260
‘‘(f) AUTHORITY TO OPERATE EMPLOYMENT PLACE-
MENT PROGRAM.—A State to which a grant is made under
section 403 may use the grant to make payments (or pro-
vide 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 elec-
tronic 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 re-
spect to the State.
‘‘(c) COMPUTATION AND CERTIFICATION OF PAY-
MENTS TO STATES.—
261
‘‘(1) COMPUTATION.—The Secretary shall esti-
mate 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 ex-
pended by the State in the quarter under the State
program funded under this part and such other in-
formation 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 ad-
justment has not been made under this paragraph.
‘‘(d) PAYMENT METHOD.—Upon receipt of a certifi-
cation 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.
262
‘‘(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 in-
dividual has been overpaid under the State program
funded under this part, the Secretary of the Treas-
ury shall determine whether any amounts as refunds
of Federal taxes paid are payable to such individual,
regardless of whether the individual filed a tax re-
turn 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 overpay-
ment 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 pro-
vide—
‘‘(A) that a State may only submit under
paragraph (1) requests for collection of over-
payments with respect to individuals—
263
‘‘(i) who are no longer receiving as-
sistance 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 with-
holding by the Secretary of the Treasury
from the income tax refunds of such indi-
viduals;
‘‘(B) that the Secretary of the Treasury
will give a timely and appropriate notice to any
other person filing a joint return with the indi-
vidual 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 ex-
tent feasible and consistent with the provisions
of this subsection, will be the same as those is-
264
sued pursuant to section 464(b) applicable to
collection of past-due child support.
‘‘SEC. 406. FEDERAL LOANS FOR STATE WELFARE PRO-
GRAMS.
‘‘(a) LOAN AUTHORITY.—
‘‘(1) IN GENERAL.—The Secretary shall make
loans to any loan-eligible State, for a period to ma-
turity of not more than 3 years.
‘‘(2) LOAN-ELIGIBLE STATE.—As used in para-
graph (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
265
the service area of an Indian tribe with a tribal fam-
ily 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 OUTSTAND-
ING LOANS.—The total dollar amount of loans outstand-
ing 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:
1997 ...................................................................
1998 ...................................................................
1999 ...................................................................
2000 ...................................................................
266
2001 ...................................................................
2002 or 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 speci-
fied in the following table for the fiscal year with re-
spect 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 ...................................................................
1997 ...................................................................
1998 ...................................................................
1999 or thereafter .............................................
90.
‘‘(b) CALCULATION OF PARTICIPATION RATES.—
‘‘(1) ALL FAMILIES.—
‘‘(A) AVERAGE MONTHLY RATE.—For pur-
poses 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 fis-
cal year.
‘‘(B) MONTHLY PARTICIPATION RATES.—
The participation rate of a State for all families
of the State for a month, expressed as a per-
centage, is—
‘‘(i) the number of families receiving
assistance under the State program funded
267
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 re-
ceiving such assistance during the
month that include an adult receiving
such assistance; exceeds
‘‘(II) the number of families re-
ceiving such assistance that are sub-
ject in such month to a penalty de-
scribed in subsection (e)(1) but have
not been subject to such penalty for
more than 3 months within the pre-
ceding 12-month period (whether or
not consecutive).
‘‘(2) 2-PARENT FAMILIES.—
‘‘(A) AVERAGE MONTHLY RATE.—For pur-
poses 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
268
families of the State for a month shall be cal-
culated by use of the formula set forth in para-
graph (1)(B), except that in the formula the
term ‘number of 2-parent families’ shall be sub-
stituted for the term ‘number of families’ each
place such latter term appears.
‘‘(3) PRO RATA REDUCTION OF PARTICIPATION
RATE
DUE
TO
CASELOAD
REDUCTIONS
NOT
RE-
QUIRED 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 per-
centage points equal to the number of percent-
age points (if any) by which—
‘‘(i) the average monthly number of
families receiving assistance during the fis-
cal 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.
269
The minimum participation rate shall not be re-
duced to the extent that the Secretary deter-
mines that the reduction in the number of fami-
lies receiving such assistance is required by
Federal law.
