The 108th Congress did not complete action on legislation to reauthorize the block grant ofTemporary Assistance for Needy Families (TANF). Instead it and its predecessor, the 107thCongress, adopted short-term funding extensions since the original funding authority for TANFexpired on September 30, 2002. The latest short-term extension funds the program through March31, 2005. The House of Representatives did pass a bill in February 2003 ( H.R. 4 ), and the Senate Finance Committee reported an amended version of the legislation in October 2003. Thoughthe full Senate took up the bill in late March 2004, the measure was set-aside in that chamber aftera motion to limit debate on the bill failed to receive the required 60 votes on April 1. The lack of final action in the 108th Congress means that welfare reauthorization is likely to again be a topic in the 109th Congress. This report describes both the House-passed and SenateFinance Committee-approved versions of welfare reauthorization legislation in the 108th Congress. The differences in the two bills highlight some of the contentious issues in the reauthorizationdebate. Before the bill was pulled from the Senate floor, the Senate did approve one amendment tothe bill which would have added $6 billion over five years for child care funding (to a total of $7billion in child care funds above current law levels for the five years). There were no approvedamendments to the Senate Finance Committee bill's TANF provisions. The bills had many similarities, with both extending basic funding at current levels throughFY2008 and incorporating President Bush's proposal to provide categorical "marriage promotion"grants. They both also raised TANF work participation standards, though the two bills differed interms of how much more work would be required and what activities count toward the participationstandards. This report provides a comparison of the TANF provisions of H.R. 4 as itpassed the House and was reported from the Senate Finance Committee. It does not addressnon-TANF provisions of both bills, such as revisions to the Child Care and Development Fund,Child Support Enforcement, Abstinence Education, and transitional Medicaid. The House-passed and Senate Finance Committee bills had very similar funding provisions. The major difference in the funding provision between the two bills was that the Senate FinanceCommittee bill would have completely revamped the TANF contingency (recession) funds, whilethe House-passed bill would have made relatively minor revisions to the fund. Basic Funding. The 1996 welfare reform law entitled states to a basic TANF block grant equal to peak expenditures in the pre-1996 welfareprograms during the FY1992 to FY1995 period. It also established a maintenance of effort (MOE)requirement that states continue to spend at least 75% (80% if a state failed TANF work participationrequirements) of what they spent in these programs in FY1994. The mid-1990s were the period whencash welfare caseloads were at their peak. Both the basic TANF grant and the MOE are legislativelyfixed: they did not change when cash welfare caseloads declined in the mid- and late-1990s, nor didthey increase when caseloads in some states increased during the recent economic slump. Neitherthe basic TANF block grant nor the MOE have been adjusted for inflation. Both the House-passed and Senate Finance Committee versions of H.R. 4 would have continued both the basic block grant and the MOE at their current funding levels (withoutinflation or caseload adjustment) through FY2008. Supplemental Grants. During the consideration of legislation that led to the 1996 welfare law, fixed funding based on historical expenditures wasthought to disadvantage two groups of states: (1) those that experience relatively high populationgrowth; and (2) states that had historically low grant levels relative to poverty in the state. Therefore,additional funding in the form of supplemental grants was provided to states that met criteria of highpopulation growth and/or low historic grants per poor person. Supplemental grants have beenprovided to 17 states: Alabama, Alaska, Arizona, Arkansas, Colorado, Florida, Georgia, Idaho,Louisiana, Mississippi, Montana, New Mexico, Nevada, North Carolina, Tennessee, Texas, andUtah. In FY2003, supplemental grants totaled $319 million. Both the House-passed and Senate Finance Committee bills would have continued supplemental grants for the same 17 states at theFY2003 funding level through FY2007 (unlike other grants, which expire in FY2008). Contingency Funds. The fixed basic grant under TANF also led to concerns of inadequate funding during economic downturns. TANF includes acontingency fund, which is designed to provide extra matching grants to states that meet criteria ofeconomic need (based on unemployment rates and food stamp caseloads) and have stateexpenditures in excess of their FY1994 level. The two bills differed substantially in their revisions to the TANF contingency fund. The House-passed version of