‘‘(A) IN GENERAL.—For purposes of this
title, a child care certificate is a certificate is-
sued by a State directly to a parent or legal
guardian for use only as payment for child care
services in any child care facility eligible to re-
ceive funds under this Act.
‘‘(B) REDEMPTION.—If the demand for
child care services of families qualified to re-
ceive such services from a State under this Act
exceeds the available supply of such services,
the State shall ration assistance to obtain such
services using procedures that do not disadvan-
tage parents using child care certificates, rel-
ative to other methods of financing, in either
the waiting period or the pecuniary value of
such services.
‘‘(C) COMMENCEMENT
OF
CERTIFICATE
PROGRAM.—Beginning not later than 1 year
after the date of the enactment of this section,
each State that receives funds under this title
shall offer a child care certificate program in
accordance with this section.
‘‘(D) AUTHORITY
TO
USE
CHILD
CARE
FUNDS
FOR
CERTIFICATE
PROGRAM.—Each
State to which funds are paid under this title
may use the funds provided to the State under
this title which are required to be used for child
care activities to plan and establish the State’s
child care certificate program.
‘‘(7) OPTION
OF
RECEIVING
A
CHILD
CARE
CERTIFICATE.—Each parent or legal guardian who
receives assistance pursuant to this title shall be
provided with the option of enrolling their child with
an eligible child care provider that receives funds
through grants, contracts, or child care certificates
provided under this title. Such parent shall have the
right to use such certificates to purchase child care
services from an eligible provider of their choice. The
State shall ensure that parental preference is consid-
ered to the maximum extent possible in awarding
grants or contracts.
‘‘(8) RIGHTS OF RELIGIOUS CHILD CARE PRO-
VIDERS.—Notwithstanding any other provision of
law, a religious child care provider who receives
funds under this Act may require adherence by em-
ployees to the religious tenets or teachings of the
provider.
‘‘(9) ELIGIBLE CHILD CARE PROVIDERS.—Any
child care provider who meets applicable standards
of State and local law shall be eligible to receive
funds under this section. As used in this paragraph,
the term ‘child care provider’ includes—
‘‘(A) proprietary for-profit entities, rel-
atives, informal day care homes, religious child
care providers, day care centers, and any other
entities that the State determines appropriate
subject to approval of the Secretary;
‘‘(B) nonprofit organizations under sub-
sections (c) and (d) of section 501 of the Inter-
nal Revenue Code of 1986;
‘‘(C) professional or employee associations;
‘‘(D) consortia of small businesses; and
‘‘(E) units of State and local governments,
and elementary, secondary, and post-secondary
educational institutions.
‘‘(10) PROHIBITED USES.—Any State to which
funds are paid under this section may not use such
funds—
‘‘(A) to satisfy any State matching require-
ment imposed under any Federal grant;
‘‘(B) for the purchase or improvement of
land, or the purchase, construction, or perma-
nent improvement (other than minor remodel-
ing) of any building or other facility; or
‘‘(C) to provide any service which the State
makes generally available to the residents of the
State without cost to such residents and with-
out regard to the income of such residents.
‘‘(f) REPORTING REQUIREMENTS.—
‘‘(1) NOTICE TO SECRETARY OF UNEXPENDED
FUNDS.—Each State which has not completely ex-
pended the funds paid to the State under this sec-
tion for a fiscal year in the fiscal year or the imme-
diately succeeding fiscal year shall notify the Sec-
retary of any amount not so expended.
‘‘(2) STATE REPORTS ON USE OF FUNDS.—Not
later than 18 months after the date of the enact-
ment of this section, and each year thereafter, the
State shall prepare and submit to the Secretary, in
such form as the Secretary shall prescribe, a report
describing the State’s use of funds paid to the State
under this section, including—
‘‘(A) the number, type, and distribution of
services and programs under this section;
‘‘(B) the average cost of child care, by type
of provider;
‘‘(C) the number of children serviced under
this section;
‘‘(D) the average income and distribution
of incomes of the families being served;
‘‘(E) efforts undertaken by the State pur-
suant to this section to promote and ensure
health and safety and improve quality; and
‘‘(F) such other information as the Sec-
retary considers appropriate.
‘‘(3) GUIDELINES
FOR
STATE
REPORTS; CO-
ORDINATION
WITH
REPORTS
UNDER
SECTION
2006.—Within 6 months after the date of the enact-
ment of this section, the Secretary shall establish
guidelines for State reports under paragraph (2). To
the extent feasible, the Secretary shall coordinate
such reporting requirement with the reports required
under section 2006 and, as the Secretary deems ap-
propriate, with other reporting requirements placed
on States as a condition of receipt of other Federal
funds which support child care.
‘‘(4) REPORTS BY THE SECRETARY.—
‘‘(A) REPORTS TO THE CONGRESS OF SUM-
MARY OF STATE REPORTS.—The Secretary shall
annually summarize the information reported to
the Secretary pursuant to paragraph (2) and
provide such summary to the Congress.
‘‘(B) REPORTS TO THE STATES ON EFFEC-
TIVE PRACTICES.—The Secretary shall annually
provide the States with a report on particularly
effective practices and programs supported by
funds paid to the State under this section,
which ensure the health and safety of children
in care, promote quality child care, and provide
training to all types of providers.
‘‘(g) ADMINISTRATION AND ENFORCEMENT.—
‘‘(1) ADMINISTRATION.—The Secretary shall—
‘‘(A) coordinate all activities of the Depart-
ment of Health and Human Services relating to
child care, and, to the maximum extent prac-
ticable, coordinate such activities with similar
activities of other Federal entities;
‘‘(B) collect, publish, and make available to
the public a listing of State child care standards
at least once every 3 years; and
‘‘(C) provide technical assistance to assist
States to carry out this section, including as-
sistance on a reimbursable basis.
‘‘(2) ENFORCEMENT.—
‘‘(A) REVIEW
OF
COMPLIANCE
WITH
STATE PLAN.—The Secretary shall review and
monitor State compliance with this section and
the plans approved under this section for the
State, and shall have the power to terminate
payments to the State in accordance with sub-
paragraph (B).
‘‘(B) NONCOMPLIANCE.—
‘‘(i) IN GENERAL.—If the Secretary,
after reasonable notice to a State and op-
portunity 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 plan approved under this sec-
tion for the State; or
‘‘(II) in the operation of any pro-
gram 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
findings and that no further payments may
be made to such State under this section
(or, in the case of noncompliance in the op-
eration of a program or activity, that no
further payments to the State will be made
with respect to such program or activity)
until the Secretary is satisfied that there is
no longer any such failure to comply or
that the noncompliance will be promptly
corrected.
‘‘(ii) ADDITIONAL SANCTIONS.—In the
case of a finding of noncompliance made
pursuant to clause (i), the Secretary may,
in addition to imposing the sanctions de-
scribed in such subparagraph, impose the
other 
appropriate 
sanctions, 
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.
‘‘(iii) NOTICE.—The notice required
under subparagraph (A) shall include a
specific identification of any additional
sanction being imposed under clause (ii).
‘‘(C) ISSUANCE OF RULES.—The Secretary
shall establish by rule procedures for—
‘‘(i) receiving, processing, and deter-
mining the validity of complaints concern-
ing any failure of a State to comply with
the State plan or any requirement of this
section; and
‘‘(ii) imposing sanctions under this
subsection.
‘‘SEC. 2009. CHILD CARE DURING PARTICIPATION IN EM-
PLOYMENT, EDUCATION, AND TRAINING; EX-
TENDED ELIGIBILITY.
‘‘(a) CHILD CARE GUARANTEE.—
‘‘(1) IN GENERAL.—Each State agency referred
to in section 2008(b)(1)(A) shall guarantee child
care in accordance with section 2008—
‘‘(A) for any individual who is participat-
ing in an education or training activity (includ-
ing participation in a program established
under part G of title IV) if the State agency
approves the activity and determines that the
individual is participating satisfactorily in the
activity;
‘‘(B) for each family with a dependent
child requiring such care to the extent that
such care is determined by the State agency to
be necessary for an individual in the family to
accept employment or remain employed, includ-
ing in a community service job under part H of
title IV; and
‘‘(C) to the extent that the State agency
determines that such care is necessary for the
employment of an individual, if the family of
which the individual is a member has ceased to
receive aid under the State plan approved under
part A of title IV by reason of increased hours
of, or income from, such employment or by rea-
son of section 402(a)(8)(B)(ii)(II), subject to
paragraph (2) of this subsection.
‘‘(2) LIMITATIONS ON ELIGIBILITY FOR TRANSI-
TIONAL CHILD CARE.—A family shall not be eligible
for child care under paragraph (1)(C)—
‘‘(A) for more than 12 months after the
last month for which the family received aid de-
scribed in such paragraph;
‘‘(B) if the family did not receive such aid
in at least 3 of the most recent 6 months in
which the family received such aid;
‘‘(C) if the family does not include a child
who is (or, if needy, would be) a dependent
child (within the meaning of part A of title IV);
‘‘(D) for any month beginning after the
caretaker relative (within the meaning of such
part) in the family has terminated his or her
employment without good cause; or
‘‘(E) with respect to a child, for any month
beginning after the caretaker relative in the
family has refused to cooperate with the State
in establishing or enforcing the obligation of
any parent of the child to provide support for
the child, without good cause as determined by
the State agency in accordance with standards
prescribed by the Secretary which shall take
into consideration the best interests of the
child.