‘‘(B) ELIGIBILITY CHANGES NOT COUNT-
ED.—The regulations described in subpara-
graph (A) shall not take into account families
that are diverted from a State program funded
under this part as a result of differences in eli-
gibility 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 di-
verted 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, in-
clude families receiving assistance under a tribal
family assistance plan approved under section 412.
270
‘‘(5) STATE
OPTION
FOR
PARTICIPATION
RE-
QUIREMENT EXEMPTIONS.—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 deter-
mining the participation rates under subsection (a).
‘‘(c) ENGAGED IN WORK.—
‘‘(1) ALL
FAMILIES.—For purposes of sub-
section (b)(1)(B)(i), a recipient is engaged in work
for a month in a fiscal year if the recipient is par-
ticipating 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 activ-
ity 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 ...............................................................
1997 ...............................................................
1998 ...............................................................
1999 ...............................................................
2000 or thereafter .........................................
30.
‘‘(2) 2-PARENT
FAMILIES.—For purposes of
subsection (b)(2)(B)(i), 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
271
week of which are attributable to an activity de-
scribed in paragraph (1), (2), (3), (4), (5), (6), (7),
or (8) of subsection (d).
‘‘(3) LIMITATION ON NUMBER OF WEEKS FOR
WHICH JOB SEARCH COUNTS AS WORK.—Notwith-
standing 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 8 weeks in a fiscal year, or if the par-
ticipation is for a week that is in a fiscal year and
that immediately follows 4 consecutive weeks of such
participation in the 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 para-
graphs (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 voca-
tional educational training.
272
‘‘(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 deter-
mining 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 MAIN-
TAINS
SATISFACTORY
SCHOOL
ATTENDANCE
DEEMED TO BE MEETING WORK PARTICIPATION RE-
QUIREMENTS.—For purposes of determining month-
ly 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 en-
gaged in work for a month in a fiscal year if the re-
cipient—
‘‘(A) maintains satisfactory attendance at
secondary school or the equivalent during the
month; or
‘‘(B) participates in education directly re-
lated to employment for at least the minimum
273
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 ex-
ceed 12 months with respect to any individual);
‘‘(9) job skills training directly related to em-
ployment;
‘‘(10) education directly related to employment,
in the case of a recipient who 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 has not com-
pleted secondary school.
‘‘(e) PENALTIES AGAINST INDIVIDUALS.—
274
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), if an adult in a family receiving assist-
ance under the State program funded under this
part refuses to engage in work required in accord-
ance with this section, the State shall—
‘‘(A) reduce the amount of assistance oth-
erwise 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 re-
fuses; or
‘‘(B) terminate such assistance,
subject to such good cause and other exceptions as
the State may establish.
‘‘(2) EXCEPTION.—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:
‘‘(A) Unavailability of appropriate child
care within a reasonable distance from the indi-
vidual’s home or work site.
275
‘‘(B) Unavailability or unsuitability of in-
formal child care by a relative or under other
arrangements.
‘‘(C) Unavailability of appropriate and af-
fordable formal child care arrangements.
‘‘(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
adult in a work activity described in subsection (d)
which is funded, in whole or in part, by funds pro-
vided by the Federal Government shall be employed
or assigned—
‘‘(A) when any other individual is on layoff
from the same or any substantially equivalent
job; or
‘‘(B) if the employer has terminated the
employment of any regular employee or other-
wise caused an involuntary reduction of its
workforce in order to fill the vacancy so created
with an adult described in paragraph (1).
276
‘‘(3) NO PREEMPTION.—Nothing in this sub-
section 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 NON-
CUSTODIAL, NONSUPPORTING MINOR PARENTS.—It is the
sense of the Congress that the States should require non-
custodial, nonsupporting parents who have not attained 18
years of age to fulfill community work obligations and at-
tend appropriate parenting or money management classes
after school.
‘‘(i) REVIEW OF IMPLEMENTATION OF STATE WORK
PROGRAMS.—During fiscal year 1999, the Committee on
Ways and Means of the House of Representatives and the
Committee on Finance of the Senate shall hold hearings
and engage in other appropriate activities to review the
implementation of this section by the States, and shall in-
277
vite the Governors of the States to testify before them re-
garding such implementation. Based on such hearings,
such Committees may introduce such legislation as may
be appropriate to remedy any problems with the State pro-
grams operated pursuant to this section.