H.R. 4 essentially would have continued the fund on existingrules, with some relatively minor modifications: allowing some additional state spending to counttoward meeting the FY1994 funding level threshold and modifications to increase grants for statesthat qualify for funds for only part of the year. The Senate Finance Committee bill fully revamped the contingency fund. It would have eliminated the requirement that states increase expenditures from their own funds above the regularTANF MOE level and eliminated the matching requirements. It added a new financial requirementthat unspent TANF balances be below a certain threshold to qualify for contingency funds. TheFinance Committee proposal would have based contingency grants on a portion of the estimated costof increased cash assistance caseloads. The Senate Finance Committee bill would have also revisedthe criteria of economic need for a state. Uses of Grants and Program Requirements. Federal TANF grants and MOE funds can be used for a wide range of benefits, services, andactivities to assist low income families with children and to further TANF goals of reducingout-of-wedlock births and promoting two-parent families. TANF grants can also be transferred toother block grant programs: up to 30% of the grant can be transferred to the Child Care andDevelopment Fund (CCDF) and to the Social Services Block Grant, though the limit on transfers toSSBG is set at 4.25% (though annual appropriations have restored the SSBG transfer limit to itsoriginal limit set in the 1996 welfare law of 10%). Within the overall 30% limit, federal TANFfunds may also be used as the state match for federal reverse commuter grants if the program benefitswelfare families. Both bills would have set the SSBG transfer limit permanently at 10%. However, the Housebill would have raised the overall transfer limit to 50%. The Senate Finance Committee bill wouldhave retained the current law 30% transfer limit. Both bills included provisions to ease some rules regarding use of TANF funds. Both the House-passed and Senate Finance Committee versions of H.R. 4 would have: Allowed states to use carryover TANF funds for any TANF benefit and service. Current law restricts the use of carryover funds for the provision of"assistance." Narrowed the definition of "assistance" to exclude all child care andtransportation aid. TANF funds spent on assistance trigger certain program requirements, such aswork requirement, time limits, assignment of child support payments, and data reportingrequirements. Under current regulations, child care and transportation aid for nonworking familiesis counted as assistance and triggers these requirements. The bills would have eliminated such aidfrom the definition of assistance, freeing nonworking families who receiving only child care ortransportation aid from these requirements. Both the House-passed and Senate Finance Committee bills substantially revised TANF workparticipation requirements that apply to both the states and to individuals. They both raised workparticipation rates that states must meet from the current law's standard of 50% to 70%, raised therequired hours of working to receive full credit and provided partial credit for participating familiesthat do not meet the full credit standard, and revised the list of activities. However, the bills differedin how they did these three things. Both bills also incorporated the Bush Administration's "universal engagement" proposal, which requires states to develop a self-sufficiency plan for all TANF adult recipient to monitor progresstoward that plan. The House -passed bill also required states to end benefits ("full family sanction")for families that fail to comply with work participation rules. Participation Rate Standards. Current law requires states to have a specified percentage of their families with an adult recipient (or minor headof household) participating in creditable work activities. The current participation standard is 50%. States are subject to an additional participation rate standard for two-parent families, currently 90%. The participation rate standards may be reduced for caseload reduction (not attributable to policychanges) that have occurred since before enactment of welfare reform (FY1995). This "caseloadreduction credit" has had a large effect on participation standards, reducing the standardconsiderably from its statutory rate. In FY2002, the standard was reduced to 0% for 21 states. Both the House-passed and Senate Finance Committee bills raised the work participation standard for all families to 70% by FY2008 and eliminated the separate standard for two-parentfamilies. Both bills also would have revised the credits that reduce these standards from theirstatutory rate (i.e., reduce the 70% standard to a lower rate), but they did so in different ways. The House-passed bill revised the current caseload reduction credit so that caseload change is measured from a more recent year (rather than the pre-welfare reform caseload level of 1995).