and inserting ``assistance under a State 
        program funded''.
    (i) The Carl D. Perkins Vocational and Applied Technology Education 
Act (20 U.S.C. 2301 et seq.) is amended--
            (1) in section 231(d)(3)(A)(ii) (20 U.S.C. 
        2341(d)(3)(A)(ii)), by striking ``The program for aid to 
        dependent children'' and inserting ``The State program 
        funded'';
            (2) in section 232(b)(2)(B) (20 U.S.C. 2341a(b)(2)(B)), by 
        striking ``the program for aid to families with dependent 
        children'' and inserting ``the State program funded''; and
            (3) in section 521(14)(B)(iii) (20 U.S.C. 
        2471(14)(B)(iii)), by striking ``the program for aid to 
        families with dependent children'' and inserting ``the State 
        program funded''.
    (j) The Elementary and Secondary Education Act of 1965 (20 U.S.C. 
2701 et seq.) is amended--
            (1) in section 1113(a)(5) (20 U.S.C. 6313(a)(5)), by 
        striking ``Aid to Families with Dependent Children program'' 
        and inserting ``State program funded under part A of title IV 
        of the Social Security Act'';
            (2) in section 1124(c)(5) (20 U.S.C. 6333(c)(5)), by 
        striking ``the program of aid to families with dependent 
        children under a State plan approved under'' and inserting ``a 
        State program funded under part A of''; and
            (3) in section 5203(b)(2) (20 U.S.C. 7233(b)(2))--
                    (A) in subparagraph (A)(xi), by striking ``Aid to 
                Families with Dependent Children benefits'' and 
                inserting ``assistance under a State program funded 
                under part A of title IV of the Social Security Act''; 
                and
                    (B) in subparagraph (B)(viii), by striking ``Aid to 
                Families with Dependent Children'' and inserting 
                ``assistance under the State program funded under part 
                A of title IV of the Social Security Act''.
    (k) The 4th proviso of chapter VII of title I of Public Law 99-88 
(25 U.S.C. 13d-1) is amended to read as follows: ``Provided further, 
That general assistance payments made by the Bureau of Indian Affairs 
shall be made--
            ``(1) after April 29, 1985, and before October 1, 1995, on 
        the basis of Aid to Families with Dependent Children (AFDC) 
        standards of need; and
            ``(2) on and after October 1, 1995, on the basis of 
        standards of need established under the State program funded 
        under part A of title IV of the Social Security Act,
except that where a State ratably reduces its AFDC or State program 
payments, the Bureau shall reduce general assistance payments in such 
State by the same percentage as the State has reduced the AFDC or State 
program payment.''.
    (l) The Internal Revenue Code of 1986 (26 U.S.C. 1 et seq.) is 
amended--
            (1) in section 51(d)(9) (26 U.S.C. 51(d)(9)), by striking 
        all that follows ``agency as'' and inserting ``being eligible 
        for financial assistance under part A of title IV of the Social 
        Security Act and as having continually received such financial 
        assistance during the 90-day period which immediately precedes 
        the date on which such individual is hired by the employer.'';
            (2) in section 3304(a)(16) (26 U.S.C. 3304(a)(16)), by 
        striking ``eligibility for aid or services,'' and all that 
        follows through ``children approved'' and inserting 
        ``eligibility for assistance, or the amount of such assistance, 
        under a State program funded'';
            (3) in section 6103(l)(7)(D)(i) (26 U.S.C. 
        6103(l)(7)(D)(i)), by striking ``aid to families with dependent 
        children provided under a State plan approved'' and inserting 
        ``a State program funded'';
            (4) in section 6103(l)(10) (26 U.S.C. 6103(l)(10))--
                    (A) by striking ``(c) or (d)'' each place it 
                appears and inserting ``(c), (d), or (e)''; and
                    (B) by adding at the end of subparagraph (B) the 
                following new sentence: ``Any return information 
                disclosed with respect to section 6402(e) shall only be 
                disclosed to officers and employees of the State agency 
                requesting such information.'';
            (5) in section 6103(p)(4) (26 U.S.C. 6103(p)(4)), in the 
        matter preceding subparagraph (A)--
                    (A) by striking ``(5), (10)'' and inserting 
                ``(5)''; and
                    (B) by striking ``(9), or (12)'' and inserting 
                ``(9), (10), or (12)'';
            (6) in section 6334(a)(11)(A) (26 U.S.C. 6334(a)(11)(A)), 
        by striking ``(relating to aid to families with dependent 
        children)'';
            (7) in section 6402 (26 U.S.C. 6402)--
                    (A) in subsection (a), by striking ``(c) and (d)'' 
                and inserting ``(c), (d), and (e)'';
                    (B) by redesignating subsections (e) through (i) as 
                subsections (f) through (j), respectively; and
                    (C) by inserting after subsection (d) the 
                following:
    ``(e) Collection of Overpayments Under Title IV-A of the Social 
Security Act.--The amount of any overpayment to be refunded to the 
person making the overpayment shall be reduced (after reductions 
pursuant to subsections (c) and (d), but before a credit against future 
liability for an internal revenue tax) in accordance with section 
405(e) of the Social Security Act (concerning recovery of overpayments 
to individuals under State plans approved under part A of title IV of 
such Act).''; and
            (8) in section 7523(b)(3)(C) (26 U.S.C. 7523(b)(3)(C)), by 
        striking ``aid to families with dependent children'' and 
        inserting ``assistance under a State program funded under part 
        A of title IV of the Social Security Act''.
    (m) Section 3(b) of the Wagner-Peyser Act (29 U.S.C. 49b(b)) is 
amended by striking ``State plan approved under part A of title IV'' 
and inserting ``State program funded under part A of title IV''.
    (n) The Job Training Partnership Act (29 U.S.C. 1501 et seq.) is 
amended--
            (1) in section 4(29)(A)(i) (29 U.S.C. 1503(29)(A)(i)), by 
        striking ``(42 U.S.C. 601 et seq.)'';
            (2) in section 106(b)(6)(C) (29 U.S.C. 1516(b)(6)(C)), by 
        striking ``State aid to families with dependent children 
        records,'' and inserting ``records collected under the State 
        program funded under part A of title IV of the Social Security 
        Act,'';
            (3) in section 121(b)(2) (29 U.S.C. 1531(b)(2))--
                    (A) by striking ``the JOBS program'' and inserting 
                ``the work activities required under title IV of the 
                Social Security Act''; and
                    (B) by striking the second sentence;
            (4) in section 123(c) (29 U.S.C. 1533(c))--
                    (A) in paragraph (1)(E), by repealing clause (vi); 
                and
                    (B) in paragraph (2)(D), by repealing clause (v);
            (5) in section 203(b)(3) (29 U.S.C. 1603(b)(3)), by 
        striking ``, including recipients under the JOBS program'';
            (6) in subparagraphs (A) and (B) of section 204(a)(1) (29 
        U.S.C. 1604(a)(1) (A) and (B)), by striking ``(such as the JOBS 
        program)'' each place it appears;
            (7) in section 205(a) (29 U.S.C. 1605(a)), by striking 
        paragraph (4) and inserting the following:
            ``(4) the portions of title IV of the Social Security Act 
        relating to work activities;'';
            (8) in section 253 (29 U.S.C. 1632)--
                    (A) in subsection (b)(2), by repealing subparagraph 
                (C); and
                    (B) in paragraphs (1)(B) and (2)(B) of subsection 
                (c), by striking ``the JOBS program or'' each place it 
                appears;
            (9) in section 264 (29 U.S.C. 1644)--
                    (A) in subparagraphs (A) and (B) of subsection 
                (b)(1), by striking ``(such as the JOBS program)'' each 
                place it appears; and
                    (B) in subparagraphs (A) and (B) of subsection 
                (d)(3), by striking ``and the JOBS program'' each place 
                it appears;
            (10) in section 265(b) (29 U.S.C. 1645(b)), by striking 
        paragraph (6) and inserting the following:
            ``(6) the portion of title IV of the Social Security Act 
        relating to work activities;'';
            (11) in the second sentence of section 429(e) (29 U.S.C. 
        1699(e)), by striking ``and shall be in an amount that does not 
        exceed the maximum amount that may be provided by the State 
        pursuant to section 402(g)(1)(C) of the Social Security Act (42 
        U.S.C. 602(g)(1)(C))'';
            (12) in section 454(c) (29 U.S.C. 1734(c)), by striking 
        ``JOBS and'';
            (13) in section 455(b) (29 U.S.C. 1735(b)), by striking 
        ``the JOBS program,'';
            (14) in section 501(1) (29 U.S.C. 1791(1)), by striking 
        ``aid to families with dependent children under part A of title 
        IV of the Social Security Act (42 U.S.C. 601 et seq.)'' and 
        inserting ``assistance under the State program funded under 
        part A of title IV of the Social Security Act'';
            (15) in section 506(1)(A) (29 U.S.C. 1791e(1)(A)), by 
        striking ``aid to families with dependent children'' and 
        inserting ``assistance under the State program funded'';
            (16) in section 508(a)(2)(A) (29 U.S.C. 1791g(a)(2)(A)), by 
        striking ``aid to families with dependent children'' and 
        inserting ``assistance under the State program funded''; and
            (17) in section 701(b)(2)(A) (29 U.S.C. 1792(b)(2)(A))--
                    (A) in clause (v), by striking the semicolon and 
                inserting ``; and''; and
                    (B) by striking clause (vi).
    (o) Section 3803(c)(2)(C)(iv) of title 31, United States Code, is 
amended to read as follows:
            ``(iv) assistance under a State program funded under part A 
        of title IV of the Social Security Act;''.
    (p) Section 2605(b)(2)(A)(i) of the Low-Income Home Energy 
Assistance Act of 1981 (42 U.S.C. 8624(b)(2)(A)(i)) is amended to read 
as follows:
                            ``(i) assistance under the State program 
                        funded under part A of title IV of the Social 
                        Security Act;''.
    (q) Section 303(f)(2) of the Family Support Act of 1988 (42 U.S.C. 
602 note) is amended--
            (1) by striking ``(A)''; and
            (2) by striking subparagraphs (B) and (C).
    (r) The Balanced Budget and Emergency Deficit Control Act of 1985 
(2 U.S.C. 900 et seq.) is amended--
            (1) in the first section 255(h) (2 U.S.C. 905(h)), by 
        striking ``Aid to families with dependent children (75-0412-0-
        1-609);'' and inserting ``Block grants to States for temporary 
        assistance for needy families;''; and
            (2) in section 256 (2 U.S.C. 906)--
                    (A) by striking subsection (k); and
                    (B) by redesignating subsection (l) as subsection 
                (k).
    (s) The Immigration and Nationality Act (8 U.S.C. 1101 et seq.) is 
amended--
            (1) in section 210(f) (8 U.S.C. 1160(f)), by striking ``aid 
        under a State plan approved under'' each place it appears and 
        inserting ``assistance under a State program funded under'';
            (2) in section 245A(h) (8 U.S.C. 1255a(h))--
                    (A) in paragraph (1)(A)(i), by striking ``program 
                of aid to families with dependent children'' and 
                inserting ``State program of assistance''; and
                    (B) in paragraph (2)(B), by striking ``aid to 
                families with dependent children'' and inserting 
                ``assistance under a State program funded under part A 
                of title IV of the Social Security Act''; and
            (3) in section 412(e)(4) (8 U.S.C. 1522(e)(4)), by striking 
        ``State plan approved'' and inserting ``State program funded''.
    (t) Section 640(a)(4)(B)(i) of the Head Start Act (42 U.S.C. 
9835(a)(4)(B)(i)) is amended by striking ``program of aid to families 
with dependent children under a State plan approved'' and inserting 
``State program of assistance funded''.
    (u) Section 9 of the Act of April 19, 1950 (64 Stat. 47, chapter 
92; 25 U.S.C. 639) is repealed.
    (v) Subparagraph (E) of section 213(d)(6) of the School-To-Work 
Opportunities Act of 1994 (20 U.S.C. 6143(d)(6)) is amended to read as 
follows:
                    ``(E) part A of title IV of the Social Security Act 
                (42 U.S.C. 601 et seq.) relating to work activities;''.
    (w) Section 552a(a)(8)(B)(iv)(III) of title 5, United States Code, 
is amended by striking ``section 464 or 1137 of the Social Security 
Act'' and inserting ``section 404(e), 464, or 1137 of the Social 
Security Act''.

SEC. 2112. DEVELOPMENT OF PROTOTYPE OF COUNTERFEIT-RESISTANT SOCIAL 
              SECURITY CARD REQUIRED.

    (a) Development.--
            (1) In general.--The Commissioner of Social Security (in 
        this section referred to as the ``Commissioner'') shall, in 
        accordance with this section, develop a prototype of a 
        counterfeit-resistant social security card. Such prototype card 
        shall--
                    (A) be made of a durable, tamper-resistant material 
                such as plastic or polyester,
                    (B) employ technologies that provide security 
                features, such as magnetic stripes, holograms, and 
                integrated circuits, and
                    (C) be developed so as to provide individuals with 
                reliable proof of citizenship or legal resident alien 
                status.
            (2) Assistance by attorney general.--The Attorney General 
        of the United States shall provide such information and 
        assistance as the Commissioner deems necessary to enable the 
        Commissioner to comply with this section.
    (b) Study and Report.--
            (1) In general.--The Commissioner shall conduct a study and 
        issue a report to the Congress which examines different methods 
        of improving the social security card application process.
            (2) Elements of study.--The study shall include an 
        evaluation of the cost and work load implications of issuing a 
        counterfeit-resistant social security card for all individuals 
        over a 3-, 5-, and 10-year period. The study shall also 
evaluate the feasibility and cost implications of imposing a user fee 
for replacement cards and cards issued to individuals who apply for 
such a card prior to the scheduled 3-, 5-, and 10-year phase-in 
options.
            (3) Distribution of report.--The Commissioner shall submit 
        copies of the report described in this subsection along with a 
        facsimile of the prototype card as described in subsection (a) 
        to the Committees on Ways and Means and Judiciary of the House 
        of Representatives and the Committees on Finance and Judiciary 
        of the Senate within 1 year after the date of the enactment of 
        this Act.

SEC. 2113. DISCLOSURE OF RECEIPT OF FEDERAL FUNDS.

    (a) In General.--Whenever an organization that accepts Federal 
funds under this subtitle or the amendments made by this subtitle makes 
any communication that in any way intends to promote public support or 
opposition to any policy of a Federal, State, or local government 
through any broadcasting station, newspaper, magazine, outdoor 
advertising facility, direct mailing, or any other type of general 
public advertising, such communication shall state the following: 
``This was prepared and paid for by an organization that accepts 
taxpayer dollars.''.
    (b) Failure To Comply.--If an organization makes any communication 
described in subsection (a) and fails to provide the statement required 
by that subsection, such organization shall be ineligible to receive 
Federal funds under this subtitle or the amendments made by this 
subtitle.
    (c) Definition.--For purposes of this section, the term 
``organization'' means an organization described in section 501(c) of 
the Internal Revenue Code of 1986.
    (d) Effective Dates.--This section shall take effect--
            (1) with respect to printed communications 1 year after the 
        date of enactment of this Act; and
            (2) with respect to any other communication on the date of 
        enactment of this Act.

SEC. 2114. MODIFICATIONS TO THE JOB OPPORTUNITIES FOR CERTAIN LOW-
              INCOME INDIVIDUALS PROGRAM.

    Section 505 of the Family Support Act of 1988 (42 U.S.C. 1315 note) 
is amended--
            (1) in the heading, by striking ``demonstration'';
            (2) by striking ``demonstration'' each place such term 
        appears;
            (3) in subsection (a), by striking ``in each of fiscal 
        years'' and all that follows through ``10'' and inserting 
        ``shall enter into agreements with'';
            (4) in subsection (b)(3), by striking ``aid to families 
        with dependent children under part A of title IV of the Social 
        Security Act'' and inserting ``assistance under the program 
        funded part A of title IV of the Social Security Act of the 
        State in which the individual resides'';
            (5) in subsection (c)--
                    (A) in paragraph (1)(C), by striking ``aid to 
                families with dependent children under title IV of the 
                Social Security Act'' and inserting ``assistance under 
                a State program funded part A of title IV of the Social 
                Security Act''; and
                    (B) in paragraph (2), by striking ``aid to families 
                with dependent children under title IV of such Act'' 
                and inserting ``assistance under a State program funded 
                part A of title IV of the Social Security Act'';
            (6) in subsection (d), by striking ``job opportunities and 
        basic skills training program (as provided for under title IV 
        of the Social Security Act)'' and inserting ``the State program 
        funded under part A of title IV of the Social Security Act''; 
        and
            (7) by striking subsections (e) through (g) and inserting 
        the following:
    ``(e) Authorization of Appropriations.--For the purpose of 
conducting projects under this section, there is authorized to be 
appropriated an amount not to exceed $25,000,000 for any fiscal 
year.''.

SEC. 2115. SECRETARIAL SUBMISSION OF LEGISLATIVE PROPOSAL FOR TECHNICAL 
              AND CONFORMING AMENDMENTS.

    Not later than 90 days after the date of the enactment of this Act, 
the Secretary of Health and Human Services and the Commissioner of 
Social Security, in consultation, as appropriate, with the heads of 
other Federal agencies, shall submit to the appropriate committees of 
the Congress a legislative proposal proposing such technical and 
conforming amendments as are necessary to bring the law into conformity 
with the policy embodied in this chapter.

SEC. 2116. EFFECTIVE DATE; TRANSITION RULE.

    (a) Effective Dates.--
            (1) In general.--Except as otherwise provided in this 
        chapter, this chapter and the amendments made by this chapter 
        shall take effect on July 1, 1997.
            (2) Delayed effective date for certain provisions.--
        Notwithstanding any other provision of this section, paragraphs 
        (2), (3), (4), (5), (8), and (10) of section 409(a) and section 
        411(a) of the Social Security Act (as added by the amendments 
        made by section 2103(a) of this Act) shall not take effect with 
        respect to a State until, and shall apply only with respect to 
        conduct that occurs on or after, the later of--
                    (A) July 1, 1997; or
                    (B) the date that is 6 months after the date the 
                Secretary of Health and Human Services receives from 
                the State a plan described in section 402(a) of the 
                Social Security Act (as added by such amendment).
            (3) Elimination of child care programs.--The amendments 
        made by section 2103(d) shall take effect on October 1, 1996.
            (4) Definitions applicable to new child care entitlement.--
        Sections 403(a)(1)(C), 403(a)(1)(D), and 419(4) of the Social 
        Security Act, as added by the amendments made by section 
        2103(a) of this Act, shall take effect on October 1, 1996.
    (b) Transition Rules.--Effective on the date of the enactment of 
this Act:
            (1) State option to accelerate effective date.--
                    (A) In general.--If the Secretary of Health and 
                Human Services receives from a State a plan described 
                in section 402(a) of the Social Security Act (as added 
                by the amendment made by section 2103(a)(1) of this 
                Act), then--
                            (i) on and after the date of such receipt--
                                    (I) except as provided in clause 
                                (ii), this chapter and the amendments 
                                made by this chapter (other than by 
                                section 2103(d) of this Act) shall 
                                apply with respect to the State; and
                                    (II) the State shall be considered 
                                an eligible State for purposes of part 
                                A of title IV of the Social Security 
                                Act (as in effect pursuant to the 
                                amendments made by such section 
                                2103(a)); and
                            (ii) during the period that begins on the 
                        date of such receipt and ends on June 30, 1997, 
                        there shall remain in effect with respect to 
                        the State--
                                    (I) section 403(h) of the Social 
                                Security Act (as in effect on September 
                                30, 1995); and
                                    (II) all State reporting 
                                requirements under parts A and F of 
                                title IV of the Social Security Act (as 
                                in effect on September 30, 1995), 
                                modified by the Secretary as 
                                appropriate, taking into account the 
                                State program under part A of title IV 
                                of the Social Security Act (as in 
                                effect pursuant to the amendments made 
                                by such section 2103(a)).
                    (B) Limitations on federal obligations.--
                            (i) Under afdc program.--The total 
                        obligations of the Federal Government to a 
                        State under part A of title IV of the Social 
                        Security Act (as in effect on September 30, 
                        1995) with respect to expenditures in fiscal 
year 1997 shall not exceed an amount equal to the State family 
assistance grant.
                            (ii) Under temporary family assistance 
                        program.--Notwithstanding section 403(a)(1) of 
                        the Social Security Act (as in effect pursuant 
                        to the amendments made by section 2103(a) of 
                        this Act), the total obligations of the Federal 
                        Government to a State under such section 
                        403(a)(1)--
                                    (I) for fiscal year 1996, shall be 
                                an amount equal to--
                                            (aa) the State family 
                                        assistance grant; multiplied by
                                            (bb) \1/366\ of the number 
                                        of days during the period that 
                                        begins on the date the 
                                        Secretary of Health and Human 
                                        Services first receives from 
                                        the State a plan described in 
                                        section 402(a) of the Social 
                                        Security Act (as added by the 
                                        amendment made by section 
                                        2103(a)(1) of this Act) and 
                                        ends on September 30, 1996; and
                                    (II) for fiscal year 1997, shall be 
                                an amount equal to the lesser of--
                                            (aa) the amount (if any) by 
                                        which the State family 
                                        assistance grant exceeds the 
                                        total obligations of the 
                                        Federal Government to the State 
                                        under part A of title IV of the 
                                        Social Security Act (as in 
                                        effect on September 30, 1995) 
                                        with respect to expenditures in 
                                        fiscal year 1997; or
                                            (bb) the State family 
                                        assistance grant, multiplied by 
                                        \1/365\ of the number of days 
                                        during the period that begins 
                                        on October 1, 1996, or the date 
                                        the Secretary of Health and 
                                        Human Services first receives 
                                        from the State a plan described 
                                        in section 402(a) of the Social 
                                        Security Act (as added by the 
                                        amendment made by section 
                                        2103(a)(1) of this Act), 
                                        whichever is later, and ends on 
                                        September 30, 1997.
                            (iii) Child care obligations excluded in 
                        determining federal afdc obligations.--As used 
                        in this subparagraph, the term ``obligations of 
                        the Federal Government to the State under part 
                        A of title IV of the Social Security Act'' does 
                        not include any obligation of the Federal 
                        Government with respect to child care 
                        expenditures by the State.
                    (C) Submission of state plan for fiscal year 1996 
                or 1997 deemed acceptance of grant limitations and 
                formula and termination of afdc entitlement.--The 
                submission of a plan by a State pursuant to 
                subparagraph (A) is deemed to constitute--
                            (i) the State's acceptance of the grant 
                        reductions under subparagraph (B) (including 
                        the formula for computing the amount of the 
                        reduction); and
                            (ii) the termination of any entitlement of 
                        any individual or family to benefits or 
                        services under the State AFDC program.
                    (D) Definitions.--As used in this paragraph:
                            (i) State afdc program.--The term ``State 
                        AFDC program'' means the State program under 
                        parts A and F of title IV of the Social 
                        Security Act (as in effect on September 30, 
                        1995).
                            (ii) State.--The term ``State'' means the 
                        50 States and the District of Columbia.
                            (iii) State family assistance grant.--The 
                        term ``State family assistance grant'' means 
                        the State family assistance grant (as defined 
                        in section 403(a)(1)(B) of the Social Security 
                        Act, as added by the amendment made by section 
                        2103(a)(1) of this Act).
            (2) Claims, actions, and proceedings.--The amendments made 
        by this chapter shall not apply with respect to--
                    (A) powers, duties, functions, rights, claims, 
                penalties, or obligations applicable to aid, 
                assistance, or services provided before the effective 
                date of this chapter under the provisions amended; and
                    (B) administrative actions and proceedings 
                commenced before such date, or authorized before such 
                date to be commenced, under such provisions.
            (3) Closing out account for those programs terminated or 
        substantially modified by this chapter.--In closing out 
        accounts, Federal and State officials may use scientifically 
        acceptable statistical sampling techniques. Claims made with 
        respect to State expenditures under a State plan approved under 
        part A of title IV of the Social Security Act (as in effect on 
        September 30, 1995) with respect to assistance or services 
        provided on or before September 30, 1995, shall be treated as 
        claims with respect to expenditures during fiscal year 1995 for 
        purposes of reimbursement even if payment was made by a State 
        on or after October 1, 1995. Each State shall complete the 
        filing of all claims under the State plan (as so in effect) 
        within 2 years after the date of the enactment of this Act. The 
        head of each Federal department shall--
                    (A) use the single audit procedure to review and 
                resolve any claims in connection with the close out of 
                programs under such State plans; and
                    (B) reimburse States for any payments made for 
                assistance or services provided during a prior fiscal 
                year from funds for fiscal year 1995, rather than from 
                funds authorized by this chapter.
            (4) Continuance in office of assistant secretary for family 
        support.--The individual who, on the day before the effective 
        date of this chapter, is serving as Assistant Secretary for 
        Family Support within the Department of Health and Human 
        Services shall, until a successor is appointed to such 
        position--
                    (A) continue to serve in such position; and
                    (B) except as otherwise provided by law--
                            (i) continue to perform the functions of 
                        the Assistant Secretary for Family Support 
                        under section 417 of the Social Security Act 
                        (as in effect before such effective date); and
                            (ii) have the powers and duties of the 
                        Assistant Secretary for Family Support under 
                        section 416 of the Social Security Act (as in 
                        effect pursuant to the amendment made by 
                        section 2103(a)(1) of this Act).
    (c) Termination of Entitlement Under AFDC Program.--Effective 
October 1, 1996, no individual or family shall be entitled to any 
benefits or services under any State plan approved under part A or F of 
title IV of the Social Security Act (as in effect on September 30, 
1995).

                CHAPTER 2--SUPPLEMENTAL SECURITY INCOME

SEC. 2200. REFERENCE TO SOCIAL SECURITY ACT.

    Except as otherwise specifically provided, wherever in this chapter 
an amendment is expressed in terms of an amendment to or repeal of a 
section or other provision, the reference shall be considered to be 
made to that section or other provision of the Social Security Act.

                 Subchapter A--Eligibility Restrictions

SEC. 2201. DENIAL OF SSI BENEFITS FOR 10 YEARS TO INDIVIDUALS FOUND TO 
              HAVE FRAUDULENTLY MISREPRESENTED RESIDENCE IN ORDER TO 
              OBTAIN BENEFITS SIMULTANEOUSLY IN 2 OR MORE STATES.

    (a) In General.--Section 1611(e) (42 U.S.C. 1382(e)), as amended by 
section 105(b)(4) of the Contract with America Advancement Act of 1996, 
is amended by redesignating paragraph (5) as paragraph (3) and by 
adding at the end the following new paragraph:
    ``(4)(A) No person shall be considered an eligible individual or 
eligible spouse for purposes of this title during the 10-year period 
that begins on the date the person is convicted in Federal or State 
court of having made a fraudulent statement or representation with 
respect to the place of residence of the person in order to receive 
assistance simultaneously from 2 or more States under programs that are 
funded under title IV, title XV, title XIX, or the Food Stamp Act of 
1977, or benefits in 2 or more States under the supplemental security 
income program under this title.
    ``(B) As soon as practicable after the conviction of a person in a 
Federal or State court as described in subparagraph (A), an official of 
such court shall notify the Commissioner of such conviction.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 2202. DENIAL OF SSI BENEFITS FOR FUGITIVE FELONS AND PROBATION AND 
              PAROLE VIOLATORS.

    (a) In General.--Section 1611(e) (42 U.S.C. 1382(e)), as amended by 
section 2201(a) of this Act, is amended by adding at the end the 
following new paragraph:
    ``(5) No person shall be considered an eligible individual or 
eligible spouse for purposes of this title with respect to any month if 
during such month the person is--
            ``(A) fleeing to avoid prosecution, or custody or 
        confinement after conviction, under the laws of the place from 
        which the person flees, for a crime, or an attempt to commit a 
        crime, which is a felony under the laws of the place from which 
        the person flees, or which, in the case of the State of New 
        Jersey, is a high misdemeanor under the laws of such State; or
            ``(B) violating a condition of probation or parole imposed 
        under Federal or State law.''.
    (b) Exchange of Information.--Section 1611(e) (42 U.S.C. 1382(e)), 
as amended by section 2201(a) of this Act and subsection (a) of this 
section, is amended by adding at the end the following new paragraph:
    ``(6) Notwithstanding any other provision of law (other than 
section 6103 of the Internal Revenue Code of 1986), the Commissioner 
shall furnish any Federal, State, or local law enforcement officer, 
upon the written request of the officer, with the current address, 
Social Security number, and photograph (if applicable) of any recipient 
of benefits under this title, if the officer furnishes the Commissioner 
with the name of the recipient, and other identifying information as 
reasonably required by the Commissioner to establish the unique 
identity of the recipient, and notifies the Commissioner that--
            ``(A) the recipient--
                    ``(i) is described in subparagraph (A) or (B) of 
                paragraph (5); or
                    ``(ii) has information that is necessary for the 
                officer to conduct the officer's official duties; and
            ``(B) the location or apprehension of the recipient is 
        within the officer's official duties.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 2203. TREATMENT OF PRISONERS.

    (a) Implementation of Prohibition Against Payment of Benefits to 
Prisoners.--Section 1611(e)(1) (42 U.S.C. 1382(e)(1)) is amended by 
adding at the end the following new subparagraph:
    ``(I)(i) The Commissioner shall enter into a contract, with any 
interested State or local institution referred to in subparagraph (A), 
under which--
            ``(I) the institution shall provide to the Commissioner, on 
        a monthly basis, the names, social security account numbers, 
        dates of birth, and such other identifying information 
        concerning the inmates of the institution as the Commissioner 
        may require for the purpose of carrying out paragraph (1); and
            ``(II) the Commissioner shall pay to any such institution, 
        with respect to each inmate of the institution who is eligible 
        for a benefit under this title for the month preceding the 
        first month throughout which such inmate is in such institution 
        and becomes ineligible for such benefit (or becomes eligible 
        only for a benefit payable at a reduced rate) as a result of 
        the application of this paragraph, an amount not to exceed $400 
        if the institution furnishes the information described in 
        subclause (I) to the Commissioner within 30 days after such 
        individual becomes an inmate of such institution, or an amount 
        not to exceed $200 if the institution furnishes such 
        information after 30 days after such date but within 90 days 
        after such date.
    ``(ii) The provisions of section 552a of title 5, United States 
Code, shall not apply to any agreement entered into under clause (i) or 
to information exchanged pursuant to such agreement.
    ``(iii) Payments to institutions required by clause (i)(II) shall 
be made from funds otherwise available for the payment of benefits 
under this title and shall be treated as direct spending for purposes 
of the Balanced Budget and Emergency Deficit Control Act of 1985.''.
    (b) Denial of SSI Benefits for 10 Years to a Person Found To Have 
Fraudulently Obtained SSI Benefits While in Prison.--
            (1) In general.--Section 1611(e)(1) (42 U.S.C. 1382(e)(1)), 
        as amended by subsection (a) of this section, is amended by 
        adding at the end the following new subparagraph:
    ``(J) In any case in which the Commissioner of Social Security 
finds that a person has made a fraudulent statement or representation 
in order to obtain or to continue to receive benefits under this title 
while being an inmate in a penal institution, such person shall not be 
considered an eligible individual or eligible spouse for any month 
ending during the 10-year period beginning on the date on which such 
person ceases being such an inmate.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply with respect to statements or representations made 
        on or after the date of the enactment of this Act.
    (c) Study of Other Potential Improvements in the Collection of 
Information Respecting Public Inmates.--
            (1) Study.--The Commissioner of Social Security shall 
        conduct a study of the desirability, feasibility, and cost of--
                    (A) establishing a system under which Federal, 
                State, and local courts would furnish to the 
                Commissioner such information respecting court orders 
                by which individuals are confined in jails, prisons, or 
                other public penal, correctional, or medical facilities 
                as the Commissioner may require for the purpose of 
                carrying out section 1611(e)(1) of the Social Security 
                Act; and
                    (B) requiring that State and local jails, prisons, 
                and other institutions that enter into contracts with 
                the Commissioner under section 1611(e)(1)(I) of the 
                Social Security Act furnish the information required by 
                such contracts to the Commissioner by means of an 
                electronic or other sophisticated data exchange system.
            (2) Report.--Not later than 1 year after the date of the 
        enactment of this Act, the Commissioner of Social Security 
        shall submit a report on the results of the study conducted 
        pursuant to this subsection to the Committee on Finance of the 
        Senate and the Committee on Ways and Means of the House of 
        Representatives.

SEC. 2204. EFFECTIVE DATE OF APPLICATION FOR BENEFITS.

    (a) In General.--Subparagraphs (A) and (B) of section 1611(c)(7) 
(42 U.S.C. 1382(c)(7)) are amended to read as follows:
            ``(A) the first day of the month following the date such 
        application is filed, or
            ``(B) the first day of the month following the date such 
        individual becomes eligible for such benefits with respect to 
        such application.''.
    (b) Special Rule Relating to Emergency Advance Payments.--Section 
1631(a)(4)(A) (42 U.S.C. 1383(a)(4)(A)) is amended--
            (1) by inserting ``for the month following the date the 
        application is filed'' after ``is presumptively eligible for 
        such benefits''; and
            (2) by inserting ``, which shall be repaid through 
        proportionate reductions in such benefits over a period of not 
        more than 6 months'' before the semicolon.
    (c) Conforming Amendments.--
            (1) Section 1614(b) (42 U.S.C. 1382c(b)) is amended by 
        striking ``at the time the application or request is filed'' 
        and inserting ``on the first day of the month following the 
        date the application or request is filed''.
            (2) Section 1631(g)(3) (42 U.S.C. 1382j(g)(3)) is amended 
        by inserting ``following the month'' after ``beginning with the 
        month''.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to applications for benefits under title XVI of the 
        Social Security Act filed on or after the date of the enactment 
        of this Act, without regard to whether regulations have been 
        issued to implement such amendments.
            (2) Benefits under title xvi.--For purposes of this 
        subsection, the term ``benefits under title XVI of the Social 
        Security Act'' includes supplementary payments pursuant to an 
        agreement for Federal administration under section 1616(a) of 
        the Social Security Act, and payments pursuant to an agreement 
        entered into under section 212(b) of Public Law 93-66.

              Subchapter B--Benefits for Disabled Children

SEC. 2211. DEFINITION AND ELIGIBILITY RULES.

    (a) Definition of Childhood Disability.--Section 1614(a)(3) (42 
U.S.C. 1382c(a)(3)), as amended by section 105(b)(1) of the Contract 
with America Advancement Act of 1996, is amended--
            (1) in subparagraph (A), by striking ``An individual'' and 
        inserting ``Except as provided in subparagraph (C), an 
        individual'';
            (2) in subparagraph (A), by striking ``(or, in the case of 
        an individual under the age of 18, if he suffers from any 
        medically determinable physical or mental impairment of 
        comparable severity)'';
            (3) by redesignating subparagraphs (C) through (I) as 
        subparagraphs (D) through (J), respectively;
            (4) by inserting after subparagraph (B) the following new 
        subparagraph:
    ``(C) An individual under the age of 18 shall be considered 
disabled for the purposes of this title if that individual has a 
medically determinable physical or mental impairment, which results in 
marked and severe functional limitations, and which can be expected to 
result in death or which has lasted or can be expected to last for a 
continuous period of not less than 12 months. Notwithstanding the 
preceding sentence, no individual under the age of 18 who engages in 
substantial gainful activity (determined in accordance with regulations 
prescribed pursuant to subparagraph (E)) may be considered to be 
disabled.''; and
            (5) in subparagraph (F), as redesignated by paragraph (3), 
        by striking ``(D)'' and inserting ``(E)''.
    (b) Request for Comments to Improve Disability Evaluation.--Not 
later than 60 days after the date of the enactment of this Act, and 
annually thereafter, the Commissioner of Social Security shall issue a 
request for comments in the Federal Register regarding improvements to 
the disability evaluation and determination procedures for individuals 
under age 18 to ensure the comprehensive assessment of such 
individuals, including--
            (1) additions to conditions which should be presumptively 
        disabling at birth or ages 0 through 3 years;
            (2) specific changes in individual listings in the Listing 
        of Impairments set forth in appendix 1 of subpart P of part 404 
        of title 20, Code of Federal Regulations;
            (3) improvements in regulations regarding determinations 
        based on regulations providing for medical and functional 
        equivalence to such Listing of Impairments, and consideration 
        of multiple impairments; and
            (4) any other changes to the disability determination 
        procedures.
    (c) Changes to Childhood SSI Regulations.--
            (1) Modification to medical criteria for evaluation of 
        mental and emotional disorders.--The Commissioner of Social 
        Security shall modify sections 112.00C.2. and 112.02B.2.c.(2) 
        of appendix 1 to subpart P of part 404 of title 20, Code of 
        Federal Regulations, to eliminate references to maladaptive 
        behavior in the domain of personal/behavorial function.
            (2) Discontinuance of individualized functional 
        assessment.--The Commissioner of Social Security shall 
        discontinue the individualized functional assessment for 
        children set forth in sections 416.924d and 416.924e of title 
        20, Code of Federal Regulations.
    (d) Medical Improvement Review Standard as it Applies to 
Individuals Under the Age of 18.--Section 1614(a)(4) (42 U.S.C. 
1382(a)(4)) is amended--
            (1) by redesignating subclauses (I) and (II) of clauses (i) 
        and (ii) of subparagraph (B) as items (aa) and (bb), 
        respectively;
            (2) by redesignating clauses (i) and (ii) of subparagraphs 
        (A) and (B) as subclauses (I) and (II), respectively;
            (3) by redesignating subparagraphs (A) through (C) as 
        clauses (i) through (iii), respectively;
            (4) by inserting before clause (i) (as redesignated by 
        paragraph (3)) the following new subparagraph:
            ``(A) in the case of an individual who is age 18 or older--
        '';
            (5) by inserting after and below subparagraph (A)(iii) (as 
        so redesignated) the following new subparagraph:
            ``(B) in the case of an individual who is under the age of 
        18--
                    ``(i) substantial evidence which demonstrates that 
                there has been medical improvement in the individual's 
                impairment or combination of impairments, and that such 
                impairment or combination of impairments no longer 
                results in marked and severe functional limitations; or
                    ``(ii) substantial evidence which demonstrates 
                that, as determined on the basis of new or improved 
                diagnostic techniques or evaluations, the individual's 
                impairment or combination of impairments, is not as 
                disabling as it was considered to be at the time of the 
                most recent prior decision that the individual was 
                under a disability or continued to be under a 
                disability, and such impairment or combination of 
                impairments does not result in marked and severe 
                functional limitations; or'';
            (6) by redesignating subparagraph (D) as subparagraph (C) 
        and by inserting in such subparagraph ``in the case of any 
        individual,'' before ``substantial evidence''; and
            (7) in the first sentence following subparagraph (C) (as 
        redesignated by paragraph (6)), by--
                    (A) inserting ``(i)'' before ``to restore''; and
                    (B) inserting ``, or (ii) in the case of an 
                individual under the age of 18, to eliminate or improve 
                the individual's impairment or combination of 
                impairments so that it no longer results in marked and 
                severe functional limitations'' immediately before the 
                period.
    (e) Effective Dates, Etc.--
            (1) Effective dates.--
                    (A) Subsections (a) and (c).--
                            (i) In general.--The provisions of, and 
                        amendments made by, subsections (a) and (c) 
                        shall apply to any individual who applies for, 
                        or whose claim is finally adjudicated with 
respect to, benefits under title XVI of the Social Security Act on or 
after the date of the enactment of this Act, without regard to whether 
regulations have been issued to implement such provisions and 
amendments.
                            (ii) Determination of final adjudication.--
                        For purposes of clause (i), no individual's 
                        claim with respect to such benefits may be 
                        considered to be finally adjudicated before 
                        such date of enactment if, on or after such 
                        date, there is pending a request for either 
                        administrative or judicial review with respect 
                        to such claim that has been denied in whole, or 
                        there is pending, with respect to such claim, 
                        readjudication by the Commissioner of Social 
                        Security pursuant to relief in a class action 
                        or implementation by the Commissioner of a 
                        court remand order.
                    (B) Subsection (d).--The amendments made by 
                subsection (d) shall apply with respect to benefits 
                under title XVI of the Social Security Act for months 
                beginning on or after the date of the enactment of this 
                Act, without regard to whether regulations have been 
                issued to implement such amendments.
            (2) Application to current recipients.--
                    (A) Eligibility redeterminations.--During the 
                period beginning on the date of the enactment of this 
                Act and ending on the date which is 1 year after such 
                date of enactment, the Commissioner of Social Security 
                shall redetermine the eligibility of any individual 
                under age 18 who is receiving supplemental security 
                income benefits by reason of disability under title XVI 
                of the Social Security Act as of the date of the 
                enactment of this Act and whose eligibility for such 
                benefits may terminate by reason of the provisions of, 
                or amendments made by, subsections (a) and (c) of this 
                section. With respect to any redetermination under this 
                subparagraph--
                            (i) section 1614(a)(4) of the Social 
                        Security Act (42 U.S.C. 1382c(a)(4)) shall not 
                        apply;
                            (ii) the Commissioner of Social Security 
                        shall apply the eligibility criteria for new 
                        applicants for benefits under title XVI of such 
                        Act;
                            (iii) the Commissioner shall give such 
                        redetermination priority over all continuing 
                        eligibility reviews and other reviews under 
                        such title; and
                            (iv) such redetermination shall be counted 
                        as a review or redetermination otherwise 
                        required to be made under section 208 of the 
                        Social Security Independence and Program 
                        Improvements Act of 1994 or any other provision 
                        of title XVI of the Social Security Act.
                    (B) Grandfather provision.--The provisions of, and 
                amendments made by, subsections (a) and (c) of this 
                section, and the redetermination under subparagraph 
                (A), shall only apply with respect to the benefits of 
                an individual described in subparagraph (A) for months 
                beginning on or after the later of July 1, 1997, or the 
                date of the redetermination with respect to such 
                individual.
                    (C) Notice.--Not later than January 1, 1997, the 
                Commissioner of Social Security shall notify an 
                individual described in subparagraph (A) of the 
                provisions of this paragraph.
            (3) Report.--The Commissioner of Social Security shall 
        report to the Congress regarding the progress made in 
        implementing the provisions of, and amendments made by, this 
        section on child disability evaluations not later than 180 days 
        after the date of the enactment of this Act.
            (4) Regulations.--Notwithstanding any other provision of 
        law, the Commissioner of Social Security shall submit for 
        review to the committees of jurisdiction in the Congress any 
        final regulation pertaining to the eligibility of individuals 
        under age 18 for benefits under title XVI of the Social 
        Security Act at least 45 days before the effective date of such 
regulation. The submission under this paragraph shall include 
supporting documentation providing a cost analysis, workload impact, 
and projections as to how the regulation will effect the future number 
of recipients under such title.
            (5) Appropriations.--
                    (A) In general.--Out of any money in the Treasury 
                not otherwise appropriated, there are authorized to be 
                appropriated and are hereby appropriated, to remain 
                available without fiscal year limitation, $200,000,000 
                for fiscal year 1997, $75,000,000 for fiscal year 1998, 
                and $25,000,000 for fiscal year 1999, for the 
                Commissioner of Social Security to utilize only for 
                continuing disability reviews and redeterminations 
                under title XVI of the Social Security Act, with 
                reviews and redeterminations for individuals affected 
                by the provisions of subsection (b) given highest 
                priority.
                    (B) Additional funds.--Amounts appropriated under 
                subparagraph (A) shall be in addition to any funds 
                otherwise appropriated for continuing disability 
                reviews and redeterminations under title XVI of the 
                Social Security Act.
            (6) Benefits under title xvi.--For purposes of this 
        subsection, the term ``benefits under title XVI of the Social 
        Security Act'' includes supplementary payments pursuant to an 
        agreement for Federal administration under section 1616(a) of 
        the Social Security Act, and payments pursuant to an agreement 
        entered into under section 212(b) of Public Law 93-66.

SEC. 2212. ELIGIBILITY REDETERMINATIONS AND CONTINUING DISABILITY 
              REVIEWS.

    (a) Continuing Disability Reviews Relating to Certain Children.--
Section 1614(a)(3)(H) (42 U.S.C. 1382c(a)(3)(H)), as redesignated by 
section 2211(a)(3) of this Act, is amended--
            (1) by inserting ``(i)'' after ``(H)''; and
            (2) by adding at the end the following new clause:
    ``(ii)(I) Not less frequently than once every 3 years, the 
Commissioner shall review in accordance with paragraph (4) the 
continued eligibility for benefits under this title of each individual 
who has not attained 18 years of age and is eligible for such benefits 
by reason of an impairment (or combination of impairments) which is 
likely to improve (or, at the option of the Commissioner, which is 
unlikely to improve).
    ``(II) A representative payee of a recipient whose case is reviewed 
under this clause shall present, at the time of review, evidence 
demonstrating that the recipient is, and has been, receiving treatment, 
to the extent considered medically necessary and available, of the 
condition which was the basis for providing benefits under this title.
    ``(III) If the representative payee refuses to comply without good 
cause with the requirements of subclause (II), the Commissioner of 
Social Security shall, if the Commissioner determines it is in the best 
interest of the individual, promptly suspend payment of benefits to the 
representative payee, and provide for payment of benefits to an 
alternative representative payee of the individual or, if the interest 
of the individual under this title would be served thereby, to the 
individual.
    ``(IV) Subclause (II) shall not apply to the representative payee 
of any individual with respect to whom the Commissioner determines such 
application would be inappropriate or unnecessary. In making such 
determination, the Commissioner shall take into consideration the 
nature of the individual's impairment (or combination of impairments). 
Section 1631(c) shall not apply to a finding by the Commissioner that 
the requirements of subclause (II) should not apply to an individual's 
representative payee.''.
    (b) Disability Eligibility Redeterminations Required for SSI 
Recipients Who Attain 18 Years of Age.--
            (1) In general.--Section 1614(a)(3)(H) (42 U.S.C. 
        1382c(a)(3)(H)), as amended by subsection (a) of this section, 
        is amended by adding at the end the following new clause:
    ``(iii) If an individual is eligible for benefits under this title 
by reason of disability for the month preceding the month in which the 
individual attains the age of 18 years, the Commissioner shall 
redetermine such eligibility--
            ``(I) during the 1-year period beginning on the 
        individual's 18th birthday; and
            ``(II) by applying the criteria used in determining the 
        initial eligibility for applicants who are age 18 or older.
With respect to a redetermination under this clause, paragraph (4) 
shall not apply and such redetermination shall be considered a 
substitute for a review or redetermination otherwise required under any 
other provision of this subparagraph during that 1-year period.''.
            (2) Conforming repeal.--Section 207 of the Social Security 
        Independence and Program Improvements Act of 1994 (42 U.S.C. 
        1382 note; 108 Stat. 1516) is hereby repealed.
    (c) Continuing Disability Review Required for Low Birth Weight 
Babies.--Section 1614(a)(3)(H) (42 U.S.C. 1382c(a)(3)(H)), as amended 
by subsections (a) and (b) of this section, is amended by adding at the 
end the following new clause:
    ``(iv)(I) Not later than 12 months after the birth of an 
individual, the Commissioner shall review in accordance with paragraph 
(4) the continuing eligibility for benefits under this title by reason 
of disability of such individual whose low birth weight is a 
contributing factor material to the Commissioner's determination that 
the individual is disabled.
    ``(II) A review under subclause (I) shall be considered a 
substitute for a review otherwise required under any other provision of 
this subparagraph during that 12-month period.
    ``(III) A representative payee of a recipient whose case is 
reviewed under this clause shall present, at the time of review, 
evidence demonstrating that the recipient is, and has been, receiving 
treatment, to the extent considered medically necessary and available, 
of the condition which was the basis for providing benefits under this 
title.
    ``(IV) If the representative payee refuses to comply without good 
cause with the requirements of subclause (III), the Commissioner of 
Social Security shall, if the Commissioner determines it is in the best 
interest of the individual, promptly suspend payment of benefits to the 
representative payee, and provide for payment of benefits to an 
alternative representative payee of the individual or, if the interest 
of the individual under this title would be served thereby, to the 
individual.
    ``(V) Subclause (III) shall not apply to the representative payee 
of any individual with respect to whom the Commissioner determines such 
application would be inappropriate or unnecessary. In making such 
determination, the Commissioner shall take into consideration the 
nature of the individual's impairment (or combination of impairments). 
Section 1631(c) shall not apply to a finding by the Commissioner that 
the requirements of subclause (III) should not apply to an individual's 
representative payee.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to benefits for months beginning on or after the date of the 
enactment of this Act, without regard to whether regulations have been 
issued to implement such amendments.

SEC. 2213. ADDITIONAL ACCOUNTABILITY REQUIREMENTS.

    (a) Requirement To Establish Account.--Section 1631(a)(2) (42 
U.S.C. 1383(a)(2)) is amended--
            (1) by redesignating subparagraphs (F) and (G) as 
        subparagraphs (G) and (H), respectively; and
            (2) by inserting after subparagraph (E) the following new 
        subparagraph:
    ``(F)(i)(I) Each representative payee of an eligible individual 
under the age of 18 who is eligible for the payment of benefits 
described in subclause (II) shall establish on behalf of such 
individual an account in a financial institution into which such 
benefits shall be paid, and shall thereafter maintain such account for 
use in accordance with clause (ii).
    ``(II) Benefits described in this subclause are past-due monthly 
benefits under this title (which, for purposes of this subclause, 
include State supplementary payments made by the Commissioner pursuant 
to an agreement under section 1616 or section 212(b) of Public Law 93-
66) in an amount (after any withholding by the Commissioner for 
reimbursement to a State for interim assistance under subsection (g)) 
that exceeds the product of--
            ``(aa) 6, and
            ``(bb) the maximum monthly benefit payable under this title 
        to an eligible individual.
    ``(ii)(I) A representative payee may use funds in the account 
established under clause (i) to pay for allowable expenses described in 
subclause (II).
    ``(II) An allowable expense described in this subclause is an 
expense for--
            ``(aa) education or job skills training;
            ``(bb) personal needs assistance;
            ``(cc) special equipment;
            ``(dd) housing modification;
            ``(ee) medical treatment;
            ``(ff) therapy or rehabilitation; or
            ``(gg) any other item or service that the Commissioner 
        determines to be appropriate;
provided that such expense benefits such individual and, in the case of 
an expense described in item (cc), (dd), (ff), or (gg), is related to 
the impairment (or combination of impairments) of such individual.
    ``(III) The use of funds from an account established under clause 
(i) in any manner not authorized by this clause--
            ``(aa) by a representative payee shall be considered a 
        misapplication of benefits for all purposes of this paragraph, 
        and any representative payee who knowingly misapplies benefits 
        from such an account shall be liable to the Commissioner in an 
        amount equal to the total amount of such benefits; and
            ``(bb) by an eligible individual who is his or her own 
        payee shall be considered a misapplication of benefits for all 
        purposes of this paragraph and the total amount of such 
        benefits so used shall be considered to be the uncompensated 
        value of a disposed resource and shall be subject to the 
        provisions of section 1613(c).
    ``(IV) This clause shall continue to apply to funds in the account 
after the child has reached age 18, regardless of whether benefits are 
paid directly to the beneficiary or through a representative payee.
    ``(iii) The representative payee may deposit into the account 
established pursuant to clause (i)--
            ``(I) past-due benefits payable to the eligible individual 
        in an amount less than that specified in clause (i)(II), and
            ``(II) any other funds representing an underpayment under 
        this title to such individual, provided that the amount of such 
        underpayment is equal to or exceeds the maximum monthly benefit 
        payable under this title to an eligible individual.
    ``(iv) The Commissioner of Social Security shall establish a system 
for accountability monitoring whereby such representative payee shall 
report, at such time and in such manner as the Commissioner shall 
require, on activity respecting funds in the account established 
pursuant to clause (i).''.
    (b) Conforming Amendments.--
            (1) Exclusion from resources.--Section 1613(a) (42 U.S.C. 
        1382b(a)) is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (10);
                    (B) by striking the period at the end of paragraph 
                (11) and inserting ``; and''; and
                    (C) by inserting after paragraph (11) the following 
                new paragraph:
            ``(12) any account, including accrued interest or other 
        earnings thereon, established and maintained in accordance with 
        section 1631(a)(2)(F).''.
            (2) Exclusion from income.--Section 1612(b) (42 U.S.C. 
        1382a(b)) is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (19);
                    (B) by striking the period at the end of paragraph 
                (20) and inserting ``; and''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(21) the interest or other earnings on any account 
        established and maintained in accordance with section 
        1631(a)(2)(F).''.
            (c) Effective Date.--The amendments made by this section 
        shall apply to payments made after the date of the enactment of 
        this Act.

SEC. 2214. REDUCTION IN CASH BENEFITS PAYABLE TO INSTITUTIONALIZED 
              INDIVIDUALS WHOSE MEDICAL COSTS ARE COVERED BY PRIVATE 
              INSURANCE.

    (a) In General.--Section 1611(e)(1)(B) (42 U.S.C. 1382(e)(1)(B)) is 
amended--
            (1) by striking ``title XIX, or'' and inserting ``title XV 
        or XIX,''; and
            (2) by inserting ``or, in the case of an eligible 
        individual under the age of 18, receiving payments (with 
        respect to such individual) under any health insurance policy 
        issued by a private provider of such insurance'' after 
        ``section 1614(f)(2)(B),''.
    (b) Effective Date.--The amendment made by this section shall apply 
to benefits for months beginning 90 or more days after the date of the 
enactment of this Act, without regard to whether regulations have been 
issued to implement such amendments.

SEC. 2215. REGULATIONS.

    Within 3 months after the date of the enactment of this Act, the 
Commissioner of Social Security shall prescribe such regulations as may 
be necessary to implement the amendments made by this subchapter.

             Subchapter C--Additional Enforcement Provision

SEC. 2221. INSTALLMENT PAYMENT OF LARGE PAST-DUE SUPPLEMENTAL SECURITY 
              INCOME BENEFITS.

    (a) In General.--Section 1631(a) (42 U.S.C. 1383) is amended by 
adding at the end the following new paragraph:
    ``(10)(A) If an individual is eligible for past-due monthly 
benefits under this title in an amount that (after any withholding for 
reimbursement to a State for interim assistance under subsection (g)) 
equals or exceeds the product of--
            ``(i) 12, and
            ``(ii) the maximum monthly benefit payable under this title 
        to an eligible individual (or, if appropriate, to an eligible 
        individual and eligible spouse),
then the payment of such past-due benefits (after any such 
reimbursement to a State) shall be made in installments as provided in 
subparagraph (B).
    ``(B)(i) The payment of past-due benefits subject to this 
subparagraph shall be made in not to exceed 3 installments that are 
made at 6-month intervals.
    ``(ii) Except as provided in clause (iii), the amount of each of 
the first and second installments may not exceed an amount equal to the 
product of clauses (i) and (ii) of subparagraph (A).
    ``(iii) In the case of an individual who has--
            ``(I) outstanding debt attributable to--
                    ``(aa) food,
                    ``(bb) clothing,
                    ``(cc) shelter, or
                    ``(dd) medically necessary services, supplies or 
                equipment, or medicine; or
            ``(II) current expenses or expenses anticipated in the near 
        term attributable to--
                    ``(aa) medically necessary services, supplies or 
                equipment, or medicine, or
                    ``(bb) the purchase of a home, and
such debt or expenses are not subject to reimbursement by a public 
assistance program, the Secretary under title XVIII, a State plan 
approved under title XV or XIX, or any private entity legally liable to 
provide payment pursuant to an insurance policy, pre-paid plan, or 
other arrangement, the limitation specified in clause (ii) may be 
exceeded by an amount equal to the total of such debt and expenses.
    ``(C) This paragraph shall not apply to any individual who, at the 
time of the Commissioner's determination that such individual is 
eligible for the payment of past-due monthly benefits under this 
title--
            ``(i) is afflicted with a medically determinable impairment 
        that is expected to result in death within 12 months; or
            ``(ii) is ineligible for benefits under this title and the 
        Commissioner determines that such individual is likely to 
        remain ineligible for the next 12 months.
    ``(D) For purposes of this paragraph, the term `benefits under this 
title' includes supplementary payments pursuant to an agreement for 
Federal administration under section 1616(a), and payments pursuant to 
an agreement entered into under section 212(b) of Public Law 93-66.''.
    (b) Conforming Amendment.--Section 1631(a)(1) (42 U.S.C. 
1383(a)(1)) is amended by inserting ``(subject to paragraph (10))'' 
immediately before ``in such installments''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section are 
        effective with respect to past-due benefits payable under title 
        XVI of the Social Security Act after the third month following 
        the month in which this Act is enacted.
            (2) Benefits payable under title xvi.--For purposes of this 
        subsection, the term ``benefits payable under title XVI of the 
        Social Security Act'' includes supplementary payments pursuant 
        to an agreement for Federal administration under section 
        1616(a) of the Social Security Act, and payments pursuant to an 
        agreement entered into under section 212(b) of Public Law 93-
        66.

SEC. 2222. REGULATIONS.

    Within 3 months after the date of the enactment of this Act, the 
Commissioner of Social Security shall prescribe such regulations as may 
be necessary to implement the amendments made by this subchapter.

              Subchapter D--State Supplementation Programs

SEC. 2225. REPEAL OF MAINTENANCE OF EFFORT REQUIREMENTS APPLICABLE TO 
              OPTIONAL STATE PROGRAMS FOR SUPPLEMENTATION OF SSI 
              BENEFITS.

    Section 1618 (42 U.S.C. 1382g) is hereby repealed.

  Subchapter E--Studies Regarding Supplemental Security Income Program

SEC. 2231. ANNUAL REPORT ON THE SUPPLEMENTAL SECURITY INCOME PROGRAM.

    Title XVI (42 U.S.C. 1381 et seq.), as amended by section 2201(c) 
of this Act, is amended by adding at the end the following new section:

                       ``annual report on program

    ``Sec. 1637. (a) Not later than May 30 of each year, the 
Commissioner of Social Security shall prepare and deliver a report 
annually to the President and the Congress regarding the program under 
this title, including--
            ``(1) a comprehensive description of the program;
            ``(2) historical and current data on allowances and 
        denials, including number of applications and allowance rates 
        for initial determinations, reconsideration determinations, 
        administrative law judge hearings, appeals council reviews, and 
        Federal court decisions;
            ``(3) historical and current data on characteristics of 
        recipients and program costs, by recipient group (aged, blind, 
        disabled adults, and disabled children);
            ``(4) historical and current data on prior enrollment by 
        recipients in public benefit programs, including State programs 
        funded under part A of title IV of the Social Security Act and 
        State general assistance programs;
            ``(5) projections of future number of recipients and 
        program costs, through at least 25 years;
            ``(6) number of redeterminations and continuing disability 
        reviews, and the outcomes of such redeterminations and reviews;
            ``(7) data on the utilization of work incentives;
            ``(8) detailed information on administrative and other 
        program operation costs;
            ``(9) summaries of relevant research undertaken by the 
        Social Security Administration, or by other researchers;
            ``(10) State supplementation program operations;
            ``(11) a historical summary of statutory changes to this 
        title; and
            ``(12) such other information as the Commissioner deems 
        useful.
    ``(b) Each member of the Social Security Advisory Board shall be 
permitted to provide an individual report, or a joint report if agreed, 
of views of the program under this title, to be included in the annual 
report required under this section.''.

SEC. 2232. STUDY BY GENERAL ACCOUNTING OFFICE.

    Not later than January 1, 1999, the Comptroller General of the 
United States shall study and report on--
            (1) the impact of the amendments made by, and the 
        provisions of, this chapter on the supplemental security income 
        program under title XVI of the Social Security Act; and
            (2) extra expenses incurred by families of children 
        receiving benefits under such title that are not covered by 
        other Federal, State, or local programs.

                        CHAPTER 3--CHILD SUPPORT

SEC. 2300. REFERENCE TO SOCIAL SECURITY ACT.

    Except as otherwise specifically provided, wherever in this chapter 
an amendment is expressed in terms of an amendment to or repeal of a 
section or other provision, the reference shall be considered to be 
made to that section or other provision of the Social Security Act.

    Subchapter A--Eligibility for Services; Distribution of Payments

SEC. 2301. STATE OBLIGATION TO PROVIDE CHILD SUPPORT ENFORCEMENT 
              SERVICES.

    (a) State Plan Requirements.--Section 454 (42 U.S.C. 654) is 
amended--
            (1) by striking paragraph (4) and inserting the following 
        new paragraph:
            ``(4) provide that the State will--
                    ``(A) provide services relating to the 
                establishment of paternity or the establishment, 
                modification, or enforcement of child support 
                obligations, as appropriate, under the plan with 
                respect to--
                            ``(i) each child for whom (I) assistance is 
                        provided under the State program funded under 
                        part A of this title, (II) benefits or services 
                        for foster care maintenance are provided under 
                        the State program funded under part E of this 
                        title, (III) medical assistance is provided 
                        under the State plan under title XV, or (IV) 
                        medical assistance is provided under the State 
                        plan approved under title XIX, unless, in 
                        accordance with paragraph (29), good cause or 
                        other exceptions exist;
                            ``(ii) any other child, if an individual 
                        applies for such services with respect to the 
                        child; and
                    ``(B) enforce any support obligation established 
                with respect to--
                            ``(i) a child with respect to whom the 
                        State provides services under the plan; or
                            ``(ii) the custodial parent of such a 
                        child;''; and
            (2) in paragraph (6)--
                    (A) by striking ``provide that'' and inserting 
                ``provide that--'';
                    (B) by striking subparagraph (A) and inserting the 
                following new subparagraph:
                    ``(A) services under the plan shall be made 
                available to residents of other States on the same 
                terms as to residents of the State submitting the 
                plan;'';
                    (C) in subparagraph (B), by inserting ``on 
                individuals not receiving assistance under any State 
                program funded under part A'' after ``such services 
                shall be imposed'';
                    (D) in each of subparagraphs (B), (C), (D), and 
                (E)--
                            (i) by indenting the subparagraph in the 
                        same manner as, and aligning the left margin of 
                        the subparagraph with the left margin of, the 
                        matter inserted by subparagraph (B) of this 
                        paragraph; and
                            (ii) by striking the final comma and 
                        inserting a semicolon; and
                    (E) in subparagraph (E), by indenting each of 
                clauses (i) and (ii) 2 additional ems.
    (b) Continuation of Services for Families Ceasing To Receive 
Assistance Under the State Program Funded Under Part A.--Section 454 
(42 U.S.C. 654) is amended--
            (1) by striking ``and'' at the end of paragraph (23);
            (2) by striking the period at the end of paragraph (24) and 
        inserting ``; and''; and
            (3) by adding after paragraph (24) the following new 
        paragraph:
            ``(25) provide that if a family with respect to which 
        services are provided under the plan ceases to receive 
        assistance under the State program funded under part A, the 
        State shall provide appropriate notice to the family and 
        continue to provide such services, subject to the same 
        conditions and on the same basis as in the case of other 
        individuals to whom services are furnished under the plan, 
        except that an application or other request to continue 
        services shall not be required of such a family and paragraph 
        (6)(B) shall not apply to the family.''.
    (c) Conforming Amendments.--
            (1) Section 452(b) (42 U.S.C. 652(b)) is amended by 
        striking ``454(6)'' and inserting ``454(4)''.
            (2) Section 452(g)(2)(A) (42 U.S.C. 652(g)(2)(A)) is 
        amended by striking ``454(6)'' each place it appears and 
        inserting ``454(4)(A)(ii)''.
            (3) Section 466(a)(3)(B) (42 U.S.C. 666(a)(3)(B)) is 
        amended by striking ``in the case of overdue support which a 
        State has agreed to collect under section 454(6)'' and 
        inserting ``in any other case''.
            (4) Section 466(e) (42 U.S.C. 666(e)) is amended by 
        striking ``paragraph (4) or (6) of section 454'' and inserting 
        ``section 454(4)''.

SEC. 2302. DISTRIBUTION OF CHILD SUPPORT COLLECTIONS.

    (a) In General.--Section 457 (42 U.S.C. 657) is amended to read as 
follows:

``SEC. 457. DISTRIBUTION OF COLLECTED SUPPORT.

    ``(a) In General.--Subject to subsection (e), an amount collected 
on behalf of a family as support by a State pursuant to a plan approved 
under this part shall be distributed as follows:
            ``(1) Families receiving assistance.--In the case of a 
        family receiving assistance from the State, the State shall--
                    ``(A) pay to the Federal Government the Federal 
                share of the amount so collected; and
                    ``(B) retain, or distribute to the family, the 
                State share of the amount so collected.
            ``(2) Families that formerly received assistance.--In the 
        case of a family that formerly received assistance from the 
        State:
                    ``(A) Current support payments.--To the extent that 
                the amount so collected does not exceed the amount 
                required to be paid to the family for the month in 
                which collected, the State shall distribute the amount 
                so collected to the family.
                    ``(B) Payments of arrearages.--To the extent that 
                the amount so collected exceeds the amount required to 
                be paid to the family for the month in which collected, 
                the State shall distribute the amount so collected as 
                follows:
                            ``(i) Distribution of arrearages that 
                        accrued after the family ceased to receive 
                        assistance.--
                                    ``(I) Pre-october 1997.--Except as 
                                provided in subclause (II), the 
                                provisions of this section (other than 
                                subsection (b)(1)) as in effect and 
                                applied on the day before the date of 
                                the enactment of section 2302 of the 
                                Personal Responsibility and Work 
                                Opportunity Act of 1996 shall apply 
                                with respect to the distribution of 
                                support arrearages that--
                                            ``(aa) accrued after the 
                                        family ceased to receive 
                                        assistance, and
                                            ``(bb) are collected before 
                                        October 1, 1997.
                                    ``(II) Post-september 1997.--With 
                                respect to the amount so collected on 
                                or after October 1, 1997 (or before 
                                such date, at the option of the 
                                State)--
                                            ``(aa) In general.--The 
                                        State shall first distribute 
                                        the amount so collected (other 
                                        than any amount described in 
                                        clause (iv)) to the family to 
                                        the extent necessary to satisfy 
any support arrearages with respect to the family that accrued after 
the family ceased to receive assistance from the State.
                                            ``(bb) Reimbursement of 
                                        governments for assistance 
                                        provided to the family.--After 
                                        the application of division 
                                        (aa) and clause (ii)(II)(aa) 
                                        with respect to the amount so 
                                        collected, the State shall 
                                        retain the State share of the 
                                        amount so collected, and pay to 
                                        the Federal Government the 
                                        Federal share (as defined in 
                                        subsection (c)(2)) of the 
                                        amount so collected, but only 
                                        to the extent necessary to 
                                        reimburse amounts paid to the 
                                        family as assistance by the 
                                        State.
                                            ``(cc) Distribution of the 
                                        remainder to the family.--To 
                                        the extent that neither 
                                        division (aa) nor division (bb) 
                                        applies to the amount so 
                                        collected, the State shall 
                                        distribute the amount to the 
                                        family.
                            ``(ii) Distribution of arrearages that 
                        accrued before the family received 
                        assistance.--
                                    ``(I) Pre-october 2000.--Except as 
                                provided in subclause (II), the 
                                provisions of this section (other than 
                                subsection (b)(1)) as in effect and 
                                applied on the day before the date of 
                                the enactment of section 2302 of the 
                                Personal Responsibility and Work 
                                Opportunity Act of 1996 shall apply 
                                with respect to the distribution of 
                                support arrearages that--
                                            ``(aa) accrued before the 
                                        family received assistance, and
                                            ``(bb) are collected before 
                                        October 1, 2000.
                                    ``(II) Post-september 2000.--
                                Unless, based on the report required by 
                                paragraph (4), the Congress determines 
                                otherwise, with respect to the amount 
                                so collected on or after October 1, 
                                2000 (or before such date, at the 
                                option of the State)--
                                            ``(aa) In general.--The 
                                        State shall first distribute 
                                        the amount so collected (other 
                                        than any amount described in 
                                        clause (iv)) to the family to 
                                        the extent necessary to satisfy 
                                        any support arrearages with 
                                        respect to the family that 
                                        accrued before the family 
                                        received assistance from the 
                                        State.
                                            ``(bb) Reimbursement of 
                                        governments for assistance 
                                        provided to the family.--After 
                                        the application of clause 
                                        (i)(II)(aa) and division (aa) 
                                        with respect to the amount so 
                                        collected, the State shall 
                                        retain the State share of the 
                                        amount so collected, and pay to 
                                        the Federal Government the 
                                        Federal share (as defined in 
                                        subsection (c)(2)) of the 
                                        amount so collected, but only 
                                        to the extent necessary to 
                                        reimburse amounts paid to the 
                                        family as assistance by the 
                                        State.
                                            ``(cc) Distribution of the 
                                        remainder to the family.--To 
                                        the extent that neither 
                                        division (aa) nor division (bb) 
                                        applies to the amount so 
                                        collected, the State shall 
                                        distribute the amount to the 
                                        family.
                            ``(iii) Distribution of arrearages that 
                        accrued while the family received assistance.--
                        In the case of a family described in this 
                        subparagraph, the provisions of paragraph (1) 
                        shall apply with respect to the distribution of 
                        support arrearages that accrued while the 
                        family received assistance.
                            ``(iv) Amounts collected pursuant to 
                        section 464.--Notwithstanding any other 
                        provision of this section, any amount of 
                        support collected pursuant to section 464 shall 
                        be retained by the State to the extent past-due 
                        support has been assigned to the State as a 
                        condition of receiving assistance from the 
                        State, up to the amount necessary to reimburse 
                        the State for amounts paid to the family as 
                        assistance by the State. The State shall pay to 
                        the Federal Government the Federal share of the 
                        amounts so retained. To the extent the amount 
                        collected pursuant to section 464 exceeds the 
                        amount so retained, the State shall distribute 
                        the excess to the family.
                            ``(v) Ordering rules for distributions.--
                        For purposes of this subparagraph, unless an 
                        earlier effective date is required by this 
                        section, effective October 1, 2000, the State 
                        shall treat any support arrearages collected, 
                        except for amounts collected pursuant to 
                        section 464, as accruing in the following 
                        order:
                                    ``(I) To the period after the 
                                family ceased to receive assistance.
                                    ``(II) To the period before the 
                                family received assistance.
                                    ``(III) To the period while the 
                                family was receiving assistance.
            ``(3) Families that never received assistance.--In the case 
        of any other family, the State shall distribute the amount so 
        collected to the family.
            ``(4) Study and report.--Not later than October 1, 1998, 
        the Secretary shall report to the Congress the Secretary's 
        findings with respect to--
                    ``(A) whether the distribution of post-assistance 
                arrearages to families has been effective in moving 
                people off of welfare and keeping them off of welfare;
                    ``(B) whether early implementation of a pre-
                assistance arrearage program by some States has been 
                effective in moving people off of welfare and keeping 
                them off of welfare;
                    ``(C) what the overall impact has been of the 
                amendments made by the Personal Responsibility and Work 
                Opportunity Act of 1996 with respect to child support 
                enforcement in moving people off of welfare and keeping 
                them off of welfare; and
                    ``(D) based on the information and data the 
                Secretary has obtained, what changes, if any, should 
be made in the policies related to the distribution of child support 
arrearages.
    ``(b) Continuation Of Assignments.--Any rights to support 
obligations, which were assigned to a State as a condition of receiving 
assistance from the State under part A and which were in effect on the 
day before the date of the enactment of the Personal Responsibility and 
Work Opportunity Act of 1996, shall remain assigned after such date.
    ``(c) Definitions.--As used in subsection (a):
            ``(1) Assistance.--The term `assistance from the State' 
        means--
                    ``(A) assistance under the State program funded 
                under part A or under the State plan approved under 
                part A of this title (as in effect on the day before 
                the date of the enactment of the Personal 
                Responsibility and Work Opportunity Act of 1996); and
                    ``(B) foster care maintenance payments under the 
                State plan approved under part E of this title.
            ``(2) Federal share.--The term `Federal share' means that 
        portion of the amount collected resulting from the application 
        of the Federal medical assistance percentage in effect for the 
        fiscal year in which the amount is collected.
            ``(3) Federal medical assistance percentage.--The term 
        `Federal medical assistance percentage' means--
                    ``(A) the Federal medical assistance percentage (as 
                defined in section 1118), in the case of Puerto Rico, 
                the Virgin Islands, Guam, and American Samoa; or
                    ``(B) the Federal medical assistance percentage (as 
                defined in section 1905(b), as in effect on September 
                30, 1996) in the case of any other State.
            ``(4) State share.--The term `State share' means 100 
        percent minus the Federal share.
    ``(d) Hold Harmless Provision.--If the amounts collected which 
could be retained by the State in the fiscal year (to the extent 
necessary to reimburse the State for amounts paid to families as 
assistance by the State) are less than the State share of the amounts 
collected in fiscal year 1995 (determined in accordance with section 
457 as in effect on the day before the date of the enactment of the 
Personal Responsibility and Work Opportunity Act of 1996), the State 
share for the fiscal year shall be an amount equal to the State share 
in fiscal year 1995.
    ``(e) Gap Payments not Subject to Distribution Under This 
Section.--At State option, this section shall not apply to any amount 
collected on behalf of a family as support by the State (and paid to 
the family in addition to the amount of assistance otherwise payable to 
the family) pursuant to a plan approved under this part if such amount 
would have been paid to the family by the State under section 
402(a)(28), as in effect and applied on the day before the date of the 
enactment of section 2302 of the Personal Responsibility and Work 
Opportunity Act of 1996. For purposes of subsection (d), the State 
share of such amount paid to the family shall be considered amounts 
which could be retained by the State if such payments were reported by 
the State as part of the State share of amounts collected in fiscal 
year 1995.''.
    (b) Conforming Amendments.--
            (1) Section 464(a)(1) (42 U.S.C. 664(a)(1)) is amended by 
        striking ``section 457(b)(4) or (d)(3)'' and inserting 
        ``section 457''.
            (2) Section 454 (42 U.S.C. 654) is amended--
                    (A) in paragraph (11)--
                            (i) by striking ``(11)'' and inserting 
                        ``(11)(A)''; and
                            (ii) by inserting after the semicolon 
                        ``and''; and
                    (B) by redesignating paragraph (12) as subparagraph 
                (B) of paragraph (11).
    (c) Effective Dates.--
            (1) In General.--Except as provided in paragraph (2), the 
        amendments made by this section shall be effective on October 
        1, 1996, or earlier at the State's option.
            (2) Conforming amendments.--The amendments made by 
        subsection (b)(2) shall become effective on the date of the 
        enactment of this Act.

SEC. 2303. PRIVACY SAFEGUARDS.

    (a) State Plan Requirement.--Section 454 (42 U.S.C. 654), as 
amended by section 2301(b) of this Act, is amended--
            (1) by striking ``and'' at the end of paragraph (24);
            (2) by striking the period at the end of paragraph (25) and 
        inserting ``; and''; and
            (3) by adding after paragraph (25) the following new 
        paragraph:
            ``(26) will have in effect safeguards, applicable to all 
        confidential information handled by the State agency, that are 
        designed to protect the privacy rights of the parties, 
        including--
                    ``(A) safeguards against unauthorized use or 
                disclosure of information relating to proceedings or 
                actions to establish paternity, or to establish or 
                enforce support;
                    ``(B) prohibitions against the release of 
                information on the whereabouts of 1 party to another 
                party against whom a protective order with respect to 
                the former party has been entered; and
                    ``(C) prohibitions against the release of 
                information on the whereabouts of 1 party to another 
                party if the State has reason to believe that the 
                release of the information may result in physical or 
                emotional harm to the former party.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
become effective on October 1, 1997.

SEC. 2304. RIGHTS TO NOTIFICATION OF HEARINGS.

    (a) In General.--Section 454 (42 U.S.C. 654), as amended by section 
2302(b)(2) of this Act, is amended by inserting after paragraph (11) 
the following new paragraph:
            ``(12) provide for the establishment of procedures to 
        require the State to provide individuals who are applying for 
        or receiving services under the State plan, or who are parties 
        to cases in which services are being provided under the State 
        plan--
                    ``(A) with notice of all proceedings in which 
                support obligations might be established or modified; 
                and
                    ``(B) with a copy of any order establishing or 
                modifying a child support obligation, or (in the case 
                of a petition for modification) a notice of 
                determination that there should be no change in the 
                amount of the child support award, within 14 days after 
                issuance of such order or determination;''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
become effective on October 1, 1997.

                 Subchapter B--Locate and Case Tracking

SEC. 2311. STATE CASE REGISTRY.

    Section 454A, as added by section 2344(a)(2) of this Act, is 
amended by adding at the end the following new subsections:
    ``(e) State Case Registry.--
            ``(1) Contents.--The automated system required by this 
        section shall include a registry (which shall be known as the 
        `State case registry') that contains records with respect to--
                    ``(A) each case in which services are being 
                provided by the State agency under the State plan 
                approved under this part; and
                    ``(B) each support order established or modified in 
                the State on or after October 1, 1998.
            ``(2) Linking of local registries.--The State case registry 
        may be established by linking local case registries of support 
        orders through an automated information network, subject to 
        this section.
            ``(3) Use of standardized data elements.--Such records 
        shall use standardized data elements for both parents (such as 
        names, social security numbers and other uniform identification 
        numbers, dates of birth, and case identification numbers), and 
        contain such other information (such as on case status) as the 
        Secretary may require.
            ``(4) Payment records.--Each case record in the State case 
        registry with respect to which services are being provided 
        under the State plan approved under this part and with respect 
        to which a support order has been established shall include a 
        record of--
                    ``(A) the amount of monthly (or other periodic) 
                support owed under the order, and other amounts 
                (including arrearages, interest or late payment 
                penalties, and fees) due or overdue under the order;
                    ``(B) any amount described in subparagraph (A) that 
                has been collected;
                    ``(C) the distribution of such collected amounts;
                    ``(D) the birth date of any child for whom the 
                order requires the provision of support; and
                    ``(E) the amount of any lien imposed with respect 
                to the order pursuant to section 466(a)(4).
            ``(5) Updating and monitoring.--The State agency operating 
        the automated system required by this section shall promptly 
        establish and update, maintain, and regularly monitor, case 
        records in the State case registry with respect to which 
        services are being provided under the State plan approved under 
        this part, on the basis of--
                    ``(A) information on administrative actions and 
                administrative and judicial proceedings and orders 
                relating to paternity and support;
                    ``(B) information obtained from comparison with 
                Federal, State, or local sources of information;
                    ``(C) information on support collections and 
                distributions; and
                    ``(D) any other relevant information.
    ``(f) Information Comparisons and Other Disclosures of 
Information.--The State shall use the automated system required by this 
section to extract information from (at such times, and in such 
standardized format or formats, as may be required by the Secretary), 
to share and compare information with, and to receive information from, 
other data bases and information comparison services, in order to 
obtain (or provide) information necessary to enable the State agency 
(or the Secretary or other State or Federal agencies) to carry out this 
part, subject to section 6103 of the Internal Revenue Code of 1986. 
Such information comparison activities shall include the following:
            ``(1) Federal case registry of child support orders.--
        Furnishing to the Federal Case Registry of Child Support Orders 
        established under section 453(h) (and update as necessary, with 
        information including notice of expiration of orders) the 
        minimum amount of information on child support cases recorded 
        in the State case registry that is necessary to operate the 
        registry (as specified by the Secretary in regulations).
            ``(2) Federal parent locator service.--Exchanging 
        information with the Federal Parent Locator Service for the 
        purposes specified in section 453.
            ``(3) Temporary family assistance and medicaid agencies.--
        Exchanging information with State agencies (of the State and of 
        other States) administering programs funded under part A, 
        programs operated under a State plan under title XV or a State 
        plan approved under title XIX, and other programs designated by 
        the Secretary, as necessary to perform State agency 
        responsibilities under this part and under such programs.
            ``(4) Intrastate and interstate information comparisons.--
        Exchanging information with other agencies of the State, 
        agencies of other States, and interstate information networks, 
        as necessary and appropriate to carry out (or assist other 
        States to carry out) the purposes of this part.''.

SEC. 2312. COLLECTION AND DISBURSEMENT OF SUPPORT PAYMENTS.

    (a) State Plan Requirement.--Section 454 (42 U.S.C. 654), as 
amended by sections 2301(b) and 2303(a) of this Act, is amended--
            (1) by striking ``and'' at the end of paragraph (25);
            (2) by striking the period at the end of paragraph (26) and 
        inserting ``; and''; and
            (3) by adding after paragraph (26) the following new 
        paragraph:
            ``(27) provide that, on and after October 1, 1998, the 
        State agency will--
                    ``(A) operate a State disbursement unit in 
                accordance with section 454B; and
                    ``(B) have sufficient State staff (consisting of 
                State employees) and (at State option) contractors 
                reporting directly to the State agency to--
                            ``(i) monitor and enforce support 
                        collections through the unit in cases being 
                        enforced by the State pursuant to section 
                        454(4) (including carrying out the automated 
                        data processing responsibilities described in 
                        section 454A(g)); and
                            ``(ii) take the actions described in 
                        section 466(c)(1) in appropriate cases.''.
    (b) Establishment of State Disbursement Unit.--Part D of title IV 
(42 U.S.C. 651-669), as amended by section 2344(a)(2) of this Act, is 
amended by inserting after section 454A the following new section:

``SEC. 454B. COLLECTION AND DISBURSEMENT OF SUPPORT PAYMENTS.

