732 
(B) by striking ‘‘; and’’ at the end of sub-
clause (II) and inserting a period; and 
(C) by striking subclause (III); 
(2) in subparagraph (B)(i)(II), by striking all 
that follows ‘‘section 409(a)(7)(B)(iii))’’ and insert-
ing a period; 
(3) by amending subparagraph (B)(ii)(I) to 
read as follows: 
‘‘(I) the qualified State expendi-
tures 
(as 
defined 
in 
section 
409(a)(7)(B)(i)) for the fiscal year; 
plus’’; and 
(4) by striking subparagraph (C). 
(e) CONSIDERATION OF CERTAIN CHILD CARE EX-
PENDITURES
IN
DETERMINING
STATE
COMPLIANCE 
WITH CONTINGENCY FUND MAINTENANCE OF EFFORT 
REQUIREMENT.—Section 
409(a)(10) 
(42 
U.S.C. 
609(a)(10)) is amended— 
(1) by striking ‘‘(other than the expenditures 
described in subclause (I)(bb) of that paragraph)) 
under the State program funded under this part’’ 
and inserting a close parenthesis; and 
(2) by striking ‘‘excluding any amount ex-
pended by the State for child care under subsection
733 
(g) or (i) of section 402 (as in effect during fiscal 
year 1994) for fiscal year 1994,’’. 
(f) EFFECTIVE DATE.—The amendments made by 
subsections (c), (d), and (e) shall take effect on October 
1, 2007. 
SEC. 8107. USE OF FUNDS. 
(a) GENERAL RULES.—Section 404(a)(2) (42 U.S.C. 
604(a)(2)) is amended by striking ‘‘in any manner that’’ 
and inserting ‘‘for any purposes or activities for which’’. 
(b) TREATMENT OF INTERSTATE IMMIGRANTS.— 
(1) 
STATE
PLAN
PROVISION.—Section 
402(a)(1)(B) (42 U.S.C. 602(a)(1)(B)) is amended 
by striking clause (i) and redesignating clauses (ii) 
through (iv) as clauses (i) through (iii), respectively. 
(2) USE OF FUNDS.—Section 404 (42 U.S.C. 
604) is amended by striking subsection (c). 
(c) INCREASE IN AMOUNT TRANSFERABLE TO CHILD 
CARE.—Section 404(d)(1) (42 U.S.C. 604(d)(1)) is 
amended by striking ‘‘30’’ and inserting ‘‘50’’. 
(d) INCREASE IN AMOUNT TRANSFERABLE TO TITLE 
XX 
PROGRAMS.—Section 
404(d)(2)(B) 
(42 
U.S.C. 
604(d)(2)(B)) is amended to read as follows: 
‘‘(B) APPLICABLE
PERCENT.—For pur-
poses of subparagraph (A), the applicable per-
734 
cent is 10 percent for fiscal year 2006 and each 
succeeding fiscal year.’’. 
(e) 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, 
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 shall, on an annual basis, include
735 
in its report under section 411(a) the amount so 
designated.’’. 
SEC. 8108. REPEAL OF FEDERAL LOAN FOR STATE WEL-
FARE PROGRAMS. 
(a) REPEAL.—Effective as of October 1, 2006, sec-
tion 406 (42 U.S.C. 606) is repealed. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 409(a) (42 U.S.C. 609(a)) is 
amended by striking paragraph (6). 
(2) Section 412 (42 U.S.C. 612) is amended by 
striking subsection (f) and redesignating subsections 
(g) through (i) as subsections (f) through (h), re-
spectively. 
(3) Section 1108(a)(2) (42 U.S.C. 1308(a)(2)) 
is amended by striking ‘‘406,’’. 
SEC. 8109. UNIVERSAL ENGAGEMENT AND FAMILY SELF- 
SUFFICIENCY PLAN REQUIREMENTS. 
(a) MODIFICATION
OF
STATE
PLAN
REQUIRE-
MENTS.—Section 402(a)(1)(A) (42 U.S.C. 602(a)(1)(A)) 
is amended by striking clauses (ii) and (iii) and inserting 
the following: 
‘‘(ii) Require a parent or caretaker re-
ceiving assistance under the program to 
engage in work or alternative self-suffi-
736 
ciency activities (as defined by the State), 
consistent with section 407(e)(2). 
