165
(A) by striking ‘‘(3)(A)’’ and inserting 
‘‘(1)’’; and 
(B) by striking ‘‘2-month period that begins 
with any’’ and inserting ‘‘fiscal year quarter 
that includes a’’. 
(b) 
MODIFICATION
OF
DEFINITION
OF
NEEDY 
STATE.—Section 403(b), as amended by subsection (a), (42 
U.S.C. 603(b)) is further amended—
(1) by striking paragraphs (5) and (6); 
(2) by redesignating paragraphs (7) and (8) as 
paragraphs (5) and (6), respectively; and 
(3) by inserting after paragraph (2) (as redesig-
nated by subsection (a)(2)) the following: 
‘‘(3) INITIAL DETERMINATION OF WHETHER A 
STATE QUALIFIES AS A NEEDY STATE.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), subject to paragraph (4), a State will 
be initially determined to be a needy State for 
a month if, as determined by the Secretary—
‘‘(i) the monthly average of the 
unduplicated number of families that re-
ceived assistance under the State program 
funded under this part in the most recently 
concluded 3-month period for which data 
are available from the State increased by at
166
least 5 percent over the number of such fam-
ilies that received such benefits in the cor-
responding 3-month period in either of the 
2 most recent preceding fiscal years; 
‘‘(ii) the increase in the number of 
such families for the State was due, in large 
measure, to economic conditions rather than 
State policy changes; and 
‘‘(iii) the State satisfies any of the fol-
lowing criteria: 
‘‘(I) The average rate of total un-
employment in the State (seasonally 
adjusted) for the period consisting of 
the most recent 3 months for which 
data are available has increased by the 
lesser of 1.5 percentage points or by 50 
percent over the corresponding 3-month 
period in either of the 2 most recent 
preceding fiscal years. 
‘‘(II) The average insured unem-
ployment rate for the most recent 13 
weeks for which data are available has 
increased by 1 percentage point over 
the corresponding 13-week period in ei-
167
ther of the 2 most recent preceding fis-
cal years. 
‘‘(III) As determined by the Sec-
retary of Agriculture, the monthly av-
erage number of households (as of the 
last day of each month) that partici-
pated in the food stamp program in 
the State in the then most recently con-
cluded 3-month period for which data 
are available exceeds by at least 15 
percent the monthly average number of 
households (as of the last day of each 
month) in the State that participated 
in the food stamp program in the cor-
responding 3-month period in either of 
the 2 most recent preceding fiscal 
years, but only if the Secretary and the 
Secretary of Agriculture concur in the 
determination that the State’s in-
creased caseload was due, in large 
measure, to economic conditions rather 
than changes in Federal or State poli-
cies related to the food stamp program. 
‘‘(B) DURATION.—A State that qualifies as 
a needy State—
168
‘‘(i) under subclause (I) or (II) of sub-
paragraph (A)(iii), shall be considered a 
needy State until the State’s average rate of 
total unemployment or the State’s insured 
unemployment rate, respectively, falls below 
the level attained in the applicable period 
that was first used to determine that the 
State qualified as a needy State under that 
subparagraph (and in the case of the in-
sured unemployment rate, without regard to 
any declines in the rate that are the result 
of seasonal variation); and 
‘‘(ii) under subclause (III) of subpara-
graph (A)(iii), shall be considered a needy 
State so long as the State meets the criteria 
for being considered a needy State under 
that subparagraph. 
‘‘(4) EXCEPTIONS.—
‘‘(A) UNEXPENDED BALANCES.—
‘‘(i) IN
GENERAL.—Notwithstanding 
paragraph (3), a State that has unexpended 
TANF balances in an amount that exceeds 
30 percent of the total amount of grants re-
ceived by the State under subsection (a) for 
the most recently completed fiscal year
169
(other than welfare-to-work grants made 
under paragraph (5) of that subsection 
prior to fiscal year 2000), shall not be a 
needy State under this subsection. 
‘‘(ii) DEFINITION
OF
UNEXPENDED 
TANF BALANCES.—In clause (i), the term 
‘unexpended TANF balances’ means the les-
sor of—
‘‘(I) the total amount of grants 
made to the State (regardless of the fis-
cal year in which such funds were 
awarded) under subsection (a) (other 
than 
welfare-to-work 
grants 
made 
under paragraph (5) of that subsection 
prior to fiscal year 2000) but not yet 
expended as of the end of the fiscal 
year preceding the fiscal year for 
which the State would, in the absence 
of this subparagraph, be considered a 
needy State under this subsection; and 
‘‘(II) the total amount of grants 
made to the State under subsection (a) 
(other 
than 
welfare-to-work 
grants 
made under paragraph (5) of that sub-
section prior to fiscal year 2000) but
170
not yet expended as of the end of such 
preceding fiscal year, plus the dif-
ference between—
‘‘(aa) the pro rata share of 
the current fiscal year grant to be 
made under subsection (a) to the 
State; and 
‘‘(bb) current year expendi-
tures of the total amount of grants 
made to the State under sub-
section (a) (regardless of the fiscal 
year in which such funds were 
awarded) (other than such wel-
fare-to-work grants) through the 
end of the most recent calendar 
quarter. 
‘‘(B) FAILURE
TO
SATISFY
MAINTENANCE 
OF
EFFORT
REQUIREMENT.—Notwithstanding 
paragraph (3), a State that fails to satisfy the 
requirement of section 409(a)(7) with respect to 
a fiscal year shall not be a needy State under 
this subsection for that fiscal year.’’. 