    ``(a) State Disbursement Unit.--
            ``(1) In general.--In order for a State to meet the 
        requirements of this section, the State agency must establish 
        and operate a unit (which shall be known as the `State 
        disbursement unit') for the collection and disbursement of 
        payments under support orders--
                    ``(A) in all cases being enforced by the State 
                pursuant to section 454(4); and
                    ``(B) in all cases not being enforced by the State 
                under this part in which the support order is initially 
                issued in the State on or after January 1, 1994, and in 
                which the wages of the noncustodial parent are subject 
                to withholding pursuant to section 466(a)(8)(B).
            ``(2) Operation.--The State disbursement unit shall be 
        operated--
                    ``(A) directly by the State agency (or 2 or more 
                State agencies under a regional cooperative agreement), 
                or (to the extent appropriate) by a contractor 
                responsible directly to the State agency; and
                    ``(B) except in cases described in paragraph 
                (1)(B), in coordination with the automated system 
                established by the State pursuant to section 454A.
            ``(3) Linking of local disbursement units.--The State 
        disbursement unit may be established by linking local 
        disbursement units through an automated information network, 
        subject to this section, if the Secretary agrees that the 
        system will not cost more nor take more time to establish or 
        operate than a centralized system. In addition, employers shall 
        be given 1 location to which income withholding is sent.
    ``(b) Required Procedures.--The State disbursement unit shall use 
automated procedures, electronic processes, and computer-driven 
technology to the maximum extent feasible, efficient, and economical, 
for the collection and disbursement of support payments, including 
procedures--
            ``(1) for receipt of payments from parents, employers, and 
        other States, and for disbursements to custodial parents and 
        other obligees, the State agency, and the agencies of other 
        States;
            ``(2) for accurate identification of payments;
            ``(3) to ensure prompt disbursement of the custodial 
        parent's share of any payment; and
            ``(4) to furnish to any parent, upon request, timely 
        information on the current status of support payments under an 
        order requiring payments to be made by or to the parent.
    ``(c) Timing of Disbursements.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        State disbursement unit shall distribute all amounts payable 
        under section 457(a) within 2 business days after receipt from 
the employer or other source of periodic income, if sufficient 
information identifying the payee is provided.
            ``(2) Permissive retention of arrearages.--The State 
        disbursement unit may delay the distribution of collections 
        toward arrearages until the resolution of any timely appeal 
        with respect to such arrearages.
    ``(d) Business Day Defined.--As used in this section, the term 
`business day' means a day on which State offices are open for regular 
business.''.
    (c) Use of Automated System.--Section 454A, as added by section 
2344(a)(2) and as amended by section 2311 of this Act, is amended by 
adding at the end the following new subsection:
    ``(g) Collection and Distribution of Support Payments.--
            ``(1) In general.--The State shall use the automated system 
        required by this section, to the maximum extent feasible, to 
        assist and facilitate the collection and disbursement of 
        support payments through the State disbursement unit operated 
        under section 454B, through the performance of functions, 
        including, at a minimum--
                    ``(A) transmission of orders and notices to 
                employers (and other debtors) for the withholding of 
                wages and other income--
                            ``(i) within 2 business days after receipt 
                        of notice of, and the income source subject to, 
                        such withholding from a court, another State, 
                        an employer, the Federal Parent Locator 
                        Service, or another source recognized by the 
                        State; and
                            ``(ii) using uniform formats prescribed by 
                        the Secretary;
                    ``(B) ongoing monitoring to promptly identify 
                failures to make timely payment of support; and
                    ``(C) automatic use of enforcement procedures 
                (including procedures authorized pursuant to section 
                466(c)) if payments are not timely made.
            ``(2) Business day defined.--As used in paragraph (1), the 
        term `business day' means a day on which State offices are open 
        for regular business.''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall become effective on 
        October 1, 1998.
            (2) Limited exception to unit handling payments.--
        Notwithstanding section 454B(b)(1) of the Social Security Act, 
        as added by this section, any State which, as of the date of 
        the enactment of this Act, processes the receipt of child 
        support payments through local courts may, at the option of the 
        State, continue to process through September 30, 1999, such 
        payments through such courts as processed such payments on or 
        before such date of enactment.

SEC. 2313. STATE DIRECTORY OF NEW HIRES.

    (a) State Plan Requirement.--Section 454 (42 U.S.C. 654), as 
amended by sections 2301(b), 2303(a) and 2312(a) of this Act, is 
amended--
            (1) by striking ``and'' at the end of paragraph (26);
            (2) by striking the period at the end of paragraph (27) and 
        inserting ``; and''; and
            (3) by adding after paragraph (27) the following new 
        paragraph:
            ``(28) provide that, on and after October 1, 1997, the 
        State will operate a State Directory of New Hires in accordance 
        with section 453A.''.
    (b) State Directory of New Hires.--Part D of title IV (42 U.S.C. 
651-669) is amended by inserting after section 453 the following new 
section:

``SEC. 453A. STATE DIRECTORY OF NEW HIRES.

    ``(a) Establishment.--
            ``(1) In general.--
                    ``(A) Requirement for States that have no 
                directory.--Except as provided in subparagraph (B), not 
                later than October 1, 1997, each State shall establish 
an automated directory (to be known as the `State Directory of New 
Hires') which shall contain information supplied in accordance with 
subsection (b) by employers on each newly hired employee.
                    ``(B) States with new hire reporting in 
                existence.--A State which has a new hire reporting law 
                in existence on the date of the enactment of this 
                section may continue to operate under the State law, 
                but the State must meet the requirements of subsection 
                (g)(2) not later than October 1, 1997, and the 
                requirements of this section (other than subsection 
                (g)(2)) not later than October 1, 1998.
            ``(2) Definitions.--As used in this section:
                    ``(A) Employee.--The term `employee'--
                            ``(i) means an individual who is an 
                        employee within the meaning of chapter 24 of 
                        the Internal Revenue Code of 1986; and
                            ``(ii) does not include an employee of a 
                        Federal or State agency performing intelligence 
                        or counterintelligence functions, if the head 
                        of such agency has determined that reporting 
                        pursuant to paragraph (1) with respect to the 
                        employee could endanger the safety of the 
                        employee or compromise an ongoing investigation 
                        or intelligence mission.
                    ``(B) Employer.--
                            ``(i) In general.--The term `employer' has 
                        the meaning given such term in section 3401(d) 
                        of the Internal Revenue Code of 1986 and 
                        includes any governmental entity and any labor 
                        organization.
                            ``(ii) Labor organization.--The term `labor 
                        organization' shall have the meaning given such 
                        term in section 2(5) of the National Labor 
                        Relations Act, and includes any entity (also 
                        known as a `hiring hall') which is used by the 
                        organization and an employer to carry out 
                        requirements described in section 8(f)(3) of 
                        such Act of an agreement between the 
                        organization and the employer.
    ``(b) Employer Information.--
            ``(1) Reporting requirement.--
                    ``(A) In general.--Except as provided in 
                subparagraphs (B) and (C), each employer shall furnish 
                to the Directory of New Hires of the State in which a 
                newly hired employee works, a report that contains the 
                name, address, and social security number of the 
                employee, and the name and address of, and identifying 
                number assigned under section 6109 of the Internal 
                Revenue Code of 1986 to, the employer.
                    ``(B) Multistate employers.--An employer that has 
                employees who are employed in 2 or more States and that 
                transmits reports magnetically or electronically may 
                comply with subparagraph (A) by designating 1 State in 
                which such employer has employees to which the employer 
                will transmit the report described in subparagraph (A), 
                and transmitting such report to such State. Any 
                employer that transmits reports pursuant to this 
                subparagraph shall notify the Secretary in writing as 
                to which State such employer designates for the purpose 
                of sending reports.
                    ``(C) Federal government employers.--Any 
                department, agency, or instrumentality of the United 
                States shall comply with subparagraph (A) by 
                transmitting the report described in subparagraph (A) 
                to the National Directory of New Hires established 
                pursuant to section 453.
            ``(2) Timing of report.--Each State may provide the time 
        within which the report required by paragraph (1) shall be made 
        with respect to an employee, but such report shall be made--
                    ``(A) not later than 20 days after the date the 
                employer hires the employee; or
                    ``(B) in the case of an employer transmitting 
                reports magnetically or electronically, by 2 
monthly transmissions (if necessary) not less than 12 days nor more 
than 16 days apart.
    ``(c) Reporting Format and Method.--Each report required by 
subsection (b) shall be made on a W-4 form or, at the option of the 
employer, an equivalent form, and may be transmitted by 1st class mail, 
magnetically, or electronically.
    ``(d) Civil Money Penalties on Noncomplying Employers.--The State 
shall have the option to set a State civil money penalty which shall be 
less than--
            ``(1) $25; or
            ``(2) $500 if, under State law, the failure is the result 
        of a conspiracy between the employer and the employee to not 
        supply the required report or to supply a false or incomplete 
        report.
    ``(e) Entry of Employer Information.--Information shall be entered 
into the data base maintained by the State Directory of New Hires 
within 5 business days of receipt from an employer pursuant to 
subsection (b).
    ``(f) Information Comparisons.--
            ``(1) In general.--Not later than May 1, 1998, an agency 
        designated by the State shall, directly or by contract, conduct 
        automated comparisons of the social security numbers reported 
        by employers pursuant to subsection (b) and the social security 
        numbers appearing in the records of the State case registry for 
        cases being enforced under the State plan.
            ``(2) Notice of match.--When an information comparison 
        conducted under paragraph (1) reveals a match with respect to 
        the social security number of an individual required to provide 
        support under a support order, the State Directory of New Hires 
        shall provide the agency administering the State plan approved 
        under this part of the appropriate State with the name, 
        address, and social security number of the employee to whom the 
        social security number is assigned, and the name and address 
        of, and identifying number assigned under section 6109 of the 
        Internal Revenue Code of 1986 to, the employer.
    ``(g) Transmission of Information.--
            ``(1) Transmission of wage withholding notices to 
        employers.--Within 2 business days after the date information 
        regarding a newly hired employee is entered into the State 
        Directory of New Hires, the State agency enforcing the 
        employee's child support obligation shall transmit a notice to 
        the employer of the employee directing the employer to withhold 
        from the wages of the employee an amount equal to the monthly 
        (or other periodic) child support obligation (including any 
        past due support obligation) of the employee, unless the 
        employee's wages are not subject to withholding pursuant to 
        section 466(b)(3).
            ``(2) Transmissions to the national directory of new 
        hires.--
                    ``(A) New hire information.--Within 3 business days 
                after the date information regarding a newly hired 
                employee is entered into the State Directory of New 
                Hires, the State Directory of New Hires shall furnish 
                the information to the National Directory of New Hires.
                    ``(B) Wage and unemployment compensation 
                information.--The State Directory of New Hires shall, 
                on a quarterly basis, furnish to the National Directory 
                of New Hires extracts of the reports required under 
                section 303(a)(6) to be made to the Secretary of Labor 
                concerning the wages and unemployment compensation paid 
                to individuals, by such dates, in such format, and 
                containing such information as the Secretary of Health 
                and Human Services shall specify in regulations.
            ``(3) Business day defined.--As used in this subsection, 
        the term `business day' means a day on which State offices are 
        open for regular business.
    ``(h) Other Uses of New Hire Information.--
            ``(1) Location of child support obligors.--The agency 
        administering the State plan approved under this part shall use 
        information received pursuant to subsection (f)(2) to locate 
individuals for purposes of establishing paternity and establishing, 
modifying, and enforcing child support obligations.
            ``(2) Verification of eligibility for certain programs.--A 
        State agency responsible for administering a program specified 
        in section 1137(b) shall have access to information reported by 
        employers pursuant to subsection (b) of this section for 
        purposes of verifying eligibility for the program.
            ``(3) Administration of employment security and workers' 
        compensation.--State agencies operating employment security and 
        workers' compensation programs shall have access to information 
        reported by employers pursuant to subsection (b) for the 
        purposes of administering such programs.''.
    (c) Quarterly Wage Reporting.--Section 1137(a)(3) (42 U.S.C. 1320b-
7(a)(3)) is amended--
            (1) by inserting ``(including State and local governmental 
        entities and labor organizations (as defined in section 
        453A(a)(2)(B)(iii))'' after ``employers''; and
            (2) by inserting ``, and except that no report shall be 
        filed with respect to an employee of a State or local agency 
        performing intelligence or counterintelligence functions, if 
        the head of such agency has determined that filing such a 
        report could endanger the safety of the employee or compromise 
        an ongoing investigation or intelligence mission'' after 
        ``paragraph (2)''.

SEC. 2314. AMENDMENTS CONCERNING INCOME WITHHOLDING.

    (a) Mandatory Income Withholding.--
            (1) In general.--Section 466(a)(1) (42 U.S.C. 666(a)(1)) is 
        amended to read as follows:
            ``(1)(A) Procedures described in subsection (b) for the 
        withholding from income of amounts payable as support in cases 
        subject to enforcement under the State plan.
            ``(B) Procedures under which the wages of a person with a 
        support obligation imposed by a support order issued (or 
        modified) in the State before October 1, 1996, if not otherwise 
        subject to withholding under subsection (b), shall become 
        subject to withholding as provided in subsection (b) if 
        arrearages occur, without the need for a judicial or 
        administrative hearing.''.
            (2) Conforming amendments.--
                    (A) Section 466(b) (42 U.S.C. 666(b)) is amended in 
                the matter preceding paragraph (1), by striking 
                ``subsection (a)(1)'' and inserting ``subsection 
                (a)(1)(A)''.
                    (B) Section 466(b)(4) (42 U.S.C. 666(b)(4)) is 
                amended to read as follows:
            ``(4)(A) Such withholding must be carried out in full 
        compliance with all procedural due process requirements of the 
        State, and the State must send notice to each noncustodial 
        parent to whom paragraph (1) applies--
                    ``(i) that the withholding has commenced; and
                    ``(ii) of the procedures to follow if the 
                noncustodial parent desires to contest such withholding 
                on the grounds that the withholding or the amount 
                withheld is improper due to a mistake of fact.
            ``(B) The notice under subparagraph (A) of this paragraph 
        shall include the information provided to the employer under 
        paragraph (6)(A).''.
                    (C) Section 466(b)(5) (42 U.S.C. 666(b)(5)) is 
                amended by striking all that follows ``administered 
                by'' and inserting ``the State through the State 
                disbursement unit established pursuant to section 454B, 
                in accordance with the requirements of section 454B.''.
                    (D) Section 466(b)(6)(A) (42 U.S.C. 666(b)(6)(A)) 
                is amended--
                            (i) in clause (i), by striking ``to the 
                        appropriate agency'' and all that follows and 
                        inserting ``to the State disbursement unit 
                        within 5 business days after the date the 
                        amount would (but for this subsection) have 
                        been paid or credited to the employee, for 
                        distribution in accordance with this part. The 
employer shall comply with the procedural rules relating to income 
withholding of the State in which the employee works, regardless of the 
State where the notice originates.'';
                            (ii) in clause (ii), by inserting ``be in a 
                        standard format prescribed by the Secretary, 
                        and'' after ``shall''; and
                            (iii) by adding at the end the following 
                        new clause:
            ``(iii) As used in this subparagraph, the term `business 
        day' means a day on which State offices are open for regular 
        business.''.
                    (E) Section 466(b)(6)(D) (42 U.S.C. 666(b)(6)(D)) 
                is amended by striking ``any employer'' and all that 
                follows and inserting ``any employer who--
                    ``(i) discharges from employment, refuses to 
                employ, or takes disciplinary action against any 
                noncustodial parent subject to wage withholding 
                required by this subsection because of the existence of 
                such withholding and the obligations or additional 
                obligations which it imposes upon the employer; or
                    ``(ii) fails to withhold support from wages or to 
                pay such amounts to the State disbursement unit in 
                accordance with this subsection.''.
                    (F) Section 466(b) (42 U.S.C. 666(b)) is amended by 
                adding at the end the following new paragraph:
            ``(11) Procedures under which the agency administering the 
        State plan approved under this part may execute a withholding 
        order without advance notice to the obligor, including issuing 
        the withholding order through electronic means.''.
    (b) Conforming Amendment.--Section 466(c) (42 U.S.C. 666(c)) is 
repealed.

SEC. 2315. LOCATOR INFORMATION FROM INTERSTATE NETWORKS.

    Section 466(a) (42 U.S.C. 666(a)) is amended by inserting after 
paragraph (11) the following new paragraph:
            ``(12) Locator information from interstate networks.--
        Procedures to ensure that all Federal and State agencies 
        conducting activities under this part have access to any system 
        used by the State to locate an individual for purposes relating 
        to motor vehicles or law enforcement.''.

SEC. 2316. EXPANSION OF THE FEDERAL PARENT LOCATOR SERVICE.

    (a) Expanded Authority To Locate Individuals and Assets.--Section 
453 (42 U.S.C. 653) is amended--
            (1) in subsection (a), by striking all that follows 
        ``subsection (c))'' and inserting ``, for the purpose of 
        establishing parentage, establishing, setting the amount of, 
        modifying, or enforcing child support obligations, or enforcing 
        child custody or visitation orders--
            ``(1) information on, or facilitating the discovery of, the 
        location of any individual--
                    ``(A) who is under an obligation to pay child 
                support or provide child custody or visitation rights;
                    ``(B) against whom such an obligation is sought;
                    ``(C) to whom such an obligation is owed,
        including the individual's social security number (or numbers), 
        most recent address, and the name, address, and employer 
        identification number of the individual's employer;
            ``(2) information on the individual's wages (or other 
        income) from, and benefits of, employment (including rights to 
        or enrollment in group health care coverage); and
            ``(3) information on the type, status, location, and amount 
        of any assets of, or debts owed by or to, any such 
        individual.''; and
            (2) in subsection (b)--
                    (A) in the matter preceding paragraph (1), by 
                striking ``social security'' and all that follows 
                through ``absent parent'' and inserting ``information 
                described in subsection (a)''; and
                    (B) in the flush paragraph at the end, by adding 
                the following: ``No information shall be disclosed to 
                any person if the State has notified the Secretary that 
the State has reasonable evidence of domestic violence or child abuse 
and the disclosure of such information could be harmful to the 
custodial parent or the child of such parent. Information received or 
transmitted pursuant to this section shall be subject to the safeguard 
provisions contained in section 454(26).''.
    (b) Authorized Person for Information Regarding Visitation 
Rights.--Section 453(c) (42 U.S.C. 653(c)) is amended--
            (1) in paragraph (1), by striking ``support'' and inserting 
        ``support or to seek to enforce orders providing child custody 
        or visitation rights''; and
            (2) in paragraph (2), by striking ``, or any agent of such 
        court; and'' and inserting ``or to issue an order against a 
        resident parent for child custody or visitation rights, or any 
        agent of such court;''.
    (c) Reimbursement for Information From Federal Agencies.--Section 
453(e)(2) (42 U.S.C. 653(e)(2)) is amended in the 4th sentence by 
inserting ``in an amount which the Secretary determines to be 
reasonable payment for the information exchange (which amount shall not 
include payment for the costs of obtaining, compiling, or maintaining 
the information)'' before the period.
    (d) Reimbursement for Reports by State Agencies.--Section 453 (42 
U.S.C. 653) is amended by adding at the end the following new 
subsection:
    ``(g) Reimbursement for Reports by State Agencies.--The Secretary 
may reimburse Federal and State agencies for the costs incurred by such 
entities in furnishing information requested by the Secretary under 
this section in an amount which the Secretary determines to be 
reasonable payment for the information exchange (which amount shall not 
include payment for the costs of obtaining, compiling, or maintaining 
the information).''.
    (e) Conforming Amendments.--
            (1) Sections 452(a)(9), 453(a), 453(b), 463(a), 463(e), and 
        463(f) (42 U.S.C. 652(a)(9), 653(a), 653(b), 663(a), 663(e), 
        and 663(f)) are each amended by inserting ``Federal'' before 
        ``Parent'' each place such term appears.
            (2) Section 453 (42 U.S.C. 653) is amended in the heading 
        by adding ``federal'' before ``parent''.
    (f) New Components.--Section 453 (42 U.S.C. 653), as amended by 
subsection (d) of this section, is amended by adding at the end the 
following new subsections:
    ``(h) Federal Case Registry of Child Support Orders.--
            ``(1) In general.--Not later than October 1, 1998, in order 
        to assist States in administering programs under State plans 
        approved under this part and programs funded under part A, and 
        for the other purposes specified in this section, the Secretary 
        shall establish and maintain in the Federal Parent Locator 
        Service an automated registry (which shall be known as the 
        `Federal Case Registry of Child Support Orders'), which shall 
        contain abstracts of support orders and other information 
        described in paragraph (2) with respect to each case in each 
        State case registry maintained pursuant to section 454A(e), as 
        furnished (and regularly updated), pursuant to section 454A(f), 
        by State agencies administering programs under this part.
            ``(2) Case information.--The information referred to in 
        paragraph (1) with respect to a case shall be such information 
        as the Secretary may specify in regulations (including the 
        names, social security numbers or other uniform identification 
        numbers, and State case identification numbers) to identify the 
        individuals who owe or are owed support (or with respect to or 
        on behalf of whom support obligations are sought to be 
        established), and the State or States which have the case.
    ``(i) National Directory of New Hires.--
            ``(1) In general.--In order to assist States in 
        administering programs under State plans approved under this 
        part and programs funded under part A, and for the other 
purposes specified in this section, the Secretary shall, not later than 
October 1, 1997, establish and maintain in the Federal Parent Locator 
Service an automated directory to be known as the National Directory of 
New Hires, which shall contain the information supplied pursuant to 
section 453A(g)(2).
            ``(2) Entry of data.--Information shall be entered into the 
        data base maintained by the National Directory of New Hires 
        within 2 business days of receipt pursuant to section 
        453A(g)(2).
            ``(3) Administration of federal tax laws.--The Secretary of 
        the Treasury shall have access to the information in the 
        National Directory of New Hires for purposes of administering 
        section 32 of the Internal Revenue Code of 1986, or the advance 
        payment of the earned income tax credit under section 3507 of 
        such Code, and verifying a claim with respect to employment in 
        a tax return.
            ``(4) List of multistate employers.--The Secretary shall 
        maintain within the National Directory of New Hires a list of 
        multistate employers that report information regarding newly 
        hired employees pursuant to section 453A(b)(1)(B), and the 
        State which each such employer has designated to receive such 
        information.
    ``(j) Information Comparisons and Other Disclosures.--
            ``(1) Verification by social security administration.--
                    ``(A) In general.--The Secretary shall transmit 
                information on individuals and employers maintained 
                under this section to the Social Security 
                Administration to the extent necessary for verification 
                in accordance with subparagraph (B).
                    ``(B) Verification by ssa.--The Social Security 
                Administration shall verify the accuracy of, correct, 
                or supply to the extent possible, and report to the 
                Secretary, the following information supplied by the 
                Secretary pursuant to subparagraph (A):
                            ``(i) The name, social security number, and 
                        birth date of each such individual.
                            ``(ii) The employer identification number 
                        of each such employer.
            ``(2) Information comparisons.--For the purpose of locating 
        individuals in a paternity establishment case or a case 
        involving the establishment, modification, or enforcement of a 
        support order, the Secretary shall--
                    ``(A) compare information in the National Directory 
                of New Hires against information in the support case 
                abstracts in the Federal Case Registry of Child Support 
                Orders not less often than every 2 business days; and
                    ``(B) within 2 business days after such a 
                comparison reveals a match with respect to an 
                individual, report the information to the State agency 
                responsible for the case.
            ``(3) Information comparisons and disclosures of 
        information in all registries for title iv program purposes.--
        To the extent and with the frequency that the Secretary 
        determines to be effective in assisting States to carry out 
        their responsibilities under programs operated under this part 
        and programs funded under part A, the Secretary shall--
                    ``(A) compare the information in each component of 
                the Federal Parent Locator Service maintained under 
                this section against the information in each other such 
                component (other than the comparison required by 
                paragraph (2)), and report instances in which such a 
                comparison reveals a match with respect to an 
                individual to State agencies operating such programs; 
                and
                    ``(B) disclose information in such registries to 
                such State agencies.
            ``(4) Provision of new hire information to the social 
        security administration.--The National Directory of New Hires 
        shall provide the Commissioner of Social Security with all 
        information in the National Directory.
            ``(5) Research.--The Secretary may provide access to 
        information reported by employers pursuant to section 453A(b) 
        for research purposes found by the Secretary to be likely to 
        contribute to achieving the purposes of part A or this part, 
        but without personal identifiers.
    ``(k) Fees.--
            ``(1) For ssa verification.--The Secretary shall reimburse 
        the Commissioner of Social Security, at a rate negotiated 
        between the Secretary and the Commissioner, for the costs 
        incurred by the Commissioner in performing the verification 
        services described in subsection (j).
            ``(2) For information from state directories of new 
        hires.--The Secretary shall reimburse costs incurred by State 
        directories of new hires in furnishing information as required 
        by subsection (j)(3), at rates which the Secretary determines 
        to be reasonable (which rates shall not include payment for the 
        costs of obtaining, compiling, or maintaining such 
        information).
            ``(3) For information furnished to state and federal 
        agencies.--A State or Federal agency that receives information 
        from the Secretary pursuant to this section shall reimburse the 
        Secretary for costs incurred by the Secretary in furnishing the 
        information, at rates which the Secretary determines to be 
        reasonable (which rates shall include payment for the costs of 
        obtaining, verifying, maintaining, and comparing the 
        information).
    ``(l) Restriction on Disclosure and Use.--Information in the 
Federal Parent Locator Service, and information resulting from 
comparisons using such information, shall not be used or disclosed 
except as expressly provided in this section, subject to section 6103 
of the Internal Revenue Code of 1986.
    ``(m) Information Integrity and Security.--The Secretary shall 
establish and implement safeguards with respect to the entities 
established under this section designed to--
            ``(1) ensure the accuracy and completeness of information 
        in the Federal Parent Locator Service; and
            ``(2) restrict access to confidential information in the 
        Federal Parent Locator Service to authorized persons, and 
        restrict use of such information to authorized purposes.
    ``(n) Federal Government Reporting.--Each department, agency, and 
instrumentality of the United States shall on a quarterly basis report 
to the Federal Parent Locator Service the name and social security 
number of each employee and the wages paid to the employee during the 
previous quarter, except that such a report shall not be filed with 
respect to an employee of a department, agency, or instrumentality 
performing intelligence or counterintelligence functions, if the head 
of such department, agency, or instrumentality has determined that 
filing such a report could endanger the safety of the employee or 
compromise an ongoing investigation or intelligence mission.''.
    (g) Conforming Amendments.--
            (1) To part d of title iv of the social security act.--
                    (A) Section 454(8)(B) (42 U.S.C. 654(8)(B)) is 
                amended to read as follows:
                    ``(B) the Federal Parent Locator Service 
                established under section 453;''.
                    (B) Section 454(13) (42 U.S.C.654(13)) is amended 
                by inserting ``and provide that information requests by 
                parents who are residents of other States be treated 
                with the same priority as requests by parents who are 
                residents of the State submitting the plan'' before the 
                semicolon.
            (2) To federal unemployment tax act.--Section 3304(a)(16) 
        of the Internal Revenue Code of 1986 is amended--
                    (A) by striking ``Secretary of Health, Education, 
                and Welfare'' each place such term appears and 
                inserting ``Secretary of Health and Human Services'';
                    (B) in subparagraph (B), by striking ``such 
                information'' and all that follows and inserting 
                ``information furnished under subparagraph (A) or (B) 
                is used only for the purposes authorized under such 
subparagraph;'';
                    (C) by striking ``and'' at the end of subparagraph 
                (A);
                    (D) by redesignating subparagraph (B) as 
                subparagraph (C); and
                    (E) by inserting after subparagraph (A) the 
                following new subparagraph:
            ``(B) wage and unemployment compensation information 
        contained in the records of such agency shall be furnished to 
        the Secretary of Health and Human Services (in accordance with 
        regulations promulgated by such Secretary) as necessary for the 
        purposes of the National Directory of New Hires established 
        under section 453(i) of the Social Security Act, and''.
            (3) To state grant program under title iii of the social 
        security act.--Subsection (h) of section 303 (42 U.S.C. 503) is 
        amended to read as follows:
    ``(h)(1) The State agency charged with the administration of the 
State law shall, on a reimbursable basis--
            ``(A) disclose quarterly, to the Secretary of Health and 
        Human Services, wage and claim information, as required 
        pursuant to section 453(i)(1), contained in the records of such 
        agency;
            ``(B) ensure that information provided pursuant to 
        subparagraph (A) meets such standards relating to correctness 
        and verification as the Secretary of Health and Human Services, 
        with the concurrence of the Secretary of Labor, may find 
        necessary; and
            ``(C) establish such safeguards as the Secretary of Labor 
        determines are necessary to insure that information disclosed 
        under subparagraph (A) is used only for purposes of section 
        453(i)(1) in carrying out the child support enforcement program 
        under title IV.
    ``(2) Whenever the Secretary of Labor, after reasonable notice and 
opportunity for hearing to the State agency charged with the 
administration of the State law, finds that there is a failure to 
comply substantially with the requirements of paragraph (1), the 
Secretary of Labor shall notify such State agency that further payments 
will not be made to the State until the Secretary of Labor is satisfied 
that there is no longer any such failure. Until the Secretary of Labor 
is so satisfied, the Secretary shall make no future certification to 
the Secretary of the Treasury with respect to the State.
    ``(3) For purposes of this subsection--
            ``(A) the term `wage information' means information 
        regarding wages paid to an individual, the social security 
        account number of such individual, and the name, address, 
        State, and the Federal employer identification number of the 
        employer paying such wages to such individual; and
            ``(B) the term `claim information' means information 
        regarding whether an individual is receiving, has received, or 
        has made application for, unemployment compensation, the amount 
        of any such compensation being received (or to be received by 
        such individual), and the individual's current (or most recent) 
        home address.''.
            (4) Disclosure of certain information to agents of child 
        support enforcement agencies.--
                    (A) In general.--Paragraph (6) of section 6103(l) 
                of the Internal Revenue Code of 1986 (relating to 
                disclosure of return information to Federal, State, and 
                local child support enforcement agencies) is amended by 
                redesignating subparagraph (B) as subparagraph (C) and 
                by inserting after subparagraph (A) the following new 
                subparagraph:
                    ``(B) Disclosure to certain agents.--The following 
                information disclosed to any child support enforcement 
                agency under subparagraph (A) with respect to any 
                individual with respect to whom child support 
                obligations are sought to be established or enforced 
                may be disclosed by such agency to any agent of such 
                agency which is under contract with such agency to 
                carry out the purposes described in subparagraph (C):
                            ``(i) The address and social security 
                        account number (or numbers) of such individual.
                            ``(ii) The amount of any reduction under 
                        section 6402(c) (relating to offset of past-due 
                        support against overpayments) in any 
                        overpayment otherwise payable to such 
                        individual.''.
                    (B) Conforming amendments.--
                            (i) Paragraph (3) of section 6103(a) of 
                        such Code is amended by striking ``(l)(12)'' 
                        and inserting ``paragraph (6) or (12) of 
                        subsection (l)''.
                            (ii) Subparagraph (C) of section 6103(l)(6) 
                        of such Code, as redesignated by subsection 
                        (a), is amended to read as follows:
                    ``(C) Restriction on disclosure.--Information may 
                be disclosed under this paragraph only for purposes of, 
                and to the extent necessary in, establishing and 
                collecting child support obligations from, and 
                locating, individuals owing such obligations.''.
                            (iii) The material following subparagraph 
                        (F) of section 6103(p)(4) of such Code is 
                        amended by striking ``subsection (l)(12)(B)'' 
                        and inserting ``paragraph (6)(A) or (12)(B) of 
                        subsection (l)''.
    (h) Requirement for Cooperation.--The Secretary of Labor and the 
Secretary of Health and Human Services shall work jointly to develop 
cost-effective and efficient methods of accessing the information in 
the various State directories of new hires and the National Directory 
of New Hires as established pursuant to the amendments made by this 
subchapter. In developing these methods the Secretaries shall take into 
account the impact, including costs, on the States, and shall also 
consider the need to insure the proper and authorized use of wage 
record information.

SEC. 2317. COLLECTION AND USE OF SOCIAL SECURITY NUMBERS FOR USE IN 
              CHILD SUPPORT ENFORCEMENT.

    Section 466(a) (42 U.S.C. 666(a)), as amended by section 2315 of 
this Act, is amended by inserting after paragraph (12) the following 
new paragraph:
            ``(13) Recording of social security numbers in certain 
        family matters.--Procedures requiring that the social security 
        number of--
                    ``(A) any applicant for a professional license, 
                commercial driver's license, occupational license, or 
                marriage license be recorded on the application;
                    ``(B) any individual who is subject to a divorce 
                decree, support order, or paternity determination or 
                acknowledgment be placed in the records relating to the 
                matter; and
                    ``(C) any individual who has died be placed in the 
                records relating to the death and be recorded on the 
                death certificate.
        For purposes of subparagraph (A), if a State allows the use of 
        a number other than the social security number, the State shall 
        so advise any applicants.''.

        Subchapter C--Streamlining and Uniformity of Procedures

SEC. 2321. ADOPTION OF UNIFORM STATE LAWS.

    Section 466 (42 U.S.C. 666) is amended by adding at the end the 
following new subsection:
    ``(f) Uniform Interstate Family Support Act.--
            ``(1) Enactment and use.--In order to satisfy section 
        454(20)(A), on and after January 1, 1998, each State must have 
        in effect the Uniform Interstate Family Support Act, as 
        approved by the American Bar Association on February 9, 1993, 
        together with any amendments officially adopted before January 
        1, 1998 by the National Conference of Commissioners on Uniform 
        State Laws.
            ``(2) Employers to follow procedural rules of state where 
        employee works.--The State law enacted pursuant to paragraph 
(1) shall provide that an employer that receives an income withholding 
order or notice pursuant to section 501 of the Uniform Interstate 
Family Support Act follow the procedural rules that apply with respect 
to such order or notice under the laws of the State in which the 
obligor works.''.

SEC. 2322. IMPROVEMENTS TO FULL FAITH AND CREDIT FOR CHILD SUPPORT 
              ORDERS.

    Section 1738B of title 28, United States Code, is amended--
            (1) in subsection (a)(2), by striking ``subsection (e)'' 
        and inserting ``subsections (e), (f), and (i)'';
            (2) in subsection (b), by inserting after the 2nd 
        undesignated paragraph the following:
    ```child's home State' means the State in which a child lived with 
a parent or a person acting as parent for at least 6 consecutive months 
immediately preceding the time of filing of a petition or comparable 
pleading for support and, if a child is less than 6 months old, the 
State in which the child lived from birth with any of them. A period of 
temporary absence of any of them is counted as part of the 6-month 
period.'';
            (3) in subsection (c), by inserting ``by a court of a 
        State'' before ``is made'';
            (4) in subsection (c)(1), by inserting ``and subsections 
        (e), (f), and (g)'' after ``located'';
            (5) in subsection (d)--
                    (A) by inserting ``individual'' before 
                ``contestant''; and
                    (B) by striking ``subsection (e)'' and inserting 
                ``subsections (e) and (f)'';
            (6) in subsection (e), by striking ``make a modification of 
        a child support order with respect to a child that is made'' 
        and inserting ``modify a child support order issued'';
            (7) in subsection (e)(1), by inserting ``pursuant to 
        subsection (i)'' before the semicolon;
            (8) in subsection (e)(2)--
                    (A) by inserting ``individual'' before 
                ``contestant'' each place such term appears; and
                    (B) by striking ``to that court's making the 
                modification and assuming'' and inserting ``with the 
                State of continuing, exclusive jurisdiction for a court 
                of another State to modify the order and assume'';
            (9) by redesignating subsections (f) and (g) as subsections 
        (g) and (h), respectively;
            (10) by inserting after subsection (e) the following new 
        subsection:
    ``(f) Recognition of Child Support Orders.--If 1 or more child 
support orders have been issued with regard to an obligor and a child, 
a court shall apply the following rules in determining which order to 
recognize for purposes of continuing, exclusive jurisdiction and 
enforcement:
            ``(1) If only 1 court has issued a child support order, the 
        order of that court must be recognized.
            ``(2) If 2 or more courts have issued child support orders 
        for the same obligor and child, and only 1 of the courts would 
        have continuing, exclusive jurisdiction under this section, the 
        order of that court must be recognized.
            ``(3) If 2 or more courts have issued child support orders 
        for the same obligor and child, and more than 1 of the courts 
        would have continuing, exclusive jurisdiction under this 
        section, an order issued by a court in the current home State 
        of the child must be recognized, but if an order has not been 
        issued in the current home State of the child, the order most 
        recently issued must be recognized.
            ``(4) If 2 or more courts have issued child support orders 
        for the same obligor and child, and none of the courts would 
        have continuing, exclusive jurisdiction under this section, a 
        court may issue a child support order, which must be 
        recognized.
            ``(5) The court that has issued an order recognized under 
        this subsection is the court having continuing, exclusive 
        jurisdiction.'';
            (11) in subsection (g) (as so redesignated)--
                    (A) by striking ``Prior'' and inserting 
                ``Modified''; and
                    (B) by striking ``subsection (e)'' and inserting 
                ``subsections (e) and (f)'';
            (12) in subsection (h) (as so redesignated)--
                    (A) in paragraph (2), by inserting ``including the 
                duration of current payments and other obligations of 
                support'' before the comma; and
                    (B) in paragraph (3), by inserting ``arrears 
                under'' after ``enforce''; and
            (13) by adding at the end the following new subsection:
    ``(i) Registration for Modification.--If there is no individual 
contestant or child residing in the issuing State, the party or support 
enforcement agency seeking to modify, or to modify and enforce, a child 
support order issued in another State shall register that order in a 
State with jurisdiction over the nonmovant for the purpose of 
modification.''.

SEC. 2323. ADMINISTRATIVE ENFORCEMENT IN INTERSTATE CASES.

    Section 466(a) (42 U.S.C. 666(a)), as amended by sections 2315 and 
2317(a) of this Act, is amended by inserting after paragraph (13) the 
following new paragraph:
            ``(14) Administrative enforcement in interstate cases.--
        Procedures under which--
                    ``(A)(i) the State shall respond within 5 business 
                days to a request made by another State to enforce a 
                support order; and
                    ``(ii) the term `business day' means a day on which 
                State offices are open for regular business;
                    ``(B) the State may, by electronic or other means, 
                transmit to another State a request for assistance in a 
                case involving the enforcement of a support order, 
                which request--
                            ``(i) shall include such information as 
                        will enable the State to which the request is 
                        transmitted to compare the information about 
                        the case to the information in the data bases 
                        of the State; and
                            ``(ii) shall constitute a certification by 
                        the requesting State--
                                    ``(I) of the amount of support 
                                under the order the payment of which is 
                                in arrears; and
                                    ``(II) that the requesting State 
                                has complied with all procedural due 
                                process requirements applicable to the 
                                case;
                    ``(C) if the State provides assistance to another 
                State pursuant to this paragraph with respect to a 
                case, neither State shall consider the case to be 
                transferred to the caseload of such other State; and
                    ``(D) the State shall maintain records of--
                            ``(i) the number of such requests for 
                        assistance received by the State;
                            ``(ii) the number of cases for which the 
                        State collected support in response to such a 
                        request; and
                            ``(iii) the amount of such collected 
                        support.''.

SEC. 2324. USE OF FORMS IN INTERSTATE ENFORCEMENT.

    (a) Promulgation.--Section 452(a) (42 U.S.C. 652(a)) is amended--
            (1) by striking ``and'' at the end of paragraph (9);
            (2) by striking the period at the end of paragraph (10) and 
        inserting ``; and''; and
            (3) by adding at the end the following new paragraph:
            ``(11) not later than October 1, 1996, after consulting 
        with the State directors of programs under this part, 
        promulgate forms to be used by States in interstate cases for--
                    ``(A) collection of child support through income 
                withholding;
                    ``(B) imposition of liens; and
                    ``(C) administrative subpoenas.''.
    (b) Use by States.--Section 454(9) (42 U.S.C. 654(9)) is amended--
            (1) by striking ``and'' at the end of subparagraph (C);
            (2) by inserting ``and'' at the end of subparagraph (D); 
        and
            (3) by adding at the end the following new subparagraph:
                    ``(E) not later than March 1, 1997, in using the 
                forms promulgated pursuant to section 452(a)(11) for 
                income withholding, imposition of liens, and issuance 
                of administrative subpoenas in interstate child support 
                cases;''.

SEC. 2325. STATE LAWS PROVIDING EXPEDITED PROCEDURES.

    (a) State Law Requirements.--Section 466 (42 U.S.C. 666), as 
amended by section 2314 of this Act, is amended--
            (1) in subsection (a)(2), by striking the first sentence 
        and inserting the following: ``Expedited administrative and 
        judicial procedures (including the procedures specified in 
        subsection (c)) for establishing paternity and for 
        establishing, modifying, and enforcing support obligations.''; 
        and
            (2) by inserting after subsection (b) the following new 
        subsection:
    ``(c) Expedited Procedures.--The procedures specified in this 
subsection are the following:
            ``(1) Administrative action by state agency.--Procedures 
        which give the State agency the authority to take the following 
        actions relating to establishment of paternity or to 
        establishment, modification, or enforcement of support orders, 
        without the necessity of obtaining an order from any other 
        judicial or administrative tribunal, and to recognize and 
        enforce the authority of State agencies of other States to take 
        the following actions:
                    ``(A) Genetic testing.--To order genetic testing 
                for the purpose of paternity establishment as provided 
                in section 466(a)(5).
                    ``(B) Financial or other information.--To subpoena 
                any financial or other information needed to establish, 
                modify, or enforce a support order, and to impose 
                penalties for failure to respond to such a subpoena.
                    ``(C) Response to state agency request.--To require 
                all entities in the State (including for-profit, 
                nonprofit, and governmental employers) to provide 
                promptly, in response to a request by the State agency 
                of that or any other State administering a program 
                under this part, information on the employment, 
                compensation, and benefits of any individual employed 
                by such entity as an employee or contractor, and to 
                sanction failure to respond to any such request.
                    ``(D) Access to certain records.--To obtain access, 
                subject to safeguards on privacy and information 
                security, to the following records (including automated 
                access, in the case of records maintained in automated 
                data bases):
                            ``(i) Records of other State and local 
                        government agencies, including--
                                    ``(I) vital statistics (including 
                                records of marriage, birth, and 
                                divorce);
                                    ``(II) State and local tax and 
                                revenue records (including information 
                                on residence address, employer, income 
                                and assets);
                                    ``(III) records concerning real and 
                                titled personal property;
                                    ``(IV) records of occupational and 
                                professional licenses, and records 
                                concerning the ownership and control of 
                                corporations, partnerships, and other 
                                business entities;
                                    ``(V) employment security records;
                                    ``(VI) records of agencies 
                                administering public assistance 
                                programs;
                                    ``(VII) records of the motor 
                                vehicle department; and
                                    ``(VIII) corrections records.
                            ``(ii) Certain records held by private 
                        entities with respect to individuals who owe or 
                        are owed support (or against or with respect to 
whom a support obligation is sought), consisting of--
                                    ``(I) the names and addresses of 
                                such individuals and the names and 
                                addresses of the employers of such 
                                individuals, as appearing in customer 
                                records of public utilities and cable 
                                television companies; and
                                    ``(II) information (including 
                                information on assets and liabilities) 
                                on such individuals held by financial 
                                institutions,
                        subject to the nonliability of such entities 
                        arising from affording such access under this 
                        subparagraph.
                    ``(E) Change in payee.--In cases in which support 
                is subject to an assignment in order to comply with a 
                requirement imposed pursuant to part A or section 1912, 
                or to a requirement to pay through the State 
                disbursement unit established pursuant to section 454B, 
                upon providing notice to obligor and obligee, to direct 
                the obligor or other payor to change the payee to the 
                appropriate government entity.
                    ``(F) Income withholding.--To order income 
                withholding in accordance with subsections (a)(1)(A) 
                and (b) of section 466.
                    ``(G) Securing assets.--In cases in which there is 
                a support arrearage, to secure assets to satisfy the 
                arrearage by--
                            ``(i) intercepting or seizing periodic or 
                        lump-sum payments from--
                                    ``(I) a State or local agency, 
                                including unemployment compensation, 
                                workers' compensation, and other 
                                benefits; and
                                    ``(II) judgments, settlements, and 
                                lotteries;
                            ``(ii) attaching and seizing assets of the 
                        obligor held in financial institutions;
                            ``(iii) attaching public and private 
                        retirement funds; and
                            ``(iv) imposing liens in accordance with 
                        subsection (a)(4) and, in appropriate cases, to 
                        force sale of property and distribution of 
                        proceeds.
                    ``(H) Increase monthly payments.--For the purpose 
                of securing overdue support, to increase the amount of 
                monthly support payments to include amounts for 
                arrearages, subject to such conditions or limitations 
                as the State may provide.
        Such procedures shall be subject to due process safeguards, 
        including (as appropriate) requirements for notice, opportunity 
        to contest the action, and opportunity for an appeal on the 
        record to an independent administrative or judicial tribunal.
            ``(2) Substantive and procedural rules.--The expedited 
        procedures required under subsection (a)(2) shall include the 
        following rules and authority, applicable with respect to all 
        proceedings to establish paternity or to establish, modify, or 
        enforce support orders:
                    ``(A) Locator information; presumptions concerning 
                notice.--Procedures under which--
                            ``(i) each party to any paternity or child 
                        support proceeding is required (subject to 
                        privacy safeguards) to file with the tribunal 
                        and the State case registry upon entry of an 
                        order, and to update as appropriate, 
                        information on location and identity of the 
                        party, including social security number, 
                        residential and mailing addresses, telephone 
                        number, driver's license number, and name, 
                        address, and telephone number of employer; and
                            ``(ii) in any subsequent child support 
                        enforcement action between the parties, upon 
                        sufficient showing that diligent effort has 
                        been made to ascertain the location of such a 
                        party, the tribunal may deem State due process 
                        requirements for notice and service of process 
                        to be met with respect to the party, upon 
                        delivery of written notice to the most recent 
residential or employer address filed with the tribunal pursuant to 
clause (i).
                    ``(B) Statewide jurisdiction.--Procedures under 
                which--
                            ``(i) the State agency and any 
                        administrative or judicial tribunal with 
                        authority to hear child support and paternity 
                        cases exerts statewide jurisdiction over the 
                        parties; and
                            ``(ii) in a State in which orders are 
                        issued by courts or administrative tribunals, a 
                        case may be transferred between local 
                        jurisdictions in the State without need for any 
                        additional filing by the petitioner, or service 
                        of process upon the respondent, to retain 
                        jurisdiction over the parties.
            ``(3) Coordination with erisa.--Notwithstanding subsection 
        (d) of section 514 of the Employee Retirement Income Security 
        Act of 1974 (relating to effect on other laws), nothing in this 
        subsection shall be construed to alter, amend, modify, 
        invalidate, impair, or supersede subsections (a), (b), and (c) 
        of such section 514 as it applies with respect to any procedure 
        referred to in paragraph (1) and any expedited procedure 
        referred to in paragraph (2), except to the extent that such 
        procedure would be consistent with the requirements of section 
        206(d)(3) of such Act (relating to qualified domestic relations 
        orders) or the requirements of section 609(a) of such Act 
        (relating to qualified medical child support orders) if the 
        reference in such section 206(d)(3) to a domestic relations 
        order and the reference in such section 609(a) to a medical 
        child support order were a reference to a support order 
        referred to in paragraphs (1) and (2) relating to the same 
        matters, respectively.''.
    (b) Automation of State Agency Functions.--Section 454A, as added 
by section 2344(a)(2) and as amended by sections 2311 and 2312(c) of 
this Act, is amended by adding at the end the following new subsection:
    ``(h) Expedited Administrative Procedures.--The automated system 
required by this section shall be used, to the maximum extent feasible, 
to implement the expedited administrative procedures required by 
section 466(c).''.

                 Subchapter D--Paternity Establishment

SEC. 2331. STATE LAWS CONCERNING PATERNITY ESTABLISHMENT.

    (a) State Laws Required.--Section 466(a)(5) (42 U.S.C. 666(a)(5)) 
is amended to read as follows:
            ``(5) Procedures concerning paternity establishment.--
                    ``(A) Establishment process available from birth 
                until age 18.--
                            ``(i) Procedures which permit the 
                        establishment of the paternity of a child at 
                        any time before the child attains 18 years of 
                        age.
                            ``(ii) As of August 16, 1984, clause (i) 
                        shall also apply to a child for whom paternity 
                        has not been established or for whom a 
                        paternity action was brought but dismissed 
                        because a statute of limitations of less than 
                        18 years was then in effect in the State.
                    ``(B) Procedures concerning genetic testing.--
                            ``(i) Genetic testing required in certain 
                        contested cases.--Procedures under which the 
                        State is required, in a contested paternity 
                        case (unless otherwise barred by State law) to 
                        require the child and all other parties (other 
                        than individuals found under section 454(29) to 
                        have good cause and other exceptions for 
                        refusing to cooperate) to submit to genetic 
                        tests upon the request of any such party, if 
                        the request is supported by a sworn statement 
                        by the party--
                                    ``(I) alleging paternity, and 
                                setting forth facts establishing a 
                                reasonable possibility of the requisite 
                                sexual contact between the parties; or
                                    ``(II) denying paternity, and 
                                setting forth facts establishing a 
                                reasonable possibility of the 
                                nonexistence of sexual contact between 
                                the parties.
                            ``(ii) Other requirements.--Procedures 
                        which require the State agency, in any case in 
                        which the agency orders genetic testing--
                                    ``(I) to pay costs of such tests, 
                                subject to recoupment (if the State so 
                                elects) from the alleged father if 
                                paternity is established; and
                                    ``(II) to obtain additional testing 
                                in any case if an original test result 
                                is contested, upon request and advance 
                                payment by the contestant.
                    ``(C) Voluntary paternity acknowledgment.--
                            ``(i) Simple civil process.--Procedures for 
                        a simple civil process for voluntarily 
                        acknowledging paternity under which the State 
                        must provide that, before a mother and a 
                        putative father can sign an acknowledgment of 
                        paternity, the mother and the putative father 
                        must be given notice, orally and in writing, of 
                        the alternatives to, the legal consequences of, 
                        and the rights (including, if 1 parent is a 
                        minor, any rights afforded due to minority 
                        status) and responsibilities that arise from, 
                        signing the acknowledgment.
                            ``(ii) Hospital-based program.--Such 
                        procedures must include a hospital-based 
                        program for the voluntary acknowledgment of 
                        paternity focusing on the period immediately 
                        before or after the birth of a child, unless 
                        good cause and other exceptions exist which--
                                    ``(I) shall be defined, taking into 
                                account the best interests of the 
                                child, and
                                    ``(II) shall be applied in each 
                                case,
                        by, at the option of the State, the State 
                        agency administering the State program under 
                        part A, this part, title XV, or title XIX.
                            ``(iii) Paternity establishment services.--
                                    ``(I) State-offered services.--Such 
                                procedures must require the State 
                                agency responsible for maintaining 
                                birth records to offer voluntary 
                                paternity establishment services.
                                    ``(II) Regulations.--
                                            ``(aa) Services offered by 
                                        hospitals and birth record 
                                        agencies.--The Secretary shall 
                                        prescribe regulations governing 
                                        voluntary paternity 
                                        establishment services offered 
                                        by hospitals and birth record 
                                        agencies.
                                            ``(bb) Services offered by 
                                        other entities.--The Secretary 
                                        shall prescribe regulations 
                                        specifying the types of other 
                                        entities that may offer 
                                        voluntary paternity 
                                        establishment services, and 
                                        governing the provision of such 
                                        services, which shall include a 
                                        requirement that such an entity 
                                        must use the same notice 
                                        provisions used by, use the 
                                        same materials used by, provide 
                                        the personnel providing such 
                                        services with the same training 
                                        provided by, and evaluate the 
                                        provision of such services in 
                                        the same manner as the 
                                        provision of such services is 
                                        evaluated by, voluntary 
                                        paternity establishment 
                                        programs of hospitals and birth 
                                        record agencies.
                            ``(iv) Use of paternity acknowledgment 
                        affidavit.--Such procedures must require the 
                        State to develop and use an affidavit for the 
                        voluntary acknowledgment of paternity which 
                        includes the minimum requirements of the 
                        affidavit specified by the Secretary under 
section 452(a)(7) for the voluntary acknowledgment of paternity, and to 
give full faith and credit to such an affidavit signed in any other 
State according to its procedures.
                    ``(D) Status of signed paternity acknowledgment.--
                            ``(i) Inclusion in birth records.--
                        Procedures under which the name of the father 
                        shall be included on the record of birth of the 
                        child of unmarried parents only if--
                                    ``(I) the father and mother have 
                                signed a voluntary acknowledgment of 
                                paternity; or
                                    ``(II) a court or an administrative 
                                agency of competent jurisdiction has 
                                issued an adjudication of paternity.
                        Nothing in this clause shall preclude a State 
                        agency from obtaining an admission of paternity 
                        from the father for submission in a judicial or 
                        administrative proceeding, or prohibit the 
                        issuance of an order in a judicial or 
                        administrative proceeding which bases a legal 
                        finding of paternity on an admission of 
                        paternity by the father and any other 
                        additional showing required by State law.
                            ``(ii) Legal finding of paternity.--
                        Procedures under which a signed voluntary 
                        acknowledgment of paternity is considered a 
                        legal finding of paternity, subject to the 
                        right of any signatory to rescind the 
                        acknowledgment within the earlier of--
                                    ``(I) 60 days; or
                                    ``(II) the date of an 
                                administrative or judicial proceeding 
                                relating to the child (including a 
                                proceeding to establish a support 
                                order) in which the signatory is a 
                                party.
                            ``(iii) Contest.--Procedures under which, 
                        after the 60-day period referred to in clause 
                        (ii), a signed voluntary acknowledgment of 
                        paternity may be challenged in court only on 
                        the basis of fraud, duress, or material mistake 
                        of fact, with the burden of proof upon the 
                        challenger, and under which the legal 
                        responsibilities (including child support 
                        obligations) of any signatory arising from the 
                        acknowledgment may not be suspended during the 
                        challenge, except for good cause shown.
                    ``(E) Bar on acknowledgment ratification 
                proceedings.--Procedures under which judicial or 
                administrative proceedings are not required or 
                permitted to ratify an unchallenged acknowledgment of 
                paternity.
                    ``(F) Admissibility of genetic testing results.--
                Procedures--
                            ``(i) requiring the admission into 
                        evidence, for purposes of establishing 
                        paternity, of the results of any genetic test 
                        that is--
                                    ``(I) of a type generally 
                                acknowledged as reliable by 
                                accreditation bodies designated by the 
                                Secretary; and
                                    ``(II) performed by a laboratory 
                                approved by such an accreditation body;
                            ``(ii) requiring an objection to genetic 
                        testing results to be made in writing not later 
                        than a specified number of days before any 
                        hearing at which the results may be introduced 
                        into evidence (or, at State option, not later 
                        than a specified number of days after receipt 
                        of the results); and
                            ``(iii) making the test results admissible 
                        as evidence of paternity without the need for 
                        foundation testimony or other proof of 
                        authenticity or accuracy, unless objection is 
                        made.
                    ``(G) Presumption of paternity in certain cases.--
                Procedures which create a rebuttable or, at the option 
                of the State, conclusive presumption of paternity upon 
                genetic testing results indicating a threshold 
                probability that the alleged father is the father of 
                the child.
                    ``(H) Default orders.--Procedures requiring a 
                default order to be entered in a paternity case upon a 
                showing of service of process on the defendant and any 
                additional showing required by State law.
                    ``(I) No right to jury trial.--Procedures providing 
                that the parties to an action to establish paternity 
                are not entitled to a trial by jury.
                    ``(J) Temporary support order based on probable 
                paternity in contested cases.--Procedures which require 
                that a temporary order be issued, upon motion by a 
                party, requiring the provision of child support pending 
                an administrative or judicial determination of 
                parentage, if there is clear and convincing evidence of 
                paternity (on the basis of genetic tests or other 
                evidence).
                    ``(K) Proof of certain support and paternity 
                establishment costs.--Procedures under which bills for 
                pregnancy, childbirth, and genetic testing are 
                admissible as evidence without requiring third-party 
                foundation testimony, and shall constitute prima facie 
                evidence of amounts incurred for such services or for 
                testing on behalf of the child.
                    ``(L) Standing of putative fathers.--Procedures 
                ensuring that the putative father has a reasonable 
                opportunity to initiate a paternity action.
                    ``(M) Filing of acknowledgments and adjudications 
                in state registry of birth records.--Procedures under 
                which voluntary acknowledgments and adjudications of 
                paternity by judicial or administrative processes are 
                filed with the State registry of birth records for 
                comparison with information in the State case 
                registry.''.
    (b) National Paternity Acknowledgment Affidavit.--Section 452(a)(7) 
(42 U.S.C. 652(a)(7)) is amended by inserting ``, and specify the 
minimum requirements of an affidavit to be used for the voluntary 
acknowledgment of paternity which shall include the social security 
number of each parent and, after consultation with the States, other 
common elements as determined by such designee'' before the semicolon.
    (c) Conforming Amendment.--Section 468 (42 U.S.C. 668) is amended 
by striking ``a simple civil process for voluntarily acknowledging 
paternity and''.

SEC. 2332. OUTREACH FOR VOLUNTARY PATERNITY ESTABLISHMENT.

    Section 454(23) (42 U.S.C. 654(23)) is amended by inserting ``and 
will publicize the availability and encourage the use of procedures for 
voluntary establishment of paternity and child support by means the 
State deems appropriate'' before the semicolon.

SEC. 2333. COOPERATION BY APPLICANTS FOR AND RECIPIENTS OF PART A 
              ASSISTANCE.

    Section 454 (42 U.S.C. 654), as amended by sections 2301(b), 
2303(a), 2312(a), and 2313(a) of this Act, is amended--
            (1) by striking ``and'' at the end of paragraph (27);
            (2) by striking the period at the end of paragraph (28) and 
        inserting ``; and''; and
            (3) by inserting after paragraph (28) the following new 
        paragraph:
            ``(29) provide that the State agency responsible for 
        administering the State plan--
                    ``(A) shall make the determination (and 
                redetermination at appropriate intervals) as to whether 
                an individual who has applied for or is receiving 
                assistance under the State program funded under part A, 
                the State program under title XV, or the State program 
                under title XIX is cooperating in good faith with the 
                State in establishing the paternity of, or in 
                establishing, modifying, or enforcing a support order 
                for, any child of the individual by providing the State 
                agency with the name of, and such other information as 
                the State agency may require with respect to, the 
                noncustodial parent of the child, subject to good cause 
                and other exceptions which--
                            ``(i) shall be defined, taking into account 
                        the best interests of the child, and
                            ``(ii) shall be applied in each case,
                by, at the option of the State, the State agency 
                administering the State program under part A, this 
                part, title XV, or title XIX;
                    ``(B) shall require the individual to supply 
                additional necessary information and appear at 
                interviews, hearings, and legal proceedings;
                    ``(C) shall require the individual and the child to 
                submit to genetic tests pursuant to judicial or 
                administrative order;
                    ``(D) may request that the individual sign a 
                voluntary acknowledgment of paternity, after notice of 
                the rights and consequences of such an acknowledgment, 
                but may not require the individual to sign an 
                acknowledgment or otherwise relinquish the right to 
                genetic tests as a condition of cooperation and 
                eligibility for assistance under the State program 
                funded under part A, the State program under title XV, 
                or the State program under title XIX; and
                    ``(E) shall promptly notify the individual and the 
                State agency administering the State program funded 
                under part A, the State agency administering the State 
                program under title XV, and the State agency 
                administering the State program under title XIX, of 
                each such determination, and if noncooperation is 
                determined, the basis therefore.''.

            Subchapter E--Program Administration and Funding

SEC. 2341. PERFORMANCE-BASED INCENTIVES AND PENALTIES.

    (a) Development of New System.--The Secretary of Health and Human 
Services, in consultation with State directors of programs under part D 
of title IV of the Social Security Act, shall develop a new incentive 
system to replace, in a revenue neutral manner, the system under 
section 458 of such Act. The new system shall provide additional 
payments to any State based on such State's performance under such a 
program. Not later than November 1, 1996, the Secretary shall report on 
the new system to the Committee on Ways and Means of the House of 
Representatives and the Committee on Finance of the Senate.
    (b) Conforming Amendments to Present System.--Section 458 (42 
U.S.C. 658) is amended--
            (1) in subsection (a), by striking ``aid to families with 
        dependent children under a State plan approved under part A of 
        this title'' and inserting ``assistance under a program funded 
        under part A'';
            (2) in subsection (b)(1)(A), by striking ``section 
        402(a)(26)'' and inserting ``section 408(a)(4)'';
            (3) in subsections (b) and (c)--
                    (A) by striking ``AFDC collections'' each place it 
                appears and inserting ``title IV-A collections'', and
                    (B) by striking ``non-AFDC collections'' each place 
                it appears and inserting ``non-title IV-A 
                collections''; and
            (4) in subsection (c), by striking ``combined AFDC/non-AFDC 
        administrative costs'' both places it appears and inserting 
        ``combined title IV-A/non-title IV-A administrative costs''.
    (c) Calculation of Paternity Establishment Percentage.--
            (1) Section 452(g)(1)(A) (42 U.S.C. 652(g)(1)(A)) is 
        amended by striking ``75'' and inserting ``90''.
            (2) Section 452(g)(1) (42 U.S.C. 652(g)(1)) is amended--
                    (A) by redesignating subparagraphs (B) through (E) 
                as subparagraphs (C) through (F), respectively, and by 
                inserting after subparagraph (A) the following new 
                subparagraph:
            ``(B) for a State with a paternity establishment percentage 
        of not less than 75 percent but less than 90 percent for such 
        fiscal year, the paternity establishment percentage of the 
State for the immediately preceding fiscal year plus 2 percentage 
points;''; and
                    (B) by adding at the end the following new flush 
                sentence:
``In determining compliance under this section, a State may use as its 
paternity establishment percentage either the State's IV-D paternity 
establishment percentage (as defined in paragraph (2)(A)) or the 
State's statewide paternity establishment percentage (as defined in 
paragraph (2)(B)).''.
            (3) Section 452(g)(2) (42 U.S.C. 652(g)(2)) is amended--
                    (A) in subparagraph (A)--
                            (i) in the matter preceding clause (i)--
                                    (I) by striking ``paternity 
                                establishment percentage'' and 
                                inserting ``IV-D paternity 
                                establishment percentage''; and
                                    (II) by striking ``(or all States, 
                                as the case may be)''; and
                            (ii) by striking ``and'' at the end 
                        thereof;
                    (B) by redesignating subparagraph (B) as 
                subparagraph (C) and by inserting after subparagraph 
                (A) the following new subparagraph:
            ``(B) the term `statewide paternity establishment 
        percentage' means, with respect to a State for a fiscal year, 
        the ratio (expressed as a percentage) that the total number of 
        minor children--
                    ``(i) who have been born out of wedlock, and
                    ``(ii) the paternity of whom has been established 
                or acknowledged during the fiscal year,
        bears to the total number of children born out of wedlock 
        during the preceding fiscal year; and''.
            (4) Section 452(g)(3) (42 U.S.C. 652(g)(3)) is amended--
                    (A) by striking subparagraph (A) and redesignating 
                subparagraphs (B) and (C) as subparagraphs (A) and (B), 
                respectively; and
                    (B) in subparagraph (A) (as so redesignated), by 
                striking ``the percentage of children born out-of-
                wedlock in a State'' and inserting ``the percentage of 
                children in a State who are born out of wedlock or for 
                whom support has not been established''.
    (d) Effective Dates.--
            (1) Incentive adjustments.--
            (A) In general.--The system developed under subsection (a) 
        and the amendments made by subsection (b) shall become 
        effective on October 1, 1998, except to the extent provided in 
        subparagraph (B).
            (B) Application of section 458.--Section 458 of the Social 
        Security Act, as in effect on the day before the date of the 
        enactment of this section, shall be effective for purposes of 
        incentive payments to States for fiscal years before fiscal 
        year 1999.
            (2) Penalty reductions.--The amendments made by subsection 
        (c) shall become effective with respect to calendar quarters 
        beginning on or after the date of the enactment of this Act.

SEC. 2342. FEDERAL AND STATE REVIEWS AND AUDITS.

    (a) State Agency Activities.--Section 454 (42 U.S.C. 654) is 
amended--
            (1) in paragraph (14), by striking ``(14)'' and inserting 
        ``(14)(A)'';
            (2) by redesignating paragraph (15) as subparagraph (B) of 
        paragraph (14); and
            (3) by inserting after paragraph (14) the following new 
        paragraph:
            ``(15) provide for--
                    ``(A) a process for annual reviews of and reports 
                to the Secretary on the State program operated under 
                the State plan approved under this part, including such 
                information as may be necessary to measure State 
                compliance with Federal requirements for expedited 
                procedures, using such standards and procedures as are 
                required by the Secretary, under which the State 
agency will determine the extent to which the program is operated in 
compliance with this part; and
                    ``(B) a process of extracting from the automated 
                data processing system required by paragraph (16) and 
                transmitting to the Secretary data and calculations 
                concerning the levels of accomplishment (and rates of 
                improvement) with respect to applicable performance 
                indicators (including paternity establishment 
                percentages) to the extent necessary for purposes of 
                sections 452(g) and 458;''.
    (b) Federal Activities.--Section 452(a)(4) (42 U.S.C. 652(a)(4)) is 
amended to read as follows:
            ``(4)(A) review data and calculations transmitted by State 
        agencies pursuant to section 454(15)(B) on State program 
        accomplishments with respect to performance indicators for 
        purposes of subsection (g) of this section and section 458;
            ``(B) review annual reports submitted pursuant to section 
        454(15)(A) and, as appropriate, provide to the State comments, 
        recommendations for additional or alternative corrective 
        actions, and technical assistance; and
            ``(C) conduct audits, in accordance with the Government 
        auditing standards of the Comptroller General of the United 
        States--
                    ``(i) at least once every 3 years (or more 
                frequently, in the case of a State which fails to meet 
                the requirements of this part concerning performance 
                standards and reliability of program data) to assess 
                the completeness, reliability, and security of the data 
                and the accuracy of the reporting systems used in 
                calculating performance indicators under subsection (g) 
                of this section and section 458;
                    ``(ii) of the adequacy of financial management of 
                the State program operated under the State plan 
                approved under this part, including assessments of--
                            ``(I) whether Federal and other funds made 
                        available to carry out the State program are 
                        being appropriately expended, and are properly 
                        and fully accounted for; and
                            ``(II) whether collections and 
                        disbursements of support payments are carried 
                        out correctly and are fully accounted for; and
                    ``(iii) for such other purposes as the Secretary 
                may find necessary;''.
    (c) Effective Date.--The amendments made by this section shall be 
effective with respect to calendar quarters beginning 12 months or more 
after the date of the enactment of this Act.

SEC. 2343. REQUIRED REPORTING PROCEDURES.

    (a) Establishment.--Section 452(a)(5) (42 U.S.C. 652(a)(5)) is 
amended by inserting ``, and establish procedures to be followed by 
States for collecting and reporting information required to be provided 
under this part, and establish uniform definitions (including those 
necessary to enable the measurement of State compliance with the 
requirements of this part relating to expedited processes) to be 
applied in following such procedures'' before the semicolon.
    (b) State Plan Requirement.--Section 454 (42 U.S.C. 654), as 
amended by sections 2301(b), 2303(a), 2312(a), 2313(a), and 2333 of 
this Act, is amended--
            (1) by striking ``and'' at the end of paragraph (28);
            (2) by striking the period at the end of paragraph (29) and 
        inserting ``; and''; and
            (3) by adding after paragraph (29) the following new 
        paragraph:
            ``(30) provide that the State shall use the definitions 
        established under section 452(a)(5) in collecting and reporting 
        information as required under this part.''.

SEC. 2344. AUTOMATED DATA PROCESSING REQUIREMENTS.

    (a) Revised Requirements.--
            (1) In general.--Section 454(16) (42 U.S.C. 654(16)) is 
        amended--
                    (A) by striking ``, at the option of the State,'';
                    (B) by inserting ``and operation by the State 
                agency'' after ``for the establishment'';
                    (C) by inserting ``meeting the requirements of 
                section 454A'' after ``information retrieval system'';
                    (D) by striking ``in the State and localities 
                thereof, so as (A)'' and inserting ``so as'';
                    (E) by striking ``(i)''; and
                    (F) by striking ``(including'' and all that follows 
                and inserting a semicolon.
            (2) Automated data processing.--Part D of title IV (42 
        U.S.C. 651-669) is amended by inserting after section 454 the 
        following new section:

``SEC. 454A. AUTOMATED DATA PROCESSING.

    ``(a) In General.--In order for a State to meet the requirements of 
this section, the State agency administering the State program under 
this part shall have in operation a single statewide automated data 
processing and information retrieval system which has the capability to 
perform the tasks specified in this section with the frequency and in 
the manner required by or under this part.
    ``(b) Program Management.--The automated system required by this 
section shall perform such functions as the Secretary may specify 
relating to management of the State program under this part, 
including--
            ``(1) controlling and accounting for use of Federal, State, 
        and local funds in carrying out the program; and
            ``(2) maintaining the data necessary to meet Federal 
        reporting requirements under this part on a timely basis.
    ``(c) Calculation of Performance Indicators.--In order to enable 
the Secretary to determine the incentive payments and penalty 
adjustments required by sections 452(g) and 458, the State agency 
shall--
            ``(1) use the automated system--
                    ``(A) to maintain the requisite data on State 
                performance with respect to paternity establishment and 
                child support enforcement in the State; and
                    ``(B) to calculate the paternity establishment 
                percentage for the State for each fiscal year; and
            ``(2) have in place systems controls to ensure the 
        completeness and reliability of, and ready access to, the data 
        described in paragraph (1)(A), and the accuracy of the 
        calculations described in paragraph (1)(B).
    ``(d) Information Integrity and Security.--The State agency shall 
have in effect safeguards on the integrity, accuracy, and completeness 
of, access to, and use of data in the automated system required by this 
section, which shall include the following (in addition to such other 
safeguards as the Secretary may specify in regulations):
            ``(1) Policies restricting access.--Written policies 
        concerning access to data by State agency personnel, and 
        sharing of data with other persons, which--
                    ``(A) permit access to and use of data only to the 
                extent necessary to carry out the State program under 
                this part; and
                    ``(B) specify the data which may be used for 
                particular program purposes, and the personnel 
                permitted access to such data.
            ``(2) Systems controls.--Systems controls (such as 
        passwords or blocking of fields) to ensure strict adherence to 
        the policies described in paragraph (1).
            ``(3) Monitoring of access.--Routine monitoring of access 
        to and use of the automated system, through methods such as 
        audit trails and feedback mechanisms, to guard against and 
        promptly identify unauthorized access or use.
            ``(4) Training and information.--Procedures to ensure that 
        all personnel (including State and local agency staff and 
        contractors) who may have access to or be required to use 
        confidential program data are informed of applicable 
        requirements and penalties (including those in section 6103 of 
        the Internal Revenue Code of 1986), and are adequately trained 
        in security procedures.
            ``(5) Penalties.--Administrative penalties (up to and 
        including dismissal from employment) for unauthorized access 
        to, or disclosure or use of, confidential data.''.
            (3) Regulations.--The Secretary of Health and Human 
        Services shall prescribe final regulations for implementation 
        of section 454A of the Social Security Act not later than 2 
        years after the date of the enactment of this Act.
            (4) Implementation timetable.--Section 454(24) (42 U.S.C. 
        654(24)), as amended by section 2303(a)(1) of this Act, is 
        amended to read as follows:
            ``(24) provide that the State will have in effect an 
        automated data processing and information retrieval system--
                    ``(A) by October 1, 1997, which meets all 
                requirements of this part which were enacted on or 
                before the date of enactment of the Family Support Act 
                of 1988, and
                    ``(B) by October 1, 2000, which meets all 
                requirements of this part enacted on or before the date 
                of the enactment of the Personal Responsibility and 
                Work Opportunity Act of 1996, except that such deadline 
                shall be extended by 1 day for each day (if any) by 
                which the Secretary fails to meet the deadline imposed 
                by section 2344(a)(3) of the Personal Responsibility 
                and Work Opportunity Act of 1996;''.
    (b) Special Federal Matching Rate for Development Costs of 
Automated Systems.--
            (1) In general.--Section 455(a) (42 U.S.C. 655(a)) is 
        amended--
                    (A) in paragraph (1)(B)--
                            (i) by striking ``90 percent'' and 
                        inserting ``the percent specified in paragraph 
                        (3)'';
                            (ii) by striking ``so much of''; and
                            (iii) by striking ``which the Secretary'' 
                        and all that follows and inserting ``, and''; 
                        and
                    (B) by adding at the end the following new 
                paragraph:
    ``(3)(A) The Secretary shall pay to each State, for each quarter in 
fiscal years 1996 and 1997, 90 percent of so much of the State 
expenditures described in paragraph (1)(B) as the Secretary finds are 
for a system meeting the requirements specified in section 454(16) (as 
in effect on September 30, 1995) but limited to the amount approved for 
States in the advance planning documents of such States submitted on or 
before September 30, 1995. Notwithstanding the preceding sentence, any 
payment to a State with respect to fiscal year 1997 shall be made in 
one payment in fiscal year 1998.
    ``(B)(i) The Secretary shall pay to each State, for each quarter in 
fiscal years 1996 through 2001, the percentage specified in clause (ii) 
of so much of the State expenditures described in paragraph (1)(B) as 
the Secretary finds are for a system meeting the requirements of 
sections 454(16) and 454A.
    ``(ii) The percentage specified in this clause is 80 percent.''.
            (2) Temporary limitation on payments under special federal 
        matching rate.--
                    (A) In general.--The Secretary of Health and Human 
                Services may not pay more than $400,000,000 in the 
                aggregate under section 455(a)(3)(B) of the Social 
                Security Act for fiscal years 1996 through 2001.
                    (B) Allocation of limitation among states.--The 
                total amount payable to a State under section 
                455(a)(3)(B) of such Act for fiscal years 1996 through 
                2001 shall not exceed the limitation determined for the 
                State by the Secretary of Health and Human Services in 
                regulations.
                    (C) Allocation formula.--The regulations referred 
                to in subparagraph (B) shall prescribe a formula for 
                allocating the amount specified in subparagraph (A) 
                among States with plans approved under part D of 
title IV of the Social Security Act, which shall take into account--
                            (i) the relative size of State caseloads 
                        under such part; and
                            (ii) the level of automation needed to meet 
                        the automated data processing requirements of 
                        such part.
    (c) Conforming Amendment.--Section 123(c) of the Family Support Act 
of 1988 (102 Stat. 2352; Public Law 100-485) is repealed.

SEC. 2345. TECHNICAL ASSISTANCE.

    (a) For Training of Federal and State Staff, Research and 
Demonstration Programs, and Special Projects of Regional or National 
Significance.--Section 452 (42 U.S.C. 652) is amended by adding at the 
end the following new subsection:
    ``(j) Out of any money in the Treasury of the United States not 
otherwise appropriated, there is hereby appropriated to the Secretary 
for each fiscal year (beginning with fiscal year 1998) an amount equal 
to 1 percent of the total amount paid to the Federal Government 
pursuant to section 457(a) during the immediately preceding fiscal year 
(as determined on the basis of the most recent reliable data available 
to the Secretary as of the end of the 3rd calendar quarter following 
the end of such preceding fiscal year), to cover costs incurred by the 
Secretary for--
            ``(1) information dissemination and technical assistance to 
        States, training of State and Federal staff, staffing studies, 
        and related activities needed to improve programs under this 
        part (including technical assistance concerning State automated 
        systems required by this part); and
            ``(2) research, demonstration, and special projects of 
        regional or national significance relating to the operation of 
        State programs under this part.
The amount appropriated under this subsection shall remain available 
until expended.''.
    (b) Operation of Federal Parent Locator Service.--Section 453 (42 
U.S.C. 653), as amended by section 2316 of this Act, is amended by 
adding at the end the following new subsection:
    ``(o) Recovery of Costs.--Out of any money in the Treasury of the 
United States not otherwise appropriated, there is hereby appropriated 
to the Secretary for each fiscal year an amount equal to 2 percent of 
the total amount paid to the Federal Government pursuant to section 
457(a) during the immediately preceding fiscal year (as determined on 
the basis of the most recent reliable data available to the Secretary 
as of the end of the 3rd calendar quarter following the end of such 
preceding fiscal year), to cover costs incurred by the Secretary for 
operation of the Federal Parent Locator Service under this section, to 
the extent such costs are not recovered through user fees.''.

SEC. 2346. REPORTS AND DATA COLLECTION BY THE SECRETARY.

    (a) Annual Report to Congress.--
            (1) Section 452(a)(10)(A) (42 U.S.C. 652(a)(10)(A)) is 
        amended--
                    (A) by striking ``this part;'' and inserting ``this 
                part, including--''; and
                    (B) by adding at the end the following new clauses:
                            ``(i) the total amount of child support 
                        payments collected as a result of services 
                        furnished during the fiscal year to individuals 
                        receiving services under this part;
                            ``(ii) the cost to the States and to the 
                        Federal Government of so furnishing the 
                        services; and
                            ``(iii) the number of cases involving 
                        families--
                                    ``(I) who became ineligible for 
                                assistance under State programs funded 
                                under part A during a month in the 
                                fiscal year; and
                                    ``(II) with respect to whom a child 
                                support payment was received in the 
                                month;''.
            (2) Section 452(a)(10)(C) (42 U.S.C. 652(a)(10)(C)) is 
        amended--
                    (A) in the matter preceding clause (i)--
                            (i) by striking ``with the data required 
                        under each clause being separately stated for 
                        cases'' and inserting ``separately stated for 
                        cases'';
                            (ii) by striking ``cases where the child 
                        was formerly receiving'' and inserting ``or 
                        formerly received'';
                            (iii) by inserting ``or 1912'' after 
                        ``471(a)(17)''; and
                            (iv) by inserting ``for'' before ``all 
                        other'';
                    (B) in each of clauses (i) and (ii), by striking 
                ``, and the total amount of such obligations'';
                    (C) in clause (iii), by striking ``described in'' 
                and all that follows and inserting ``in which support 
                was collected during the fiscal year;'';
                    (D) by striking clause (iv); and
                    (E) by redesignating clause (v) as clause (vii), 
                and inserting after clause (iii) the following new 
                clauses:
                            ``(iv) the total amount of support 
                        collected during such fiscal year and 
                        distributed as current support;
                            ``(v) the total amount of support collected 
                        during such fiscal year and distributed as 
                        arrearages;
                            ``(vi) the total amount of support due and 
                        unpaid for all fiscal years; and''.
            (3) Section 452(a)(10)(G) (42 U.S.C. 652(a)(10)(G)) is 
        amended by striking ``on the use of Federal courts and''.
            (4) Section 452(a)(10) (42 U.S.C. 652(a)(10)) is amended--
                    (A) in subparagraph (H), by striking ``and'';
                    (B) in subparagraph (I), by striking the period and 
                inserting ``; and''; and
                    (C) by inserting after subparagraph (I) the 
                following new subparagraph:
                    ``(J) compliance, by State, with the standards 
                established pursuant to subsections (h) and (i).''.
            (5) Section 452(a)(10) (42 U.S.C. 652(a)(10)) is amended by 
        striking all that follows subparagraph (J), as added by 
        paragraph (4).
    (b) Effective Date.--The amendments made by subsection (a) shall be 
effective with respect to fiscal year 1997 and succeeding fiscal years.

     Subchapter F--Establishment and Modification of Support Orders

SEC. 2351. SIMPLIFIED PROCESS FOR REVIEW AND ADJUSTMENT OF CHILD 
              SUPPORT ORDERS.