‘‘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, unless the
family includes—
‘‘(A) a minor child who resides with a cus-
todial parent or other adult caretaker relative of
the child; or
‘‘(B) a pregnant individual.
‘‘(2) NO
ADDITIONAL
CASH
ASSISTANCE
FOR
CHILDREN BORN TO FAMILIES RECEIVING ASSIST-
ANCE.—
‘‘(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
278
‘‘(ii) a person who received such as-
sistance 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 in-
clude any other children.
‘‘(C) EXCEPTION
FOR
VOUCHERS.—Sub-
paragraph (A) shall not apply to vouchers
which are provided in lieu of cash benefits and
which may be used only to pay for particular
goods and services specified by the State as
suitable for the care of the child involved.
‘‘(D) EXCEPTION FOR RAPE OR INCEST.—
Subparagraph (A) shall not apply with respect
to a child who is born as a result of rape or in-
cest.
‘‘(E) STATE ELECTION TO OPT OUT.—Sub-
paragraph (A) shall not apply to a State if
State law specifically exempts the State pro-
gram funded under this part from the applica-
tion of subparagraph (A).
279
‘‘(F) SUBSTITUTION OF FAMILY CAPS IN
EFFECT UNDER WAIVERS.—Subparagraph (A)
shall not apply to a State—
‘‘(i) if, as of the date of the enactment
of this part, there is in effect a waiver ap-
proved 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 subtitle A of
the Personal Responsibility and Work Op-
portunity Act of 1996) to a family by rea-
son of the birth of a child to a family
member otherwise eligible for such aid; and
‘‘(ii) for so long as the State contin-
ues to implement such policy under the
State program funded under this part,
under rules prescribed by the State.
‘‘(3) REDUCTION OR ELIMINATION OF ASSIST-
ANCE FOR NONCOOPERATION IN ESTABLISHING PA-
TERNITY
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 pa-
ternity or in establishing, modifying, or enforcing a
280
support order with respect to a child of the individ-
ual, 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 from the assistance that
would otherwise be provided to the family of the
individual under the State program funded
under this part the share of such assistance at-
tributable to the individual; and
‘‘(B) may deny the family any assistance
under the State program.
‘‘(4) NO ASSISTANCE FOR FAMILIES NOT AS-
SIGNING
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 fam-
ily 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,
281
which accrue (or have accrued) before the date
the family leaves the program, which assign-
ment, 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 as-
signment 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 re-
quire, 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 de-
scribed 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
282
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 com-
pleted 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 pro-
vided in subparagraph (B), a State to
which a grant is made under section 403
shall not use any part of the grant to pro-
vide 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 in-
283
dividual as such parent’s, guardian’s, or
adult relative’s own home.
‘‘(ii) INDIVIDUAL DESCRIBED.— For
purposes of clause (i), an individual de-
scribed 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 AR-
RANGEMENT.—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 lo-
cating, a second chance home, maternity
home, or other appropriate adult-super-
vised supportive living arrangement, taking
into consideration the needs and concerns
of the individual, unless the State agency
determines that the individual’s current
living arrangement is appropriate, and
thereafter shall require that the individual
284
and the minor child referred to in subpara-
graph (A)(ii)(II) reside in such living ar-
rangement as a condition of the continued
receipt of assistance under the State pro-
gram funded under this part attributable
to funds provided by the Federal Govern-
ment (or in an alternative appropriate ar-
rangement, should circumstances change
and the current arrangement cease to be
appropriate).
‘‘(ii) INDIVIDUAL
DESCRIBED.—For
purposes of clause (i), an individual is de-
scribed 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 in-
dividual allows the individual to live in
285
the home of such parent, guardian, or
relative;
‘‘(III) the State agency deter-
mines that—
‘‘(aa) the individual or the
minor child referred to in sub-
paragraph (A)(ii)(II) is being or
has been subjected to serious
physical or emotional harm, sex-
ual 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 se-
rious 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 inter-
est of the minor child to waive the re-
quirement of subparagraph (A) with
respect to the individual or the minor
child.