‘‘(iii) Require families receiving assist-
ance under the program to engage in ac-
tivities in accordance with family self-suffi-
ciency plans developed pursuant to section 
408(b).’’. 
(b) ESTABLISHMENT OF FAMILY SELF-SUFFICIENCY 
PLANS.— 
(1) IN GENERAL.—Section 408(b) (42 U.S.C. 
608(b)) is amended to read as follows: 
‘‘(b) FAMILY SELF-SUFFICIENCY PLANS.— 
‘‘(1) IN GENERAL.—A State to which a grant 
is made under section 403 shall— 
‘‘(A) assess, in the manner deemed appro-
priate by the State, the skills, prior work expe-
rience, and employability of each work-eligible 
individual (as defined in section 407(b)(2)(C)) 
receiving assistance under the State program 
funded under this part; 
‘‘(B) establish for each family that in-
cludes such an individual, in consultation as the 
State deems appropriate with the individual, a 
self-sufficiency plan that specifies appropriate 
activities described in the State plan submitted
737 
pursuant to section 402, including direct work 
activities as appropriate designed to assist the 
family in achieving their maximum degree of 
self-sufficiency, and that provides for the ongo-
ing participation of the individual in the activi-
ties; 
‘‘(C) require, at a minimum, each such in-
dividual to participate in activities in accord-
ance with the self-sufficiency plan; 
‘‘(D) monitor the participation of each 
such individual in the activities specified in the 
self-sufficiency plan, and regularly review the 
progress of the family toward self-sufficiency; 
‘‘(E) upon such a review, revise the self- 
sufficiency plan and activities as the State 
deems appropriate. 
‘‘(2) TIMING.—The State shall comply with 
paragraph (1) with respect to a family— 
‘‘(A) in the case of a family that, as of Oc-
tober 1, 2005, is not receiving assistance from 
the State program funded under this part, not 
later than 60 days after the family first receives 
assistance on the basis of the most recent appli-
cation for the assistance; or
738 
‘‘(B) in the case of a family that, as of 
such date, is receiving the assistance, not later 
than 12 months after the date of enactment of 
this subsection. 
‘‘(3) STATE DISCRETION.—A State shall have 
sole discretion, consistent with section 407, to define 
and design activities for families for purposes of this 
subsection, to develop methods for monitoring and 
reviewing progress pursuant to this subsection, and 
to make modifications to the plan as the State 
deems appropriate to assist the individual in increas-
ing their degree of self-sufficiency. 
‘‘(4) RULE OF INTERPRETATION.—Nothing in 
this part shall preclude a State from— 
‘‘(A) requiring participation in work and 
any other activities the State deems appropriate 
for helping families achieve self-sufficiency and 
improving child well-being; or 
‘‘(B) using job search or other appropriate 
job readiness or work activities to assess the 
employability of individuals and to determine 
appropriate future engagement activities.’’. 
(2) PENALTY
FOR
FAILURE
TO
ESTABLISH 
FAMILY
SELF-SUFFICIENCY
PLAN.—Section 
409(a)(3) (42 U.S.C. 609(a)(3)) is amended—
739 
(A) in the paragraph heading, by inserting 
‘‘OR
ESTABLISH
FAMILY
SELF-SUFFICIENCY 
PLAN’’ after ‘‘RATES’’; and 
(B) in subparagraph (A), by inserting ‘‘or 
408(b)’’ after ‘‘407(a)’’. 
SEC. 8110. WORK PARTICIPATION REQUIREMENTS. 
(a) IN GENERAL.—Section 407 (42 U.S.C. 607) is 
amended by striking all that precedes subsection (b)(3) 
and inserting the following: 
‘‘SEC. 407. WORK PARTICIPATION REQUIREMENTS. 
‘‘(a) PARTICIPATION
RATE
REQUIREMENTS.—A 
State to which a grant is made under section 403 for a 
fiscal year shall achieve a minimum participation rate 
equal to not less than— 
‘‘(1) 50 percent for fiscal year 2006; 
‘‘(2) 55 percent for fiscal year 2007; 
‘‘(3) 60 percent for fiscal year 2008; 
‘‘(4) 65 percent for fiscal year 2009; and 
‘‘(5) 70 percent for fiscal year 2010 and each 
succeeding fiscal year. 