    Section 466(a)(10) (42 U.S.C. 666(a)(10)) is amended to read as 
follows:
            ``(10) Review and adjustment of support orders upon 
        request.--Procedures under which the State shall review and 
        adjust each support order being enforced under this part if 
        there is an assignment under part A or upon the request of 
        either parent, and may review and adjust any other support 
        order being enforced under this part. Such procedures shall 
        provide the following:
                    ``(A) In general.--
                            ``(i) 3-year cycle.--Except as provided in 
                        subparagraphs (B) and (C), the State shall 
                        review and, as appropriate, adjust the support 
                        order every 3 years, taking into account the 
                        best interests of the child involved.
                            ``(ii) Methods of adjustment.--The State 
                        may elect to review and, if appropriate, adjust 
                        an order pursuant to clause (i) by--
                                    ``(I) reviewing and, if 
                                appropriate, adjusting the order in 
                                accordance with the guidelines 
                                established pursuant to section 467(a) 
                                if the amount of the child support 
                                award under the order differs from the 
                                amount that would be awarded in 
                                accordance with the guidelines; or
                                    ``(II) applying a cost-of-living 
                                adjustment to the order in accordance 
                                with a formula developed by the State 
                                and permit either party to contest the 
                                adjustment, within 30 days after the 
                                date of the notice of the adjustment, 
                                by making a request for review and, if 
                                appropriate, adjustment of the order in 
                                accordance with the child support 
                                guidelines established pursuant to 
                                section 467(a).
                            ``(iii) No proof of change in circumstances 
                        necessary.--Any adjustment under this 
                        subparagraph (A) shall be made without a 
                        requirement for proof or showing of a change in 
                        circumstances.
                    ``(B) Automated method.--The State may use 
                automated methods (including automated comparisons with 
                wage or State income tax data) to identify orders 
                eligible for review, conduct the review, identify 
                orders eligible for adjustment, and apply the 
                appropriate adjustment to the orders eligible for 
                adjustment under the threshold established by the 
                State.
                    ``(C) Request upon substantial change in 
                circumstances.--The State shall, at the request of 
                either parent subject to such an order or of any State 
                child support enforcement agency, review and, if 
                appropriate, adjust the order in accordance with the 
                guidelines established pursuant to section 467(a) based 
                upon a substantial change in the circumstances of 
                either parent.
                    ``(D) Notice of right to review.--The State shall 
                provide notice not less than once every 3 years to the 
                parents subject to such an order informing them of 
                their right to request the State to review and, if 
                appropriate, adjust the order pursuant to this 
                paragraph. The notice may be included in the order.''.

SEC. 2352. FURNISHING CONSUMER REPORTS FOR CERTAIN PURPOSES RELATING TO 
              CHILD SUPPORT.

    Section 604 of the Fair Credit Reporting Act (15 U.S.C. 1681b) is 
amended by adding at the end the following new paragraphs:
    ``(4) In response to a request by the head of a State or local 
child support enforcement agency (or a State or local government 
official authorized by the head of such an agency), if the person 
making the request certifies to the consumer reporting agency that--
            ``(A) the consumer report is needed for the purpose of 
        establishing an individual's capacity to make child support 
        payments or determining the appropriate level of such payments;
            ``(B) the paternity of the consumer for the child to which 
        the obligation relates has been established or acknowledged by 
        the consumer in accordance with State laws under which the 
        obligation arises (if required by those laws);
            ``(C) the person has provided at least 10 days' prior 
        notice to the consumer whose report is requested, by certified 
        or registered mail to the last known address of the consumer, 
        that the report will be requested; and
            ``(D) the consumer report will be kept confidential, will 
        be used solely for a purpose described in subparagraph (A), and 
        will not be used in connection with any other civil, 
        administrative, or criminal proceeding, or for any other 
        purpose.
    ``(5) To an agency administering a State plan under section 454 of 
the Social Security Act (42 U.S.C. 654) for use to set an initial or 
modified child support award.''.

SEC. 2353. NONLIABILITY FOR FINANCIAL INSTITUTIONS PROVIDING FINANCIAL 
              RECORDS TO STATE CHILD SUPPORT ENFORCEMENT AGENCIES IN 
              CHILD SUPPORT CASES.

    Part D of title IV (42 U.S.C. 651-669) is amended by adding at the 
end the following:

``SEC. 469A. NONLIABILITY FOR FINANCIAL INSTITUTIONS PROVIDING 
              FINANCIAL RECORDS TO STATE CHILD SUPPORT ENFORCEMENT 
              AGENCIES IN CHILD SUPPORT CASES.

    ``(a) In General.--Notwithstanding any other provision of Federal 
or State law, a financial institution shall not be liable under any 
Federal or State law to any person for disclosing any financial record 
of an individual to a State child support enforcement agency attempting 
to establish, modify, or enforce a child support obligation of such 
individual.
    ``(b) Prohibition of Disclosure of Financial Record Obtained by 
State Child Support Enforcement Agency.--A State child support 
enforcement agency which obtains a financial record of an individual 
from a financial institution pursuant to subsection (a) may disclose 
such financial record only for the purpose of, and to the extent 
necessary in, establishing, modifying, or enforcing a child support 
obligation of such individual.
    ``(c) Civil Damages for Unauthorized Disclosure.--
            ``(1) Disclosure by state officer or employee.--If any 
        person knowingly, or by reason of negligence, discloses a 
        financial record of an individual in violation of subsection 
        (b), such individual may bring a civil action for damages 
        against such person in a district court of the United States.
            ``(2) No liability for good faith but erroneous 
        interpretation.--No liability shall arise under this subsection 
        with respect to any disclosure which results from a good faith, 
        but erroneous, interpretation of subsection (b).
            ``(3) Damages.--In any action brought under paragraph (1), 
        upon a finding of liability on the part of the defendant, the 
        defendant shall be liable to the plaintiff in an amount equal 
        to the sum of--
                    ``(A) the greater of--
                            ``(i) $1,000 for each act of unauthorized 
                        disclosure of a financial record with respect 
                        to which such defendant is found liable; or
                            ``(ii) the sum of--
                                    ``(I) the actual damages sustained 
                                by the plaintiff as a result of such 
                                unauthorized disclosure; plus
                                    ``(II) in the case of a willful 
                                disclosure or a disclosure which is the 
                                result of gross negligence, punitive 
                                damages; plus
                    ``(B) the costs (including attorney's fees) of the 
                action.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Financial institution.--The term `financial 
        institution' means--
                    ``(A) a depository institution, as defined in 
                section 3(c) of the Federal Deposit Insurance Act (12 
                U.S.C. 1813(c));
                    ``(B) an institution-affiliated party, as defined 
                in section 3(u) of such Act (12 U.S.C. 1813(u));
                    ``(C) any Federal credit union or State credit 
                union, as defined in section 101 of the Federal Credit 
                Union Act (12 U.S.C. 1752), including an institution-
                affiliated party of such a credit union, as defined in 
                section 206(r) of such Act (12 U.S.C. 1786(r)); and
                    ``(D) any benefit association, insurance company, 
                safe deposit company, money-market mutual fund, or 
                similar entity authorized to do business in the State.
            ``(2) Financial record.--The term `financial record' has 
        the meaning given such term in section 1101 of the Right to 
        Financial Privacy Act of 1978 (12 U.S.C. 3401).''.

              Subchapter G--Enforcement of Support Orders

SEC. 2361. INTERNAL REVENUE SERVICE COLLECTION OF ARREARAGES.

    (a) Collection of Fees.--Section 6305(a) of the Internal Revenue 
Code of 1986 (relating to collection of certain liability) is amended--
            (1) by striking ``and'' at the end of paragraph (3);
            (2) by striking the period at the end of paragraph (4) and 
        inserting ``, and'';
            (3) by adding at the end the following new paragraph:
            ``(5) no additional fee may be assessed for adjustments to 
        an amount previously certified pursuant to such section 452(b) 
        with respect to the same obligor.''; and
            (4) by striking ``Secretary of Health, Education, and 
        Welfare'' each place it appears and inserting ``Secretary of 
        Health and Human Services''.
    (b) Effective Date.--The amendments made by this section shall 
become effective October 1, 1997.

SEC. 2362. AUTHORITY TO COLLECT SUPPORT FROM FEDERAL EMPLOYEES.

    (a) Consolidation and Streamlining of Authorities.--Section 459 (42 
U.S.C. 659) is amended to read as follows:

``SEC. 459. CONSENT BY THE UNITED STATES TO INCOME WITHHOLDING, 
              GARNISHMENT, AND SIMILAR PROCEEDINGS FOR ENFORCEMENT OF 
              CHILD SUPPORT AND ALIMONY OBLIGATIONS.

    ``(a) Consent to Support Enforcement.--Notwithstanding any other 
provision of law (including section 207 of this Act and section 5301 of 
title 38, United States Code), effective January 1, 1975, moneys (the 
entitlement to which is based upon remuneration for employment) due 
from, or payable by, the United States or the District of Columbia 
(including any agency, subdivision, or instrumentality thereof) to any 
individual, including members of the Armed Forces of the United States, 
shall be subject, in like manner and to the same extent as if the 
United States or the District of Columbia were a private person, to 
withholding in accordance with State law enacted pursuant to 
subsections (a)(1) and (b) of section 466 and regulations of the 
Secretary under such subsections, and to any other legal process 
brought, by a State agency administering a program under a State plan 
approved under this part or by an individual obligee, to enforce the 
legal obligation of the individual to provide child support or alimony.
    ``(b) Consent to Requirements Applicable to Private Person.--With 
respect to notice to withhold income pursuant to subsection (a)(1) or 
(b) of section 466, or any other order or process to enforce support 
obligations against an individual (if the order or process contains or 
is accompanied by sufficient data to permit prompt identification of 
the individual and the moneys involved), each governmental entity 
specified in subsection (a) shall be subject to the same requirements 
as would apply if the entity were a private person, except as otherwise 
provided in this section.
    ``(c) Designation of Agent; Response to Notice or Process--
            ``(1) Designation of agent.--The head of each agency 
        subject to this section shall--
                    ``(A) designate an agent or agents to receive 
                orders and accept service of process in matters 
                relating to child support or alimony; and
                    ``(B) annually publish in the Federal Register the 
                designation of the agent or agents, identified by title 
                or position, mailing address, and telephone number.
            ``(2) Response to notice or process.--If an agent 
        designated pursuant to paragraph (1) of this subsection 
        receives notice pursuant to State procedures in effect pursuant 
        to subsection (a)(1) or (b) of section 466, or is effectively 
        served with any order, process, or interrogatory, with respect 
        to an individual's child support or alimony payment 
        obligations, the agent shall--
                    ``(A) as soon as possible (but not later than 15 
                days) thereafter, send written notice of the notice or 
                service (together with a copy of the notice or 
service) to the individual at the duty station or last-known home 
address of the individual;
                    ``(B) within 30 days (or such longer period as may 
                be prescribed by applicable State law) after receipt of 
                a notice pursuant to such State procedures, comply with 
                all applicable provisions of section 466; and
                    ``(C) within 30 days (or such longer period as may 
                be prescribed by applicable State law) after effective 
                service of any other such order, process, or 
                interrogatory, respond to the order, process, or 
                interrogatory.
    ``(d) Priority of Claims.--If a governmental entity specified in 
subsection (a) receives notice or is served with process, as provided 
in this section, concerning amounts owed by an individual to more than 
1 person--
            ``(1) support collection under section 466(b) must be given 
        priority over any other process, as provided in section 
        466(b)(7);
            ``(2) allocation of moneys due or payable to an individual 
        among claimants under section 466(b) shall be governed by 
        section 466(b) and the regulations prescribed under such 
        section; and
            ``(3) such moneys as remain after compliance with 
        paragraphs (1) and (2) shall be available to satisfy any other 
        such processes on a first-come, first-served basis, with any 
        such process being satisfied out of such moneys as remain after 
        the satisfaction of all such processes which have been 
        previously served.
    ``(e) No Requirement to Vary Pay Cycles.--A governmental entity 
that is affected by legal process served for the enforcement of an 
individual's child support or alimony payment obligations shall not be 
required to vary its normal pay and disbursement cycle in order to 
comply with the legal process.
    ``(f) Relief From Liability.--
            ``(1) Neither the United States, nor the government of the 
        District of Columbia, nor any disbursing officer shall be 
        liable with respect to any payment made from moneys due or 
        payable from the United States to any individual pursuant to 
        legal process regular on its face, if the payment is made in 
        accordance with this section and the regulations issued to 
        carry out this section.
            ``(2) No Federal employee whose duties include taking 
        actions necessary to comply with the requirements of subsection 
        (a) with regard to any individual shall be subject under any 
        law to any disciplinary action or civil or criminal liability 
        or penalty for, or on account of, any disclosure of information 
        made by the employee in connection with the carrying out of 
        such actions.
    ``(g) Regulations.--Authority to promulgate regulations for the 
implementation of this section shall, insofar as this section applies 
to moneys due from (or payable by)--
            ``(1) the United States (other than the legislative or 
        judicial branches of the Federal Government) or the government 
        of the District of Columbia, be vested in the President (or the 
        designee of the President);
            ``(2) the legislative branch of the Federal Government, be 
        vested jointly in the President pro tempore of the Senate and 
        the Speaker of the House of Representatives (or their 
        designees), and
            ``(3) the judicial branch of the Federal Government, be 
        vested in the Chief Justice of the United States (or the 
        designee of the Chief Justice).
    ``(h) Moneys Subject to Process.--
            ``(1) In general.--Subject to paragraph (2), moneys paid or 
        payable to an individual which are considered to be based upon 
        remuneration for employment, for purposes of this section--
                    ``(A) consist of--
                            ``(i) compensation paid or payable for 
                        personal services of the individual, whether 
                        the compensation is denominated as wages, 
                        salary, commission, bonus, pay, allowances, or 
                        otherwise (including severance pay, sick pay, 
                        and incentive pay);
                            ``(ii) periodic benefits (including a 
                        periodic benefit as defined in section 
                        228(h)(3)) or other payments--
                                    ``(I) under the insurance system 
                                established by title II;
                                    ``(II) under any other system or 
                                fund established by the United States 
                                which provides for the payment of 
                                pensions, retirement or retired pay, 
                                annuities, dependents' or survivors' 
                                benefits, or similar amounts payable on 
                                account of personal services performed 
                                by the individual or any other 
                                individual;
                                    ``(III) as compensation for death 
                                under any Federal program;
                                    ``(IV) under any Federal program 
                                established to provide `black lung' 
                                benefits; or
                                    ``(V) by the Secretary of Veterans 
                                Affairs as compensation for a service-
                                connected disability paid by the 
                                Secretary to a former member of the 
                                Armed Forces who is in receipt of 
                                retired or retainer pay if the former 
                                member has waived a portion of the 
                                retired or retainer pay in order to 
                                receive such compensation; and
                            ``(iii) worker's compensation benefits paid 
                        under Federal or State law but
                    ``(B) do not include any payment--
                            ``(i) by way of reimbursement or otherwise, 
                        to defray expenses incurred by the individual 
                        in carrying out duties associated with the 
                        employment of the individual; or
                            ``(ii) as allowances for members of the 
                        uniformed services payable pursuant to chapter 
                        7 of title 37, United States Code, as 
                        prescribed by the Secretaries concerned 
                        (defined by section 101(5) of such title) as 
                        necessary for the efficient performance of 
                        duty.
            ``(2) Certain amounts excluded.--In determining the amount 
        of any moneys due from, or payable by, the United States to any 
        individual, there shall be excluded amounts which--
                    ``(A) are owed by the individual to the United 
                States;
                    ``(B) are required by law to be, and are, deducted 
                from the remuneration or other payment involved, 
                including Federal employment taxes, and fines and 
                forfeitures ordered by court-martial;
                    ``(C) are properly withheld for Federal, State, or 
                local income tax purposes, if the withholding of the 
                amounts is authorized or required by law and if amounts 
                withheld are not greater than would be the case if the 
                individual claimed all dependents to which he was 
                entitled (the withholding of additional amounts 
                pursuant to section 3402(i) of the Internal Revenue 
                Code of 1986 may be permitted only when the individual 
                presents evidence of a tax obligation which supports 
                the additional withholding);
                    ``(D) are deducted as health insurance premiums;
                    ``(E) are deducted as normal retirement 
                contributions (not including amounts deducted for 
                supplementary coverage); or
                    ``(F) are deducted as normal life insurance 
                premiums from salary or other remuneration for 
                employment (not including amounts deducted for 
                supplementary coverage).
    ``(i) Definitions.--For purposes of this section--
            ``(1) United states.--The term `United States' includes any 
        department, agency, or instrumentality of the legislative, 
        judicial, or executive branch of the Federal Government, the 
        United States Postal Service, the Postal Rate Commission, any 
        Federal corporation created by an Act of Congress that is 
        wholly owned by the Federal Government, and the governments of 
        the territories and possessions of the United States.
            ``(2) Child support.--The term `child support', when used 
        in reference to the legal obligations of an individual to 
        provide such support, means amounts required to be paid under a 
        judgment, decree, or order, whether temporary, final, or 
        subject to modification, issued by a court or an administrative 
        agency of competent jurisdiction, for the support and 
        maintenance of a child, including a child who has attained the 
        age of majority under the law of the issuing State, or a child 
        and the parent with whom the child is living, which provides 
        for monetary support, health care, arrearages or reimbursement, 
        and which may include other related costs and fees, interest 
        and penalties, income withholding, attorney's fees, and other 
        relief.
            ``(3) Alimony.--
                    ``(A) In general.--The term `alimony', when used in 
                reference to the legal obligations of an individual to 
                provide the same, means periodic payments of funds for 
                the support and maintenance of the spouse (or former 
                spouse) of the individual, and (subject to and in 
                accordance with State law) includes separate 
                maintenance, alimony pendente lite, maintenance, and 
                spousal support, and includes attorney's fees, 
                interest, and court costs when and to the extent that 
                the same are expressly made recoverable as such 
                pursuant to a decree, order, or judgment issued in 
                accordance with applicable State law by a court of 
                competent jurisdiction.
                    ``(B) Exceptions.--Such term does not include--
                            ``(i) any child support; or
                            ``(ii) any payment or transfer of property 
                        or its value by an individual to the spouse or 
                        a former spouse of the individual in compliance 
                        with any community property settlement, 
                        equitable distribution of property, or other 
                        division of property between spouses or former 
                        spouses.
            ``(4) Private person.--The term `private person' means a 
        person who does not have sovereign or other special immunity or 
        privilege which causes the person not to be subject to legal 
        process.
            ``(5) Legal process.--The term `legal process' means any 
        writ, order, summons, or other similar process in the nature of 
        garnishment--
                    ``(A) which is issued by--
                            ``(i) a court or an administrative agency 
                        of competent jurisdiction in any State, 
                        territory, or possession of the United States;
                            ``(ii) a court or an administrative agency 
                        of competent jurisdiction in any foreign 
                        country with which the United States has 
                        entered into an agreement which requires the 
                        United States to honor the process; or
                            ``(iii) an authorized official pursuant to 
                        an order of such a court or an administrative 
                        agency of competent jurisdiction or pursuant to 
                        State or local law; and
                    ``(B) which is directed to, and the purpose of 
                which is to compel, a governmental entity which holds 
                moneys which are otherwise payable to an individual to 
                make a payment from the moneys to another party in 
                order to satisfy a legal obligation of the individual 
                to provide child support or make alimony payments.''.
    (b) Conforming Amendments.--
            (1) To part d of title iv.--Sections 461 and 462 (42 U.S.C. 
        661 and 662) are repealed.
            (2) To title 5, united states code.--Section 5520a of title 
        5, United States Code, is amended, in subsections (h)(2) and 
        (i), by striking ``sections 459, 461, and 462 of the Social 
        Security Act (42 U.S.C. 659, 661, and 662)'' and inserting 
        ``section 459 of the Social Security Act (42 U.S.C. 659)''.
    (c) Military Retired and Retainer Pay.--
            (1) Definition of court.--Section 1408(a)(1) of title 10, 
        United States Code, is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (B);
                    (B) by striking the period at the end of 
                subparagraph (C) and inserting ``; and''; and
                    (C) by adding after subparagraph (C) the following 
                new subparagraph:
                    ``(D) any administrative or judicial tribunal of a 
                State competent to enter orders for support or 
                maintenance (including a State agency administering a 
                program under a State plan approved under part D of 
                title IV of the Social Security Act), and, for purposes 
                of this subparagraph, the term `State' includes the 
                District of Columbia, the Commonwealth of Puerto Rico, 
                the Virgin Islands, Guam, and American Samoa.''.
            (2) Definition of court order.--Section 1408(a)(2) of such 
        title is amended--
                    (A) by inserting ``or a support order, as defined 
                in section 453(p) of the Social Security Act (42 U.S.C. 
                653(p)),'' before ``which--'';
                    (B) in subparagraph (B)(i), by striking ``(as 
                defined in section 462(b) of the Social Security Act 
                (42 U.S.C. 662(b)))'' and inserting ``(as defined in 
                section 459(i)(2) of the Social Security Act (42 U.S.C. 
                659(i)(2)))''; and
                    (C) in subparagraph (B)(ii), by striking ``(as 
                defined in section 462(c) of the Social Security Act 
                (42 U.S.C. 662(c)))'' and inserting ``(as defined in 
                section 459(i)(3) of the Social Security Act (42 U.S.C. 
                659(i)(3)))''.
            (3) Public payee.--Section 1408(d) of such title is 
        amended--
                    (A) in the heading, by inserting ``(or for Benefit 
                of)'' before ``Spouse or''; and
                    (B) in paragraph (1), in the 1st sentence, by 
                inserting ``(or for the benefit of such spouse or 
                former spouse to a State disbursement unit established 
                pursuant to section 454B of the Social Security Act or 
                other public payee designated by a State, in accordance 
                with part D of title IV of the Social Security Act, as 
                directed by court order, or as otherwise directed in 
                accordance with such part D)'' before ``in an amount 
                sufficient''.
            (4) Relationship to part d of title iv.--Section 1408 of 
        such title is amended by adding at the end the following new 
        subsection:
    ``(j) Relationship to Other Laws.--In any case involving an order 
providing for payment of child support (as defined in section 459(i)(2) 
of the Social Security Act) by a member who has never been married to 
the other parent of the child, the provisions of this section shall not 
apply, and the case shall be subject to the provisions of section 459 
of such Act.''.
    (d) Effective Date.--The amendments made by this section shall 
become effective 6 months after the date of the enactment of this Act.

SEC. 2363. ENFORCEMENT OF CHILD SUPPORT OBLIGATIONS OF MEMBERS OF THE 
              ARMED FORCES.

    (a) Availability of Locator Information.--
            (1) Maintenance of address information.--The Secretary of 
        Defense shall establish a centralized personnel locator service 
        that includes the address of each member of the Armed Forces 
        under the jurisdiction of the Secretary. Upon request of the 
        Secretary of Transportation, addresses for members of the Coast 
        Guard shall be included in the centralized personnel locator 
        service.
            (2) Type of address.--
                    (A) Residential address.--Except as provided in 
                subparagraph (B), the address for a member of the Armed 
                Forces shown in the locator service shall be the 
                residential address of that member.
                    (B) Duty address.--The address for a member of the 
                Armed Forces shown in the locator service shall be the 
                duty address of that member in the case of a member--
                            (i) who is permanently assigned overseas, 
                        to a vessel, or to a routinely deployable unit; 
                        or
                            (ii) with respect to whom the Secretary 
                        concerned makes a determination that the 
                        member's residential address should not be 
                        disclosed due to national security or safety 
                        concerns.
            (3) Updating of locator information.--Within 30 days after 
        a member listed in the locator service establishes a new 
        residential address (or a new duty address, in the case of a 
        member covered by paragraph (2)(B)), the Secretary concerned 
        shall update the locator service to indicate the new address of 
        the member.
            (4) Availability of information.--The Secretary of Defense 
        shall make information regarding the address of a member of the 
        Armed Forces listed in the locator service available, on 
        request, to the Federal Parent Locator Service established 
        under section 453 of the Social Security Act.
    (b) Facilitating Granting of Leave for Attendance at Hearings.--
            (1) Regulations.--The Secretary of each military 
        department, and the Secretary of Transportation with respect to 
        the Coast Guard when it is not operating as a service in the 
        Navy, shall prescribe regulations to facilitate the granting of 
        leave to a member of the Armed Forces under the jurisdiction of 
        that Secretary in a case in which--
                    (A) the leave is needed for the member to attend a 
                hearing described in paragraph (2);
                    (B) the member is not serving in or with a unit 
                deployed in a contingency operation (as defined in 
                section 101 of title 10, United States Code); and
                    (C) the exigencies of military service (as 
                determined by the Secretary concerned) do not otherwise 
                require that such leave not be granted.
            (2) Covered hearings.--Paragraph (1) applies to a hearing 
        that is conducted by a court or pursuant to an administrative 
        process established under State law, in connection with a civil 
        action--
                    (A) to determine whether a member of the Armed 
                Forces is a natural parent of a child; or
                    (B) to determine an obligation of a member of the 
                Armed Forces to provide child support.
            (3) Definitions.--For purposes of this subsection--
                    (A) The term ``court'' has the meaning given that 
                term in section 1408(a) of title 10, United States 
                Code.
                    (B) The term ``child support'' has the meaning 
                given such term in section 459(i) of the Social 
                Security Act (42 U.S.C. 659(i)).
    (c) Payment of Military Retired Pay in Compliance With Child 
Support Orders.--
            (1) Date of certification of court order.--Section 1408 of 
        title 10, United States Code, as amended by section 2362(c)(4) 
        of this Act, is amended--
                    (A) by redesignating subsections (i) and (j) as 
                subsections (j) and (k), respectively; and
                    (B) by inserting after subsection (h) the following 
                new subsection:
    ``(i) Certification Date.--It is not necessary that the date of a 
certification of the authenticity or completeness of a copy of a court 
order for child support received by the Secretary concerned for the 
purposes of this section be recent in relation to the date of receipt 
by the Secretary.''.
            (2) Payments consistent with assignments of rights to 
        states.--Section 1408(d)(1) of such title is amended by 
        inserting after the 1st sentence the following new sentence: 
        ``In the case of a spouse or former spouse who, pursuant to 
        section 408(a)(4) of the Social Security Act (42 U.S.C. 
        608(a)(4)), assigns to a State the rights of the spouse or 
        former spouse to receive support, the Secretary concerned may 
        make the child support payments referred to in the preceding 
        sentence to that State in amounts consistent with that 
        assignment of rights.''.
            (3) Arrearages owed by members of the uniformed services.--
        Section 1408(d) of such title is amended by adding at the end 
        the following new paragraph:
    ``(6) In the case of a court order for which effective service is 
made on the Secretary concerned on or after the date of the enactment 
of this paragraph and which provides for payments from the disposable 
retired pay of a member to satisfy the amount of child support set 
forth in the order, the authority provided in paragraph (1) to make 
payments from the disposable retired pay of a member to satisfy the 
amount of child support set forth in a court order shall apply to 
payment of any amount of child support arrearages set forth in that 
order as well as to amounts of child support that currently become 
due.''.
            (4) Payroll deductions.--The Secretary of Defense shall 
        begin payroll deductions within 30 days after receiving notice 
        of withholding, or for the 1st pay period that begins after 
        such 30-day period.

SEC. 2364. VOIDING OF FRAUDULENT TRANSFERS.

    Section 466 (42 U.S.C. 666), as amended by section 2321 of this 
Act, is amended by adding at the end the following new subsection:
    ``(g) Laws Voiding Fraudulent Transfers.--In order to satisfy 
section 454(20)(A), each State must have in effect--
            ``(1)(A) the Uniform Fraudulent Conveyance Act of 1981;
            ``(B) the Uniform Fraudulent Transfer Act of 1984; or
            ``(C) another law, specifying indicia of fraud which create 
        a prima facie case that a debtor transferred income or property 
        to avoid payment to a child support creditor, which the 
        Secretary finds affords comparable rights to child support 
        creditors; and
            ``(2) procedures under which, in any case in which the 
        State knows of a transfer by a child support debtor with 
        respect to which such a prima facie case is established, the 
        State must--
                    ``(A) seek to void such transfer; or
                    ``(B) obtain a settlement in the best interests of 
                the child support creditor.''.

SEC. 2365. WORK REQUIREMENT FOR PERSONS OWING PAST-DUE CHILD SUPPORT.

    (a) In General.--Section 466(a) (42 U.S.C. 666(a)), as amended by 
sections 2315, 2317(a), and 2323 of this Act, is amended by inserting 
after paragraph (14) the following new paragraph:
            ``(15) Procedures to ensure that persons owing past-due 
        support work or have a plan for payment of such support.--
                    ``(A) In general.--Procedures under which the State 
                has the authority, in any case in which an individual 
                owes past-due support with respect to a child receiving 
                assistance under a State program funded under part A, 
                to issue an order or to request that a court or an 
                administrative process established pursuant to State 
                law issue an order that requires the individual to--
                            ``(i) pay such support in accordance with a 
                        plan approved by the court, or, at the option 
                        of the State, a plan approved by the State 
                        agency administering the State program under 
                        this part; or
                            ``(ii) if the individual is subject to such 
                        a plan and is not incapacitated, participate in 
                        such work activities (as defined in section 
                        407(d)) as the court, or, at the option of the 
                        State, the State agency administering the State 
                        program under this part, deems appropriate.
                    ``(B) Past-due support defined.--For purposes of 
                subparagraph (A), the term `past-due support' means the 
                amount of a delinquency, determined under a court 
                order, or an order of an administrative process 
                established under State law, for support 
and maintenance of a child, or of a child and the parent with whom the 
child is living.''.
    (b) Conforming Amendment.--The flush paragraph at the end of 
section 466(a) (42 U.S.C. 666(a)) is amended by striking ``and (7)'' 
and inserting ``(7), and (15)''.

SEC. 2366. DEFINITION OF SUPPORT ORDER.

    Section 453 (42 U.S.C. 653) as amended by sections 2316 and 2345(b) 
of this Act, is amended by adding at the end the following new 
subsection:
    ``(p) Support Order Defined.--As used in this part, the term 
`support order' means a judgment, decree, or order, whether temporary, 
final, or subject to modification, issued by a court or an 
administrative agency of competent jurisdiction, for the support and 
maintenance of a child, including a child who has attained the age of 
majority under the law of the issuing State, or a child and the parent 
with whom the child is living, which provides for monetary support, 
health care, arrearages, or reimbursement, and which may include 
related costs and fees, interest and penalties, income withholding, 
attorneys' fees, and other relief.''.

SEC. 2367. REPORTING ARREARAGES TO CREDIT BUREAUS.

    Section 466(a)(7) (42 U.S.C. 666(a)(7)) is amended to read as 
follows:
            ``(7) Reporting arrearages to credit bureaus.--
                    ``(A) In general.--Procedures (subject to 
                safeguards pursuant to subparagraph (B)) requiring the 
                State to report periodically to consumer reporting 
                agencies (as defined in section 603(f) of the Fair 
                Credit Reporting Act (15 U.S.C. 1681a(f)) the name of 
                any noncustodial parent who is delinquent in the 
                payment of support, and the amount of overdue support 
                owed by such parent.
                    ``(B) Safeguards.--Procedures ensuring that, in 
                carrying out subparagraph (A), information with respect 
                to a noncustodial parent is reported--
                            ``(i) only after such parent has been 
                        afforded all due process required under State 
                        law, including notice and a reasonable 
                        opportunity to contest the accuracy of such 
                        information; and
                            ``(ii) only to an entity that has furnished 
                        evidence satisfactory to the State that the 
                        entity is a consumer reporting agency (as so 
                        defined).''.

SEC. 2368. LIENS.

    Section 466(a)(4) (42 U.S.C. 666(a)(4)) is amended to read as 
follows:
            ``(4) Liens.--Procedures under which--
                    ``(A) liens arise by operation of law against real 
                and personal property for amounts of overdue support 
                owed by a noncustodial parent who resides or owns 
                property in the State; and
                    ``(B) the State accords full faith and credit to 
                liens described in subparagraph (A) arising in another 
                State, when the State agency, party, or other entity 
                seeking to enforce such a lien complies with the 
                procedural rules relating to recording or serving liens 
                that arise within the State, except that such rules may 
                not require judicial notice or hearing prior to the 
                enforcement of such a lien.''.

SEC. 2369. STATE LAW AUTHORIZING SUSPENSION OF LICENSES.

    Section 466(a) (42 U.S.C. 666(a)), as amended by sections 2315, 
2317(a), 2323, and 2365 of this Act, is amended by inserting after 
paragraph (15) the following:
            ``(16) Authority to withhold or suspend licenses.--
        Procedures under which the State has (and uses in appropriate 
        cases) authority to withhold or suspend, or to restrict the use 
        of driver's licenses, professional and occupational licenses, 
        and recreational licenses of individuals owing overdue support 
        or failing, after receiving appropriate notice, to comply with 
        subpoenas or warrants relating to paternity or child support 
        proceedings.''.

SEC. 2370. DENIAL OF PASSPORTS FOR NONPAYMENT OF CHILD SUPPORT.

    (a) HHS Certification Procedure.--
            (1) Secretarial responsibility.--Section 452 (42 U.S.C. 
        652), as amended by section 2345 of this Act, is amended by 
        adding at the end the following new subsection:
    ``(k)(1) If the Secretary receives a certification by a State 
agency in accordance with the requirements of section 454(31) that an 
individual owes arrearages of child support in an amount exceeding 
$5,000, the Secretary shall transmit such certification to the 
Secretary of State for action (with respect to denial, revocation, or 
limitation of passports) pursuant to paragraph (2).
    ``(2) The Secretary of State shall, upon certification by the 
Secretary transmitted under paragraph (1), refuse to issue a passport 
to such individual, and may revoke, restrict, or limit a passport 
issued previously to such individual.
    ``(3) The Secretary and the Secretary of State shall not be liable 
to an individual for any action with respect to a certification by a 
State agency under this section.''.
            (2) State agency responsibility.--Section 454 (42 U.S.C. 
        654), as amended by sections 2301(b), 2303(a), 2312(b), 
        2313(a), 2333, and 2343(b) of this Act, is amended--
                    (A) by striking ``and'' at the end of paragraph 
                (29);
                    (B) by striking the period at the end of paragraph 
                (30) and inserting ``; and''; and
                    (C) by adding after paragraph (30) the following 
                new paragraph:
            ``(31) provide that the State agency will have in effect a 
        procedure for certifying to the Secretary, for purposes of the 
        procedure under section 452(k), determinations that individuals 
        owe arrearages of child support in an amount exceeding $5,000, 
        under which procedure--
                    ``(A) each individual concerned is afforded notice 
                of such determination and the consequences thereof, and 
                an opportunity to contest the determination; and
                    ``(B) the certification by the State agency is 
                furnished to the Secretary in such format, and 
                accompanied by such supporting documentation, as the 
                Secretary may require.''.
    (b) Effective Date.--This section and the amendments made by this 
section shall become effective October 1, 1997.

SEC. 2371. INTERNATIONAL SUPPORT ENFORCEMENT.

    (a) Authority for International Agreements.--Part D of title IV, as 
amended by section 2362(a) of this Act, is amended by adding after 
section 459 the following new section:

``SEC. 459A. INTERNATIONAL SUPPORT ENFORCEMENT.

    ``(a) Authority for Declarations.--
            ``(1) Declaration.--The Secretary of State, with the 
        concurrence of the Secretary of Health and Human Services, is 
        authorized to declare any foreign country (or a political 
        subdivision thereof) to be a foreign reciprocating country if 
        the foreign country has established, or undertakes to 
        establish, procedures for the establishment and enforcement of 
        duties of support owed to obligees who are residents of the 
        United States, and such procedures are substantially in 
        conformity with the standards prescribed under subsection (b).
            ``(2) Revocation.--A declaration with respect to a foreign 
        country made pursuant to paragraph (1) may be revoked if the 
        Secretaries of State and Health and Human Services determine 
        that--
                    ``(A) the procedures established by the foreign 
                country regarding the establishment and enforcement of 
                duties of support have been so changed, or the foreign 
                country's implementation of such procedures is so 
                unsatisfactory, that such procedures do not meet the 
                criteria for such a declaration; or
                    ``(B) continued operation of the declaration is not 
                consistent with the purposes of this part.
            ``(3) Form of declaration.--A declaration under paragraph 
        (1) may be made in the form of an international agreement, in 
        connection with an international agreement or corresponding 
        foreign declaration, or on a unilateral basis.
    ``(b) Standards for Foreign Support Enforcement Procedures.--
            ``(1) Mandatory elements.--Support enforcement procedures 
        of a foreign country which may be the subject of a declaration 
        pursuant to subsection (a)(1) shall include the following 
        elements:
                    ``(A) The foreign country (or political subdivision 
                thereof) has in effect procedures, available to 
                residents of the United States--
                            ``(i) for establishment of paternity, and 
                        for establishment of orders of support for 
                        children and custodial parents; and
                            ``(ii) for enforcement of orders to provide 
                        support to children and custodial parents, 
                        including procedures for collection and 
                        appropriate distribution of support payments 
                        under such orders.
                    ``(B) The procedures described in subparagraph (A), 
                including legal and administrative assistance, are 
                provided to residents of the United States at no cost.
                    ``(C) An agency of the foreign country is 
                designated as a Central Authority responsible for--
                            ``(i) facilitating support enforcement in 
                        cases involving residents of the foreign 
                        country and residents of the United States; and
                            ``(ii) ensuring compliance with the 
                        standards established pursuant to this 
                        subsection.
            ``(2) Additional elements.--The Secretary of Health and 
        Human Services and the Secretary of State, in consultation with 
        the States, may establish such additional standards as may be 
        considered necessary to further the purposes of this section.
    ``(c) Designation of United States Central Authority.--It shall be 
the responsibility of the Secretary of Health and Human Services to 
facilitate support enforcement in cases involving residents of the 
United States and residents of foreign countries that are the subject 
of a declaration under this section, by activities including--
            ``(1) development of uniform forms and procedures for use 
        in such cases;
            ``(2) notification of foreign reciprocating countries of 
        the State of residence of individuals sought for support 
        enforcement purposes, on the basis of information provided by 
        the Federal Parent Locator Service; and
            ``(3) such other oversight, assistance, and coordination 
        activities as the Secretary may find necessary and appropriate.
    ``(d) Effect on Other Laws.--States may enter into reciprocal 
arrangements for the establishment and enforcement of support 
obligations with foreign countries that are not the subject of a 
declaration pursuant to subsection (a), to the extent consistent with 
Federal law.''.
    (b) State Plan Requirement.--Section 454 (42 U.S.C. 654), as 
amended by sections 2301(b), 2303(a), 2312(b), 2313(a), 2333, 2343(b), 
and 2370(a)(2) of this Act, is amended--
            (1) by striking ``and'' at the end of paragraph (30);
            (2) by striking the period at the end of paragraph (31) and 
        inserting ``; and''; and
            (3) by adding after paragraph (31) the following new 
        paragraph:
            ``(32)(A) provide that any request for services under this 
        part by a foreign reciprocating country or a foreign country 
        with which the State has an arrangement described in section 
        459A(d)(2) shall be treated as a request by a State;
            ``(B) provide, at State option, notwithstanding paragraph 
        (4) or any other provision of this part, for services under the 
        plan for enforcement of a spousal support order not described 
        in paragraph (4)(B) entered by such a country (or subdivision); 
        and
            ``(C) provide that no applications will be required from, 
        and no costs will be assessed for such services against, the 
        foreign reciprocating country or foreign obligee (but costs may 
        at State option be assessed against the obligor).''.

SEC. 2372. FINANCIAL INSTITUTION DATA MATCHES.

    Section 466(a) (42 U.S.C. 666(a)), as amended by sections 2315, 
2317(a), 2323, 2365, and 2369 of this Act, is amended by inserting 
after paragraph (16) the following new paragraph:
            ``(17) Financial institution data matches.--
                    ``(A) In general.--Procedures under which the State 
                agency shall enter into agreements with financial 
                institutions doing business in the State--
                            ``(i) to develop and operate, in 
                        coordination with such financial institutions, 
                        a data match system, using automated data 
                        exchanges to the maximum extent feasible, in 
                        which each such financial institution is 
                        required to provide for each calendar quarter 
                        the name, record address, social security 
                        number or other taxpayer identification number, 
                        and other identifying information for each 
                        noncustodial parent who maintains an account at 
                        such institution and who owes past-due support, 
                        as identified by the State by name and social 
                        security number or other taxpayer 
                        identification number; and
                            ``(ii) in response to a notice of lien or 
                        levy, encumber or surrender, as the case may 
                        be, assets held by such institution on behalf 
                        of any noncustodial parent who is subject to a 
                        child support lien pursuant to paragraph (4).
                    ``(B) Reasonable fees.--The State agency may pay a 
                reasonable fee to a financial institution for 
                conducting the data match provided for in subparagraph 
                (A)(i), not to exceed the actual costs incurred by such 
                financial institution.
                    ``(C) Liability.--A financial institution shall not 
                be liable under any Federal or State law to any 
                person--
                            ``(i) for any disclosure of information to 
                        the State agency under subparagraph (A)(i);
                            ``(ii) for encumbering or surrendering any 
                        assets held by such financial institution in 
                        response to a notice of lien or levy issued by 
                        the State agency as provided for in 
                        subparagraph (A)(ii); or
                            ``(iii) for any other action taken in good 
                        faith to comply with the requirements of 
                        subparagraph (A).
                    ``(D) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Financial institution.--The term 
                        `financial institution' has the meaning given 
                        to such term by section 469A(d)(1).
                            ``(ii) Account.--The term `account' means a 
                        demand deposit account, checking or negotiable 
                        withdrawal order account, savings account, time 
                        deposit account, or money-market mutual fund 
                        account.''.

SEC. 2373. ENFORCEMENT OF ORDERS AGAINST PATERNAL OR MATERNAL 
              GRANDPARENTS IN CASES OF MINOR PARENTS.

    Section 466(a) (42 U.S.C. 666(a)), as amended by sections 2315, 
2317(a), 2323, 2365, 2369, and 2372 of this Act, is amended by 
inserting after paragraph (17) the following new paragraph:
            ``(18) Enforcement of orders against paternal or maternal 
        grandparents.--Procedures under which, at the State's option, 
        any child support order enforced under this part with respect 
to a child of minor parents, if the custodial parent of such child is 
receiving assistance under the State program under part A, shall be 
enforceable, jointly and severally, against the parents of the 
noncustodial parent of such child.''.

SEC. 2374. NONDISCHARGEABILITY IN BANKRUPTCY OF CERTAIN DEBTS FOR THE 
              SUPPORT OF A CHILD.

    (a) Amendment to Title 11 of the United States Code.--Section 
523(a) of title 11, United States Code, is amended--
            (1) by striking ``or'' at the end of paragraph (16);
            (2) by striking the period at the end of paragraph (17) and 
        inserting ``; or'';
            (3) by adding at the end the following:
            ``(18) owed under State law to a State or municipality that 
        is--
                    ``(A) in the nature of support, and
                    ``(B) enforceable under part D of title IV of the 
                Social Security Act (42 U.S.C. 601 et seq.).'', and
            (3) in paragraph (5), by striking ``section 402(a)(26)'' 
        and inserting ``section 408(a)(4)''.
    (b) Amendment to the Social Security Act.--Section 456(b) (42 
U.S.C. 656(b)) is amended to read as follows:
    ``(b) Nondischargeability.--A debt (as defined in section 101 of 
title 11 of the United States Code) owed under State law to a State (as 
defined in such section) or municipality (as defined in such section) 
that is in the nature of support and that is enforceable under this 
part is not released by a discharge in bankruptcy under title 11 of the 
United States Code.''.
    (c) Application of Amendments.--The amendments made by this section 
shall apply only with respect to cases commenced under title 11 of the 
United States Code after the date of the enactment of this Act.

                     Subchapter H--Medical Support

SEC. 2376. CORRECTION TO ERISA DEFINITION OF MEDICAL CHILD SUPPORT 
              ORDER.

    (a) In General.--Section 609(a)(2)(B) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1169(a)(2)(B)) is amended--
            (1) by striking ``issued by a court of competent 
        jurisdiction'';
            (2) by striking the period at the end of clause (ii) and 
        inserting a comma; and
            (3) by adding, after and below clause (ii), the following:
                ``if such judgment, decree, or order (I) is issued by a 
                court of competent jurisdiction or (II) is issued 
                through an administrative process established under 
                State law and has the force and effect of law under 
                applicable State law.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        take effect on the date of the enactment of this Act.
            (2) Plan amendments not required until january 1, 1997.--
        Any amendment to a plan required to be made by an amendment 
        made by this section shall not be required to be made before 
        the 1st plan year beginning on or after January 1, 1997, if--
                    (A) during the period after the date before the 
                date of the enactment of this Act and before such 1st 
                plan year, the plan is operated in accordance with the 
                requirements of the amendments made by this section; 
                and
                    (B) such plan amendment applies retroactively to 
                the period after the date before the date of the 
                enactment of this Act and before such 1st plan year.
        A plan shall not be treated as failing to be operated in 
        accordance with the provisions of the plan merely because it 
        operates in accordance with this paragraph.

SEC. 2377. ENFORCEMENT OF ORDERS FOR HEALTH CARE COVERAGE.

    Section 466(a) (42 U.S.C. 666(a)), as amended by sections 2315, 
2317(a), 2323, 2365, 2369, 2372, and 2373 of this Act, is amended by 
inserting after paragraph (18) the following new paragraph:
            ``(19) Health care coverage.--Procedures under which all 
        child support orders enforced pursuant to this part shall 
        include a provision for the health care coverage of the child, 
        and in the case in which a noncustodial parent provides such 
        coverage and changes employment, and the new employer provides 
        health care coverage, the State agency shall transfer notice of 
        the provision to the employer, which notice shall operate to 
        enroll the child in the noncustodial parent's health plan, 
        unless the noncustodial parent contests the notice.''.

    Subchapter I--Enhancing Responsibility and Opportunity for Non-
                          Residential Parents

SEC. 2381. GRANTS TO STATES FOR ACCESS AND VISITATION PROGRAMS.

    Part D of title IV (42 U.S.C. 651-669), as amended by section 2353 
of this Act, is amended by adding at the end the following new section:

``SEC. 469B. GRANTS TO STATES FOR ACCESS AND VISITATION PROGRAMS.

    ``(a) In General.--The Administration for Children and Families 
shall make grants under this section to enable States to establish and 
administer programs to support and facilitate noncustodial parents' 
access to and visitation of their children, by means of activities 
including mediation (both voluntary and mandatory), counseling, 
education, development of parenting plans, visitation enforcement 
(including monitoring, supervision and neutral drop-off and pickup), 
and development of guidelines for visitation and alternative custody 
arrangements.
    ``(b) Amount of Grant.--The amount of the grant to be made to a 
State under this section for a fiscal year (beginning with fiscal year 
1998) shall be an amount equal to the lesser of--
            ``(1) 90 percent of State expenditures during the fiscal 
        year for activities described in subsection (a); or
            ``(2) the allotment of the State under subsection (c) for 
        the fiscal year.
    ``(c) Allotments to States.--
            ``(1) In general.--The allotment of a State for a fiscal 
        year is the amount that bears the same ratio to $10,000,000 for 
        grants under this section for the fiscal year as the number of 
        children in the State living with only 1 biological parent 
        bears to the total number of such children in all States.
            ``(2) Minimum allotment.--The Administration for Children 
        and Families shall adjust allotments to States under paragraph 
        (1) as necessary to ensure that no State is allotted less 
        than--
                    ``(A) $50,000 for fiscal year 1998 or 1999 or
                    ``(B) $100,000 for any succeeding fiscal year.
    ``(d) No Supplantation of State Expenditures for Similar 
Activities.--A State to which a grant is made under this section may 
not use the grant to supplant expenditures by the State for activities 
specified in subsection (a), but shall use the grant to supplement such 
expenditures at a level at least equal to the level of such 
expenditures for fiscal year 1995.
    ``(e) State Administration.--Each State to which a grant is made 
under this section--
            ``(1) may administer State programs funded with the grant, 
        directly or through grants to or contracts with courts, local 
        public agencies, or nonprofit private entities;
            ``(2) shall not be required to operate such programs on a 
        statewide basis; and
            ``(3) shall monitor, evaluate, and report on such programs 
        in accordance with regulations prescribed by the Secretary.''.

        Subchapter J--Effective Dates and Conforming Amendments

SEC. 2391. EFFECTIVE DATES AND CONFORMING AMENDMENTS.

    (a) In General.--Except as otherwise specifically provided (but 
subject to subsections (b) and (c))--
            (1) the provisions of this chapter requiring the enactment 
        or amendment of State laws under section 466 of the Social 
        Security Act, or revision of State plans under section 454 of 
        such Act, shall be effective with respect to periods beginning 
        on and after October 1, 1996; and
            (2) all other provisions of this chapter shall become 
        effective upon the date of the enactment of this Act.
    (b) Grace Period for State Law Changes.--The provisions of this 
chapter shall become effective with respect to a State on the later 
of--
            (1) the date specified in this chapter, or
            (2) the effective date of laws enacted by the legislature 
        of such State implementing such provisions,
but in no event later than the 1st day of the 1st calendar quarter 
beginning after the close of the 1st regular session of the State 
legislature that begins after the date of the enactment of this Act. 
For purposes of the previous sentence, in the case of a State that has 
a 2-year legislative session, each year of such session shall be deemed 
to be a separate regular session of the State legislature.
    (c) Grace Period for State Constitutional Amendment.--A State shall 
not be found out of compliance with any requirement enacted by this 
chapter if the State is unable to so comply without amending the State 
constitution until the earlier of--
            (1) 1 year after the effective date of the necessary State 
        constitutional amendment; or
            (2) 5 years after the date of the enactment of this Act.
    (d) Conforming Amendments.--
            (1) The following provisions are amended by striking 
        ``absent'' each place it appears and inserting 
        ``noncustodial'':
                    (A) Section 451 (42 U.S.C. 651).
                    (B) Subsections (a)(1), (a)(8), (a)(10)(E), 
                (a)(10)(F), (f), and (h) of section 452 (42 U.S.C. 
                652).
                    (C) Section 453(f) (42 U.S.C. 653(f)).
                    (D) Paragraphs (8), (13), and (21)(A) of section 
                454 (42 U.S.C. 654).
                    (E) Section 455(e)(1) (42 U.S.C. 655(e)(1)).
                    (F) Section 458(a) (42 U.S.C. 658(a)).
                    (G) Subsections (a), (b), and (c) of section 463 
                (42 U.S.C. 663).
                    (H) Subsections (a)(3)(A), (a)(3)(C), (a)(6), and 
                (a)(8)(B)(ii), the last sentence of subsection (a), and 
                subsections (b)(1), (b)(3)(B), (b)(3)(B)(i), 
                (b)(6)(A)(i), (b)(8), (b)(9), and (e) of section 466 
                (42 U.S.C. 666).
            (2) The following provisions are amended by striking ``an 
        absent'' each place it appears and inserting ``a 
        noncustodial'':
                    (A) Paragraphs (2) and (3) of section 453(c) (42 
                U.S.C. 653(c)).
                    (B) Subparagraphs (B) and (C) of section 454(9) (42 
                U.S.C. 654(9)).
                    (C) Section 456(a)(3) (42 U.S.C. 656(a)(3)).
                    (D) Subsections (a)(3)(A), (a)(6), (a)(8)(B)(i), 
                (b)(3)(A), and (b)(3)(B) of section 466 (42 U.S.C. 
                666).
                    (E) Paragraphs (2) and (4) of section 469(b) (42 
                U.S.C. 669(b)).

     CHAPTER 4--RESTRICTING WELFARE AND PUBLIC BENEFITS FOR ALIENS

SEC. 2400. STATEMENTS OF NATIONAL POLICY CONCERNING WELFARE AND 
              IMMIGRATION.

    The Congress makes the following statements concerning national 
policy with respect to welfare and immigration:
            (1) Self-sufficiency has been a basic principle of United 
        States immigration law since this country's earliest 
        immigration statutes.
            (2) It continues to be the immigration policy of the United 
        States that--
                    (A) aliens within the Nation's borders not depend 
                on public resources to meet their needs, but rather 
                rely on their own capabilities and the resources of 
                their families, their sponsors, and private 
                organizations, and
                    (B) the availability of public benefits not 
                constitute an incentive for immigration to the United 
                States.
            (3) Despite the principle of self-sufficiency, aliens have 
        been applying for and receiving public benefits from Federal, 
        State, and local governments at increasing rates.
            (4) Current eligibility rules for public assistance and 
        unenforceable financial support agreements have proved wholly 
        incapable of assuring that individual aliens not burden the 
        public benefits system.
            (5) It is a compelling government interest to enact new 
        rules for eligibility and sponsorship agreements in order to 
        assure that aliens be self-reliant in accordance with national 
        immigration policy.
            (6) It is a compelling government interest to remove the 
        incentive for illegal immigration provided by the availability 
        of public benefits.
            (7) With respect to the State authority to make 
        determinations concerning the eligibility of qualified aliens 
        for public benefits in this chapter, a State that chooses to 
        follow the Federal classification in determining the 
        eligibility of such aliens for public assistance shall be 
        considered to have chosen the least restrictive means available 
        for achieving the compelling governmental interest of assuring 
        that aliens be self-reliant in accordance with national 
        immigration policy.

             Subchapter A--Eligibility for Federal Benefits

SEC. 2401. ALIENS WHO ARE NOT QUALIFIED ALIENS INELIGIBLE FOR FEDERAL 
              PUBLIC BENEFITS.

    (a) In General.--Notwithstanding any other provision of law and 
except as provided in subsection (b), an alien who is not a qualified 
alien (as defined in section 2431) is not eligible for any Federal 
public benefit (as defined in subsection (c)).
    (b) Exceptions.--
            (1) Subsection (a) shall not apply with respect to the 
        following Federal public benefits:
                    (A) Emergency medical services under title XV or 
                XIX of the Social Security Act.
                    (B) Short-term, non-cash, in-kind emergency 
                disaster relief.
                    (C)(i) Public health assistance for immunizations.
                    (ii) Public health assistance for testing and 
                treatment of a communicable disease if the Secretary of 
                Health and Human Services determines that it is 
                necessary to prevent the spread of such disease.
                    (D) Programs, services, or assistance (such as soup 
                kitchens, crisis counseling and intervention, and 
                short-term shelter) specified by the Attorney General, 
                in the Attorney General's sole and unreviewable 
                discretion after consultation with appropriate Federal 
                agencies and departments, which (i) deliver in-kind 
                services at the community level, including through 
                public or private nonprofit agencies; (ii) do not 
                condition the provision of assistance, the amount of 
                assistance provided, or the cost of assistance provided 
                on the individual recipient's income or resources; and 
                (iii) are necessary for the protection of life or 
                safety.
                    (E) Programs for housing or community development 
                assistance or financial assistance administered by the 
                Secretary of Housing and Urban Development, any program 
                under title V of the Housing Act of 1949, or any 
                assistance under section 306C of the Consolidated Farm 
                and Rural Development Act, to the extent that the alien 
is receiving such a benefit on the date of the enactment of this Act.
            (2) Subsection (a) shall not apply to any benefit payable 
        under title II of the Social Security Act to an alien who is 
        lawfully present in the United States as determined by the 
        Attorney General, to any benefit if nonpayment of such benefit 
        would contravene an international agreement described in 
        section 233 of the Social Security Act, to any benefit if 
        nonpayment would be contrary to section 202(t) of the Social 
        Security Act, or to any benefit payable under title II of the 
        Social Security Act to which entitlement is based on an 
        application filed in or before the month in which this Act 
        becomes law.
    (c) Federal Public Benefit Defined.--
            (1) Except as provided in paragraph (2), for purposes of 
        this chapter the term ``Federal public benefit'' means--
                    (A) any grant, contract, loan, professional 
                license, or commercial license provided by an agency of 
                the United States or by appropriated funds of the 
                United States; and
                    (B) any retirement, welfare, health, disability, 
                public or assisted housing, postsecondary education, 
                food assistance, unemployment benefit, or any other 
                similar benefit for which payments or assistance are 
                provided to an individual, household, or family 
                eligibility unit by an agency of the United States or 
                by appropriated funds of the United States.
            (2) Such term shall not apply--
                    (A) to any contract, professional license, or 
                commercial license for a nonimmigrant whose visa for 
                entry is related to such employment in the United 
                States; or
                    (B) with respect to benefits for an alien who as a 
                work authorized nonimmigrant or as an alien lawfully 
                admitted for permanent residence under the Immigration 
                and Nationality Act qualified for such benefits and for 
                whom the United States under reciprocal treaty 
                agreements is required to pay benefits, as determined 
                by the Attorney General, after consultation with the 
                Secretary of State.

SEC. 2402. LIMITED ELIGIBILITY OF QUALIFIED ALIENS FOR CERTAIN FEDERAL 
              PROGRAMS.

    (a) Limited Eligibility for Specified Federal Programs.--
            (1) In general.--Notwithstanding any other provision of law 
        and except as provided in paragraph (2), an alien who is a 
        qualified alien (as defined in section 2431) is not eligible 
        for any specified Federal program (as defined in paragraph 
        (3)).
            (2) Exceptions.--
                    (A) Time-limited exception for refugees and 
                asylees.--Paragraph (1) shall not apply to an alien 
                until 5 years after the date--
                            (i) an alien is admitted to the United 
                        States as a refugee under section 207 of the 
                        Immigration and Nationality Act;
                            (ii) an alien is granted asylum under 
                        section 208 of such Act; or
                            (iii) an alien's deportation is withheld 
                        under section 243(h) of such Act.
                    (B) Certain permanent resident aliens.--Paragraph 
                (1) shall not apply to an alien who--
                            (i) is lawfully admitted to the United 
                        States for permanent residence under the 
                        Immigration and Nationality Act; and
                            (ii)(I) has worked 40 qualifying quarters 
                        of coverage as defined under title II of the 
                        Social Security Act or can be credited with 
                        such qualifying quarters as provided under 
                        section 435, and (II) did not receive any 
                        Federal means-tested public benefit (as defined 
                        in section 2403(c)) during any such quarter.
                    (C) Veteran and active duty exception.--Paragraph 
                (1) shall not apply to an alien who is lawfully 
                residing in any State and is--
                            (i) a veteran (as defined in section 101 of 
                        title 38, United States Code) with a discharge 
                        characterized as an honorable discharge and not 
                        on account of alienage,
                            (ii) on active duty (other than active duty 
                        for training) in the Armed Forces of the United 
                        States, or
                            (iii) the spouse or unmarried dependent 
                        child of an individual described in clause (i) 
                        or (ii).
                    (D) Transition for aliens currently receiving 
                benefits.--
                            (i) SSI.--
                                    (I) In general.--With respect to 
                                the specified Federal program described 
                                in paragraph (3)(A), during the period 
                                beginning on the date of the enactment 
                                of this Act and ending on the date 
                                which is 1 year after such date of 
                                enactment, the Commissioner of Social 
                                Security shall redetermine the 
                                eligibility of any individual who is 
                                receiving benefits under such program 
                                as of the date of the enactment of this 
                                Act and whose eligibility for such 
                                benefits may terminate by reason of the 
                                provisions of this subsection.
                                    (II) Redetermination criteria.--
                                With respect to any redetermination 
                                under subclause (I), the Commissioner 
                                of Social Security shall apply the 
                                eligibility criteria for new applicants 
                                for benefits under such program.
                                    (III) Grandfather provision.--The 
                                provisions of this subsection and the 
                                redetermination under subclause (I), 
                                shall only apply with respect to the 
                                benefits of an individual described in 
                                subclause (I) for months beginning on 
                                or after the date of the 
                                redetermination with respect to such 
                                individual.
                                    (IV) Notice.--Not later than 
                                January 1, 1997, the Commissioner of 
                                Social Security shall notify an 
                                individual described in subclause (I) 
                                of the provisions of this clause.
                            (ii) Food stamps.--
                                    (I) In general.--With respect to 
                                the specified Federal program described 
                                in paragraph (3)(B), during the period 
                                beginning on the date of enactment of 
                                this Act and ending on the date which 
                                is 1 year after the date of enactment, 
                                the State agency shall, at the time of 
                                the recertification, recertify the 
                                eligibility of any individual who is 
                                receiving benefits under such program 
                                as of the date of enactment of this Act 
                                and whose eligibility for such benefits 
                                may terminate by reason of the 
                                provisions of this subsection.
                                    (II) Recertification criteria.--
                                With respect to any recertification 
                                under subclause (I), the State agency 
                                shall apply the eligibility criteria 
                                for applicants for benefits under such 
                                program.
                                    (III) Grandfather provision.--The 
                                provisions of this subsection and the 
                                recertification under subclause (I) 
                                shall only apply with respect to the 
                                eligibility of an alien for a program 
                                for months beginning on or after the 
                                date of recertification, if on the date 
                                of enactment of this Act the alien is 
                                lawfully residing in any State and is 
                                receiving benefits under such program 
                                on such date of enactment.
            (3) Specified federal program defined.--For purposes of 
        this chapter, the term ``specified Federal program'' means any 
        of the following:
                    (A) SSI.--The supplemental security income program 
                under title XVI of the Social Security Act, including 
                supplementary payments pursuant to an agreement for 
Federal administration under section 1616(a) of the Social Security Act 
and payments pursuant to an agreement entered into under section 212(b) 
of Public Law 93-66.
                    (B) Food stamps.--The food stamp program as defined 
                in section 3(h) of the Food Stamp Act of 1977.
    (b) Limited Eligibility for Designated Federal Programs.--
            (1) In general.--Notwithstanding any other provision of law 
        and except as provided in section 2403 and paragraph (2), a 
        State is authorized to determine the eligibility of an alien 
        who is a qualified alien (as defined in section 2431) for any 
        designated Federal program (as defined in paragraph (3)).
            (2) Exceptions.--Qualified aliens under this paragraph 
        shall be eligible for any designated Federal program.
                    (A) Time-limited exception for refugees and 
                asylees.--
                            (i) An alien who is admitted to the United 
                        States as a refugee under section 207 of the 
                        Immigration and Nationality Act until 5 years 
                        after the date of an alien's entry into the 
                        United States.
                            (ii) An alien who is granted asylum under 
                        section 208 of such Act until 5 years after the 
                        date of such grant of asylum.
                            (iii) An alien whose deportation is being 
                        withheld under section 243(h) of such Act until 
                        5 years after such withholding.
                    (B) Certain permanent resident aliens.--An alien 
                who--
                            (i) is lawfully admitted to the United 
                        States for permanent residence under the 
                        Immigration and Nationality Act; and
                            (ii)(I) has worked 40 qualifying quarters 
                        of coverage as defined under title II of the 
                        Social Security Act or can be credited with 
                        such qualifying quarters as provided under 
                        section 2435, and (II) did not receive any 
                        Federal means-tested public benefit (as defined 
                        in section 2403(c)) during any such quarter.
                    (C) Veteran and active duty exception.--An alien 
                who is lawfully residing in any State and is--
                            (i) a veteran (as defined in section 101 of 
                        title 38, United States Code) with a discharge 
                        characterized as an honorable discharge and not 
                        on account of alienage,
                            (ii) on active duty (other than active duty 
                        for training) in the Armed Forces of the United 
                        States, or
                            (iii) the spouse or unmarried dependent 
                        child of an individual described in clause (i) 
                        or (ii).
                    (D) Transition for those currently receiving 
                benefits.--An alien who on the date of the enactment of 
                this Act is lawfully residing in any State and is 
                receiving benefits under such program on the date of 
                the enactment of this Act shall continue to be eligible 
                to receive such benefits until January 1, 1997.
            (3) Designated federal program defined.--For purposes of 
        this chapter, the term ``designated Federal program'' means any 
        of the following:
                    (A) Temporary assistance for needy families.--The 
                program of block grants to States for temporary 
                assistance for needy families under part A of title IV 
                of the Social Security Act.
                    (B) Social services block grant.--The program of 
                block grants to States for social services under title 
                XX of the Social Security Act.
                    (C) Medicaid.--The program of medical assistance 
                under title XV and XIX of the Social Security Act.

SEC. 2403. FIVE-YEAR LIMITED ELIGIBILITY OF QUALIFIED ALIENS FOR 
              FEDERAL MEANS-TESTED PUBLIC BENEFIT.

    (a) In General.--Notwithstanding any other provision of law and 
except as provided in subsection (b), an alien who is a qualified alien 
(as defined in section 2431) and who enters the United States on or 
after the date of the enactment of this Act is not eligible for any 
Federal means-tested public benefit (as defined in subsection (c)) for 
a period of five years beginning on the date of the alien's entry into 
the United States with a status within the meaning of the term 
``qualified alien''.
    (b) Exceptions.--The limitation under subsection (a) shall not 
apply to the following aliens:
            (1) Exception for refugees and asylees.--
                    (A) An alien who is admitted to the United States 
                as a refugee under section 207 of the Immigration and 
                Nationality Act.
                    (B) An alien who is granted asylum under section 
                208 of such Act.
                    (C) An alien whose deportation is being withheld 
                under section 243(h) of such Act.
            (2) Veteran and active duty exception.--An alien who is 
        lawfully residing in any State and is--
                    (A) a veteran (as defined in section 101 of title 
                38, United States Code) with a discharge characterized 
                as an honorable discharge and not on account of 
                alienage,
                    (B) on active duty (other than active duty for 
                training) in the Armed Forces of the United States, or
                    (C) the spouse or unmarried dependent child of an 
                individual described in subparagraph (A) or (B).
    (c) Federal Means-tested Public Benefit Defined.--
            (1) Except as provided in paragraph (2), for purposes of 
        this chapter, the term ``Federal means-tested public benefit'' 
        means a public benefit (including cash, medical, housing, and 
        food assistance and social services) of the Federal Government 
        in which the eligibility of an individual, household, or family 
        eligibility unit for benefits, or the amount of such benefits, 
        or both are determined on the basis of income, resources, or 
        financial need of the individual, household, or unit.
            (2) Such term does not include the following:
                    (A) Emergency medical services under title XV or 
                XIX of the Social Security Act.
                    (B) Short-term, non-cash, in-kind emergency 
                disaster relief.
                    (C) Assistance or benefits under the National 
                School Lunch Act.
                    (D) Assistance or benefits under the Child 
                Nutrition Act of 1966.
                    (E)(i) Public health assistance for immunizations.
                    (ii) Public health assistance for testing and 
                treatment of a communicable disease if the Secretary of 
                Health and Human Services determines that it is 
                necessary to prevent the spread of such disease.
                    (F) Payments for foster care and adoption 
                assistance under part E of title IV of the Social 
                Security Act for a child who would, in the absence of 
                subsection (a), be eligible to have such payments made 
                on the child's behalf under such part, but only if the 
                foster or adoptive parent or parents of such child are 
                not described under subsection (a).
                    (G) Programs, services, or assistance (such as soup 
                kitchens, crisis counseling and intervention, and 
                short-term shelter) specified by the Attorney General, 
                in the Attorney General's sole and unreviewable 
                discretion after consultation with appropriate Federal 
                agencies and departments, which (i) deliver in-kind 
                services at the community level, including through 
                public or private nonprofit agencies; (ii) do not 
                condition the provision of assistance, the amount of 
                assistance provided, or the cost of assistance provided 
                on the individual recipient's income or resources; and 
(iii) are necessary for the protection of life or safety.
                    (H) Programs of student assistance under titles IV, 
                V, IX, and X of the Higher Education Act of 1965.
                    (I) Means-tested programs under the Elementary and 
                Secondary Education Act of 1965.

SEC. 2404. NOTIFICATION AND INFORMATION REPORTING.

    (a) Notification.--Each Federal agency that administers a program 
to which section 2401, 2402, or 2403 applies shall, directly or through 
the States, post information and provide general notification to the 
public and to program recipients of the changes regarding eligibility 
for any such program pursuant to this subchapter.
    (b) Information Reporting Under Title IV of the Social Security 
Act.--Part A of title IV of the Social Security Act, as amended by 
section 2103(a) of this Act, is amended by inserting the following new 
section after section 411:

``SEC. 411A. STATE REQUIRED TO PROVIDE CERTAIN INFORMATION.

    ``Each State to which a grant is made under section 403 shall, at 
least 4 times annually and upon request of the Immigration and 
Naturalization Service, furnish the Immigration and Naturalization 
Service with the name and address of, and other identifying information 
on, any individual who the State knows is unlawfully in the United 
States.''.
    (c) SSI.--Section 1631(e) of such Act (42 U.S.C. 1383(e)) is 
amended--
            (1) by redesignating the paragraphs (6) and (7) inserted by 
        sections 206(d)(2) and 206(f)(1) of the Social Security 
        Independence and Programs Improvement Act of 1994 (Public Law 
        103-296; 108 Stat. 1514, 1515) as paragraphs (7) and (8), 
        respectively; and
            (2) by adding at the end the following new paragraph:
    ``(9) Notwithstanding any other provision of law, the Commissioner 
shall, at least 4 times annually and upon request of the Immigration 
and Naturalization Service (hereafter in this paragraph referred to as 
the `Service'), furnish the Service with the name and address of, and 
other identifying information on, any individual who the Commissioner 
knows is unlawfully in the United States, and shall ensure that each 
agreement entered into under section 1616(a) with a State provides that 
the State shall furnish such information at such times with respect to 
any individual who the State knows is unlawfully in the United 
States.''.
    (d) Information Reporting for Housing Programs.--Title I of the 
United States Housing Act of 1937 (42 U.S.C. 1437 et seq.) is amended 
by adding at the end the following new section:

``SEC. 27. PROVISION OF INFORMATION TO LAW ENFORCEMENT AND OTHER 
              AGENCIES.

    ``Notwithstanding any other provision of law, the Secretary shall, 
at least 4 times annually and upon request of the Immigration and 
Naturalization Service (hereafter in this section referred to as the 
`Service'), furnish the Service with the name and address of, and other 
identifying information on, any individual who the Secretary knows is 
unlawfully in the United States, and shall ensure that each contract 
for assistance entered into under section 6 or 8 of this Act with a 
public housing agency provides that the public housing agency shall 
furnish such information at such times with respect to any individual 
who the public housing agency knows is unlawfully in the United 
States.''.

 Subchapter B--Eligibility for State and Local Public Benefits Programs

SEC. 2411. ALIENS WHO ARE NOT QUALIFIED ALIENS OR NONIMMIGRANTS 
              INELIGIBLE FOR STATE AND LOCAL PUBLIC BENEFITS.

    (a) In General.--Notwithstanding any other provision of law and 
except as provided in subsections (b) and (d), an alien who is not--
            (1) a qualified alien (as defined in section 2431),
            (2) a nonimmigrant under the Immigration and Nationality 
        Act, or
            (3) an alien who is paroled into the United States under 
        section 212(d)(5) of such Act for less than one year,
is not eligible for any State or local public benefit (as defined in 
subsection (c)).
    (b) Exceptions.--Subsection (a) shall not apply with respect to the 
following State or local public benefits:
            (1) Emergency medical services under title XV or XIX of the 
        Social Security Act.
            (2) Short-term, non-cash, in-kind emergency disaster 
        relief.
            (3)(A) Public health assistance for immunizations.
            (B) Public health assistance for testing and treatment of a 
        communicable disease if the Secretary of Health and Human 
        Services determines that it is necessary to prevent the spread 
        of such disease.
            (4) Programs, services, or assistance (such as soup 
        kitchens, crisis counseling and intervention, and short-term 
        shelter) specified by the Attorney General, in the Attorney 
        General's sole and unreviewable discretion after consultation 
        with appropriate Federal agencies and departments, which (A) 
        deliver in-kind services at the community level, including 
        through public or private nonprofit agencies; (B) do not 
        condition the provision of assistance, the amount of assistance 
        provided, or the cost of assistance provided on the individual 
        recipient's income or resources; and (C) are necessary for the 
        protection of life or safety.
    (c) State or Local Public Benefit Defined.--
            (1) Except as provided in paragraph (2), for purposes of 
        this subchapter the term ``State or local public benefit'' 
        means--
                    (A) any grant, contract, loan, professional 
                license, or commercial license provided by an agency of 
                a State or local government or by appropriated funds of 
                a State or local government; and
                    (B) any retirement, welfare, health, disability, 
                public or assisted housing, postsecondary education, 
                food assistance, unemployment benefit, or any other 
                similar benefit for which payments or assistance are 
                provided to an individual, household, or family 
                eligibility unit by an agency of a State or local 
                government or by appropriated funds of a State or local 
                government.
            (2) Such term shall not apply--
                    (A) to any contract, professional license, or 
                commercial license for a nonimmigrant whose visa for 
                entry is related to such employment in the United 
                States; or
                    (B) with respect to benefits for an alien who as a 
                work authorized nonimmigrant or as an alien lawfully 
                admitted for permanent residence under the Immigration 
                and Nationality Act qualified for such benefits and for 
                whom the United States under reciprocal treaty 
                agreements is required to pay benefits, as determined 
                by the Secretary of State, after consultation with the 
                Attorney General.
    (d) State Authority To Provide for Eligibility of Illegal Aliens 
for State and Local Public Benefits.--A State may provide that an alien 
who is not lawfully present in the United States is eligible for any 
State or local public benefit for which such alien would otherwise be 
ineligible under subsection (a) only through the enactment of a State 
law after the date of the enactment of this Act which affirmatively 
provides for such eligibility.

SEC. 2412. STATE AUTHORITY TO LIMIT ELIGIBILITY OF QUALIFIED ALIENS FOR 
              STATE PUBLIC BENEFITS.

    (a) In General.--Notwithstanding any other provision of law and 
except as provided in subsection (b), a State is authorized to 
determine the eligibility for any State public benefits (as defined in 
subsection (c) of an alien who is a qualified alien (as defined in 
section 2431), a nonimmigrant under the Immigration and Nationality 
Act, or an alien who is paroled into the United States under section 
212(d)(5) of such Act for less than one year.
    (b) Exceptions.--Qualified aliens under this subsection shall be 
eligible for any State public benefits.
            (1) Time-limited exception for refugees and asylees.--
                    (A) An alien who is admitted to the United States 
                as a refugee under section 207 of the Immigration and 
                Nationality Act until 5 years after the date of an 
                alien's entry into the United States.
                    (B) An alien who is granted asylum under section 
                208 of such Act until 5 years after the date of such 
                grant of asylum.
                    (C) An alien whose deportation is being withheld 
                under section 243(h) of such Act until 5 years after 
                such withholding.
            (2) Certain permanent resident aliens.--An alien who--
                    (A) is lawfully admitted to the United States for 
                permanent residence under the Immigration and 
                Nationality Act; and
                    (B)(i) has worked 40 qualifying quarters of 
                coverage as defined under title II of the Social 
                Security Act or can be credited with such qualifying 
                quarters as provided under section 2435, and (ii) did 
                not receive any Federal means-tested public benefit (as 
                defined in section 2403(c)) during any such quarter.
            (3) Veteran and active duty exception.--An alien who is 
        lawfully residing in any State and is--
                    (A) a veteran (as defined in section 101 of title 
                38, United States Code) with a discharge characterized 
                as an honorable discharge and not on account of 
                alienage,
                    (B) on active duty (other than active duty for 
                training) in the Armed Forces of the United States, or
                    (C) the spouse or unmarried dependent child of an 
                individual described in subparagraph (A) or (B).
            (4) Transition for those currently receiving benefits.--An 
        alien who on the date of the enactment of this Act is lawfully 
        residing in any State and is receiving benefits on the date of 
        the enactment of this Act shall continue to be eligible to 
        receive such benefits until January 1, 1997.
    (c) State Public Benefits Defined.--The term ``State public 
benefits'' means any means-tested public benefit of a State or 
political subdivision of a State under which the State or political 
subdivision specifies the standards for eligibility, and does not 
include any Federal public benefit.

     Subchapter C--Attribution of Income and Affidavits of Support

SEC. 2421. FEDERAL ATTRIBUTION OF SPONSOR'S INCOME AND RESOURCES TO 
              ALIEN.

    (a) In General.--Notwithstanding any other provision of law, in 
determining the eligibility and the amount of benefits of an alien for 
any Federal means-tested public benefits program (as defined in section 
2403(c)), the income and resources of the alien shall be deemed to 
include the following:
            (1) The income and resources of any person who executed an 
        affidavit of support pursuant to section 213A of the 
        Immigration and Nationality Act (as added by section 2423) on 
        behalf of such alien.
            (2) The income and resources of the spouse (if any) of the 
        person.
    (b) Application.--Subsection (a) shall apply with respect to an 
alien until such time as the alien--
            (1) achieves United States citizenship through 
        naturalization pursuant to chapter 2 of title III of the 
        Immigration and Nationality Act; or
            (2)(A) has worked 40 qualifying quarters of coverage as 
        defined under title II of the Social Security Act or can be 
        credited with such qualifying quarters as provided under 
        section 2435, and (B) did not receive any Federal means-tested 
        public benefit (as defined in section 2403(c)) during any such 
        quarter.
    (c) Review of Income and Resources of Alien Upon Reapplication.--
Whenever an alien is required to reapply for benefits under any Federal 
means-tested public benefits program, the applicable agency shall 
review the income and resources attributed to the alien under 
subsection (a).
    (d) Application.--
            (1) If on the date of the enactment of this Act, a Federal 
        means-tested public benefits program attributes a sponsor's 
        income and resources to an alien in determining the alien's 
        eligibility and the amount of benefits for an alien, this 
        section shall apply to any such determination beginning on the 
        day after the date of the enactment of this Act.
            (2) If on the date of the enactment of this Act, a Federal 
        means-tested public benefits program does not attribute a 
        sponsor's income and resources to an alien in determining the 
        alien's eligibility and the amount of benefits for an alien, 
        this section shall apply to any such determination beginning 
        180 days after the date of the enactment of this Act.

SEC. 2422. AUTHORITY FOR STATES TO PROVIDE FOR ATTRIBUTION OF SPONSORS 
              INCOME AND RESOURCES TO THE ALIEN WITH RESPECT TO STATE 
              PROGRAMS.

    (a) Optional Application to State Programs.--Except as provided in 
subsection (b), in determining the eligibility and the amount of 
benefits of an alien for any State public benefits (as defined in 
section 2412(c)), the State or political subdivision that offers the 
benefits is authorized to provide that the income and resources of the 
alien shall be deemed to include--
            (1) the income and resources of any individual who executed 
        an affidavit of support pursuant to section 213A of the 
        Immigration and Nationality Act (as added by section 2423) on 
        behalf of such alien, and
            (2) the income and resources of the spouse (if any) of the 
        individual.
    (b) Exceptions.--Subsection (a) shall not apply with respect to the 
following State public benefits:
            (1) Emergency medical services.
            (2) Short-term, non-cash, in-kind emergency disaster 
        relief.
            (3) Programs comparable to assistance or benefits under the 
        National School Lunch Act.
            (4) Programs comparable to assistance or benefits under the 
        Child Nutrition Act of 1966.
            (5)(A) Public health assistance for immunizations.
            (B) Public health assistance for testing and treatment of a 
        communicable disease if the appropriate chief State health 
        official determines that it is necessary to prevent the spread 
        of such disease.
            (6) Payments for foster care and adoption assistance.
            (7) Programs, services, or assistance (such as soup 
        kitchens, crisis counseling and intervention, and short-term 
        shelter) specified by the Attorney General of a State, after 
        consultation with appropriate agencies and departments, which 
        (A) deliver in-kind services at the community level, including 
        through public or private nonprofit agencies; (B) do not 
        condition the provision of assistance, the amount of assistance 
        provided, or the cost of assistance provided on the individual 
        recipient's income or resources; and (C) are necessary for the 
        protection of life or safety.

SEC. 2423. REQUIREMENTS FOR SPONSOR'S AFFIDAVIT OF SUPPORT.