286
‘‘(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 ar-
rangement 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
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
287
any part of the grant to provide assistance to
a family that includes an adult who has re-
ceived 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 deter-
mining the number of months for which an in-
dividual who is a parent or pregnant has re-
ceived assistance under the State program
funded under this part, the State shall dis-
regard 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 ex-
empt a family from the application of sub-
paragraph (A) by reason of hardship or if
the family includes an individual who has
288
been battered or subjected to extreme cru-
elty.
‘‘(ii) LIMITATION.—The number of
families with respect to which an exemp-
tion 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 EX-
TREME CRUELTY DEFINED.—For purposes
of clause (i), an individual has been bat-
tered 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 care-
taker relative of a dependent child to
engage in nonconsensual sexual acts
or activities;
289
‘‘(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.—Sub-
paragraph (A) shall not be interpreted to re-
quire any State to provide assistance to any in-
dividual for any period of time under the State
program funded under this part.
‘‘(E) RULE
OF
INTERPRETATION.—This
part shall not be interpreted to prohibit any
State from expending State funds not originat-
ing with the Federal Government on benefits
for children or families that have become ineli-
gible for assistance under the State program
funded under this part by reason of subpara-
graph (A).
‘‘(9) DENIAL OF ASSISTANCE FOR 10 YEARS TO
A PERSON FOUND TO HAVE FRAUDULENTLY MIS-
REPRESENTED RESIDENCE IN ORDER TO OBTAIN AS-
SISTANCE 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 in-
dividual during the 10-year period that begins on
290
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 resi-
dence of the individual in order to receive assistance
simultaneously from 2 or more States under pro-
grams that are funded under this title, title 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 Presi-
dent of the United States grants a pardon with re-
spect to the conduct which was the subject of the
conviction.
‘‘(10) DENIAL OF ASSISTANCE FOR FUGITIVE
FELONS
AND
PROBATION
AND
PAROLE
VIOLA-
TORS.—
‘‘(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
291
to commit a crime, which is a felony under
the laws of the place from which the indi-
vidual flees, or which, in the case of the
State of New Jersey, is a high mis-
demeanor 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 re-
spect to conduct of an individual, for any month
beginning after the President of the United
States grants a pardon with respect to the con-
duct.
‘‘(B) EXCHANGE OF INFORMATION WITH
LAW ENFORCEMENT AGENCIES.—If a State to
which a grant is made under section 403 estab-
lishes 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 pre-
vent the State agency administering the pro-
gram from furnishing a Federal, State, or local
law enforcement officer, upon the request of the
officer, with the current address of any recipi-
ent if the officer furnishes the agency with the
292
name of the recipient and notifies the agency
that—
‘‘(i) the recipient—
‘‘(I) is described in subparagraph
(A); or
‘‘(II) has information that is nec-
essary 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.
293
‘‘(B) STATE
AUTHORITY
TO
ESTABLISH
GOOD CAUSE EXCEPTIONS.—The State may es-
tablish such good cause exceptions to subpara-
graph (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
REL-
ATIVE 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 care-
taker relative) of a minor child and who fails to
notify the agency administering the State pro-
gram funded under this part of the absence of
the minor child from the home for the period
specified in or provided for pursuant to sub-
paragraph (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) INCOME SECURITY PAYMENTS NOT TO BE
DISREGARDED
IN
DETERMINING
THE
AMOUNT
OF
ASSISTANCE TO BE PROVIDED TO A FAMILY.—If a
294
State to which a grant is made under section 403
uses any part of the grant to provide assistance for
any individual who is receiving benefits, or on behalf
of whom benefits are paid, under a State plan for
old-age assistance approved under section 2, under
section 202, 205(j)(1), 223, or 228, under a State
program funded under part E that provides cash
payments for foster care, or under the supplemental
security income program under title XVI, then the
State may disregard the payment in determining the
amount of assistance to be provided under the State
program funded under this part, from funds pro-
vided by the Federal Government, to the family of
which the individual is a member.