‘‘(b) STATE ENTITLEMENT
TO PAYMENTS.—Each
State with a plan approved under section 2008 shall be
entitled to receive from the Secretary for any fiscal year
an amount equal to—
‘‘(1) the total amount expended by the State to
carry out subsection (a) during the fiscal year; mul-
tiplied by
‘‘(2) the greater of—
‘‘(A) 70 percent; or
‘‘(B) the Federal medical assistance per-
centage (as defined in the last sentence of sec-
tion 1118, increased by 10 percentage points.’’.
(c) EFFECTIVE DATE.—The amendments and re-
peals made by this section shall take effect on October
1, 1996.
Subtitle D—AFDC Work Disregards
SEC. 231. OPTION TO INCREASE DISREGARD OF EARNED IN-
COME.
Section 402(a)(8)(A) (42 U.S.C. 602(a)(8)(A)) is
amended—
(1) by striking ‘‘and’’ at the end of clause (vii);
and
(2) by adding at the end the following:
‘‘(ix) if electing to disregard clauses (ii)
and (iv), shall disregard from the earned in-
come of any child, relative, or other individual
specified in clause (ii) an amount equal to not
less than the first $120 and not more than the
first $225 of the total of such earned income
not disregarded under any other clause of this
subparagraph, plus not more than one third of
the remainder of such earned income; and’’.
SEC. 232. STATE OPTION TO ESTABLISH VOLUNTARY DI-
VERSION PROGRAM.
Section 402(a) (42 U.S.C. 602(a)), as amended by
sections 101, 102, and 211(a) of this Act, is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(47);
(2) by striking the period at the end of para-
graph (48) and inserting ‘‘; and’’; and
(3) by inserting after paragraph (48) the fol-
lowing:
‘‘(49) at the option of the State, and in such
part or parts of the State as the State may select,
provide that—
‘‘(A) upon the recommendation of the case-
worker who is handling the case of a family eli-
gible for aid under the State plan, the State
shall, in lieu of any other payment under the
State plan to a family during a time period of
not more than 3 months, make a lump-sum
payment to the family for the time period in an
amount not to exceed—
‘‘(i) the amount of the monthly bene-
fit to which the family is entitled under the
State plan; multiplied by
‘‘(ii) the number of months in the
time period;
‘‘(B) a lump-sum payment pursuant to
subparagraph (A) shall not be made more than
once to any family; and
‘‘(C) if, during a time period for which the
State has made a lump-sum payment to a fam-
ily pursuant to subparagraph (A), the family
applies for and (but for the lump-sum payment)
would be eligible for aid under the State plan
for a greater monthly benefit than the monthly
benefit to which the family was entitled under
the State plan at the time of the calculation of
the lump sum payment, then, notwithstanding
subparagraph (A), the State shall, for that part
of the time period that remains after the family
becomes eligible for the greater monthly benefit,
provide monthly benefits to the family in an
amount not to exceed—
‘‘(i) the amount by which the greater
monthly benefit exceeds the former month-
ly benefit, multiplied by the number of
months in the time period; divided by
‘‘(ii) the whole number of months re-
maining in the time period.’’.
SEC. 233. ELIMINATION OF QUARTERS OF COVERAGE RE-
QUIREMENT FOR MARRIED TEENS UNDER
AFDC–UP PROGRAM.
(a) IN GENERAL.—Section 407(b)(1)(A)(iii)(I) (42
U.S.C. 607(b)(1)(A)(iii)(I)) is amended by inserting ‘‘ex-
cept in the case of a family in which the parents are mar-
ried and neither parent has attained 20 years of age,’’
after ‘‘(I)’’.
(b) EXTENSION OF AFDC–UP PROGRAM.—Section
401(h) of the Family Support Act of 1988 (42 U.S.C. 602
and note, 607) is amended by striking ‘‘1998’’ and insert-
ing ‘‘2000’’.
Subtitle E—AFDC Asset
Limitations
SEC. 241. INCREASE IN RESOURCE THRESHOLDS; SEPA-
RATE THRESHOLD FOR VEHICLES.
Section 402(a)(7)(B) (42 U.S.C. 602(a)(7)(B)) is
amended—
(1) by striking ‘‘$1,000 or such lower amount
as the State may determine’’ and inserting
‘‘$2,000’’; and
(2) in clause (i), by striking ‘‘such amount as
the Secretary may prescribe’’ and inserting ‘‘the dol-
lar amount prescribed by the Secretary of Agri-
culture under section 5(g) of the Food Stamp Act of
1977’’.
SEC. 242. LIMITED DISREGARD OF AMOUNTS SAVED FOR
POST-SECONDARY 
EDUCATION, 
THE 
PUR-
CHASE OF A FIRST HOME, OR THE ESTAB-
LISHMENT 
OR 
OPERATION 
OF 
A
MICROENTERPRISE.
(a) 
DISREGARD
FROM
RESOURCES.—Section
402(a)(7)(B) (42 U.S.C. 602(a)(7)(B)) is amended—
(1) by striking ‘‘or’’ before ‘‘(iv)’’; and
(2) by inserting ‘‘, or (v) any amount not ex-
ceeding $8,000 in 1 qualified asset account (as de-
fined in section 406(i)) of 1 member of such family’’
before ‘‘; and’’.
(b) DISREGARD FROM INCOME.—
(1) IN
GENERAL.—Section 402(a)(8)(A) (42
U.S.C. 602(a)(8)(A)), as amended by section 231 of
this Act, is amended—
(A) by striking ‘‘and’’ at the end of clause
(viii); and
(B) by inserting after clause (ix) the fol-
lowing new clause:
‘‘(x) shall disregard any interest or in-
come earned on a qualified asset account
(as defined in section 406(i)) and paid into
the account, to the extent that the total
amount in the account, after such pay-
ment, does not exceed $8,000; and’’.
(2) NONRECURRING LUMP SUM EXEMPT FROM
LUMP SUM RULE.—Section 402(a)(17) (42 U.S.C.
602(a)(17)) is amended by adding at the end the
following: ‘‘; and that this paragraph shall not apply
to earned or unearned income received in a month
on a nonrecurring basis to the extent that such in-
come is placed in a qualified asset account (as de-
fined in section 406(i)) the total amount in which,
after such placement, does not exceed $8,000;’’.
(3) 
TREATMENT
AS
INCOME.—Section
402(a)(7) (42 U.S.C. 602(a)(7)) is amended—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (B);
(B) by striking the semicolon at the end of
subparagraph (C) and inserting ‘‘; and’’; and
(C) by adding at the end the following new
subparagraph:
‘‘(D) shall treat as income any distribution
from a qualified asset account (as defined in
section 406(i)(1)) that is not a qualified dis-
tribution (as defined in section 406(i)(2));’’.
(c) DEFINITIONS.—Section 406 (42 U.S.C. 606) is
amended by adding at the end the following:
‘‘(i)(1) The term ‘qualified asset account’ means a
mechanism approved by the State (such as individual re-
tirement accounts, escrow accounts, or savings bonds) that
allows savings of an individual receiving aid to families
with dependent children to be used for a purpose described
in paragraph (2).
‘‘(2) The term ‘qualified distribution’ means a dis-
tribution for expenses directly related to 1 or more of the
following purposes:
‘‘(A) The attendance of a member of the family
at any postsecondary education program.
‘‘(B) The purchase of residential real property
for the family that the family intends to occupy, if
no member of the family has an ownership interest
in such a property.
‘‘(C) The establishment or operation of a
microenterprise owned by a member of the family.
‘‘(j) The term ‘microenterprise’ means a commercial
enterprise which has 5 or fewer employees, 1 or more of
whom owns the enterprise.’’.
TITLE III—THE WORK FIRST
PROGRAM
SEC. 301. WORK FIRST PROGRAM.
(a) STATE PLAN REQUIREMENT.—Section 402(a)
(42 U.S.C. 602(a)), as amended by sections 101, 102,
211(a), and 232 of this Act, is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(48);
(2) by striking the period at the end of para-
graph (49) and inserting ‘‘; and’’; and
(3) by inserting after paragraph (49) the fol-
lowing:
‘‘(50) provide that the State—
‘‘(A) shall develop an individual respon-
sibility plan in accordance with part F for each
applicant for, or recipient of, aid under the
State plan who—
‘‘(i) has attained 18 years of age; or
‘‘(ii) has not completed high school or
obtained a certificate of high school equiva-
lency, and is not attending secondary
school;
‘‘(B) has in effect and operation—
‘‘(i) a work first program that meets
the requirements of subpart 1 of part G
(or, for any fiscal year for which the Sec-
retary has approved a State plan under
subpart 2 of part G, such subpart 2); and
‘‘(ii) a community service program
that meets the requirements of part H, or
a job placement voucher program that
meets the requirements of part I, but not
both;
‘‘(C) shall provide a position in the
workfare program established by the State