    (a) In General.--Title II of the Immigration and Nationality Act is 
amended by inserting after section 213 the following new section:

           ``requirements for sponsor's affidavit of support

    ``Sec. 213A. (a) Enforceability.--(1) No affidavit of support may 
be accepted by the Attorney General or by any consular officer to 
establish that an alien is not excludable as a public charge under 
section 212(a)(4) unless such affidavit is executed as a contract--
            ``(A) which is legally enforceable against the sponsor by 
        the sponsored alien, the Federal Government, and by any State 
        (or any political subdivision of such State) which provides any 
means-tested public benefits program, but not later than 10 years after 
the alien last receives any such benefit;
            ``(B) in which the sponsor agrees to financially support 
        the alien, so that the alien will not become a public charge; 
        and
            ``(C) in which the sponsor agrees to submit to the 
        jurisdiction of any Federal or State court for the purpose of 
        actions brought under subsection (e)(2).
    ``(2) A contract under paragraph (1) shall be enforceable with 
respect to benefits provided to the alien until such time as the alien 
achieves United States citizenship through naturalization pursuant to 
chapter 2 of title III.
    ``(b) Forms.--Not later than 90 days after the date of enactment of 
this section, the Attorney General, in consultation with the Secretary 
of State and the Secretary of Health and Human Services, shall 
formulate an affidavit of support consistent with the provisions of 
this section.
    ``(c) Remedies.--Remedies available to enforce an affidavit of 
support under this section include any or all of the remedies described 
in section 3201, 3203, 3204, or 3205 of title 28, United States Code, 
as well as an order for specific performance and payment of legal fees 
and other costs of collection, and include corresponding remedies 
available under State law. A Federal agency may seek to collect amounts 
owed under this section in accordance with the provisions of subchapter 
II of chapter 37 of title 31, United States Code.
    ``(d) Notification of Change of Address.--
            ``(1) In general.--The sponsor shall notify the Attorney 
        General and the State in which the sponsored alien is currently 
        resident within 30 days of any change of address of the sponsor 
        during the period specified in subsection (a)(2).
            ``(2) Penalty.--Any person subject to the requirement of 
        paragraph (1) who fails to satisfy such requirement shall be 
        subject to a civil penalty of--
                    ``(A) not less than $250 or more than $2,000, or
                    ``(B) if such failure occurs with knowledge that 
                the alien has received any means-tested public benefit, 
                not less than $2,000 or more than $5,000.
    ``(e) Reimbursement of Government Expenses.--(1)(A) Upon 
notification that a sponsored alien has received any benefit under any 
means-tested public benefits program, the appropriate Federal, State, 
or local official shall request reimbursement by the sponsor in the 
amount of such assistance.
    ``(B) The Attorney General, in consultation with the Secretary of 
Health and Human Services, shall prescribe such regulations as may be 
necessary to carry out subparagraph (A).
    ``(2) If within 45 days after requesting reimbursement, the 
appropriate Federal, State, or local agency has not received a response 
from the sponsor indicating a willingness to commence payments, an 
action may be brought against the sponsor pursuant to the affidavit of 
support.
    ``(3) If the sponsor fails to abide by the repayment terms 
established by such agency, the agency may, within 60 days of such 
failure, bring an action against the sponsor pursuant to the affidavit 
of support.
    ``(4) No cause of action may be brought under this subsection later 
than 10 years after the alien last received any benefit under any 
means-tested public benefits program.
    ``(5) If, pursuant to the terms of this subsection, a Federal, 
State, or local agency requests reimbursement from the sponsor in the 
amount of assistance provided, or brings an action against the sponsor 
pursuant to the affidavit of support, the appropriate agency may 
appoint or hire an individual or other person to act on behalf of such 
agency acting under the authority of law for purposes of collecting any 
moneys owed. Nothing in this subsection shall preclude any appropriate 
Federal, State, or local agency from directly requesting reimbursement 
from a sponsor for the amount of assistance provided, or from bringing 
an action against a sponsor pursuant to an affidavit of support.
    ``(f) Definitions.--For the purposes of this section--
            ``(1) Sponsor.--The term `sponsor' means an individual 
        who--
                    ``(A) is a citizen or national of the United States 
                or an alien who is lawfully admitted to the United 
                States for permanent residence;
                    ``(B) is 18 years of age or over;
                    ``(C) is domiciled in any of the 50 States or the 
                District of Columbia; and
                    ``(D) is the person petitioning for the admission 
                of the alien under section 204.
            ``(2) Means-tested public benefits program.--The term 
        `means-tested public benefits program' means a program of 
        public benefits (including cash, medical, housing, and food 
        assistance and social services) of the Federal Government or of 
        a State or political subdivision of a State in which the 
        eligibility of an individual, household, or family eligibility 
        unit for benefits under the program, or the amount of such 
        benefits, or both are determined on the basis of income, 
        resources, or financial need of the individual, household, or 
        unit.''.
    (b) Clerical Amendment.--The table of contents of such Act is 
amended by inserting after the item relating to section 213 the 
following:

``Sec. 213A. Requirements for sponsor's affidavit of support.''.
    (c) Effective Date.--Subsection (a) of section 213A of the 
Immigration and Nationality Act, as inserted by subsection (a) of this 
section, shall apply to affidavits of support executed on or after a 
date specified by the Attorney General, which date shall be not earlier 
than 60 days (and not later than 90 days) after the date the Attorney 
General formulates the form for such affidavits under subsection (b) of 
such section.
    (d) Benefits Not Subject to Reimbursement.--Requirements for 
reimbursement by a sponsor for benefits provided to a sponsored alien 
pursuant to an affidavit of support under section 213A of the 
Immigration and Nationality Act shall not apply with respect to the 
following:
            (1) Emergency medical services under title XV or XIX of the 
        Social Security Act.
            (2) Short-term, non-cash, in-kind emergency disaster 
        relief.
            (3) Assistance or benefits under the National School Lunch 
        Act.
            (4) Assistance or benefits under the Child Nutrition Act of 
        1966.
            (5)(A) Public health assistance for immunizations.
            (B) Public health assistance for testing and treatment of a 
        communicable disease if the Secretary of Health and Human 
        Services determines that it is necessary to prevent the spread 
        of such disease.
            (6) Payments for foster care and adoption assistance under 
        part E of title IV of the Social Security Act for a child, but 
        only if the foster or adoptive parent or parents of such child 
        are not otherwise ineligible pursuant to section 2403 of this 
        Act.
            (7) Programs, services, or assistance (such as soup 
        kitchens, crisis counseling and intervention, and short-term 
        shelter) specified by the Attorney General, in the Attorney 
        General's sole and unreviewable discretion after consultation 
        with appropriate Federal agencies and departments, which (A) 
        deliver in-kind services at the community level, including 
        through public or private nonprofit agencies; (B) do not 
        condition the provision of assistance, the amount of assistance 
        provided, or the cost of assistance provided on the individual 
        recipient's income or resources; and (C) are necessary for the 
        protection of life or safety.
            (8) Programs of student assistance under titles IV, V, IX, 
        and X of the Higher Education Act of 1965.

SEC. 2424. COSIGNATURE OF ALIEN STUDENT LOANS.

    Section 484(b) of the Higher Education Act of 1965 (20 U.S.C. 
1091(b)) is amended by adding at the end the following new paragraph:
    ``(6) Notwithstanding sections 427(a)(2)(A), 428B(a), 
428C(b)(4)(A), and 464(c)(1)(E), or any other provision of this title, 
a student who is an alien lawfully admitted for permanent residence 
under the Immigration and Nationality Act shall not be eligible for a 
loan under this title unless the loan is endorsed and cosigned by the 
alien's sponsor under section 213A of the Immigration and Nationality 
Act or by another creditworthy individual who is a United States 
citizen.''.

                    Subchapter D--General Provisions

SEC. 2431. DEFINITIONS.

    (a) In General.--Except as otherwise provided in this chapter, the 
terms used in this chapter have the same meaning given such terms in 
section 101(a) of the Immigration and Nationality Act.
    (b) Qualified Alien.--For purposes of this chapter, the term 
``qualified alien'' means an alien who, at the time the alien applies 
for, receives, or attempts to receive a Federal public benefit, is--
            (1) an alien who is lawfully admitted for permanent 
        residence under the Immigration and Nationality Act,
            (2) an alien who is granted asylum under section 208 of 
        such Act,
            (3) a refugee who is admitted to the United States under 
        section 207 of such Act,
            (4) an alien who is paroled into the United States under 
        section 212(d)(5) of such Act for a period of at least 1 year,
            (5) an alien whose deportation is being withheld under 
        section 243(h) of such Act, or
            (6) an alien who is granted conditional entry pursuant to 
        section 203(a)(7) of such Act as in effect prior to April 1, 
        1980.

SEC. 2432. VERIFICATION OF ELIGIBILITY FOR FEDERAL PUBLIC BENEFITS.

    (a) In General.--Not later than 18 months after the date of the 
enactment of this Act, the Attorney General of the United States, after 
consultation with the Secretary of Health and Human Services, shall 
promulgate regulations requiring verification that a person applying 
for a Federal public benefit (as defined in section 2401(c)), to which 
the limitation under section 2401 applies, is a qualified alien and is 
eligible to receive such benefit. Such regulations shall, to the extent 
feasible, require that information requested and exchanged be similar 
in form and manner to information requested and exchanged under section 
1137 of the Social Security Act.
    (b) State Compliance.--Not later than 24 months after the date the 
regulations described in subsection (a) are adopted, a State that 
administers a program that provides a Federal public benefit shall have 
in effect a verification system that complies with the regulations.
    (c) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as may be necessary to carry out the purpose of 
this section.

SEC. 2433. STATUTORY CONSTRUCTION.

    (a) Limitation.--
            (1) Nothing in this chapter may be construed as an 
        entitlement or a determination of an individual's eligibility 
        or fulfillment of the requisite requirements for any Federal, 
        State, or local governmental program, assistance, or benefits. 
        For purposes of this chapter, eligibility relates only to the 
        general issue of eligibility or ineligibility on the basis of 
        alienage.
            (2) Nothing in this chapter may be construed as addressing 
        alien eligibility for a basic public education as determined by 
        the Supreme Court of the United States under Plyler v. Doe (457 
        U.S. 202)(1982).
    (b) Not Applicable to Foreign Assistance.--This chapter does not 
apply to any Federal, State, or local governmental program, assistance, 
or benefits provided to an alien under any program of foreign 
assistance as determined by the Secretary of State in consultation with 
the Attorney General.
    (c) Severability.--If any provision of this chapter or the 
application of such provision to any person or circumstance is held to 
be unconstitutional, the remainder of this chapter and the application 
of the provisions of such to any person or circumstance shall not be 
affected thereby.

SEC. 2434. COMMUNICATION BETWEEN STATE AND LOCAL GOVERNMENT AGENCIES 
              AND THE IMMIGRATION AND NATURALIZATION SERVICE.

    Notwithstanding any other provision of Federal, State, or local 
law, no State or local government entity may be prohibited, or in any 
way restricted, from sending to or receiving from the Immigration and 
Naturalization Service information regarding the immigration status, 
lawful or unlawful, of an alien in the United States.

SEC. 2435. QUALIFYING QUARTERS.

    For purposes of this chapter, in determining the number of 
qualifying quarters of coverage under title II of the Social Security 
Act an alien shall be credited with--
            (1) all of the qualifying quarters of coverage as defined 
        under title II of the Social Security Act worked by a parent of 
        such alien while the alien was under age 18 if the parent did 
        not receive any Federal means-tested public benefit (as defined 
        in section 2403(c)) during any such quarter, and
            (2) all of the qualifying quarters worked by a spouse of 
        such alien during their marriage if the spouse did not receive 
        any Federal means-tested public benefit (as defined in section 
        2403(c)) during any such quarter and the alien remains married 
        to such spouse or such spouse is deceased.

    Subchapter E--Conforming Amendments Relating to Assisted Housing

SEC. 2441. CONFORMING AMENDMENTS RELATING TO ASSISTED HOUSING.

    (a) Limitations on Assistance.--Section 214 of the Housing and 
Community Development Act of 1980 (42 U.S.C. 1436a) is amended--
            (1) by striking ``Secretary of Housing and Urban 
        Development'' each place it appears and inserting ``applicable 
        Secretary'';
            (2) in subsection (b), by inserting after ``National 
        Housing Act,'' the following: ``the direct loan program under 
        section 502 of the Housing Act of 1949 or section 502(c)(5)(D), 
        504, 521(a)(2)(A), or 542 of such Act, subtitle A of title III 
        of the Cranston-Gonzalez National Affordable Housing Act,'';
            (3) in paragraphs (2) through (6) of subsection (d), by 
        striking ``Secretary'' each place it appears and inserting 
        ``applicable Secretary'';
            (4) in subsection (d), in the matter following paragraph 
        (6), by striking ``the term `Secretary''' and inserting ``the 
        term `applicable Secretary'''; and
            (5) by adding at the end the following new subsection:
    ``(h) For purposes of this section, the term `applicable Secretary' 
means--
            ``(1) the Secretary of Housing and Urban Development, with 
        respect to financial assistance administered by such Secretary 
        and financial assistance under subtitle A of title III of the 
        Cranston-Gonzalez National Affordable Housing Act; and
            ``(2) the Secretary of Agriculture, with respect to 
        financial assistance administered by such Secretary.''.
    (b) Conforming Amendments.--Section 501(h) of the Housing Act of 
1949 (42 U.S.C. 1471(h)) is amended--
            (1) by striking ``(1)'';
            (2) by striking ``by the Secretary of Housing and Urban 
        Development''; and
            (3) by striking paragraph (2).

  Subchapter F--Earned Income Credit Denied to Unauthorized Employees

SEC. 2451. EARNED INCOME CREDIT DENIED TO INDIVIDUALS NOT AUTHORIZED TO 
              BE EMPLOYED IN THE UNITED STATES.

    (a) In General.--Section 32(c)(1) of the Internal Revenue Code of 
1986 (relating to individuals eligible to claim the earned income 
credit) is amended by adding at the end the following new subparagraph:
                    ``(F) Identification number requirement.--The term 
                `eligible individual' does not include any individual 
who does not include on the return of tax for the taxable year--
                            ``(i) such individual's taxpayer 
                        identification number, and
                            ``(ii) if the individual is married (within 
                        the meaning of section 7703), the taxpayer 
                        identification number of such individual's 
                        spouse.''.
    (b) Special Identification Number.--Section 32 of such Code is 
amended by adding at the end the following new subsection:
    ``(l) Identification Numbers.--Solely for purposes of subsections 
(c)(1)(F) and (c)(3)(D), a taxpayer identification number means a 
social security number issued to an individual by the Social Security 
Administration (other than a social security number issued pursuant to 
clause (II) (or that portion of clause (III) that relates to clause 
(II)) of section 205(c)(2)(B)(i) of the Social Security Act).''.
    (c) Extension of Procedures Applicable to Mathematical or Clerical 
Errors.--Section 6213(g)(2) of such Code (relating to the definition of 
mathematical or clerical errors) is amended by striking ``and' at the 
end of subparagraph (D), by striking the period at the end of 
subparagraph (E) and inserting a comma, and by inserting after 
subparagraph (E) the following new subparagraphs:
                    ``(F) an omission of a correct taxpayer 
                identification number required under section 32 
                (relating to the earned income tax credit) to be 
                included on a return, and
                    ``(G) an entry on a return claiming the credit 
                under section 32 with respect to net earnings from 
                self-employment described in section 32(c)(2)(A) to the 
                extent the tax imposed by section 1401 (relating to 
                self-employment tax) on such net earnings has not been 
                paid.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

         CHAPTER 5--REDUCTIONS IN FEDERAL GOVERNMENT POSITIONS

SEC. 2501. REDUCTIONS.

    (a) Definitions.--As used in this section:
            (1) Appropriate effective date.--The term ``appropriate 
        effective date'', used with respect to a Department referred to 
        in this section, means the date on which all provisions of this 
        Act (other than chapter 2 of this subtitle) that the Department 
        is required to carry out, and amendments and repeals made by 
        such Act to provisions of Federal law that the Department is 
        required to carry out, are effective.
            (2) Covered activity.--The term ``covered activity'', used 
        with respect to a Department referred to in this section, means 
        an activity that the Department is required to carry out 
        under--
                    (A) a provision of this Act (other than chapter 2 
                of this subtitle); or
                    (B) a provision of Federal law that is amended or 
                repealed by this Act (other than chapter 2 of this 
                subtitle).
    (b) Reports.--
            (1) Contents.--Not later than December 31, 1996, each 
        Secretary referred to in paragraph (2) shall prepare and submit 
        to the relevant committees described in paragraph (3) a report 
        containing--
                    (A) the determinations described in subsection (c);
                    (B) appropriate documentation in support of such 
                determinations; and
                    (C) a description of the methodology used in making 
                such determinations.
            (2) Secretary.--The Secretaries referred to in this 
        paragraph are--
                    (A) the Secretary of Agriculture;
                    (B) the Secretary of Education;
                    (C) the Secretary of Labor;
                    (D) the Secretary of Housing and Urban Development; 
                and
                    (E) the Secretary of Health and Human Services.
            (3) Relevant committees.--The relevant Committees described 
        in this paragraph are the following:
                    (A) With respect to each Secretary described in 
                paragraph (2), the Committee on Government Reform and 
                Oversight of the House of Representatives and the 
                Committee on Governmental Affairs of the Senate.
                    (B) With respect to the Secretary of Agriculture, 
                the Committee on Agriculture and the Committee on 
                Economic and Educational Opportunities of the House of 
                Representatives and the Committee on Agriculture, 
                Nutrition, and Forestry of the Senate.
                    (C) With respect to the Secretary of Education, the 
                Committee on Economic and Educational Opportunities of 
                the House of Representatives and the Committee on Labor 
                and Human Resources of the Senate.
                    (D) With respect to the Secretary of Labor, the 
                Committee on Economic and Educational Opportunities of 
                the House of Representatives and the Committee on Labor 
                and Human Resources of the Senate.
                    (E) With respect to the Secretary of Housing and 
                Urban Development, the Committee on Banking and 
                Financial Services of the House of Representatives and 
                the Committee on Banking, Housing, and Urban Affairs of 
                the Senate.
                    (F) With respect to the Secretary of Health and 
                Human Services, the Committee on Economic and 
                Educational Opportunities of the House of 
                Representatives, the Committee on Labor and Human 
                Resources of the Senate, the Committee on Ways and 
                Means of the House of Representatives, and the 
                Committee on Finance of the Senate.
            (4) Report on changes.--Not later than December 31, 1997, 
        and each December 31 thereafter, each Secretary referred to in 
        paragraph (2) shall prepare and submit to the relevant 
        Committees described in paragraph (3), a report concerning any 
        changes with respect to the determinations made under 
        subsection (c) for the year in which the report is being 
        submitted.
    (c) Determinations.--Not later than December 31, 1996, each 
Secretary referred to in subsection (b)(2) shall determine--
            (1) the number of full-time equivalent positions required 
        by the Department headed by such Secretary to carry out the 
        covered activities of the Department, as of the day before the 
        date of enactment of this Act;
            (2) the number of such positions required by the Department 
        to carry out the activities, as of the appropriate effective 
        date for the Department; and
            (3) the difference obtained by subtracting the number 
        referred to in paragraph (2) from the number referred to in 
        paragraph (1).
    (d) Actions.--Each Secretary referred to in subsection (b)(2) shall 
take such actions as may be necessary, including reduction in force 
actions, consistent with sections 3502 and 3595 of title 5, United 
States Code, to reduce the number of positions of personnel of the 
Department--
            (1) not later than 30 days after the appropriate effective 
        date for the Department involved, by at least 50 percent of the 
        difference referred to in subsection (c)(3); and
            (2) not later than 13 months after such appropriate 
        effective date, by at least the remainder of such difference 
        (after the application of paragraph (1)).
    (e) Consistency.--
            (1) Education.--The Secretary of Education shall carry out 
        this section in a manner that enables the Secretary to meet the 
requirements of this section.
            (2) Labor.--The Secretary of Labor shall carry out this 
        section in a manner that enables the Secretary to meet the 
        requirements of this section.
            (3) Health and human services.--The Secretary of Health and 
        Human Services shall carry out this section in a manner that 
        enables the Secretary to meet the requirements of this section 
        and sections 502 and 503.
    (f) Calculation.--In determining, under subsection (c), the number 
of full-time equivalent positions required by a Department to carry out 
a covered activity, a Secretary referred to in subsection (b)(2) shall 
include the number of such positions occupied by personnel carrying out 
program functions or other functions (including budgetary, legislative, 
administrative, planning, evaluation, and legal functions) related to 
the activity.
    (g) General Accounting Office Report.--Not later than July 1, 1997, 
the Comptroller General of the United States shall prepare and submit 
to the committees described in subsection (b)(3), a report concerning 
the determinations made by each Secretary under subsection (c). Such 
report shall contain an analysis of the determinations made by each 
Secretary under subsection (c) and a determination as to whether 
further reductions in full-time equivalent positions are appropriate.

SEC. 2502. REDUCTIONS IN FEDERAL BUREAUCRACY.

    (a) In General.--The Secretary of Health and Human Services shall 
reduce the Federal workforce within the Department of Health and Human 
Services by an amount equal to the sum of--
            (1) 75 percent of the full-time equivalent positions at 
        such Department that relate to any direct spending program, or 
        any program funded through discretionary spending, that has 
        been converted into a block grant program under this Act and 
        the amendments made by this Act; and
            (2) an amount equal to 75 percent of that portion of the 
        total full-time equivalent departmental management positions at 
        such Department that bears the same relationship to the amount 
        appropriated for the programs referred to in paragraph (1) as 
        such amount relates to the total amount appropriated for use by 
        such Department.
    (b) Reductions in the Department of Health and Human Services.--
Notwithstanding any other provision of this Act, the Secretary of 
Health and Human Services shall take such actions as may be necessary, 
including reductions in force actions, consistent with sections 3502 
and 3595 of title 5, United States Code, to reduce the full-time 
equivalent positions within the Department of Health and Human 
Services--
            (1) by 245 full-time equivalent positions related to the 
        program converted into a block grant under the amendment made 
        by section 103; and
            (2) by 60 full-time equivalent managerial positions in the 
        Department.

SEC. 2503. REDUCING PERSONNEL IN WASHINGTON, D.C. AREA.

    In making reductions in full-time equivalent positions, the 
Secretary of Health and Human Services is encouraged to reduce 
personnel in the Washington, D.C., area office (agency headquarters) 
before reducing field personnel.

SEC. 2504. DOWNWARD ADJUSTMENT OF DISCRETIONARY SPENDING LIMITS.

    The discretionary spending limits (new budget authority and 
outlays) for fiscal years 1997 and 1998 set forth in section 601(a)(2) 
of the Congressional Budget Act of 1974, as adjusted in strict 
conformance with section 251 of the Balanced Budget and Emergency 
Deficit Control Act of 1985, shall be reduced, as calculated by the 
Director of the Office of Management and Budget, in amounts equal to 
the aggregate amounts of savings resulting from the reductions imposed 
as a result of this chapter in each of fiscal years 1997 and 1998.

                  CHAPTER 6--REFORM OF PUBLIC HOUSING

SEC. 2601. FAILURE TO COMPLY WITH OTHER WELFARE AND PUBLIC ASSISTANCE 
              PROGRAMS.

    Title I of the United States Housing Act of 1937 (42 U.S.C. 1437 et 
seq.), as amended by section 2404(d) of this Act, is amended by adding 
at the end the following new section:

``SEC. 28. FAILURE TO COMPLY WITH OTHER WELFARE AND PUBLIC ASSISTANCE 
              PROGRAMS.

    ``(a) In General.--If the benefits of a family are reduced under a 
Federal, State, or local law relating to welfare or a public assistance 
program for the failure of any member of the family to perform an 
action required under the law or program, the family may not, for the 
duration of the reduction, receive any increased assistance under this 
Act as the result of a decrease in the income of the family to the 
extent that the decrease in income is the result of the benefits 
reduction.
    ``(b) Exception.--Subsection (a) shall not apply in any case in 
which the benefits of a family are reduced because the welfare or 
public assistance program to which the Federal, State, or local law 
relates limits the period during which benefits may be provided under 
the program.''.

SEC. 2602. FRAUD UNDER MEANS-TESTED WELFARE AND PUBLIC ASSISTANCE 
              PROGRAMS.

    (a) In General.--If an individual's benefits under a Federal, 
State, or local law relating to a means-tested welfare or a public 
assistance program are reduced because of an act of fraud by the 
individual under the law or program, the individual may not, for the 
duration of the reduction, receive an increased benefit under any other 
means-tested welfare or public assistance program for which Federal 
funds are appropriated as a result of a decrease in the income of the 
individual (determined under the applicable program) attributable to 
such reduction.
    (b) Welfare or Public Assistance Programs for Which Federal Funds 
Are Appropriated.--For purposes of subsection (a), the term ``means-
tested welfare or public assistance program for which Federal funds are 
appropriated'' includes the food stamp program under the Food Stamp Act 
of 1977 (7 U.S.C. 2011 et seq.), any program of public or assisted 
housing under title I of the United States Housing Act of 1937 (42 
U.S.C. 1437 et seq.), and State programs funded under part A of title 
IV of the Social Security Act (42 U.S.C. 601 et seq.).

 CHAPTER 7--TECHNICAL AMENDMENTS RELATING TO CHILD PROTECTION PROGRAMS

SEC. 2701. EXTENSION OF ENHANCED FUNDING FOR IMPLEMENTATION OF 
              STATEWIDE AUTOMATED CHILD WELFARE INFORMATION SYSTEMS.

    Section 474(a)(3)(B) of the Social Security Act (42 U.S.C. 
674(a)(3)(B)) is amended by inserting ``(of, if the quarter is in 
fiscal year 1997, 75 percent)'' after ``50 percent'' each place it 
appears.

SEC. 2702. REDESIGNATION OF SECTION 1123.

    The Social Security Act is amended by redesignating section 1123, 
the second place it appears (42 U.S.C. 1320a-1a), as section 1123A.

                         CHAPTER 8--CHILD CARE

SEC. 2801. SHORT TITLE AND REFERENCES.

    (a) Short Title.--This chapter may be cited as the ``Child Care and 
Development Block Grant Amendments of 1996''.
    (b) References.--Except as otherwise expressly provided, whenever 
in this chapter an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Child Care and Development Block Grant Act of 1990 (42 U.S.C. 9858 et 
seq.).

SEC. 2802. GOALS.

    (a) Goals.--Section 658A (42 U.S.C. 9801 note) is amended--
            (1) in the section heading by inserting ``and goals'' after 
        ``title'';
            (2) by inserting ``(a) Short Title.--'' before ``This''; 
        and
            (3) by adding at the end the following:
    ``(b) Goals.--The goals of this subchapter are--
            ``(1) to allow each State maximum flexibility in developing 
        child care programs and policies that best suit the needs of 
        children and parents within such State;
            ``(2) to promote parental choice to empower working parents 
        to make their own decisions on the child care that best suits 
        their family's needs;
            ``(3) to encourage States to provide consumer education 
        information to help parents make informed choices about child 
        care;
            ``(4) to assist States to provide child care to parents 
        trying to achieve independence from public assistance; and
            ``(5) to assist States in implementing the health, safety, 
        licensing, and registration standards established in State 
        regulations.''.

SEC. 2803. AUTHORIZATION OF APPROPRIATIONS AND ENTITLEMENT AUTHORITY.

    (a) In General.--Section 658B (42 U.S.C. 9858) is amended to read 
as follows:

``SEC. 658B. AUTHORIZATION OF APPROPRIATIONS.

    ``There is authorized to be appropriated to carry out this 
subchapter $1,000,000,000 for each of the fiscal years 1996 through 
2002.''.
    (b) Social Security Act.--Part A of title IV of the Social Security 
Act (42 U.S.C. 601 et seq.) is amended by adding at the end the 
following:

``SEC. 418. FUNDING FOR CHILD CARE.

    ``(a) General Child Care Entitlement.--
            ``(1) General entitlement.--Subject to the amount 
        appropriated under paragraph (3), each State shall, for the 
        purpose of providing child care assistance, be entitled to 
        payments under a grant under this subsection for a fiscal year 
        in an amount equal to--
                    ``(A) the sum of the total amount required to be 
                paid to the State under former section 403 for fiscal 
                year 1994 or 1995 (whichever is greater) with respect 
                to amounts expended for child care under section--
                            ``(i) 402(g) of this Act (as such section 
                        was in effect before October 1, 1995); and
                            ``(ii) 402(i) of this Act (as so in 
                        effect); or
                    ``(B) the average of the total amounts required to 
                be paid to the State for fiscal years 1992 through 1994 
                under the sections referred to in subparagraph (A);
        whichever is greater.
            ``(2) Remainder.--
                    ``(A) Grants.--The Secretary shall use any amounts 
                appropriated for a fiscal year under paragraph (3), and 
                remaining after the reservation described in paragraph 
                (4) and after grants are awarded under paragraph (1), 
                to make grants to States under this paragraph.
                    ``(B) Amount.--Subject to subparagraph (C), the 
                amount of a grant awarded to a State for a fiscal year 
                under this paragraph shall be based on the formula used 
                for determining the amount of Federal payments to the 
                State under section 403(n) (as such section was in 
                effect before October 1, 1995).
                    ``(C) Matching requirement.--The Secretary shall 
                pay to each eligible State in a fiscal year an amount, 
                under a grant under subparagraph (A), equal to the 
                Federal medical assistance percentage for such State 
                for fiscal year 1995 (as defined in section 1905(b)) of 
                so much of the expenditures by the State for child care 
                in such year as exceed the State set-aside for such 
                State under paragraph (1)(A) for such year and the 
                amount of State expenditures in fiscal year 1994 (or 
                fiscal year 1995, whichever is greater) that equal the 
                non-Federal share for the programs described in 
                subparagraph (A) of paragraph (1).
                    ``(D) Redistribution.--
                            ``(i) In general.--With respect to any 
                        fiscal year, if the Secretary determines (in 
                        accordance with clause (ii)) that amounts under 
                        any grant awarded to a State under this 
                        paragraph for such fiscal year will not be used 
                        by such State during such fiscal year for 
                        carrying out the purpose for which the grant is 
                        made, the Secretary shall make such amounts 
available in the subsequent fiscal year for carrying out such purpose 
to 1 or more States which apply for such funds to the extent the 
Secretary determines that such States will be able to use such 
additional amounts for carrying out such purpose. Such available 
amounts shall be redistributed to a State pursuant to section 402(i) 
(as such section was in effect before October 1, 1995) by substituting 
`the number of children residing in all States applying for such funds' 
for `the number of children residing in the United States in the second 
preceding fiscal year'.
                            ``(ii) Time of determination and 
                        distribution.--The determination of the 
                        Secretary under clause (i) for a fiscal year 
                        shall be made not later than the end of the 
                        first quarter of the subsequent fiscal year. 
                        The redistribution of amounts under clause (i) 
                        shall be made as close as practicable to the 
                        date on which such determination is made. Any 
                        amount made available to a State from an 
                        appropriation for a fiscal year in accordance 
                        with this subparagraph shall, for purposes of 
                        this part, be regarded as part of such State's 
                        payment (as determined under this subsection) 
                        for the fiscal year in which the redistribution 
                        is made.
            ``(3) Appropriation.--There are authorized to be 
        appropriated, and there are appropriated, to carry out this 
        section--
                    ``(A) $1,967,000,000 for fiscal year 1997;
                    ``(B) $2,067,000,000 for fiscal year 1998;
                    ``(C) $2,167,000,000 for fiscal year 1999;
                    ``(D) $2,367,000,000 for fiscal year 2000;
                    ``(E) $2,567,000,000 for fiscal year 2001; and
                    ``(F) $2,717,000,000 for fiscal year 2002.
            ``(4) Indian tribes.--The Secretary shall reserve not more 
        than 1 percent of the aggregate amount appropriated to carry 
        out this section in each fiscal year for payments to Indian 
        tribes and tribal organizations.
    ``(b) Use of Funds.--
            ``(1) In general.--Amounts received by a State under this 
        section shall only be used to provide child care assistance. 
        Amounts received by a State under a grant under subsection 
        (a)(1) shall be available for use by the State without fiscal 
        year limitation.
            ``(2) Use for certain populations.--A State shall ensure 
        that not less than 70 percent of the total amount of funds 
        received by the State in a fiscal year under this section are 
        used to provide child care assistance to families who are 
        receiving assistance under a State program under this part, 
        families who are attempting through work activities to 
        transition off of such assistance program, and families who are 
        at risk of becoming dependent on such assistance program.
    ``(c) Application of Child Care and Development Block Grant Act of 
1990.--Notwithstanding any other provision of law, amounts provided to 
a State under this section shall be transferred to the lead agency 
under the Child Care and Development Block Grant Act of 1990, 
integrated by the State into the programs established by the State 
under such Act, and be subject to requirements and limitations of such 
Act.
    ``(d) Definition.--As used in this section, the term `State' means 
each of the 50 States or the District of Columbia.''.

SEC. 2804. LEAD AGENCY.

    Section 658D(b) (42 U.S.C. 9858b(b)) is amended--
            (1) in paragraph (1)--
                    (A) in subparagraph (A), by striking ``State'' the 
                first place that such appears and inserting 
                ``governmental or nongovernmental''; and
                    (B) in subparagraph (C), by inserting ``with 
                sufficient time and Statewide distribution of the 
                notice of such hearing,'' after ``hearing in the 
                State''; and
            (2) in paragraph (2), by striking the second sentence.

SEC. 2805. APPLICATION AND PLAN.

    Section 658E (42 U.S.C. 9858c) is amended--
            (1) in subsection (b)--
                    (A) by striking ``implemented--'' and all that 
                follows through ``(2)'' and inserting ``implemented''; 
                and
                    (B) by striking ``for subsequent State plans'';
            (2) in subsection (c)--
                    (A) in paragraph (2)--
                            (i) in subparagraph (A)--
                                    (I) in clause (i) by striking ``, 
                                other than through assistance provided 
                                under paragraph (3)(C),''; and
                                    (II) by striking ``except'' and all 
                                that follows through ``1992'', and 
                                inserting ``and provide a detailed 
                                description of the procedures the State 
                                will implement to carry out the 
                                requirements of this subparagraph'';
                            (ii) in subparagraph (B)--
                                    (I) by striking ``Provide 
                                assurances'' and inserting ``Certify''; 
                                and
                                    (II) by inserting before the period 
                                at the end ``and provide a detailed 
                                description of such procedures'';
                            (iii) in subparagraph (C)--
                                    (I) by striking ``Provide 
                                assurances'' and inserting ``Certify''; 
                                and
                                    (II) by inserting before the period 
                                at the end ``and provide a detailed 
                                description of how such record is 
                                maintained and is made available'';
                            (iv) by amending subparagraph (D) to read 
                        as follows:
                    ``(D) Consumer education information.--Certify that 
                the State will collect and disseminate to parents of 
                eligible children and the general public, consumer 
                education information that will promote informed child 
                care choices.'';
                            (v) in subparagraph (E), to read as 
                        follows:
                    ``(E) Compliance with state licensing 
                requirements.--
                            ``(i) In general.--Certify that the State 
                        has in effect licensing requirements applicable 
                        to child care services provided within the 
                        State, and provide a detailed description of 
                        such requirements and of how such requirements 
                        are effectively enforced. Nothing in the 
                        preceding sentence shall be construed to 
                        require that licensing requirements be applied 
                        to specific types of providers of child care 
                        services.
                            ``(ii) Indian tribes and tribal 
                        organizations.--In lieu of any licensing and 
                        regulatory requirements applicable under State 
                        and local law, the Secretary, in consultation 
                        with Indian tribes and tribal organizations, 
                        shall develop minimum child care standards 
                        (that appropriately reflect tribal needs and 
                        available resources) that shall be applicable 
                        to Indian tribes and tribal organizations 
                        receiving assistance under this subchapter.'';
                            (vi) by striking subparagraph (F);
                            (vii) in subparagraph (G)--
                                    (I) by redesignating such 
                                subparagraph as subparagraph (F);
                                    (II) by striking ``Provide 
                                assurances'' and inserting ``Certify''; 
                                and
                                    (III) by striking ``as described in 
                                subparagraph (F)''; and
                            (viii) by striking subparagraphs (H), (I), 
                        and (J) and inserting the following:
                    ``(G) Meeting the needs of certain populations.--
                Demonstrate the manner in which the State will meet the 
                specific child care needs of families who are receiving 
                assistance under a State program under part A of title 
IV of the Social Security Act, families who are attempting through work 
activities to transition off of such assistance program, and families 
that are at risk of becoming dependent on such assistance program.'';
                    (B) in paragraph (3)--
                            (i) in subparagraph (A), by striking ``(B) 
                        and (C)'' and inserting ``(B) through (D)'';
                            (ii) in subparagraph (B)--
                                    (I) by striking ``.--Subject to the 
                                reservation contained in subparagraph 
                                (C), the'' and inserting ``and related 
                                activities.--The'';
                                    (II) in clause (i) by striking ``; 
                                and'' at the end and inserting a 
                                period;
                                    (III) by striking ``for--'' and all 
                                that follows through ``section 
                                658E(c)(2)(A)'' and inserting ``for 
                                child care services on sliding fee 
                                scale basis, activities that improve 
                                the quality or availability of such 
                                services, and any other activity that 
                                the State deems appropriate to realize 
                                any of the goals specified in 
                                paragraphs (2) through (5) of section 
                                658A(b)''; and
                                    (IV) by striking clause (ii);
                            (iii) by amending subparagraph (C) to read 
                        as follows:
                    ``(C) Limitation on administrative costs.--Not more 
                than 5 percent of the aggregate amount of funds 
                available to the State to carry out this subchapter by 
                a State in each fiscal year may be expended for 
                administrative costs incurred by such State to carry 
                out all of its functions and duties under this 
                subchapter. As used in the preceding sentence, the term 
                `administrative costs' shall not include the costs of 
                providing direct services.''; and
                            (iv) by adding at the end thereof the 
                        following:
                    ``(D) Assistance for certain families.--A State 
                shall ensure that a substantial portion of the amounts 
                available (after the State has complied with the 
                requirement of section 418(b)(2) of the Social Security 
                Act with respect to each of the fiscal years 1997 
                through 2002) to the State to carry out activities 
                under this subchapter in each fiscal year is used to 
                provide assistance to low-income working families other 
                than families described in paragraph (2)(F).''; and
                    (C) in paragraph (4)(A)--
                            (i) by striking ``provide assurances'' and 
                        inserting ``certify'';
                            (ii) in the first sentence by inserting 
                        ``and shall provide a summary of the facts 
                        relied on by the State to determine that such 
                        rates are sufficient to ensure such access'' 
                        before the period; and
                            (iii) by striking the last sentence.

SEC. 2806. LIMITATION ON STATE ALLOTMENTS.

    Section 658F(b) (42 U.S.C. 9858d(b)) is amended--
            (1) in paragraph (1), by striking ``No'' and inserting 
        ``Except as provided for in section 658O(c)(6), no''; and
            (2) in paragraph (2), by striking ``referred to in section 
        658E(c)(2)(F)''.

SEC. 2807. ACTIVITIES TO IMPROVE THE QUALITY OF CHILD CARE.

    Section 658G (42 U.S.C. 9858e) is amended to read as follows:

``SEC. 658G. ACTIVITIES TO IMPROVE THE QUALITY OF CHILD CARE.

    ``A State that receives funds to carry out this subchapter for a 
fiscal year, shall use not less than 3 percent of the amount of such 
funds for activities that are designed to provide comprehensive 
consumer education to parents and the public, activities that increase 
parental choice, and activities designed to improve the quality and 
availability of child care (such as resource and referral services).''.

SEC. 2808. REPEAL OF EARLY CHILDHOOD DEVELOPMENT AND BEFORE- AND AFTER-
              SCHOOL CARE REQUIREMENT.

    Section 658H (42 U.S.C. 9858f) is repealed.

SEC. 2809. ADMINISTRATION AND ENFORCEMENT.

    Section 658I(b) (42 U.S.C. 9858g(b)) is amended--
            (1) in paragraph (1), by striking ``, and shall have'' and 
        all that follows through ``(2)''; and
            (2) in the matter following clause (ii) of paragraph 
        (2)(A), by striking ``finding and that'' and all that follows 
        through the period and inserting ``finding and shall require 
        that the State reimburse the Secretary for any funds that were 
        improperly expended for purposes prohibited or not authorized 
        by this subchapter, that the Secretary deduct from the 
        administrative portion of the State allotment for the following 
        fiscal year an amount that is less than or equal to any 
        improperly expended funds, or a combination of such options.''.

SEC. 2810. PAYMENTS.

    Section 658J(c) (42 U.S.C. 9858h(c)) is amended by striking 
``expended'' and inserting ``obligated''.

SEC. 2811. ANNUAL REPORT AND AUDITS.

    Section 658K (42 U.S.C. 9858i) is amended--
            (1) in the section heading by striking ``annual report'' 
        and inserting ``reports'';
            (2) in subsection (a), to read as follows:
    ``(a) Reports.--
            ``(1) Collection of information by states.--
                    ``(A) In general.--A State that receives funds to 
                carry out this subchapter shall collect the information 
                described in subparagraph (B) on a monthly basis.
                    ``(B) Required information.--The information 
                required under this subparagraph shall include, with 
                respect to a family unit receiving assistance under 
                this subchapter information concerning--
                            ``(i) family income;
                            ``(ii) county of residence;
                            ``(iii) the gender, race, and age of 
                        children receiving such assistance;
                            ``(iv) whether the family includes only 1 
                        parent;
                            ``(v) the sources of family income, 
                        including the amount obtained from (and 
                        separately identified)--
                                    ``(I) employment, including self-
                                employment;
                                    ``(II) cash or other assistance 
                                under part A of title IV of the Social 
                                Security Act;
                                    ``(III) housing assistance;
                                    ``(IV) assistance under the Food 
                                Stamp Act of 1977; and
                                    ``(V) other assistance programs;
                            ``(vi) the number of months the family has 
                        received benefits;
                            ``(vii) the type of child care in which the 
                        child was enrolled (such as family child care, 
                        home care, or center-based child care);
                            ``(viii) whether the child care provider 
                        involved was a relative;
                            ``(ix) the cost of child care for such 
                        families; and
                            ``(x) the average hours per week of such 
                        care;
                during the period for which such information is 
                required to be submitted.
                    ``(C) Submission to secretary.--A State described 
                in subparagraph (A) shall, on a quarterly basis, submit 
                the information required to be collected under 
                subparagraph (B) to the Secretary.
                    ``(D) Sampling.--The Secretary may disapprove the 
                information collected by a State under this paragraph 
                if the State uses sampling methods to collect such 
                information.
            ``(2) Biannual reports.--Not later than December 31, 1997, 
        and every 6 months thereafter, a State described in paragraph 
        (1)(A) shall prepare and submit to the Secretary a report that 
        includes aggregate data concerning--
                    ``(A) the number of child care providers that 
                received funding under this subchapter as 
separately identified based on the types of providers listed in section 
658P(5);
                    ``(B) the monthly cost of child care services, and 
                the portion of such cost that is paid for with 
                assistance provided under this subchapter, listed by 
                the type of child care services provided;
                    ``(C) the number of payments made by the State 
                through vouchers, contracts, cash, and disregards under 
                public benefit programs, listed by the type of child 
                care services provided;
                    ``(D) the manner in which consumer education 
                information was provided to parents and the number of 
                parents to whom such information was provided; and
                    ``(E) the total number (without duplication) of 
                children and families served under this subchapter;
        during the period for which such report is required to be 
        submitted.''; and
            (2) in subsection (b)--
                    (A) in paragraph (1) by striking ``a application'' 
                and inserting ``an application'';
                    (B) in paragraph (2) by striking ``any agency 
                administering activities that receive'' and inserting 
                ``the State that receives''; and
                    (C) in paragraph (4) by striking ``entitles'' and 
                inserting ``entitled''.

SEC. 2812. REPORT BY THE SECRETARY.

    Section 658L (42 U.S.C. 9858j) is amended--
            (1) by striking ``1993'' and inserting ``1997'';
            (2) by striking ``annually'' and inserting ``biennially''; 
        and
            (3) by striking ``Education and Labor'' and inserting 
        ``Economic and Educational Opportunities''.

SEC. 2813. ALLOTMENTS.

    Section 658O (42 U.S.C. 9858m) is amended--
            (1) in subsection (a)--
                    (A) in paragraph (1)
                            (i) by striking ``Possessions'' and 
                        inserting ``possessions'';
                            (ii) by inserting ``and'' after 
                        ``States,''; and
                            (iii) by striking ``, and the Trust 
                        Territory of the Pacific Islands''; and
                    (B) in paragraph (2), by striking ``3 percent'' and 
                inserting ``1 percent'';
            (2) in subsection (c)--
                    (A) in paragraph (5) by striking ``our'' and 
                inserting ``out''; and
                    (B) by adding at the end thereof the following new 
                paragraph:
            ``(6) Construction or renovation of facilities.--
                    ``(A) Request for use of funds.--An Indian tribe or 
                tribal organization may submit to the Secretary a 
                request to use amounts provided under this subsection 
                for construction or renovation purposes.
                    ``(B) Determination.--With respect to a request 
                submitted under subparagraph (A), and except as 
                provided in subparagraph (C), upon a determination by 
                the Secretary that adequate facilities are not 
                otherwise available to an Indian tribe or tribal 
                organization to enable such tribe or organization to 
                carry out child care programs in accordance with this 
                subchapter, and that the lack of such facilities will 
                inhibit the operation of such programs in the future, 
                the Secretary may permit the tribe or organization to 
                use assistance provided under this subsection to make 
                payments for the construction or renovation of 
                facilities that will be used to carry out such 
                programs.
                    ``(C) Limitation.--The Secretary may not permit an 
                Indian tribe or tribal organization to use amounts 
                provided under this subsection for construction or 
                renovation if such use will result in a decrease in the 
                level of child care services provided by the tribe or 
organization as compared to the level of such services provided by the 
tribe or organization in the fiscal year preceding the year for which 
the determination under subparagraph (A) is being made.
                    ``(D) Uniform procedures.--The Secretary shall 
                develop and implement uniform procedures for the 
                solicitation and consideration of requests under this 
                paragraph.''; and
            (3) in subsection (e), by adding at the end thereof the 
        following new paragraph:
            ``(4) Indian tribes or tribal organizations.--Any portion 
        of a grant or contract made to an Indian tribe or tribal 
        organization under subsection (c) that the Secretary determines 
        is not being used in a manner consistent with the provision of 
        this subchapter in the period for which the grant or contract 
        is made available, shall be allotted by the Secretary to other 
        tribes or organizations that have submitted applications under 
        subsection (c) in accordance with their respective needs.''.

SEC. 2814. DEFINITIONS.

    Section 658P (42 U.S.C. 9858n) is amended--
            (1) in paragraph (2), in the first sentence by inserting 
        ``or as a deposit for child care services if such a deposit is 
        required of other children being cared for by the provider'' 
        after ``child care services''; and
            (2) by striking paragraph (3);
            (3) in paragraph (4)(B), by striking ``75 percent'' and 
        inserting ``85 percent'';
            (4) in paragraph (5)(B)--
                    (A) by inserting ``great grandchild, sibling (if 
                such provider lives in a separate residence),'' after 
                ``grandchild,'';
                    (B) by striking ``is registered and''; and
                    (C) by striking ``State'' and inserting 
                ``applicable''.
            (5) by striking paragraph (10);
            (6) in paragraph (13)--
                    (A) by inserting ``or'' after ``Samoa,''; and
                    (B) by striking ``, and the Trust Territory of the 
                Pacific Islands'';
            (7) in paragraph (14)--
                    (A) by striking ``The term'' and inserting the 
                following:
                    ``(A) In general.--The term''; and
                    (B) by adding at the end thereof the following new 
                subparagraph:
                    ``(B) Other organizations.--Such term includes a 
                Native Hawaiian Organization, as defined in section 
                4009(4) of the Augustus F. Hawkins-Robert T. Stafford 
                Elementary and Secondary School Improvement Amendments 
                of 1988 (20 U.S.C. 4909(4)) and a private nonprofit 
                organization established for the purpose of serving 
                youth who are Indians or Native Hawaiians.''.

SEC. 2815. REPEALS.

    (a) Child Development Associate Scholarship Assistance Act of 
1985.--Title VI of the Human Services Reauthorization Act of 1986 (42 
U.S.C. 10901-10905) is repealed.
    (b) State Dependent Care Development Grants Act.--Subchapter E of 
chapter 8 of subtitle A of title VI of the Omnibus Budget 
Reconciliation Act of 1981 (42 U.S.C. 9871-9877) is repealed.
    (c) Programs of National Significance.--Title X of the Elementary 
and Secondary Education Act of 1965, as amended by Public Law 103-382 
(108 Stat. 3809 et seq.), is amended--
            (1) in section 10413(a) by striking paragraph (4),
            (2) in section 10963(b)(2) by striking subparagraph (G), 
        and
            (3) in section 10974(a)(6) by striking subparagraph (G).
    (d) Native Hawaiian Family-Based Education Centers.--Section 9205 
of the Native Hawaiian Education Act, as amended by section 101 of 
Public Law 103-382, (108 Stat. 3794) is repealed.

SEC. 2816. EFFECTIVE DATE.

    (a) In General.--Except as provided in subsection (b), this chapter 
and the amendments made by this chapter shall take effect on October 1, 
1996.
    (b) Exception.--The amendment made by section 2803(a) shall take 
effect on the date of enactment of this Act.

                        CHAPTER 9--MISCELLANEOUS

SEC. 2901. APPROPRIATION BY STATE LEGISLATURES.

    (a) In General.--Any funds received by a State under the provisions 
of law specified in subsection (b) shall be subject to appropriation by 
the State legislature, consistent with the terms and conditions 
required under such provisions of law.
    (b) Provisions of Law.--The provisions of law specified in this 
subsection are the following:
            (1) Part A of title IV of the Social Security Act (relating 
        to block grants for temporary assistance for needy families).
            (2) Section 27 of the Food Stamp Act of 1977 (relating to 
        the optional State food assistance block grant).
            (3) The Child Care and Development Block Grant Act of 1990 
        (relating to block grants for child care).

SEC. 2902. SANCTIONING FOR TESTING POSITIVE FOR CONTROLLED SUBSTANCES.

    Notwithstanding any other provision of law, States shall not be 
prohibited by the Federal Government from testing welfare recipients 
for use of controlled substances nor from sanctioning welfare 
recipients who test positive for use of controlled substances.

SEC. 2903. REDUCTION IN BLOCK GRANTS TO STATES FOR SOCIAL SERVICES.

    Section 2003(c) of the Social Security Act (42 U.S.C. 1397b(c)) is 
amended--
            (1) by striking ``and'' at the end of paragraph (4); and
            (2) by striking paragraph (5) and inserting the following:
            ``(5) $2,800,000,000 for each of the fiscal years 1990 
        through 1995;
            ``(6) $2,381,000,000 for the fiscal year 1996;
            ``(7) $2,240,000,000 for each of the fiscal years 1997 
        through 2002; and
            ``(8) $2,800,000,000 for the fiscal year 2003 and each 
        succeeding fiscal year.''.

SEC. 2904. ELIMINATION OF HOUSING ASSISTANCE WITH RESPECT TO FUGITIVE 
              FELONS AND PROBATION AND PAROLE VIOLATORS.

    (a) Eligibility for Assistance.--The United States Housing Act of 
1937 (42 U.S.C. 1437 et seq.) is amended--
            (1) in section 6(l)--
                    (A) in paragraph (5), by striking ``and'' at the 
                end;
                    (B) in paragraph (6), by striking the period at the 
                end and inserting ``; and''; and
                    (C) by inserting immediately after paragraph (6) 
                the following new paragraph:
            ``(7) provide that it shall be cause for immediate 
        termination of the tenancy of a public housing tenant if such 
        tenant--
                    ``(A) is fleeing to avoid prosecution, or custody 
                or confinement after conviction, under the laws of the 
                place from which the individual flees, for a crime, or 
                attempt to commit a crime, which is a felony under the 
                laws of the place from which the individual flees, or 
                which, in the case of the State of New Jersey, is a 
                high misdemeanor under the laws of such State; or
            ``(2) is violating a condition of probation or parole 
        imposed under Federal or State law.''; and
            (2) in section 8(d)(1)(B)--
                    (A) in clause (iii), by striking ``and'' at the 
                end;
                    (B) in clause (iv), by striking the period at the 
                end and inserting ``; and''; and
                    (C) by adding after clause (iv) the following new 
                clause:
                            ``(v) it shall be cause for termination of 
                        the tenancy of a tenant if such tenant--
                                    ``(I) is fleeing to avoid 
                                prosecution, or custody or confinement 
                                after conviction, under the laws of the 
                                place from which the individual flees, 
                                for a crime, or attempt to commit a 
                                crime, which is a felony under the laws 
                                of the place from which the individual 
                                flees, or which, in the case of the 
                                State of New Jersey, is a high 
                                misdemeanor under the laws of such 
                                State; or
                                    ``(II) is violating a condition of 
                                probation or parole imposed under 
                                Federal or State law;''.
    (b) Provision of Information to Law Enforcement Agencies.--Title I 
of the United States Housing Act of 1937 (42 U.S.C. 1437 et seq.), as 
amended by sections 2404(d) and 2601 of this Act, is amended by adding 
at the end the following:

``SEC. 29. EXCHANGE OF INFORMATION WITH LAW ENFORCEMENT AGENCIES.

    ``Notwithstanding any other provision of law, each public housing 
agency that enters into a contract for assistance under section 6 or 8 
of this Act with the Secretary shall furnish any Federal, State, or 
local law enforcement officer, upon the request of the officer, with 
the current address, Social Security number, and photograph (if 
applicable) of any recipient of assistance under this Act, if the 
officer--
            ``(1) furnishes the public housing agency with the name of 
        the recipient; and
            ``(2) notifies the agency that--
                    ``(A) such recipient--
                            ``(i) is fleeing to avoid prosecution, or 
                        custody or confinement after conviction, under 
                        the laws of the place from which the individual 
                        flees, for a crime, or attempt to commit a 
                        crime, which is a felony under the laws of the 
                        place from which the individual flees, or 
                        which, in the case of the State of New Jersey, 
                        is a high misdemeanor under the laws of such 
                        State; or
                            ``(ii) is violating a condition of 
                        probation or parole imposed under Federal or 
                        State law; or
                            ``(iii) has information that is necessary 
                        for the officer to conduct the officer's 
                        official duties;
                    ``(B) the location or apprehension of the recipient 
                is within such officer's official duties; and
                    ``(C) the request is made in the proper exercise of 
                the officer's official duties.''.

SEC. 2905. SENSE OF THE SENATE REGARDING ENTERPRISE ZONES.

    (a) Findings.--The Senate finds that:
            (1) Many of the Nation's urban centers are places with high 
        levels of poverty, high rates of welfare dependency, high crime 
        rates, poor schools, and joblessness;
            (2) Federal tax incentives and regulatory reforms can 
        encourage economic growth, job creation and small business 
        formation in many urban centers;
            (3) Encouraging private sector investment in America's 
        economically distressed urban and rural areas is essential to 
        breaking the cycle of poverty and the related ills of crime, 
        drug abuse, illiteracy, welfare dependency, and unemployment;
            (4) The empowerment zones enacted in 1993 should be 
        enhanced by providing incentives to increase entrepreneurial 
        growth, capital formation, job creation, educational 
        opportunities, and home ownership in the designated communities 
        and zones.
    (b) Sense of the Senate.--Therefore, it is the Sense of the Senate 
that the Congress should adopt enterprise zone legislation in the One 
Hundred Fourth Congress, and that such enterprise zone legislation 
provide the following incentives and provisions:
            (1) Federal tax incentives that expand access to capital, 
        increase the formation and expansion of small businesses, and 
        promote commercial revitalization;
            (2) Regulatory reforms that allow localities to petition 
        Federal agencies, subject to the relevant agencies' approval, 
        for waivers or modifications of regulations to improve job 
        creation, small business formation and expansion, community 
        development, or economic revitalization objectives of the 
        enterprise zones;
            (3) Home ownership incentives and grants to encourage 
        resident management of public housing and home ownership of 
        public housing;
            (4) School reform pilot projects in certain designated 
        enterprise zones to provide low-income parents with new and 
        expanded educational options for their children's elementary 
        and secondary schooling.

SEC. 2906. SENSE OF THE SENATE REGARDING THE INABILITY OF THE NON-
              CUSTODIAL PARENT TO PAY CHILD SUPPORT.

    It is the sense of the Senate that--
            (a) States should diligently continue their efforts to 
        enforce child support payments by the non-custodial parent to 
        the custodial parent, regardless of the employment status or 
        location of the non-custodial parent; and
            (b) States are encouraged to pursue pilot programs in which 
        the parents of a non-adult, non-custodial parent who refuses to 
        or is unable to pay child support must--
                    (1) pay or contribute to the child support owed by 
                the non-custodial parent; or
                    (2) otherwise fulfill all financial obligations and 
                meet all conditions imposed on the non-custodial 
                parent, such as participation in a work program or 
                other related activity.

SEC. 2907. ESTABLISHING NATIONAL GOALS TO PREVENT TEENAGE PREGNANCIES.

    (a) In General.--Not later than January 1, 1997, the Secretary of 
Health and Human Services shall establish and implement a strategy 
for--
            (1) preventing out-of-wedlock teenage pregnancies, and
            (2) assuring that at least 25 percent of the communities in 
        the United States have teenage pregnancy prevention programs in 
        place.
    (b) Report.--Not later than June 30, 1998, and annually thereafter, 
the Secretary shall report to the Congress with respect to the progress 
that has been made in meeting the goals described in paragraphs (1) and 
(2) of subsection (a).

SEC. 2908. SENSE OF THE SENATE REGARDING ENFORCEMENT OF STATUTORY RAPE 
              LAWS.

    It is the sense of the Senate that States and local jurisdictions 
should aggressively enforce statutory rape laws.

SEC. 2909. ABSTINENCE EDUCATION.

    (a) Increases in Funding.--Section 501(a) of the Social Security 
Act (42 U.S.C. 701(a)) is amended in the matter preceding paragraph (1) 
by striking ``Fiscal year 1990 and each fiscal year thereafter'' and 
inserting ``Fiscal years 1990 through 1995 and $761,000,000 for fiscal 
year 1996 and each fiscal year thereafter''.
    (b) Abstinence Education.--Section 501(a)(1) of such Act (42 U.S.C. 
701(a)(1)) is amended--
            (1) in subparagraph (C), by striking ``and'' at the end;
            (2) in subparagraph (D), by adding ``and'' at the end; and
            (3) by adding at the end the following new subparagraph:
                    ``(E) to provide abstinence education, and at the 
                option of the State, where appropriate, mentoring, 
                counseling, and adult supervision to promote abstinence 
                from sexual activity, with a focus on those groups 
                which are most likely to bear children out-of-
                wedlock.''.
    (c) Abstinence Education Defined.--Section 501(b) of such Act (42 
U.S.C. 701(b)) is amended by adding at the end the following new 
paragraph:
            ``(5) Abstinence education.--For purposes of this 
        subsection, the term `abstinence education' means an 
        educational or motivational program which--
                    ``(A) has as its exclusive purpose, teaching the 
                social, psychological, and health gains to be realized 
                by abstaining from sexual activity;
                    ``(B) teaches abstinence from sexual activity 
                outside marriage as the expected standard for all 
                school age children;
                    ``(C) teaches that abstinence from sexual activity 
                is the only certain way to avoid out-of-wedlock 
                pregnancy, sexually transmitted diseases, and other 
                associated health problems;
                    ``(D) teaches that a mutually faithful monogamous 
                relationship in context of marriage is the expected 
                standard of human sexual activity;
                    ``(E) teaches that sexual activity outside of the 
                context of marriage is likely to have harmful 
                psychological and physical effects;
                    ``(F) teaches that bearing children out-of-wedlock 
                is likely to have harmful consequences for the child, 
                the child's parents, and society;
                    ``(G) teaches young people how to reject sexual 
                advances and how alcohol and drug use increases 
                vulnerability to sexual advances; and
                    ``(H) teaches the importance of attaining self-
                sufficiency before engaging in sexual activity.''.
    (d) Set-Aside.--
            (1) In general.--Section 502(c) of such Act (42 U.S.C. 
        702(c)) is amended in the matter preceding paragraph (1) by 
        striking ``From'' and inserting ``Except as provided in 
        subsection (e), from''.
            (2) Set-aside.--Section 502 of such Act (42 U.S.C. 702) is 
        amended by adding at the end the following new subsection:
    ``(e) Of the amounts appropriated under section 501(a) for any 
fiscal year, the Secretary shall set aside $75,000,000 for abstinence 
education in accordance with section 501(a)(1)(E).''.

SEC. 2910. PROVISIONS TO ENCOURAGE ELECTRONIC BENEFIT TRANSFER SYSTEMS.

    Section 904 of the Electronic Fund Transfer Act (15 U.S.C. 1693b) 
is amended--
            (1) by striking ``(d) In the event'' and inserting ``(d) 
        Applicability to Service Providers Other Than Certain Financial 
        Institutions.--
            ``(1) In general.--In the event''; and
            (2) by adding at the end the following new paragraph:
            ``(2) State and local government electronic benefit 
        transfer programs.--
                    ``(A) Exemption generally.--The disclosures, 
                protections, responsibilities, and remedies established 
                under this title, and any regulation prescribed or 
                order issued by the Board in accordance with this 
                title, shall not apply to any electronic benefit 
                transfer program established under State or local law 
                or administered by a State or local government.
                    ``(B) Exception for direct deposit into recipient's 
                account.--Subparagraph (A) shall not apply with respect 
                to any electronic funds transfer under an electronic 
                benefit transfer program for deposits directly into a 
                consumer account held by the recipient of the benefit.
                    ``(C) Rule of construction.--No provision of this 
                paragraph may be construed as--
                            ``(i) affecting or altering the protections 
                        otherwise applicable with respect to benefits 
                        established by Federal, State, or local law; or
                            ``(ii) otherwise superseding the 
                        application of any State or local law.
                    ``(D) Electronic benefit transfer program 
                defined.--For purposes of this paragraph, the term 
                `electronic benefit transfer program'--
                            ``(i) means a program under which a 
                        government agency distributes needs-tested 
                        benefits by establishing accounts to be 
                        accessed by recipients electronically, such as 
through automated teller machines, or point-of-sale terminals; and
                            ``(ii) does not include employment-related 
                        payments, including salaries and pension, 
                        retirement, or unemployment benefits 
                        established by Federal, State, or local 
                        governments.''.

SEC. 2911. RULES RELATING TO DENIAL OF EARNED INCOME CREDIT ON BASIS OF 
              DISQUALIFIED INCOME.

    (a) Reduction in Disqualified Income Threshold.--
            (1) In general.--Paragraph (1) of section 32(i) of the 
        Internal Revenue Code of 1986 (relating to denial of credit for 
        individuals having excessive investment income) is amended by 
        striking ``$2,350'' and inserting ``$2,200''.
            (2) Adjustment for inflation.--Subsection (j) of section 32 
        of such Code is amended to read as follows:
    ``(j) Inflation Adjustments.--
            ``(1) In general.--In the case of any taxable year 
        beginning after 1996, each of the dollar amounts in subsections 
        (b)(2)(A) and (i)(1) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 1995' for `calendar year 1992' in 
                subparagraph (B) thereof.
            ``(2) Rounding.--
                    ``(A) In general.--If any dollar amount in 
                subsection (b)(2), after being increased under 
                paragraph (1), is not a multiple of $10, such dollar 
                amount shall be rounded to the nearest multiple of $10.
                    ``(B) Disqualified income threshold amount.--If the 
                dollar amount in subsection (i)(1), after being 
                increased under paragraph (1), is not a multiple of 
                $50, such amount shall be rounded to the next lowest 
                multiple of $50.''.
            (3) Conforming amendments.--The table contained in section 
        32(b)(2)(A) of the Internal Revenue Code of 1986 is amended--
            (1) by striking ``$6,000'' and inserting ``$6,330'',
            (2) by striking ``$11,000'' both places it appears and 
        inserting ``$11,610'',
            (3) by striking ``$8,425'' and inserting ``$8,890'',
            (4) by striking ``$4,000'' and inserting ``$4,220'', and
            (5) by striking ``$5,000'' and inserting ``$5,280''.
    (b) Definition of Disqualified Income.--Paragraph (2) of section 
32(i) of such Code (defining disqualified income) is amended by 
striking ``and'' at the end of subparagraph (B), by striking the period 
at the end of subparagraph (C) and inserting a comma, and by adding at 
the end the following new subparagraphs:
                    ``(D) the capital gain net income (as defined in 
                section 1222) of the taxpayer for such taxable year, 
                and
                    ``(E) the excess (if any) of--
                            ``(i) the aggregate income from all passive 
                        activities for the taxable year (determined 
                        without regard to any amount included in earned 
                        income under subsection (c)(2) or described in 
                        a preceding subparagraph), over
                            ``(ii) the aggregate losses from all 
                        passive activities for the taxable year (as so 
                        determined).
        For purposes of subparagraph (E), the term `passive activity' 
        has the meaning given such term by section 469.''.
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 1995.
            (2) Advance payment individuals.--In the case of any 
        individual who on or before June 26, 1996, has in effect an 
        earned income eligibility certificate for the individual's 
        taxable year beginning in 1996, the amendments made by this 
section shall apply to taxable years beginning after December 31, 1996.

SEC. 2912. MODIFICATION OF ADJUSTED GROSS INCOME DEFINITION FOR EARNED 
              INCOME CREDIT.

    (a) In General.--Subsections (a)(2)(B), (c)(1)(C), and (f)(2)(B) of 
section 32 of the Internal Revenue Code of 1986 are each amended by 
striking ``adjusted gross income'' each place it appears and inserting 
``modified adjusted gross income''.
    (b) Modified Adjusted Gross Income Defined.--Section 32(c) of such 
Code (relating to definitions and special rules) is amended by adding 
at the end the following new paragraph:
            ``(5) Modified adjusted gross income.--
                    ``(A) In general.--The term `modified adjusted 
                gross income' means adjusted gross income--
                            ``(i) increased by the sum of the amounts 
                        described in subparagraph (B), and
                            ``(ii) determined without regard to the 
                        amounts described in subparagraph (C).
                    ``(B) Nontaxable income taken into account.--
                Amounts described in this subparagraph are--
                            ``(i) interest received or accrued during 
                        the taxable year which is exempt from tax 
                        imposed by this chapter, and
                            ``(ii) amounts received as a pension or 
                        annuity, and any distributions or payments 
                        received from an individual retirement plan, by 
                        the taxpayer during the taxable year to the 
                        extent not included in gross income.
                Clause (ii) shall not include any amount which is not 
                includible in gross income by reason of section 402(c), 
                403(a)(4), 403(b)(8), 408(d) (3), (4), or (5), or 
                457(e)(10).
                    ``(C) Certain amounts disregarded.--An amount is 
                described in this subparagraph if it is--
                            ``(i) the amount of losses from sales or 
                        exchanges of capital assets in excess of gains 
                        from such sales or exchanges to the extent such 
                        amount does not exceed the amount under section 
                        1211(b)(1),
                            ``(ii) the net loss from estates and 
                        trusts,
                            ``(iii) the excess (if any) of amounts 
                        described in subsection (i)(2)(C)(ii) over the 
                        amounts described in subsection (i)(2)(C)(i) 
                        (relating to nonbusiness rents and royalties), 
                        and
                            ``(iv) the net loss from the carrying on of 
                        trades or businesses, computed separately with 
                        respect to--
                                    ``(I) trades or businesses (other 
                                than farming) conducted as sole 
                                proprietorships,
                                    ``(II) trades or businesses of 
                                farming conducted as sole 
                                proprietorships, and
                                    ``(III) other trades or businesses.
                For purposes of clause (iv), there shall not be taken 
                into account items which are attributable to a trade or 
                business which consists of the performance of services 
                by the taxpayer as an employee.''.
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 1995.
            (2) Advance payment individuals.--In the case of any 
        individual who on or before June 26, 1996, has in effect an 
        earned income eligibility certificate for the individual's 
        taxable year beginning in 1996, the amendments made by this 
        section shall apply to taxable years beginning after December 
        31, 1996.

SEC. 2913. SUSPENSION OF INFLATION ADJUSTMENTS FOR INDIVIDUALS WITH NO 
              QUALIFYING CHILDREN.

    (a) In General.--Subsection (j) of section 32 of the Internal 
Revenue Code of 1986, as amended by section 2911(a)(2) of this Act, is 
amended by adding at the end the following new paragraph:
            ``(3) No adjustment for individuals with no qualifying 
        children.--This subsection shall not apply to each dollar 
        amount contained in subsection (b)(2)(A) with respect to 
        individuals with no qualifying children.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1996.

                   Subtitle B--Restructuring Medicaid

SEC. 2920. SHORT TITLE OF SUBTITLE.

    This subtitle may be cited as the ``Medicaid Restructuring Act of 
1996''.

SEC. 2921. TABLE OF CONTENTS OF SUBTITLE.

    The table of contents for this subtitle is as follows:

Sec. 2920. Short title of subtitle.
Sec. 2921. Table of contents of subtitle.
Sec. 2922. Finding; goals for medicaid restructuring.
Sec. 2923. Restructuring the medicaid program.
Sec. 2924. State election; termination of current program; and 
                            transition.
Sec. 2925. Integration demonstration project.
Sec. 2926. National Commission on Medicaid and State-Based Health Care 
                            Reform.

SEC. 2922. FINDING; GOALS FOR MEDICAID RESTRUCTURING.

    (a) Finding.--The Congress finds that the National Governors' 
Association on February 6, 1996, adopted unanimously and on a 
bipartisan basis goals to guide the restructuring of the medicaid 
program.
    (b) Goals for Restructuring.--The following are the 4 primary goals 
so adopted:
            (1) The basic health care needs of the nation's most 
        vulnerable populations must be guaranteed.
            (2) The growth in health care expenditures must be brought 
        under control.
            (3) States must have maximum flexibility in the design and 
        implementation of cost-effective systems of care.
            (4) States must be protected from unanticipated program 
        costs resulting from economic fluctuations in the business 
        cycle, changing demographics, and natural disasters.

SEC. 2923. RESTRUCTURING THE MEDICAID PROGRAM.

    The Social Security Act is amended by inserting after title XIV the 
following new title:

 ``TITLE XV--PROGRAM OF MEDICAL ASSISTANCE FOR LOW-INCOME INDIVIDUALS 
                      ``table of contents of title
``Sec. 1500. Purpose; State plans.
                   ``Part A--Eligibility and Benefits

``Sec. 1501. Guaranteed eligibility and benefits.
``Sec. 1502. Other provisions relating to eligibility and benefits.
``Sec. 1503. Limitations on cost-sharing.
``Sec. 1504. Requirements relating to medical assistance provided 
                            through managed care arrangements.
``Sec. 1505. Preventing spousal impoverishment.
``Sec. 1506. Preventing family impoverishment.
``Sec. 1507. State flexibility.
``Sec. 1508. Private rights of action.
                      ``Part B--Payments to States

``Sec. 1511. Allotment of funds among States.
``Sec. 1512. Payments to States.
``Sec. 1513. Limitation on use of funds; disallowance.
          ``Part C--Establishment and Amendment of State Plans

``Sec. 1521. Description of strategic objectives and performance goals.
``Sec. 1522. Annual reports.
``Sec. 1523. Periodic, independent evaluations.
``Sec. 1524. Description of process for State plan development.
``Sec. 1525. Consultation in State plan development.
``Sec. 1526. Submittal and approval of State plans.
``Sec. 1527. Submittal and approval of plan amendments.
``Sec. 1528. Process for State withdrawal from program.
``Sec. 1529. Sanctions for noncompliance.
``Sec. 1530. Secretarial authority.
                ``Part D--Program Integrity and Quality

``Sec. 1551. Use of audits to achieve fiscal integrity.
``Sec. 1552. Fraud prevention program.
``Sec. 1553. Information concerning sanctions taken by State licensing 
                            authorities against health care 
                            practitioners and providers.
``Sec. 1554. State fraud control units.
``Sec. 1555. Recoveries from third parties and others.
``Sec. 1556. Assignment of rights of payment.
``Sec. 1557. Quality assurance requirements for nursing facilities.
``Sec. 1558. Other provisions promoting program integrity.
                      ``Part E--General Provisions

``Sec. 1571. Definitions.
``Sec. 1572. Treatment of territories.
``Sec. 1573. Description of treatment of Indian Health Service 
                            facilities and related programs.
``Sec. 1574. Application of certain general provisions.
``Sec. 1575. Optional master drug rebate agreements.

``SEC. 1500. PURPOSE; STATE PLANS.

    ``(a) Purpose.--The purpose of this title is to provide funds to 
States to enable them to provide medical assistance to low-income 
individuals and families in a more effective, efficient, and responsive 
manner.
    ``(b) State Plan Required.--A State is not eligible for payment 
under section 1512 unless the State has submitted to the Secretary 
under part C a plan (in this title referred to as a `State plan') 
that--
            ``(1) sets forth how the State intends to use the funds 
        provided under this title to provide medical assistance to 
        needy individuals and families consistent with the provisions 
        of this title, and
            ``(2) is approved under such part.
    ``(c) Continued Approval.--An approved State plan shall continue in 
effect unless and until--
            ``(1) the State amends the plan under section 1527,
            ``(2) the State terminates participation under this title 
        under section 1528, or
            ``(3) the Secretary finds substantial noncompliance of the 
        plan with the requirements of this title under section 1529.
    ``(d) State Entitlement.--This title constitutes budget authority 
in advance of appropriations Acts and represents the obligation of the 
Federal Government to provide for the payment to States (and, beginning 
on October 1, 1997, to facilities or programs described in section 
1512(f)(3)(B)(iii)) of amounts provided under part B.
    ``(e) Effective Date.--No State is eligible for payments under 
section 1512 for any calendar quarter beginning before October 1, 1996.

                   ``Part A--Eligibility and Benefits

``SEC. 1501. GUARANTEED ELIGIBILITY AND BENEFITS.

    ``(a) Guaranteed Coverage and Benefits for Certain Populations.--
            ``(1) In general.--Each State plan shall provide for making 
        medical assistance available for benefits in the guaranteed 
        benefit package (as defined in paragraph (2)) to individuals 
        within each of the following categories:
                    ``(A) Poor pregnant women.--Pregnant women with 
                family income below 133 percent of the poverty line.
                    ``(B) Children under 6.--Children under 6 years of 
                age whose family income does not exceed 133 percent of 
                the poverty line.
                    ``(C) Children 6 to 19.--Children born after 
                September 30, 1983, who are over 5 years of age, but 
                under 19 years of age, whose family income does not 
                exceed 100 percent of the poverty line.
                    ``(D) Disabled individuals.--As elected by the 
                State under paragraph (3), either--
                            ``(i) disabled individuals (as defined by 
                        the State) who meet the income and resource 
                        standards established under the plan, or
                            ``(ii) individuals who are under 65 years 
                        of age, who are disabled (as determined under 
                        section 1614(a)(3)), and who, using the 
                        methodology provided for determining 
                        eligibility for payment of supplemental 
                        security income benefits under title XVI, meet 
                        the income and resource standards for payment 
                        of such benefits.
                    ``(E) Poor elderly individuals.--Subject to 
                paragraph (4), elderly individuals who, using the 
                methodology provided for determining eligibility for 
                payment of supplemental security income benefits under 
                title XVI, meet the income and resource standards for 
                payment of such benefits.
                    ``(F) Children receiving foster care or adoption 
                assistance.--Subject to paragraph (5), children who 
                meet the requirements for receipt of foster care 
                maintenance payments or adoption assistance under title 
                IV.
                    ``(G) Certain low-income families.--Subject to 
                paragraph (6), individuals and members of families who 
                meet current AFDC income, resource, and eligibility 
                standards (as defined in paragraph (6)(C)) in the 
                State.
            ``(2) Guaranteed benefits package.--
                    ``(A) In general.--In this title, the term 
                `guaranteed benefit package' means benefits (in an 
                amount, duration, and scope specified under the State 
                plan) for at least the following categories of 
                services:
                            ``(i) Inpatient and outpatient hospital 
                        services.
                            ``(ii) Physicians' surgical and medical 
                        services.
                            ``(iii) Laboratory and x-ray services.
                            ``(iv) Nursing facility services.
                            ``(v) Home health care.
                            ``(vi) Federally-qualified health center 
                        services and rural health clinic services.
                            ``(vii) Immunizations for children (in 
                        accordance with a schedule for immunizations 
                        established by the Health Department of the 
                        State in consultation with the State agency 
                        responsible for the administration of the 
                        plan).
                            ``(viii) Prepregnancy family planning 
                        services and supplies (as specified by the 
                        State).
                            ``(ix) Prenatal care.
                            ``(x) Physician assistant services (to the 
                        extent such services are authorized under State 
                        law or regulation), pediatric and family nurse 
                        practitioner services and nurse midwife 
                        services.
                            ``(xi) EPSDT services (as defined in 
                        section 1571(e)) for individuals who are under 
                        the age of 21.
                    ``(B) Amount, duration, and scope.--
                            ``(i) In general.--The amount, duration, 
                        and scope of benefits specified under the State 
                        plan must be sufficient to reasonably achieve 
                        the purpose of the benefit. A State may 
                        establish criteria, including medical 
                        necessity, utilization review, and cost 
                        effectiveness of alternative covered services, 
                        for purposes of limiting the amount, duration, 
                        and scope of benefits provided under the State 
                        plan.
                            ``(ii) Epsdt services.--The amount, 
                        duration, and scope of EPSDT services for 
                        individuals who are under the age of 21 may not 
                        be less than the amount, duration, and scope of 
                        such services provided under the State plan 
                        under title XIX (as in effect on June 1, 1996).
            ``(3) State election of disabled individuals to be 
        guaranteed coverage.--
                    ``(A) In general.--Each State shall specify in its 
                State plan, before the beginning of each Federal fiscal 
                year, whether to guarantee coverage of disabled 
                individuals under the plan under the option described 
                in paragraph (1)(D)(i) or under the option described in 
                paragraph (1)(D)(ii). An election under this paragraph 
                shall continue in effect for the subsequent fiscal year 
                unless the election is changed before the beginning of 
                the fiscal year.
                    ``(B) Consequences of election.--
                            ``(i) State flexible definition option.--If 
                        a State elects the option described in 
                        paragraph (1)(D)(i) for a fiscal year--
                                    ``(I) the State plan must provide 
                                under section 1502(c) for a set aside 
                                of funds for disabled individuals for 
                                the fiscal year, and
                                    ``(II) disabled individuals are not 
                                taken into account in determining a 
                                State supplemental umbrella allotment 
                                under section 1511(g).
                            ``(ii) SSI definition option.--If a State 
                        elects the option described in paragraph 
                        (1)(D)(ii) for a fiscal year--
                                    ``(I) section 1502(c) shall not 
                                apply for the fiscal year, and
                                    ``(II) the State is eligible for an 
                                increase under section 1511(g) in its 
                                outlay allotment for the fiscal year 
                                based on an increase in the number of 
                                guaranteed and optional disabled 
                                individuals covered under the plan.
            ``(4) Continuation of special eligibility standards for 
        section 209(b) states.--
                    ``(A) In general.--A section 209(b) State (as 
                defined in subparagraph (B)) may elect to treat any 
                reference in paragraph (1)(E) to `elderly individuals 
                who meet the income and resource standards for the 
                payment of supplemental security income benefits under 
                title XVI' as a reference to `elderly individuals who 
                meet the standards described in the first sentence of 
                section 1902(f) (as in effect on the day before the 
                date of the enactment of this title)'.
                    ``(B) Section 209(b) state defined.--In 
                subparagraph (A), the term `section 209(b) State' means 
                a State to which section 1902(f) applied as of the day 
                before the date of the enactment of this title.
            ``(5) Option for application of current requirements for 
        certain children.--A State may elect to apply paragraph (1)(F) 
        by treating any reference to `requirements for receipt of 
        foster care maintenance payments or adoption assistance under 
        title IV' as a reference to `requirements for receipt of foster 
        care maintenance payments or adoption assistance as in effect 
        under its State plan under part E of title IV as of the date of 
        the enactment of this title'.
            ``(6) Special rules for low-income families.--
                    ``(A) Optional use of lower national average 
                standards.--In the case of a State in which the current 
                AFDC income, resource, and eligibility standards are 
                above the national average of the current AFDC income, 
                resource, and eligibility standards for the 50 States 
                and the District of Columbia, as determined and 
                published by the Secretary, in applying paragraph 
                (1)(G), the State may elect to substitute such national 
                average income, resource, and eligibility standards for 
                the current AFDC income, resource, and eligibility 
                standards in that State.
                    ``(B) Optional eligibility based on link to other 
                assistance.--
                            ``(i) In general.--Subject to clause (ii), 
                        in the case of a State which maintains a link 
                        between eligibility for aid or assistance under 
                        one or more parts of title IV and eligibility 
                        for medical assistance under this title, in 
                        applying paragraph (1)(G), the State may elect 
                        to treat any reference in such paragraph to 
                        `individuals and members of families who meet 
                        current AFDC income, resource, and eligibility 
                        standards in the State' as a reference to 
                        `members of families who are receiving 
                        assistance under a State plan under part A or E 
                        of title IV'.
                            ``(ii) Limitation on election.--A State may 
                        only make the election described in clause (i) 
                        if, and so long as, the State demonstrates to 
                        the satisfaction of the Secretary that the such 
                        election does not result in Federal 
                        expenditures under this title (taking into 
                        account any supplemental amounts provided 
                        pursuant to section 1511(g)) that are greater 
                        than the Federal expenditures that would have 
                        been made under this title if the State had not 
                        made such election.
                    ``(C) Current afdc income, resource, and 
                eligibility standards defined.--In this subsection, the 
                term `current AFDC income, resource, and eligibility 
                standards' means, with respect to a State, the income, 
                resource, and eligibility standards for the payment of 
                assistance under the State plan under part A or E of 
                title IV (as in effect as of May 1, 1996).
                    ``(D) Medical assistance required to be provided 
                for 1 year for certain low-income families during the 
                transition from welfare to work.--Each State plan shall 
                provide that medical assistance under this title for a 
                family described in section 408(a)(12) of this Act 
                shall be provided to such family in accordance with 
                such section.
                    ``(E) State option to continue to provide medical 
                assistance during the transition from welfare to 
                work.--Nothing in this title shall be construed as 
                preventing a State from continuing to provide medical 
                assistance under a State plan under this title to an 
                individual or a member of such individual's family 
                who--
                            ``(i) is eligible for medical assistance 
                        under this title as a result of a link between 
                        eligibility for such medical assistance and aid 
                        or assistance under one or more parts of title 
                        IV or any other program of assistance based on 
                        need; and
                            ``(ii) because of hours of, or income from, 
                        employment is no longer eligible for such aid 
                        or assistance.
            ``(7) Methodology.--Family income shall be determined for 
        purposes of subparagraphs (A) through (C) of paragraph (1) in 
        the same manner (and using the same methodology) as income was 
        determined under the State medicaid plan under section 1902(l) 
        (as in effect as of May 1, 1996).
    ``(b) Guaranteed Coverage of Medicare Premiums and Cost-Sharing for 
Certain Medicare Beneficiaries.--
            ``(1) Guaranteed eligibility.--Each State plan shall 
        provide--
                    ``(A) for making medical assistance available for 
                required medicare cost-sharing (as defined in paragraph 
                (2)) for qualified medicare beneficiaries described in 
                paragraph (3);
                    ``(B) for making medical assistance available for 
                payment of medicare premiums under section 1818A for 
                qualified disabled and working individuals described in 
                paragraph (4); and
                    ``(C) for making medical assistance available for 
                payment of medicare premiums under section 1839 for 
                individuals who would be qualified medicare 
                beneficiaries described in paragraph (3) but for the 
                fact that their income exceeds 100 percent, but is less 
                than 120 percent, of the poverty line for a family of 
                the size involved.
            ``(2) Required medicare cost-sharing defined.--
                    ``(A) In general.--In this subsection, the term 
                `required medicare cost-sharing' means, with respect to 
                an individual, costs incurred for medicare cost-sharing 
                described in paragraphs (1) through (4) of section 
                1571(c) (and, at the option of a State, section 
                1571(c)(5))) without regard to whether the costs 
                incurred were for items and services for which medical 
                assistance is otherwise available under the plan.
                    ``(B) Limitation on obligation for certain cost-
                sharing assistance.--In the case of medical assistance 
                furnished under this title for medicare cost-sharing 
                described in paragraph (2), (3), or (4) of section 
                1571(c) relating to the furnishing of a service or item 
                to a medicare beneficiary, nothing in this title shall 
                be construed as preventing a State plan--
                            ``(i) from limiting the assistance to the 
                        amount (if any) by which (I) the amount that is 
                        otherwise payable under the plan for the item 
                        or service for eligible individuals who are not 
                        such medicare beneficiaries (or, if payments 
                        for such items or services are made on a 
                        capitated basis, an amount reasonably related 
                        or derived from such capitated payment amount), 
                        exceeds (II) the amount of payment (if any) 
                        made under title XVIII with respect to the 
                        service or item, and
                            ``(ii) if the amount described in subclause 
                        (II) of clause (i) exceeds the amount described 
                        in subclause (I) of such clause, from treating 
                        the amount paid under title XVIII as payment in 
                        full and not requiring or providing for any 
                        additional medical assistance under this 
                        subsection.
            ``(3) Qualified medicare beneficiary defined.--In this 
        subsection, the term `qualified medicare beneficiary' means an 
        individual--
                    ``(A) who is entitled to hospital insurance 
                benefits under part A of title XVIII (including an 
                individual entitled to such benefits pursuant to an 
                enrollment under section 1818, but not including an 
                individual entitled to such benefits only pursuant to 
                an enrollment under section 1818A),
                    ``(B) whose income (as determined under section 
                1612 for purposes of the supplemental security income 
                program, except as provided in paragraph (5)) does not 
                exceed 100 percent of the poverty line applicable to a 
                family of the size involved, and
                    ``(C) whose resources (as determined under section 
                1613 for purposes of the supplemental security income 
                program) do not exceed twice the maximum amount of 
                resources that an individual may have and obtain 
                benefits under that program.
            ``(4) Qualified disabled and working individual defined.--
        In this subsection, the term `qualified disabled and working 
        individual' means an individual--
                    ``(A) who is entitled to enroll for hospital 
                insurance benefits under part A of title XVIII under 
                section 1818A;
                    ``(B) whose income (as determined under section 
                1612 for purposes of the supplemental security income 
                program) does not exceed 200 percent of the poverty 
                line applicable to a family of the size involved;
                    ``(C) whose resources (as determined under section 
                1613 for purposes of the supplemental security income 
                program) do not exceed twice the maximum amount of 
                resources that an individual or a couple (in the case 
                of an individual with a spouse) may have and obtain 
                benefits for supplemental security income benefits 
                under title XVI; and
                    ``(D) who is not otherwise eligible for medical 
                assistance under this title.
            ``(5) Income determinations.--
                    ``(A) In general.--In determining under this 
                subsection the income of an individual who is entitled 
                to monthly insurance benefits under title II for a 
                transition month (as defined in subparagraph (B)) in a 
                year, such income shall not include any amounts 
                attributable to an increase in the level of monthly 
                insurance benefits payable under such title which have 
                occurred pursuant to section 215(i) for benefits 
                payable for months beginning with December of the 
                previous year.
                    ``(B) Transition month defined.--For purposes of 
                subparagraph (A), the term `transition month' means 
                each month in a year through the month following the 
                month in which the annual revision of the poverty line 
                is published.

