409(a)(7)(B)(i)) of the suspension of any durational 
limit on assistance under the program.’’. 
(2) PENALTY.—Section 409(a) (42 U.S.C. 
609(a)), as amended by sections 5(c)(2)(A), 7(d)(1), 
and 8(b)(2) of this Act, is amended by adding at the 
end the following: 
‘‘(19) FAILURE TO CONDUCT OUTREACH TO IN-
FORM POTENTIALLY ELIGIBLE RECIPIENTS OF AS-
SISTANCE OF SUSPENSION OF DURATIONAL LIMIT 
ON ASSISTANCE.—If the Secretary determines that a 
State to which a grant is made under section 403 
in a fiscal year has violated section 408(a)(16) dur-
ing 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 5 percent of the State family assist-
ance grant.’’. 
(c) STATE PLAN REQUIRED TO INCLUDE DESCRIP-
TION OF HOW POTENTIALLY ELIGIBLE RECIPIENTS WILL 
BE INFORMED OF SUSPENSION OF TIME LIMITS DURING 
RECESSION.—Section 
402(a)(1)(B) 
(42 
U.S.C. 
602(a)(1)(B)), as amended by section 8(c) of this Act, is 
amended by adding at the end the following: 
‘‘(vii) The document shall describe 
how the State intends to inform potentially 
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eligible recipients of assistance under the 
program of the suspension of durational 
limits on the assistance during a high un-
employment period with respect to the 
State.’’. 
(d) HIGH UNEMPLOYMENT PERIOD DEFINED.—Sec-
tion 419 (42 U.S.C. 619) is amended by adding at the 
end the following: 
‘‘(6) 
HIGH
UNEMPLOYMENT
PERIOD
DE-
FINED.—The term ‘high unemployment period’ 
means, with respect to a State, a period of 1 or 
more consecutive months if the average rate of total 
unemployment in the State (seasonally adjusted) for 
the period consisting of the then most recent 3 
months for which data for all States are published 
equals or exceeds 6.5 percent.’’. 
SEC. 10. REQUIREMENT THAT STATES USE MERIT-BASED 
SYSTEM IN ADMINISTRATION OF TANF PRO-
GRAMS. 
(a) PROGRAM REQUIREMENT.—Section 408(a) (42 
U.S.C. 608(a)), as amended by sections 7(d)(1), 8(b)(1), 
and 9(b)(1) of this Act, is amended by adding at the end 
the following: 
‘‘(17) REQUIREMENT
TO
USE
MERIT-BASED 
SYSTEM IN ADMINISTERING PROGRAM.—A State to 
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which a grant is made under section 403 shall estab-
lish and maintain personnel standards through a 
merit-based system, in administering the State pro-
gram funded under this part and any other State 
program funded by qualified State expenditures (as 
defined in section 409(a)(7)(B)(i)).’’. 
(b) PENALTY.—Section 409(a) (42 U.S.C. 609), as 
amended by sections 5(c)(2)(A), 7(d)(1), 8(b)(2), and 
9(b)(2) of this Act, is amended by adding at the end the 
following: 
‘‘(20) PENALTY FOR FAILURE TO USE MERIT- 
BASED
SYSTEM
IN
ADMINISTERING
PROGRAM.—If 
the Secretary determines that a State to which a 
grant is made under section 403 in a fiscal year has 
violated section 408(a)(17) during the fiscal year, 
the Secretary shall reduce the grant payable to the 
State under section 403(a)(1) for the immediately 
succeeding fiscal year by an amount equal to 5 per-
cent of the State family assistance grant.’’. 
SEC. 11. BAN ON USING FEDERAL TANF FUNDS TO RE-
PLACE STATE AND LOCAL SPENDING THAT 
DOES NOT MEET THE DEFINITION OF QUALI-
FIED STATE EXPENDITURES. 
(a) PROHIBITION.—Section 408(a) (42 U.S.C. 
608(a)), as amended by sections 7(d)(1), 8(b)(1), 9(b)(1), 
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