‘‘(20) 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 
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.’’. 
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(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 
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 
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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: 
‘‘(21) 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), 
and 10(a) of this Act, is amended by adding at the end 
the following: 
‘‘(18) BAN ON USING FEDERAL TANF FUNDS 
TO REPLACE STATE OR LOCAL SPENDING THAT IS 
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NOT A QUALIFIED STATE EXPENDITURE.—A State 
to which a grant is made under section 403, and a 
sub-State entity that receives funds from such a 
grant, shall not expend any part of the grant funds 
to supplant State or local spending for benefits or 
services which are not qualified State expenditures 
(within the meaning of 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), 9(b)(2), 
and 10(b) of this Act, is amended by adding at the end 
the following: 
‘‘(22) USE OF FEDERAL TANF FUNDS TO RE-
PLACE STATE OR LOCAL SPENDING THAT IS NOT A 
QUALIFIED STATE EXPENDITURE.—If the Secretary 
determines that a State to which a grant is made 
under section 403 in a fiscal year has violated sec-
tion 408(a)(18) during the fiscal year, the Secretary 
shall reduce the grant payable to the State under 
section 403(a)(1) for the immediately succeeding fis-
cal year by an amount equal to 5 percent of the 
State family assistance grant.’’. 
SEC. 12. TANF ASSISTANCE TO MEET BASIC FAMILY ECO-
NOMIC NEEDS. 
(a) 
STATE
PLAN
REQUIREMENT.—Section 
402(a)(1)(B) (42 U.S.C. 602(a)(1)(B)), as amended by 
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sections 8(c) and 9(d) of this Act, is amended by adding 
at the end the following: 
‘‘(viii) 
FAMILY
BUDGET
PROVI-
SIONS.—The document shall set forth a 
family budget of a dollar amount sufficient 
to meet the basic economic needs (includ-
ing food, clothing, shelter, utilities, house-
hold goods, personal care items, and gen-
eral incidental expenses) of a family, how 
the family budget is adjusted for family 
size, the method used to estimate the fam-
ily budget (including a statement of the re-
lationship between shelter and utility costs 
and the fair market rents in localities in 
the State), and the relationship between 
the amount of assistance provided to each 
family under the program and the amount 
of the family budget for the family.’’. 
(b) PROGRAM REQUIREMENT.—Section 408(a) (42 
U.S.C. 608(a)), as amended by sections 7(d)(1), 8(b)(1), 
9(b)(1), 10(a), and 11(a) of this Act, is amended by add-
ing at the end the following: 
‘‘(19) REQUIREMENT THAT AMOUNT OF ASSIST-
ANCE MEET BASIC ECONOMIC NEEDS.—A State to 
which a grant is made under section 403 shall en-
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