``SEC. 1502. OTHER PROVISIONS RELATING TO ELIGIBILITY AND BENEFITS.

    ``(a) Optional Eligibility Groups for Which Umbrella Supplemental 
Funding Is Available.--In addition to the guaranteed coverage 
categories described in section 1501(a)(1), the following are 
population groups with respect to which supplemental allotments may be 
made under section 1511(g), but only if (for the individual involved) 
medical assistance is made available under the State plan for the 
guaranteed benefit package (as defined in section 1501(a)(2)):
            ``(1) Certain disabled individuals.--Individuals (not 
        described in section 1501(a)(1)(D)(ii)) who are disabled (as 
        determined under section 1614(a)(3)), covered under the State 
        plan, and meet the eligibility standards for coverage under the 
        State medicaid plan under title XIX (as in effect as of May 1, 
        1996).
            ``(2) Certain elderly individuals.--Elderly individuals 
        (not described in section 1501(a)(1)(E)) who are covered under 
        the State plan and who meet the eligibility standards for 
        coverage under the State medicaid plan under title XIX (as in 
effect as of May 1, 1996) other than solely on the basis of being an 
individual described in section 1902(a)(10)(E).
Eligibility under paragraphs (1) and (2) shall be determined using the 
methodologies that are not more restrictive than the methodologies used 
under the State medicaid plan as in effect as of May 1, 1996.
    ``(b) Other Provisions Relating to General Eligibility and 
Benefits.--
            ``(1) General description.--Each State plan shall include a 
        description (consistent with this title) of the following:
                    ``(A) General eligibility guidelines.--The general 
                eligibility guidelines of the plan for eligible low-
                income individuals, including--
                            ``(i) for individuals other than those 
                        covered under subsection (a) or (b) of section 
                        1501, any limitations as to the duration of 
                        eligibility,
                            ``(ii) any eligibility standards relating 
                        to age, income and resources (including any 
                        standards relating to spenddowns and 
                        disposition of resources), residency, 
                        disability status, immigration status, or 
                        employment status of individuals,
                            ``(iii) methods of establishing and 
                        continuing eligibility and enrollment, 
                        including the methodology for computing family 
                        income,
                            ``(iv) the eligibility standards in the 
                        plan that protect the income and resources of a 
                        married individual who is living in the 
                        community and whose spouse is residing in an 
                        institution in order to prevent the 
                        impoverishment of the community spouse, and
                            ``(v) for individuals other than those 
                        covered under subsection (a) or (b) of section 
                        1501, any other standards relating to 
                        eligibility for medical assistance under the 
                        plan.
                    ``(B) Scope of assistance.--The amount, duration, 
                and scope of health care services and items covered 
                under the plan, including differences among different 
                eligible population groups. The amount, duration, and 
                scope of benefits specified shall comport with 
                requirements of section 1501(a)(2)(B)(i).
                    ``(C) Delivery method.--The State's approach to 
                delivery of medical assistance, including a general 
                description of--
                            ``(i) the use (or intended use) of 
                        vouchers, fee-for-service, or managed care 
                        arrangements (such as capitated health care 
                        plans, case management, and case coordination); 
                        and
                            ``(ii) utilization control systems.
                    ``(D) Fee-for-service benefits.--To the extent that 
                medical assistance is furnished on a fee-for-service 
                basis--
                            ``(i) how the State determines the 
                        qualifications of health care providers 
                        eligible to provide such assistance; and
                            ``(ii) how the State determines rates of 
                        reimbursement for providing such assistance.
                    ``(E) Cost-sharing.--Beneficiary cost-sharing (if 
                any), including variations in such cost-sharing by 
                population group or type of service and financial 
                responsibilities of parents of recipients who are 
                children and the spouses of recipients.
                    ``(F) Utilization incentives.--Incentives or 
                requirements (if any) to encourage the appropriate 
                utilization of services.
                    ``(G) Support for certain hospitals.--
                            ``(i) In general.--With respect to 
                        hospitals described in clause (ii) located in 
                        the State, a description of the extent to which 
                        provisions are made for expenditures for items 
                        and services furnished by such hospitals and 
                        covered under the State plan.
                            ``(ii) Hospitals described.--A hospital 
                        described in this clause is a short-term acute 
                        care general hospital or a children's hospital, 
                        the low-income utilization rate of which 
                        exceeds the lesser of--
                                    ``(I) 1 standard deviation above 
                                the mean low-income utilization rate 
                                for hospitals receiving payments under 
                                a State plan in the State in which such 
                                hospital is located, or
                                    ``(II) 1\1/4\ standard deviations 
                                above the mean low-income utilization 
                                rate for hospitals receiving such 
                                payments in the 50 States and the 
                                District of Columbia.
                            ``(iii) Low-income utilization rate.--For 
                        purposes of clause (ii), the term `low-income 
                        utilization rate' means, for a hospital, a 
                        fraction (expressed as a percentage), the 
                        numerator of which is the hospital's number of 
                        patient days attributable to patients who (for 
                        such days) were eligible for medical assistance 
                        under a State plan or were uninsured in a 
                        period, and the denominator of which is the 
                        total number of the hospital's patient days in 
                        that period.
                            ``(iv) Patient days.--For purposes of 
                        clause (iii), the term `patient day' includes 
                        each day in which--
                                    ``(I) an individual, including a 
                                newborn, is an inpatient in the 
                                hospital, whether or not the individual 
                                is in a specialized ward and whether or 
                                not the individual remains in the 
                                hospital for lack of suitable placement 
                                elsewhere; or
                                    ``(II) an individual makes one or 
                                more outpatient visits to the hospital.
                    ``(H) Implementation of set asides for rural health 
                clinics and federally-qualified health centers and 
                utilization of services.--How the State will implement 
                the funding requirements imposed under subsection (e) 
                and how the State will utilize facilities described in 
                such subsection to provide services under the State 
                plan.
            ``(2) Conditions for guarantees and relation of guarantees 
        to financing.--The guarantees of States required under 
        subsection (a) and (b) of section 1501 and subsection (d) of 
        this section are subject to the limitations on payment to the 
        States provided under section 1511 (including the provisions of 
        subsection (g), relating to supplemental umbrella allotments). 
        In submitting a plan under this title, a State voluntarily 
        agrees to accept payment amounts provided under such section as 
        full payment from the Federal Government in return for 
        providing for the benefits (including the guaranteed benefit 
        package) under this title.
            ``(3) Secondary payment.--Nothing in this section shall be 
        construed as preventing a State from denying benefits to an 
        individual to the extent such benefits are available to the 
        individual under the medicare program under title XVIII or 
        under another public or private health care insurance program.
            ``(4) Residency requirement.--In the case of an individual 
        who--
                    ``(A) is described in section 1501(a)(1),
                    ``(B) changed residence from another State to the 
                State, and
                    ``(C) has resided in the State for less than 180 
                days,
        the State may limit the benefits provided to such individual in 
        the guaranteed benefits package under paragraph (2) of section 
        1501(a) to the amount, duration, and scope of benefits 
        available under the State plan of the individual's previous 
        State of residence.
            ``(5) Access to services.--
                    ``(A) Primary care services.--The State plan shall 
                contain provisions which ensure that an eligible low-
                income individual has access to primary care services 
within 30 miles of such individual's residence, or, in the case of an 
eligible low-income individual residing in a rural area, within a 
reasonable distance of such individual's residence, as determined by 
the Secretary.
                    ``(B) Nursing facilities.--The State plan shall 
                contain provisions which ensure that an eligible low-
                income individual has access to nursing facility 
                services within 50 miles of such individual's 
                residence, or, in the case of an eligible low-income 
                individual residing in a rural area, within a 
                reasonable distance of such individual's residence, as 
                determined by the Secretary.
            ``(6) Services for individuals with developmental 
        disabilities.--The State plan shall contain provisions which 
        ensure--
                    ``(A) compliance with the minimum health, safety, 
                and welfare standards for individuals with 
                developmental disabilities who receive services in an 
                intermediate care facility for the mentally retarded, 
                home and community-based health care services and 
                related supportive services, community supported living 
                arrangements, and transitional living arrangements 
                established under section 1558(c)(2); and
                    ``(B) that treatment services provided for each 
                such individual are based on an individualized plan 
                which includes a goal to maintain, enhance, or support, 
                or prevent or minimize the deterioration of skills to 
                maximize the potential and independence of the 
                individual.
    ``(c) Set-Aside of Funds for the Low-Income Disabled.--
            ``(1) In general.--In the case of a State that has elected 
        the option described in section 1501(a)(1)(D)(i) for a fiscal 
        year, the State plan shall provide that the percentage of funds 
        expended under the plan for medical assistance for eligible 
        low-income individuals who are not elderly individuals and who 
        are eligible for such assistance on the basis of a disability, 
        including being blind, for the fiscal year is not less than the 
        minimum low-income-disabled percentage specified in paragraph 
        (2) of the total funds expended under the plan for medical 
        assistance for the fiscal year.
            ``(2) Minimum low-income-disabled percentage.--The minimum 
        low-income-disabled percentage specified in this paragraph for 
        a State is equal to 90 percent of the percentage of the 
        expenditures under title XIX for medical assistance in the 
        State during Federal fiscal year 1995 which was attributable to 
        expenditures for medical assistance for benefits furnished to 
        individuals whose coverage (at such time) was on a basis 
        directly related to disability status, including being blind.
            ``(3) Computations.--States shall calculate the minimum 
        percentage under paragraph (2) in a reasonable manner 
        consistent with reports submitted to the Secretary for the 
        fiscal years involved and medical assistance attributable to 
        the exception provided under section 1903(v)(2) shall not be 
        considered to be expenditures for medical assistance.
    ``(d) Preexisting Condition Exclusions.--Notwithstanding any other 
provision of this title--
            ``(1) a State plan may not deny or exclude coverage of any 
        item or service for an eligible individual for benefits under 
        the State plan for such item or service on the basis of a 
        preexisting condition; and
            ``(2) if a State contracts or makes other arrangements 
        (through the eligible individual or through another entity) 
        with a capitated health care organization, insurer, or other 
        entity, for the provision of items or services to eligible 
        individuals under the State plan and the State permits such 
        organization, insurer, or other entity to exclude coverage of a 
        covered item or service on the basis of a preexisting 
        condition, the State shall provide, through its State plan, for 
        such coverage (through direct payment or otherwise) for any 
        such covered item or service denied or excluded on the basis of 
        a preexisting condition.
    ``(e) Set Aside of Funds for Services Provided at Federally-
Qualified Health Centers and Rural Health Clinics.--
            ``(1) Rural health clinic services.--A State plan shall 
        provide that the amount of funds expended under the plan for 
        medical assistance for services provided at rural health 
        clinics (as defined in section 1571(f)(1)), for eligible low-
        income individuals for a fiscal year is not less than 95 
        percent of the rural health clinic base year expenditures (as 
        defined in paragraph (3)(A)), increased annually by the State 
        percentage growth factor (as defined in section 1511(g)(3)(C)).
            ``(2) Federally-qualified health center services.--A State 
        plan shall provide that the amount of funds expended under the 
        plan for medical assistance for services provided at federally-
        qualified health centers (as defined in section 1571(f)(2)(B)), 
        for eligible low-income individuals for a fiscal year is not 
        less than 95 percent of the federally-qualified health center 
        base year expenditures (as defined in paragraph (3)(B)), 
        increased annually by the State percentage growth factor (as 
        defined in section 1511(g)(3)(C)).
            ``(3) Base year expenditures defined.--
                    ``(A) Rural health clinic base year expenditures.--
                For purposes of paragraph (1), the term `rural health 
                clinic base year expenditures' means, with respect to a 
                State, the annual expenditures under title XIX for 
                medical assistance in the State which were attributable 
                to expenditures for medical assistance for services 
                provided at rural health clinics (as defined in section 
                1571(f)(1)) located in the State, during Federal fiscal 
                year 1995 or 1996, whichever is greater.
                    ``(B) Federally-qualified health center base year 
                expenditures.--For purposes of paragraph (2), the term 
                `federally-qualified health center base year 
                expenditures' means, with respect to a State, the 
                annual expenditures under title XIX for medical 
                assistance in the State which were attributable to 
                expenditures for medical assistance for services 
                provided at federally-qualified health centers (as 
                defined in section 1571(f)(2)(B)) located in the State, 
                during Federal fiscal year 1995 or 1996, whichever is 
                greater.
                    ``(C) Notice.--For each fiscal year, the Secretary 
                shall provide each State with notice of the amount of 
                funds required under this subsection to be expended 
                during such fiscal year for medical assistance for 
                services provided at rural health clinics and 
                federally-qualified health centers located in the 
                State.
            ``(4) No waiver.--No waiver of the requirements of this 
        subsection may be granted under this title, section 1115 of 
        this Act, or any other provision of law.
    ``(f) Parity for mental health services.--
            ``(1) In general.--A State plan may not impose treatment 
        limits or financial requirements on mental illness services 
        which are not imposed on services for other illnesses or 
        diseases. The plan may require pre-admission screening, prior 
        authorization of services, or other mechanisms limiting 
        coverage of mental illness services to services that are 
        medically necessary.
            ``(2) Construction.--Except as provided in section 1508, no 
        person or entity may bring an action against a State based on 
        its failure to comply with the requirements of paragraph (1).

``SEC. 1503. LIMITATIONS ON COST-SHARING.

    ``(a) Guaranteed Population.--The State plan may not impose any 
cost-sharing with respect to any benefit provided to an individual 
described in section 1501(a), or with respect to any required medicare 
cost-sharing provided for an individual described in subsection (b) of 
such section, except to the extent such cost-sharing could have been 
imposed against such an individual for such benefit, or such required 
medicare cost-sharing, under the State plan under title XIX, or under a 
waiver of the requirements of such plan granted to any State (as such 
plan (or waiver) is in effect on the date of the enactment of the 
Medicaid Restructuring Act of 1996).
    ``(b) Optional Population.--
            ``(1) Benefits described in the guaranteed benefit 
        package.--The State plan may impose cost-sharing with respect 
        to any benefit described in the guaranteed benefit package in 
        section 1501(a)(2) provided to an eligible low-income 
        individual who is not described in subsection (a) or (b) of 
        section 1501, but only to the extent such cost-sharing could 
        have been imposed against such an individual for such benefit 
        under the State plan under title XIX, or under a waiver of the 
        requirements of such plan granted to any State (as such plan 
        (or waiver) is in effect on the date of the enactment of the 
        Medicaid Restructuring Act of 1996).
            ``(2) Other benefits.--The State plan may impose cost-
        sharing with respect to any benefit not described in the 
        guaranteed benefit package described in section 1501(a)(2) 
        provided to an eligible low-income individual who is not 
        described in subsection (a) or (b) of section 1501. Such cost-
        sharing may be imposed in a manner that reflects such economic 
        factors, employment status, and family size with respect to 
        each such individual as the State determines appropriate.
    ``(c) Certain Cost-Sharing Permitted.--Nothing in this section 
shall be construed as preventing a State plan (consistent with 
subsections (a) and (b))--
            ``(1) from imposing cost-sharing to discourage the 
        inappropriate use of emergency medical services delivered 
        through a hospital emergency room, a medical transportation 
        provider, or otherwise,
            ``(2) from imposing premiums and cost-sharing 
        differentially in order to encourage the use of primary and 
        preventive care and discourage unnecessary or less economical 
        care,
            ``(3) from scaling cost-sharing in a manner that reflects 
        economic factors, employment status, and family size, or
            ``(4) from scaling cost-sharing based on the availability 
        to the individual or family of other health insurance coverage.
    ``(d) Prohibition on Balance Billing.--An individual eligible for 
benefits for items and services under the State plan who is furnished 
such an items or service by a provider under the plan may not be billed 
by the provider for such item or service, other than such amount of 
cost-sharing as is permitted with this section.
    ``(e) No Denial of Services Due to An Inability To Pay Cost-
Sharing.--
            ``(1) In general.--No provider of items or services under 
        the State plan may refuse to provide such items or services to 
        an individual eligible for such items or services based on the 
        individual's inability to pay a cost-sharing charge.
            ``(2) Individual remains liable.--An individual who is 
        subject to a cost-sharing charge for an item or service under 
        this section and who receives such item or service despite such 
        individual's inability to pay such charge, shall remain liable 
        for such charge.
    ``(f) Public Notice.--If any charges are imposed under the State 
plan for cost-sharing, such cost-sharing shall be pursuant to a public 
cost-sharing schedule.
    ``(g) Cost-Sharing Defined.--In this section, the term `cost-
sharing' includes copayments, deductibles, coinsurance, enrollment 
fees, premiums, and other charges for the provision of health care 
services.

``SEC. 1504. REQUIREMENTS RELATING TO MEDICAL ASSISTANCE PROVIDED 
              THROUGH MANAGED CARE ARRANGEMENTS.

    ``(a) Solvency Standards for Capitated Health Care Organizations.--
            ``(1) In general.--A State may not contract with a 
        capitated health care organization, as defined in subsection 
        (e)(1), for the provision of medical assistance under a State 
        plan under which the organization is--
                    ``(A) at full financial risk, as defined by the 
                State, unless the organization meets solvency standards 
                established by the State for private health maintenance 
                organizations or is described in paragraph (4) and 
                meets other solvency standards established by the 
                State, so long as such standards are adequate to 
                protect against the risk of insolvency, or
                    ``(B) is not at such risk, unless the organization 
                meets solvency standards that are established under the 
                State plan.
            ``(2) Treatment of public entities.--Paragraph (1) shall 
        not apply to an organization that is a public entity or if the 
        solvency of such organization is guaranteed by the State.
            ``(3) Transition.--In the case of a capitated health care 
        organization that as of the date of the enactment of this title 
        has entered into a contract with a State for the provision of 
        medical assistance under title XIX under which the organization 
        assumes full financial risk and is receiving capitation 
        payments, paragraph (1) shall not apply to such organization 
        until 3 years after the date of the enactment of this title.
            ``(4) Organization described.--An organization described in 
        this paragraph is a capitated health care organization which is 
        (or is controlled by) one or more Federally-qualified health 
        centers or rural health clinics. For purposes of this 
        paragraph, the term `control' means the possession, whether 
        direct or indirect, of the power to direct or cause the 
        direction of the management and policies of a capitated health 
        care organization through membership, board representation, or 
        an ownership interest equal to or greater than 50.1 percent.
    ``(b) Description of Process for Developing Capitation Payment 
Rates.--
            ``(1) In general.--If a State contracts (or intends to 
        contract) with a capitated health care organization (as defined 
        in subsection (e)(1)) under which the State makes a capitation 
        payment (as defined in subsection (e)(2)) to the organization 
        for providing or arranging for the provision of medical 
        assistance under the State plan for a group of services, 
        including at least inpatient hospital services and physicians' 
        services, the plan shall include a description of the 
        following:
                    ``(A) Use of actuarial science.--The extent and 
                manner in which the State uses actuarial science--
                            ``(i) to analyze and project health care 
                        expenditures and utilization for individuals 
                        enrolled (or to be enrolled) in such an 
                        organization under the State plan; and
                            ``(ii) to develop capitation payment rates, 
                        including a brief description of the general 
                        methodologies used by actuaries.
                    ``(B) Qualifications of organizations.--The general 
                qualifications, including any accreditation, State 
                licensure or certification, or provider network 
                standards, required by the State for participation of 
                capitated health care organizations under the State 
                plan.
                    ``(C) Dissemination process.--The process used by 
                the State under paragraph (2) and otherwise to 
                disseminate, before entering into contracts with 
                capitated health care organizations, actuarial 
                information to such organizations on the historical 
                fee-for-service costs (or, if not available, other 
                recent financial data associated with providing covered 
                services) and utilization associated with individuals 
                described in subparagraph (A)(i).
            ``(2) Public notice and comment.--Under the State plan the 
        State shall provide a process for providing, before the 
        beginning of each contract year--
                    ``(A) public notice of--
                            ``(i) the amounts of the capitation 
                        payments (if any) made under the plan for the 
                        contract year preceding the public notice, and
                            ``(ii)(I) the information described under 
                        paragraph (1)(A) with respect to capitation 
                        payments for the contract year involved, or 
                        (II) amounts of the capitation payments the 
                        State expects to make for the contract year 
                        involved,
                unless such information is designated as proprietary 
                and not subject to public disclosure under State law, 
                and
                    ``(B) an opportunity for receiving public comment 
                on the amounts and information for which notice is 
                provided under subparagraph (A).
    ``(c) Quality Assurance Standards.--
            ``(1) Choice of provider.--If a State requires an 
        individual eligible for medical assistance under the State plan 
        under this title to enroll with a capitated health care 
        organization or with a primary care case management provider as 
        a condition of receiving such assistance, the State shall 
        permit such individual to choose a provider of such 
        assistance--
                    ``(A) from among not less than 2 capitated health 
                care organizations; or
                    ``(B) from either a capitated health care 
                organization or a primary care case management 
                provider.
            ``(2) No required enrollment for special needs 
        individuals.--
                    ``(A) In general.--A State may not require an 
                individual who is a special needs individual (as 
                described in subparagraph (B)) to enroll with a 
                capitated health care organization as a condition of 
                receiving medical assistance under the State plan under 
                this title.
                    ``(B) Special needs individuals described.--In this 
                paragraph, a `special needs individual' means any of 
                the following:
                            ``(i) Special needs child.--An individual 
                        who is under 19 years of age who--
                                    ``(I) is eligible for supplemental 
                                security income under title XVI;
                                    ``(II) is described under section 
                                501(a)(1)(D);
                                    ``(III) is a child described in 
                                section 1571(b)(1)(B); or
                                    ``(IV) is in foster care or is 
                                otherwise in an out-of-home placement.
                            ``(ii) Homeless individuals.--An individual 
                        who is homeless (without regard to whether the 
                        individual is a member of a family), 
                        including--
                                    ``(I) an individual whose primary 
                                residence during the night is a 
                                supervised public or private facility 
                                that provides temporary living 
                                accommodations; or
                                    ``(II) an individual who is a 
                                resident in transitional housing.
                            ``(iii) Migrant agricultural workers.--A 
                        migratory agricultural worker or a seasonal 
                        agricultural worker (as such terms are defined 
                        in section 329 of the Public Health Service 
                        Act), or the spouse or dependent of such a 
                        worker.
            ``(3) Default enrollment.--
                    ``(A) Establishment of process.--A State may 
                establish a default enrollment process under which any 
                individual who does not enroll with a capitated health 
                care organization during the enrollment period 
                specified by the State shall be enrolled by the State 
                with such an organization in accordance with such 
                process.
                    ``(B) Limitation.--A State may not enroll an 
                individual using the default enrollment process 
                established by the State with a capitated health 
care organization which is not in compliance with the requirements of 
this section.
            ``(4) Availability of services.--A State may not contract 
        with a capitated health care organization to provide medical 
        assistance under the State plan under this title unless such 
        organization delivers medical assistance to an enrollee with 
        such organization under this title in a manner which makes such 
        assistance, when medically necessary, available and accessible 
        24 hours a day and 7 days a week.
            ``(5) Adequate number of providers.--A State may not 
        contract with a capitated health care organization to provide 
        medical assistance under the State plan under this title unless 
        such organization contracts with a reasonable number of primary 
        care and specialty care providers to meet the health care needs 
        of enrollees with such organizations under this title.
            ``(6) Prohibitions.--
                    ``(A) In general.--A State shall prohibit a 
                capitated health care organization that the State 
                enters into a contract with to provide medical 
                assistance under a State plan under this title from--
                            ``(i) discriminating on the basis of health 
                        status or anticipated need for services in the 
                        enrollment, reenrollment, or disenrollment of 
                        such an individual;
                            ``(ii) obtaining the enrollment of such an 
                        individual through fraudulent or coercive 
                        means;
                            ``(iii) distributing marketing materials 
                        within the State that contain false or 
                        materially misleading information; and
                            ``(iv) having--
                                    ``(I) a person described in 
                                subparagraph (B) as a director, 
                                officer, partner, or person with 
                                beneficial ownership of more than 5 
                                percent of the organization's equity; 
                                or
                                    ``(II) an employment, consulting, 
                                or other agreement with a person 
                                described in subparagraph (B) for the 
                                provision of items and services that 
                                are significant and material to the 
                                organization's obligations under its 
                                contract with the State.
                    ``(B) Persons described.--A person is described in 
                this subparagraph if such person--
                            ``(i) is debarred or suspended by the 
                        Federal Government, pursuant to the Federal 
                        acquisition regulation, from Government 
                        contracting and subcontracting;
                            ``(ii) is an affiliate (within the meaning 
                        of the Federal acquisition regulation) of a 
                        person described in clause (i); or
                            ``(iii) is excluded from participation in 
                        any program under title XVIII or any State 
                        health care program, as defined in section 
                        1128(h).
            ``(7) Audits, inspections, and external reviews.--
                    ``(A) By the state.--A State shall require a 
                capitated health care organization that the State 
                enters into a contract with to provide medical 
                assistance under a State plan under this title to 
                provide such financial information as the State may 
                specify and to allow the State to audit and inspect the 
                records of the organization to verify such information.
                    ``(B) Independent, external reviews.--A State may 
                not enter into a contract with a capitated health care 
                organization to provide medical assistance under the 
                State plan under this title unless the organization has 
                a contract with a utilization and quality control 
                organization under part B of title XI, an entity which 
                meets the requirements of section 1152, as determined 
                by the Secretary, or a private accreditation body, to 
                conduct, on an annual basis, an independent, external 
review of the quality of the services provided by the organization.
            ``(8) Establishment of sanctions for noncompliance with 
        standards.--A State shall establish sanctions, including 
        intermediate sanctions and civil money penalties, which may be 
        imposed against a capitated health care organization with a 
        contract to provide medical assistance under the State plan 
        under this title for--
                    ``(A) noncompliance with the requirements of this 
                subsection; or
                    ``(B) failure to provide medically necessary 
                services required under such contract.
    ``(d) Authority to Contract with Primary Care Case Management 
Providers.--
            ``(1) In general.--A State may contract with a primary care 
        case management provider (as defined under subsection (e)(3)) 
        for the provision of case management services to an eligible 
        low-income individual under the State plan.
            ``(2) Default enrollment.--If a State establishes a default 
        enrollment process under subsection (c)(3), the State may 
        enroll an individual who does not enroll with a capitated 
        health care organization or with a primary care case management 
        provider during the enrollment period specified by the State 
        with a primary care case management provider using such 
        process.
    ``(e) Definitions.--In this title:
            ``(1) Capitated health care organization.--The term 
        `capitated health care organization' means a health maintenance 
        organization or any other entity (including a health insuring 
        organization, managed care organization, prepaid health plan, 
        integrated service network, or similar entity) which under 
        State law is permitted to accept capitation payments for 
        providing (or arranging for the provision of) a group of items 
        and services including at least inpatient hospital services and 
        physicians' services.
            ``(2) Capitation payment.--The term `capitation payment' 
        means, with respect to payment, payment on a prepaid capitation 
        basis or any other risk basis to an entity for the entity's 
        provision (or arranging for the provision) of a group of items 
        and services, including at least inpatient hospital services 
        and physicians' services.
            ``(3) Primary care case management provider.--The term 
        `primary care case management provider' means a health care 
        provider that--
                    ``(A) is a physician, group of physicians, a 
                Federally-qualified health center, a rural health 
                clinic, or an entity employing or having other 
                arrangements with physicians that provides or arranges 
                for the provision of one or more items and services to 
                individuals eligible for medical assistance under the 
                State plan under this title;
                    ``(B) receives a fixed fee per enrollee for a 
                specified period for providing case management services 
                (including approving and arranging for the provision of 
                health care items and services on a referral basis) to 
                enrolled individuals; and
                    ``(C) is not an entity that is at full financial 
                risk, as defined by the State.

``SEC. 1505. PREVENTING SPOUSAL IMPOVERISHMENT.

    ``(a) Special Treatment for Institutionalized Spouses.--
            ``(1) Supersedes other provisions.--In determining the 
        eligibility for medical assistance of an institutionalized 
        spouse (as defined in subsection (h)(1)), the provisions of 
        this section supersede any other provision of this title which 
        is inconsistent with them.
            ``(2) Does not affect certain determinations.--Except as 
        this section specifically provides, this section does not apply 
        to--
                    ``(A) the determination of what constitutes income 
                or resources, or
                    ``(B) the methodology and standards for determining 
                and evaluating income and resources.
            ``(3) No application in commonwealths and territories.--
        This section shall only apply to a State that is one of the 50 
        States or the District of Columbia.
    ``(b) Rules for Treatment of Income.--
            ``(1) Separate treatment of income.--During any month in 
        which an institutionalized spouse is in the institution, except 
        as provided in paragraph (2), no income of the community spouse 
        shall be deemed available to the institutionalized spouse.
            ``(2) Attribution of income.--In determining the income of 
        an institutionalized spouse or community spouse for purposes of 
        the post-eligibility income determination described in 
        subsection (d), except as otherwise provided in this section 
        and regardless of any State laws relating to community property 
        or the division of marital property, the following rules apply:
                    ``(A) Non-trust property.--Subject to subparagraphs 
                (C) and (D), in the case of income not from a trust, 
                unless the instrument providing the income otherwise 
                specifically provides--
                            ``(i) if payment of income is made solely 
                        in the name of the institutionalized spouse or 
                        the community spouse, the income shall be 
                        considered available only to that respective 
                        spouse,
                            ``(ii) if payment of income is made in the 
                        names of the institutionalized spouse and the 
                        community spouse, \1/2\ of the income shall be 
                        considered available to each of them, and
                            ``(iii) if payment of income is made in the 
                        names of the institutionalized spouse or the 
                        community spouse, or both, and to another 
                        person or persons, the income shall be 
                        considered available to each spouse in 
                        proportion to the spouse's interest (or, if 
                        payment is made with respect to both spouses 
                        and no such interest is specified, \1/2\ of the 
                        joint interest shall be considered available to 
                        each spouse).
                    ``(B) Trust property.--In the case of a trust--
                            ``(i) except as provided in clause (ii), 
                        income shall be attributed in accordance with 
                        the provisions of this title; and
                            ``(ii) income shall be considered available 
                        to each spouse as provided in the trust, or, in 
                        the absence of a specific provision in the 
                        trust--
                                    ``(I) if payment of income is made 
                                solely to the institutionalized spouse 
                                or the community spouse, the income 
                                shall be considered available only to 
                                that respective spouse,
                                    ``(II) if payment of income is made 
                                to both the institutionalized spouse 
                                and the community spouse, \1/2\ of the 
                                income shall be considered available to 
                                each of them, and
                                    ``(III) if payment of income is 
                                made to the institutionalized spouse or 
                                the community spouse, or both, and to 
                                another person or persons, the income 
                                shall be considered available to each 
                                spouse in proportion to the spouse's 
                                interest (or, if payment is made with 
                                respect to both spouses and no such 
                                interest is specified, \1/2\ of the 
                                joint interest shall be considered 
                                available to each spouse).
                    ``(C) Property with no instrument.--In the case of 
                income not from a trust in which there is no instrument 
                establishing ownership, subject to subparagraph (D), 
                \1/2\ of the income shall be considered to be available 
                to the institutionalized spouse and \1/2\ to the 
                community spouse.
                    ``(D) Rebutting ownership.--The rules of 
                subparagraphs (A) and (C) are superseded to the extent 
                that an institutionalized spouse can establish, by a 
                preponderance of the evidence, that the 
ownership interests in income are other than as provided under such 
subparagraphs.
    ``(c) Rules for Treatment of Resources.--
            ``(1) Computation of spousal share at time of 
        institutionalization.--
                    ``(A) Total joint resources.--There shall be 
                computed (as of the beginning of the first continuous 
                period of institutionalization of the institutionalized 
                spouse)--
                            ``(i) the total value of the resources to 
                        the extent either the institutionalized spouse 
                        or the community spouse has an ownership 
                        interest, and
                            ``(ii) a spousal share which is equal to 
                        \1/2\ of such total value.
                    ``(B) Assessment.--At the request of an 
                institutionalized spouse or community spouse, at the 
                beginning of the first continuous period of 
                institutionalization of the institutionalized spouse 
                and upon the receipt of relevant documentation of 
                resources, the State shall promptly assess and document 
                the total value described in subparagraph (A)(i) and 
                shall provide a copy of such assessment and 
                documentation to each spouse and shall retain a copy of 
                the assessment for use under this section. If the 
                request is not part of an application for medical 
                assistance under this title, the State may, at its 
                option as a condition of providing the assessment, 
                require payment of a fee not exceeding the reasonable 
                expenses of providing and documenting the assessment. 
                At the time of providing the copy of the assessment, 
                the State shall include a notice indicating that the 
                spouse will have a right to a fair hearing under 
                subsection (e)(2).
            ``(2) Attribution of resources at time of initial 
        eligibility determination.--In determining the resources of an 
        institutionalized spouse at the time of application for medical 
        assistance under this title, regardless of any State laws 
        relating to community property or the division of marital 
        property--
                    ``(A) except as provided in subparagraph (B), all 
                the resources held by either the institutionalized 
                spouse, community spouse, or both, shall be considered 
                to be available to the institutionalized spouse, and
                    ``(B) resources shall be considered to be available 
                to an institutionalized spouse, but only to the extent 
                that the amount of such resources exceeds the amount 
                computed under subsection (f)(2)(A) (as of the time of 
                application for medical assistance).
            ``(3) Assignment of support rights.--The institutionalized 
        spouse shall not be ineligible by reason of resources 
        determined under paragraph (2) to be available for the cost of 
        care where--
                    ``(A) the institutionalized spouse has assigned to 
                the State any rights to support from the community 
                spouse,
                    ``(B) the institutionalized spouse lacks the 
                ability to execute an assignment due to physical or 
                mental impairment but the State has the right to bring 
                a support proceeding against a community spouse without 
                such assignment, or
                    ``(C) the State determines that denial of 
                eligibility would work an undue hardship.
            ``(4) Separate treatment of resources after eligibility for 
        medical assistance established.--During the continuous period 
        in which an institutionalized spouse is in an institution and 
        after the month in which an institutionalized spouse is 
        determined to be eligible for medical assistance under this 
        title, no resources of the community spouse shall be deemed 
        available to the institutionalized spouse.
            ``(5) Resources defined.--In this section, the term 
        `resources' does not include--
                    ``(A) resources excluded under subsection (a) or 
                (d) of section 1613, and
                    ``(B) resources that would be excluded under 
                section 1613(a)(2)(A) but for the limitation on total 
                value described in such section.
    ``(d) Protecting Income for Community Spouse.--
            ``(1) Allowances to be offset from income of 
        institutionalized spouse.--After an institutionalized spouse is 
        determined or redetermined to be eligible for medical 
        assistance, in determining the amount of the spouse's income 
        that is to be applied monthly to payment for the costs of care 
        in the institution, there shall be deducted from the spouse's 
        monthly income the following amounts in the following order:
                    ``(A) A personal needs allowance (described in 
                paragraph (2)(A)), in an amount not less than the 
                amount specified in paragraph (2)(C).
                    ``(B) A community spouse monthly income allowance 
                (as defined in paragraph (3)), but only to the extent 
                income of the institutionalized spouse is made 
                available to (or for the benefit of) the community 
                spouse.
                    ``(C) A family allowance, for each family member, 
                equal to at least \1/3\ of the amount by which the 
                amount described in paragraph (4)(A)(i) exceeds the 
                amount of the monthly income of that family member.
                    ``(D) Amounts for incurred expenses for medical or 
                remedial care for the institutionalized spouse as 
                provided under paragraph (6).
        In subparagraph (C), the term `family member' only includes 
        minor or dependent children, dependent parents, or dependent 
        siblings of the institutionalized or community spouse who are 
        residing with the community spouse.
            ``(2) Personal needs allowance.--
                    ``(A) In general.--The State plan must provide 
                that, in the case of an institutionalized individual or 
                couple described in subparagraph (B), in determining 
                the amount of the individual's or couple's income to be 
                applied monthly to payment for the cost of care in an 
                institution, there shall be deducted from the monthly 
                income (in addition to other allowances otherwise 
                provided under the plan) a monthly personal needs 
                allowance--
                            ``(i) which is reasonable in amount for 
                        clothing and other personal needs of the 
                        individual (or couple) while in an institution, 
                        and
                            ``(ii) which is not less (and may be 
                        greater) than the minimum monthly personal 
                        needs allowance described in subparagraph (C).
                    ``(B) Institutionalized individual or couple 
                defined.--In this paragraph, the term 
                `institutionalized individual or couple' means an 
                individual or married couple--
                            ``(i) who is an inpatient (or who are 
                        inpatients) in a medical institution or nursing 
                        facility for which payments are made under this 
                        title throughout a month, and
                            ``(ii) who is or are determined to be 
                        eligible for medical assistance under the State 
                        plan.
                    ``(C) Minimum allowance.--The minimum monthly 
                personal needs allowance described in this subparagraph 
                is $40 for an institutionalized individual and $80 for 
                an institutionalized couple (if both are aged, blind, 
                or disabled, and their incomes are considered available 
                to each other in determining eligibility).
            ``(3) Community spouse monthly income allowance defined.--
                    ``(A) In general.--In this section (except as 
                provided in subparagraph (B)), the community spouse 
                monthly income allowance for a community spouse is an 
                amount by which--
                            ``(i) except as provided in subsection (e), 
                        the minimum monthly maintenance needs allowance 
                        (established under and in accordance with 
                        paragraph (4)) for the spouse, exceeds
                            ``(ii) the amount of monthly income 
                        otherwise available to the community spouse 
                        (determined without regard to such an 
                        allowance).
                    ``(B) Court ordered support.--If a court has 
                entered an order against an institutionalized spouse 
                for monthly income for the support of the community 
                spouse, the community spouse monthly income allowance 
                for the spouse shall be not less than the amount of the 
                monthly income so ordered.
            ``(4) Establishment of minimum monthly maintenance needs 
        allowance.--
                    ``(A) In general.--Each State shall establish a 
                minimum monthly maintenance needs allowance for each 
                community spouse which, subject to subparagraph (B), is 
                equal to or exceeds--
                            ``(i) 150 percent of \1/12\ of the poverty 
                        line applicable to a family unit of 2 members, 
                        plus
                            ``(ii) an excess shelter allowance (as 
                        defined in paragraph (4)).
                A revision of the poverty line referred to in clause 
                (i) shall apply to medical assistance furnished during 
                and after the second calendar quarter that begins after 
                the date of publication of the revision.
                    ``(B) Cap on minimum monthly maintenance needs 
                allowance.--The minimum monthly maintenance needs 
                allowance established under subparagraph (A) may not 
                exceed $1,500 (subject to adjustment under subsections 
                (e) and (g)).
            ``(5) Excess shelter allowance defined.--In paragraph 
        (4)(A)(ii), the term `excess shelter allowance' means, for a 
        community spouse, the amount by which the sum of--
                    ``(A) the spouse's expenses for rent or mortgage 
                payment (including principal and interest), taxes and 
                insurance and, in the case of a condominium or 
                cooperative, required maintenance charge, for the 
                community spouse's principal residence, and
                    ``(B) the standard utility allowance (used by the 
                State under section 5(e) of the Food Stamp Act of 1977) 
                or, if the State does not use such an allowance, the 
                spouse's actual utility expenses,
        exceeds 30 percent of the amount described in paragraph 
        (4)(A)(i), except that, in the case of a condominium or 
        cooperative, for which a maintenance charge is included under 
        subparagraph (A), any allowance under subparagraph (B) shall be 
        reduced to the extent the maintenance charge includes utility 
        expenses.
            ``(6) Treatment of incurred expenses.--With respect to the 
        post-eligibility treatment of income under this section, there 
        shall be disregarded reparation payments made by the Federal 
        Republic of Germany and, there shall be taken into account 
        amounts for incurred expenses for medical or remedial care that 
        are not subject to payment by a third party, including--
                    ``(A) medicare and other health insurance premiums, 
                deductibles, or coinsurance, and
                    ``(B) necessary medical or remedial care recognized 
                under State law but not covered under the State plan 
                under this title, subject to reasonable limits the 
                State may establish on the amount of these expenses.
    ``(e) Notice and Fair Hearing.--
            ``(1) Notice.--Upon--
                    ``(A) a determination of eligibility for medical 
                assistance of an institutionalized spouse, or
                    ``(B) a request by either the institutionalized 
                spouse, or the community spouse, or a representative 
                acting on behalf of either spouse,
        each State shall notify both spouses (in the case described in 
        subparagraph (A)) or the spouse making the request (in the case 
        described in subparagraph (B)) of the amount of the community 
        spouse monthly income allowance (described in subsection 
        (d)(1)(B)), of the amount of any family allowances (described 
        in subsection (d)(1)(C)), of the method for computing the 
        amount of the community spouse resources allowance permitted 
under subsection (f), and of the spouse's right to a fair hearing under 
the State plan respecting ownership or availability of income or 
resources, and the determination of the community spouse monthly income 
or resource allowance.
            ``(2) Fair hearing.--
                    ``(A) In general.--If either the institutionalized 
                spouse or the community spouse is dissatisfied with a 
                determination of--
                            ``(i) the community spouse monthly income 
                        allowance;
                            ``(ii) the amount of monthly income 
                        otherwise available to the community spouse (as 
                        applied under subsection (d)(3)(A)(ii));
                            ``(iii) the computation of the spousal 
                        share of resources under subsection (c)(1);
                            ``(iv) the attribution of resources under 
                        subsection (c)(2); or
                            ``(v) the determination of the community 
                        spouse resource allowance (as defined in 
                        subsection (f)(2));
                such spouse is entitled to a fair hearing under the 
                State plan with respect to such determination if an 
                application for benefits under this title has been made 
                on behalf of the institutionalized spouse. Any such 
                hearing respecting the determination of the community 
                spouse resource allowance shall be held within 30 days 
                of the date of the request for the hearing.
                    ``(B) Revision of minimum monthly maintenance needs 
                allowance.--If either such spouse establishes that the 
                community spouse needs income, above the level 
                otherwise provided by the minimum monthly maintenance 
                needs allowance, due to exceptional circumstances 
                resulting in significant financial duress, there shall 
                be substituted, for the minimum monthly maintenance 
                needs allowance in subsection (d)(3)(A)(i), an amount 
                adequate to provide such additional income as is 
                necessary.
                    ``(C) Revision of community spouse resource 
                allowance.--If either such spouse establishes that the 
                community spouse resource allowance (in relation to the 
                amount of income generated by such an allowance) is 
                inadequate to raise the community spouse's income to 
                the minimum monthly maintenance needs allowance, there 
                shall be substituted, for the community spouse resource 
                allowance under subsection (f)(2), an amount adequate 
                to provide such a minimum monthly maintenance needs 
                allowance.
    ``(f) Permitting Transfer of Resources to Community Spouse.--
            ``(1) In general.--An institutionalized spouse may, without 
        regard to any other provision of the State plan to the 
        contrary, transfer an amount equal to the community spouse 
        resource allowance (as defined in paragraph (2)), but only to 
        the extent the resources of the institutionalized spouse are 
        transferred to, or for the sole benefit of, the community 
        spouse. The transfer under the preceding sentence shall be made 
        as soon as practicable after the date of the initial 
        determination of eligibility, taking into account such time as 
        may be necessary to obtain a court order under paragraph (3).
            ``(2) Community spouse resource allowance defined.--In 
        paragraph (1), the `community spouse resource allowance' for a 
        community spouse is an amount (if any) by which--
                    ``(A) the greatest of--
                            ``(i) $12,000 (subject to adjustment under 
                        subsection (g)), or, if greater (but not to 
                        exceed the amount specified in clause (ii)(II)) 
                        an amount specified under the State plan,
                            ``(ii) the lesser of (I) the spousal share 
                        computed under subsection (c)(1), or (II) 
                        $60,000 (subject to adjustment under subsection 
                        (g)),
                            ``(iii) the amount established under 
                        subsection (e)(2), or
                            ``(iv) the amount transferred under a court 
                        order under paragraph (3);
                exceeds
                    ``(B) the amount of the resources otherwise 
                available to the community spouse (determined without 
                regard to such an allowance).
            ``(3) Transfers under court orders.--If a court has entered 
        an order against an institutionalized spouse for the support of 
        the community spouse, any provisions under the plan relating to 
        transfers or disposals of assets for less than fair market 
        value shall not apply to amounts of resources transferred 
        pursuant to such order for the support of the spouse or a 
        family member (as defined in subsection (d)(1)).
    ``(g) Indexing Dollar Amounts.--For services furnished during a 
calendar year after 1989, the dollar amounts specified in subsections 
(d)(3)(C), (f)(2)(A)(i), and (f)(2)(A)(ii)(II) shall be increased by 
the same percentage as the percentage increase in the consumer price 
index for all urban consumers (all items; U.S. city average) between 
September 1988 and the September before the calendar year involved.
    ``(h) Definitions.--In this section:
            ``(1) Institutionalized spouse.--The term 
        `institutionalized spouse' means an individual--
                    ``(A)(i) who is in a medical institution or nursing 
                facility, or
                    ``(ii) at the option of the State (I) who would be 
                eligible under the State plan under this title if such 
                individual was in a medical institution, (II) with 
                respect to whom there has been a determination that but 
                for the provision of home or community-based services 
                such individual would require the level of care 
                provided in a hospital, nursing facility or 
                intermediate care facility for the mentally retarded 
                the cost of which could be reimbursed under the plan, 
                and (III) who will receive home or community-based 
                services pursuant the plan; and
                    ``(B) is married to a spouse who is not in a 
                medical institution or nursing facility;
        but does not include any such individual who is not likely to 
        meet the requirements of subparagraph (A) for at least 30 
        consecutive days.
            ``(2) Community spouse.--The term `community spouse' means 
        the spouse of an institutionalized spouse.

``SEC. 1506. PREVENTING FAMILY IMPOVERISHMENT.

    ``(a) Responsibilities for Long-term Care Generally.--A State plan 
may not--
            ``(1) require an adult child or any other individual (other 
        than the applicant or recipient of services or the spouse of 
        such an applicant or recipient) to contribute to the cost of 
        covered nursing facility services and other long-term care 
        services under the plan; and
            ``(2) take into account with respect to such services the 
        financial responsibility of any individual for any applicant or 
        recipient of assistance under the plan unless such applicant or 
        recipient is such individual's spouse or such individual's 
        child who is under age 21 or (with respect to States eligible 
        to participate in the State program established under title 
        XVI), is blind or permanently and totally disabled, or is blind 
        or disabled as defined in section 1614 (with respect to States 
        which are not eligible to participate in such program).
    ``(b) Limitations on Liens.--
            ``(1) In general.--No lien may be imposed against the 
        property of any individual prior to the individual's death on 
        account of medical assistance paid or to be paid on the 
        individual's behalf under a State plan, except--
                    ``(A) pursuant to the judgment of a court on 
                account of benefits incorrectly paid on behalf of such 
                individual; or
                    ``(B) in the case of the real property of an 
                individual--
                            ``(i) who is an inpatient in a nursing 
                        facility, intermediate care facility for the 
                        mentally retarded, or other medical 
                        institution, if such individual is required, as 
                        a condition of receiving services in such 
                        institution under the plan, to spend for costs 
                        of medical care all but a minimal amount of the 
                        individual's income required for personal 
                        needs, and
                            ``(ii) with respect to whom the State 
                        determines, after notice and opportunity for a 
                        hearing (in accordance with procedures 
                        established by the State), that the individual 
                        cannot reasonably be expected to be discharged 
                        from the medical institution and to return 
                        home,
                except as provided in paragraph (2).
            ``(2) Exception.--No lien may be imposed under paragraph 
        (1)(B) on such individual's home if--
                    ``(A) the spouse of such individual,
                    ``(B) such individual's child who is under age 21, 
                or (with respect to States eligible to participate in 
                the State program established under title XVI) is blind 
                or permanently and totally disabled, or (with respect 
                to States which are not eligible to participate in such 
                program) is blind or disabled as defined in section 
                1614, or
                    ``(C) a sibling of such individual (who has an 
                equity interest in such home and who was residing in 
                such individual's home for a period of at least one 
                year immediately before the date of the individual's 
                admission to the medical institution),
        is lawfully residing in such home.
            ``(3) Dissolution upon return home.--Any lien imposed with 
        respect to an individual pursuant to paragraph (1)(B) shall 
        dissolve upon that individual's discharge from the medical 
        institution and return home.

``SEC. 1507. STATE FLEXIBILITY.

    ``(a) State Flexibility in Benefits, Provider Payments, 
Geographical Coverage Area, and Selection of Providers.--The State 
under its State plan may--
            ``(1) specify those items and services for which medical 
        assistance is provided (consistent with guarantees under 
        subsections (a) and (b) of section 1501), the providers which 
        may provide such items and services, and the amount and 
        frequency of providing such items and services;
            ``(2) specify the extent to which the same medical 
        assistance will be provided in all geographical areas or 
        political subdivisions of the State, so long as medical 
        assistance is made available in all such areas or subdivisions;
            ``(3) specify the extent to which the medical assistance 
        made available to any individual eligible for medical 
        assistance is comparable in amount, duration, or scope to the 
        medical assistance made available to any other such individual; 
        and
            ``(4) specify the extent to which an individual eligible 
        for medical assistance with respect to an item or service may 
        choose to obtain such assistance from any institution, agency, 
        or person qualified to provide the item or service.
    ``(b) State Flexibility With Respect to Managed Care.--Nothing in 
this title shall be construed--
            ``(1) to limit a State's ability to contract with, on a 
        capitated basis or otherwise, health care plans or individual 
        health care providers for the provision or arrangement of 
        medical assistance,
            ``(2) to limit a State's ability to contract with health 
        care plans or other entities for case management services or 
        for coordination of medical assistance, or
            ``(3) to restrict a State from establishing capitation 
        rates on the basis of competition among health care plans or 
        negotiations between the State and one or more health care 
        plans.

``SEC. 1508. PRIVATE RIGHTS OF ACTION.

    ``(a) Limitation on Federal Causes of Action.--Except as provided 
in this section, no person or entity may bring an action against a 
State in Federal court based on its failure to comply with any 
requirement of this title.
    ``(b) State Causes of Action.--
            ``(1) Administrative and judicial procedures.--A State plan 
        shall provide for--
                    ``(A) an administrative procedure whereby an 
                individual alleging a denial of benefits under the 
                State plan may receive a hearing regarding such denial, 
                and
                    ``(B) judicial review, through a private right of 
                action in a State court by an individual or class of 
                individuals, regarding such a denial, but a State may 
                require exhaustion of administrative remedies before 
                such an action may be taken.
        The administrative procedure under subparagraph (A) shall 
        include impartial decision makers, a fair process, and timely 
        decisions.
            ``(2) Writ of certiorari.--An individual or class may file 
        a petition for certiorari before the Supreme Court of the 
        United States in a case of a denial of benefits under the State 
        plan to review a determination of the highest court of a State 
        regarding such denial.
            (3) Construction.--Nothing in this subsection shall be 
        construed as requiring a State to provide a private right of 
        action in State court by a provider, health plan, or a class of 
        providers or health plans.
    ``(c) Secretarial Relief.--
            ``(1) In general.--The Secretary may bring an action in 
        Federal court against a State and on behalf of an individual or 
        class of individuals in order to assure that a State provides 
        benefits to individuals and classes of individuals as 
        guaranteed under subsection (a) or (b) of section 1501 under 
        its State plan.
            ``(2) No private right.--No action may be brought in any 
        court against the Secretary based on the Secretary's bringing, 
        or failure to bring, an action under paragraph (1).
            ``(3) Construction.--Nothing in this title shall be 
        construed as authorizing the Secretary to bring an action on 
        behalf of a provider, health plan, or a class of providers or 
        health plans.

                      ``Part B--Payments to States

``SEC. 1511. ALLOTMENT OF FUNDS AMONG STATES.

    ``(a) Allotments.--
            ``(1) Computation.--The Secretary shall provide for the 
        computation of State obligation and outlay allotments in 
        accordance with this section for each fiscal year beginning 
        with fiscal year 1997. Nothing in this part shall be construed 
        as authorizing payment under this part to any State for fiscal 
        year 1996.
            ``(2) Limitation on obligations.--
                    ``(A) In general.--Subject to the succeeding 
                provisions of this paragraph, the Secretary shall not 
                enter into obligations with any State under this title 
                for a fiscal year in excess of the sum of the following 
                allotments for the State for the fiscal year:
                            ``(i) Base obligation allotment.--The 
                        amount of the base obligation allotment for 
                        that State for the fiscal year under paragraph 
                        (4).
                            ``(ii) Supplemental allotment for certain 
                        aliens.--The amount of any supplemental 
                        allotment for that State for the fiscal year 
                        under subsection (f).
                            ``(iii) Supplemental per beneficiary 
                        umbrella allotment.--The amount of any 
                        supplemental per beneficiary umbrella allotment 
                        for that State for the fiscal year under 
                        subsection (g).
        The sum of the base obligation allotments for all States in any 
        fiscal year (excluding amounts carried over under subparagraph 
        (B) and excluding changes in allotments effected under 
        paragraph (4)(D)) shall not exceed the aggregate limit on new 
base obligation authority specified in paragraph (3) for that fiscal 
year.
                    ``(B) Adjustments.--
                            ``(i) Carryover of base allotment 
                        permitted.--Subject to clauses (ii), if the 
                        amount of obligations entered into under this 
                        part with a State for quarters in a fiscal year 
                        is less than the amount of the obligation 
                        allotment under this section to the State for 
                        the fiscal year, the amount of the difference 
                        (less any amount computed under clause (iii)) 
                        shall be added to the amount of the State 
                        obligation allotment otherwise provided under 
                        this section for the succeeding fiscal year.
                            ``(ii) No carryover permitted for states 
                        receiving supplemental umbrella allotments.--
                        Clause (i) shall not apply, insofar as it 
                        permits a carryover for a State from a 
                        particular year to the next year, if in the 
                        particular year the State receives a 
                        supplemental umbrella allotment under 
                        subsection (g).
                            ``(iii) No carryover of alien supplemental 
                        allotment.--The amount of any carryover under 
                        clause (i) from a fiscal year shall be reduced 
                        by the amount (if any) by which the amount of 
                        the outlays for expenditures described in 
                        subsection (f) for the fiscal year is less than 
                        the amount of any supplemental allotment 
                        provided under the respective subsection for 
                        the State and fiscal year involved.
                    ``(C) Reduction for new obligations under title xix 
                in fiscal year 1997.--The amount of the base obligation 
                allotment otherwise provided under this section for 
                fiscal year 1997 for a State shall be reduced by the 
                amount of the obligations entered into with respect to 
                the State under section 1903(a) during such fiscal 
                year.
                    ``(D) No effect on prior year obligations.--
                Subparagraph (A) shall not apply to or affect 
                obligations for a fiscal year prior to fiscal year 
                1997.
                    ``(E) Obligation.--For purposes of this section, 
                the Secretary's establishment of an estimate under 
                section 1512(b) of the amount a State is entitled to 
                receive for a quarter (taking into account any 
                adjustments described in such subsection) beginning 
                during or after fiscal year 1997 shall be treated as 
                the obligation of such amount for the State as of the 
                first day of the quarter.
                    ``(F) Relation to guarantees.--The Federal 
                Government's obligations for payments under this title 
                are limited as provided under subparagraph (A) and are 
                only subject to adjustment based on any guarantee 
                provided under section 1501 as provided under 
                subsection (g).
            ``(3) Aggregate limit on new base obligation authority.--
                    ``(A) In general.--For purposes of this subsection, 
                subject to subparagraph (C), the `aggregate limit on 
                new base obligation authority', for a fiscal year, is 
                the base pool amount under subsection (b) for the 
                fiscal year, divided by the payout adjustment factor 
                (described in subparagraph (B)) for the fiscal year.
                    ``(B) Payout adjustment factor.--For purposes of 
                this subsection, the `payout adjustment factor'--
                            ``(i) for fiscal year 1997 is 0.950,
                            ``(ii) for fiscal year 1998 is 0.986, and
                            ``(iii) for a subsequent fiscal year is 
                        0.998.
                    ``(C) Transitional adjustment for pre-fiscal year 
                1997-obligation outlays.--In order to account for pre-
                fiscal year 1997-obligation outlays described in 
                paragraph (4)(C)(iv), in determining the aggregate 
                limit on new obligation authority under subparagraph 
(A) for fiscal year 1997, the pool amount for such fiscal year is equal 
to--
                            ``(i) the pool amount for such year, 
                        reduced by
                            ``(ii) $12,000,000,000.
            ``(4) Base obligation allotments.--
                    ``(A) General rule for 50 states and the district 
                of columbia.--Except as provided in this paragraph, the 
                `base obligation allotment' for any of the 50 States or 
                the District of Columbia for a fiscal year (beginning 
                with fiscal year 1997) is an amount that bears the same 
                ratio to the base outlay allotment under subsection 
                (c)(2) for such State or District (not taking into 
                account any adjustment due to an election under 
                subsection (c)(4)) for the fiscal year as the ratio 
                of--
                            ``(i) the aggregate limit on new base 
                        obligation authority (less the total of the 
                        obligation allotments under subparagraph (B)) 
                        for the fiscal year, to
                            ``(ii) the base pool amount (less the sum 
                        of the base outlay allotments for the 
                        territories) for such fiscal year.
                    ``(B) Territories.--The base obligation allotment 
                for each of the Commonwealths and territories for a 
                fiscal year is the base outlay allotment for such 
                Commonwealth or Territory (as determined under 
                subsection (c)(5)) for the fiscal year divided by the 
                payout adjustment factor for the fiscal year (as 
                defined in paragraph (3)(B)).
                    ``(C) Transitional rule for fiscal year 1997.--
                            ``(i) In general.--The obligation amount 
                        for fiscal year 1997 for any State (including 
                        the District of Columbia, a Commonwealth, or 
                        Territory) is determined according to the 
                        formula: A=(B-C)/D, where--
                                    ``(I) `A' is the base obligation 
                                amount for such State,
                                    ``(II) `B' is the base outlay 
                                allotment of such State for fiscal year 
                                1997, as determined under subsection 
                                (c),
                                    ``(III) `C' is the amount of the 
                                pre-enactment-obligation outlays (as 
                                established for such State under clause 
                                (ii)), and
                                    ``(IV) `D' is the payout adjustment 
                                factor for such fiscal year (as defined 
                                in paragraph (3)(B)).
                            ``(ii) Pre-fiscal year 1997-obligation 
                        outlay amounts.--Not later than November 1, 
                        1996, the Secretary shall estimate (based on 
                        the best data available) and publish in the 
                        Federal Register the amount of the pre-fiscal 
                        year 1997-obligation outlays (as defined in 
                        clause (iv)) for each State (including the 
                        District of Columbia, Commonwealths, and 
                        Territories). The total of such amounts shall 
                        equal the dollar amount specified in paragraph 
                        (3)(C)(ii).
                            ``(iii) Agreement.--The submission of a 
                        State plan by a State under this title is 
                        deemed to constitute the State's acceptance of 
                        the obligation allotment limitations under this 
                        subsection, including the formula for computing 
                        the amount of the base obligation allotment and 
                        any supplemental obligation allotments.
                            ``(iv) Pre-fiscal year 1997-obligation 
                        outlays defined.--In this subsection, the term 
                        `pre-fiscal year 1997-obligation outlays' 
                        means, for a State, the outlays of the Federal 
                        Government that result from obligations that 
                        have been incurred under title XIX with respect 
                        to the State before October 1, 1996, but for 
                        which payments to States have not been made as 
                        of such date.
                    ``(D) Adjustment to reflect adoption of alternative 
                growth formula.--Any State that has elected an 
                alternative growth formula under subsection (c)(4) 
which increases or decreases the dollar amount of an outlay allotment 
for a fiscal year is deemed to have increased or decreased, 
respectively, its obligation amount for such fiscal year by the amount 
of such increase or decrease.
                    ``(E) Transitional correction for fiscal year 
                1997.--
                            ``(i) In general.--The base obligation 
                        amount for fiscal year 1998 for any State 
                        described in clause (ii) shall be increased by 
                        the amount by which the amount described in 
                        clause (ii)(I) exceeds the amount described in 
                        clause (ii)(II), divided by the payout 
                        adjustment factor specified in paragraph (3)(B) 
                        for fiscal year 1997. The increase under this 
                        clause shall be paid to a State in the first 
                        quarter of fiscal year 1998.
                            ``(ii) States described.--A State described 
                        in this clause is a State for which--
                                    ``(I) the amount of the pre-fiscal 
                                year 1997-obligation outlays (as 
                                established for such State under 
                                subparagraph (C)(ii)), exceeded
                                    ``(II) the outlays of the Federal 
                                Government during fiscal year 1997 that 
                                are attributable to obligations that 
                                were incurred under title XIX with 
                                respect to the State before October 1, 
                                1996, but for which payments to States 
                                had not been made as of such date.
            ``(5) Sequence of obligations.--For purposes of carrying 
        out this title, payments under section 1512 to a State eligible 
        for a supplemental outlay allotment that are attributable to--
                    ``(A) expenditures for medical assistance described 
                in the second sentence of subsection (f)(1) or the 
                second sentence of subsection (h)(1) shall first be 
                counted toward the supplemental outlay allotment 
                provided under subsection (f) or (h), respectively, 
                rather than toward the base outlay allotment otherwise 
                provided under this section; or
                    ``(B) subsection (g) (relating to the umbrella 
                fund) shall first be counted toward the allotment 
                provided other than under such subsection, and then to 
                such subsection.
    ``(b) Base Pool of Available Funds.--
            ``(1) In general.--For purposes of this section, the `base 
        pool amount' under this subsection for--
                    ``(A) fiscal year 1996 is $96,601,037,894,
                    ``(B) fiscal year 1997 is $103,447,755,053,
                    ``(C) fiscal year 1998 is $108,430,173,129,
                    ``(D) fiscal year 1999 is $113,652,562,483,
                    ``(E) fiscal year 2000 is $119,126,480,999,
                    ``(F) fiscal year 2001 is $124,864,043,230,
                    ``(G) fiscal year 2002 is $130,877,947,213, and
                    ``(H) each subsequent fiscal year is the pool 
                amount under this paragraph for the previous fiscal 
                year increased by the lesser of 4.82 percent or the 
                annual percentage increase in the gross domestic 
                product for the 12-month period ending in June before 
                the beginning of that subsequent fiscal year.
            ``(2) National growth percentage.--For purposes of this 
        section for a fiscal year (beginning with fiscal year 1997), 
        the `national growth percentage' is the percentage by which--
                    ``(A) the base pool amount under paragraph (1) for 
                the fiscal year, exceeds
                    ``(B) such base pool amount for the previous fiscal 
                year.
    ``(c) State Base Outlay Allotments.--
            ``(1) Fiscal year 1996.--
                    ``(A) In general.--For each of the 50 States and 
                the District of Columbia, the amount of the State base 
                outlay allotment under this subsection for fiscal year 
                1996 is, subject to paragraph (4), determined in 
                accordance with the following table:

``State or District:                Outlay allotment (in dollars):
    Alabama........................
                                        1,517,652,207
    Alaska.........................
                                        204,933,213
    Arizona........................
                                        1,385,781,297
    Arkansas.......................
                                        1,011,457,933
    California.....................
                                        8,946,838,461
    Colorado.......................
                                        757,492,679
    Connecticut....................
                                        1,463,011,635
    Delaware.......................
                                        212,327,763
    District of Columbia...........
                                        501,412,091
    Florida........................
                                        3,715,624,180
    Georgia........................
                                        2,426,320,602
    Hawaii.........................
                                        323,124,375
    Idaho..........................
                                        278,329,686
    Illinois.......................
                                        3,467,274,342
    Indiana........................
                                        1,952,467,267
    Iowa...........................
                                        835,235,895
    Kansas.........................
                                        713,700,869
    Kentucky.......................
                                        1,577,828,832
    Louisiana......................
                                        2,622,000,000
    Maine..........................
                                        694,220,790
    Maryland.......................
                                        1,369,699,847
    Massachusetts..................
                                        2,870,346,862
    Michigan.......................
                                        3,465,182,886
    Minnesota......................
                                        1,793,776,356
    Mississippi....................
                                        1,261,781,330
    Missouri.......................
                                        1,849,248,945
    Montana........................
                                        312,212,472
    Nebraska.......................
                                        463,900,417
    Nevada.........................
                                        257,896,453
    New Hampshire..................
                                        560,000,000
    New Jersey.....................
                                        2,854,621,241
    New Mexico.....................
                                        634,756,945
    New York.......................
                                        12,901,793,038
    North Carolina.................
                                        2,587,883,809
    North Dakota...................
                                        241,168,563
    Ohio...........................
                                        4,034,049,690
    Oklahoma.......................
                                        911,198,775
    Oregon.........................
                                        1,088,670,440
    Pennsylvania...................
                                        4,454,423,400
    Rhode Island...................
                                        545,686,262
    South Carolina.................
                                        1,621,021,815
    South Dakota...................
                                        262,804,959
    Tennessee......................
                                        2,519,934,251
    Texas..........................
                                        6,351,909,343
    Utah...........................
                                        484,274,254
    Vermont........................
                                        248,158,729
    Virginia.......................
                                        1,144,962,509
    Washington.....................
                                        1,763,460,996
    West Virginia..................
                                        1,156,813,157
    Wisconsin......................
                                        1,709,500,642
    Wyoming........................
                                        132,915,390.
            ``(2) For subsequent fiscal years.--
                    ``(A) In general.--Subject to the succeeding 
                provisions of this subsection, the amount of the State 
                base outlay allotment under this subsection for one of 
                the 50 States and the District of Columbia for a fiscal 
                year (beginning with fiscal year 1997) is equal to the 
                product of--
                            ``(i) the needs-based amount determined 
                        under subparagraph (B) for such State or 
                        District for the fiscal year, and
                            ``(ii) the adjustment factor described in 
                        subparagraph (C) for the fiscal year.
                    ``(B) Needs-based amount.--The needs-based amount 
                under this subparagraph for a State or the District of 
                Columbia for a fiscal year is equal to the product of--
                            ``(i) the State's or District's aggregate 
                        expenditure need for the fiscal year (as 
                        determined under subsection (d)), and
                            ``(ii) the State's or District's old 
                        Federal medical assistance percentage (as 
                        defined in section 1512(d)) for the fiscal year 
                        (or, in the case of fiscal year 1997, the 
                        Federal medical assistance percentage 
                        determined under section 1905(b) for fiscal 
                        year 1996).
                    ``(C) Adjustment factor.--The adjustment factor 
                under this subparagraph for a fiscal year is such 
                proportion so that, when it is applied under 
                subparagraph (A)(ii) for the fiscal year (taking into 
                account the floors and ceilings under paragraph (3)), 
                the total of the base outlay allotments under this 
                subsection for all the 50 States and the District of 
                Columbia for the fiscal year (not taking into account 
                any increase in a base outlay allotment for a fiscal 
                year attributable to the election of an alternative 
                growth formula under paragraph (4)) is equal to the 
                amount by which (i) the base pool amount for the fiscal 
                year (as determined under subsection (b)), exceeds (ii) 
                the sum of the base outlay allotments provided under 
paragraph (5) for the Commonwealths and Territories for the fiscal 
year.
            ``(3) Floors and ceilings.--
                    ``(A) Floors.--Subject to the ceiling established 
                under subparagraph (B), in no case shall the amount of 
                the State base outlay allotment under paragraph (2) for 
                a fiscal year be less than the greatest of the 
                following:
                            ``(i) In general.--Beginning with fiscal 
                        year 1998, 0.24 percent of the pool amount for 
                        the fiscal year.
                            ``(ii) Floor based on previous year's 
                        outlay allotment.--Subject to clause (iii)--
                                    ``(I) for fiscal year 1997, 103.5 
                                percent of the amount of the State base 
                                outlay allotment under this subsection 
                                for fiscal year 1996,
                                    ``(II) for fiscal year 1998, 103 
                                percent of the amount of the State base 
                                outlay allotment under this subsection 
                                for fiscal year 1997,
                                    ``(III) for fiscal year 1999, 102.5 
                                percent of the amount of the State base 
                                outlay allotment under this subsection 
                                for fiscal year 1998,
                                    ``(IV) for fiscal year 2000, 102.25 
                                percent of the amount of the State base 
                                outlay allotment under this subsection 
                                for fiscal year 1999, and
                                    ``(V) for each of fiscal years 2001 
                                and 2002, 102 percent of the amount of 
                                the State base outlay allotment under 
                                this subsection for the previous fiscal 
                                year.
                            ``(iii) Floor based on outlay allotment 
                        growth rate in first year.--Beginning with 
                        fiscal year 1998, in the case of a State for 
                        which the outlay allotment under this 
                        subsection for fiscal year 1997 exceeded its 
                        outlay allotment under this subsection for the 
                        previous fiscal year by more than 95 percent of 
                        the national growth percentage for fiscal year 
                        1997, 90 percent of the national growth 
                        percentage for the fiscal year involved.
                    ``(B) Ceilings.--
                            ``(i) In general.--Subject to clause (ii), 
                        in no case shall the amount of the State base 
                        outlay allotment under paragraph (2) for a 
                        fiscal year be greater than the product of--
                                    ``(I) the State base outlay 
                                allotment under this subsection for the 
                                State for the preceding fiscal year, 
                                and
                                    ``(II) the applicable percent 
                                (specified in clause (ii) or (iii)) for 
                                the fiscal year involved.
                            ``(ii) General rule for applicable 
                        percent.--For purposes of clause (i), subject 
                        to clause (iii), the `applicable percent' for 
                        fiscal year 1997 is 126.98 percent and for a 
                        subsequent fiscal year is 133 percent of the 
                        national growth percentage for the fiscal year.
                            ``(iii) Special rule.--For a fiscal year 
                        after fiscal year 1997, in the case of a State 
                        (among the 50 States and the District of 
                        Columbia) that is one of the 10 States with the 
                        lowest Federal spending per resident-in-poverty 
                        rates (as determined under clause (iv)) for the 
                        fiscal year, the `applicable percent' is 150 
                        percent of the national growth percentage for 
                        the fiscal year.
                            ``(iv) Determination of federal spending 
                        per resident-in-poverty rate.--For purposes of 
                        clause (iii), the `Federal spending per 
                        resident-in-poverty rate' for a State for a 
                        fiscal year is equal to--
                                    ``(I) the State's outlay allotment 
                                under this subsection for the previous 
                                fiscal year (determined without regard 
                                to paragraph (4)), divided by
                                    ``(II) the average annual number of 
                                residents of the State in poverty (as 
                                defined in subsection (d)(2)) with 
                                respect to the fiscal year.
                    ``(C) Special rule.--
                            ``(i) In general.--Notwithstanding the 
                        preceding subparagraphs of this paragraph, the 
                        State base outlay allotment for--
                                    ``(I) Louisiana, subject to 
                                subclause (II), for each of the fiscal 
                                years 1997 through 2000, is 
                                $2,622,000,000,
                                    ``(II) Louisiana for fiscal year 
                                1997 only, as otherwise determined, 
                                shall be increased by $37,048,207, and
                                    ``(III) Nevada for each of fiscal 
                                years 1997, 1998, and 1999, as 
                                otherwise determined, shall be 
                                increased by $90,000,000.
                            ``(ii) Exception.--A State described in 
                        subclause (I) of clause (i) may apply to the 
                        Secretary for use of the State base outlay 
                        allotment otherwise determined under this 
                        subsection for any fiscal year, if such State 
                        notifies the Secretary not later than March 1 
                        preceding such fiscal year that such State will 
                        be able to expend sufficient State funds in 
                        such fiscal year to qualify for such allotment.
                            ``(iii) Treatment of increase as 
                        supplemental allotment.--Any increase in an 
                        outlay allotment under clause (i)(II) or 
                        (i)(III) shall not be taken into account for 
                        purposes of determining--
                                    ``(I) the adjustment factor under 
                                paragraph (2) for fiscal year 1997,
                                    ``(II) any State base outlay 
                                allotment for a fiscal year after 
                                fiscal year 1997,
                                    ``(III) the base pool amount for a 
                                fiscal year after fiscal year 1997, or
                                    ``(IV) determination of the 
                                national growth percentage for any 
                                fiscal year.
            ``(4) Election of alternative growth formula.--
                    ``(A) Election.--In order to reduce variations in 
                increases in outlay allotments over time, any of the 50 
                States or the District of Columbia may elect (by notice 
                provided to the Secretary by not later than April 1, 
                1997) to adopt an alternative growth rate formula under 
                this paragraph for the determination of the State's 
                base outlay allotment in fiscal year 1997 and for the 
                increase in the amount of such allotment in subsequent 
                fiscal years.
                    ``(B) Formula.--The alternative growth formula 
                under this paragraph may be any formula under which a 
                portion of the State base outlay allotment for fiscal 
                year 1997 under paragraph (1) is deferred and applied 
                to increase the amount of its base outlay allotment for 
                one or more subsequent fiscal years, so long as the 
                total amount of such increases for all such subsequent 
                fiscal years does not exceed the amount of the base 
                outlay allotment deferred from fiscal year 1997.
            ``(5) Commonwealths and territories.--
                    ``(A) In general.--The base outlay allotment for 
                each of the Commonwealths and Territories for a fiscal 
                year is the maximum amount that could have been 
                certified under section 1108(c) (as in effect on the 
                day before the date of the enactment of this title) 
                with respect to the Commonwealth or Territory for the 
                fiscal year with respect to title XIX, if the national 
                growth percentage (as determined under subsection 
                (b)(2)) for the fiscal year had been substituted 
                (beginning with fiscal year 1997) for the percentage 
                increase referred to in section 1108(c)(1)(B) (as so in 
                effect).
                    ``(B) Disregard of rounding requirements.--For 
                purposes of subparagraph (A), the rounding requirements 
under section 1108(c) shall not apply.
                    ``(C) Limitation on total amount for fiscal year 
                1996.--Notwithstanding the provisions of subparagraph 
                (A), the total amount of the base outlay allotments for 
                the Commonwealths and Territories for fiscal year 1996 
                may not exceed $139,950,000.
    ``(d) State Aggregate Expenditure Need Determined.--
            ``(1) In general.--For purposes of subsection (c), the 
        `State aggregate expenditure need' for a State or the District 
        of Columbia for a fiscal year is equal to the product of the 
        following 4 factors:
                    ``(A) Program need.--The program need for the State 
                for the fiscal year, as determined under paragraph (2).
                    ``(B) Health care cost index.--The health care cost 
                index for the State (as determined under paragraph (3)) 
                for the most recent fiscal year for which data are 
                available.
                    ``(C) Projected inflation.--The CPI increase factor 
                for the fiscal year (as defined in subsection 
                (g)(4)(C)).
                    ``(D) National average spending per resident in 
                poverty.--The national average spending per resident in 
                poverty (as determined under paragraph (4)).
            ``(2) Program need.--
                    ``(A) In general.--In this subsection and subject 
                to subparagraph (D), the `program need' of a State for 
                a fiscal year is equal to the sum, for each of the 
                population groups described in subparagraph (B), of the 
                product described in subparagraph (C) for that 
                population group.
                    ``(B) Population groups described.--The population 
                groups described in this subparagraph are as follows:
                            ``(i) Individuals between 60 and 85.--
                        Individuals who are least 60, but less than 85, 
                        years of age.
                            ``(ii) Individuals 85 or older.--
                        Individuals who are 85 years of age or older.
                            ``(iii) Disabled individuals.--Individuals 
                        who are eligible for medical assistance because 
                        such individuals are blind or disabled and are 
                        not described in clause (i) or (ii).
                            ``(iv) Children.--Individuals described in 
                        subsection (g)(2)(B).
                            ``(v) Other individuals.--Individuals not 
                        described in a previous clause of this 
                        subparagraph.
                    ``(C) Product described.--The product described in 
                this subparagraph, with respect to a population group 
                for a fiscal year for a State (or District), is the 
                product of the following 2 factors for that group, 
                year, and State (or District):
                            ``(i) Weighting factor reflecting relative 
                        need for the group.--For all States, the 
                        national average per recipient expenditures 
                        under this title in the 50 States and the 
                        District of Columbia for individuals in such 
                        group, as determined under subparagraph (E), 
                        divided by the national average of such 
                        averages for all such groups (weighted by the 
                        number of recipients in each group).
                            ``(ii) Number of needy in group.--The 
                        product of--
                                    ``(I) for all groups, the average 
                                annual number of residents in poverty 
                                in such State or District (based on 
                                data made generally available by the 
                                Bureau of the Census from the Current 
                                Population Survey) for the most recent 
                                3-calendar-year period (ending before 
                                the fiscal year) for which such data 
                                are available; and
                                    ``(II) the proportion, of all 
                                individuals who received medical 
                                assistance under this title in such 
                                State or District, that were 
                                individuals in such group.
                        In clause (ii)(II), the term `resident in 
                        poverty' means an individual whose family 
                        income does not exceed the poverty threshold 
                        (as such terms are defined by the Office of 
                        Management and Budget and are generally 
                        interpreted and applied by the Bureau of the 
                        Census for the year involved).
                    ``(D) Floors and ceilings on program need.--
                            ``(i) In general.--In no case shall the 
                        value of the program need for a State for a 
                        fiscal year be less than 90 percent, or be more 
                        than 115 percent, of the program need based on 
                        national averages (determined under clause 
                        (ii)) for that State for the fiscal year.
                            ``(ii) Program need based on national 
                        averages.--For purposes of clause (i), the 
                        `program need based on national average' for a 
                        fiscal year is equal to the sum of the product 
                        (for each of the population groups) of the 
                        following 3 factors (for that group, year, and 
                        State or District):
                                    ``(I) Weighting factor for group.--
                                The weighting factor for the group 
                                (described in subparagraph (C)(i)).
                                    ``(II) Total number of needy in 
                                state.--For all groups, the average 
                                annual number of residents in poverty 
                                in such State or District (as defined 
                                in subparagraph (C)(ii)(I)).
                                    ``(III) National proportion of 
                                needy in group.--The proportion, of all 
                                individuals who received medical 
                                assistance under this title in all of 
                                the States and the District in all such 
                                groups, that were individuals in such 
                                group.
                    ``(E) Determination of national averages and 
                proportions.--The national averages per recipient and 
                the proportions referred to in subparagraph (C)(ii) and 
                (C)(iii), respectively, shall be determined by the 
                Secretary using the most recent data available.
                    ``(F) Expenditure defined.--For purposes of this 
                paragraph, the term `expenditure' means medical vendor 
                payments by basis of eligibility as reported by HCFA 
                Form 2082.
            ``(3) Health care cost index.--
                    ``(A) In general.--In this section, the `health 
                care cost index' for a State or the District of 
                Columbia for a fiscal year is the sum of--
                            ``(i) 0.15, and
                            ``(ii) 0.85 multiplied by the ratio of (I) 
                        the annual average wages for hospital employees 
                        in such State or District for the fiscal year 
                        (as determined under subparagraph (B)), to (II) 
                        the annual average wages for hospital employees 
                        in the 50 States and the District of Columbia 
                        for such year (as determined under such 
                        subparagraph).
                    ``(B) Determination of annual average wages of 
                hospital employees.--The Secretary shall provide for 
                the determination of annual average wages for hospital 
                employees in a State or the District of Columbia and, 
                collectively, in the 50 States and the District of 
                Columbia for a fiscal year based on the area wage data 
                applicable to hospitals under section 1886(d)(2)(E) 
                (or, if such data no longer exists, comparable data of 
                hospital wages) for discharges occurring during the 
                fiscal year involved.
            ``(4) National average spending per resident in poverty.--
        For purposes of this subsection, the `national average spending 
        per resident in poverty'--
                    ``(A) for fiscal year 1997 is equal to--
                            ``(i) the sum (for each of the 50 States 
                        and the District of Columbia) of the total of 
                        the Federal and State expenditures under title 
XIX for calendar quarters in fiscal year 1994, increased by the 
percentage by which (I) the base pool amount for fiscal year 1997, 
exceeds (II) $83,213,431,458 (which represents Federal medicaid 
expenditures for such States and District for fiscal year 1994); 
divided by
                            ``(ii) the sum of the number of residents 
                        in poverty (as defined in paragraph 
                        (2)(C)(ii)(I)) for all of the 50 States and the 
                        District of Columbia for fiscal year 1994; and
                    ``(B) for a succeeding fiscal year is equal to the 
                national average spending per resident in poverty under 
                this paragraph for the preceding fiscal year increased 
                by the national growth percentage (as defined in 
                subsection (b)(2)) for the fiscal year involved.
    ``(e) Publication of Obligation and Outlay Allotments.--
            ``(1) Notice of preliminary allotments.--Not later than 
        April 1 before the beginning of each fiscal year (beginning 
        with fiscal year 1997), the Secretary shall initially compute, 
        after consultation with the Comptroller General, and publish in 
        the Federal Register notice of the proposed base obligation 
        allotment, base outlay allotment, and supplemental allotments 
        under subsections (f) and (h) for each State under this section 
        (not taking into account subsection (a)(2)(B)) for the fiscal 
        year. The Secretary shall include in the notice a description 
        of the methodology and data used in deriving such allotments 
        for the year.
            ``(2) Review by gao.--The Comptroller General shall submit 
        to Congress by not later than May 15 of each such fiscal year, 
        a report analyzing such allotments and the extent to which they 
        comply with the precise requirements of this section.
            ``(3) Notice of final allotments.--Not later than July 1 
        before the beginning of each such fiscal year, the Secretary, 
        taking into consideration the analysis contained in the report 
        of the Comptroller General under paragraph (2), shall compute 
        and publish in the Federal Register notice of the final 
        allotments under this section (both taking into account and not 
        taking into account subsection (a)(2)(B)) for the fiscal year. 
        The Secretary shall include in the notice a description of any 
        changes in such allotments from the initial allotments 
        published under paragraph (1) for the fiscal year and the 
        reasons for such changes. Once published under this paragraph, 
        the Secretary is not authorized to change such allotments.
            ``(4) GAO report on final allotments.--The Comptroller 
        General shall submit to Congress by not later than August 1 of 
        each such fiscal year, a report analyzing the final allotments 
        under paragraph (3) and the extent to which they comply with 
        the precise requirements of this section.
            ``(5) Transitional rule for fiscal year 1997.--With respect 
        to fiscal year 1997, the deadlines under the previous 
        provisions of this subsection shall be extended by a number of 
        days equal to the number of days between May 1, 1996, and the 
        date of the enactment of this title.
    ``(f) Supplemental Allotment for Certain Health Care Services to 
Certain Aliens.--
            ``(1) In general.--For purposes of this section for each of 
        fiscal years 1998 through 2002 in the case of a subsection (f) 
        supplemental allotment eligible State, the amount of the 
        supplemental allotment under this subsection is the amount 
        provided under paragraph (2) for the State for that year. Such 
        amount may only be used for the purpose of providing medical 
        assistance for care and services for aliens described in 
        paragraph (1) of section 1513(f) and for which the exception 
        described in paragraph (2) of such section applies. Section 
        1512(f)(4) shall apply to such assistance in the same manner as 
        it applies to medical assistance described in such section.
            ``(2) Supplemental amount.--
                    ``(A) In general.--For purposes of paragraph (1), 
                the supplemental amount for a subsection (f) 
                supplemental allotment eligible State for a fiscal year 
                is equal to the subsection (f) supplemental allotment 
                ratio (as defined in subparagraph (C)) multiplied by 
                the subsection (f) supplemental pool amount (specified 
                in subparagraph (D)) for the fiscal year.
                    ``(B) Subsection (f) supplemental allotment 
                eligible state.--In this subsection, the term 
                `subsection (f) supplemental allotment eligible State' 
                means one of the 15 States with the highest ratio of 
                undocumented alien residents to the total population 
                for such State.
                    ``(C) Subsection (f) supplemental allotment 
                ratio.--In this paragraph, the `subsection (f) 
                supplemental allotment ratio' for a State is the ratio 
                of--
                            ``(i) the number of undocumented aliens 
                        residing in the State, to
                            ``(ii) the sum of such numbers for all 
                        subsection (f) supplemental allotment eligible 
                        States.
                    ``(D) Subsection (f) supplemental pool amount.--In 
                this paragraph, the `subsection (f) supplemental pool 
                amount'--
                            ``(i) for fiscal year 1998 is $389,800,000,
                            ``(ii) for fiscal year 1999 is 
                        $489,800,000,
                            ``(iii) for fiscal year 2000 is 
                        $589,800,000,
                            ``(iv) for fiscal year 2001 is 
                        $689,800,000, and
                            ``(v) for fiscal year 2002 is $789,800,000.
                    ``(E) Determination of number.--
                            ``(i) In general.--The number of 
                        undocumented aliens residing in a State under 
                        this paragraph--
                                    ``(I) for fiscal year 1998 shall be 
                                determined based on estimates of the 
                                resident illegal alien population 
                                residing in each State prepared by the 
                                Statistics Division of the Immigration 
                                and Naturalization Service as of 
                                October 1992, and
                                    ``(II) for a subsequent fiscal year 
                                shall be determined based on the most 
                                recent updated estimate made under 
                                clause (ii).
                            ``(ii) Updating estimate.--For each fiscal 
                        year beginning with fiscal year 1999, the 
                        Secretary, in consultation with the Commission 
                        of the Immigration and Naturalization Service, 
                        States, and outside experts, shall estimate the 
                        number of undocumented aliens residing in each 
                        of the 50 States and the District of Columbia.
    ``(g) Supplemental Per Beneficiary Umbrella Allotment for States 
with Excess Growth in Certain Population Groups.--
            ``(1) In general.--Subject to paragraphs (5) through (7), 
        for purposes of this section the amount of the supplemental 
        allotment under this subsection for a State for a fiscal year 
        (beginning with fiscal year 1997) is the sum, for each 
        supplemental allotment population group described in paragraph 
        (2), of the product of the following:
                    ``(A) Excess number of individuals.--The excess 
                number of individuals (if any, determined under 
                paragraph (3)) for State and the fiscal year who are in 
                the population group.
                    ``(B) Applicable per beneficiary amount.--The 
                applicable per beneficiary amount (determined under 
                paragraph (4)) for the State and fiscal year for the 
                population group.
                    ``(C) FMAP.--The old Federal medical assistance 
                percentage (as defined in section 1512(d)) for the 
                State and fiscal year.
            ``(2) Supplemental allotment population group.--In this 
        subsection, each of the following shall be considered to be a 
        separate `supplemental allotment population group':
                    ``(A) Poor pregnant women.--Individuals described 
                in section 1501(a)(1)(A).
                    ``(B) Poor children.--Individuals (not described in 
                subparagraph (C))--
                            ``(i) described in subparagraph (B) or (C) 
                        of section 1501(a)(1), or
                            ``(ii) described in subparagraph (F) or (G) 
                        of section 1501(a)(1) who are under 21 years of 
                        age and who are not pregnant women.
                    ``(C) Poor disabled individuals.--Only in the case 
                of a State that has elected the option (of guaranteeing 
                coverage of disabled individuals) described in section 
                1501(a)(1)(D)(ii) for the fiscal year (and, in the case 
                of a fiscal year after fiscal year 1997, for the 
                previous fiscal year), individuals--
                            ``(i) who are described in such section; or
                            ``(ii) who are described in section 1502(a) 
                        under paragraph (1) of that section.
                    ``(D) Poor elderly individuals.--Individuals who 
                are--
                            ``(i) described in section 1501(a)(1)(E); 
                        or
                            ``(ii) described in section 1502(a) under 
                        paragraph (2) of that section.
                    ``(E) Qualified medicare beneficiaries.--
                Individuals described in section 1501(b)(1)(A) who are 
                not described in subparagraph (D).
                    ``(F) Qualified disabled and working individuals.--
                Individuals described in section 1501(b)(1)(B) who are 
                not described in subparagraph (D).
                    ``(G) Certain other medicare beneficiaries.--
                Individuals described in section 1501(b)(1)(C) who are 
                not described in subparagraph (D).
                    ``(H) Other poor adults.--Individuals described in 
                section 1501(a)(1)(G) who are not within a population 
                group described in a previous subparagraph.
            ``(3) Excess number of individuals.--
                    ``(A) In general.--In this subsection, the `excess 
                number of individuals', for a State for a fiscal year 
                with respect to a supplemental allotment population 
                group, is equal to the amount (if any) by which--
                            ``(i) the number of full-year equivalent 
                        individuals in the population group for the 
                        State and fiscal year, exceeds
                            ``(ii) the anticipated number of such 
                        individuals (as determined under subparagraph 
                        (B)) for the State and fiscal year in such 
                        group.
                    ``(B) Anticipated number.--
                            ``(i) In general.--In subparagraph (A)(ii), 
                        the `anticipated number' of individuals for a 
                        State in a supplemental allotment population 
                        group for--
                                    ``(I) fiscal year 1997 is equal to 
                                the number of full-year equivalent 
                                individuals in such group enrolled in 
                                the State medicaid plan under title XIX 
                                in fiscal year 1996 increased by the 
                                percentage increase factor (described 
                                in clause (ii)) for fiscal year 1997; 
                                or
                                    ``(II) a subsequent fiscal year is 
                                equal to the number of full-year 
                                equivalent individuals in the 
                                population group for the State for the 
                                previous fiscal year increased by the 
                                percentage increase factor (described 
                                in clause (ii)) for that subsequent 
                                fiscal year.
                            ``(ii) Percentage increase factor.--For 
                        purposes of this subparagraph, the `percentage 
                        increase factor' for a fiscal year is equal to 
                        zero or, if greater, the number of percentage 
                        points by which (I) the State percentage growth 
                        factor (as defined in subparagraph (C)) for the 
                        fiscal year, exceeds (II) the percentage 
                        increase in the consumer price index for all 
                        urban consumers (U.S. city average) during the 
                        12-month period beginning with July before the 
                        beginning of the fiscal year.
                    ``(C) State percentage growth factor.--In this 
                paragraph, the term `State percentage growth factor' 
                means, for a State for a fiscal year, the percentage by 
                which (i) the State outlay allotment for the State for 
                the fiscal year (determined under this section without 
                regard to this subsection or subsection (f) or (h)), 
                exceeds (ii) such outlay allotment for such State for 
                the preceding fiscal year (as so determined).
                    ``(D) Individuals count only once.--An individual 
                may at any time not be counted in more than one 
                supplemental allotment population group.
            ``(4) Applicable per beneficiary amount.--
                    ``(A) In general.--In this subsection, subject to 
                subparagraph (D), the `applicable per beneficiary 
                amount', for a State for a fiscal year for a 
                supplemental allotment population group, is equal to 
                the base per beneficiary amount (determined under 
                subparagraph (B)) for the State for the group, 
                increased by the Secretary's estimate of the increase 
                in the per beneficiary expenditures under this title 
                (and title XIX) for States between fiscal year 1995 and 
                fiscal year 1996, and further increased (for each 
                subsequent fiscal year up to the fiscal year involved 
                and in a compounded manner) by the CPI increase factor 
                (as defined in subparagraph (C)) for each such fiscal 
                year.
                    ``(B) Base per beneficiary amount.--
                            ``(i) In general.--The Secretary shall 
                        determine for each State a base per beneficiary 
                        amount for each supplemental allotment 
                        population group equal to--
                                    ``(I) the sum of the total 
                                expenditure amounts described in 
                                clauses (ii) and (iii), divided by
                                    ``(II) the full-year equivalent 
                                number of such individuals in such 
                                group enrolled under the State plan 
                                under title XIX for fiscal year 1995.
                            ``(ii) Medical assistance expenditures.--
                        The total expenditure amount described in this 
                        clause, with respect to a supplemental 
                        allotment population group, is the total amount 
                        of expenditures for which Federal financial 
                        participation was provided to the State under 
                        paragraphs (1) and (5) of section 1903(a) for 
                        fiscal year 1995 with respect to medical 
                        assistance furnished with respect to 
                        individuals included in such group. Such amount 
                        shall not include expenditures attributable to 
                        payment adjustments under section 1923.
                            ``(iii) Administrative expenditures.--The 
                        total expenditure amount described in this 
                        clause, with respect to a supplemental 
                        allotment population group, is the product of--
                                    ``(I) the total amount of 
                                administrative expenditures for which 
                                Federal financial participation was 
                                provided to the State under section 
                                1903(a) (other than paragraphs (1) and 
                                (5) of such section) for fiscal year 
                                1995, and
                                    ``(II) the ratio described in 
                                clause (iv) for the population group.
                    ``(iv) Ratio described.--The ratio described in 
                this clause for a group is the ratio of--
                                    ``(I) the total amount of 
                                expenditures described in clause (ii) 
                                for the group, to
                                    ``(II) the total amount of 
                                expenditures described in such clause 
                                for all individuals under the State 
                                plan under title XIX in the base fiscal 
                                year.
                    ``(C) CPI increase factor.--In subparagraph (A), 
                the `CPI increase factor' for a fiscal year is the 
                percentage by which--
                            ``(i) the Secretary's estimate of the 
                        average value of the consumer price index for 
                        all urban consumers (all items, U.S. city 
                        average) for months in the fiscal year, exceeds
                            ``(ii) the average value of such index for 
                        months in the previous fiscal year.
                    ``(D) Special rules for certain medicare 
                beneficiaries.--
                            ``(i) Qualified disabled and working 
                        individuals.--In the case of the supplemental 
                        allotment population group described in 
                        paragraph (2)(F), the `applicable per 
                        beneficiary amount', for all States for a 
                        fiscal year is the sum of the medicare premiums 
                        applied under section 1818A for months in the 
                        fiscal year.
                            ``(ii) Other medicare beneficiaries.--In 
                        the case of the supplemental allotment 
                        population group described in paragraph (2)(G), 
                        the `applicable per beneficiary amount', for 
                        all States for a fiscal year is the sum of the 
                        medicare premiums applied under section 1839 
                        for months in the fiscal year.
            ``(5) Conditions for access to umbrella supplemental 
        allotment.--
                    ``(A) In general.--A State may receive a 
                supplemental umbrella allotment under this subsection 
                for a fiscal year only if the following conditions are 
                met:
                            ``(i) The State provides assurances 
                        satisfactory to the Secretary that it will 
                        obligate during the fiscal year the full amount 
                        of the allotment otherwise provided under this 
                        section for the fiscal year.
                            ``(ii) The State provides assurances 
                        satisfactory to the Secretary that any amount 
                        attributable to a carryover from a previous 
                        fiscal year under subsection (a)(2)(B) shall 
                        also be obligated under the plan by the end of 
                        the fiscal year.
                            ``(iii) The State submits to the Secretary 
                        on a periodic basis such reports on numbers of 
                        individuals within each supplemental allotment 
                        population group as the Secretary may determine 
                        necessary to assure the accuracy of the 
                        supplemental umbrella allotments under this 
                        subsection. The Secretary may not require the 
                        submission of such reports more frequently than 
                        quarterly.
                            ``(iv) The State provides assurances 
                        satisfactory to the Secretary that it has in 
                        effect such data collection procedures as may 
                        be necessary to provide for the reports 
                        described in clause (iii).
                    ``(B) Estimate.--The amount of any supplemental 
                allotment under this subsection shall be estimated in 
                advance of the fiscal year involved, based on data 
                required to be reported under subparagraph (A)(iii). 
                The Secretary is authorized to adjust such data on a 
                preliminary basis if the Secretary determines that the 
                estimates do not reasonably reflect the actual excess 
                number of individuals in the supplemental allotment 
                population groups for the fiscal year involved. Section 
                1512(b)(6) provides for adjustment of payments of the 
                supplemental allotment under this subsection based on a 
                final determination using data on actual numbers of 
                individual in each supplemental allotment population 
                group.
            ``(6) Adjustment in allotment for savings from slower 
        population growth.--
                    ``(A) In general.--The amount of the supplemental 
                umbrella allotment to a State under this subsection for 
                a fiscal year shall be reduced (but not below zero) by 
                the sum, for each supplemental allotment population 
                group described in paragraph (2), of the product of the 
                following:
                            ``(i) Less-than-anticipated number of 
                        individuals.--The less-than-anticipated number 
                        of individuals (if any, determined under 
                        subparagraph (B)) for State and the fiscal year 
                        who are in the population group.
                            ``(ii) Applicable per beneficiary amount.--
                        The applicable per beneficiary 
amount (determined under paragraph (4)) for the State and fiscal year 
for the population group.
                            ``(iii) FMAP.--The old Federal medical 
                        assistance percentage (as defined in section 
                        1512(d)) for the State and fiscal year.
                    ``(B) Less-than-anticipated number of 
                individuals.--In this paragraph, the `less-than-
                anticipated number of individuals', for a State for a 
                fiscal year with respect to a supplemental allotment 
                population group, is equal to the amount (if any) by 
                which--
                            ``(i) the anticipated number of such 
                        individuals (as determined under paragraph 
                        (3)(B)) for the State and fiscal year in such 
                        group, exceeds
                            ``(ii) the number of full-year equivalent 
                        individuals in the population group for the 
                        State and fiscal year.
            ``(7) Special rule for fiscal year 1997.--In applying this 
        subsection to fiscal year 1997--
                    ``(A) in determining the excess number of 
                individuals under paragraph (3)--
                            ``(i) the number of full-year equivalent 
                        individuals shall only be determined based on 
                        the portion of fiscal year 1997 in which the 
                        State plan is in effect under this title, and
                            ``(ii) the anticipated number of such 
                        individuals (referred to in paragraph 
                        (3)(A)(ii)) shall be the anticipated number 
                        otherwise determined multiplied by the 
                        proportion of fiscal year 1997 in which such 
                        State plan will be in effect; and
                    ``(B) if the State plan is effective before April 
                1, 1997, the amount of the supplemental allotment 
                otherwise determined under this subsection shall be 
                multiplied by the ratio of the portion of fiscal year 
                1997 that occurs on or after April 1, 1997, to the 
                total portion of such fiscal year in which the State 
                plan is in effect.

``SEC. 1512. PAYMENTS TO STATES.

    ``(a) Amount of Payment.--From the allotment of a State under 
section 1511 for a fiscal year, subject to the succeeding provisions of 
this title, the Secretary shall pay to each State which has a State 
plan approved under part C, for each quarter in the fiscal year--
            ``(1) an amount equal to the applicable Federal medical 
        assistance percentage (as defined in subsection (c)) of the 
        total amount expended during such quarter as medical assistance 
        under the plan; plus
            ``(2) an amount equal to the applicable Federal medical 
        assistance percentage of the total amount expended during such 
        quarter for medically-related services (as defined in section 
        1571(g)); plus
            ``(3) subject to section 1513(c)--
                    ``(A) an amount equal to 90 percent of the amounts 
                expended during such quarter for the design, 
                development, and installation of information systems 
                and for providing incentives to promote the enforcement 
                of medical support orders, plus
                    ``(B) an amount equal to 75 percent of the amounts 
                expended during such quarter for medical personnel, 
                administrative support of medical personnel, operation 
                and maintenance of information systems, modification of 
                information systems, quality assurance activities, 
                utilization review, medical and peer review, anti-fraud 
                activities, independent evaluations, independent, 
                external quality review programs for capitated health 
                care organizations, coordination of benefits, and 
                meeting reporting requirements under this title, plus
                    ``(C) an amount equal to 50 percent of so much of 
                the remainder of the amounts expended during such 
                quarter as are expended by the State in the 
                administration of the State plan.
    ``(b) Payment Process.--
            ``(1) Quarterly estimates.--Prior to the beginning of each 
        quarter, the Secretary shall estimate the amount to which a 
State will be entitled under subsection (a) for such quarter, such 
estimates to be based on (A) a report filed by the State containing its 
estimate of the total sum to be expended in such quarter in accordance 
with the provisions of such subsections, and stating the amount 
appropriated or made available by the State and its political 
subdivisions for such expenditures in such quarter, and if such amount 
is less than the State's proportionate share of the total sum of such 
estimated expenditures, the source or sources from which the difference 
is expected to be derived, and (B) such other investigation as the 
Secretary may find necessary.
            ``(2) Payment.--
                    ``(A) In general.--The Secretary shall then pay to 
                the State, in such installments as the Secretary may 
                determine and in accordance with section 6503(a) of 
                title 31, United States Code, the amount so estimated, 
                reduced or increased to the extent of any overpayment 
                or underpayment which the Secretary determines was made 
                under this section (or section 1903) to such State for 
                any prior quarter and with respect to which adjustment 
                has not already been made under this subsection (or 
                under section 1903(d)).
                    ``(B) Treatment as overpayments.--Expenditures for 
                which payments were made to the State under subsection 
                (a) shall be treated as an overpayment to the extent 
                that the State or local agency administering such plan 
                has been reimbursed for such expenditures by a third 
                party pursuant to the provisions of its plan in 
                compliance with section 1555.
                    ``(C) Recovery of overpayments.--For purposes of 
                this subsection, when an overpayment is discovered, 
                which was made by a State to a person or other entity, 
                the State shall have a period of 60 days in which to 
                recover or attempt to recover such overpayment before 
                adjustment is made in the Federal payment to such State 
                on account of such overpayment. Except as otherwise 
                provided in subparagraph (D), the adjustment in the 
                Federal payment shall be made at the end of the 60 
                days, whether or not recovery was made.
                    ``(D) No adjustment for uncollectables.--In any 
                case where the State is unable to recover a debt which 
                represents an overpayment (or any portion thereof) made 
                to a person or other entity on account of such debt 
                having been discharged in bankruptcy or otherwise being 
                uncollectable, no adjustment shall be made in the 
                Federal payment to such State on account of such 
                overpayment (or portion thereof).
            ``(3) Federal share of recoveries.--The pro rata share to 
        which the United States is equitably entitled, as determined by 
        the Secretary, of the net amount recovered during any quarter 
        by the State or any political subdivision thereof with respect 
        to medical assistance furnished under the State plan shall be 
        considered an overpayment to be adjusted under this subsection.
            ``(4) Timing of obligation of funds.--Upon the making of 
        any estimate by the Secretary under this subsection, any 
        appropriations available for payments under this section shall 
        be deemed obligated.
            ``(5) Disallowances.--In any case in which the Secretary 
        estimates that there has been an overpayment under this section 
        to a State on the basis of a claim by such State that has been 
        disallowed by the Secretary under section 1116(d) or in the 
        case described in paragraph (6)(C), and such State disputes 
        such disallowance or an adjustment under such paragraph, the 
        amount of the Federal payment in controversy shall, at the 
        option of the State, be retained by such State or recovered by 
        the Secretary pending a final determination with respect to 
        such payment amount. If such final determination is to the 
        effect that any amount was properly disallowed, and the State 
        chose to retain payment of the amount in controversy, the 
        Secretary shall offset, from any subsequent payments made to 
        such State under this title, an amount equal to the proper 
        amount of the disallowance plus interest on such amount 
disallowed for the period beginning on the date such amount was 
disallowed and ending on the date of such final determination at a rate 
(determined by the Secretary) based on the average of the bond 
equivalent of the weekly 90-day treasury bill auction rates during such 
period.
            ``(6) Adjustments in payments reflecting over- and under-
        estimations of supplemental umbrella allotment.--
                    ``(A) In general.--Based on data reported under 
                section 1511(g)(5)(A)(iii) and annual audits provided 
                for under section 1551(a) on the actual excess number 
                of individuals in each population group for a fiscal 
                year, the Secretary shall determine the final amount of 
                the supplemental umbrella allotment for each State for 
                the fiscal year and whether, based on such final 
                amount, the amount of payment made for the fiscal year 
                was greater, or less, than the amount that should have 
                been paid if payments had been made based on such final 
                amount.
                    ``(B) Payment in case of underestimation.--If the 
                Secretary determines under subparagraph (A) there was 
                an underpayment to a State, the Secretary shall 
                increase the amount of the next quarterly payment under 
                this section to the State by the amount of such 
                underpayment.
                    ``(C) Offsetting of payments in case of 
                overestimation.--If the Secretary determines under 
                subparagraph (A) there was an overpayment to a State, 
                the Secretary shall, subject to the procedures provided 
                under paragraph (5), decrease the amount of the payment 
                for the next quarter (or, at the discretion of the 
                Secretary, over a period of not more than 4 calendar 
                quarters) by the amount of such overpayment. In the 
                case in which a State seeks review of such a 
                determination in accordance with the procedures under 
                paragraph (5), the Secretary shall provide for 
                completion of such review process within 1 year after 
                the date the State requests such review.
    ``(c) Applicable Federal Medical Assistance Percentage Defined.--In 
this section, except as provided in subsection (f), the term 
`applicable Federal medical assistance percentage' means, with respect 
to one of the 50 States or the District of Columbia, at the State's or 
District's option--
            ``(1) the old Federal medical assistance percentage (as 
        determined in subsection (d));
            ``(2) the lesser of--
                    ``(A) new Federal medical assistance percentage (as 
                determined under subsection (e)) or
                    ``(B) the old Federal medical assistance percentage 
                plus 10 percentage points; or
            ``(3) 60 percent.
    ``(d) Old Federal Medical Assistance Percentage.--
            ``(1) In general.--Except as provided in paragraph (2) and 
        subsection (f), the term `old Federal medical assistance 
        percentage' for any State is 100 percent less the State 
        percentage; and the State percentage is that percentage which 
        bears the same ratio to 45 percent as the square of the per 
        capita income of such State bears to the square of the per 
        capita income of the continental United States (including 
        Alaska) and Hawaii.
            ``(2) Limitation on range.--In no case shall the old 
        Federal medical assistance percentage be less than 50 percent 
        or more than 83 percent.
            ``(3) Promulgation.--The old Federal medical assistance 
        percentage for any State shall be determined and promulgated in 
        accordance with the provisions of section 1101(a)(8)(B).
    ``(e) New Federal Medical Assistance Percentage Defined.--
            ``(1) In general.--
                    ``(A) Term defined.--Except as provided in 
                paragraph (3) and subsection (f), the term `new Federal 
medical assistance percentage' means, for each of the 50 States and the 
District of Columbia, 100 percent reduced by the product 0.39 and the 
ratio of--
                            ``(i)(I) for each of the 50 States, the 
                        total taxable resources (TTR) ratio of the 
                        State specified in subparagraph (B), or
                            ``(II) for the District of Columbia, the 
                        per capita income ratio specified in 
                        subparagraph (C),
                to--
                            ``(ii) the aggregate expenditure need ratio 
                        of the State or District, as described in 
                        subparagraph (D).
                    ``(B) Total taxable resources (ttr) ratio.--For 
                purposes of subparagraph (A)(i)(I), the total taxable 
                resources (TTR) ratio for each of the 50 States is--
                            ``(i) an amount equal to the most recent 3-
                        year average of the total taxable resources 
                        (TTR) of the State, as determined by the 
                        Secretary of the Treasury, divided by
                            ``(ii) an amount equal to the sum of the 3-
                        year averages determined under clause (i) for 
                        each of the 50 States.
                    ``(C) Per capita income ratio.--For purposes of 
                subparagraph (A)(i)(II), the per capita income ratio of 
                the District of Columbia is--
                            ``(i) an amount equal to the most recent 3-
                        year average of the total personal income of 
                        the District of Columbia, as determined in 
                        accordance with the provisions of section 
                        1101(a)(8)(B), divided by
                            ``(ii) an amount equal to the total 
                        personal income of the continental United 
                        States (including Alaska) and Hawaii, as 
                        determined under section 1101(a)(8)(B).
                    ``(D) Aggregate expenditure need ratio.--For 
                purposes of subparagraph (A), with respect to each of 
                the 50 States and the District of Columbia for a fiscal 
                year, the aggregate expenditure need ratio is--
                            ``(i) the State aggregate expenditure need 
                        (as defined in section 1511(d)) for the State 
                        for the fiscal year, divided by
                            ``(ii) the sum of such State aggregate 
                        expenditure needs for the 50 States and the 
                        District of Columbia for the fiscal year.
            ``(2) Limitation on range.--Except as provided in 
        subsection (f), the new Federal medical assistance percentage 
        shall in no case be less than 60 percent or greater than 83 
        percent.
            ``(3) Promulgation.--The new Federal medical assistance 
        percentage for any State shall be promulgated in a timely 
        manner consistent with the promulgation of the old Federal 
        medical assistance percentage under section 1101(a)(8)(B).
    ``(f) Special Rules.--For purposes of this title--
            ``(1) Commonwealths and territories.--In the case of Puerto 
        Rico, the Virgin Islands, Guam, the Northern Mariana Islands, 
        and American Samoa, the old and new Federal medical assistance 
        percentages are 50 percent.
            ``(2) Alaska.--In the case of Alaska, the old Federal 
        medical assistance percentage is that percentage which bears 
        the same ratio to 45 percent as the square of the adjusted per 
        capita income of such State bears to the square of the per 
        capita income of the continental United States. For purposes of 
        the preceding sentence, the adjusted per capita income for 
        Alaska shall be determined by dividing the State's most recent 
        3-year average per capita by the health care cost index for 
        such State (as determined under section 1511(d)(3)).
            ``(3) Indian health service and related facilities and 
        programs.--
                    ``(A) Fiscal year 1997.--
                            ``(i) In general.--During fiscal year 1997, 
                        the Secretary shall reimburse a State for 
                        amounts expended under the State plan as 
medical assistance for services which are received through an Indian 
Health Service facility whether operated by the Indian Health Service 
or by an Indian tribe or tribal organization (as defined in section 4 
of the Indian Health Care Improvement Act) in the same manner and under 
the same Federal medical assistance percentage as such amounts were 
reimbursed under title XIX (as in effect on June 1, 1996).
                            ``(ii) Eligible providers under a state 
                        plan.--A program described in subclause (II) or 
                        (III) of clause (iii) shall be an eligible 
                        provider under the State plan of the State in 
                        which such program is located and may receive 
                        reimbursement under the State plan for medical 
                        assistance for services provided by such 
                        program.
                            ``(iii) Rule of construction.--Nothing in 
                        clause (i) or (ii) shall be construed as 
                        increasing the obligation or outlay allotment 
                        established for a State under section 1511 for 
                        fiscal year 1997.
                    ``(B) Fiscal year 1998 and thereafter.--Beginning 
                on October 1, 1997, the following shall apply:
                            ``(i) Providers under a state plan.--
                                    ``(I) In general.--Subject to the 
                                succeeding provisions of this 
                                paragraph, a facility or program 
                                described in clause (iii) shall be an 
                                eligible provider under the State plan 
                                of the State in which such facility or 
                                program is located and shall receive 
                                payments under the State plan for 
                                medical assistance for services 
                                provided at such facility or by such 
                                program.
                                    ``(II) Election of provider 
                                reimbursement rate.--A facility or 
                                program described in clause (iii) shall 
                                elect one of the following provider 
                                reimbursement rates to apply to medical 
                                assistance provided by such facility or 
                                through such program under the State 
                                plan:
                                            ``(aa) The provider 
                                        reimbursement rate established 
                                        under the State plan of the 
                                        State in which such facility or 
                                        program is located.
                                            ``(bb) The provider 
                                        reimbursement rate established 
                                        by the Secretary for such 
                                        facilities or programs.
                            ``(ii) Federal Indian Medicaid 
                        Allocation.--
                                    ``(I) Appropriation.--Out of any 
                                money in the Treasury of the United 
                                States not otherwise appropriated, 
                                there are appropriated for fiscal years 
                                1998 through 2002, $2,401,000,000 for 
                                reimbursement of amounts expended as 
                                medical assistance for services 
                                provided by a facility or program 
                                described in clause (iii).
                                    ``(II) Reimbursement to states.--
                                Subject to the limitation for a fiscal 
                                year described in subclause (III), the 
                                Secretary shall reimburse a State with 
                                one or more facilities or programs 
                                described in clause (iii) for payments 
                                made under the State plan for medical 
                                assistance provided by such facilities 
                                or through such programs.
                                    ``(III) Limitation on 
                                reimbursement.--Subject to subclause 
                                (IV), the total amount paid with 
                                respect to the amounts expended as 
                                medical assistance for services 
                                provided by facilities or programs 
                                described in clause (iii) shall not 
                                exceed the following:
                                            ``(aa) For fiscal year 
                                        1998, $393,100,000.
                                            ``(bb) For fiscal year 
                                        1999, $459,200,000.
                                            ``(cc) For fiscal year 
                                        2000, $486,300,000.
                                            ``(dd) For fiscal year 
                                        2001, $515,500,000.
                                            ``(ee) For fiscal year 
                                        2002, $546,900,000.
                                    ``(IV) Carryover permitted.--The 
                                limitation described in subclause (II) 
                                for a fiscal year shall be increased by 
                                the amount, if any, of any funds 
                                remaining from the limitation described 
                                in such subclause for the preceding 
                                fiscal year.
                            ``(iii) Fmap.--The old and new Federal 
                        medical assistance percentages shall be 100 
                        percent with respect to the amounts expended as 
                        medical assistance for services provided by--
                                    ``(I) an Indian Health Service 
                                facility;
                                    ``(II) an Indian health program 
                                operated by an Indian tribe or tribal 
                                organization (as defined in section 4 
                                of the Indian Health Care Improvement 
                                Act) pursuant to a contract, grant, 
                                cooperative agreement, or compact with 
                                the Indian Health Service under the 
                                Indian Self-Determination Act; or
                                    ``(III) an urban Indian health 
                                program operated by an urban Indian 
                                organization pursuant to a grant or 
                                contract with the Indian Health Service 
                                under title V of the Indian Health Care 
                                Improvement Act.
                            ``(iv) No cost-sharing.--Notwithstanding 
                        the provisions of section 1503 or any other 
                        provision of this title, no State plan shall 
                        impose any cost-sharing, as defined in section 
                        1503(g), on any individual who is an Indian for 
                        services provided to such an individual by a 
                        facility or program described in clause (iii).
                            ``(v) Agreements between states and indian 
                        tribes.--A State and an Indian tribe may enter 
                        into an agreement for the provision of medical 
                        services that are not inconsistent with the 
                        provisions of this paragraph.
                    ``(C) Indian and indian tribe defined.--For 
                purposes of this title, the terms `Indian' and `Indian 
                tribe' have the meaning given such terms in section 4 
                of the Indian Self-Determination and Education 
                Assistance Act (25 U.S.C. 450b(d)).
                    ``(D) Study.--The Comptroller General shall study 
                the impact of the amendment to the Social Security Act 
                made by section 2923 of the Medicaid Restructuring Act 
                of 1996 on the provision of health care to Indians and, 
                beginning October 1, 1996, and every third fiscal year 
                thereafter, shall submit a report to the Congress 
                containing the findings and recommendations resulting 
                from such study.
            ``(4) No state matching required for certain 
        expenditures.--In applying subsection (a)(1) with respect to 
        medical assistance provided to unlawful aliens pursuant to the 
        exception specified in section 1513(f)(2), payment shall be 
        made for the amount of such assistance without regard to any 
        need for a State match.
            ``(5) Special transitional rule.--
                    ``(A) In general.--Notwithstanding subsections (a) 
                and (f), in order to receive the full State outlay 
                allotment described in section 1511(c)(3)(C)(i), a 
                State described in subparagraph (C) shall expend State 
                funds in a fiscal year (before fiscal year 2000) under 
                a State plan under this title in an amount not less 
                than the adjusted base year State expenditures, plus 
                the applicable percentage of the difference between 
                such expenditures and the amount necessary to qualify 
                for the full State outlay allotment so described in 
                such fiscal year as determined under this section 
                without regard to this paragraph.
                    ``(B) Reduction in allotment if expenditure not 
                met.--In the event a State described in subparagraph 
                (C) fails to expend State funds in an amount required 
by subparagraph (A) for a fiscal year, the outlay allotment described 
in section 1511(c)(3)(C)(i) for such year for such State shall be 
reduced by an amount which bears the same ratio to such outlay 
allotment as the State funds expended in such fiscal year bears to the 
amount required by subparagraph (A).
                    ``(C) Adjusted base year state expenditures.--For 
                purposes of this paragraph, the term `adjusted base 
                year State expenditures' means, for Louisiana, 
                $355,000,000.
                    ``(D) Applicable percentage.--For purposes of this 
                paragraph, the applicable percentage for a fiscal year 
                is specified in the following table:

                                                             Applicable
``Fiscal year:                                              Percentage:
    1996..........................................                  20 
    1997..........................................                  40 
    1998..........................................                  60 
    1999..........................................                  80.
            ``(6) Treatment of expenditures attributable to umbrella 
        fund.--The `applicable Federal medical assistance percentage' 
        with respect to amounts attributable to supplemental amounts 
        described in section 1511(g), is the old Federal medical 
        assistance percentage.
    ``(g) Use of Local Funds.--
            ``(1) In general.--Subject to paragraph (2), a State may 
        use local funds to meet the non-Federal share of the 
        expenditures under the State plan with respect to which 
        payments may be made under this section.
            ``(2) Limitation.--For any fiscal year local funds may not 
        exceed 40 percent of the total of the non-Federal share of such 
        expenditures for the fiscal year.
    ``(h) Permitting Inter-Governmental Funds Transfers.--
            ``(1) In general.--Public funds, as defined in paragraph 
        (2), may be considered as the State's share in determining 
        State financial participation under this title.
            ``(2) Public funds defined.--For purposes of this 
        subsection, the term `public funds' means funds--
                    ``(A) that are--
                            ``(i) appropriated directly to the State or 
                        to the local agency administering the State 
                        plan under this title, or transferred from 
                        other public agencies (including Indian tribes) 
                        to the State or local agency and under its 
                        administrative control, or
                            ``(ii) certified by the contributing public 
                        agency as representing expenditures eligible 
                        for Federal financial participation under this 
                        title; and
                    ``(B) that--
                            ``(i) are not Federal funds, or
                            ``(ii) are Federal funds authorized by 
                        Federal law to be used to match other Federal 
                        funds.
    ``(i) Application of Provider Tax and Donation Restrictions.--The 
provisions of section 1903(w) (as in effect on June 1, 1996) shall 
apply under this title in the same manner as they applied under title 
XIX (as of such date).

``SEC. 1513. LIMITATION ON USE OF FUNDS; DISALLOWANCE.

    ``(a) In General.--Funds provided to a State under this title shall 
only be used to carry out the purposes of this title.
    ``(b) Disallowances For Excluded Providers.--
            ``(1) In general.--Payment shall not be made to a State 
        under this part for expenditures for items and services 
        furnished--
                    ``(A) by a provider who was excluded from 
                participation under title V, XVIII, or XX or under this 
                title pursuant to section 1128, 1128A, 1156, or 
                1842(j)(2), or
                    ``(B) under the medical direction or on the 
                prescription of a physician who was so excluded, if the 
                provider of the services knew or had reason to know of 
                the exclusion.
            ``(2) Exception for emergency services.--Subparagraph (A) 
        shall not apply to emergency items or services, not including 
        hospital emergency room services.
    ``(c) Limitations on Payments for Medically-Related Services and 
Administrative Expenses.--
            ``(1) In general.--No Federal financial assistance is 
        available for expenditures under the State plan for--
                    ``(A) medically-related services for a quarter to 
                the extent such expenditures exceed 5 percent of the 
                total expenditures under the plan for the quarter, or
                    ``(B) total administrative expenses (other than 
                expenses described in paragraph (2) during the first 8 
                quarters in which the plan is in effect under this 
                title) for quarters in a fiscal year to the extent such 
                expenditures exceed the sum of $20,000,000 plus 10 
                percent of the total expenditures under the plan for 
                the year.
            ``(2) Administrative expenses not subject to limitation.--
        The administrative expenses referred to in this paragraph are 
        expenditures under the State plan for the following activities:
                    ``(A) Quality assurance.
                    ``(B) The development and operation of the 
                certification program for nursing facilities and 
                intermediate care facilities for the mentally retarded 
                under section 1557.
                    ``(C) Utilization review activities, including 
                medical activities and activities of peer review 
                organizations.
                    ``(D) Inspection and oversight of providers and 
                capitated health care organizations.
                    ``(E) Anti-fraud activities.
                    ``(F) Independent evaluations.
                    ``(G) Activities required to meet reporting 
                requirements under this title.
    ``(d) Treatment of Third Party Liability.--No payment shall be made 
to a State under this part for expenditures for medical assistance 
provided for an individual under its State plan to the extent that a 
private insurer (as defined by the Secretary by regulation and 
including a group health plan (as defined in section 607(1) of the 
Employee Retirement Income Security Act of 1974), a service benefit 
plan, and a health maintenance organization) would have been obligated 
to provide such assistance but for a provision of its insurance 
contract which has the effect of limiting or excluding such obligation 
because the individual is eligible for or is provided medical 
assistance under the plan.
    ``(e) Secondary Payer Provisions.--Except as otherwise provided by 
law, no payment shall be made to a State under this part for 
expenditures for medical assistance provided for an individual under 
its State plan to the extent that payment has been made or can 
reasonably be expected to be made promptly (as determined in accordance 
with regulations) under any other federally operated or financed health 
care insurance program, other than an insurance program operated or 
financed by the Indian Health Service, as identified by the Secretary. 
For purposes of this subsection, rules similar to the rules for 
overpayments under section 1512(b) shall apply.
    ``(f) Limitation on Payments For Services to Nonlawful Aliens.--
            ``(1) In general.--Notwithstanding the preceding provisions 
        of this section, except as provided in paragraph (2), no 
        payment may be made to a State under this part for medical 
        assistance furnished to an alien who is not lawfully admitted 
        for permanent residence or otherwise permanently residing in 
        the United States under color of law.
            ``(2) Exception.--Payment may be made under this section 
        for care and services that are furnished to an alien described 
        in paragraph (1) only if--
                    ``(A) such care and services are necessary for the 
                treatment of an emergency medical condition of the 
                alien (or, at the option of the State, for prenatal 
                care),
                    ``(B) such alien otherwise meets the eligibility 
                requirements for medical assistance under the State 
                plan (other than a requirement of the receipt of aid or 
                assistance under title IV, supplemental security 
income benefits under title XVI, or a State supplementary payment), and
                    ``(C) such care and services are not related to an 
                organ transplant procedure.
            ``(3) Emergency medical condition defined.--For purposes of 
        this subsection, the term `emergency medical condition' means a 
        medical condition (including emergency labor and delivery) 
        manifesting itself by acute symptoms of sufficient severity 
        (including severe pain) such that the absence of immediate 
        medical attention could reasonably be expected to result in--
                    ``(A) placing the patient's health in serious 
                jeopardy,
                    ``(B) serious impairment to bodily functions, or
                    ``(C) serious dysfunction of any bodily organ or 
                part.
    ``(g) Limitation on Payment for Certain Outpatient Prescription 
Drugs.--
            ``(1) In general.--No payment may be made to a State under 
        this part for medical assistance for covered outpatient drugs 
        (as defined in section 1575(i)(2)) of a manufacturer provided 
        under the State plan unless the manufacturer (as defined in 
        section 1575(i)(4)) of the drug--
                    ``(A) has entered into a master rebate agreement 
                with the Secretary under section 1575,
                    ``(B) is otherwise complying with the provisions of 
                such section,
                    ``(C) is complying with the provisions of section 
                8126 of title 38, United States Code, including the 
                requirement of entering into a master agreement with 
                the Secretary of Veterans Affairs under such section, 
                and
                    ``(D) subject to paragraph (4), is complying with 
                the provisions of section 340B of the Public Health 
                Service Act, including the requirement of entering into 
                an agreement with the Secretary under such section.
            ``(2) Construction.--Nothing in this subsection shall be 
        construed as requiring a State to participate in the master 
        rebate agreement under section 1575.
            ``(3) Effect of subsequent amendments.--For purposes of 
        subparagraphs (C) and (D), in determining whether a 
        manufacturer is in compliance with the requirements of section 
        8126 of title 38, United States Code, or section 340B of the 
        Public Health Service Act--
                    ``(A) the Secretary shall not take into account any 
                amendments to such sections that are enacted after the 
                enactment of title VI of the Veterans Health Care Act 
                of 1992, and
                    ``(B) a manufacturer is deemed to meet such 
                requirements if the manufacturer establishes to the 
                satisfaction of the Secretary that the manufacturer 
                would comply (and has offered to comply) with the 
                provisions of such sections (as in effect immediately 
                after the enactment of the Veterans Health Care Act of 
                1992) and would have entered into an agreement under 
                such section (as such section was in effect at such 
                time), but for a legislative change in such section 
                after the date of the enactment of the Veterans Health 
                Care Act of 1992.
            ``(4) Effect of establishment of alternative mechanism 
        under public health service act.--If the Secretary does not 
        establish a mechanism to ensure against duplicate discounts or 
        rebates under section 340B(a)(5)(A) of the Public Health 
        Service Act within 12 months of the date of the enactment of 
        such section, the following requirements shall apply:
                    ``(A) Each covered entity under such section shall 
                inform the State when it is seeking reimbursement from 
                the State plan for medical assistance with respect to a 
                unit of any covered outpatient drug which is subject to 
                an agreement under section 340B(a) of such Act.
                    ``(B) Each such State shall provide a means by 
                which such an entity shall indicate on any drug 
                reimbursement claims form (or format, where electronic 
                claims management is used) that a unit of the drug that 
                is the subject of the form is subject to an agreement 
                under section 340B of such Act, and not submit to any 
                manufacturer a claim for a rebate payment with respect 
                to such a drug.
    ``(h) Limitation on Payment for Abortions.--
            ``(1) In general.--Payment shall not be made to a State 
        under this part for any amount expended under the State plan to 
        pay for any abortion or to assist in the purchase, in whole or 
        in part, of health benefit coverage that includes coverage of 
        abortion.
            ``(2) Exception.--Paragraph (1) shall not apply to an 
        abortion--
                    ``(A) if the pregnancy is the result of an act of 
                rape or incest, or
                    ``(B) in the case where a woman suffers from a 
                physical disorder, illness, or injury that would, as 
                certified by a physician, place the woman in danger of 
                death unless an abortion is performed.
    ``(i) Limitation on Payment for Assisting Deaths.--Payment shall 
not be made to a State under this part for amounts expended under the 
State plan to pay for, or to assist in the purchase, in whole or in 
part, of health benefit coverage that includes payment for any drug, 
biological product, or service which was furnished for the purpose of 
causing, or assisting in causing, the death, suicide, euthanasia, or 
mercy killing of a person.
    ``(j) No supplantation of state health funds.--A State may not 
replace State funds expended for the provision of health care services 
as of the date of June 1, 1996 with Federal funds received under this 
title.

          ``Part C--Establishment and Amendment of State Plans

``SEC. 1521. DESCRIPTION OF STRATEGIC OBJECTIVES AND PERFORMANCE GOALS.

    ``(a) Description.--A State plan shall include a description of the 
strategic objectives and performance goals the State has established 
for providing health care services to low-income populations under this 
title, including a general description of the manner in which the plan 
is designed to meet these objectives and goals.
    ``(b) Certain Objectives and Goals Required.--A State plan shall 
include strategic objectives and performance goals relating to rates of 
childhood immunizations, reductions in infant mortality and morbidity, 
and standards of care and access to services for children with special 
health care needs (as defined by the State).
    ``(c) Considerations.--In specifying these objectives and goals the 
State may consider factors such as the following:
            ``(1) The State's priorities with respect to providing 
        assistance to low-income populations.
            ``(2) The State's priorities with respect to the general 
        public health and the health status of individuals eligible for 
        assistance under the State plan.
            ``(3) The State's financial resources, the particular 
        economic conditions in the State, and relative adequacy of the 
        health care infrastructure in different regions of the State.
    ``(d) Performance Measures.--To the extent practicable--
            ``(1) one or more performance goals shall be established by 
        the State for each strategic objective identified in the State 
        plan; and
            ``(2) the State plan shall describe, how program 
        performance will be--
                    ``(A) measured through objective, independently 
                verifiable means, and
                    ``(B) compared against performance goals, in order 
                to determine the State's performance under this title.
    ``(e) Period Covered.--
            ``(1) Strategic objectives.--The strategic objectives shall 
        cover a period of not less than 5 years and shall be updated 
        and revised at least every 3 years.
            ``(2) Performance goals.--The performance goals shall be 
        established for dates that are not more than 3 years apart.

``SEC. 1522. ANNUAL REPORTS.

    ``(a) In General.--In the case of a State with a State plan that is 
in effect for part or all of a fiscal year, no later than March 31 
following such fiscal year the State shall prepare and submit to the 
Secretary and the Congress a report on program activities and 
performance under this title for such fiscal year.
    ``(b) Contents.--Each annual report under this section for a fiscal 
year shall include the following:
            ``(1) Expenditure and beneficiary summary.--
                    ``(A) Initial summary.--For the report for fiscal 
                year 1997, a summary of all expenditures under the 
                State plan during the fiscal year as follows:
                            ``(i) Aggregate medical assistance 
                        expenditures, disaggregated to the extent 
                        required to determine compliance with the set-
                        aside requirements of subsections (c) and (e) 
                        of section 1502, and to determine the program 
                        need of the State under section 1511(d)(2).
                            ``(ii) For each general category of 
                        eligible individuals (specified in subsection 
                        (c)(1)), aggregate medical assistance 
                        expenditures and the total and average number 
                        of eligible individuals under the State plan.
                            ``(iii) By each general category of 
                        eligible individuals, total expenditures for 
                        each of the categories of health care items and 
                        services (specified in subsection (c)(2)) which 
                        are covered under the State plan and provided 
                        on a fee-for-service basis.
                            ``(iv) By each general category of eligible 
                        individuals, total expenditures for payments to 
                        capitated health care organizations (as defined 
                        in section 1504(d)(1)).
                            ``(v) Total administrative expenditures.
                    ``(B) Subsequent summaries.--For reports for each 
                succeeding fiscal year, a summary of--
                            ``(i) all expenditures under the State 
                        plan, and
                            ``(ii) the total and average number of 
                        eligible individuals under the State plan for 
                        each general category of eligible individuals.
            ``(2) Utilization summary.--
                    ``(A) Initial summary.--For the report for fiscal 
                year 1997, summary statistics on the utilization of 
                health care services under the State plan during the 
                year as follows:
                            ``(i) For each general category of eligible 
                        individuals and for each of the categories of 
                        health care items and services which are 
                        covered under the State plan and provided on a 
                        fee-for-service basis, the number and 
                        percentage of persons who received such a type 
                        of service or item during the period covered by 
                        the report.
                            ``(ii) Summary of health care utilization 
                        data reported to the State by capitated health 
                        care organizations.
                    ``(B) Subsequent summaries.--For reports for each 
                succeeding fiscal year, summary statistics on the 
                utilization of health care services under the State 
                plan.
            ``(3) Achievement of performance goals.--With respect to 
        each performance goal established under section 1521 and 
        applicable to the year involved--
                    ``(A) a brief description of the goal;
                    ``(B) a description of the methods to be used to 
                measure the attainment of such goal;
                    ``(C) data on the actual performance with respect 
                to the goal;
                    ``(D) a review of the extent to which the goal was 
                achieved, based on such data; and
                    ``(E) if a performance goal has not been met--
                            ``(i) why the goal was not met, and
                            ``(ii) actions to be taken in response to 
                        such performance, including adjustments in 
                        performance goals or program activities for 
                        subsequent years.
            ``(4) Program evaluations.--A summary of the findings of 
        evaluations under section 1523 completed during the fiscal year 
        covered by the report.
            ``(5) Fraud and abuse and quality control activities.--A 
        general description of the State's activities under part D to 
        detect and deter fraud and abuse and to assure quality of 
        services provided under the program.
            ``(6) Plan administration.--
                    ``(A) A description of the administrative roles and 
                responsibilities of entities in the State responsible 
                for administration of this title.
                    ``(B) Organizational charts for each entity in the 
                State primarily responsible for activities under this 
                title.
                    ``(C) A brief description of each interstate 
                compact (if any) the State has entered into with other 
                States with respect to activities under this title.
                    ``(D) General citations to the State statutes and 
                administrative rules governing the State's activities 
                under this title.
    ``(c) Description of Categories.--In this section:
            ``(1) General categories of eligible individuals.--Each of 
        the following is a general category of eligible individuals:
                    ``(A) Pregnant women.
                    ``(B) Children.
                    ``(C) Blind or disabled adults who are not elderly 
                individuals.
                    ``(D) Elderly individuals.
                    ``(E) Other adults.
            ``(2) Categories of health care items and services.--The 
        health care items and services described in each paragraph of 
        section 1571(a) shall be considered a separate category of 
        health care items and services.
    ``(d) Development of Uniform Data Collection System.--The Secretary 
shall develop a uniform data collection system for the provision of 
information under this section.

``SEC. 1523. PERIODIC, INDEPENDENT EVALUATIONS.

    ``(a) In General.--During fiscal year 1999 and every third fiscal 
year thereafter, each State shall provide for an evaluation of the 
operation of its State plan under this title. Such evaluation shall 
include an assessment of how successfully the State is implementing the 
funding requirements imposed under section 1502(e) and the manner in 
which the State has utilized Federally-qualified health centers and 
rural health clinics to provide services under the State plan.
    ``(b) Independent.--Each such evaluation with respect to an 
activity under the State plan shall be conducted by an entity that is 
neither responsible under State law for the submission of the State 
plan (or part thereof) nor responsible for administering (or 
supervising the administration of) the activity. If consistent with the 
previous sentence, such an entity may be a college or university, a 
State agency, a legislative branch agency in a State, or an independent 
contractor.
    ``(c) Research Design.--Each such evaluation shall be conducted in 
accordance with a research design that is based on generally accepted 
models of survey design and sampling and statistical analysis.

``SEC. 1524. DESCRIPTION OF PROCESS FOR STATE PLAN DEVELOPMENT.

    ``Each State plan shall include a description of the process under 
which the plan shall be developed and implemented in the State 
(consistent with section 1525).

``SEC. 1525. CONSULTATION IN STATE PLAN DEVELOPMENT.

    ``(a) Public Notice Process.--Before submitting a State plan or a 
plan amendment described in subsection (c) to the Secretary under part 
C, a State shall provide--
            ``(1) public notice respecting the submittal of the 
        proposed plan or amendment, including a general description of 
        the plan or amendment,
            ``(2) a means for the public to inspect or obtain a copy 
        (at reasonable charge) of the proposed plan or amendment,
            ``(3) an opportunity for submittal and consideration of 
        public comments on the proposed plan or amendment, and
            ``(4) for consultation with one or more advisory committees 
        established and maintained by the State.
The previous sentence shall not apply to a revision of a State plan (or 
revision of an amendment to a plan) made by a State under section 
1529(c)(1) or to a plan amendment withdrawal described in section 
1529(c)(4).
    ``(b) Contents of Notice.--A notice under subsection (a)(1) for a 
proposed plan or amendment shall include a description of--
            ``(1) the general purpose of the proposed plan or amendment 
        (including applicable effective dates),
            ``(2) where the public may inspect the proposed plan or 
        amendment,
            ``(3) how the public may obtain a copy of the proposed plan 
        or amendment and the applicable charge (if any) for the copy, 
        and
            ``(4) how the public may submit comments on the proposed 
        plan or amendment, including any deadlines applicable to 
        consideration of such comments.
    ``(c) Amendments Described.--An amendment to a State plan described 
in this subsection is an amendment which makes a material and 
substantial change in eligibility under the State plan or the benefits 
provided under the plan or a material or substantial change in the 
manner in which the State will comply with subsection (b)(1)(H) or (e) 
of section 1502.
    ``(d) Publication.--Notices under this section may be published (as 
selected by the State) in one or more daily newspapers of general 
circulation in the State or in any publication used by the State to 
publish State statutes or rules.
    ``(e) Comparable Process.--A separate notice, or notices, shall not 
be required under this section for a State if notice of the State plan 
or an amendment to the plan will be provided under a process specified 
in State law that is substantially equivalent to the notice process 
specified in this section.
    ``(f) Provider payment rates.--Each State shall provide public 
notice, in accordance with the provisions of this section, of proposed 
payment rates and the methodologies underlying the establishment of 
such rates, for all providers (including institutional providers) of 
services under the State plan under this title. A State shall publish 
final payment rates, the methodologies underlying the establishment of 
such rates, and justifications for such rates. Such justifications may 
take in account public comments received by the State (if any) in one 
or more daily newspapers of general circulation in the State or in any 
publication used by the State to publish State statutes or rules.

``SEC. 1526. SUBMITTAL AND APPROVAL OF STATE PLANS.

    ``(a) Submittal.--As a condition of receiving funding under part B, 
each State shall submit to the Secretary a State plan that meets the 
applicable requirements of this title.
    ``(b) Approval.--Except as the Secretary may provide under section 
1529 (including subsection (b) relating to noncompliance with required 
guarantees), a State plan submitted under subsection (a)--
            ``(1) shall be approved for purposes of this title, and
            ``(2) shall be effective beginning on a date that is 
        specified in the plan, but in no case earlier than 60 days 
        after the date the plan is submitted.
    ``(c) Construction.--Nothing in this section shall be construed as 
prohibiting a State from submitting a State plan that includes the 
coverage and benefits (including those provided under a waiver granted 
under section 1115) of its State plan under title XIX (as in effect as 
of the date of the enactment of the Medicaid Restructuring Act of 
1996), so long as such plan complies with the applicable requirements 
of this title, including the guarantees under section 1501, and remains 
subject to the funding provisions of section 1511.

``SEC. 1527. SUBMITTAL AND APPROVAL OF PLAN AMENDMENTS.

    ``(a) Submittal of Amendments.--A State may amend, in whole or in 
part, its State plan at any time through transmittal of a plan 
amendment under this section.
    ``(b) Approval.--Except as the Secretary may provide under section 
1529 (including subsection (b) relating to noncompliance with required 
guarantees), an amendment to a State plan submitted under subsection 
(a)--
            ``(1) shall be approved for purposes of this title, and
            ``(2) shall be effective as provided in subsection (c).
    ``(c) Effective Dates for Amendments.--
            ``(1) In general.--Subject to the succeeding provisions of 
        this subsection, an amendment to a State plan shall take effect 
        on one or more effective dates specified in the amendment.
            ``(2) Amendments relating to eligibility or benefits.--
        Except as provided in paragraph (4)--
                    ``(A) Notice requirement.--Any plan amendment that 
                eliminates or restricts eligibility or benefits under 
                the plan may not take effect unless the State certifies 
                that it has provided prior or contemporaneous public 
                notice of the change, in a form and manner provided 
                under applicable State law.
                    ``(B) Timely transmittal.--Any plan amendment that 
                eliminates or restricts eligibility or benefits under 
                the plan shall not be effective for longer than a 60-
                day period unless the amendment has been transmitted to 
                the Secretary before the end of such period.
            ``(3) Other amendments.--Subject to paragraph (4), any plan 
        amendment that is not described in paragraph (2) becomes 
        effective in a State fiscal year may not remain in effect after 
        the end of such fiscal year (or, if later, the end of the 90-
        day period on which it becomes effective) unless the amendment 
        has been transmitted to the Secretary.
            ``(4) Exception.--The requirements of paragraphs (2) and 
        (3) shall not apply to a plan amendment that is submitted on a 
        timely basis pursuant to a court order or an order of the 
        Secretary.

``SEC. 1528. PROCESS FOR STATE WITHDRAWAL FROM PROGRAM.

    ``(a) In General.--A State may rescind its State plan and 
discontinue participation in the program under this title at any time 
after providing--
            ``(1) the public with 90 days prior notice in a publication 
        in one or more daily newspapers of general circulation in the 
        State or in any publication used by the State to publish State 
        statutes or rules, and
            ``(2) the Secretary with 90 days prior written notice.
    ``(b) Effective Date.--Such discontinuation shall not apply to 
payments under part B for expenditures made for items and services 
furnished under the State plan before the effective date of the 
discontinuation.
    ``(c) Proration of Allotments.--In the case of any withdrawal under 
this section other than at the end of a Federal fiscal year, 
notwithstanding any provision of section 1511 to the contrary, the 
Secretary shall provide for such appropriate proration of the 
application of allotments under section 1511 as is appropriate.

``SEC. 1529. SANCTIONS FOR NONCOMPLIANCE.

    ``(a) Prompt Review of Plan Submittals.--The Secretary shall 
promptly review State plans and plan amendments submitted under this 
part to determine if they substantially comply with the requirements of 
this title.
    ``(b) Determinations of Noncompliance with Certain Guarantees.--
            ``(1) At time of plan or amendment submittal.--If the 
        Secretary determines that a State plan or plan amendment 
        submitted under this part violates the guarantees of coverage 
        and benefits under subsections (a) and (b) of section 1501, the 
        Secretary shall notify the State in writing of such 
        determination and shall issue an order specifying that the plan 
        or amendment, insofar as it is in violation with such 
        requirement, shall not be effective, except as provided in 
        subsection (d), as of the date specified in the order.
            ``(2) Violations in administration of plan.--If the 
        Secretary determines, after reasonable notice and opportunity 
        for a hearing for the State, that in the administration of a 
        State plan there is a violation of guarantee of coverage and 
        benefits under subsection (a) or (b) of section 1501, or of the 
        funding requirements under section 1502(e), the Secretary shall 
        provide the State with written notice of the determination and 
        with an order to remedy such violation. Such an order shall 
        become effective prospectively, as specified in the order, 
after the date of receipt of such written notice. Such an order may 
include the withholding of funds, consistent with subsection (g), for 
parts of the State plan affected by such violation, until the Secretary 
is satisfied that the violation has been corrected.
            ``(3) Consultation with state.--Before making a 
        determination adverse to a State under this section, the 
        Secretary shall--
                    ``(A) reasonably consult with the State involved,
                    ``(B) offer the State a reasonable opportunity to 
                clarify the submission and submit further information 
                to substantiate compliance with the requirements of 
                subsections (a) and (b) of section 1501 and of section 
                1502(e), and
                    ``(C) reasonably consider any such clarifications 
                and information submitted.
            ``(4) Justification of any inconsistencies in 
        determinations.--If the Secretary makes a determination under 
        this section that is, in whole or in part, inconsistent with 
        any previous determination issued by the Secretary under this 
        title, the Secretary shall include in the determination a 
        detailed explanation and justification for any such difference.
    ``(c) Determinations of Other Substantial Noncompliance.--
            ``(1) At time of plan or amendment submittal.--
                    ``(A) In general.--If the Secretary, during the 30-
                day period beginning on the date of submittal of a 
                State plan or plan amendment--
                            ``(i) determines that the plan or amendment 
                        substantially violates (within the meaning of 
                        paragraph (5)) a requirement of this title, and
                            ``(ii) provides written notice of such 
                        determination to the State,
                the Secretary shall issue an order specifying that the 
                plan or amendment, insofar as it is in substantial 
                violation of such a requirement, shall not be 
                effective, except as provided in subsection (d), 
                beginning at the end of a period of not less than 30 
                days (or 120 days in the case of the initial submission 
                of the State plan) specified in the order beginning on 
                the date of the notice of the determination.
                    ``(B) Extension of time periods.--The time periods 
                specified in subparagraph (A) may be extended by 
                written agreement of the Secretary and the State 
                involved.
            ``(2) Violations in administration of plan.--
                    ``(A) In general.--If the Secretary determines, 
                after reasonable notice and opportunity for a hearing 
                for the State, that in the administration of a State 
                plan there is a substantial violation of a requirement 
                of this title, the Secretary shall provide the State 
                with written notice of the determination and with an 
                order to remedy such violation. Such an order shall 
                become effective prospectively, as specified in the 
                order, after the date of receipt of such written 
                notice. Such an order may include the withholding of 
                funds, consistent with subsection (g), for parts of the 
                State plan affected by such violation, until the 
                Secretary is satisfied that the violation has been 
                corrected.
                    ``(B) Effectiveness.--If the Secretary issues an 
                order under paragraph (1), the order shall become 
                effective, except as provided in subsection (d), 
                beginning at the end of a period (of not less than 30 
                days) specified in the order beginning on the date of 
                the notice of the determination to the State.
                    ``(C) Timeliness of determinations relating to 
                report-based compliance.--The Secretary shall make 
                determinations under this paragraph respecting 
                violations relating to information contained in an 
                annual report under section 1522, an independent 
                evaluation under section 1523, or an audit report under 
                section 1551 not later than 30 days after the date of 
                transmittal of the report or evaluation to the 
                Secretary.
            ``(3) Consultation with state.--Before making a 
        determination adverse to a State under this section, the 
        Secretary shall (within any time periods provided under this 
        section)--
                    ``(A) reasonably consult with the State involved,
                    ``(B) offer the State a reasonable opportunity to 
                clarify the submission and submit further information 
                to substantiate compliance with the requirements of 
                this title, and
                    ``(C) reasonably consider any such clarifications 
                and information submitted.
            ``(4) Justification of any inconsistencies in 
        determinations.--If the Secretary makes a determination under 
        this section that is, in whole or in part, inconsistent with 
        any previous determination issued by the Secretary under this 
        title, the Secretary shall include in the determination a 
        detailed explanation and justification for any such difference.
            ``(5) Substantial violation defined.--For purposes of this 
        title, a State plan (or amendment to such a plan) or the 
        administration of the State plan is considered to 
        `substantially violate' a requirement of this title if a 
        provision of the plan or amendment (or an omission from the 
        plan or amendment) or the administration of the plan--
                    ``(A) is material and substantial in nature and 
                effect, and
                    ``(B) is inconsistent with an express requirement 
                of this title.
        A failure to meet a strategic objective or performance goal (as 
        described in section 1521) shall not be considered to 
        substantially violate a requirement of this title.
            ``(6) Relation to other provision.--This subsection shall 
        not apply to violation of a requirement of subsection (a) or 
        (b) of section 1501 or of section 1502(e).
    ``(d) State Response to Orders.--
            ``(1) State response by revising plan.--
                    ``(A) In general.--Insofar as an order under 
                subsection (b)(1) or (c)(1) relates to a violation by a 
                State plan or plan amendment, a State may respond 
                (before the date the order becomes effective) to such 
                an order by submitting a written revision of the State 
                plan or plan amendment to comply with the requirements 
                of this title.
                    ``(B) Review of revision.--In the case of 
                submission of such a revision, the Secretary shall 
                promptly review the submission and shall, in the case 
                of an order under subsection (c)(1), withhold any 
                action on the order during the period of such review.
                    ``(C) Secretarial response.--
                            ``(i) Orders relating to guarantees.--In 
                        the case of a revision submitted in response to 
                        an order under subsection (b)(1), the revision 
                        shall not be considered to have corrected the 
                        deficiency unless the Secretary determines and 
notifies the State that the State plan or amendment, as proposed to be 
revised, complies with the requirements of subsections (a) and (b) of 
section 1501, or of section 1502(e) (as the case may be). If the 
Secretary determines that the revision does not correct the deficiency, 
the Secretary shall notify the State in writing of such determination 
and the State may respond by seeking reconsideration or a hearing under 
paragraph (2).
                            ``(ii) Other orders.--In the case of a 
                        revision submitted in response to an order 
                        under subsection (c)(1), the revision shall be 
                        considered to have corrected the deficiency 
                        (and the order rescinded insofar as it relates 
                        to such deficiency) unless the Secretary 
                        determines and notifies the State in writing, 
                        within 15 days after the date the Secretary 
                        receives the revision, that the State plan or 
                        amendment, as proposed to be revised, still 
                        substantially violates a requirement of this 
                        title. In such case the State may respond by 
                        seeking reconsideration or a hearing under 
                        paragraph (2).
                    ``(D) Revision retroactive.--If the revision 
                provides for compliance (in the case of an order under 
                subsection (b)(1)) or substantial compliance (in the 
                case of an order under subsection (c)(1)), the revision 
                may be treated, at the option of the State, as being 
                effective either as of the effective date of the 
                provision to which it relates or such later date as the 
                State and Secretary may agree.
            ``(2) State response by seeking reconsideration or an 
        administrative hearing.--A State may respond to an order under 
        subsection (b) or (c) by filing a request with the Secretary 
        for--
                    ``(A) a reconsideration of the determination, 
                pursuant to subsection (e)(1), or
                    ``(B) a review of the determination through an 
                administrative hearing, pursuant to subsection (e)(2).
        In such case for an order under subsection (c), the order shall 
        not take effect before the completion of the reconsideration or 
        hearing.
            ``(3) State response by corrective action plan.--
                    ``(A) In general.--In the case of an order 
                described in subsection (b)(2) or (c)(2) that relates 
                to a violation in the administration of the State plan, 
                a State may respond to such an order by submitting a 
                corrective action plan with the Secretary to correct 
                deficiencies in the administration of the plan which 
                are the subject of the order.
                    ``(B) Review of corrective action plan.--In the 
                case of a corrective action plan submitted in response 
                to an order under subsection (c)(2), the Secretary 
                shall withhold any action on the order for a period 
                (not to exceed 30 days) during which the Secretary 
                reviews the corrective action plan.
                    ``(C) Secretarial response.--
                            ``(i) Orders relating to guarantees.--In 
                        the case of a corrective action plan submitted 
                        in response to an order under subsection 
                        (b)(2), the plan shall not be considered to 
                        have corrected the deficiency unless the 
                        Secretary determines and notifies the State 
                        that the State's administration of the State 
                        plan, as proposed to be corrected in the plan, 
                        will not violate a requirement of subsection 
                        (a) or (b) of section 1501, or of section 
                        1502(e) (as the case may be). If the Secretary 
                        determines that the plan does not correct the 
                        deficiency, the Secretary shall notify the 
                        State in writing of such determination and the 
                        State may respond by seeking reconsideration or 
                        a hearing under paragraph (2).
                            ``(ii) Other orders.--In the case of a 
                        corrective action plan submitted in response to 
                        an order under subsection (c)(2), the 
corrective action plan shall be considered to have corrected the 
deficiency (and the order rescinded insofar as it relates to such 
deficiency) unless the Secretary determines and notifies the State in 
writing, within 15 days after the date the Secretary receives the 
corrective action plan, that the State's administration of the State 
plan, as proposed to be corrected in the plan, will still substantially 
violate a requirement of this title. In such case the State may respond 
by seeking reconsideration or a hearing under paragraph (2).
            ``(4) State response by withdrawal of plan amendment; 
        failure to respond.--Insofar as an order relates to a violation 
        in a plan amendment submitted, a State may respond to such an 
        order by withdrawing the plan amendment and the State plan 
        shall be treated as though the amendment had not been made.
    ``(e) Administrative Review and Hearing.--
            ``(1) Reconsideration.--Within 30 days after the date of 
        receipt of a request under subsection (d)(2)(A), the Secretary 
        shall notify the State of the time and place at which a hearing 
        will be held for the purpose of reconsidering the Secretary's 
        determination. The hearing shall be held not less than 20 days 
        nor more than 60 days after the date notice of the hearing is 
        furnished to the State, unless the Secretary and the State 
        agree in writing to holding the hearing at another time. The 
        Secretary shall affirm, modify, or reverse the original 
        determination within 60 days of the conclusion of the hearing.
            ``(2) Administrative hearing.--Within 30 days after the 
        date of receipt of a request under subsection (d)(2)(B), an 
        administrative law judge shall schedule a hearing for the 
        purpose of reviewing the Secretary's determination. The hearing 
        shall be held not less than 20 days nor more than 60 days after 
        the date notice of the hearing is furnished to the State, 
        unless the Secretary and the State agree in writing to holding 
        the hearing at another time. The administrative law judge shall 
        affirm, modify, or reverse the determination within 60 days of 
        the conclusion of the hearing.
    ``(f) Judicial Review.--
            ``(1) In general.--A State which is dissatisfied with a 
        final determination made by the Secretary under subsection 
        (e)(1) or a final determination of an administrative law judge 
        under subsection (e)(2) may, within 60 days after it has been 
        notified of such determination, file with the United States 
        court of appeals for the circuit in which the State is located 
        a petition for review of such determination. A copy of the 
        petition shall be forthwith transmitted by the clerk of the 
        court to the Secretary and, in the case of a determination 
        under subsection (e)(2), to the administrative law judge 
        involved. The Secretary (or judge involved) thereupon shall 
        file in the court the record of the proceedings on which the 
        final determination was based, as provided in section 1502 of 
        title 28, United States Code. Except as provided in section 
        1508, only the Secretary, in accordance with this title, may 
        compel a State under Federal law to comply with the provisions 
        of this title or a State plan, or otherwise enforce a provision 
        of this title against a State, and no action may be filed under 
        Federal law against a State in relation to the State's 
        compliance, or failure to comply, with the provisions of this 
        title or of a State plan except under section 1508 or by the 
        Secretary as provided under this subsection.
            ``(2) Standard for review.--The findings of fact by the 
        Secretary or administrative law judge, if supported by 
        substantial evidence, shall be conclusive, but the court, for 
        good cause shown, may remand the case to the Secretary or judge 
        to take further evidence, and the Secretary or judge may 
        thereupon make new or modified findings of fact and may modify 
        a previous determination, and shall certify to the court the 
        transcript and record of the further proceedings. Such new or 
modified findings of fact shall likewise be conclusive if supported by 
substantial evidence.
            ``(3) Jurisdiction of appellate court.--The court shall 
        have jurisdiction to affirm the action of the Secretary or 
        judge or to set it aside, in whole or in part. The judgment of 
        the court shall be subject to review by the Supreme Court of 
        the United States upon certiorari or certification as provided 
        in section 1254 of title 28, United States Code.
    ``(g) Withholding of Funds.--
            ``(1) In general.--Any order under this section relating to 
        the withholding of funds shall be effective not earlier than 
        the effective date of the order and shall only relate to the 
        portions of a State plan or administration thereof which 
        violate a requirement of subsection (a) or (b) of section 1501, 
        section 1502(e), or substantially violate another requirement 
        of this title. In the case of a failure to meet a set-aside 
        requirement under subsection (c) or (e) of section 1502, any 
        withholding shall only apply to the extent of such failure.
            ``(2) Suspension of withholding.--The Secretary may suspend 
        withholding of funds under paragraph (1) during the period 
        reconsideration or administrative and judicial review is 
        pending under subsection (e) or (f).
            ``(3) Restoration of funds.--Any funds withheld under this 
        subsection under an order shall be immediately restored to a 
        State--
                    ``(A) to the extent and at the time the order is--
                            ``(i) modified or withdrawn by the 
                        Secretary upon reconsideration,
                            ``(ii) modified or reversed by an 
                        administrative law judge, or
                            ``(iii) set aside (in whole or in part) by 
                        an appellate court; or
                    ``(B) when the Secretary determines that the 
                deficiency which was the basis for the order is 
                corrected;
                    ``(C) when the Secretary determines that violation 
                which was the basis for the order is resolved or the 
                amendment which was the basis for the order is 
                withdrawn; or
                    ``(D) at any time upon the initiative of the 
                Secretary.
            ``(4) Direct payment of certain funds withheld.--In the 
        case of an order to withhold funds for failure to meet a set-
        aside requirement imposed under section 1502(e), the Secretary 
        shall, during the period such order is in effect, pay directly 
        to rural health clinics and federally-qualified health centers 
        located in the State an amount equal to the amount that should 
        have been paid to such clinics and centers by the State under 
        section 1502(e).
    ``(h) Individual Complaint Process.--The Secretary shall provide 
for a process under which an individual may notify the Secretary 
concerning a State's failure to provide medical assistance as required 
under the State plan or otherwise comply with the requirements of this 
title or such plan, including any failure to comply with a requirement 
of subsection (a) or (b) of section 1501. If the Secretary finds that 
there is a pattern of complaints with respect to a State or that a 
particular failure or finding of noncompliance is egregious, the 
Secretary shall notify the chief executive officer of the State of such 
finding and shall notify the Congress if the State fails to respond to 
such notification within a reasonable period of time.

``SEC. 1530. SECRETARIAL AUTHORITY.

    ``(a) Negotiated Agreement and Dispute Resolution.--
            ``(1) Negotiations.--Nothing in this part shall be 
        construed as preventing the Secretary and a State from at any 
        time negotiating a satisfactory resolution to any dispute 
        concerning the approval of a State plan (or amendments to a 
        State plan) or the compliance of a State plan (including its 
        administration) with requirements of this title.
            ``(2) Cooperation.--The Secretary shall act in a 
        cooperative manner with the States in carrying out this title. 
        In the event of a dispute between a State and the Secretary, 
        the Secretary shall, whenever practicable, engage in informal 
        dispute resolution activities in lieu of formal enforcement or 
        sanctions under section 1529.
    ``(b) Limitations on Delegation of Decisionmaking Authority.--The 
Secretary may not delegate (other than to the Administrator of the 
Health Care Financing Administration) the authority to make 
determinations or reconsiderations respecting the approval of State 
plans (or amendments to such plans) or the compliance of a State plan 
(including its administration) with requirements of this title. Such 
Administrator may not further delegate such authority to any 
individual, including any regional official of such Administration.
    ``(c) Requiring Formal Rulemaking for Changes in Secretarial 
Administration.--The Secretary shall carry out the administration of 
the program under this title only through a prospective formal 
rulemaking process, including issuing notices of proposed rulemaking, 
publishing proposed rules or modifications to rules in the Federal 
Register, and soliciting public comment.

                ``Part D--Program Integrity and Quality

``SEC. 1551. USE OF AUDITS TO ACHIEVE FISCAL INTEGRITY.

    ``(a) Financial Audits of Program.--
            ``(1) In general.--Each State plan shall provide for an 
        annual audit of the State's expenditures from amounts received 
        under this title, in compliance with chapter 75 of title 31, 
        United States Code.
            ``(2) Verification audits.--If, after consultation with the 
        State and the Comptroller General and after a fair hearing, the 
        Secretary determines that a State's audit under paragraph (1) 
        was performed in substantial violation of chapter 75 of title 
        31, United States Code, the Secretary may--
                    ``(A) require that the State provide for a 
                verification audit in compliance with such chapter, or
                    ``(B) conduct such a verification audit.
            ``(3) Availability of audit reports.--Within 30 days after 
        completion of each audit or verification audit under this 
        subsection, the State shall--
                    ``(A) provide the Secretary with a copy of the 
                audit report, including the State's response to any 
                recommendations of the auditor, and
                    ``(B) make the audit report available for public 
                inspection in the same manner as proposed State plan 
                amendments are made available under section 1525.
    ``(b) Fiscal Controls.--
            ``(1) In general.--With respect to the accounting and 
        expenditure of funds under this title, each State shall adopt 
        and maintain such fiscal controls, accounting procedures, and 
        data processing safeguards as the State deems reasonably 
        necessary to assure the fiscal integrity of the State's 
        activities under this title.
            ``(2) Consistency with generally accepted accounting 
        principles.--Such controls and procedures shall be generally 
        consistent with generally accepted accounting principles as 
        recognized by the Governmental Accounting Standards Board or 
        the Comptroller General.
    ``(c) Audits of Providers.--Each State plan shall provide that the 
records of any entity providing items or services for which payment may 
be made under the plan may be audited as necessary to ensure that 
proper payments are made under the plan.

