The Personal Responsibility and Work Opportunity Reconciliation Act (P.L. 104-193), enacted in August 1996, replaced AFDC with a block grant to the states, entitled Temporary Assistance for Needy Families. As specified in the law, the objectives of TANF are to provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives; end the dependence of needy parents on government benefits by promoting job preparation, work, and marriage; prevent and reduce the incidence of out-of-wedlock pregnancies and establish annual numerical goals for preventing and reducing the incidence of these pregnancies; and encourage the formation and maintenance of two-parent families. All these goals are to be accomplished by providing states increased flexibility to design their own programs, thus allowing states to build on the initiatives they began experimenting with before federal reform. However, the law sets some parameters: to avoid financial penalties, states must impose work requirements for adults, meet steadily rising rates of caseload participation in work activities, and enforce a 5-year lifetime limit on the receipt of federally funded assistance, along with several other provisions. To enable HHS to monitor states’ progress in meeting key program objectives, the law also requires states to meet new data reporting requirements. On November 20, 1997, HHS issued proposed regulations for implementing TANF in accordance with the new federal law; however, as of May 1998, these regulations had not yet been finalized. Under AFDC, states were required to provide benefits to all economically needy families with children who applied and were eligible under federal law and whose income and assets were within state-prescribed limits. In fiscal year 1996, over $20 billion in combined federal and state funds were paid in cash assistance to a nationwide caseload that averaged about 4.6 million families a month. Within AFDC, states were required to establish welfare-to-work programs, called Job Opportunities and Basic Skills Training (JOBS), to ensure that AFDC families obtained the education, training, and employment that would help them avoid long-term welfare dependence. Federal matching funds for JOBS were available as a capped entitlement set at $1 billion in fiscal year 1996. Historically, many families were exempt from participating in JOBS, and less than a third of those required to participate actually were able to participate because of limited state funding. In addition, within AFDC, unlimited federal matching funds were available for states opting to provide emergency assistance for families to avoid the destitution of a child or to provide for a child’s living arrangements. Emergency assistance could be authorized for up to 30 days in any 12-month period, and eligibility criteria often differed from those of the regular AFDC program. As of 1995, all states but Alaska and Mississippi had implemented emergency assistance programs, spending about $3.2 billion on these programs nationwide in fiscal year 1996. To ensure states adhered to the goals and requirements of the law governing these programs, HHS was given oversight responsibility to be exercised through its approval, review, and audit functions. Before passage of the new federal welfare reform law, HHS had authority to waive certain statutory program requirements for AFDC, and most states had begun experimenting with various reforms intended to move more recipients from welfare to work. Between January 1987 and the passage of welfare reform in August 1996, 46 states had received approval to implement waivers affecting their AFDC and JOBS programs—in some cases, statewide; in others, only in selected sites. These waiver initiatives included time limits, strengthened work requirements, and teen-parent requirements related to school attendance and living in supervised settings—provisions similar to those subsequently embodied in the new federal law. (See app. II for a summary of states’ waiver provisions approved before passage of the federal welfare reform act.) Because these waivers had been approved and implemented at different times, states were in different stages of implementing their reform efforts when the federal reform law was enacted. Some states continued their waiver programs implemented before federal reform, while other states enacted new legislation to redesign their programs after passage of the new federal law. Oregon, for example, enacted legislation in 1995 and implemented its welfare reform program statewide in July 1996. In contrast, California did not pass welfare reform legislation until mid-1997, with statewide implementation of its new program effective in January 1998. The 1996 federal welfare reform law made sweeping changes to the nation’s cash assistance program for needy families with children. Title I of the law ended the entitlement of families to welfare benefits and replaced the AFDC program, including JOBS and emergency assistance, with block grants to the states under TANF. The fixed amounts of states’ grants under the new law are based on the amount of their grants received in specified fiscal years under prior law, supplemented for population increases under certain circumstances. For fiscal year 1997, federal grants available to the states ranged from $21.8 million in Wyoming to over $3.7 billion in California, totaling $16.7 billion nationwide. With respect to state funding, the federal reform law included a “maintenance-of-effort” provision requiring states to provide 75 to 80 percent of their historic level of funding. Subsequent legislation provided additional federal funds totaling $3 billion over 2 years for Welfare-to-Work Grants to be allocated to states for increased support of activities helping to place and keep individuals in unsubsidized jobs. Federal law also makes federal funding available to states for child care subsidies for low-income families, authorizing $2.9 billion for fiscal year 1997 and up to $3.7 billion in the year 2002. Under the new reform law, states are required to ensure that a significant percentage of these funds are used to provide child care assistance to current or potential TANF recipients. The federal welfare reform law also made significant changes to Medicaid—a federal/state-funded program that provides medical assistance to low-income families. Before welfare reform, AFDC recipients were automatically enrolled in Medicaid on the basis of their eligibility for cash assistance under AFDC. The new law severed the connection between eligibility standards for Medicaid and cash assistance, allowing states to set their own eligibility standards for Medicaid within certain parameters. However, most families who would have been eligible for Medicaid before welfare reform continue to qualify for services. Because of congressional concern that welfare had become a way of life for some recipients, a key purpose of the new law was to promote work over welfare and self-reliance over dependency. In support of this goal, the law provides that states must require able-bodied recipients to participate in work or work-related activities and must impose a 5-year lifetime limit on federal assistance. States must require adults in families receiving TANF-funded assistance to participate in work or work-related activities after receiving assistance for 24 months, or sooner, as defined by the state. If recipients fail to participate as required, states must at least reduce the families’ grant and may opt to terminate the grant entirely. To avoid financial penalties, states must ensure that a certain specified minimum percentage of their caseloads are participating in work or work-related activities each year. These percentages are referred to as “minimum mandated participation rates.” To count toward states’ mandated rates, adult recipients in families must participate a certain minimum number of hours in work or a work-related activity as prescribed in the law—such as job readiness workshops; on-the-job training; and, under certain circumstances, education. The required number of hours of participation and the percentage of a state’s caseload that must participate to meet mandated rates increase over time, as shown in table 1.1. Finally, to help ensure the temporary nature of assistance and to provide further impetus for moving recipients to self-reliance, the law prohibits the use of TANF funds to provide assistance for families with adults who have received assistance for more than 5 years, cumulative over their lifetimes. Families with no adult receiving assistance (commonly referred to as “child-only” cases) are not subject to this limit, and up to 20 percent of a state’s average monthly caseload may be exempt on the basis of hardship or having been subjected to domestic violence. States with time-limit waivers inconsistent with these provisions may delay implementing the 5-year lifetime limit until their waivers expire. Also, states may opt to continue to provide assistance beyond the 5-year limit using state funds. To address concerns about the growing number of children born to unwed mothers and the impact on welfare caseloads, another key purpose of the new law was to reduce out-of-wedlock pregnancies and encourage the formation and maintenance of two-parent families. To this end, the law included provisions requiring HHS and the states to establish goals and take action to reduce the incidence of out-of-wedlock pregnancies, especially among teens, and to provide annual progress reports to the Congress beginning this month. In addition, citing studies that indicate that the increase of teenage pregnancies among the youngest girls has been particularly severe and linked to predatory sexual practices of men who were significantly older, the law also requires states to conduct programs to provide education and training on the problem of statutory rape. To expand their reach to males, these programs are to be provided through law enforcement agencies, the education system, and other relevant counseling services. Instead of prescribing in detail how programs are to be structured, the new law authorizes states to use their block grants in any manner reasonably calculated to accomplish the purposes of TANF. For example, states are allowed to set forth their own criteria for defining who will be eligible and what assistance and services will be available, provided states ensure fair and equitable treatment. States may opt to deny assistance altogether for noncitizens, drug felons, minor teen parents, or those determined to be able to work. Alternatively, these groups could be provided a different array of assistance and services funded by TANF or a separate state-funded program.