The block grant of Temporary Assistance for Needy Families (TANF) is best known as a funding source for cash welfare for low-income families with children. However, the block grant also funds a wide range of benefits and services for economically disadvantaged families. It also funds activities to help achieve the goals of reducing out-of-wedlock pregnancies and raising children in two-parent families. TANF was created in the 1996 welfare reform law ( P.L. 104-193 ), with the funding originally slated to expire at the end of Fiscal Year (FY) 2002. Congress debated reauthorization of the block grant during the 107 th through the 109 th Congresses. Comprehensive legislation to reauthorize and revise TANF did not pass during this period, and the program operated on the basis of a series of temporary extensions. The Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) included a slimmed down version of welfare reauthorization that extended TANF funding through FY2010, though TANF " Supplemental Grants " (discussed below) were extended only through FY2008; revised the work requirements that apply to welfare recipients; and established new funding for competitive grants to demonstrate initiatives to promote healthy marriage and responsible fatherhood. A decision on whether and how to extend TANF supplemental grants, which go to 17 states in the South and West on the basis of low historic levels of welfare funding and high population growth, beyond September 30, 2008, is the only "must-do" task related to TANF in the 110 th Congress. However, Congress might examine the impact of DRA's provisions related to TANF work participation standards for welfare recipients. Additionally, in light of renewed interest in issues related to poverty and disadvantaged families with children, interest might be raised in the flexibility states have to use TANF funds for a wide range of "non-welfare" activities. TANF is the block grant created in the 1996 welfare reform law that replaced the New Deal program of Aid to Families with Dependent Children (AFDC). AFDC provided monthly cash welfare benefits to needy families with children, with most of these families headed by single mothers. Concerns that AFDC helped create disadvantage by discouraging work and breaking up families dominated welfare reform debates from 1970 onward, culminating in the 1996 welfare reform law. Some of the most visible policies of the 1996 welfare reform law are TANF work requirements for welfare recipients, time limits on the receipt of welfare, and the end of a federal entitlement to welfare for needy families with children. The monthly TANF cash welfare benefit, like the monthly AFDC benefit before it, is determined by the states, and benefit amounts vary widely among the states. In January 2005, the monthly cash benefit in California was $723 for a family of three. The California benefit amount is high relative to many other states, though even that benefit is only a fraction (54%) of poverty-level income. In Alabama, a family of three received $215 per month (16% of poverty-level income). Table 1 shows selected economic and social indicators for 1995, 2000, and 2006. As shown, the cash welfare caseload plummeted from nearly 5 million to 1.9 million families over this period. Most of that caseload decline occurred from 1995 to 2000, though recently the cash welfare caseload has fallen again. The number of children in families receiving cash welfare fell from 9.1 million to 3.5 million from 1995 to 2006. Work among single mothers (who head most welfare families) increased from 1995 to 2000, with some slippage in the 2000-2006 period. However, despite the decline in receipt of cash welfare and increase in work among single mothers, improvements in other social and economic indicators have been less dramatic. The child poverty rate did fall from 1995 to 2000, but the 2006 rate of 17.4% is higher than in 2000. There remained 12.8 million children living in families with incomes below the poverty threshold in 2006. Further, the percentage of babies born out-of-wedlock in 2006 was 38.9%—an all-time high. Cash welfare reaches far fewer disadvantaged children than it did prior to welfare reform. The ratio of the average monthly number of children in families receiving cash welfare to the total number of children in poverty declined from about six out of ten in 1995 to less than three out of ten in 2006. TANF is not just a welfare program. The 1996 law granted states permission to use funds for a wide range of benefits, services, and activities to address some of the social and economic ills afflicting disadvantaged families with children. States may use their funds in any manner "reasonably calculated" to further TANF's purpose, which is to provide states with the flexibility to achieve four goals set in statute: (1) provide assistance to needy families so that children may live in their own homes or in the homes of relatives; (2) end dependence of needy parents on government benefits by promoting work, job preparation, and marriage; (3) reduce the incidence of out-of-wedlock pregnancies; and (4) promote the formation and maintenance of two-parent families. Given the fixed funding of the TANF block grant, states are able to use the savings from the welfare caseload decline to fund other "nonwelfare" benefits, services, and activities. Total funding in the TANF "system" comprises both the federal block grant to states and a state's own funds spent to meet a maintenance of effort (MOE) requirement. Figure 1 shows the uses of TANF and MOE funds in FY2006. It shows that the categories typically associated with a traditional cash welfare program—cash benefits, administrative costs, and work activities—accounted for only a little more than half of total TANF funds. Thus, TANF has the potential to make an impact on disadvantaged families with children through both its "nonwelfare" benefits, services, and activities, as well as its "welfare" component. Enactment of the Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) ended more than four years of congressional debate on "reauthorizing" the TANF block grant. Over the 2002 to 2005 period, Congress passed twelve temporary extensions of the program while more comprehensive reauthorization bills remained pending. The DRA included a slimmed down version of reauthorization, extending TANF funding and making some limited policy changes. Many of the policy changes proposed in the reauthorization bills considered from 2002 to 2005 were not included in the DRA, and some of those changes may be revived for legislation in the 110 th Congress. Additionally, DRA's changes to the TANF work participation standards have met with some criticism that also might spur proposals in this Congress. This section provides a brief summary of the DRA provisions affecting TANF. For more detail, please see CRS Report RS22369, TANF, Child Care, Marriage Promotion, and Responsible Fatherhood Provisions in the Deficit Reduction Act of 2005 (P.L. 109-171) , by [author name scrubbed]. The DRA extended most TANF funding through FY2010. However, TANF " Supplemental Grants " (discussed in some detail below) were extended only through FY2008. Therefore, the 110 th Congress may consider whether to further extend these grants. Additionally, the DRA eliminated two TANF bonus funds: the first bonus ($200 million per year) was for states that achieved high performance on measures relating to achieving TANF goals; the second ($100 million per year) was for states that reduced out-of-wedlock birth ratios without increasing abortions. The 1996 welfare reform law established work participation standards for a state's welfare caseload. States that fail these participation standards could be financially penalized by a reduction in their block grants. The TANF work participation standards are numerical standards computed in the aggregate for a state's cash welfare caseload. The participation standards are 50% for all families; and 90% for the two-parent portion of its cash welfare caseload. These standards may be met either by engaging welfare adult and teen parents in specified work and job preparation activities or through reductions in the TANF cash welfare caseload. The 1996 welfare reform law provided states with credit for caseload reduction that occurred from FY1995. The caseload reduction credit provided a state with a one percentage point reduction in its participation standards for each percent decline in its TANF cash welfare caseload from FY1995. The large caseload declines that occurred subsequent to FY1995 meant that most states had large reductions in the standards they were required to meet; for many states, the effective (after credit) participation standard was reduced to 0%. The DRA revised the caseload reduction credit, so that states will receive credit only for future welfare caseload reduction. Beginning in FY2007, states receive credit for caseload reductions measured from FY2005 forward. The effect of this change is much smaller caseload reduction credits for FY2007 and higher effective (after credit) participation standards. Like the prior law caseload reduction credit, states are not given credit for caseload declines estimated to come from policy changes that restrict eligibility for welfare benefits. Under the 1996 welfare reform law, states could provide welfare to families using state MOE funds and not count those families when determining whether the state met its work participation standard. States could designate families receiving welfare from MOE funds as being assisted by "separate state programs" outside of the TANF program. This effectively exempted the family from TANF's work participation standards.