‘‘(13) MEDICAL ASSISTANCE REQUIRED TO BE
PROVIDED FOR 1 YEAR FOR FAMILIES BECOMING IN-
ELIGIBLE FOR CASH ASSISTANCE UNDER THIS PART
DUE
TO
INCREASED
EARNINGS
FROM
EMPLOY-
MENT.—A State to which a grant is made under sec-
tion 403 shall take such action as may be necessary
to ensure that, if an individual or family becomes in-
eligible to receive cash assistance under the State
program funded under this part as a result of in-
creased earnings from employment, having received
such assistance in at least 3 of the 6 months imme-
295
diately preceding the month in which such ineligibil-
ity begins, the individual (or in the case of a family,
each individual in the family) shall be eligible for
medical assistance under the State’s plan approved
under title XIX during the immediately succeeding
12-month period for so long as family income (as de-
fined by the State), excluding any refund of Federal
income taxes made by reason of section 32 of the In-
ternal Revenue Code of 1986 (relating to earned in-
come tax credit) and any payment made by an em-
ployer 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 ap-
propriately notified of such eligibility.
‘‘(14) MEDICAL ASSISTANCE REQUIRED TO BE
PROVIDED FOR 4 MONTHS FOR FAMILIES BECOMING
INELIGIBLE
FOR
CASH
ASSISTANCE
UNDER
THIS
PART DUE TO COLLECTION OF CHILD SUPPORT.—A
State to which a grant is made under section 403
shall take such action as may be necessary to ensure
that, if any individual or family becomes ineligible to
receive cash assistance under the State program
funded under this part as a result of the collection
or increased collection of child or spousal support
under part D, having received such assistance in at
296
least 3 of the 6 months immediately preceding the
month in which such ineligibility begins, the individ-
ual (or, in the case of a family, each individual in
the family) shall be eligible for medical assistance
under the State’s plan approved under title XIX
during the 4-month period beginning with the month
in which such ineligibility begins.
‘‘(15) MEDICAL ASSISTANCE REQUIRED TO BE
PROVIDED FOR CERTAIN INDIVIDUALS.—A State to
which a grant is made under section 403 shall take
such action as may be necessary to ensure that,
under section 1931, individuals who would be eligible
for cash assistance under the State plan approved
under this part (as in effect as of July 16, 1996) if
such State plan were still in effect are eligible for
medical assistance under the State’s plan approved
under title XIX.
‘‘(b) INDIVIDUAL RESPONSIBILITY PLANS.—
‘‘(1) ASSESSMENT.—The State agency respon-
sible for administering the State program funded
under this part shall make an initial assessment of
the skills, prior work experience, and employability
of each recipient of assistance under the program
who—
‘‘(A) has attained 18 years of age; or
297
‘‘(B) has not completed high school or ob-
tained a certificate of high school equivalency,
and is not attending secondary school.
‘‘(2) CONTENTS OF PLANS.—
‘‘(A) IN GENERAL.—On the basis of the
assessment made under subsection (a) with re-
spect to an individual, the State agency, in con-
sultation with the individual, may develop an
individual responsibility plan for the individual,
which—
‘‘(i) sets forth an employment goal for
the individual and a plan for moving the
individual immediately into private sector
employment;
‘‘(ii) sets forth the obligations of the
individual, which may include a require-
ment that the individual attend school,
maintain certain grades and attendance,
keep school age children of the individual
in 
school, 
immunize 
children, 
attend
parenting and money management classes,
or do other things that will help the indi-
vidual become and remain employed in the
private sector;
298
‘‘(iii) to the greatest extent possible is
designed to move the individual into what-
ever private sector employment the individ-
ual is capable of handling as quickly as
possible, and to increase the responsibility
and amount of work the individual is to
handle over time;
‘‘(iv) describes the services the State
will provide the individual so that the indi-
vidual will be able to obtain and keep em-
ployment in the private sector, and de-
scribe the job counseling and other services
that will be provided by the State; and
‘‘(v) may require the individual to un-
dergo appropriate substance abuse treat-
ment.
‘‘(B) TIMING.—The State agency may
comply with paragraph (1) with respect to an
individual—
‘‘(i) within 90 days (or, at the option
of the State, 180 days) after the effective
date of this part, in the case of an individ-
ual who, as of such effective date, is a re-
cipient of aid under the State plan ap-
299
proved under part A (as in effect imme-
diately before such effective date); or
‘‘(ii) within 30 days (or, at the option
of the State, 90 days) after the individual
is determined to be eligible for such assist-
ance, in the case of any other individual.