``SEC. 1552. FRAUD PREVENTION PROGRAM.

    ``(a) Establishment.--Each State plan shall provide for the 
establishment and maintenance of an effective program for the detection 
and prevention of fraud and abuse by beneficiaries, providers, and 
others in connection with the operation of the program.
    ``(b) Program Requirements.--The program established pursuant to 
subsection (a) shall include at least the following requirements:
            ``(1) Disclosure of information.--Any disclosing entity (as 
        defined in section 1124(a)) receiving payments under the State 
        plan shall comply with the requirements of section 1124.
            ``(2) Supply of information.--An entity (other than an 
        individual practitioner or a group of practitioners) that 
        furnishes, or arranges for the furnishing of, an item or 
        service under the State plan shall supply upon request 
        specifically addressed to the entity by the Secretary or the 
        State agency the information described in section 1128(b)(9).
            ``(3) Exclusion.--
                    ``(A) In general.--The State plan shall exclude any 
                specified individual or entity from participation in 
                the plan for the period specified by the Secretary when 
                required by the Secretary to do so pursuant to section 
                1128 or section 1128A, and provide that no payment may 
                be made under the plan with respect to any item or 
                service furnished by such individual or entity during 
                such period.
                    ``(B) Authority.--In addition to any other 
                authority, a State may exclude any individual or entity 
                for purposes of participating under the State plan for 
                any reason for which the Secretary could exclude the 
                individual or entity from participation in a program 
                under title XVIII or under section 1128, 1128A, or 
                1866(b)(2).
            ``(4) Notice.--The State plan shall provide that whenever a 
        provider of services or any other person is terminated, 
        suspended, or otherwise sanctioned or prohibited from 
        participating under the plan, the State agency responsible for 
        administering the plan shall promptly notify the Secretary and, 
        in the case of a physician, the State medical licensing board 
        of such action.
            ``(5) Access to information.--The State plan shall provide 
        that the State will provide information and access to certain 
        information respecting sanctions taken against health care 
        practitioners and providers by State licensing authorities in 
        accordance with section 1553.

``SEC. 1553. INFORMATION CONCERNING SANCTIONS TAKEN BY STATE LICENSING 
              AUTHORITIES AGAINST HEALTH CARE PRACTITIONERS AND 
              PROVIDERS.

    ``(a) Information Reporting Requirement.--The requirement referred 
to in section 1552(b)(5) is that the State must provide for the 
following:
            ``(1) Information reporting system.--The State must have in 
        effect a system of reporting the following information with 
        respect to formal proceedings (as defined by the Secretary in 
        regulations) concluded against a health care practitioner or 
        entity by any authority of the State (or of a political 
        subdivision thereof) responsible for the licensing of health 
        care practitioners (or any peer review organization or private 
        accreditation entity reviewing the services provided by health 
        care practitioners) or entities:
                    ``(A) Any adverse action taken by such licensing 
                authority as a result of the proceeding, including any 
                revocation or suspension of a license (and the length 
                of any such suspension), reprimand, censure, or 
                probation.
                    ``(B) Any dismissal or closure of the proceedings 
                by reason of the practitioner or entity surrendering 
                the license or leaving the State or jurisdiction.
                    ``(C) Any other loss of the license of the 
                practitioner or entity, whether by operation of law, 
                voluntary surrender, or otherwise.
                    ``(D) Any negative action or finding by such 
                authority, organization, or entity regarding the 
                practitioner or entity.
            ``(2) Access to documents.--The State must provide the 
        Secretary (or an entity designated by the Secretary) with 
access to such documents of the authority described in paragraph (1) as 
may be necessary for the Secretary to determine the facts and 
circumstances concerning the actions and determinations described in 
such paragraph for the purpose of carrying out this Act.
    ``(b) Form of Information.--The information described in subsection 
(a)(1) shall be provided to the Secretary (or to an appropriate private 
or public agency, under suitable arrangements made by the Secretary 
with respect to receipt, storage, protection of confidentiality, and 
dissemination of information) in such a form and manner as the 
Secretary determines to be appropriate in order to provide for 
activities of the Secretary under this Act and in order to provide, 
directly or through suitable arrangements made by the Secretary, 
information--
            ``(1) to agencies administering Federal health care 
        programs, including private entities administering such 
        programs under contract,
            ``(2) to licensing authorities described in subsection 
        (a)(1),
            ``(3) to State agencies administering or supervising the 
        administration of State health care programs (as defined in 
        section 1128(h)),
            ``(4) to utilization and quality control peer review 
        organizations described in part B of title XI and to 
        appropriate entities with contracts under section 1154(a)(4)(C) 
        with respect to eligible organizations reviewed under the 
        contracts,
            ``(5) to State fraud control units (as defined in section 
        1534),
            ``(6) to hospitals and other health care entities (as 
        defined in section 431 of the Health Care Quality Improvement 
        Act of 1986), with respect to physicians or other licensed 
        health care practitioners that have entered (or may be 
        entering) into an employment or affiliation relationship with, 
        or have applied for clinical privileges or appointments to the 
        medical staff of, such hospitals or other health care entities 
        (and such information shall be deemed to be disclosed pursuant 
        to section 427 of, and be subject to the provisions of, that 
        Act),
            ``(7) to the Attorney General and such other law 
        enforcement officials as the Secretary deems appropriate, and
            ``(8) upon request, to the Comptroller General,
        in order for such authorities to determine the fitness of 
        individuals to provide health care services, to protect the 
        health and safety of individuals receiving health care through 
        such programs, and to protect the fiscal integrity of such 
        programs.
    ``(c) Confidentiality of Information Provided.--The Secretary shall 
provide for suitable safeguards for the confidentiality of the 
information furnished under subsection (a). Nothing in this subsection 
shall prevent the disclosure of such information by a party which is 
otherwise authorized, under applicable State law, to make such 
disclosure.
    ``(d) Appropriate Coordination.--The Secretary shall provide for 
the maximum appropriate coordination in the implementation of 
subsection (a) of this section and section 422 of the Health Care 
Quality Improvement Act of 1986 and section 1128E.

``SEC. 1554. STATE FRAUD CONTROL UNITS.

    ``(a) In General.--Each State plan shall provide for a State fraud 
control unit described in subsection (b) that effectively carries out 
the functions and requirements described in such subsection, unless the 
State demonstrates to the satisfaction of the Secretary that the 
effective operation of such a unit in the State would not be cost-
effective because minimal fraud exists in connection with the provision 
of covered services to eligible individuals under the plan, and that 
beneficiaries under the plan will be protected from abuse and neglect 
in connection with the provision of medical assistance under the plan 
without the existence of such a unit.
    ``(b) Units Described.--For purposes of this section, the term 
`State fraud control unit' means a single identifiable entity of the 
State government which meets the following requirements:
            ``(1) Organization.--The entity--
                    ``(A) is a unit of the office of the State Attorney 
                General or of another department of State government 
                which possesses statewide authority to prosecute 
                individuals for criminal violations;
                    ``(B) is in a State the constitution of which does 
                not provide for the criminal prosecution of individuals 
                by a statewide authority and has formal procedures 
                that--
                            ``(i) assure its referral of suspected 
                        criminal violations relating to the program 
                        under this title to the appropriate authority 
                        or authorities in the State for prosecution, 
                        and
                            ``(ii) assure its assistance of, and 
                        coordination with, such authority or 
                        authorities in such prosecutions; or
                    ``(C) has a formal working relationship with the 
                office of the State Attorney General and has formal 
                procedures (including procedures for its referral of 
                suspected criminal violations to such office) which 
                provide effective coordination of activities between 
                the entity and such office with respect to the 
                detection, investigation, and prosecution of suspected 
                criminal violations relating to the program under this 
                title.
            ``(2) Independence.--The entity is separate and distinct 
        from any State agency that has principal responsibilities for 
        administering or supervising the administration of the State 
        plan.
            ``(3) Function.--The entity's function is conducting a 
        statewide program for the investigation and prosecution of 
        violations of all applicable State laws regarding any and all 
        aspects of fraud in connection with any aspect of the provision 
        of medical assistance and the activities of providers of such 
        assistance under the State plan.
            ``(4) Review of complaints.--The entity has procedures for 
        reviewing complaints of the abuse and neglect of patients of 
        health care facilities which receive payments under the State 
        plan under this title, and, where appropriate, for acting upon 
        such complaints under the criminal laws of the State or for 
        referring them to other State agencies for action.
            ``(5) Overpayments.--
                    ``(A) In general.--The entity provides for the 
                collection, or referral for collection to a single 
                State agency, of overpayments that are made under the 
                State plan to health care providers and that are 
                discovered by the entity in carrying out its 
                activities.
                    ``(B) Treatment of certain overpayments.--If an 
                overpayment is the direct result of the failure of the 
                provider (or the provider's billing agent) to adhere to 
                a change in the State's billing instructions, the 
                entity may recover the overpayment only if the entity 
                demonstrates that the provider (or the provider's 
                billing agent) received prior written or electronic 
                notice of the change in the billing instructions before 
                the submission of the claims on which the overpayment 
                is based.
            ``(6) Personnel.--The entity employs such auditors, 
        attorneys, investigators, and other necessary personnel and is 
        organized in such a manner as is necessary to promote the 
        effective and efficient conduct of the entity's activities.

``SEC. 1555. RECOVERIES FROM THIRD PARTIES AND OTHERS.

    ``(a) Third Party Liability.--Each State plan shall provide for 
reasonable steps--
            ``(1) to ascertain the legal liability of third parties to 
        pay for care and services available under the plan, including 
        the collection of sufficient information to enable States to 
        pursue claims against third parties, and
            ``(2) to seek reimbursement for medical assistance provided 
        to the extent legal liability is established where the amount 
expected to be recovered exceeds the costs of the recovery.
    ``(b) Beneficiary Protection.--
            ``(1) In general.--Each State plan shall provide that in 
        the case of a person furnishing services under the plan for 
        which a third party may be liable for payment--
                    ``(A) the person may not seek to collect from the 
                individual (or financially responsible relative) 
                payment of an amount for the service more than could be 
                collected under the plan in the absence of such third 
                party liability, and
                    ``(B) may not refuse to furnish services to such an 
                individual because of a third party's potential 
                liability for payment for the service.
            ``(2) Penalty.--A State plan may provide for a reduction of 
        any payment amount otherwise due with respect to a person who 
        furnishes services under the plan in an amount equal to up to 3 
        times the amount of any payment sought to be collected by that 
        person in violation of paragraph (1)(A).
    ``(c) General Liability.--The State shall prohibit any health 
insurer, including a group health plan as defined in section 607 of the 
Employee Retirement Income Security Act of 1974, a service benefit 
plan, or a health maintenance organization, in enrolling an individual 
or in making any payments for benefits to the individual or on the 
individual's behalf, from taking into account that the individual is 
eligible for or is provided medical assistance under a State plan for 
any State.
    ``(d) Acquisition of Rights of Beneficiaries.--To the extent that 
payment has been made under a State plan in any case where a third 
party has a legal liability to make payment for such assistance, the 
State shall have in effect laws under which, to the extent that payment 
has been made under the plan for health care items or services 
furnished to an individual, the State is considered to have acquired 
the rights of such individual to payment by any other party for such 
health care items or services.
    ``(e) Assignment of Medical Support Rights.--The State plan shall 
provide for mandatory assignment of rights of payment for medical 
support and other medical care owed to recipients in accordance with 
section 1556.
    ``(f) Required Laws Relating to Medical Child Support.--
            ``(1) In general.--Each State with a State plan under this 
        title shall have in effect the following laws:
                    ``(A) A law that prohibits an insurer from denying 
                enrollment of a child under the health coverage of the 
                child's parent on the ground that--
                            ``(i) the child was born out of wedlock,
                            ``(ii) the child is not claimed as a 
                        dependent on the parent's Federal income tax 
                        return, or
                            ``(iii) the child does not reside with the 
                        parent or in the insurer's service area.
                    ``(B) In any case in which a parent is required by 
                a court or administrative order to provide health 
                coverage for a child and the parent is eligible for 
                family health coverage through an insurer, a law that 
                requires such insurer--
                            ``(i) to permit such parent to enroll under 
                        such family coverage any such child who is 
                        otherwise eligible for such coverage (without 
                        regard to any enrollment season restrictions);
                            ``(ii) if such a parent is enrolled but 
                        fails to make application to obtain coverage of 
                        such child, to enroll such child under such 
                        family coverage upon application by the child's 
                        other parent or by the State agency 
                        administering the program under this title or 
                        part D of title IV; and
                            ``(iii) not to disenroll, or eliminate 
                        coverage of, such a child unless the insurer is 
                        provided satisfactory written evidence that--
                                    ``(I) such court or administrative 
                                order is no longer in effect, or
                                    ``(II) the child is or will be 
                                enrolled in comparable health coverage 
                                through another insurer which will take 
                                effect not later than the effective 
                                date of such disenrollment.
                    ``(C) In any case in which a parent is required by 
                a court or administrative order to provide health 
                coverage for a child and the parent is eligible for 
                family health coverage through an employer doing 
                business in the State, a law that requires such 
                employer--
                            ``(i) to permit such parent to enroll under 
                        such family coverage any such child who is 
                        otherwise eligible for such coverage (without 
                        regard to any enrollment season restrictions);
                            ``(ii) if such a parent is enrolled but 
                        fails to make application to obtain coverage of 
                        such child, to enroll such child under such 
                        family coverage upon application by the child's 
                        other parent or by the State agency 
                        administering the program under this title or 
                        part D of title IV; and
                            ``(iii) not to disenroll (or eliminate 
                        coverage of) any such child unless--
                                    ``(I) the employer is provided 
                                satisfactory written evidence that such 
                                court or administrative order is no 
                                longer in effect, or the child is or 
                                will be enrolled in comparable health 
                                coverage which will take effect not 
                                later than the effective date of such 
                                disenrollment, or
                                    ``(II) the employer has eliminated 
                                family health coverage for all of its 
                                employees; and
                            ``(iv) to withhold from such employee's 
                        compensation the employee's share (if any) of 
                        premiums for health coverage (except that the 
                        amount so withheld may not exceed the maximum 
                        amount permitted to be withheld under section 
                        303(b) of the Consumer Credit Protection Act), 
                        and to pay such share of premiums to the 
                        insurer, except that the Secretary may provide 
                        by regulation for appropriate circumstances 
                        under which an employer may withhold less than 
                        such employee's share of such premiums.
                    ``(D) A law that prohibits an insurer from imposing 
                requirements on a State agency, which has been assigned 
                the rights of an individual eligible for medical 
                assistance under this title and covered for health 
                benefits from the insurer, that are different from 
                requirements applicable to an agent or assignee of any 
                other individual so covered.
                    ``(E) A law that requires an insurer, in any case 
                in which a child has health coverage through the 
                insurer of a noncustodial parent--
                            ``(i) to provide such information to the 
                        custodial parent as may be necessary for the 
                        child to obtain benefits through such coverage,
                            ``(ii) to permit the custodial parent (or 
                        provider, with the custodial parent's approval) 
                        to submit claims for covered services without 
                        the approval of the noncustodial parent, and
                            ``(iii) to make payment on claims submitted 
                        in accordance with clause (ii) directly to such 
                        custodial parent, the provider, or the State 
                        agency.
                    ``(F) A law that permits the State agency under 
                this title to garnish the wages, salary, or other 
                employment income of, and requires withholding amounts 
                from State tax refunds to, any person who--
                            ``(i) is required by court or 
                        administrative order to provide coverage of the 
                        costs of health services to a child who is 
                        eligible for medical assistance under this 
                        title,
                            ``(ii) has received payment from a third 
                        party for the costs of such services to such 
                        child, but
                            ``(iii) has not used such payments to 
                        reimburse, as appropriate, either the other 
                        parent or guardian of such child or the 
                        provider of such services,
                to the extent necessary to reimburse the State agency 
                for expenditures for such costs under its plan under 
                this title, but any claims for current or past-due 
                child support shall take priority over any such claims 
                for the costs of such services.
            ``(2) Definition.--For purposes of this subsection, the 
        term `insurer' includes a group health plan, as defined in 
        section 607(1) of the Employee Retirement Income Security Act 
        of 1974, a health maintenance organization, and an entity 
        offering a service benefit plan.
    ``(g) Estate Recoveries and Liens Permitted.--
            ``(1) In general.--A State may take such actions as it 
        considers appropriate to adjust or recover from the individual 
        or the individual's estate any amounts paid as medical 
        assistance to or on behalf of the individual under the State 
        plan, including through the imposition of liens against the 
        property or estate of the individual to the extent consistent 
        with section 1506.
            ``(2) No lien on family farms.--For purposes of paragraph 
        (1), a State may not impose a lien on the family farm owned by 
        the individual that is the principal residence (within the 
        meaning of section 1034 of the Internal Revenue Code of 1986) 
        of such individual as a condition of the spouse of the 
        individual receiving nursing facility or other long term care 
        benefits under the State plan.
            ``(3) No lien on trusts of disabled individuals under age 
        65.--No lien may be imposed against a trust containing the 
        assets of an individual under age 65 who is disabled (as 
        defined in section 1614(a)(3)) and which is established for the 
        benefit of such individual by a parent, grandparent, legal 
        guardian of the individual, or a court, if the State will 
        receive all amounts remaining in the trust upon the death of 
        such individual up to an amount equal to the total medical 
        assistance paid on behalf of the individual under a State plan 
        under this title.

``SEC. 1556. ASSIGNMENT OF RIGHTS OF PAYMENT.

    ``(a) In General.--For the purpose of assisting in the collection 
of medical support payments and other payments for medical care owed to 
recipients of medical assistance under the State plan, each State plan 
shall--
            ``(1) provide that, as a condition of eligibility for 
        medical assistance under the plan to an individual who has the 
        legal capacity to execute an assignment for himself, the 
        individual is required--
                    ``(A) to assign the State any rights, of the 
                individual or of any other person who is eligible for 
                medical assistance under the plan and on whose behalf 
                the individual has the legal authority to execute an 
                assignment of such rights, to support (specified as 
                support for the purpose of medical care by a court or 
                administrative order) and to payment for medical care 
                from any third party,
                    ``(B) to cooperate with the State (i) in 
                establishing the paternity of such person (referred to 
                in subparagraph (A)) if the person is a child born out 
                of wedlock, and (ii) in obtaining support and payments 
                (described in subparagraph (A)) for himself and for 
                such person, unless (in either case) the individual is 
                a pregnant woman or the individual is found to have 
                good cause for refusing to cooperate as determined by 
                the State, and
                    ``(C) to cooperate with the State in identifying, 
                and providing information to assist the State in 
                pursuing, any third party who may be liable to pay for 
                care and services available under the plan, unless such 
                individual has good cause for refusing to cooperate as 
                determined by the State; and
            ``(2) provide for entering into cooperative arrangements, 
        including financial arrangements, with any appropriate agency 
        of any State (including, with respect to the enforcement and 
        collection of rights of payment for medical care by or through 
        a parent, with a State's agency established or designated under 
section 454(3)) and with appropriate courts and law enforcement 
officials, to assist the agency or agencies administering the plan with 
respect to--
                    ``(A) the enforcement and collection of rights to 
                support or payment assigned under this section, and
                    ``(B) any other matters of common concern.
    ``(b) Use of Amounts Collected.--Such part of any amount collected 
by the State under an assignment made under the provisions of this 
section shall be retained by the State as is necessary to reimburse it 
for medical assistance payments made on behalf of an individual with 
respect to whom such assignment was executed (with appropriate 
reimbursement of the Federal Government to the extent of its 
participation in the financing of such medical assistance), and the 
remainder of such amount collected shall be paid to such individual.

``SEC. 1557. QUALITY ASSURANCE REQUIREMENTS FOR NURSING FACILITIES.

    ``(a) Nursing Facility Defined.--In this title, the term `nursing 
facility' means an institution (or a distinct part of an institution) 
which--
            ``(1) is primarily engaged in providing to residents--
                    ``(A) skilled nursing care and related services for 
                residents who require medical or nursing care,
                    ``(B) rehabilitation services for the 
                rehabilitation of injured, disabled, or sick persons, 
                or
                    ``(C) on a regular basis, health-related care and 
                services to individuals who because of their mental or 
                physical condition require care and services (above the 
                level of room and board) which can be made available to 
                them only through institutional facilities,
        and is not primarily for the care and treatment of mental 
        diseases;
            ``(2) has in effect a transfer agreement (meeting the 
        requirements of section 1861(l)) with one or more hospitals 
        having agreements in effect under section 1866; and
            ``(3) meets the requirements for a nursing facility 
        described in subsections (b), (c), and (d) of this section.
Such term also includes any facility which is located in a State on an 
Indian reservation and is certified by the Secretary as meeting the 
requirements of paragraph (1) and subsections (b), (c), and (d).
    ``(b) Requirements Relating to Provision of Services.--
            ``(1) Quality of life.--
                    ``(A) In general.--A nursing facility must care for 
                its residents in such a manner and in such an 
                environment as will promote maintenance or enhancement 
                of the quality of life of each resident.
                    ``(B) Quality assessment and assurance.--A nursing 
                facility must maintain a quality assessment and 
                assurance committee, consisting of the director of 
                nursing services, a physician designated by the 
                facility, and at least 3 other members of the 
                facility's staff, which (i) meets at least quarterly to 
                identify issues with respect to which quality 
                assessment and assurance activities are necessary and 
                (ii) develops and implements appropriate plans of 
                action to correct identified quality deficiencies. A 
                State or the Secretary may not require disclosure of 
                the records of such committee except insofar as such 
                disclosure is related to the compliance of such 
                committee with the requirements of this subparagraph.
            ``(2) Scope of services and activities under plan of 
        care.--A nursing facility must provide services and activities 
        to attain or maintain the highest practicable physical, mental, 
        and psychosocial well-being of each resident in accordance with 
        a written plan of care which--
                    ``(A) describes the medical, nursing, and 
                psychosocial needs of the resident and how such needs 
                will be met;
                    ``(B) is initially prepared, with the participation 
                to the extent practicable of the resident or the 
                resident's family or legal representative, by a team 
                which includes the resident's attending physician and a 
registered professional nurse with responsibility for the resident; and
                    ``(C) is periodically reviewed and revised by such 
                team after each assessment under paragraph (3).
            ``(3) Residents' assessment.--
                    ``(A) Requirement.--A nursing facility must conduct 
                a comprehensive, accurate, standardized, reproducible 
                assessment of each resident's functional capacity, 
                which assessment--
                            ``(i) describes the resident's capability 
                        to perform daily life functions and significant 
                        impairments in functional capacity;
                            ``(ii) is based on a uniform minimum data 
                        set specified by the Secretary under subsection 
                        (f)(6)(A);
                            ``(iii) uses an instrument which is 
                        specified by the State under subsection (e)(5); 
                        and
                            ``(iv) includes the identification of 
                        medical problems.
                    ``(B) Certification.--
                            ``(i) In general.--Each such assessment 
                        must be conducted or coordinated (with the 
                        appropriate participation of health 
                        professionals) by a registered professional 
                        nurse who signs and certifies the completion of 
                        the assessment. Each individual who completes a 
                        portion of such an assessment shall sign and 
                        certify as to the accuracy of that portion of 
                        the assessment.
                            ``(ii) Penalty for falsification.--
                                    ``(I) An individual who willfully 
                                and knowingly certifies under clause 
                                (i) a material and false statement in a 
                                resident assessment is subject to a 
                                civil money penalty of not more than 
                                $1,000 with respect to each assessment.
                                    ``(II) An individual who willfully 
                                and knowingly causes another individual 
                                to certify under clause (i) a material 
                                and false statement in a resident 
                                assessment is subject to a civil money 
                                penalty of not more than $5,000 with 
                                respect to each assessment.
                                    ``(III) The provisions of section 
                                1128A (other than subsections (a) and 
                                (b)) shall apply to a civil money 
                                penalty under this clause in the same 
                                manner as such provisions apply to a 
                                penalty or proceeding under section 
                                1128A(a).
                            ``(iii) Use of independent assessors.--If a 
                        State determines, under a survey under 
                        subsection (g) or otherwise, that there has 
                        been a knowing and willful certification of 
                        false assessments under this paragraph, the 
                        State may require (for a period specified by 
                        the State) that resident assessments under this 
                        paragraph be conducted and certified by 
                        individuals who are independent of the facility 
                        and who are approved by the State.
                    ``(C) Frequency.--
                            ``(i) In general.--Such an assessment must 
                        be conducted--
                                    ``(I) promptly upon (but no later 
                                than 14 days after the date of) 
                                admission for each individual admitted;
                                    ``(II) promptly after a significant 
                                change in the resident's physical or 
                                mental condition; and
                                    ``(III) in no case less often than 
                                once every 12 months.
                            ``(ii) Resident review.--The nursing 
                        facility must examine each resident no less 
                        frequently than once every 3 months and, as 
                        appropriate, revise the resident's assessment 
                        to assure the continuing accuracy of the 
                        assessment.
                    ``(D) Use.--The results of such an assessment shall 
                be used in developing, reviewing, and revising the 
                resident's plan of care under paragraph (2).
                    ``(E) Coordination.--Such assessments shall be 
                coordinated with any State-required preadmission 
                screening program to the maximum extent practicable in 
                order to avoid duplicative testing and effort. In 
                addition, a nursing facility shall notify the State 
                mental health authority or State mental retardation or 
                developmental disability authority, as applicable, 
                promptly after a significant change in the physical or 
                mental condition of a resident who is mentally ill or 
                mentally retarded.
            ``(4) Provision of services and activities.--
                    ``(A) In general.--To the extent needed to fulfill 
                all plans of care described in paragraph (2), a nursing 
                facility must provide (or arrange for the provision 
                of)--
                            ``(i) nursing and related services and 
                        specialized rehabilitative services to attain 
                        or maintain the highest practicable physical, 
                        mental, and psychosocial well-being of each 
                        resident;
                            ``(ii) medically-related social services to 
                        attain or maintain the highest practicable 
                        physical, mental, and psychosocial well-being 
                        of each resident;
                            ``(iii) pharmaceutical services (including 
                        procedures that assure the accurate acquiring, 
                        receiving, dispensing, and administering of all 
                        drugs and biologicals) to meet the needs of 
                        each resident;
                            ``(iv) dietary services that assure that 
                        the meals meet the daily nutritional and 
                        special dietary needs of each resident;
                            ``(v) an on-going program, directed by a 
                        qualified professional, of activities designed 
                        to meet the interests and the physical, mental, 
                        and psychosocial well-being of each resident;
                            ``(vi) routine dental services (to the 
                        extent covered under the State plan) and 
                        emergency dental services to meet the needs of 
                        each resident; and
                            ``(vii) treatment and services required by 
                        mentally ill and mentally retarded residents 
                        not otherwise provided or arranged for (or 
                        required to be provided or arranged for) by the 
                        State.
                The services provided or arranged by the facility must 
                meet professional standards of quality.
                    ``(B) Qualified persons providing services.--
                Services described in clauses (i), (ii), (iii), (iv), 
                and (vi) of subparagraph (A) must be provided by 
                qualified persons in accordance with each resident's 
                written plan of care.
                    ``(C) Required nursing care; facility waivers.--
                            ``(i) General requirements.--A nursing 
                        facility--
                                    ``(I) except as provided in clause 
                                (ii), must provide 24-hour licensed 
                                nursing services which are sufficient 
                                to meet the nursing needs of its 
                                residents, and
                                    ``(II) except as provided in clause 
                                (ii), must use the services of a 
                                registered professional nurse for at 
                                least 8 consecutive hours a day, 7 days 
                                a week.
                            ``(ii) Waiver by state.--To the extent that 
                        a facility is unable to meet the requirements 
                        of clause (i), a State may waive such 
                        requirements with respect to the facility if--
                                    ``(I) the facility demonstrates to 
                                the satisfaction of the State that the 
                                facility has been unable, despite 
                                diligent efforts (including offering 
                                wages at the community prevailing rate 
                                for nursing facilities), to recruit 
                                appropriate personnel,
                                    ``(II) the State determines that a 
                                waiver of the requirement will not 
                                endanger the health or safety of 
                                individuals staying in the facility,
                                    ``(III) the State finds that, for 
                                any such periods in which licensed 
                                nursing services are not available, a 
                                registered professional nurse or a 
physician is obligated to respond immediately to telephone calls from 
the facility,
                                    ``(IV) the State agency granting a 
                                waiver of such requirements provides 
                                notice of the waiver to the State long-
                                term care ombudsman (established under 
                                section 307(a)(12) of the Older 
                                Americans Act of 1965) and the 
                                protection and advocacy system in the 
                                State for the mentally ill and the 
                                mentally retarded, and
                                    ``(V) the nursing facility that is 
                                granted such a waiver by a State 
                                notifies residents of the facility (or, 
                                where appropriate, the guardians or 
                                legal representatives of such 
                                residents) and members of their 
                                immediate families of the waiver.
                        A waiver under this clause shall be subject to 
                        annual review and to the review of the 
                        Secretary and subject to clause (iii) shall be 
                        accepted by the Secretary for purposes of this 
                        title to the same extent as is the State's 
                        certification of the facility. In granting or 
                        renewing a waiver, a State may require the 
                        facility to use other qualified, licensed 
                        personnel.
                            ``(iii) Assumption of waiver authority by 
                        secretary.--If the Secretary determines that a 
                        State has shown a clear pattern and practice of 
                        allowing waivers in the absence of diligent 
                        efforts by facilities to meet the staffing 
                        requirements, the Secretary shall assume and 
                        exercise the authority of the State to grant 
                        waivers.
            ``(5) Required training of nurse aides.--
                    ``(A) In general.--(i) Except as provided in clause 
                (ii), a nursing facility must not use on a full-time 
                basis any individual as a nurse aide in the facility, 
                for more than 4 months unless the individual--
                            ``(I) has completed a training and 
                        competency evaluation program, or a competency 
                        evaluation program, approved by the State under 
                        subsection (e)(1)(A), and
                            ``(II) is competent to provide nursing or 
                        nursing-related services.
                    ``(ii) A nursing facility must not use on a 
                temporary, per diem, leased, or on any other basis 
                other than as a permanent employee any individual as a 
                nurse aide in the facility, unless the individual meets 
                the requirements described in clause (i).
                    ``(B) Offering competency evaluation programs for 
                current employees.--A nursing facility must provide, 
                for individuals used as a nurse aide by the facility, 
                for a competency evaluation program approved by the 
                State under subsection (e)(1) and such preparation as 
                may be necessary for the individual to complete such a 
                program.
                    ``(C) Competency.--The nursing facility must not 
                permit an individual, other than in a training and 
                competency evaluation program approved by the State, to 
                serve as a nurse aide or provide services of a type for 
                which the individual has not demonstrated competency 
                and must not use such an individual as a nurse aide 
                unless the facility has inquired of any State registry 
                established under subsection (e)(2)(A) that the 
                facility believes will include information concerning 
                the individual.
                    ``(D) Re-training required.--For purposes of 
                subparagraph (A), if, since an individual's most recent 
                completion of a training and competency evaluation 
                program, there has been a continuous period of 24 
                consecutive months during none of which the individual 
                performed nursing or nursing-related services for 
                monetary compensation, such individual shall complete a 
                new training and competency evaluation program, or a 
                new competency evaluation program.
                    ``(E) Regular in-service education.--The nursing 
                facility must provide such regular performance review 
and regular in-service education as assures that individuals used as 
nurse aides are competent to perform services as nurse aides, including 
training for individuals providing nursing and nursing-related services 
to residents with cognitive impairments.
                    ``(F) Nurse aide defined.--In this paragraph, the 
                term `nurse aide' means any individual providing 
                nursing or nursing-related services to residents in a 
                nursing facility, but does not include an individual--
                            ``(i) who is a licensed health professional 
                        (as defined in subparagraph (G)) or a 
                        registered dietitian, or
                            ``(ii) who volunteers to provide such 
                        services without monetary compensation.
                    ``(G) Licensed health professional defined.--In 
                this paragraph, the term `licensed health professional' 
                means a physician, physician assistant, nurse 
                practitioner, physical, speech, or occupational 
                therapist, physical or occupational therapy assistant, 
                registered professional nurse, licensed practical 
                nurse, or licensed or certified social worker.
            ``(6) Physician supervision and clinical records.--A 
        nursing facility must--
                    ``(A) require that the health care of every 
                resident be provided under the supervision of a 
                physician (or, at the option of a State, under the 
                supervision of a nurse practitioner, clinical nurse 
                specialist, or physician assistant who is not an 
                employee of the facility but who is working in 
                collaboration with a physician);
                    ``(B) provide for having a physician available to 
                furnish necessary medical care in case of emergency; 
                and
                    ``(C) maintain clinical records on all residents, 
                which records include the plans of care (described in 
                paragraph (2)) and the residents' assessments 
                (described in paragraph (3)), as well as the results of 
                any pre-admission screening conducted under subsection 
                (e)(7).
            ``(7) Required social services.--In the case of a nursing 
        facility with more than 120 beds, the facility must have at 
        least one social worker (with at least a bachelor's degree in 
        social work or similar professional qualifications) employed 
        full-time to provide or assure the provision of social 
        services.
    ``(c) Requirements Relating to Residents' Rights.--
            ``(1) General rights.--
                    ``(A) Specified rights.--A nursing facility must 
                protect and promote the rights of each resident, 
                including each of the following rights:
                            ``(i) Free choice.--The right to choose a 
                        personal attending physician, to be fully 
                        informed in advance about care and treatment, 
                        to be fully informed in advance of any changes 
                        in care or treatment that may affect the 
                        resident's well-being, and (except with respect 
                        to a resident adjudged incompetent) to 
                        participate in planning care and treatment or 
                        changes in care and treatment.
                            ``(ii) Free from restraints.--The right to 
                        be free from physical or mental abuse, corporal 
                        punishment, involuntary seclusion, and any 
                        physical or chemical restraints imposed for 
                        purposes of discipline or convenience and not 
                        required to treat the resident's medical 
                        symptoms. Restraints may only be imposed--
                                    ``(I) to ensure the physical safety 
                                of the resident or other residents, and
                                    ``(II) only upon the written order 
                                of a physician that specifies the 
                                duration and circumstances under which 
                                the restraints are to be used (except 
                                in emergency circumstances specified by 
                                the Secretary until such an order could 
                                reasonably be obtained).
                            ``(iii) Privacy.--The right to privacy with 
                        regard to accommodations, medical treatment, 
                        written and telephonic communications, visits, 
                        and meetings of family and of resident groups.
                            ``(iv) Confidentiality.--The right to 
                        confidentiality of personal and clinical 
                        records and to access to current clinical 
                        records of the resident upon request by the 
                        resident or the resident's legal 
                        representative, within 24 hours (excluding 
                        hours occurring during a weekend or holiday) 
                        after making such a request.
                            ``(v) Accommodation of needs.--The right--
                                    ``(I) to reside and receive 
                                services with reasonable accommodation 
                                of individual needs and preferences, 
                                except where the health or safety of 
                                the individual or other residents would 
                                be endangered, and
                                    ``(II) to receive notice before the 
                                room or roommate of the resident in the 
                                facility is changed.
                            ``(vi) Grievances.--The right to voice 
                        grievances with respect to treatment or care 
                        that is (or fails to be) furnished, without 
                        discrimination or reprisal for voicing the 
                        grievances and the right to prompt efforts by 
                        the facility to resolve grievances the resident 
                        may have, including those with respect to the 
                        behavior of other residents.
                            ``(vii) Participation in resident and 
                        family groups.--The right of the resident to 
                        organize and participate in resident groups in 
                        the facility and the right of the resident's 
                        family to meet in the facility with the 
                        families of other residents in the facility.
                            ``(viii) Participation in other 
                        activities.--The right of the resident to 
                        participate in social, religious, and community 
                        activities that do not interfere with the 
                        rights of other residents in the facility.
                            ``(ix) Examination of survey results.--The 
                        right to examine, upon reasonable request, the 
                        results of the most recent survey of the 
                        facility conducted by the Secretary or a State 
                        with respect to the facility and any plan of 
                        correction in effect with respect to the 
                        facility.
                            ``(x) Refusal of certain transfers.--The 
                        right to refuse a transfer to another room 
                        within the facility, if a purpose of the 
                        transfer is to relocate the resident from a 
                        portion of the facility that is not a skilled 
                        nursing facility (for purposes of title XVIII) 
                        to a portion of the facility that is such a 
                        skilled nursing facility.
                            ``(xi) Other rights.--Any other right 
                        established by the Secretary.
                Clause (i) shall not be construed as precluding a State 
                from requiring a resident of a nursing facility to 
                choose a personal attending physician who participates 
                in a managed care network under a contract with the 
                State to provide medical assistance under this title. 
                Clause (iii) shall not be construed as requiring the 
                provision of a private room. A resident's exercise of a 
                right to refuse transfer under clause (x) shall not 
                affect the resident's eligibility or entitlement to 
                medical assistance under this title or a State's 
                entitlement to Federal medical assistance under this 
                title with respect to services furnished to such a 
                resident.
                    ``(B) Notice of rights.--A nursing facility must--
                            ``(i) inform each resident, orally and in 
                        writing at the time of admission to the 
                        facility, of the resident's legal rights during 
                        the stay at the facility and of the 
                        requirements and procedures for establishing 
                        eligibility for medical assistance under 
this title, including the right to request an assessment under section 
1505(c)(1)(B);
                            ``(ii) make available to each resident, 
                        upon reasonable request, a written statement of 
                        such rights (which statement is updated upon 
                        changes in such rights) including the notice 
                        (if any) of the State developed under 
                        subsection (e)(6);
                            ``(iii) inform each resident who is 
                        entitled to medical assistance under this 
                        title--
                                    ``(I) at the time of admission to 
                                the facility or, if later, at the time 
                                the resident becomes eligible for such 
                                assistance, of the items and services 
                                that are included in nursing facility 
                                services under the State plan and for 
                                which the resident may not be charged, 
                                and of those other items and services 
                                that the facility offers and for which 
                                the resident may be charged and the 
                                amount of the charges for such items 
                                and services, and
                                    ``(II) of changes in the items and 
                                services described in subclause (I) and 
                                of changes in the charges imposed for 
                                items and services described in that 
                                subclause; and
                            ``(iv) inform each other resident, in 
                        writing before or at the time of admission and 
                        periodically during the resident's stay, of 
                        services available in the facility and of 
                        related charges for such services, including 
                        any charges for services not covered under 
                        title XVIII or by the facility's basic per diem 
                        charge.
                The written description of legal rights under this 
                subparagraph shall include a description of the 
                protection of personal funds under paragraph (6) and a 
                statement that a resident may file a complaint with a 
                State survey and certification agency respecting 
                resident abuse and neglect and misappropriation of 
                resident property in the facility.
                    ``(C) Rights of incompetent residents.--In the case 
                of a resident adjudged incompetent under the laws of a 
                State, the rights of the resident under this title 
                shall devolve upon, and, to the extent judged necessary 
                by a court of competent jurisdiction, be exercised by, 
                the person appointed under State law to act on the 
                resident's behalf.
                    ``(D) Use of psychopharmacologic drugs.--
                Psychopharmacologic drugs may be administered only on 
                the orders of a physician and only as part of a plan 
                (included in the written plan of care described in 
                paragraph (2)) designed to eliminate or modify the 
                symptoms for which the drugs are prescribed and only 
                if, at least annually an independent, external 
                consultant reviews the appropriateness of the drug plan 
                of each resident receiving such drugs.
            ``(2) Transfer and discharge rights.--
                    ``(A) In general.--A nursing facility must permit 
                each resident to remain in the facility and must not 
                transfer or discharge the resident from the facility 
                unless--
                            ``(i) the transfer or discharge is 
                        necessary to meet the resident's welfare and 
                        the resident's welfare cannot be met in the 
                        facility;
                            ``(ii) the transfer or discharge is 
                        appropriate because the resident's health has 
                        improved sufficiently so the resident no longer 
                        needs the services provided by the facility;
                            ``(iii) the safety of individuals in the 
                        facility is endangered;
                            ``(iv) the health of individuals in the 
                        facility would otherwise be endangered;
                            ``(v) the resident has failed, after 
                        reasonable and appropriate notice, to pay (or 
                        to have paid under this title or title XVIII on 
                        the resident's behalf) for a stay at the 
                        facility; or
                            ``(vi) the facility ceases to operate.
                In each of the cases described in clauses (i) through 
                (iv), the basis for the transfer or discharge must be 
                documented in the resident's clinical record. In the 
                cases described in clauses (i) and (ii), the 
                documentation must be made by the resident's physician, 
                and in the case described in clause (iv) the 
                documentation must be made by a physician. For purposes 
                of clause (v), in the case of a resident who becomes 
                eligible for assistance under this title after 
                admission to the facility, only charges which may be 
                imposed under this title shall be considered to be 
                allowable.
                    ``(B) Pre-transfer and pre-discharge notice.--
                            ``(i) In general.--Before effecting a 
                        transfer or discharge of a resident, a nursing 
                        facility must--
                                    ``(I) notify the resident (and, if 
                                known, an immediate family member of 
                                the resident or legal representative) 
                                of the transfer or discharge and the 
                                reasons therefor,
                                    ``(II) record the reasons in the 
                                resident's clinical record (including 
                                any documentation required under 
                                subparagraph (A)), and
                                    ``(III) include in the notice the 
                                items described in clause (iii).
                            ``(ii) Timing of notice.--The notice under 
                        clause (i)(I) must be made at least 30 days in 
                        advance of the resident's transfer or discharge 
                        except--
                                    ``(I) in a case described in clause 
                                (iii) or (iv) of subparagraph (A);
                                    ``(II) in a case described in 
                                clause (ii) of subparagraph (A), where 
                                the resident's health improves 
                                sufficiently to allow a more immediate 
                                transfer or discharge;
                                    ``(III) in a case described in 
                                clause (i) of subparagraph (A), where a 
                                more immediate transfer or discharge is 
                                necessitated by the resident's urgent 
                                medical needs; or
                                    ``(IV) in a case where a resident 
                                has not resided in the facility for 30 
                                days.
                        In the case of such exceptions, notice must be 
                        given as many days before the date of the 
                        transfer or discharge as is practicable.
                            ``(iii) Items included in notice.--Each 
                        notice under clause (i) must include--
                                    ``(I) notice of the resident's 
                                right to appeal the transfer or 
                                discharge under the State process 
                                established under subsection (e)(3);
                                    ``(II) the name, mailing address, 
                                and telephone number of the State long-
                                term care ombudsman (established under 
                                title III or VII of the Older Americans 
                                Act of 1965);
                                    ``(III) in the case of residents 
                                with developmental disabilities, the 
                                mailing address and telephone number of 
                                the agency responsible for the 
                                protection and advocacy system for 
                                developmentally disabled individuals 
                                established under part C of the 
                                Developmental Disabilities Assistance 
                                and Bill of Rights Act; and
                                    ``(IV) in the case of mentally ill 
                                residents (as defined in subsection 
                                (e)(7)(G)(i)), the mailing address and 
                                telephone number of the agency 
                                responsible for the protection and 
                                advocacy system for mentally ill 
                                individuals established under the 
                                Protection and Advocacy for Mentally 
                                Ill Individuals Act.
                    ``(C) Orientation.--A nursing facility must provide 
                sufficient preparation and orientation to residents to 
                ensure safe and orderly transfer or discharge from the 
                facility.
                    ``(D) Notice on bed-hold policy and readmission.--
                            ``(i) Notice before transfer.--Before a 
                        resident of a nursing facility is transferred 
                        for hospitalization or therapeutic leave, a 
                        nursing facility must provide written 
                        information to the resident and an immediate 
                        family member or legal representative 
                        concerning--
                                    ``(I) the provisions of the State 
                                plan under this title regarding the 
                                period (if any) during which the 
                                resident will be permitted under the 
                                State plan to return and resume 
                                residence in the facility, and
                                    ``(II) the policies of the facility 
                                regarding such a period, which policies 
                                must be consistent with clause (iii).
                            ``(ii) Notice upon transfer.--At the time 
                        of transfer of a resident to a hospital or for 
                        therapeutic leave, a nursing facility must 
                        provide written notice to the resident and an 
                        immediate family member or legal representative 
                        of the duration of any period described in 
                        clause (i).
                            ``(iii) Permitting resident to return.--A 
                        nursing facility must establish and follow a 
                        written policy under which a resident--
                                    ``(I) who is eligible for medical 
                                assistance for nursing facility 
                                services under a State plan,
                                    ``(II) who is transferred from the 
                                facility for hospitalization or 
                                therapeutic leave, and
                                    ``(III) whose hospitalization or 
                                therapeutic leave exceeds a period paid 
                                for under the State plan for the 
                                holding of a bed in the facility for 
                                the resident,
                        will be permitted to be readmitted to the 
                        facility immediately upon the first 
                        availability of a bed in a room (not including 
                        a private room) in the facility if, at the time 
                        of readmission, the resident requires the 
                        services provided by the facility.
            ``(3) Access and visitation rights.--A nursing facility 
        must--
                    ``(A) permit immediate access to any resident by 
                any representative of the Secretary, by any 
                representative of the State, by an ombudsman or agency 
                described in subclause (II), (III), or (IV) of 
                paragraph (2)(B)(iii), or by the resident's individual 
                physician;
                    ``(B) permit immediate access to a resident, 
                subject to the resident's right to deny or withdraw 
                consent at any time, by immediate family or other 
                relatives of the resident;
                    ``(C) permit immediate access to a resident, 
                subject to reasonable restrictions and the resident's 
                right to deny or withdraw consent at any time, by 
                others who are visiting with the consent of the 
                resident;
                    ``(D) permit reasonable access to a resident by any 
                entity or individual that provides health, social, 
                legal, or other services to the resident, subject to 
                the resident's right to deny or withdraw consent at any 
                time; and
                    ``(E) permit representatives of the State ombudsman 
                (described in paragraph (2)(B)(iii)(II)), with the 
                permission of the resident (or the resident's legal 
                representative) and consistent with State law, to 
                examine a resident's clinical records.
            ``(4) Equal access to quality care.--
                    ``(A) In general.--A nursing facility must 
                establish and maintain identical policies and practices 
                regarding transfer, discharge, and the provision of 
                services required under the State plan for all 
                individuals regardless of source of payment.
                    ``(B) Construction.--
                            ``(i) Nothing prohibiting any charges for 
                        non-medical assistance patients.--Subparagraph 
                        (A) shall not be construed as prohibiting a 
                        nursing facility from charging any amount 
for services furnished, consistent with the notice in paragraph (1)(B) 
describing such charges.
                            ``(ii) No additional services required.--
                        Subparagraph (A) shall not be construed as 
                        requiring a State to offer additional services 
                        on behalf of a resident than are otherwise 
                        provided under the State plan.
            ``(5) Admissions Policy.--
                    ``(A) Admissions.--With respect to admissions 
                practices, a nursing facility must--
                            ``(i)(I) not require individuals applying 
                        to reside or residing in the facility to waive 
                        their rights to benefits under a State plan 
                        under this title or title XVIII, (II) not 
                        require oral or written assurance that such 
                        individuals are not eligible for, or will not 
                        apply for, benefits under a State plan under 
                        this title or title XVIII, and (III) 
                        prominently display in the facility written 
                        information, and provide to such individuals 
                        oral and written information, about how to 
                        apply for and use such benefits and how to 
                        receive refunds for previous payments covered 
                        by such benefits;
                            ``(ii) not require a third party guarantee 
                        of payment to the facility as a condition of 
                        admission (or expedited admission) to, or 
                        continued stay in, the facility; and
                            ``(iii) in the case of an individual who is 
                        provided medical assistance for nursing 
                        facility services, not charge, solicit, accept, 
                        or receive, in addition to any amount otherwise 
                        required to be paid under the State plan under 
                        this title, any gift, money, donation, or other 
                        consideration as a precondition of admitting 
                        (or expediting the admission of) the individual 
                        to the facility or as a requirement for the 
                        individual's continued stay in the facility.
                    ``(B) Construction.--
                            ``(i) No preemption of stricter 
                        standards.--Subparagraph (A) shall not be 
                        construed as preventing States or political 
                        subdivisions therein from prohibiting, under 
                        State or local law, the discrimination against 
                        individuals who are provided medical assistance 
                        under the State plan with respect to admissions 
                        practices of nursing facilities.
                            ``(ii) Contracts with legal 
                        representatives.--Subparagraph (A)(ii) shall 
                        not be construed as preventing a facility from 
                        requiring an individual, who has legal access 
                        to a resident's income or resources available 
                        to pay for care in the facility, to sign a 
                        contract (without incurring personal financial 
                        liability) to provide payment from the 
                        resident's income or resources for such care.
                            ``(iii) Charges for additional services 
                        requested.--Subparagraph (A)(iii) shall not be 
                        construed as preventing a facility from 
                        charging a resident, eligible for medical 
                        assistance under the State plan, for items or 
                        services the resident has requested and 
                        received and that are not specified in the 
                        State plan as included in covered nursing 
                        facility services.
                            ``(iv) Bona fide contributions.--
                        Subparagraph (A)(iii) shall not be construed as 
                        prohibiting a nursing facility from soliciting, 
                        accepting, or receiving a charitable, 
                        religious, or philanthropic contribution from 
                        an organization or from a person unrelated to 
                        the resident (or potential resident), but only 
                        to the extent that such contribution is not a 
                        condition of admission, expediting admission, 
                        or continued stay in the facility.
            ``(6) Protection of resident funds.--
                    ``(A) In general.--The nursing facility--
                            ``(i) may not require residents to deposit 
                        their personal funds with the facility, and
                            ``(ii) upon the written authorization of 
                        the resident, must hold, safeguard, and account 
                        for such personal funds under a system 
                        established and maintained by the facility in 
                        accordance with this paragraph.
                    ``(B) Management of personal funds.--Upon written 
                authorization of a resident under subparagraph (A)(ii), 
                the facility must manage and account for the personal 
                funds of the resident deposited with the facility as 
                follows:
                            ``(i) Deposit.--The facility must deposit 
                        any amount of personal funds in excess of $50 
                        with respect to a resident in an interest 
                        bearing account (or accounts) that is separate 
                        from any of the facility's operating accounts 
                        and credits all interest earned on such 
                        separate account to such account. With respect 
                        to any other personal funds, the facility must 
                        maintain such funds in a non-interest bearing 
                        account or petty cash fund.
                            ``(ii) Accounting and records.--The 
                        facility must assure a full and complete 
                        separate accounting of each such resident's 
                        personal funds, maintain a written record of 
                        all financial transactions involving the 
                        personal funds of a resident deposited with the 
                        facility, and afford the resident (or a legal 
                        representative of the resident) reasonable 
                        access to such record.
                            ``(iii) Notice of certain balances.--The 
                        facility must notify each resident receiving 
                        medical assistance under the State plan when 
                        the amount in the resident's account reaches 
                        $200 less than the dollar amount determined 
                        under section 1611(a)(3)(B) and the fact that 
                        if the amount in the account (in addition to 
                        the value of the resident's other nonexempt 
                        resources) reaches the amount determined under 
                        such section the resident may lose eligibility 
                        for such medical assistance or for benefits 
                        under title XVI.
                            ``(iv) Conveyance upon death.--Upon the 
                        death of a resident with such an account, the 
                        facility must convey promptly the resident's 
                        personal funds (and a final accounting of such 
                        funds) to the individual administering the 
                        resident's estate. All other personal property, 
                        including medical records, shall be considered 
                        part of the resident's estate and shall only be 
                        released to the administrator of the estate.
                    ``(C) Assurance of financial security.--The 
                facility must purchase a surety bond, or otherwise 
                provide assurance satisfactory to the State, to assure 
                the security of all personal funds of residents 
                deposited with the facility.
                    ``(D) Limitation on charges to personal funds.--The 
                facility may not impose a charge against the personal 
                funds of a resident for any item or service for which 
                payment is made under this title or title XVIII.
            ``(7) Limitation on charges in case of medical-assistance-
        eligible individuals.--
                    ``(A) In general.--A nursing facility may not 
                impose charges, for certain medical-assistance-eligible 
                individuals for nursing facility services covered by 
                the State under its plan under this title, that exceed 
                the payment amounts established by the State for such 
                services under this title.
                    ``(B) Certain medical-assistance-eligible 
                individuals defined.--In subparagraph (A), the term 
                `certain medical-assistance-eligible individual' means 
                an individual who is entitled to medical assistance for 
                nursing facility services in the facility under this 
                title but with respect to whom such benefits are not 
                being paid because, in determining the amount of the 
                individual's income to be applied monthly to payment 
                for the costs of such services, the amount of such 
income exceeds the payment amounts established by the State for such 
services under this title.
            ``(8) Posting of survey results.--A nursing facility must 
        post in a place readily accessible to residents, and family 
        members and legal representatives of residents, the results of 
        the most recent survey of the facility conducted under 
        subsection (g).
    ``(d) Requirements Relating to Administration and Other Matters.--
            ``(1) Administration.--
                    ``(A) In general.--A nursing facility must be 
                administered in a manner that enables it to use its 
                resources effectively and efficiently to attain or 
                maintain the highest practicable physical, mental, and 
                psychosocial well-being of each resident (consistent 
                with requirements established under subsection (f)(5)).
                    ``(B) Required notices.--If a change occurs in--
                            ``(i) the persons with an ownership or 
                        control interest (as defined in section 
                        1124(a)(3)) in the facility,
                            ``(ii) the persons who are officers, 
                        directors, agents, or managing employees (as 
                        defined in section 1126(b)) of the facility,
                            ``(iii) the corporation, association, or 
                        other company responsible for the management of 
                        the facility, or
                            ``(iv) the individual who is the 
                        administrator or director of nursing of the 
                        facility,
                the nursing facility must provide notice to the State 
                agency responsible for the licensing of the facility, 
                at the time of the change, of the change and of the 
                identity of each new person, company, or individual 
                described in the respective clause.
                    ``(C) Nursing facility administrator.--The 
                administrator of a nursing facility, whether 
                freestanding or hospital-based, must meet such 
                standards as are established by the Secretary under 
                subsection (f)(4).
            ``(2) Licensing and life safety code.--
                    ``(A) Licensing.--A nursing facility must be 
                licensed under applicable State and local law.
                    ``(B) Life safety code.--A nursing facility must 
                meet such provisions of such edition (as specified by 
                the Secretary in regulation) of the Life Safety Code of 
                the National Fire Protection Association as are 
                applicable to nursing homes; except that--
                            ``(i) the Secretary may waive, for such 
                        periods as he deems appropriate, specific 
                        provisions of such Code which if rigidly 
                        applied would result in unreasonable hardship 
                        upon a facility, but only if such waiver would 
                        not adversely affect the health and safety of 
                        residents or personnel, and
                            ``(ii) the provisions of such Code shall 
                        not apply in any State if the Secretary finds 
                        that in such State there is in effect a fire 
                        and safety code, imposed by State law, which 
                        adequately protects residents of and personnel 
                        in nursing facilities.
            ``(3) Sanitary and infection control and physical 
        environment.--A nursing facility must--
                    ``(A) establish and maintain an infection control 
                program designed to provide a safe, sanitary, and 
                comfortable environment in which residents reside and 
                to help prevent the development and transmission of 
                disease and infection, and
                    ``(B) be designed, constructed, equipped, and 
                maintained in a manner to protect the health and safety 
                of residents, personnel, and the general public.
            ``(4) Miscellaneous.--
                    ``(A) Compliance with federal, state, and local 
                laws and professional standards.--A nursing facility, 
                whether freestanding or hospital-based, must operate 
                and provide services in compliance with all applicable 
                Federal, State, and local laws and regulations 
(including the requirements of section 1124) and with accepted 
professional standards and principles which apply to professionals 
providing services in such a facility.
                    ``(B) Other.--A nursing facility must meet such 
                other requirements relating to the health and safety of 
                residents or relating to the physical facilities 
                thereof as the Secretary may find necessary.
    ``(e) State Requirements Relating to Nursing Facility 
Requirements.--A State with a State plan under this title shall provide 
for the following:
            ``(1) Specification and review of nurse aide training and 
        competency evaluation programs and of nurse aide competency 
        evaluation programs.--The State must--
                    ``(A) specify those training and competency 
                evaluation programs, and those competency evaluation 
                programs, that the State approves for purposes of 
                subsection (b)(5) and that meet the requirements 
                established under subsection (f)(2), and
                    ``(B) provide for the review and reapproval of such 
                programs, at a frequency and using a methodology 
                consistent with the requirements established under 
                subsection (f)(2)(A)(iii).
            ``(2) Nurse aide registry.--
                    ``(A) In general.--The State shall establish and 
                maintain a registry of all individuals who have 
                satisfactorily completed a nurse aide training and 
                competency evaluation program, or a nurse aide 
                competency evaluation program, approved under paragraph 
                (1) in the State, or any individual described in 
                subsection (f)(2)(B)(ii) or in subparagraph (B), (C), 
                or (D) of section 6901(b)(4) of the Omnibus Budget 
                Reconciliation Act of 1989.
                    ``(B) Information in registry.--The registry under 
                subparagraph (A) shall provide (in accordance with 
                regulations of the Secretary) for the inclusion of 
                specific documented findings by a State under 
                subsection (g)(1)(C) of resident neglect or abuse or 
                misappropriation of resident property involving an 
                individual listed in the registry, as well as any brief 
                statement of the individual disputing the findings. The 
                State shall make available to the public information in 
                the registry. In the case of inquiries to the registry 
                concerning an individual listed in the registry, any 
                information disclosed concerning such a finding shall 
                also include disclosure of any such statement in the 
                registry relating to the finding or a clear and 
                accurate summary of such a statement.
                    ``(C) Prohibition against charges.--A State may not 
                impose any charges on a nurse aide relating to the 
                registry established and maintained under subparagraph 
                (A).
            ``(3) State appeals process for transfers and discharges.--
        The State must provide for a fair mechanism, meeting the 
        guidelines established under subsection (f)(3), for hearing 
        appeals on transfers and discharges of residents of such 
        facilities.
            ``(4) Nursing facility administrator standards.--The State 
        must implement and enforce the nursing facility administrator 
        standards developed under subsection (f)(4) respecting the 
        qualification of administrators of nursing facilities. Any such 
        standards promulgated shall apply to administrators of 
        hospital-based facilities as well as administrators of 
        freestanding facilities.
            ``(5) Specification of resident assessment instrument.--The 
        State shall specify the instrument to be used by nursing 
        facilities in the State in complying with the requirement of 
        subsection (b)(3)(A)(iii). Such instrument shall be--
                    (A) one of the instruments designated under 
                subsection (f)(6)(B), or
                    (B) an instrument which the Secretary has approved 
                as being consistent with the minimum data set of core 
elements, common definitions, and utilization guidelines specified by 
the Secretary under subsection (f)(6)(A).
            ``(6) Notice of rights.--Each State shall develop (and 
        periodically update) a written notice of the rights and 
        obligations of residents of nursing facilities (and spouses of 
        such residents) under this title.
            ``(7) State requirements for preadmission screening and 
        resident review.--
                    ``(A) Preadmission screening.--
                            ``(i) In general.--The State must have in 
                        effect a preadmission screening program, for 
                        identifying mentally ill and mentally retarded 
                        individuals (as defined in subparagraph (B)) 
                        who are admitted to nursing facilities and for 
                        determining whether they require the level of 
                        services of such a facility.
                            ``(ii) State requirement for resident 
                        review.--The State shall notify the State 
                        mental health authority or the State mental 
                        retardation or developmental disability 
                        authority, as appropriate, of the individuals 
                        so identified.
                    ``(B) Definitions.--In this paragraph:
                            ``(i) An individual is considered to be 
                        `mentally ill' if the individual has a serious 
                        mental illness (as defined by the Secretary in 
                        consultation with the National Institute of 
                        Mental Health) and does not have a primary 
                        diagnosis of dementia (including Alzheimer's 
                        disease or a related disorder) or a diagnosis 
                        (other than a primary diagnosis) of dementia 
                        and a primary diagnosis that is not a serious 
                        mental illness.
                            ``(ii) An individual is considered to be 
                        `mentally retarded' if the individual is 
                        mentally retarded or a person with a related 
                        condition.
    ``(f) Responsibilities Relating to Nursing Facility Requirements.--
            ``(1) General responsibility.--It is the duty and 
        responsibility of the Secretary to assure that requirements 
        which govern the provision of care in nursing facilities under 
        State plans approved under this title, and the enforcement of 
        such requirements, are adequate to protect the health, safety, 
        welfare, and rights of residents and to promote the effective 
        and efficient use of public moneys.
            ``(2) Requirements for nurse aide training and competency 
        evaluation programs and for nurse aide competency evaluation 
        programs.--
                    ``(A) In general.--For purposes of subsections 
                (b)(5) and (e)(1)(A), the Secretary shall establish--
                            ``(i) requirements for the approval of 
                        nurse aide training and competency evaluation 
                        programs, including requirements relating to 
                        (I) the areas to be covered in such a program 
                        (including at least basic nursing skills, 
                        personal care skills, recognition of mental 
                        health and social service needs, care of 
                        cognitively impaired residents, basic 
                        restorative services, and residents' rights) 
                        and content of the curriculum, (II) minimum 
                        hours of initial and ongoing training and 
                        retraining (including not less than 75 hours in 
                        the case of initial training), (III) 
                        qualifications of instructors, and (IV) 
                        procedures for determination of competency;
                            ``(ii) requirements for the approval of 
                        nurse aide competency evaluation programs, 
                        including requirement relating to the areas to 
                        be covered in such a program, including at 
                        least basic nursing skills, personal care 
                        skills, recognition of mental health and social 
                        service needs, care of cognitively impaired 
                        residents, basic restorative services, and 
                        residents' rights, and procedures for 
                        determination of competency;
                            ``(iii) requirements respecting the minimum 
                        frequency and methodology to be used by a 
State in reviewing such programs' compliance with the requirements for 
such programs; and
                            ``(iv) requirements, under both such 
                        programs, that--
                                    ``(I) provide procedures for 
                                determining competency that permit a 
                                nurse aide, at the nurse aide's option, 
                                to establish competency through 
                                procedures or methods other than the 
                                passing of a written examination and to 
                                have the competency evaluation 
                                conducted at the nursing facility at 
                                which the aide is (or will be) employed 
                                (unless the facility is described in 
                                subparagraph (B)(iii)(I)),
                                    ``(II) prohibit the imposition on a 
                                nurse aide who is employed by (or who 
                                has received an offer of employment 
                                from) a facility on the date on which 
                                the aide begins either such program of 
                                any charges (including any charges for 
                                textbooks and other required course 
                                materials and any charges for the 
                                competency evaluation) for either such 
                                program, and
                                    ``(III) in the case of a nurse aide 
                                not described in subclause (II) who is 
                                employed by (or who has received an 
                                offer of employment from) a facility 
                                not later than 12 months after 
                                completing either such program, the 
                                State shall provide for the 
                                reimbursement of costs incurred in 
                                completing such program on a prorata 
                                basis during the period in which the 
                                nurse aide is so employed.
                    ``(B) Approval of certain programs.--Such 
                requirements--
                            ``(i) may permit approval of programs 
                        offered by or in facilities, as well as outside 
                        facilities (including employee organizations);
                            ``(ii) shall permit a State to find that an 
                        individual who has completed (before July 1, 
                        1989) a nurse aide training and competency 
                        evaluation program shall be deemed to have 
                        completed such a program approved under 
                        subsection (b)(5) if the State determines that, 
                        at the time the program was offered, the 
                        program met the requirements for approval under 
                        such paragraph; and
                            ``(iii) subject to subparagraph (C), shall 
                        prohibit approval of such a program--
                                    ``(I) offered by or in a nursing 
                                facility which, within the previous 2 
                                years--
                                            ``(a) has operated under a 
                                        waiver under subsection 
                                        (b)(4)(C)(ii) that was granted 
                                        on the basis of a demonstration 
                                        that the facility is unable to 
                                        provide the nursing care 
                                        required under subsection 
                                        (b)(4)(C)(i) for a period in 
                                        excess of 48 hours during a 
                                        week;
                                            ``(b) has been subject to 
                                        an extended (or partial 
                                        extended) survey under section 
                                        1819(g)(2)(B)(i) or subsection 
                                        (g)(2)(B)(i); or
                                            ``(c) has been assessed a 
                                        civil money penalty described 
                                        in section 1819(h)(2)(B)(ii) or 
                                        subsection (h)(2)(A)(ii) of not 
                                        less than $5,000, or has been 
                                        subject to a remedy described 
                                        in subsection (h)(1)(B)(i), 
                                        clauses (i), (iii), or (iv) of 
                                        subsection (h)(2)(A), clauses 
                                        (i) or (iii) of section 
                                        1819(h)(2)(B), or section 
                                        1819(h)(4), or
                                    ``(II) offered by or in a nursing 
                                facility unless the State makes the 
                                determination, upon an individual's 
                                completion of the program, that the 
                                individual is competent to provide 
                                nursing and nursing-related services in 
                                nursing facilities.
                        A State may not delegate (through subcontract 
                        or otherwise) its responsibility under clause 
                        (iii)(II) to the nursing facility.
                    ``(C) Waiver authorized.--Clause (iii) of 
                subparagraph (B) shall not apply to a program offered 
                in (but not by) a nursing facility in a State if the 
                State--
                            ``(i) determines that there is no other 
                        such program offered within a reasonable 
                        distance of the facility,
                            ``(ii) ensures, through an oversight 
                        effort, that an adequate environment exists for 
                        operating the program in the facility, and
                            ``(iii) provides notice of such 
                        determination and assurances to the State long-
                        term care ombudsman.
            ``(3) Federal guidelines for state appeals process for 
        transfers and discharges.--For purposes of subsections 
        (c)(2)(B)(iii) and (e)(3), the Secretary shall establish 
        guidelines for minimum standards which State appeals processes 
        under subsection (e)(3) must meet to provide a fair mechanism 
        for hearing appeals on transfers and discharges of residents 
        from nursing facilities.
            ``(4) Qualification of administrators.--For purposes of 
        subsections (d)(1)(C) and (e)(4), the Secretary shall develop 
        standards to be applied in assuring the qualifications of 
        administrators of nursing facilities. Any such standards must 
        apply to administrators of hospital-based facilities as well as 
        administrators of freestanding facilities.
            ``(5) Criteria for administration.--The Secretary shall 
        establish criteria for assessing a nursing facility's 
        compliance with the requirement of subsection (d)(1) with 
        respect to--
                    ``(A) its governing body and management,
                    ``(B) agreements with hospitals regarding transfers 
                of residents to and from the hospitals and to and from 
                other nursing facilities,
                    ``(C) disaster preparedness,
                    ``(D) direction of medical care by a physician,
                    ``(E) laboratory and radiological services,
                    ``(F) clinical records, and
                    ``(G) resident and advocate participation.
            ``(6) Specification of resident assessment data set and 
        instruments.--The Secretary shall--
                    ``(A) specify a minimum data set of core elements 
                and common definitions for use by nursing facilities in 
                conducting the assessments required under subsection 
                (b)(3), and establish guidelines for utilization of the 
                data set; and
                    ``(B) designate one or more instruments which are 
                consistent with the specification made under 
                subparagraph (A) and which a State may specify under 
                subsection (e)(5)(A) for use by nursing facilities in 
                complying with the requirements of subsection 
                (b)(3)(A)(iii).
            ``(7) List of items and services furnished in nursing 
        facilities not chargeable to the personal funds of a 
        resident.--The Secretary shall issue regulations that define 
        those costs which may be charged to the personal funds of 
        residents in nursing facilities who are individuals receiving 
        medical assistance with respect to nursing facility services 
        under this title and those costs which are to be included in 
        the payment amount under this title for nursing facility 
        services.
            ``(8) Criteria for monitoring state waivers.--The Secretary 
        shall develop criteria and procedures for monitoring State 
        performances in granting waivers pursuant to subsection 
        (b)(4)(C)(ii).
    ``(g) Survey and Certification Process.--
            ``(1) State and federal responsibility.--
                    ``(A) In general.--Under each State plan under this 
                title, the State shall be responsible for certifying, 
                in accordance with surveys conducted under paragraph 
                (2), the compliance of nursing facilities (other than 
                facilities of the State) with the requirements of 
                subsections (b), (c), and (d). The Secretary shall 
be responsible for certifying, in accordance with surveys conducted 
under paragraph (2), the compliance of State nursing facilities with 
the requirements of such subsections.
                    ``(B) Educational program.--Each State shall 
                conduct periodic educational programs for the staff and 
                residents (and their representatives) of nursing 
                facilities in order to present current regulations, 
                procedures, and policies under this section.
                    ``(C) Investigation of allegations of resident 
                neglect and abuse and misappropriation of resident 
                property.--The State shall provide, through the agency 
                responsible for surveys and certification of nursing 
                facilities under this subsection, for a process for the 
                receipt and timely review and investigation of 
                allegations of neglect and abuse and misappropriation 
                of resident property by a nurse aide of a resident in a 
                nursing facility or by another individual used by the 
                facility in providing services to such a resident. The 
                State shall, after notice to the individual involved 
                and a reasonable opportunity for a hearing for the 
                individual to rebut allegations, make a finding as to 
                the accuracy of the allegations. If the State finds 
                that a nurse aide has neglected or abused a resident or 
                misappropriated resident property in a facility, the 
                State shall notify the nurse aide and the registry of 
                such finding. If the State finds that any other 
                individual used by the facility has neglected or abused 
                a resident or misappropriated resident property in a 
                facility, the State shall notify the appropriate 
                licensure authority. A State shall not make a finding 
                that an individual has neglected a resident if the 
                individual demonstrates that such neglect was caused by 
                factors beyond the control of the individual.
            ``(2) Surveys.--
                    ``(A) Annual standard survey.--
                            ``(i) In general.--Each nursing facility 
                        shall be subject to a standard survey, to be 
                        conducted without any prior notice to the 
                        facility. Any individual who notifies (or 
                        causes to be notified) a nursing facility of 
                        the time or date on which such a survey is 
                        scheduled to be conducted is subject to a civil 
                        money penalty of not to exceed $2,000. The 
                        provisions of section 1128A (other than 
                        subsections (a) and (b)) shall apply to a civil 
                        money penalty under the previous sentence in 
                        the same manner as such provisions apply to a 
                        penalty or proceeding under section 1128A(a). 
                        The Secretary shall review each State's 
                        procedures for scheduling and conduct of 
                        standard surveys to assure that the State has 
                        taken all reasonable steps to avoid giving 
                        notice of such a survey through the scheduling 
                        procedures and the conduct of the surveys 
                        themselves.
                            ``(ii) Contents.--Each standard survey 
                        shall include, for a case-mix stratified sample 
                        of residents--
                                    ``(I) a survey of the quality of 
                                care furnished, as measured by 
                                indicators of medical, nursing, and 
                                rehabilitative care, dietary and 
                                nutrition services, activities and 
                                social participation, and sanitation, 
                                infection control, and the physical 
                                environment,
                                    ``(II) written plans of care 
                                provided under subsection (b)(2) and an 
                                audit of the residents' assessments 
                                under subsection (b)(3) to determine 
                                the accuracy of such assessments and 
                                the adequacy of such plans of care, and
                                    ``(III) a review of compliance with 
                                residents' rights under subsection (c).
                            ``(iii) Frequency.--
                                    ``(I) In general.--Each nursing 
                                facility shall be subject to a standard 
                                survey not later than 15 months after 
                                the date of the previous standard 
survey conducted under this subparagraph. The statewide average 
interval between standard surveys of a nursing facility shall not 
exceed 12 months.
                                    ``(II) Special surveys.--If not 
                                otherwise conducted under subclause 
                                (I), a standard survey (or an 
                                abbreviated standard survey) may be 
                                conducted within 2 months of any change 
                                of ownership, administration, 
                                management of a nursing facility, or 
                                director of nursing in order to 
                                determine whether the change has 
                                resulted in any decline in the quality 
                                of care furnished in the facility.
                    ``(B) Extended surveys.--
                            ``(i) In general.--Each nursing facility 
                        which is found, under a standard survey, to 
                        have provided substandard quality of care shall 
                        be subject to an extended survey. Any other 
                        facility may, at the Secretary's or State's 
                        discretion, be subject to such an extended 
                        survey (or a partial extended survey).
                            ``(ii) Timing.--The extended survey shall 
                        be conducted immediately after the standard 
                        survey (or, if not practicable, not later than 
                        2 weeks after the date of completion of the 
                        standard survey).
                            ``(iii) Contents.--In such an extended 
                        survey, the survey team shall review and 
                        identify the policies and procedures which 
                        produced such substandard quality of care and 
                        shall determine whether the facility has 
                        complied with all the requirements described in 
                        subsections (b), (c), and (d). Such review 
                        shall include an expansion of the size of the 
                        sample of residents' assessments reviewed and a 
                        review of the staffing, of in-service training, 
                        and, if appropriate, of contracts with 
                        consultants.
                            ``(iv) Construction.--Nothing in this 
                        paragraph shall be construed as requiring an 
                        extended or partial extended survey as a 
                        prerequisite to imposing a sanction against a 
                        facility under subsection (h) on the basis of 
                        findings in a standard survey.
                    ``(C) Survey protocol.--Standard and extended 
                surveys shall be conducted--
                            ``(i) based upon the protocol which the 
                        Secretary has developed, tested, and validated, 
                        as of the date of the enactment of this title, 
                        and
                            ``(ii) by individuals, of a survey team, 
                        who meet such minimum qualifications as the 
                        Secretary establishes.
                    ``(D) Consistency of surveys.--Each State shall 
                implement programs to measure and reduce inconsistency 
                in the application of survey results among surveyors.
                    ``(E) Survey teams.--
                            ``(i) In general.--Surveys under this 
                        subsection shall be conducted by a 
                        multidisciplinary team of professionals 
                        (including a registered professional nurse).
                            ``(ii) Prohibition of conflicts of 
                        interest.--A State may not use as a member of a 
                        survey team under this subsection an individual 
                        who is serving (or has served within the 
                        previous 2 years) as a member of the staff of, 
                        or as a consultant to, the facility surveyed 
                        respecting compliance with the requirements of 
                        subsections (b), (c), and (d), or who has a 
                        personal or familial financial interest in the 
                        facility being surveyed.
                            ``(iii) Training.--The Secretary shall 
                        provide for the comprehensive training of State 
                        and Federal surveyors in the conduct of 
                        standard and extended surveys under this 
                        subsection, including the auditing of resident 
                        assessments and plans of care. No individual 
                        shall serve as a member of a survey team unless 
                        the individual has successfully completed a 
training and testing program in survey and certification techniques 
that has been approved by the Secretary.
            ``(3) Validation surveys.--
                    ``(A) In general.--The Secretary shall conduct 
                onsite surveys of a representative sample of nursing 
                facilities in each State, within 2 months of the date 
                of surveys conducted under paragraph (2) by the State, 
                in a sufficient number to allow inferences about the 
                adequacies of each State's surveys conducted under 
                paragraph (2). In conducting such surveys, the 
                Secretary shall use the same survey protocols as the 
                State is required to use under paragraph (2). If the 
                State has determined that an individual nursing 
                facility meets the requirements of subsections (b), 
                (c), and (d), but the Secretary determines that the 
                facility does not meet such requirements, the 
                Secretary's determination as to the facility's 
                noncompliance with such requirements is binding and 
                supersedes that of the State survey.
                    ``(B) Scope.--With respect to each State, the 
                Secretary shall conduct surveys under subparagraph (A) 
                each year with respect to at least 5 percent of the 
                number of nursing facilities surveyed by the State in 
                the year, but in no case less than 5 nursing facilities 
                in the State.
                    ``(C) Reduction in administrative costs for 
                substandard performance.--If the Secretary finds, on 
                the basis of such surveys, that a State has failed to 
                perform surveys as required under paragraph (2) or that 
                a State's survey and certification performance 
                otherwise is not adequate, the Secretary may provide 
                for the training of survey teams in the State and shall 
                provide for a reduction of the payment otherwise made 
                to the State under section 1512(a)(3)(C) with respect 
                to a quarter equal to 33 percent multiplied by a 
                fraction, the denominator of which is equal to the 
                total number of residents in nursing facilities 
                surveyed by the Secretary that quarter and the 
                numerator of which is equal to the total number of 
                residents in nursing facilities which were found 
                pursuant to such surveys to be not in compliance with 
                any of the requirements of subsections (b), (c), and 
                (d). A State that is dissatisfied with the Secretary's 
                findings under this subparagraph may obtain 
                reconsideration and review of the findings under 
                section 1116 in the same manner as a State may seek 
                reconsideration and review under that section of the 
                Secretary's determination under section 1116(a)(1).
                    ``(D) Special surveys of compliance.--Where the 
                Secretary has reason to question the compliance of a 
                nursing facility with any of the requirements of 
                subsections (b), (c), and (d), the Secretary may 
                conduct a survey of the facility and, on the basis of 
                that survey, make independent and binding 
                determinations concerning the extent to which the 
                nursing facility meets such requirements.
            ``(4) Investigation of complaints and monitoring nursing 
        facility compliance.--Each State shall maintain procedures and 
        adequate staff to--
                    ``(A) investigate complaints of violations of 
                requirements by nursing facilities, and
                    ``(B) monitor, on-site, on a regular, as needed 
                basis, a nursing facility's compliance with the 
                requirements of subsections (b), (c), and (d), if--
                            ``(i) the facility has been found not to be 
                        in compliance with such requirements and is in 
                        the process of correcting deficiencies to 
                        achieve such compliance;
                            ``(ii) the facility was previously found 
                        not to be in compliance with such requirements, 
                        has corrected deficiencies to achieve such 
                        compliance, and verification of continued 
                        compliance is indicated; or
                            ``(iii) the State has reason to question 
                        the compliance of the facility with such 
                        requirements.
                A State may maintain and utilize a specialized team 
                (including an attorney, an auditor, and appropriate 
                health care professionals) for the purpose of 
                identifying, surveying, gathering and preserving 
                evidence, and carrying out appropriate enforcement 
                actions against substandard nursing facilities.
            ``(5) Disclosure of results of inspections and 
        activities.--
                    ``(A) Public information.--Each State, and the 
                Secretary, shall make available to the public--
                            ``(i) information respecting all surveys 
                        and certifications made respecting nursing 
                        facilities, including statements of 
                        deficiencies, within 14 calendar days after 
                        such information is made available to those 
                        facilities, and approved plans of correction,
                            ``(ii) copies of cost reports of such 
                        facilities filed under this title or under 
                        title XVIII,
                            ``(iii) copies of statements of ownership 
                        under section 1124, and
                            ``(iv) information disclosed under section 
                        1126.
                    ``(B) Notice to ombudsman.--Each State shall notify 
                the State long-term care ombudsman (established under 
                title III or VII of the Older Americans Act of 1965 in 
                accordance with section 712 of the Act) of the State's 
                findings of noncompliance with any of the requirements 
                of subsections (b), (c), and (d), or of any adverse 
                action taken against a nursing facility under 
                paragraphs (1), (2), or (3) of subsection (h), with 
                respect to a nursing facility in the State.
                    ``(C) Notice to physicians and nursing facility 
                administrator licensing board.--If a State finds that a 
                nursing facility has provided substandard quality of 
                care, the State shall notify--
                            ``(i) the attending physician of each 
                        resident with respect to which such finding is 
                        made, and
                            ``(ii) any State board responsible for the 
                        licensing of the nursing facility administrator 
                        of the facility.
                    ``(D) Access to fraud control units.--Each State 
                shall provide its State fraud and abuse control unit 
                (established under section 1554) with access to all 
                information of the State agency responsible for surveys 
                and certifications under this subsection.
    ``(h) Enforcement Process.--
            ``(1) In general.--If a State finds, on the basis of a 
        standard, extended, or partial extended survey under subsection 
        (g)(2) or otherwise, that a nursing facility no longer meets a 
        requirement of subsection (b), (c), or (d)--
                    ``(A) the State shall require the facility to 
                correct the deficiency involved;
                    ``(B) if the State finds that the facility's 
                deficiencies immediately jeopardize the health or 
                safety of its residents, the State shall take immediate 
                action to remove the jeopardy and correct the 
                deficiencies through the remedy specified in paragraph 
                (2)(A)(iii), or terminate the facility's participation 
                under the State plan and may provide, in addition, for 
                one or more of the other remedies described in 
                paragraph (2); and
                    ``(C) if the State finds that the facility's 
                deficiencies do not immediately jeopardize the health 
                or safety of its residents, the State may--
                            ``(i) terminate the facility's 
                        participation under the State plan,
                            ``(ii) provide for one or more of the 
                        remedies described in paragraph (2), or
                            ``(iii) do both.
        Nothing in this paragraph shall be construed as restricting the 
        remedies available to a State to remedy a nursing facility's 
        deficiencies. If a State finds that a nursing facility meets 
        the requirements of subsections (b), (c), and (d), but, as of a 
        previous period, did not meet such requirements, the State may 
        provide for a civil money penalty under paragraph (2)(A)(ii) 
for the days in which it finds that the facility was not in compliance 
with such requirements.
            ``(2) Specified remedies.--
                    ``(A) Listing.--Except as provided in subparagraph 
                (B), each State shall establish by law (whether statute 
                or regulation) at least the following remedies:
                            ``(i) Denial of payment under the State 
                        plan with respect to any individual admitted to 
                        the nursing facility involved after such notice 
                        to the public and to the facility as may be 
                        provided for by the State.
                            ``(ii) A civil money penalty assessed and 
                        collected, with interest, for each day in which 
                        the facility is or was out of compliance with a 
                        requirement of subsection (b), (c), or (d). 
                        Funds collected by a State as a result of 
                        imposition of such a penalty (or as a result of 
                        the imposition by the State of a civil money 
                        penalty for activities described in subsections 
                        (b)(3)(B)(ii)(I), (b)(3)(B)(ii)(II), or 
                        (g)(2)(A)(i)) shall be applied to the 
                        protection of the health or property of 
                        residents of nursing facilities that the State 
                        or the Secretary finds deficient, including 
                        payment for the costs of relocation of 
                        residents to other facilities, maintenance of 
                        operation of a facility pending correction of 
                        deficiencies or closure, and reimbursement of 
                        residents for personal funds lost.
                            ``(iii) The appointment of temporary 
                        management to oversee the operation of the 
                        facility and to assure the health and safety of 
                        the facility's residents, where there is a need 
                        for temporary management while--
                                    ``(I) there is an orderly closure 
                                of the facility, or
                                    ``(II) improvements are made in 
                                order to bring the facility into 
                                compliance with all the requirements of 
                                subsections (b), (c), and (d).
                        The temporary management under this clause 
                        shall not be terminated under subclause (II) 
                        until the State has determined that the 
                        facility has the management capability to 
                        ensure continued compliance with all the 
                        requirements of subsections (b), (c), and (d).
                            ``(iv) The authority, in the case of an 
                        emergency, to close the facility, to transfer 
                        residents in that facility to other facilities, 
                        or both.
                The State also shall specify criteria, as to when and 
                how each of such remedies is to be applied, the amounts 
                of any fines, and the severity of each of these 
                remedies, to be used in the imposition of such 
                remedies. Such criteria shall be designed so as to 
                minimize the time between the identification of 
                violations and final imposition of the remedies and 
                shall provide for the imposition of incrementally more 
                severe fines for repeated or uncorrected deficiencies. 
                In addition, the State may provide for other specified 
                remedies, such as directed plans of correction.
                    ``(B) Guidance and alternative remedies.--(i) The 
                Secretary shall provide through regulations guidance to 
                States in establishing remedies under clauses (i) 
                through (iv) of subparagraph (A).
                    ``(ii) A State may establish alternative remedies 
                (other than termination of participation) other than 
                those described in clauses (i) through (iv) of 
                subparagraph (A), if the State demonstrates to the 
                Secretary's satisfaction that the alternative remedies 
                are as effective in deterring noncompliance and 
                correcting deficiencies as those described in such 
                subparagraph.
                    ``(C) Assuring prompt compliance.--If a nursing 
                facility has not complied with any of the requirements 
                of subsections (b), (c), and (d), within 3 months after 
the date the facility is found to be out of compliance with such 
requirements, the State shall impose the remedy described in 
subparagraph (A)(i) for all individuals who are admitted to the 
facility after such date.
                    ``(D) Repeated noncompliance.--In the case of a 
                nursing facility which, on 3 consecutive standard 
                surveys conducted under subsection (g)(2), has been 
                found to have provided substandard quality of care, the 
                State shall (regardless of what other remedies are 
                provided)--
                            ``(i) impose the remedy described in 
                        subparagraph (A)(i), and
                            ``(ii) monitor the facility under 
                        subsection (g)(4)(B),
                until the facility has demonstrated, to the 
                satisfaction of the State, that it is in compliance 
                with the requirements of subsections (b), (c), and (d), 
                and that it will remain in compliance with such 
                requirements.
                    ``(E) Funding.--The reasonable expenditures of a 
                State to provide for temporary management and other 
                expenses associated with implementing the remedies 
                described in clauses (iii) and (iv) of subparagraph (A) 
                shall be considered, for purposes of section 
                1512(a)(3)(C), to be necessary for the proper and 
                efficient administration of the State plan.
                    ``(F) Incentives for high quality care.--In 
                addition to the remedies specified in this paragraph, a 
                State may establish a program to reward, through public 
                recognition, incentive payments, or both, nursing 
                facilities that provide the highest quality care to 
                residents who are entitled to medical assistance under 
                this title. For purposes of section 1512(a)(3)(C), 
                proper expenses incurred by a State in carrying out 
                such a program shall be considered to be expenses 
                necessary for the proper and efficient administration 
                of the State plan.
            ``(3) Secretarial authority.--
                    ``(A) For state nursing facilities.--With respect 
                to a State nursing facility, the Secretary shall have 
                the authority and duties of a State under this 
                subsection, including the authority to impose remedies 
                described in clauses (i), (ii), and (iii) of paragraph 
                (2)(A). Nothing in this subparagraph shall be construed 
                as restricting the remedies available to the Secretary 
                to remedy a nursing facility's deficiencies.
                    ``(B) Other nursing facilities.--With respect to 
                any other nursing facility in a State, if the Secretary 
                finds that a nursing facility no longer meets a 
                requirement of subsection (b), (c), (d), or (e), and 
                further finds that the facility's deficiencies--
                            ``(i) immediately jeopardize the health or 
                        safety of its residents, the Secretary shall 
                        take immediate action to remove the jeopardy 
                        and correct the deficiencies through the remedy 
                        specified in subparagraph (C)(iii), or 
                        terminate the facility's participation under 
                        the State plan and may provide, in addition, 
                        for one or more of the other remedies described 
                        in subparagraph (C); or
                            ``(ii) do not immediately jeopardize the 
                        health or safety of its residents, the 
                        Secretary may impose any of the remedies 
                        described in subparagraph (C).
                Nothing in this subparagraph shall be construed as 
                restricting the remedies available to the Secretary to 
                remedy a nursing facility's deficiencies. If the 
                Secretary finds that a nursing facility meets such 
                requirements but, as of a previous period, did not meet 
                such requirements, the Secretary may provide for a 
                civil money penalty under subparagraph (C)(ii) for the 
                days on which he finds that the facility was not in 
                compliance with such requirements.
                    ``(C) Specified remedies.--The remedies specified 
                in this subparagraph are as follows:
                            ``(i) Denial of payment.--Denial of any 
                        further payments to the State in accordance 
                        with section 1529(f) for medical assistance 
furnished by the facility to all individuals in the facility or to 
individuals admitted to the facility after the effective date of the 
finding.
                            ``(ii) Authority with respect to civil 
                        money penalties.--Imposition of a civil money 
                        penalty against the facility in an amount not 
                        to exceed $10,000 for each day of 
                        noncompliance. The provisions of section 1128A 
                        (other than subsections (a) and (b)) shall 
                        apply to a civil money penalty under the 
                        previous sentence in the same manner as such 
                        provisions apply to a penalty or proceeding 
                        under section 1128A(a).
                            ``(iii) Appointment of temporary 
                        management.--Appointment of temporary 
                        management to oversee the operation of the 
                        facility and to assure the health and safety of 
                        the facility's residents, where there is a need 
                        for temporary management while--
                                    ``(I) there is an orderly closure 
                                of the facility, or
                                    ``(II) improvements are made in 
                                order to bring the facility into 
                                compliance with all the requirements of 
                                subsections (b), (c), and (d).
                        The temporary management under this clause 
                        shall not be terminated under subclause (II) 
                        until the Secretary has determined that the 
                        facility has the management capability to 
                        ensure continued compliance with all the 
                        requirements of subsections (b), (c), and (d).
                The Secretary shall specify criteria, as to when and 
                how each of such remedies is to be applied, the amounts 
                of any fines, and the severity of each of these 
                remedies, to be used in the imposition of such 
                remedies. Such criteria shall be designed so as to 
                minimize the time between the identification of 
                violations and final imposition of the remedies and 
                shall provide for the imposition of incrementally more 
                severe fines for repeated or uncorrected deficiencies. 
                In addition, the Secretary may provide for other 
                specified remedies, such as directed plans of 
                correction.
                    ``(D) Continuation of payments pending 
                remediation.--The Secretary may continue payments, over 
                a period of not longer than 6 months after the 
                effective date of the findings, under this title with 
                respect to a nursing facility not in compliance with a 
                requirement of subsection (b), (c), or (d), if--
                            ``(i) the State survey agency finds that it 
                        is more appropriate to take alternative action 
                        to assure compliance of the facility with the 
                        requirements than to terminate the 
                        certification of the facility,
                            ``(ii) the State has submitted a plan and 
                        timetable for corrective action to the 
                        Secretary for approval and the Secretary 
                        approves the plan of corrective action, and
                            ``(iii) the State agrees to repay to the 
                        Federal Government payments received under this 
                        subparagraph if the corrective action is not 
                        taken in accordance with the approved plan and 
                        timetable.
                The Secretary shall establish guidelines for approval 
                of corrective actions requested by States under this 
                subparagraph.
            ``(4) Special rules regarding payments to facilities.--
                    ``(A) Continuation of payments pending 
                remediation.--The State or the Secretary, as 
                appropriate, may continue payments, over a period of 
                not longer than 6 months after the effective date of 
                the findings, under this title with respect to a 
                nursing facility not in compliance with a requirement 
                of subsection (b), (c), or (d). The State may continue 
                such payments only if--
                            ``(i) the State survey agency finds that it 
                        is more appropriate to take alternative action 
                        to assure compliance of the facility with the 
                        requirements than to terminate the 
                        certification of the facility,
                            ``(ii) the State has submitted a plan and 
                        timetable for corrective action to the 
                        Secretary for approval and the Secretary 
                        approves the plan of corrective action, and
                            ``(iii) the State agrees to repay to the 
                        Federal Government payments received under this 
                        subparagraph if the corrective action is not 
                        taken in accordance with the approved plan and 
                        timetable.
                The Secretary shall establish guidelines for approval 
                of corrective actions requested by States under this 
                subparagraph.
                    ``(B) Effective period of denial of payment.--A 
                finding to deny payment under this subsection shall 
                terminate when the State or Secretary (as the case may 
                be) finds that the facility is in substantial 
                compliance with all the requirements of subsections 
                (b), (c), and (d).
            ``(5) Immediate termination of participation for facility 
        where state or secretary finds noncompliance and immediate 
        jeopardy.--If either the State or the Secretary finds that a 
        nursing facility has not met a requirement of subsection (b), 
        (c), or (d), and finds that the failure immediately jeopardizes 
        the health or safety of its residents, the State or the 
        Secretary, respectively shall notify the other of such finding, 
        and the State or the Secretary, respectively, shall take 
        immediate action to remove the jeopardy and correct the 
        deficiencies through the remedy specified in paragraph 
        (2)(A)(iii) or (3)(C)(iii), or terminate the facility's 
        participation under the State plan. If the facility's 
        participation in the State plan is terminated by either the 
        State or the Secretary, the State shall provide for the safe 
        and orderly transfer of the residents eligible under the State 
        plan consistent with the requirements of subsection (c)(2).
            ``(6) Special rules where state and secretary do not agree 
        on finding of noncompliance.--
                    ``(A) State finding of noncompliance and no 
                secretarial finding of noncompliance.--If the Secretary 
                finds that a nursing facility has met all the 
                requirements of subsections (b), (c), and (d), but a 
                State finds that the facility has not met such 
                requirements and the failure does not immediately 
                jeopardize the health or safety of its residents, the 
                State's findings shall control and the remedies imposed 
                by the State shall be applied.
                    ``(B) Secretarial finding of noncompliance and no 
                state finding of noncompliance.--If the Secretary finds 
                that a nursing facility has not met all the 
                requirements of subsections (b), (c), and (d), and that 
                the failure does not immediately jeopardize the health 
                or safety of its residents, but the State has not made 
                such a finding, the Secretary--
                            ``(i) may impose any remedies specified in 
                        paragraph (3)(C) with respect to the facility, 
                        and
                            ``(ii) shall (pending any termination by 
                        the Secretary) permit continuation of payments 
                        in accordance with paragraph (3)(D).
            ``(7) Special rules for timing of termination of 
        participation where remedies overlap.--If both the Secretary 
        and the State find that a nursing facility has not met all the 
        requirements of subsections (b), (c), and (d), and neither 
        finds that the failure immediately jeopardizes the health or 
        safety of its residents--
                    ``(A)(i) if both find that the facility's 
                participation under the State plan should be 
                terminated, the State's timing of any termination shall 
                control so long as the termination date does not occur 
                later than 6 months after the date of the finding to 
                terminate;
                    ``(ii) if the Secretary, but not the State, finds 
                that the facility's participation under the State plan 
                should be terminated, the Secretary shall (pending any 
                termination by the Secretary) permit continuation of 
                payments in accordance with paragraph (3)(D); or
                    ``(iii) if the State, but not the Secretary, finds 
                that the facility's participation under the State plan 
                should be terminated, the State's decision to 
                terminate, and timing of such termination, shall 
                control; and
                    ``(B)(i) if the Secretary or the State, but not 
                both, establishes one or more remedies which are 
                additional or alternative to the remedy of terminating 
                the facility's participation under the State plan, such 
                additional or alternative remedies shall also be 
                applied, or
                    ``(ii) if both the Secretary and the State 
                establish one or more remedies which are additional or 
                alternative to the remedy of terminating the facility's 
                participation under the State plan, only the additional 
                or alternative remedies of the Secretary shall apply.
            ``(8) Construction.--The remedies provided under this 
        subsection are in addition to those otherwise available under 
        Federal or State law and shall not be construed as limiting 
        such other remedies, including any remedy available to an 
        individual at common law. The remedies described in clauses 
        (i), (iii), and (iv) of paragraph (2)(A) may be imposed during 
        the pendency of any hearing. The provisions of this subsection 
        shall apply to a nursing facility (or portion thereof) 
        notwithstanding that the facility (or portion thereof) also is 
        a skilled nursing facility for purposes of title XVIII.
            ``(9) Sharing of information.--Notwithstanding any other 
        provision of law, all information concerning nursing facilities 
        required by this section to be filed with the Secretary or a 
        State agency shall be made available by such facilities to 
        Federal or State employees for purposes consistent with the 
        effective administration of programs established under this 
        title and title XVIII, including investigations by State fraud 
        control units.
    ``(i) Construction.--Where requirements or obligations under this 
section are identical to those provided under section 1819 of this Act, 
the fulfillment of those requirements or obligations under section 1819 
shall be considered to be the fulfillment of the corresponding 
requirements or obligations under this section.
    ``(j) Report.--Not later than 2 years after the date of the 
enactment of the Medicaid Restructuring Act of 1996, and annually 
thereafter, the Secretary shall submit a report to the Congress 
analyzing--
            ``(1) the differences between the reimbursement rates 
        established under the State plan under this title, and the 
        reimbursement rates that applied under the State plan under 
        title XIX (as in effect on the date of the enactment of such 
        Act) for nursing facility services and other medical assistance 
        provided by such facilities; and
            ``(2) whether and how such differences have affected the 
        quality of such services or assistance.

