PRWORA built upon and expanded state-level welfare reforms to transform federal welfare policy for needy families with children. It replaced the individual entitlement to benefits under the 61-year-old AFDC program with TANF block grants to the states and emphasized the transitional nature of assistance and the importance of reducing welfare dependence through employment, among other goals. PRWORA provides states with the flexibility to set a wide range of TANF program rules, including the types of programs and services available and the eligibility criteria for them. In addition, states may choose to administer TANF directly, devolve responsibility to the county or local TANF offices, or contract with nonprofit or for-profit providers to administer TANF. In addition to TANF funds, states may access other federal funds and programs to provide treatment and employment services to recipients. For example, states may use Labor’s Welfare-to-Work grants to operate employment service programs, Medicaid funds to provide physical or mental health treatment services, and vocational rehabilitation funds to provide services to recipients. While states have great flexibility to design programs that meet their own goals and needs, they must also meet several federal requirements designed to emphasize the importance of work and the temporary nature of TANF aid. TANF established stronger work requirements for those receiving aid unlike the AFDC program, which did not require most adult recipients to participate due to allowable exemptions and minimum participation standards. For example, parents of children aged 3 and under were not required to meet work requirements under AFDC; under TANF parents may now be required to work, regardless of the ages of their children. Furthermore, to avoid financial penalties, states must ensure that a steadily rising specified minimum percentage of adult recipients are participating in work or work-related activities each year. To count toward the state’s minimum participation rate, adult TANF recipients in families must participate in a minimum number of hours of work or a work-related activity a week, including subsidized or unsubsidized employment, work experience, community service, and job search. These activities are more employment-focused than the AFDC participation requirements. The required number of hours of participation and the percentage of a state’s caseload that must participate to meet mandated rates has steadily increased since 1997, as shown in table 1. If recipients refuse to participate as required, states must impose a financial sanction on the family by reducing the benefits, or they may opt to terminate the benefits entirely. States must also enforce a 60-month limit (or less at state option) on the length of time a family may receive federal TANF assistance, although the law allows states to provide assistance beyond 60 months using state funds. A state may exempt up to 20 percent of its average monthly caseload for hardship or having been subjected to domestic violence. PRWORA devolved significant authority for program results and outcomes to states and other levels of government. It also reduced HHS’ staffing and restricted it from regulating any area not specified in the law. Despite these changes, the federal government retains some program oversight responsibilities. Under the law, HHS is responsible for administering TANF funding, setting reporting requirements for states, and reviewing state TANF plans. HHS is also responsible for conducting research on the benefits and effects of the TANF program and receives funding for welfare reform and social service research and evaluation studies. TANF often serves, as did AFDC, as a temporary stopping point for low- income individuals with physical or mental impairments considered severe enough to make them eligible for the federal Supplemental Security Income (SSI) program. SSI, administered by the Social Security Administration (SSA), provides cash assistance to low-income individuals who cannot obtain or retain employment because of a severe long-term impairment and who do not have sufficient work history to qualify for SSA’s Disability Insurance (DI) program. To qualify for SSI, an applicant’s impairment must be of such severity that the person is not only unable to do previous work but is also unable to do any other kind of substantial work that exists in the national economy. Prior work experience is not a requirement, and in most states, SSI eligibility also entitles individuals to Medicaid benefits. As distinct from TANF, SSI for adults has federally- established eligibility requirements and benefit levels and a nationwide disability determination process. Some individuals who apply for TANF may have impairments severe enough to make them eligible to receive SSI. In recent years, even before welfare reform, states had been actively identifying and referring potential SSI-eligible welfare recipients to SSI. In these cases, individuals may be on TANF while they are waiting for their SSI eligibility to be determined. In some cases, an individual with an impairment severe enough to qualify may not get referred to the SSI program, but remain on TANF. This puts the individual at risk of losing aid through a financial sanction or time limit or not receiving