‘‘(3) PENALTY FOR NONCOMPLIANCE BY INDI-
VIDUAL.—In addition to any other penalties required
under the State program funded under this part, the
State may reduce, by such amount as the State con-
siders appropriate, the amount of assistance other-
wise payable under the State program to a family
that includes an individual who fails without good
cause to comply with an individual responsibility
plan signed by the individual.
‘‘(4) STATE DISCRETION.—The exercise of the
authority of this subsection shall be within the sole
discretion of the State.
‘‘(c) ALIENS.—For special rules relating to the treat-
ment of aliens, see section 4402 of the Personal Respon-
sibility and Work Opportunity Act of 1996.
‘‘SEC. 409. PENALTIES.
‘‘(a) IN GENERAL.—Subject to this section:
‘‘(1) USE OF GRANT IN VIOLATION OF THIS
PART.—
300
‘‘(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 Sec-
retary shall reduce the grant payable to the
State under section 403(a)(1) for the imme-
diately succeeding fiscal year quarter by the
amount so used.
‘‘(B) ENHANCED
PENALTY
FOR
INTEN-
TIONAL
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 fur-
ther 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 assist-
ance grant.
‘‘(2) FAILURE
TO
SUBMIT
REQUIRED
RE-
PORT.—
‘‘(A) IN GENERAL.—If the Secretary deter-
mines 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 quar-
301
ter, the Secretary shall reduce the grant pay-
able 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 Sec-
retary 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 suc-
ceeds the fiscal quarter for which the report
was required.
‘‘(3) FAILURE TO SATISFY MINIMUM PARTICIPA-
TION RATES.—
‘‘(A) IN GENERAL.—If the Secretary deter-
mines 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 imme-
diately 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 reduc-
302
tions under subparagraph (A) based on the de-
gree of noncompliance, and may reduce the
penalty if the State experiences an economic
downturn that leads to significantly greater un-
employment.
‘‘(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 ES-
TABLISHMENT AND CHILD SUPPORT ENFORCEMENT
REQUIREMENTS UNDER PART D.—Notwithstanding
any other provision of this Act, if the Secretary de-
termines 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 pater-
nity or in establishing, modifying, or enforcing a
303
child support order in accordance with such part and
who do not qualify for any good cause or other ex-
ception established by the State under section
454(29), the Secretary shall reduce the grant pay-
able to the State under section 403(a)(1) for the im-
mediately 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 succeed-
ing fiscal year quarter (without regard to this sec-
tion) by the outstanding loan amount, plus the inter-
est owed on the outstanding amount. The Secretary
shall not forgive any outstanding loan amount or in-
terest 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
304
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 ex-
penditures with respect to such preceding fiscal
year.
‘‘(B) DEFINITIONS.—As used in this para-
graph:
‘‘(i) 
QUALIFIED
STATE
EXPENDI-
TURES.—
‘‘(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 follow-
ing with respect to eligible families:
‘‘(aa) Cash assistance.
‘‘(bb) Child care assistance.
‘‘(cc) Educational activities
designed to increase self-suffi-
ciency, job training, and work,
excluding any expenditure for
public education in the State ex-
305
cept expenditures which involve
the provision of services or assist-
ance 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 ex-
tent that such costs do not ex-
ceed 15 percent of the total
amount of qualified State ex-
penditures 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 PRO-
GRAMS.—Such term does not include
expenditures under any State or local
program during a fiscal year, except
to the extent that—
‘‘(aa) the expenditures ex-
ceed the amount expended under
306
the State or local program in the
fiscal year most recently ending
before the date of the enactment
of this part; or
‘‘(bb) the State is entitled to
a payment under former section
403 (as in effect immediately be-
fore such date of enactment) with
respect to the expenditures.
‘‘(III) ELIGIBLE
FAMILIES.—As
used in subclause (I), the term ‘eligi-
ble families’ means families eligible
for assistance under the State pro-
gram 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 sec-
tion 4402 of the Personal Responsibil-
ity and Work Opportunity Act of
1996.