``SEC. 1558. OTHER PROVISIONS PROMOTING PROGRAM INTEGRITY.

    ``(a) Public Access to Survey Results.--Each State plan shall 
provide that upon completion of a survey of any health care facility or 
organization by a State agency to carry out the plan, the agency shall 
make public in readily available form and place the pertinent findings 
of the survey relating to the compliance of the facility or 
organization with requirements of law.
    ``(b) Record Keeping.--Each State plan shall provide for agreements 
with persons or institutions providing services under the plan under 
which the person or institution agrees--
            ``(1) to keep such records, including ledgers, books, and 
        original evidence of costs, as are necessary to fully disclose 
        the extent of the services provided to individuals receiving 
        assistance under the plan, and
            ``(2) to furnish the State agency with such information 
        regarding any payments claimed by such person or institution 
        for providing services under the plan, as the State agency may 
        from time to time request.
    ``(c) Quality Assurance.--
            ``(1) In general.--Each State plan shall provide a program 
        to--
                    ``(A) ensure the quality of services provided under 
                the plan, including such services provided to 
                individuals with chronic mental or physical illness; 
                and
                    ``(B) measure, evaluate, and improve the quality of 
                care delivered under such plan, including services 
                delivered by a capitated health care organization or 
                through a primary care case management provider.
            ``(2) Establishment of minimum standards for services for 
        individuals with developmental disabilities.--
                    ``(A) In general.--The Secretary, in consultation 
                with the States, shall establish, monitor, and enforce 
                minimum health, safety, and welfare standards for 
                eligible low-income individuals with developmental 
                disabilities who receive intermediate care facility 
                services for the mentally retarded, home and community-
                based health care services and related supportive 
                services, community supported living arrangements, 
                assisted living arrangements, and transitional living 
                arrangements in the community. Such standards shall 
                ensure that individuals receiving such services are 
                protected from neglect, physical and sexual abuse, 
                financial exploitation, inappropriate involuntary 
                restraint, and the provision of health care services by 
                unqualified personnel.
                    ``(B) Public participation.--The State plan shall 
                contain provisions that ensure the involvement of 
                consumers, family members, and the local community in 
                planning the provision of such services to such 
                individuals and ensuring the quality assurance of such 
                services.
    ``(d) Prohibition Against Conflicts of Interest.--Each State plan 
shall provide that each State or local officer or employee who is 
responsible for the expenditure of substantial amounts of funds under 
the State plan, each individual who formerly was such an officer or 
employee, and each partner of such an officer or employee shall be 
prohibited from committing any act, in relation to any activity under 
the plan, the commission of which, in connection with any activity 
concerning the United States Government, by an officer or employee of 
the United States Government, an individual who was such an officer or 
employee, or a partner of such an officer or employee is prohibited by 
section 207 or 208 of title 18, United States Code.
    ``(e) Nondiscrimination Provisions.--Any program or activity that 
receives funds under this part shall be subject to enforcement 
authorized under the following provisions of law:
            ``(1) The Age Discrimination Act of 1975 (42 U.S.C. 6101 et 
        seq.).
            ``(2) Section 504 of the Rehabilitation Act of 1973 (29 
        U.S.C. 794).
            ``(3) The Americans with Disabilities Act of 1990 (42 
        U.S.C. 12101 et seq.).
            ``(4) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 
        2000d et seq.).

                      ``Part E--General Provisions

``SEC. 1571. DEFINITIONS.

    ``(a) Medical Assistance.--For purposes of this title, the term 
`medical assistance' means payment of part or all of the cost of any of 
the following, or assistance in the purchase, in whole or in part, of 
health benefit coverage that includes any of the following, for 
eligible low-income individuals (as defined in subsection (b)) as 
specified under the State plan:
            ``(1) Inpatient hospital services.
            ``(2) Outpatient hospital services.
            ``(3) Physician services.
            ``(4) Surgical services.
            ``(5) Clinic services and other ambulatory health care 
        services.
            ``(6) Nursing facility services.
            ``(7) Intermediate care facility services for the mentally 
        retarded.
            ``(8) Prescription drugs and biologicals and the 
        administration of such drugs and biologicals, only if such 
        drugs and biologicals are not furnished for the purpose of 
        causing, or assisting in causing, the death, suicide, 
        euthanasia, or mercy killing of a person.
            ``(9) Over-the-counter medications.
            ``(10) Laboratory and radiological services.
            ``(11) Prepregnancy family planning services and supplies.
            ``(12) Inpatient mental health services, including services 
        furnished in a State-operated mental hospital, and residential 
        or other 24-hour therapeutically planned structured services, 
        except that for individuals not less than age 22 and not more 
        than age 64, such services shall be limited to acute services 
        only.
            ``(13) Outpatient and intensive community-based mental 
        health services, including psychiatric rehabilitation, day 
        treatment, intensive in-home services for children, and partial 
        hospitalization.
            ``(14) Durable medical equipment and other medically-
        related or remedial devices (such as prosthetic devices, 
        implants, eyeglasses, hearing aids, dental devices, and 
        adaptive devices).
            ``(15) Disposable medical supplies.
            ``(16) Home and community-based health care services and 
        related supportive services (such as home health nursing 
        services, home health aide services, personal care, assistance 
        with activities of daily living, chore services, day care 
        services, respite care services, training for family members, 
        and minor modifications to the home).
            ``(17) Community supported living arrangements, assisted 
        living arrangements, and transitional living arrangements in 
        the community.
            ``(18) Nursing care services (such as nurse practitioner 
        services, nurse midwife services, advanced practice nurse 
        services, private duty nursing care, pediatric nurse services, 
        and respiratory care services) in a home, school, or other 
        setting.
            ``(19) Abortion only if necessary to save the life of the 
        mother or if the pregnancy is the result of an act of rape or 
        incest.
            ``(20) Dental services.
            ``(21) Inpatient substance abuse treatment services and 
        residential substance abuse treatment services.
            ``(22) Outpatient substance abuse treatment services.
            ``(23) Case management services.
            ``(24) Care coordination services.
            ``(25) Physical therapy, occupational therapy, and services 
        for individuals with speech, hearing, and language disorders.
            ``(26) Hospice care.
            ``(27) Any other medical, diagnostic, screening, 
        preventive, restorative, remedial, therapeutic, or 
        rehabilitative services (whether in a facility, home, school, 
        or other setting) if recognized by State law and only if the 
        service is--
                    ``(A) prescribed by or furnished by a physician or 
                other licensed or registered practitioner within the 
                scope of practice as defined by State law,
                    ``(B) performed under the general supervision or at 
                the direction of a physician, or
                    ``(C) furnished by a health care facility that is 
                operated by a State or local government or is licensed 
                under State law and operating within the scope of the 
                license.
            ``(28) Premiums, or capitation payments (as defined in 
        section 1504(e)(2)) for private health care insurance coverage, 
        including private long-term care insurance coverage.
            ``(29) Medical transportation.
            ``(30) Medicare cost-sharing (as defined in subsection 
        (c)).
            ``(31) Enabling services (such as transportation, 
        translation, and outreach services) only if designed to 
        increase the accessibility of primary and preventive health 
        care services for eligible low-income individuals.
            ``(32) Federally-qualified health center services (as 
        defined in subsection (f)(2)(A)), capitation payments (as 
        defined in section 1504(e)(2)) provided by a State to a 
        capitated health care organization which is (or is controlled 
        by, as determined under section 1504(a)(4)) one or more 
        Federally-qualified health centers (as defined in subsection 
        (f)(2)(B)), and supplemental payments to a Federally-qualified 
        health center (as so defined) that participates in a capitated 
        health care organization which is (or is controlled by, as 
        determined under section 1504(a)(4)) one or more Federally-
        qualified health centers (as so defined).
            ``(33) Rural health clinic services (as defined in 
        subsection (f)(1)), capitation payments (as defined in section 
        1504(e)(2)) provided by a State to a capitated health care 
        organization which is (or is controlled by, as determined under 
        section 1504(a)(4)) one or more rural health clinics (as 
        defined in subsection (f)(1)), and supplemental payments to a 
        rural health clinic (as so defined) that participates in a 
        capitated health care organization which is (or is controlled 
        by, as determined under section 1504(a)(4)) one or more rural 
        health clinics (as so defined).
            ``(34) Physician assistant services (to the extent such 
        services are authorized under State law or regulation).
            ``(35) Any other health care services or items specified by 
        the Secretary and not excluded under this section.
    ``(b) Eligible Low-Income Individual.--
            ``(1) State plan eligibility standards.--
                    ``(A) In general.--The term `eligible low-income 
                individual' means an individual--
                            ``(i) who has been determined eligible by 
                        the State for medical assistance under the 
                        State plan and is not an inmate of a public 
                        institution (except as a patient in a State 
                        psychiatric hospital), and
                            ``(ii) whose family income (as determined 
                        under the plan) does not exceed a percentage 
                        (specified in the State plan and not to exceed 
                        275 percent) of the poverty line for a family 
                        of the size involved.
                    ``(B) Continuation of katie beckett eligibility.--
                At the option of a State, subparagraph (A)(ii) shall 
                not apply in the case of an individual who--
                            ``(i) is 18 years of age or younger and 
                        qualifies as a disabled individual under 
                        section 1614(a); and
                            ``(ii) with respect to whom there has been 
                        a determination by the State that--
                                    ``(I) the individual requires a 
                                level of care provided in a hospital, 
                                nursing facility, or intermediate care 
                                facility for the mentally retarded; and
                                    ``(II) it is appropriate to provide 
                                such care for the individual outside 
                                such an institution.
            ``(2) Amount of income.--In determining the amount of 
        income under paragraph (1)(B), a State may exclude costs 
        incurred for medical care or other types of remedial care 
        recognized by the State.
            ``(3) Computation of income for certain children.--In 
        determining the amount of family income under paragraph (1)(B) 
        in the case of a child described in section 1501(a)(1)(F), the 
        State shall only count the income of the child and not that of 
        the family in which the child is placed.
    ``(c) Medicare Cost-Sharing.--For purposes of this title, the term 
`medicare cost-sharing' means any of the following:
            ``(1)(A) Premiums under section 1839.
            ``(B) Premiums under section 1818 or 1818A.
            ``(2) Coinsurance under title XVIII (including coinsurance 
        described in section 1813).
            ``(3) Deductibles established under title XVIII (including 
        those described in sections 1813 and 1833(b)).
            ``(4) The difference between the amount that is paid under 
        section 1833(a) and the amount that would be paid under such 
        section if any reference to `80 percent' therein were deemed a 
        reference to `100 percent'.
            ``(5) Premiums for enrollment of an individual with an 
        eligible organization under section 1876.
    ``(d) Additional Definitions.--For purposes of this title:
            ``(1) Child.--The term `child' means an individual under 19 
        years of age.
            ``(2) Elderly individual.--The term `elderly individual' 
        means an individual who has attained retirement age, as defined 
        under section 216(l)(1).
            ``(3) Poverty line defined.--The term `poverty line' has 
        the meaning given such term in section 673(2) of the Community 
        Services Block Grant Act (42 U.S.C. 9902(2)), including any 
        revision required by such section.
            ``(4) Pregnant woman.--The term `pregnant woman' includes a 
        woman during the 60-day period beginning on the last day of the 
        pregnancy.
    ``(e) EPSDT Services.--In this title, the term `EPSDT services' 
means `early and periodic screening, diagnostic, and treatment 
services' as defined in section 1905(r) (as in effect on June 1, 1996).

    ``(f) Center and Clinic Services.--In this title:
            ``(1) Rural health clinic related definitions.--The terms 
        `rural health clinic services' and `rural health clinic' have 
        the meanings given such terms in section 1861(aa), except that 
        (A) clause (ii) of section 1861(aa)(2) shall not apply to such 
        terms, and (B) the physician arrangement required under section 
        1861(aa)(2)(B) shall only apply with respect to rural health 
        clinic services and, with respect to other ambulatory care 
        services, the physician arrangement required shall be only such 
        as may be required under the State plan for those services.
            ``(2) Federally-qualified health center related 
        definitions.--
                    ``(A) Services.--
                            ``(i) In general.--The term `Federally-
                        qualified health center services' means 
                        services of the type described in subparagraphs 
                        (A) through (C) of section 1861(aa)(1), and any 
                        other ambulatory care services which are 
                        otherwise included in the State plan, when 
                        furnished to an individual as a patient of a 
                        Federally-qualified health center and, for this 
                        purpose, any reference to a rural health clinic 
                        or a physician described in section 
                        1861(aa)(2)(B) is deemed a reference to a 
                        Federally-qualified health center or a 
                        physician at the center, respectively.
                            ``(ii) Certain supplemental payments 
                        included.--
                    ``(B) Center.--The term `Federally-qualified health 
                center' means a entity which--
                            ``(i) is receiving a grant under section 
                        329, 330, 340, or 340A of the Public Health 
                        Service Act,
                            ``(ii)(I) is receiving funding from such a 
                        grant under a contract with the recipient of 
                        such a grant, and
                            ``(II) meets the requirements to receive a 
                        grant under section 329, 330, 340, or 340A of 
                        such Act,
                            ``(iii) based on the recommendation of the 
                        Health Resources and Services Administration 
                        within the Public Health Service, is determined 
                        by the Secretary to meet the requirements for 
                        receiving such a grant, or
                            ``(iv) was treated by the Secretary, for 
                        purposes of part B of title XVIII, as a 
                        comprehensive Federally funded health center as 
                        of January 1, 1990;
                and includes an outpatient health program or facility 
                operated by a tribe or tribal organization under the 
                Indian Self-Determination Act (Public Law 93-638) or by 
                an urban Indian organization receiving funds under 
                title V of the Indian Health Care Improvement Act for 
                the provision of primary health services. In applying 
                clause (ii), the Secretary may waive any requirement 
                referred to in such clause for up to 2 years for good 
                cause shown.
    ``(g) Medically-Related Services.--In this title, the term 
`medically-related services' means services reasonably related to, or 
in direct support of, the State's attainment of one or more of the 
strategic objectives and performance goals established under section 
1521, but does not include items and services included on the list 
under subsection (a).

``SEC. 1572. TREATMENT OF TERRITORIES.

    ``Notwithstanding any other requirement of this title, the 
Secretary may waive or modify any requirement of this title with 
respect to the medical assistance program for a State other than the 50 
States and the District of Columbia, other than a waiver of--
            ``(1) the applicable Federal medical assistance percentage,
            ``(2) the limitation on total payments in a fiscal year to 
        the amount of the allotment under section 1511(c), or
            ``(3) the requirement that payment may be made for medical 
        assistance only with respect to amounts expended by the State 
        for care and services described in section 1571(a) and 
        medically-related services (as defined in section 1571(g)).

``SEC. 1573. DESCRIPTION OF TREATMENT OF INDIAN HEALTH SERVICE 
              FACILITIES AND RELATED PROGRAMS.

    ``In the case of a State in which one or more facilities of the 
Indian Health Service is located or in which a facility or program 
described in section 1512(f)(3)(iii) is located, the State plan shall 
include a description of--
            ``(1) what provision (if any) has been made for payment for 
        items and services furnished by such facilities or through such 
        programs, and
            ``(2) the manner in which medical assistance for low-income 
        eligible individuals who are Indians will be provided, as 
        determined by the State in consultation with the appropriate 
        Indian tribes and tribal organizations.

``SEC. 1574. APPLICATION OF CERTAIN GENERAL PROVISIONS.

    ``The following sections in part A of title XI shall apply to 
States under this title in the same manner as they applied to a State 
under title XIX:
            ``(1) Section 1101(a)(1) (relating to definition of State).
            ``(2) Section 1116 (relating to administrative and judicial 
        review), but only insofar as consistent with the provisions of 
        part B.
            ``(3) Section 1124 (relating to disclosure of ownership and 
        related information).
            ``(4) Section 1126 (relating to disclosure of information 
        about certain convicted individuals).
            ``(5) Section 1128B(d) (relating to criminal penalties for 
        certain additional charges).
            ``(6) Section 1132 (relating to periods within which claims 
        must be filed).

``SEC. 1575. OPTIONAL MASTER DRUG REBATE AGREEMENTS.

    ``(a) Requirement for Manufacturer To Enter Into Agreement.--
            ``(1) In general.--Pursuant to section 1513(f), in order 
        for payment to be made to a State under part B for medical 
assistance for covered outpatient drugs of a manufacturer, the 
manufacturer shall enter into and have in effect a master rebate 
agreement described in subsection (b) with the Secretary on behalf of 
States electing to participate in the agreement.
            ``(2) Coverage of drugs not covered under rebate 
        agreements.--Nothing in this section shall be construed to 
        prohibit a State in its discretion from providing coverage 
        under its State plan of a covered outpatient drug for which no 
        rebate agreement is in effect under this section.
            ``(3) Effect on existing agreements.--If a State has a 
        rebate agreement in effect with a manufacturer on the date of 
        the enactment of this section which provides for a minimum 
        aggregate rebate equal to or greater than the minimum aggregate 
        rebate which would otherwise be paid under the master agreement 
        under this section, at the option of the State--
                    ``(A) such agreement shall be considered to meet 
                the requirements of the master rebate agreement, and
                    ``(B) the State shall be considered to have elected 
                to participate in the master rebate agreement.
            ``(4) Limitation on prices of drugs purchased by covered 
        entities.--
                    ``(A) Agreement with secretary.--A manufacturer 
                meets the requirements of this paragraph if the 
                manufacturer has entered into an agreement with the 
                Secretary that meets the requirements of section 340B 
                of the Public Health Service Act with respect to 
                covered outpatient drugs purchased by a covered entity 
                on or after the first day of the first month that 
                begins after the date of the enactment of title VI of 
                the Veterans Health Care Act of 1992.
                    ``(B) Covered entity defined.--In this subsection, 
                the term `covered entity' means an entity described in 
                subsection (a)(4) of section 340B of the Public Health 
                Service Act.
                    ``(C) Establishment of alternative mechanism to 
                ensure against duplicate discounts or rebates.--If the 
                Secretary does not establish a mechanism under section 
                340B(a)(5)(A) of the Public Health Service Act within 
                12 months of the date of the enactment of such section, 
                the following requirements shall apply:
                            ``(i) Each covered entity shall inform the 
                        single State agency under this title when it is 
                        seeking reimbursement for medical assistance 
                        with respect to a unit of any covered 
                        outpatient drug which is subject to an 
                        agreement under section 340B(a) of such Act.
                            ``(ii) Each such single State agency shall 
                        provide a means by which a covered entity shall 
                        indicate on any drug reimbursement claims form 
                        (or format, where electronic claims management 
                        is used) that a unit of the drug that is the 
                        subject of the form is subject to an agreement 
                        under section 340B of such Act, and not submit 
                        to any manufacturer a claim for a rebate 
                        payment under subsection (b) with respect to 
                        such a drug.
                    ``(D) Effect of subsequent amendments.--In 
                determining whether an agreement under subparagraph (A) 
                meets the requirements of section 340B of the Public 
                Health Service Act, the Secretary shall not take into 
                account any amendments to such section that are enacted 
                after the enactment of title VI of the Veterans Health 
                Care Act of 1992.
                    ``(E) Determination of compliance.--A manufacturer 
                is deemed to meet the requirements of this paragraph if 
                the manufacturer establishes to the satisfaction of the 
                Secretary that the manufacturer would comply (and has 
                offered to comply) with the provisions of section 340B 
                of the Public Health Service Act (as in effect 
                immediately after the enactment title VI of the 
                Veterans Health Care Act of 1992, and would 
have entered into an agreement under such section (as such section was 
in effect at such time), but for a legislative change in such section 
after such enactment.
    ``(b) Terms of Rebate Agreement.--
            ``(1) Periodic rebates.--The master rebate agreement under 
        this section shall require the manufacturer to provide, to the 
        State plan of each State participating in the agreement, a 
        rebate for a rebate period in an amount specified in subsection 
        (c) for covered outpatient drugs of the manufacturer dispensed 
        after the effective date of the agreement, for which payment 
        was made under the plan for such period. Such rebate shall be 
        paid by the manufacturer not later than 30 days after the date 
        of receipt of the information described in paragraph (2) for 
        the period involved.
            ``(2) State provision of information.--
                    ``(A) State responsibility.--Each State 
                participating in the master rebate agreement shall 
                report to each manufacturer not later than 60 days 
                after the end of each rebate period and in a form 
                consistent with a standard reporting format established 
                by the Secretary, information on the total number of 
                units of each dosage form and strength and package size 
                of each covered outpatient drug, for which payment was 
                made under the State plan for the period, and shall 
                promptly transmit a copy of such report to the 
                Secretary.
                    ``(B) Audits.--A manufacturer may audit the 
                information provided (or required to be provided) under 
                subparagraph (A). Adjustments to rebates shall be made 
                to the extent that information indicates that 
                utilization was greater or less than the amount 
                previously specified.
            ``(3) Manufacturer provision of price information.--
                    ``(A) In general.--Each manufacturer which is 
                subject to the master rebate agreement under this 
                section shall report to the Secretary--
                            ``(i) not later than 30 days after the last 
                        day of each rebate period under the agreement, 
                        on the average manufacturer price (as defined 
                        in subsection (i)(1)) and, for single source 
                        drugs and innovator multiple source drugs, the 
                        manufacturer's best price (as defined in 
                        subsection (c)(1)(C)) for each covered 
                        outpatient drug for the rebate period under the 
                        agreement, and
                            ``(ii) not later than 30 days after the 
                        date of entering into an agreement under this 
                        section, on the average manufacturer price (as 
                        defined in subsection (i)(1)) as of October 1, 
                        1990, for each of the manufacturer's covered 
                        outpatient drugs.
                    ``(B) Verification surveys of average manufacturer 
                price.--The Secretary may survey wholesalers and 
                manufacturers that directly distribute their covered 
                outpatient drugs, when necessary, to verify 
                manufacturer prices reported under subparagraph (A). 
                The Secretary may impose a civil monetary penalty in an 
                amount not to exceed $10,000 on a wholesaler, 
                manufacturer, or direct seller, if the wholesaler, 
                manufacturer, or direct seller of a covered outpatient 
                drug refuses a request for information by the Secretary 
                in connection with a survey under this subparagraph. 
                The provisions of section 1128A (other than subsections 
                (a) (with respect to amounts of penalties or additional 
                assessments) and (b)) shall apply to a civil money 
                penalty under this subparagraph in the same manner as 
                such provisions apply to a penalty or proceeding under 
                section 1128A(a).
                    ``(C) Penalties.--
                            ``(i) Failure to provide timely 
                        information.--In the case of a manufacturer 
                        which is subject to the master rebate agreement 
                        that fails to provide information required 
                        under subparagraph (A) on a timely basis, the 
                        amount of the penalty shall be $10,000 for each 
                        day in which such information has not been 
provided and such amount shall be paid to the Treasury. If such 
information is not reported within 90 days of the deadline imposed, the 
agreement shall be suspended for services furnished after the end of 
such 90-day period and until the date such information is reported (but 
in no case shall such suspension be for a period of less than 30 days).
                            ``(ii) False information.--Any manufacturer 
                        which is subject to the master rebate 
                        agreement, or a wholesaler or direct seller, 
                        that knowingly provides false information under 
                        subparagraph (A) or (B) is subject to a civil 
                        money penalty in an amount not to exceed 
                        $100,000 for each item of false information. 
                        Any such civil money penalty shall be in 
                        addition to other penalties as may be 
                        prescribed by law. The provisions of section 
                        1128A (other than subsections (a) and (b)) 
                        shall apply to a civil money penalty under this 
                        subparagraph in the same manner as such 
                        provisions apply to a penalty or proceeding 
                        under section 1128A(a).
                    ``(D) Confidentiality of information.--
                Notwithstanding any other provision of law, information 
                disclosed by manufacturers or wholesalers under this 
                paragraph or under an agreement with the Secretary of 
                Veterans Affairs described in section 1513(f) is 
                confidential and shall not be disclosed by the 
                Secretary or the Secretary of Veterans Affairs or a 
                State agency (or contractor therewith) in a form which 
                discloses the identity of a specific manufacturer or 
                wholesaler or the prices charged for drugs by such 
                manufacturer or wholesaler, except--
                            ``(i) as the Secretary determines to be 
                        necessary to carry out this section,
                            ``(ii) to permit the Comptroller General to 
                        review the information provided, and
                            ``(iii) to permit the Director of the 
                        Congressional Budget Office to review the 
                        information provided.
            ``(4) Length of agreement.--
                    ``(A) In general.--The master rebate agreement 
                under this section shall be effective for an initial 
                period of not less than 1 year and shall be 
                automatically renewed for a period of not less than 1 
                year unless terminated under subparagraph (B).
                    ``(B) Termination.--
                            ``(i) By the secretary.--The Secretary may 
                        provide for termination of the master rebate 
                        agreement with respect to a manufacturer for 
                        violation of the requirements of the agreement 
                        or other good cause shown. Such termination 
                        shall not be effective earlier than 60 days 
                        after the date of notice of such termination. 
                        The Secretary shall provide, upon request, a 
                        manufacturer with a hearing concerning such a 
                        termination, but such hearing shall not delay 
                        the effective date of the termination. Failure 
                        of a State to provide any advance notice of 
                        such a termination as required by regulation 
                        shall not affect the State's right to terminate 
                        coverage of the drugs affected by such 
                        termination as of the effective date of such 
                        termination.
                            ``(ii) By a manufacturer.--A manufacturer 
                        may terminate its participation in the master 
                        rebate agreement under this section for any 
                        reason. Any such termination shall not be 
                        effective until the calendar quarter beginning 
                        at least 60 days after the date the 
                        manufacturer provides notice to the Secretary.
                            ``(iii) Effectiveness of termination.--Any 
                        termination under this subparagraph shall not 
                        affect rebates due under the agreement before 
                        the effective date of its termination.
                            ``(iv) Notice to states.--In the case of a 
                        termination under this subparagraph, the 
                        Secretary shall provide notice of such 
                        termination to the States within not less than 
                        30 days before the effective date of such 
                        termination.
                            ``(v) Application to terminations of other 
                        agreements.--The provisions of this 
                        subparagraph shall apply to the terminations of 
                        master agreements described in section 8126(a) 
                        of title 38, United States Code.
                    ``(C) Delay before reentry.--In the case of any 
                rebate agreement with a manufacturer under this section 
                which is terminated, another such agreement with the 
                manufacturer (or a successor manufacturer) may not be 
                entered into until a period of 1 calendar quarter has 
                elapsed since the date of the termination, unless the 
                Secretary finds good cause for an earlier reinstatement 
                of such an agreement.
            ``(5) Settlement of disputes.--
                    ``(A) Secretary.--The Secretary shall have the 
                authority to resolve, settle, and compromise disputes 
                regarding the amounts of rebates owed under this 
                section and section 1927.
                    ``(B) State.--Each State, with respect to covered 
                outpatient drugs paid for under the State plan, shall 
                have authority, independent of the Secretary's 
                authority under subparagraph (A), to resolve, settle, 
                and compromise disputes regarding the amounts of 
                rebates owed under this section. Any such action shall 
                be deemed to comply with the requirements of this 
                title, and such covered outpatient drugs shall be 
                eligible for payment under the State plan under this 
                title.
                    ``(C) Amount of rebate.--The Secretary shall limit 
                the amount of the rebate payable in any case in which 
                the Secretary determines that, because of unusual 
                circumstances or questionable data, the provisions of 
                subsection (c) result in a rebate amount that is 
                inequitable or otherwise inconsistent with the purposes 
                of this section.
    ``(c) Determination of Amount of Rebate.--
            ``(1) Basic rebate for single source drugs and innovator 
        multiple source drugs.--
                    ``(A) In general.--Except as provided in paragraph 
                (2), the amount of the rebate specified in this 
                subsection with respect to a State participating in the 
                master rebate agreement for a rebate period (as defined 
                in subsection (i)(7)) with respect to each dosage form 
                and strength of a single source drug or an innovator 
                multiple source drug shall be equal to the product of--
                            ``(i) the total number of units of each 
                        dosage form and strength paid for under the 
                        State plan in the rebate period (as reported by 
                        the State); and
                            ``(ii) the greater of--
                                    ``(I) the difference between the 
                                average manufacturer price and the best 
                                price (as defined in subparagraph (C)) 
                                for the dosage form and strength of the 
                                drug, or
                                    ``(II) the minimum rebate 
                                percentage (specified in subparagraph 
                                (B)) of such average manufacturer 
                                price,
                        for the rebate period.
                    ``(B) Minimum rebate percentage.--For purposes of 
                subparagraph (A)(ii)(II), the `minimum rebate 
                percentage' is 15 percent.
                    ``(C) Best price defined.--For purposes of this 
                section--
                            ``(i) In general.--The term `best price' 
                        means, with respect to a single source drug or 
                        innovator multiple source drug of a 
                        manufacturer, the lowest price available from 
                        the manufacturer during the rebate period to 
                        any wholesaler, retailer, provider, health 
                        maintenance organization, nonprofit entity, or 
governmental entity within the United States, excluding--
                                    ``(I) any prices charged on or 
                                after October 1, 1992, to the Indian 
                                Health Service, the Department of 
                                Veterans Affairs, a State home 
                                receiving funds under section 1741 of 
                                title 38, United States Code, the 
                                Department of Defense, the Public 
                                Health Service, or a covered entity 
                                described in section 340B(a)(4) of the 
                                Public Health Service Act,
                                    ``(II) any prices charged under the 
                                Federal Supply Schedule of the General 
                                Services Administration,
                                    ``(III) any prices used under a 
                                State pharmaceutical assistance 
                                program, and
                                    ``(IV) any depot prices and single 
                                award contract prices, as defined by 
                                the Secretary, of any agency of the 
                                Federal Government.
                            ``(ii) Special rules.--The term `best 
                        price'--
                                    ``(I) shall be inclusive of cash 
                                discounts, free goods that are 
                                contingent on any purchase requirement, 
                                volume discounts, and rebates (other 
                                than rebates under this section),
                                    ``(II) shall be determined without 
                                regard to special packaging, labeling, 
                                or identifiers on the dosage form or 
                                product or package,
                                    ``(III) shall not take into account 
                                prices that are merely nominal in 
                                amount, and
                                    ``(IV) shall exclude rebates paid 
                                under this section or any other rebates 
                                paid to a State participating in the 
                                master rebate agreement.
            ``(2) Additional rebate for single source and innovator 
        multiple source drugs.--
                    ``(A) In general.--The amount of the rebate 
                specified in this subsection with respect to a State 
                participating in the master rebate agreement for a 
                rebate period, with respect to each dosage form and 
                strength of a single source drug or an innovator 
                multiple source drug, shall be increased by an amount 
                equal to the product of--
                            ``(i) the total number of units of such 
                        dosage form and strength dispensed after 
                        December 31, 1990, for which payment was made 
                        under the State plan for the rebate period; and
                            ``(ii) the amount (if any) by which--
                                    ``(I) the average manufacturer 
                                price for the dosage form and strength 
                                of the drug for the period, exceeds
                                    ``(II) the average manufacturer 
                                price for such dosage form and strength 
                                for the calendar quarter beginning July 
                                1, 1990 (without regard to whether or 
                                not the drug has been sold or 
                                transferred to an entity, including a 
                                division or subsidiary of the 
                                manufacturer, after the first day of 
                                such quarter), increased by the 
                                percentage by which the Consumer Price 
                                Index for All Urban Consumers (United 
                                States city average) for the month 
                                before the month in which the rebate 
                                period begins exceeds such index for 
                                September 1990.
                    ``(B) Treatment of subsequently approved drugs.--In 
                the case of a covered outpatient drug approved by the 
                Food and Drug Administration after October 1, 1990, 
                clause (ii)(II) of subparagraph (A) shall be applied by 
                substituting `the first full calendar quarter after the 
                day on which the drug was first marketed' for `the 
                calendar quarter beginning July 1, 1990' and `the month 
                prior to the first month of the first full calendar 
                quarter after the day on which the drug was first 
                marketed' for `September 1990'.
            ``(3) Rebate for other drugs.--
                    ``(A) In general.--The amount of the rebate paid to 
                a State participating in the master rebate agreement 
for a rebate period with respect to each dosage form and strength of 
covered outpatient drugs (other than single source drugs and innovator 
multiple source drugs) shall be equal to the product of--
                            ``(i) the applicable percentage (as 
                        described in subparagraph (B)) of the average 
                        manufacturer price for the dosage form and 
                        strength for the rebate period, and
                            ``(ii) the total number of units of such 
                        dosage form and strength dispensed after 
                        December 31, 1990, for which payment was made 
                        under the State plan for the rebate period.
                    ``(B) Applicable percentage defined.--For purposes 
                of subparagraph (A)(i), the `applicable percentage' is 
                11 percent.
            ``(4) Limitation on amount of rebate to amounts paid for 
        certain drugs.--
                    ``(A) In general.--Upon request of the manufacturer 
                of a covered outpatient drug, the Secretary shall 
                limit, in accordance with subparagraph (B), the amount 
                of the rebate under this subsection with respect to a 
                dosage form and strength of such drug if the majority 
                of the estimated number of units of such dosage form 
                and strength that are subject to rebates under this 
                section were dispensed to inpatients of nursing 
                facilities.
                    ``(B) Amount of rebate.--In the case of a covered 
                outpatient drug subject to subparagraph (A), the amount 
                of the rebate specified in this subsection for a rebate 
                period, with respect to each dosage form and strength 
                of such drug, shall not exceed the amount paid under 
                the State plan with respect to such dosage form and 
                strength of the drug in the rebate period (without 
                consideration of any dispensing fees paid).
            ``(5) Supplemental rebates prohibited.--No rebates shall be 
        required to be paid by manufacturers with respect to covered 
        outpatient drugs furnished to individuals in any State that 
        provides for the collection of such rebates in excess of the 
        rebate amount payable under this section.
    ``(d) Limitations on Coverage of Drugs by States Participating in 
Master Agreement.--
            ``(1) Permissible restrictions.--A State participating in 
        the master rebate agreement under this section may--
                    ``(A) subject to prior authorization under its 
                State plan any covered outpatient drug so long as any 
                such prior authorization program complies with the 
                requirements of paragraph (5); and
                    ``(B) exclude or otherwise restrict coverage under 
                its plan of a covered outpatient drug if--
                            ``(i) the drug is contained in the list 
                        referred to in paragraph (2);
                            ``(ii) the drug is subject to such 
                        restrictions pursuant to the master rebate 
                        agreement or any agreement described in 
                        subsection (a)(4); or
                            ``(iii) the State has excluded coverage of 
                        the drug from its formulary established in 
                        accordance with paragraph (4).
            ``(2) List of drugs subject to restriction.--The following 
        drugs or classes of drugs, or their medical uses, may be 
        excluded from coverage or otherwise restricted by a State 
        participating in the master rebate agreement:
                    ``(A) Agents when used for anorexia, weight loss, 
                or weight gain.
                    ``(B) Agents when used to promote fertility.
                    ``(C) Agents when used for cosmetic purposes or 
                hair growth.
                    ``(D) Agents when used for the symptomatic relief 
                of cough and colds.
                    ``(E) Agents when used to promote smoking 
                cessation.
                    ``(F) Prescription vitamins and mineral products, 
                except prenatal vitamins and fluoride preparations.
                    ``(G) Nonprescription drugs.
                    ``(H) Covered outpatient drugs which the 
                manufacturer seeks to require as a condition of sale 
                that associated tests or monitoring services be 
                purchased exclusively from the manufacturer or its 
                designee.
                    ``(I) Barbiturates.
                    ``(J) Benzodiazepines.
            ``(3) Additions to drug listings.--The Secretary shall, by 
        regulation, periodically update the list of drugs or classes of 
        drugs described in paragraph (2), or their medical uses, which 
        the Secretary has determined to be subject to clinical abuse or 
        inappropriate use.
            ``(4) Requirements for formularies.--A State participating 
        in the master rebate agreement may establish a formulary if the 
        formulary meets the following requirements:
                    ``(A) The formulary is developed by a committee 
                consisting of physicians, pharmacists, and other 
                appropriate individuals appointed by the Governor of 
                the State.
                    ``(B) Except as provided in subparagraph (C), the 
                formulary includes the covered outpatient drugs of any 
                manufacturer which has entered into and complies with 
                the agreement under subsection (a) (other than any drug 
                excluded from coverage or otherwise restricted under 
                paragraph (2)).
                    ``(C) A covered outpatient drug may be excluded 
                with respect to the treatment of a specific disease or 
                condition for an identified population (if any) only 
                if, based on the drug's labeling (or, in the case of a 
                drug the prescribed use of which is not approved under 
                the Federal Food, Drug, and Cosmetic Act but is a 
                medically accepted indication, based on information 
                from the appropriate compendia described in subsection 
                (i)(5)), the excluded drug does not have a significant, 
                clinically meaningful therapeutic advantage in terms of 
                safety, effectiveness, or clinical outcome of such 
                treatment for such population over other drugs included 
                in the formulary and there is a written explanation 
                (available to the public) of the basis for the 
                exclusion.
                    ``(D) The State plan permits coverage of a drug 
                excluded from the formulary (other than any drug 
                excluded from coverage or otherwise restricted under 
                paragraph (2)) pursuant to a prior authorization 
                program that is consistent with paragraph (5).
                    ``(E) The formulary meets such other requirements 
                as the Secretary may impose in order to achieve program 
                savings consistent with protecting the health of 
                program beneficiaries.
        A prior authorization program established by a State under 
        paragraph (5) is not a formulary subject to the requirements of 
        this paragraph.
            ``(5) Requirements of prior authorization programs.--The 
        State plan of a State participating in the master rebate 
        agreement may require, as a condition of coverage or payment 
        for a covered outpatient drug for which Federal financial 
        participation is available in accordance with this section, the 
        approval of the drug before its dispensing for any medically 
        accepted indication (as defined in subsection (i)(5)) only if 
        the system providing for such approval--
                    ``(A) provides response by telephone or other 
                telecommunication device within 24 hours of a request 
                for prior authorization, and
                    ``(B) except with respect to the drugs on the list 
                referred to in paragraph (2), provides for the 
                dispensing of at least a 72-hour supply of a covered 
                outpatient prescription drug in an emergency situation 
                (as defined by the Secretary).
            ``(6) Other permissible restrictions.--A State 
        participating in the master rebate agreement may impose 
        limitations, with respect to all such drugs in a therapeutic 
        class, on the minimum or maximum quantities per prescription or 
        on the number of refills, if such limitations are necessary to 
        discourage waste, and may address instances of fraud or abuse 
by individuals in any manner authorized under this Act.
    ``(e) Drug Use Review.--
            ``(1) In general.--A State participating in the master 
        rebate agreement may provide for a drug use review program to 
        educate physicians and pharmacists to identify and reduce the 
        frequency of patterns of fraud, abuse, gross overuse, or 
        inappropriate or medically unnecessary care, among physicians, 
        pharmacists, and patients, or associated with specific drugs or 
        groups of drugs, as well as potential and actual severe adverse 
        reactions to drugs.
            ``(2) Application of state standards.--A State with a drug 
        use review program under this subsection shall establish and 
        operate the program under such standards as it may establish.
    ``(f) Electronic Claims Management.--In accordance with chapter 35 
of title 44, United States Code (relating to coordination of Federal 
information policy), the Secretary shall encourage each State to 
establish, as its principal means of processing claims for covered 
outpatient drugs under its State plan, a point-of-sale electronic 
claims management system, for the purpose of performing on-line, real 
time eligibility verifications, claims data capture, adjudication of 
claims, and assisting pharmacists (and other authorized persons) in 
applying for and receiving payment.
    ``(g) Annual Report.--
            ``(1) In general.--Not later than May 1 of each year, the 
        Secretary shall transmit to the Committee on Finance of the 
        Senate, and the Committee on Commerce of the House of 
        Representatives, a report on the operation of this section in 
        the preceding fiscal year.
            ``(2) Details.--Each report shall include information on--
                    ``(A) ingredient costs paid under this title for 
                single source drugs, multiple source drugs, and 
                nonprescription covered outpatient drugs,
                    ``(B) the total value of rebates received and 
                number of manufacturers providing such rebates,
                    ``(C) the effect of inflation on the value of 
                rebates required under this section,
                    ``(D) trends in prices paid under this title for 
                covered outpatient drugs, and
                    ``(E) Federal and State administrative costs 
                associated with compliance with the provisions of this 
                title.
    ``(h) Exemption for Capitated Health Care Organizations, Hospitals, 
and Certain Nursing Facilities.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        requirements of the master rebate agreement under this section 
        shall not apply with respect to covered outpatient drugs 
        dispensed by or through--
                    ``(A) a capitated health care organization (as 
                defined in section 1504(d)(1)),
                    ``(B) a hospital that dispenses covered outpatient 
                drugs using a drug formulary system and bills the State 
                no more than the hospital's purchasing costs for 
                covered outpatient drugs, or
                    ``(C) a nursing facility which receives payment 
                under this title for health care services, including 
                prescription drugs, on a capitated basis or which 
                dispenses covered outpatient drugs using a drug 
                formulary system.
            ``(2) Construction in determining best price.--Nothing in 
        paragraph (1) shall be construed as excluding amounts paid by 
        the entities described in such paragraph for covered outpatient 
        drugs from the determination of the best price (as defined in 
        subsection (c)(1)(C)) for such drugs.
    ``(i) Definitions.--In the section--
            ``(1) Average manufacturer price.--The term `average 
        manufacturer price' means, with respect to a covered outpatient 
        drug of a manufacturer for a rebate period, the average price 
        paid to the manufacturer for the drug in the United States by 
        wholesalers for drugs distributed to the retail pharmacy class 
of trade, after deducting customary prompt pay discounts.
            ``(2) Covered outpatient drug.--Subject to the exceptions 
        in paragraph (3), the term `covered outpatient drug' means--
                    ``(A) of those drugs which are treated as 
                prescribed drugs for purposes of section 1571(a)(8), a 
                drug which may be dispensed only upon prescription 
                (except as provided in subparagraph (D)), and--
                            ``(i) which is approved as a prescription 
                        drug under section 505 or 507 of the Federal 
                        Food, Drug, and Cosmetic Act;
                            ``(ii)(I) which was commercially used or 
                        sold in the United States before the date of 
                        the enactment of the Drug Amendments of 1962 or 
                        which is identical, similar, or related (within 
                        the meaning of section 310.6(b)(1) of title 21 
                        of the Code of Federal Regulations) to such a 
                        drug, and (II) which has not been the subject 
                        of a final determination by the Secretary that 
                        it is a `new drug' (within the meaning of 
                        section 201(p) of the Federal Food, Drug, and 
                        Cosmetic Act) or an action brought by the 
                        Secretary under section 301, 302(a), or 304(a) 
                        of such Act to enforce section 502(f) or 505(a) 
                        of such Act; or
                            ``(iii)(I) which is described in section 
                        107(c)(3) of the Drug Amendments of 1962 and 
                        for which the Secretary has determined there is 
                        a compelling justification for its medical 
                        need, or is identical, similar, or related 
                        (within the meaning of section 310.6(b)(1) of 
                        title 21 of the Code of Federal Regulations) to 
                        such a drug, and (II) for which the Secretary 
                        has not issued a notice of an opportunity for a 
                        hearing under section 505(e) of the Federal 
                        Food, Drug, and Cosmetic Act on a proposed 
                        order of the Secretary to withdraw approval of 
                        an application for such drug under such section 
                        because the Secretary has determined that the 
                        drug is less than effective for some or all 
                        conditions of use prescribed, recommended, or 
                        suggested in its labeling;
                    ``(B) a biological product, other than a vaccine 
                which--
                            ``(i) may only be dispensed upon 
                        prescription,
                            ``(ii) is licensed under section 351 of the 
                        Public Health Service Act, and
                            ``(iii) is produced at an establishment 
                        licensed under such section to produce such 
                        product;
                    ``(C) insulin certified under section 506 of the 
                Federal Food, Drug, and Cosmetic Act; and
                    ``(D) a drug, including a biological product or 
                insulin, which may be sold without a prescription 
                (commonly referred to as an `over-the-counter drug'), 
                if the drug is prescribed by a physician (or other 
                person authorized to prescribe under State law).
            ``(3) Limiting definition.--The term `covered outpatient 
        drug' does not include any drug, biological product, or insulin 
        provided as part of, or as incident to and in the same setting 
        as, any of the following (and for which payment may be made 
        under a State plan as part of payment for the following and not 
        as direct reimbursement for the drug):
                    ``(A) Inpatient hospital services.
                    ``(B) Hospice services.
                    ``(C) Dental services, except that drugs for which 
                the State plan authorizes direct reimbursement to the 
                dispensing dentist are covered outpatient drugs.
                    ``(D) Physicians' services.
                    ``(E) Outpatient hospital services.
                    ``(F) Nursing facility services and services 
                provided by an intermediate care facility for the 
                mentally retarded.
                    ``(G) Other laboratory and x-ray services.
                    ``(H) Renal dialysis services.
        Such term also does not include any such drug or product for 
        which a National Drug Code number is not required by the Food 
        and Drug Administration or a drug or biological product used 
        for a medical indication which is not a medically accepted 
        indication. Any drug, biological product, or insulin excluded 
        from the definition of such term as a result of this paragraph 
        shall be treated as a covered outpatient drug for purposes of 
        determining the best price (as defined in subsection (c)(1)(C)) 
        for such drug, biological product, or insulin.
            ``(4) Manufacturer.--The term `manufacturer' means, with 
        respect to a covered outpatient drug, the entity holding legal 
        title to or possession of the National Drug Code number for 
        such drug.
            ``(5) Medically accepted indication.--The term `medically 
        accepted indication' means any use for a covered outpatient 
        drug which is approved under the Federal Food, Drug, and 
        Cosmetic Act, or the use of which is supported by one or more 
        citations included or approved for inclusion in any of the 
        following compendia:
                    ``(A) American Hospital Formulary Service Drug 
                Information.
                    ``(B) United States Pharmacopeia-Drug Information.
                    ``(C) American Medical Association Drug 
                Evaluations.
                    ``(D) The DRUGDEX Information System.
                    ``(E) The peer-reviewed medical literature.
            ``(6) Multiple source drug; innovator multiple source drug; 
        noninnovator multiple source drug; single source drug.--
                    ``(A) Defined.--
                            ``(i) Multiple source drug.--The term 
                        `multiple source drug' means, with respect to a 
                        rebate period, a covered outpatient drug (not 
                        including any drug described in paragraph 
                        (2)(D)) for which there are 2 or more drug 
                        products which--
                                    ``(I) are rated as therapeutically 
                                equivalent (under the Food and Drug 
                                Administration's most recent 
                                publication of `Approved Drug Products 
                                with Therapeutic Equivalence 
                                Evaluations'),
                                    ``(II) except as provided in 
                                subparagraph (B), are pharmaceutically 
                                equivalent and bioequivalent, as 
                                defined in subparagraph (C) and as 
                                determined by the Food and Drug 
                                Administration, and
                                    ``(III) are sold or marketed in the 
                                State during the period.
                            ``(ii) Innovator multiple source drug.--The 
                        term `innovator multiple source drug' means a 
                        multiple source drug that was originally 
                        marketed under an original new drug application 
                        or product licensing application approved by 
                        the Food and Drug Administration.
                            ``(iii) Noninnovator multiple source 
                        drug.--The term `noninnovator multiple source 
                        drug' means a multiple source drug that is not 
                        an innovator multiple source drug.
                            ``(iv) Single source drug.--The term 
                        `single source drug' means a covered outpatient 
                        drug (other than a drug described in paragraph 
                        (2)(D)) which is produced or distributed under 
                        an original new drug application approved by 
                        the Food and Drug Administration, including a 
                        drug product marketed by any cross-licensed 
                        producers or distributors operating under the 
                        new drug application or product licensing 
                        application.
                    ``(B) Exception.--Subparagraph (A)(i)(II) shall not 
                apply if the Food and Drug Administration changes by 
                regulation the requirement that, for purposes of the 
                publication described in subparagraph (A)(i)(I), in 
                order for drug products to be rated as therapeutically 
                equivalent, they must be pharmaceutically equivalent 
                and bioequivalent, as defined in subparagraph (C).
                    ``(C) Definitions.--For purposes of this 
                paragraph--
                            ``(i) drug products are pharmaceutically 
                        equivalent if the products contain identical 
                        amounts of the same active drug ingredient in 
                        the same dosage form and meet compendial or 
                        other applicable standards of strength, 
                        quality, purity, and identity,
                            ``(ii) drugs are bioequivalent if they do 
                        not present a known or potential bioequivalence 
                        problem, or, if they do present such a problem, 
                        they are shown to meet an appropriate standard 
                        of bioequivalence, and
                            ``(iii) a drug product is considered to be 
                        sold or marketed in a State if it appears in a 
                        published national listing of average wholesale 
                        prices selected by the Secretary, if the listed 
                        product is generally available to the public 
                        through retail pharmacies in that State.
            ``(7) Rebate period.--The term `rebate period' means, with 
        respect to an agreement under subsection (a), a calendar 
        quarter or other period specified by the Secretary with respect 
        to the payment of rebates under such agreement.''.

SEC. 2924. STATE ELECTION; TERMINATION OF CURRENT PROGRAM; AND 
              TRANSITION.

    (a) Termination of Current Program; Limitation on Medicaid Payments 
in Fiscal Year 1997.--
            (1) Repeal of title.--Title XIX of the Social Security Act 
        is repealed effective October 1, 1997, except that the repeal 
        of section 1928 of such Act is effective on the date of the 
        enactment of this Act and the succeeding two sections of such 
        title shall be effective during fiscal year 1996 in the same 
        manner and to the same extent as such sections were effective 
        during fiscal year 1995.
            (2) Limitation on obligation authority.--Notwithstanding 
        any other provision of such title--
                    (A) Fiscal year 1997.--Subject to subparagraph (B), 
                the Secretary of Health and Human Services (in this 
                section referred to as the ``Secretary'') may enter 
                into obligations under such title with any State (as 
                defined for purposes of such title) for expenses 
                incurred during fiscal year 1997, but not in excess of 
                the sum determined under clauses (i) and (ii) of 
                section 1511(a)(2)(A) of the Social Security Act (as 
                added by section 2) for that State for fiscal year 
                1997.
                    (B) None after effective date.--The Secretary is 
                not authorized to enter into any obligation with any 
                State under title XIX of such Act for expenses incurred 
                on or after the earlier of--
                            (i) October 1, 1997, or
                            (ii) the first day of the first quarter on 
                        which the State plan under title XV of such Act 
                        (as added by section 2) is first effective.
                    (C) Agreement.--A State's submission of claims for 
                payment under section 1903 of such Act on or after 
                October 1, 1996, is deemed to constitute the State's 
                acceptance of the obligation limitation under 
                subparagraph (A) (including the formula for computing 
                the amount of such obligation limitation).
                    (D) Effect on medical assistance.--Effective 
                October 1, 1996--
                            (i) except as provided in this paragraph, 
                        the Federal Government has no obligation to 
                        provide payment with respect to items and 
                        services provided under title XIX of the Social 
                        Security Act, and
                            (ii) such title and title XV of such Act 
                        shall not be construed as providing for an 
                        entitlement, under Federal law in relation to 
                        the Federal Government, in an individual or 
                        person (including any provider) at the time of 
                        provision or receipt of services.
            (3) Requirement for timely submittal of claims.--No payment 
        shall be made to a State under title XIX of such Act with 
        respect to an obligation incurred before October 1, 1996, 
        unless the State has submitted to the Secretary, by not later 
        than April 1, 1997, a claim for Federal financial participation 
        for expenses paid by the State with respect to such 
        obligations. Nothing in paragraph (2) shall be construed as 
        affecting the obligation of the Federal Government to pay 
        claims described in the previous sentence.
    (b) Transition Provisions.--
            (1) Notwithstanding any other provision of law, in the case 
        where payment has been made under section 1903(a) of the Social 
        Security Act to a State before March 1, 1996, and for which a 
        disallowance has not been taken as of such date (or, if so 
        taken, has not been completed, including judicial review, by 
        such date), the Secretary of Health and Human Services shall 
        discontinue the disallowance proceeding and, if such 
        disallowance has been taken as of the date of the enactment of 
        this Act, any payment reductions effected shall be rescinded 
        and the payments returned to the State.
            (2) The repeal under subsection (a)(1) of section 1928 of 
        the Social Security Act shall not affect the distribution of 
        vaccines purchased and delivered to the States before the date 
        of the enactment of this Act. No vaccine may be purchased after 
        such date by the Federal Government or any State under any 
        contract under section 1928(d) of the Social Security Act.
            (3) No judicial or administrative decision rendered 
        regarding requirements imposed under title XIX of the Social 
        Security Act with respect to a State shall have any application 
        to the State plan of the State under title XV of such Act. A 
        State may, pursuant to the previous sentence, seek the 
        abrogation or modification of any such decision after the date 
of termination of the State medicaid plan under title XIX of such Act.
            (4) No cause of action under title XIX of the Social 
        Security Act which seeks to require a State to establish or 
        maintain minimum payment rates under such title or claim which 
        seeks reimbursement for any period before the date of the 
        enactment of this Act based on the alleged failure of the State 
        to comply with such title and which has not become final as of 
        such date shall be brought or continued.
            (5) Section 6408(a)(3) of the Omnibus Budget Reconciliation 
        Act of 1989 (as amended by section 13642 of the Omnibus Budget 
        Reconciliation Act of 1993) and section 2 of Public Law 102-276 
        (as amended by section 13644 of the Omnibus Budget 
        Reconciliation Act of 1993) are each amended by striking 
        ``December 31, 1995'' and inserting ``October 1, 1997''.
    (c) Anti-Fraud Provisions.--Section 1128(h)(1) of the Social 
Security Act (42 U.S.C. 1320a-7(h)(1)) is amended by inserting ``or a 
State plan under title XV'' after ``title XIX''.
    (d) Technical and Conforming Amendments.--
            (1) Secretarial submission of legislative proposal.--Not 
        later than 90 days after the date of the enactment of this Act, 
        the Secretary of Health and Human Services, in consultation, as 
        appropriate, with heads of other Federal agencies and the 
        States (as defined in section 1101(a)(8) of the Social Security 
        Act for purposes of title XIX of such Act), shall submit to the 
        appropriate committees of Congress a legislative proposal 
        providing for such technical and conforming amendments in the 
        law as are required by the provisions of, and amendments made 
        by, this subtitle.
            (2) Transitional rule.--Any reference in any provision of 
        law to title XIX of the Social Security Act or any provision 
        thereof shall be deemed to be a reference to such title or 
        provision as in effect on the day before the date of the 
        enactment of this Act.
            (3) Amendment to section 1115.--Section 1115(a) of the 
        Social Security Act (42 U.S.C. 1315(a)) is amended--
                    (A) in the matter preceding paragraph (1), by 
                striking ``or XIX'' and inserting ``XIX, or XV'';
                    (B) in paragraph (1), by inserting ``or of title 
                XV,'' after ``1902,''; and
                    (C) in paragraph (2), by inserting ``or under title 
                XV,'' after ``1903,''.
            (4) Certification of christian science nursing 
        facilities.--
                    (A) In general.--Title XIX (42 U.S.C. 1396 et seq.) 
                is amended--
                            (i) in the matter following paragraph (62) 
                        of section 1902(a) (42 U.S.C. 1396a(a)), by 
                        striking ``the First Church of Christ, 
                        Scientist, Boston, Massachusetts'' and 
                        inserting ``The Commission for Accreditation of 
                        Christian Science Nursing Organizations/
                        Facilities, Inc.''; and
                            (ii) in section 1908(e)(1) (the first place 
                        it appears) (42 U.S.C. 1396g(1)(e)), by 
                        striking ``the First Church of Christ, 
                        Scientist, Boston, Massachusetts'' and 
                        inserting ``The Commission for Accreditation of 
                        Christian Science Nursing Organizations/
                        Facilities, Inc.''.
                    (B) Effective date.--The amendments made by 
                subparagraph (A) shall take effect on January 1, 1997.

SEC. 2925. INTEGRATION DEMONSTRATION PROJECT.

    (a) Description of Projects.--
            (1) In general.--The Secretary of Health and Human Services 
        (in this section referred to as the ``Secretary'') may waive 
        such requirements of titles XVIII and XV of the Social Security 
        Act as may be necessary for States to conduct demonstration 
        projects under this section. Such projects shall demonstrate 
        the manner in which States may use funds from the programs 
        under such titles to develop and implement innovative programs 
for individuals dually eligible for benefits under both titles, 
including such individuals who are chronically ill. The Secretary shall 
grant waivers in a manner that permits States flexibility in 
contracting with medicare risk providers and other providers for 
services, oversight of contract administration and quality management, 
and administration of a single enrollment process. Such a waiver may 
restrict time period during which project participants may disenroll 
without cause from capitated health plans under the medicare program.
            (2) Voluntary participation.--A State may not require an 
        individual eligible to receive items and services under the 
        medicare and title XV programs to participate in a 
        demonstration project under this section.
    (b) Budget Neutrality and Reinvestment of Savings.--
            (1) Budget neutrality.--The Secretary shall not approve a 
        demonstration project under this section for a State unless the 
        State demonstrates that the amount of the Federal expenditures 
        under the program will not exceed the amount of the Federal 
        expenditures that would have been made if the project had not 
        been approved.
            (2) Use of savings.--The Secretary shall permit a State to 
        retain any savings achieved under a project and to use such 
        savings for--
                    (A) expanding eligibility for low income medicare 
                beneficiaries who are risk of institutionalization and 
                who, if institutionalized, are likely to qualify for 
                benefits under title XV of the Social Security Act, and
                    (B) providing a scope of services under the project 
                that exceeds the scope of services normally covered 
                under such title.
    (c) Limitation on Number of Projects.--Not more than 10 
demonstration projects shall be conducted under this section.
    (d) Duration.--
            (1) In general.--Subject to paragraph (2), a demonstration 
        project conducted under this section shall be conducted for an 
        initial period of 5 years and, upon the request of a State and 
        a finding by the Secretary that the project has been 
        successful, shall be extended indefinitely.
            (2) Termination.--The Secretary may, with 90 days' notice, 
        terminate any demonstration project conducted under this 
        section that is not in substantial compliance with the terms of 
        the application approved by the Secretary under this section.
    (e) Applications.--Each State, or a coalition of States, desiring 
to conduct a demonstration project under this section shall prepare and 
submit to the Secretary an application at such time, in such manner, 
and containing such information as the Secretary may require, including 
an explanation of a plan for evaluating the project. The Secretary 
shall approve or deny an application not later than 90 days after the 
receipt of such application.
    (f) Payments.--For each calendar quarter occurring during a 
demonstration project conducted under this section, the Secretary shall 
provide for payments to the State in a manner consistent with 
subsection (b)(1).
    (g) Oversight.--The Secretary shall establish quality standards for 
evaluating and monitoring the demonstration projects conducted under 
this section. Such quality standards shall include reporting 
requirements which contain the following:
            (1) A description of the demonstration project.
            (2) An analysis of beneficiary satisfaction under such 
        project.
            (3) An analysis of the quality of the services delivered 
        under the project.
            (4) A description of the savings to the medicare and title 
        XV programs as a result of the demonstration project.

SEC. 2926. NATIONAL COMMISSION ON MEDICAID AND STATE-BASED HEALTH CARE 
              REFORM.

    (a) Establishment of Commission.--
            (1) In general.--There is established a commission to be 
        known as the National Commission on Medicaid and State-Based 
        Health Care Reform (in this section referred to as the 
        ``Commission'').
            (2) Composition.--The Commission shall be composed as 
        follows:
                    (A) 2 federal officials.--The President shall 
                appoint 2 Federal officials, one of whom the President 
                shall designate as Chair of the Commission.
                    (B) 4 members of the congress.--Four members of the 
                Congress shall be appointed as follows:
                            (i) The Speaker of the House of 
                        Representatives shall appoint one Member of the 
                        House.
                            (ii) The minority leader of the House of 
                        Representatives shall appoint one Member of the 
                        House.
                            (iii) The majority leader of the Senate 
                        shall appoint one Member of the Senate.
                            (iv) The minority leader of the Senate 
                        shall appoint one Member of the Senate.
                    (C) 5 state government representatives.--Five State 
                government representatives shall be appointed as 
                follows:
                            (i) The majority leaders of the House of 
                        Representatives and the Senate shall jointly 
                        appoint 3 individuals who are governors, State 
                        legislators, or State medicaid officials.
                            (ii) The minority leaders of the House of 
                        Representatives and the Senate shall jointly 
                        appoint 2 individuals who are governors, State 
                        legislators, or State medicaid officials.
                    (D) 6 experts.--Six experts shall be appointed as 
                follows:
                            (i) The majority leaders of the House of 
                        Representatives and the Senate shall jointly 
                        appoint 4 individuals, who are not officials of 
                        the Federal or State governments, and who may 
                        be consumers, or who are individuals who have 
                        expertise in a health-related field, such as 
                        medicine, public health, or delivery and 
                        financing of health care services.
                            (ii) The President shall appoint 2 
                        individuals who are not officials of the 
                        Federal or State governments, and who may be 
                        consumers, or who are individuals who have 
                        expertise in a health-related field, such as 
                        medicine, public health, or delivery and 
                        financing of health care services.
            (3) Initial appointment.--Members of the Commission shall 
        first be appointed by not later than 90 days after the date of 
        the enactment of this Act.
            (4) Compensation and expenses.--
                    (A) Compensation.--Each member of the Commission 
                shall serve without compensation.
                    (B) Travel expenses.--Members of the Commission 
                shall be allowed travel expenses, including per diem in 
                lieu of subsistence, at rates authorized for employees 
                of agencies under subchapter I of chapter 57 of title 
                5, United States Code, while away from their homes or 
                regular places of business in the performance of 
                services for the Commission.
    (b) Duties of Commission.--
            (1) Study.--
                    (A) In general.--The Commission shall study and 
                make recommendations to the Congress, the President, 
                and the Secretary of Health and Human Services 
                regarding the program of medical assistance under title 
                XIX of the Social Security Act (or title XV of such 
                Act, if applicable) and modifications that may be made 
                to such program to improve the program and to encourage 
                further State health reform relating to access, 
                quality, and cost containment.
                    (B) Specific concerns.--The studies and 
                recommendations of the Commission shall specifically 
                address the following:
                            (i) The progress achieved with respect to 
                        performance objectives relating to access and 
                        quality.
                            (ii) Changes needed to ensure adequate 
                        access to health care and long term care for 
                        low-income individuals.
                            (iii) Promotion of quality care.
                            (iv) Deterrence of fraud and abuse.
                            (v) Providing each State with additional 
                        flexibility in implementing the program of 
                        medical assistance under title XIX of the 
                        Social Security Act (or title XV of such Act, 
                        if applicable), consistent with maintaining the 
                        guarantee of coverage under such program.
                            (vi) Causes and strategies for limiting 
                        Federal and State expenditures under such 
                        program.
                            (vii) Enhancing the equity and fairness in 
                        the distribution of Federal per beneficiary 
                        expenditures and matching rates to the States.
                    (C) Consultation.--In addressing the issue 
                described in subparagraph (B)(vii), the Commission 
                shall consult with the Comptroller General of the 
                General Accounting Office and shall consider the 
                following:
                            (i) The rate of poverty in each State.
                            (ii) The total taxable resources in each 
                        State.
                            (iii) Differences in the efficient 
                        operation of the program of medical assistance 
                        under title XIX of the Social Security Act (or 
                        title XV of such Act, if applicable) among the 
                        States.
                            (iv) Per capita income in each State.
                            (v) The relative health care case mix in 
                        each State.
                            (vi) The wages of health care employees in 
                        each State.
                            (vii) The cost of living in each State.
            (2) Reports.--
                    (A) First report.--
                            (i) In general.--The Commission shall 
                        submit a first report to the Congress by not 
                        later than June 1, 1997.
                            (ii) Requirement.--The report submitted to 
                        Congress under clause (i) shall include the 
                        Commission's recommendation with respect to the 
                        issue described in paragraph (1)(B)(vii) in the 
                        form of a legislative proposal containing such 
                        statutory provisions as the Commission may 
                        determine are necessary or appropriate to 
                        implement such recommendation.
                    (B) Subsequent reports.--The Commission shall issue 
                subsequent reports to the Congress by not later than 
                December 31, 1997, and December 31, 1998, respectively.
    (c) Administration.--
            (1) Appointment of staff.--
                    (A) Executive director.--The Commission shall have 
                an Executive Director who shall be appointed by the 
                Chair with the approval of the Commission. The 
                Executive Director shall be paid at a rate not to 
                exceed the rate of basic pay payable for level III of 
                the Executive Schedule.
                    (B) Staff.--With the approval of the Commission, 
                the Executive Director may appoint and determine the 
                compensation of such staff as may be necessary to carry 
                out the duties of the Commission. Such appointments and 
                compensation may be made without regard to the 
                provisions of title 5, United States Code, that govern 
                appointments in the competitive services, and the 
                provisions of chapter 51 and subchapter III of chapter 
                53 of such title that relate to classifications and the 
                General Schedule pay rates.
                    (C) Consultants.--The Commission may procure such 
                temporary and intermittent services of consultants 
                under section 3109(b) of title 5, United States Code, 
                as the Commission determines to be necessary to carry 
                out the duties of the Commission.
            (2) Provision of administrative support services by hhs.--
        Upon the request of the Commission, the Secretary of Health and 
        Human Services shall provide to the Commission on a 
        reimbursable basis such administrative support services as the 
        Commission may request.
    (d) Authorization of Appropriations.--There is authorized to be 
appropriated to carry out this section $4,000,000 for each of fiscal 
years 1997 and 1998, and $2,000,000 for fiscal year 1999.
    (e) Termination.--The Commission shall terminate on December 31, 
1998.
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