(c) CLARIFICATION OF REPORTING REQUIREMENTS.—
Paragraph (6) of section 403(b) (42 U.S.C. 603(b)), as re-
designated by subsection (b)(2), is amended by striking ‘‘on
171
the status of the Fund’’ and inserting ‘‘on the States that 
qualified for contingency funds and the amount of funding 
awarded under this subsection’’. 
(d) ELIMINATION OF PENALTY FOR FAILURE TO MAIN-
TAIN 100 PERCENT MAINTENANCE OF EFFORT.—
(1) IN
GENERAL.—Section 409(a) (42 U.S.C. 
609(a)) is amended—
(A) by striking paragraph (10); and 
(B) by redesignating paragraphs (11) 
through (14) as paragraphs (10) through (13), 
respectively. 
(2) CONFORMING
AMENDMENTS.—Section 409 
(42 U.S.C. 609) is amended—
(A) in subsection (a)(7)(B)(i)(III), by strik-
ing ‘‘(12)’’ and inserting ‘‘(11)’’; 
(B) in subsection (b)(2), by striking ‘‘(10), 
(12), or (13)’’ and inserting ‘‘(11), or (12)’’; and 
(C) in subsection (c)(4), by striking ‘‘(10), 
(12), or (13)’’ and inserting ‘‘(11), or (12)’’. 
SEC. 107. USE OF FUNDS. 
(a) TREATMENT OF INTERSTATE IMMIGRANTS.—Sec-
tion 404 (42 U.S.C. 604) is amended by striking subsection 
(c). 
(b) RESTORATION OF AUTHORITY TO TRANSFER UP 
TO 10 PERCENT OF TANF FUNDS TO THE SOCIAL SERV-
172
ICES
BLOCK
GRANT.—Section 404(d)(2) (42 U.S.C. 
604(d)(2)) is amended to read as follows: 
‘‘(2) LIMITATION ON AMOUNT TRANSFERABLE TO 
TITLE XX PROGRAMS.—A State may use not more 
than 10 percent of the amount of any grant made to 
the State under section 403(a) for a fiscal year to 
carry out State programs pursuant to title XX.’’. 
(c) CLARIFICATION OF AUTHORITY OF STATES TO USE 
TANF FUNDS CARRIED OVER FROM PRIOR YEARS TO 
PROVIDE TANF BENEFITS AND SERVICES.—Section 404(e) 
(42 U.S.C. 604(e)) is amended to read as follows: 
‘‘(e) AUTHORITY TO CARRYOVER OR RESERVE CER-
TAIN AMOUNTS FOR BENEFITS OR SERVICES OR FOR FU-
TURE CONTINGENCIES.—
‘‘(1) CARRYOVER.—A State or tribe may use a 
grant made to the State or tribe under this part for 
any fiscal year to provide, without fiscal year limita-
tion, any benefit or service that may be provided 
under the State or tribal program funded under this 
part. 
‘‘(2) CONTINGENCY RESERVE.—A State or tribe 
may designate any portion of a grant made to the 
State or tribe under this part as a contingency re-
serve for future needs, and may use any amount so 
designated to provide, without fiscal year limitation,
173
any benefit or service that may be provided under the 
State or tribal program funded under this part. If a 
State or tribe so designates a portion of such a grant, 
the State or tribe shall include in its report under 
section 411(a) the amount so designated.’’. 
(d) STATE OPTION TO ESTABLISH UNDERGRADUATE 
POSTSECONDARY
OR
VOCATIONAL
EDUCATIONAL
PRO-
GRAM.—
(1) IN GENERAL.—Section 404 (42 U.S.C. 604) 
is amended by adding at the end the following: 
‘‘(l) AUTHORITY TO ESTABLISH UNDERGRADUATE 
POSTSECONDARY
OR
VOCATIONAL
EDUCATIONAL
PRO-
GRAM.—
‘‘(1) IN
GENERAL.—Subject to the succeeding 
paragraphs of this subsection, a State to which a 
grant is made under section 403 may use the grant 
to establish a program under which an eligible partic-
ipant (as defined in paragraph (5)) may be provided 
support services described in paragraph (7) and, sub-
ject to paragraph (8), may have hours of participa-
tion in such program counted as being engaged in 
work for purposes of determining monthly participa-
tion rates under section 407(b)(1)(B)(i). 
‘‘(2) STATE PLAN REQUIREMENT.—In order to 
establish a program under this subsection, a State
174
shall describe (in an addendum to the State plan sub-
mitted under section 402) the applicable eligibility 
criteria that is designed to limit participation in the 
program to only those individuals—
‘‘(A) whose past earnings indicate that the 
individuals cannot qualify for employment that 
pays enough to allow them to obtain self-suffi-
ciency (as determined by the State); and 
‘‘(B) for whom enrollment in the program 
will prepare the individuals for higher-paying 
occupations in demand in the State. 
‘‘(3) LIMITATION ON ENROLLMENT.—The number 
of eligible participants in a program established 
under this subsection may not exceed 10 percent of the 
total number of families receiving assistance under 
the State program funded under this part. 
‘‘(4) NO FEDERAL FUNDS FOR TUITION.—A State 
may not use Federal funds provided under a grant 
made under section 403 to pay tuition for an eligible 
participant. 
‘‘(5) DEFINITION OF ELIGIBLE PARTICIPANT.—In 
this subsection, the term ‘eligible participant’ means 
an individual who receives assistance under the State 
program funded under this part and satisfies the fol-
lowing requirements: