During the past 10 years, many states have developed policies that try to divert from cash welfare assistance applicants who are thought to need the least amount of state help in becoming self-sufficient. State diversion programs consist of one or more of the following three components: (1) formal diversion assistance programs (usually a one-time cash payment made directly to the family or to a vendor for expenses incurred by the family); (2) applicant job search, in which applicants for the Temporary Assistance for Needy Families (TANF) block grant program are required to participate in a job search program; and (3) resource referral, whereby intake/case workers identify other forms of assistance that may be available to a family, such as child care assistance, transportation assistance, aid from family and/or friends, or referral to a drug treatment program. This report describes formal state diversion programs. The source of information for Table 1 and the Appendix is the state annual report on the TANF block grant program for FY2005. In some instances, the TANF state plans submitted to qualify for federal block grant funds were used to supplement incomplete information. In addition, this report includes information from state data reports and state Internet sites on the numbers of families being diverted from TANF assistance. However, this information is sporadic, and the terms used by the states are not always uniform. Readers should note that although applicant job search and resource referral are considered diversion strategies, they are not considered diversion assistance in Table 1 or the Appendix . Throughout much of its history, cash welfare to families represented a paradox for both policymakers and the public: On the one hand, policymakers wanted to provide a minimum level of financial assistance to needy families. However, on the other hand, they wanted to prevent those families from falling into dependency. Since the late 1960s, concerns over the size and cost of the welfare system—and its effects on the parents and children that it serves—have led federal welfare policymakers to promote work as a path to self-sufficiency. During the early 1990s, many states had moved forward with their own demonstrations and initiatives under waiver authority in Title IV-A of the Social Security Act (i.e., referred to as Section 1115 waivers) to promote self-sufficiency of welfare families. One method that some states used to promote self-sufficiency was to divert individuals who were either job-ready or had other sources of income from becoming welfare recipients by offering them a one-time financial payment as an alternative to enrollment in the now repealed Aid to Families with Dependent Children (AFDC) program. According to some observers, states have historically tried to keep some people off the welfare rolls. In the past, this was sometimes accomplished by warding off requests for aid by not providing program information to the public; omitting information about certain program benefits or services to persons who came to the welfare office with the intention of applying for assistance; speaking to people in a condescending or derogatory manner; asking personal or embarrassing questions; requesting unnecessary documentation; and delaying application interviews. In addition, several states offered relocation assistance to certain AFDC-eligible families. Under this "relocation" practice, some families eligible for AFDC benefits were encouraged to leave the state to pursue employment opportunities in other areas or were told that an inexpensive bus ticket to another state could result in the family receiving higher monthly AFDC benefits. In 1996, policymakers concurred with assertions that for significant numbers of poor families, receipt of cash welfare had become a permanent state rather than a temporary phase. P.L. 104-193 , the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, signaled the end of an era. It was generally agreed that mandatory work requirements, together with a lifetime limit on cash welfare benefits, would "end welfare as we know it" by moving parents from welfare to work, encouraging responsibility, and improving children's lives. Under the 1996 law, eligible low-income families with children were no longer entitled to a cash welfare benefit (AFDC); instead, federal funds were sent to the states in the form of a Temporary Assistance for Needy Families (TANF) block grant, under which states have had almost complete control over program eligibility and benefits. The 1996 welfare reform law ( P.L. 104-193 ) does not contain specific diversion provisions, nor does it contain any prohibitions against the use of diversion programs. Thus, states are able to include diversion programs among their array of "welfare" related strategies if they so choose. Some differences between past efforts at deterrence and current diversion practices include the following: (1) states, on a widespread basis, have formally incorporated diversion programs and activities into their TANF programs; (2) diversion is viewed as helping families maintain their independence from welfare; (3) diversion focuses attention on a family's specific circumstances