Welfare-Reform Legislation Since (1996) - 1997 Balanced Budget Reconciliation Act

The 1997 Balanced Budget Reconciliation Act (PL 105-33) made a number of changes affecting state programs funded under TANF block grants, including partially restoring funding for some of the program cuts made in the 1996 welfare law. SSI benefits were restored to legal elderly or disabled immigrants who were receiving assistance as of August 22, 1996. These benefits were also restored to immigrants who were legally residing in the United States as of that date and subsequently became disabled. Legal immigrants who arrived after the passage of the welfare reform law are not eligible for assistance.

Funding for the food stamp employment and training program was increased so that states could create work-fare, or subsidized jobs, for food stamp recipients. Eighty percent of the funds must be spent on food stamp recipients who are eighteen to fifty years old and without children. With the 1996 law, this group was limited to three months of food stamp assistance during each thirty-six-month period unless the recipient was working at least half-time or engaged in employment and training. The balanced budget act allows states to exempt 15 percent of the ABAWD population from the three-month limit.

This act set a new mandatory penalty for failure to reduce assistance for TANF recipients who refuse to work. This penalty, to be imposed by the Secretary of Health and Human Services, may not be less than 1 percent, or more than 5 percent, of the TANF grant. The act also specified a mandatory 5 percent penalty if a state failed to meet work participation rates. Under the 1996 law, the HHS secretary had the option to penalize states.

Formulas were changed and the cap raised to allow a larger number of individuals participating in vocational education training to count toward the state's TANF work participation rate. Several changes were made in work definitions for the mandatory work requirements.

The 1997 balanced budget act also created two additional grants to aid state welfare programs. A welfare-to-work grant provided $3 billion over two years (1998 and 1999) to be used for job-related activities directed mainly at individuals with significant work barriers, such as lack of education and low skills in reading or mathematics, substance abuse, or a poor work history. In addition, the act created a $20.3 billion child health block grant, the State Children's Health Insurance Program. This money was targeted for assistance to uninsured, low-income children. States could use the new funds to make more children eligible for Medicaid or to purchase other health coverage, or both.

On April 12, 1999, the Department of Health and Human Services (HHS) issued the final TANF regulations. They include many provisions, some of which reflect significant changes from the proposed regulations, which affirm and enhance the flexibility of states to determine how best to use TANF funds to assist low-income families. The regulations, together with the already-existing substantial TANF financial reserves in many states that resulted from the decreasing number of welfare cases, provide strong support for states to improve their welfare reform approaches. The federal welfare law restricts HHS's authority to regulate state conduct or enforce any TANF provision except to the extent expressly provided in the law. The federal law expressly provides that HHS will impose penalties if a state fails to comply with requirements of the law in a number of areas. For example, a state can be subject to penalties if it uses federal TANF funds improperly, if it fails to expend the amount of state funds required under maintenance-of-effort provisions, if it fails to meet work participation rates, or if it fails to comply with time limits applicable to federal TANF funds.

There still is concern, however, that if states do not use their TANF funds, they may be taken away by the federal government for other purposes. While maintaining a surplus might offer security, opponents have urged states to spend more of their allotted money in order to avoid such an occurrence.