‘‘(ii) APPLICABLE PERCENTAGE.—The
term ‘applicable percentage’ means for fis-
cal years 1997 through 2001, 80 percent
(or, if the State meets the requirements of
section 407(a) for the fiscal year, 75 per-
307
cent) reduced (if appropriate) in accord-
ance with subparagraph (C)(ii).
‘‘(iii) 
HISTORIC
STATE
EXPENDI-
TURES.—The term ‘historic State expendi-
tures’ means, with respect to a State, the
lesser of—
‘‘(I) the expenditures by the
State under parts A and F (as in ef-
fect 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 as-
sistance grant, plus the total
amount required to be paid to
the State under former section
403 for fiscal year 1994 with re-
spect 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 re-
quired to be paid to the State
308
under former section 403 (as in
effect during fiscal year 1994)
for fiscal year 1994.
Such term does not include any expendi-
tures under the State plan approved under
part A (as so in effect) on behalf of indi-
viduals covered by a tribal family assist-
ance 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 Fed-
eral Government;
‘‘(II) State funds expended for
the medicaid program under title
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 pro-
grams other than under this part.
‘‘(C) APPLICABLE PERCENTAGE REDUCED
FOR HIGH PERFORMANCE STATES.—
309
‘‘(i) DETERMINATION OF HIGH PER-
FORMANCE STATES.—The Secretary shall
use the formula developed under section
403(a)(4)(C) to assign a score to each eli-
gible State that represents the perform-
ance 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 percent-
age with respect to any eligible State for a
fiscal year.
‘‘(ii) REDUCTION
PROPORTIONAL
TO
PERFORMANCE.—The Secretary shall re-
duce 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 as-
signed 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
310
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 RE-
QUIREMENTS 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 require-
ments 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 consecu-
311
tive 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 sub-
sequent consecutive such finding made as a
result of such a review.
‘‘(B) DISREGARD
OF
NONCOMPLIANCE
WHICH IS OF A TECHNICAL NATURE.—For pur-
poses 
of 
subparagraph 
(A) 
and 
section
452(a)(4), a State which is not in full compli-
ance with the requirements of this part shall be
determined to be in substantial compliance with
such requirements only if the Secretary deter-
mines that any noncompliance with such re-
quirements 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 PER-
CENT OF HISTORIC EFFORT.—If, at the end of any
fiscal year during which amounts from the Contin-
gency Fund for State Welfare Programs have been
paid to a State, the Secretary finds that the expendi-
tures under the State program funded under this
part for the fiscal year are less than 100 percent of
312
historic State expenditures (as defined in paragraph
(8)(B)(iii) of this subsection), the Secretary shall re-
duce 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 EXPEND ADDITIONAL STATE
FUNDS
TO
REPLACE
GRANT
REDUCTIONS.—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.
‘‘(11) FAILURE TO PROVIDE MEDICAL ASSIST-
ANCE
TO
FAMILIES
BECOMING
INELIGIBLE
FOR
CASH ASSISTANCE UNDER THIS PART DUE TO IN-
CREASED EARNINGS FROM EMPLOYMENT OR COL-
LECTION OF CHILD SUPPORT.—
‘‘(A) IN GENERAL.—If the Secretary deter-
mines that a State program funded under this
part is not in compliance with paragraph (13)
or (14) of section 408(a) for a quarter, the Sec-
retary shall reduce the grant payable to the
State under section 403(a)(1) for the imme-
diately succeeding fiscal year by an amount
313
equal to not more than 5 percent of the State
family assistance grant.
‘‘(B) PENALTY
BASED
ON
SEVERITY
OF
FAILURE.—The Secretary shall impose reduc-
tions under subparagraph (A) based on the de-
gree of noncompliance.
‘‘(b) REASONABLE CAUSE EXCEPTION.—
‘‘(1) IN GENERAL.—The Secretary may not im-
pose 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 sub-
section shall not apply to any penalty under para-
graph (7), (8), or (11) of subsection (a).
‘‘(c) CORRECTIVE COMPLIANCE PLAN.—
‘‘(1) IN GENERAL.—
‘‘(A) NOTIFICATION
OF
VIOLATION.—Be-
fore 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 ac-
cordance with this subsection which outlines
how the State will correct the violation and how