Memorandum

To: Interested Parties

Fr: Elaine Ryan, Director of Government Affairs, American Public Human Services Association

Sheri Steisel, Senior Director, Human Services and Federal Affairs Counsel, National Conference of State Legislatures

Subject: Discussion Draft for Three-Year Welfare Law Extension

Date: September 30, 2002

THREE YEAR WELFARE LAW EXTENSION

Discussion Draft

Background

From 1996 to present, states have achieved unprecedented success in moving families from welfare to unsubsidized private sector employment. In large measure, the success is due to the flexibility afforded states to meet the unique needs of the low-income families in their states and due to the unwavering federal commitment to federal funding for TANF and the Child Care Development Fund. Both of these elements are essential to continued state success in the implementation of the welfare law. Given the demands of the Congressional schedule, it appears agreement on a comprehensive reauthorization of the Personal Responsibility and Work Opportunity Act of 1996 is unlikely. APHSA and NCSL urge Congress to enact a 3-year extension of the law before the 107^th session comes to an end in order to ensure program continuity and continued progress.

State fiscal conditions continue to deteriorate dramatically. States faced budget shortfalls in FY02 and face an even larger budget gap going into session in January. NCSL estimates that states face a $58 billion budget gap in FY03. Collapsing revenues have put most states in the red and states are already making difficult choices in order to balance their budgets. Certainty of future federal funding is critical to ensure continuation of welfare-related programs and availability of child care. It is particularly important for the 19 states that must approve two-year budgets next session and to the 6 states with legislative sessions every other year. These states must make budget and programmatic decisions for a two-year period; information that would not be afforded under a one-year extension.

The House-passed bill, the Personal Responsibility, Work, and Family Promotion Act (HR. 4737) and the Work, Opportunity, and Responsibility for Kids Act (WORK), adopted by the Senate Finance Committee, contain the following provisions that state organizations believe are essential to include in a three-year extension:

1. TANF Block Grant: Guarantee $16.5 billion annually for the block grant as an entitlement to the states, D.C. and additional amounts for the territories.

2. TANF Supplemental Grant: Guarantee Supplemental Grants to states at the level of $319 million annually.

3. TANF Supplemental Grant: Adopt Section 101 of the WORK Act that treats the supplemental grants as part of the basic grant.

4. Child Care Mandatory Funding: Entitle states to an annual basic block grant equal to at least $2.917 billion for FY2003 with an increase of $200 million a year for three years as under current law. Further comments about child care funding increases can be found in our "Additional Comments" section at the end of this memo.

5. Child Care Mandatory Funding: Adopt Section 103 of the WORK Act that requires no state matching funds for any federal increases over the FY 2002 funding level of $2.717 billion.

6. Child Care Discretionary Funding: Authorize $2.1 billion for the Child Care Development Block Grant (CCDBG) the level appropriated in FY 2002.

7. TANF Transfer to CCDF: Maintain the transfer of TANF into CCDF at 30%.

8. Social Services Block Grant (SSBG): Guarantee mandatory funding at $1.975 billion in FY 2003, $2.8 billion in FY 2004 and thereafter as called for in the CARE Act.

9. Social Services Block Grant: Restore the 10% transfer of TANF into SSBG.

10. Extend Transitional Medical Assistance for at least 3 years.

11. Oppose the House-passed H.R. 4737 provision to fund the extension by reducing federal payments to states for Medicaid administrative costs.

12. Adopt Transitional Medical Assistance Technical Changes included in the WORK Act, with the exception of Sections 401 (d) and (h), which impose increased administrative burden.

13. Adopt Child Support Distribution and Passthrough Options: WORK Act provisions are preferred.

14. Extend Abstinence-only Education Grants at $50 million annually.

15. Extend High Performance Bonus in TANF: If the bonus is eliminated, then funding should be redirected to fund increases in SSBG or mandatory portion of the child care development block grant. If retained, we would be willing to discuss the high performance bonus criteria on measuring welfare to work success.

16. End the $100 million annual bonus to reduce non-marital births: Redirect funds to new marriage promotion grants and/or demonstration projects.