‘‘(b) CALCULATION OF PARTICIPATION RATES.— 
‘‘(1) AVERAGE MONTHLY RATE.—For purposes 
of subsection (a), the participation rate of a State 
for a fiscal year is the average of the participation 
rates of the State for each month in the fiscal year.
740 
‘‘(2) MONTHLY PARTICIPATION RATES; INCOR-
PORATION OF 40-HOUR WORK WEEK STANDARD.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the participation rate of a State for 
a month is— 
‘‘(i) the total number of countable 
hours (as defined in subsection (c)) with 
respect to the counted families for the 
State for the month; divided by 
‘‘(ii) 160 multiplied by the number of 
counted families for the State for the 
month. 
‘‘(B) COUNTED FAMILIES DEFINED.— 
‘‘(i) IN GENERAL.—In subparagraph 
(A), the term ‘counted family’ means, with 
respect to a State and a month, a family 
that includes a work-eligible individual and 
that receives assistance in the month under 
the State program funded under this part, 
subject to clause (ii). 
‘‘(ii) STATE
OPTION
TO
EXCLUDE 
CERTAIN
FAMILIES.—At the option of a 
State, the term ‘counted family’ shall not 
include—
741 
‘‘(I) a family in the first month 
for which the family receives assist-
ance from a State program funded 
under this part on the basis of the 
most recent application for such as-
sistance; 
‘‘(II) on a case-by-case basis, a 
family in which the youngest child has 
not attained 12 months of age; or 
‘‘(III) a family that is subject to 
a sanction under this part or part D, 
but that has not been subject to such 
a sanction for more than 3 months 
(whether or not consecutive) in the 
preceding 12-month period. 
‘‘(iii) STATE OPTION TO INCLUDE IN-
DIVIDUALS RECEIVING ASSISTANCE UNDER 
A
TRIBAL
FAMILY
ASSISTANCE
PLAN
OR 
TRIBAL WORK PROGRAM.—At the option of 
a State, the term ‘counted family’ may in-
clude families in the State that are receiv-
ing assistance under a tribal family assist-
ance plan approved under section 412 or 
under a tribal work program to which 
funds are provided under this part.
742 
‘‘(C) WORK-ELIGIBLE
INDIVIDUAL
DE-
FINED.—In this section, the term ‘work-eligible 
individual’ means an individual— 
‘‘(i) who is married or a single head 
of household; and 
‘‘(ii) whose needs are (or, but for 
sanctions under this part or part D, would 
be) included in determining the amount of 
cash assistance to be provided to the fam-
ily under the State program funded under 
this part.’’. 
(b) RECALIBRATION
OF
CASELOAD
REDUCTION 
CREDIT.— 
(1) IN GENERAL.—Section 407(b)(3)(A)(ii) (42 
U.S.C. 607(b)(3)(A)(ii)) is amended to read as fol-
lows: 
‘‘(ii) the average monthly number of 
families that received assistance under the 
State program funded under this part dur-
ing the base year.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
407(b)(3)(B) (42 U.S.C. 607(b)(3)(B)) is amended 
by striking ‘‘and eligibility criteria’’ and all that fol-
lows through the close parenthesis and inserting
743 
‘‘and the eligibility criteria in effect during the then 
applicable base year’’. 
(3) BASE YEAR DEFINED.—Section 407(b)(3) 
(42 U.S.C. 607(b)(3)) is amended by adding at the 
end the following: 
‘‘(C) BASE YEAR DEFINED.—In this para-
graph, the term ‘base year’ means, with respect 
to a fiscal year— 
‘‘(i) if the fiscal year is fiscal year 
2006, fiscal year 1996; 
‘‘(ii) if the fiscal year is fiscal year 
2007, fiscal year 1998; 
‘‘(iii) if the fiscal year is fiscal year 
2008, fiscal year 2001; or 
‘‘(iv) if the fiscal year is fiscal year 
2009 or any succeeding fiscal year, the 
then 4th preceding fiscal year.’’. 
(c) SUPERACHIEVER CREDIT.—Section 407(b) (42 
U.S.C. 607(b)) is amended by striking paragraphs (4) and 
(5) and inserting the following: 
‘‘(4) SUPERACHIEVER CREDIT.— 
‘‘(A) IN
GENERAL.—The participation 
rate, determined under paragraphs (1) and (2) 
of this subsection, of a superachiever State for