the assistance needed to become employed. Generally, except for more temporary conditions, TANF recipients not eligible for SSI or DI are expected to work, as their impairments are not severe enough to preclude substantial employment. National survey data from SIPP show that a total of 44 percent of TANF recipients aged 18 to 64 self-reported having a physical or mental impairment in 1999. In contrast, 16 percent of non-TANF adults in the U.S. population reported having an impairment. Although SIPP data show that TANF recipients with impairments were much less likely to work than those without impairments, about 20 percent who reported having impairments also reported working full- or part-time. As welfare reform has been implemented and caseloads have plummeted, the proportion of TANF recipients who reported impairments does not show any notable difference. SIPP data show that in 1999, a total of 44 percent of TANF adults aged 18 to 64 reported having one or more physical or mental impairments as defined by Census, and 38 percent reported a severe impairment. Considering both severe and nonsevere impairments, 29 percent of TANF adults reported having a mental impairment. These data capture individuals who reported functional or other activity limitations generally covered by ADA. The proportion of TANF recipients with impairments is almost three times as high as adults with impairments in the U.S. non- TANF population. Table 2 provides examples of questions asked by Census to identify persons with severe or nonsevere impairments. Appendix I lists the specific criteria developed by Census that individuals must meet to be considered impaired as applied in the SIPP. Identifying and measuring impairments or disabilities is a complex undertaking, and no single survey instrument has been accepted or generally agreed upon as the preferred method for identifying impairments within a population. Census believes the extensive set of disability questions contained in SIPP make it a preferred source to examine most impairment-related issues. Nevertheless, SIPP data should be interpreted with care. For instance, SIPP relies on self-reports of impairments and, therefore, may not accurately reflect the size of the general or TANF population with impairments. This can result in the overreporting or underreporting of impairments. For example, although some impairments, such as inability to walk, missing or impaired limbs, or severely impaired vision, are easy to identify, many impairments are not. Individuals may not report less obvious impairments because of certain stigmas surrounding them or because they may not know of their existence. Some examples of these impairments include learning disabilities, depression, and mental illness. Other surveys use different approaches to measure impairments. The National Household Survey of Drug Abuse and the University of Michigan’s Women’s Employment Survey, for example, use nonclinical in- depth diagnostic questioning to identify certain psychiatric disorders that may be overlooked by other survey techniques. Although national survey data show that TANF recipients with impairments are less likely to be combining welfare and work than those without impairments, many, in fact, do work. SIPP data show that 20 percent of TANF recipients with impairments were working full- or part- time in 1999, compared with 44 percent of TANF recipients not reporting impairments. (See fig. 1.) In addition, SIPP data show virtually no change since 1997 in the percent of TANF recipients with impairments who work. In 1997, 19 percent of TANF recipients with impairments (aged 18-64) were working compared with 20 percent working in 1999. Whether a TANF recipient with impairments is able to work while receiving welfare can depend on many complex, interrelated factors, such as other personal characteristics they may have, and state and local programs and policies, including benefit levels and policies that encourage or require work. Regarding personal characteristics, studies have shown that many factors— including poor health or disability, no high school diploma, limited work experience, exposure to domestic violence, substance abuse, and limited English proficiency—make finding and keeping a job more difficult. Moreover, recipients with impairments may have more than one characteristic that could interfere with work. Data from a longitudinal University of Michigan’s Women’s Employment Study show that physical and mental impairments co-occur with other obstacles to work in almost half of the sampled cases. More specifically, data from this panel survey of women on welfare in an urban county in Michigan show that in 1998, two-thirds of TANF recipients with physical problems and about half of those with mental health problems also had other obstacles to work. In addition, the Manpower Demonstration Research Corporation reported that the prevalence of health problems among women who were receiving welfare suggests that there will be major challenges to welfare agencies as a growing number of recipients face time-limit pressures. Nationwide data from another source show that the greater the number of obstacles a TANF recipient faces, the less likely that recipient is to be engaged in paid work or work-related activities while receiving welfare.