17. Extend state welfare waiver demonstrations, retroactive to September 30, 2002.

18. Extend Child Welfare Demonstration Authority and adopt additional changes included the House-passed H.R. 4737 waiver Sections 501, 502, 503, 504 and 505.

19. Adopt the WORK Act provision to create state option to provide Medicaid and SCHIP to pregnant women and children who are legal immigrants.

20. Extend TANF Contingency Fund and reduce MOE qualification requirement to 80%.

21. Eliminate the separate Two-Parent work rate.

22. Eliminate the Rainy Day Loan Fund.

23. Create State Human Service Program Integration Demonstration Authority to allow a select number of states to identify conflicting federal program rules, performance measurement and data collection requirements that impede the ability to enhance service delivery to needy children, families and adults and recommend areas for revision.

24. Adopt Section 710 of the WORK Act related to the Advanced Planning Document approval process for state human service information systems.

25. Extend TANF tribal family assistance grants and NEW (job training) grants and consider additional work-related services or technical assistance.

26. Adopt WORK Act provisions related to Tribal foster care and adoption assistance contained in Section 602.

27. Adopt Section 103 of the House-passed H.R. 4737 that provides that state expenditures on non-TANF eligible families to reduce out of wedlock births and promote marriage and responsible parenthood may be counted toward required MOE state spending.

28. Adopt Section 107 of the WORK Act that allows a state to count as a qualifying MOE expenditure additional amounts of child support arrearages distributed to former TANF families.

29. Allow food stamp administrative expenditures in excess of the cost allocation cap to be counted as MOE. Allow states to count any amounts paid or invested as a result of settlement of quality control sanction claims under the former AFDC program toward TANF MOE.

30. Clarify that the Income and Eligibility Verification System (IEVS) applies only to TANF cash assistance.

31. Adopt Section 117 of the House-passed H.R. 4737 that defines assistance.

32. Adopt House-passed H.R. 4737 provision that excludes the costs of transportation and child care from the definition of assistance.

33. Adopt House-passed H.R. 4737 provision that excludes non-recurrent short-term benefits from the definition of assistance.

34. Adopt Section 105 of the WORK Act clarifying that the general 15% cap on administrative expenditures applies to the full TANF allocation, no matter how much funding is transferred.

35. Adopt WORK Act provision allowing states to use TANF carryover funds for any benefit or service without fiscal year limitation.

36. Adopt Section 107 (e) of the House-passed H.R. 4737 provision permitting states or tribes to designate some TANF funds as a contingency reserve

Additional Comments

A 3-year extension of the welfare law is critically important to states. As you can see, our focus is on guaranteeing the continuity of funding for TANF, Child Care, SSBG and other key human service programs. In addition, we think that during the course of the congressional debate this year there is consensus on addressing a number of technical fixes to the law, as well as broad support for extending existing and creating new state options in the areas of child support, Medicaid and SCHIP. There is growing consensus on focusing resources on new initiatives such as marriage and family formation grants in both the House and Senate bills. We believe that it is important to begin such options and investments without delay.

Because there has not been such consensus on the next steps with respect to welfare to work, our list does not identify recommendations for change at this time. We want to emphasize that during this period of rising national unemployment and economic downturn, states will be seriously challenged to meet and or improve upon work participation for the families remaining on the caseload. Any higher work requirements will necessitate broader flexibility and new resources. Recognizing the interest in improving state performance in the area of welfare to work, we would be happy to share our ideas on how states could improve their performance in this critical area.

Similar to the work requirement discussion, there is no consensus on the appropriate increase in child care mandatory funding. The House-passed bill calls for a $1 billion increase and the Senate WORK bill includes a $5.5 billion increase, both over a five year period. A middle ground in a 3-year welfare law extension may be agreement on at least a $600 million annual increase. Due to rising demand and increased cost of child care, states are limiting program eligibility. Current funding levels are simply insufficient to support the current and future demand for such a critical work support.

We look forward to discussion our ideas with you. Please contact Sheri Steisel at Sheri.Steisel@NCSL.org or 202/624-8693 or Elaine Ryan at eryan@aphsa.org or 202/682-0100.