and needs. During the past several years, as part of their diversion activities, several states (Kentucky, Washington, Florida, South Carolina, Arkansas, Colorado, and Michigan) have offered relocation assistance to TANF-eligible families as a substitute for ongoing TANF benefits. However, unlike prior relocation practices, states now appear to be focused on encouraging families to move to where they may be more likely to find jobs. In many instances this may be within the state rather than out of the state. The number of families on AFDC/TANF dropped from a high of 5.1 million in March 1994 to 1.9 million in September 2005. During the March 1994-August 1996 period, many states were under Section 1115 waivers testing innovative approaches to reducing the welfare rolls and promoting self-sufficiency. These numbers, however, don't highlight the number of families that were diverted from the TANF rolls. Before 1999, there were only a couple of studies pertaining to state diversion policies and practices. This is no longer the situation. On April 1, 1999, the Office of the Assistant Secretary for Planning and Evaluation (ASPE) at the Department of Health and Human Services (HHS) sent out a notice inviting applications for FY1999 funding for studies on the status of applicants and potential applicants to the TANF program, individuals and families in the TANF program, and individuals and families who leave TANF. Six out of the seven FY1999 Welfare Outcomes Grants were awarded by ASPE to states that proposed to study the impact of welfare reform on TANF applicants. Subsequent to the FY1999 grants, another four states received ASPE funding. The 10 ASPE grantees with an applicant diversion component to their studies included the following states (see footnote below for citations): Arizona, two consortia of counties in California, Florida, Illinois, New York, South Carolina, Texas, Washington, Milwaukee County, and Wisconsin. The reports of these studies have been completed. Most of the reports discuss a variety of information about individuals and their families who were formally or informally diverted from TANF, including their economic and noneconomic well-being and participation in government programs. Readers should note that only Texas and North Carolina studied "formal" diversion programs. The other states did not study this population partially because of low participation in formal lump-sum diversion assistance programs. A synthesis of some of the diversion studies funded by the ASPE indicates that a significant proportion of families who were diverted from TANF were receiving TANF benefits some 12 months later. The final rule on the TANF program was published in the Federal Register on April 12, 1999. Under the final regulations, non-recurrent, short-term benefits (provided for four months or less) for crisis situations do not count as TANF assistance. Further, child care, transportation, and work supports for employed families are not considered "assistance." Since diversion is not to be considered TANF assistance, families receiving diversion aid are not subject to TANF work requirements, time limits, child support assignment, or data reporting requirements. Ten years after the 1996 welfare law was enacted, the TANF block grant program was reauthorized. P.L. 109-171 , the Deficit Reduction Act of 2005 (enacted on February 8, 2006) included, among other things, an extension of the basic TANF block grant through FY2010 at an annual $16.5 billion funding level. P.L. 109-171 requires that the Secretary of Health and Human Services issues regulations regarding the TANF program by June 30, 2006. In FY2004, $271 million in combined federal and state funds was spent on cash payments for diversion assistance or other non-recurrent short term benefits (i.e., emergency assistance, housing aid, transportation aid, etc.). As noted above, one strategy states are using to reduce the need for ongoing welfare is referred to as "diversion"assistance. By expanding the requirements that families must meet in order to be eligible for TANF benefits and referring families to alternative resources, diversion programs have the potential to dramatically alter state approaches to providing assistance to poor families with children. Families are diverted from receiving monthly cash TANF payments if they can be persuaded to be assisted through other means or persuaded to use other resources. Before the 1996 welfare reform law and some pre-1996 state waivers, when families applied for cash welfare benefits, the emphasis was on determining their eligibility for assistance and completing their application. Now, in many states cash assistance is viewed as a last resort, and diversion assistance is viewed as a positive alternative to going on welfare. In states with diversion programs or activities, the primary emphasis is on determining what a family needs to support itself. This could be a one-time cash payment to deal with an emergency or minor crisis, support services such as child care, transportation, or health care benefits, or help finding a job. These types of services and aid may enable a family to maintain its self-sufficiency without actually going on welfare.