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                                                       Calendar No. 216
107th Congress                                                   Report
                                 SENATE
 1st Session                                                     107-94

======================================================================



 
                  TANF SUPPLEMENTAL GRANTS ACT OF 2001
                                _______
                                

                November 7, 2001.--Ordered to be printed

                                _______
                                

   Mr. Baucus, from the Committee on Finance, submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                         [To accompany S. 942]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Finance, having considered legislation (S. 
942) to reauthorize the supplemental grant for population 
increases in certain states under the temporary assistance to 
needy families program for fiscal year 2002, reports favorably 
thereon with an amendment and refers the bill as amended to the 
full Senate with a recommendation that the bill do pass.

                               I. SUMMARY

    S. 942 continues, for one year, the supplemental grant 
portion of the Temporary Assistance for Needy Families (TANF) 
program. The TANF program was created in 1996 to replace the 
Aid to Families with Dependent Children (AFDC) program. It is a 
block grant, replacing the old welfare program with a flexible 
funding stream.
    State allocations of TANF funding are largely based on the 
amount of AFDC funds a State received in the years just prior 
to 1996. AFDC was an entitlement program and States set their 
own benefit levels and many of their own eligibility standards. 
The Federal Government provided a share of the cost of aiding 
families in AFDC. This led to wide variation in the amount of 
AFDC funds going to each State.
    During consideration of the 1996 welfare law, there was 
substantial discussion about whether to allocate TANF funds on 
the basis of historic AFDC spending or whether to shift to some 
alternate formula, such as one based on the number of children 
in poverty in a State. The Congress decided to primarily 
allocate TANF on the basis of historic AFDC spending. However, 
a ``supplemental grant'' funding stream was created to add to 
the base TANF allocation for certain States which receive 
relatively low TANF allocations per poor child or which had 
high growth rates.
    More specifically, for FY 1998, the first year of the 
supplemental grants, States qualified in one of three ways:
   FY 1994 Federal welfare expenditures per poor person 
        at or below 35 percent of the comparable national 
        average per poor person;
   Population growth of more than 10 percent from 1990 
        to 1994; or
   Having both below average FY 1994 Federal welfare 
        expenditures per poor person and above average 
        population growth over the most recent 2-year period.
    Seventeen States met one of these three criteria and 
received TANF supplemental grants. They are: Alabama, Alaska, 
Arizona, Arkansas, Colorado, Florida, Georgia, Idaho, 
Louisiana, Mississippi, Montana, Nevada, New Mexico, North 
Carolina, Tennessee, Texas, and Utah. These grants represented 
approximately 2.5 percent of the State's original TANF 
allocation.
    For FY 1999-FY 2001, every original TANF supplemental State 
received a grant. States which met the first or second criteria 
noted above received increases of approximately 2.5 percent 
each year. Other States only received an increase if they 
continued to meet the third criteria. $800 million was provided 
over the 4 years for TANF supplemental grants.
    TANF supplemental grants received by a State are governed 
by the general rules concerning the uses of TANF funds. States 
have great flexibility and can use the funds to support 
traditional cash welfare assistance, innovative welfare-to-work 
programs, efforts to prevent out-of-wedlock childbearing, or 
many other related purposes.
    In the FY 2002 Budget Resolution funding was set aside to 
continue the TANF supplemental grants at the FY 2001 level of 
$319 million. On May 23, 2001, Senators Bob Graham (D-FL) and 
Kay Bailey Hutchison (R-TX) introduced S. 942, the TANF 
Supplemental Grants Act of 2001, which reauthorized the program 
for 1 year. This restoration of funds is needed because, under 
the 1996 welfare reform law, the TANF supplemental grant funds 
expire 1 year before the rest of TANF as part of balancing the 
Federal budget by 2002. Since then, the Federal fiscal outlook 
has improved significantly.
    If the TANF supplemental grants are not continued, several 
States face an effective 10 percent reduction in their TANF 
funding. This could require them to lessen their welfare-to-
work efforts. This is of particular concern since States 
receiving the TANF supplemental grants are among those with the 
fewest TANF dollars per poor child. They are the States with 
the least room to make cutbacks in their TANF programs.
    We have been contacted by a number of State organizations 
and individual Governors to express their support for the 
continued funding of TANF supplemental grants and the negative 
impact of failing to do so. For example, the National Governors 
Associationstated (in a letter of September 10, 2001) that 
``[c]uts of this magnitude would have a significant effect on continued 
state implementation of welfare reform.'' Governor Foster of Louisiana 
stated (in a letter of July 19, 2001) that ``[t]hese modest grants were 
intended to reduce the very large disparity in TANF funding between 
poorer and wealthier states . . .'' and that they have ``afforded 
states like mine a much better opportunity to achieve TANF goals.''
    As the Finance Committee prepares for the reauthorization 
of the 1996 welfare law next year, this measure will ``hold 
harmless'' States receiving TANF supplemental grants. The 
committee substitute reauthorizes the TANF supplemental grants 
for 1 year at the FY 2001 funding level of $319 million, 
consistent with the Budget Resolution. (As originally 
introduced, S. 942 would have provided $402 million for TANF 
supplemental grants, consistent with the original 1996 formula, 
which allowed for funding to grow in States meeting the first 
two eligibility criteria.) Under the committee substitute no 
State will receive more TANF funding than in FY 2001. But no 
State will receive less. This will allow the committee time to 
properly review State TANF allocations as part of the broader 
welfare reauthorization process in 2002.
    To accommodate the requirements of the Budget Resolution, 
the committee substitute includes two offsets of FY 2002 
spending. The first prohibits States from drawing down TANF 
funds on September 30, 2002. The second rescinds $319 million 
of TANF ``high performance'' bonus in FY 2002 and 
reappropriates it in FY 2003. This will not affect the next 
round of ``high performance'' awards, currently scheduled to be 
awarded in December 2001.
    On November 1, 2001, the committee approved S. 942, as 
amended, by voice vote.

                         II. THE COMMITTEE BILL


Section 1. Short title

    The short title of the bill is the ``TANF Supplemental 
Grants Act of 2001.''

Section 2. Reauthorization

    Section 2 reauthorizes the TANF supplemental grants for FY 
2002 and awards States the same amount of funding they received 
in FY 2001.

Section 3. FY 2002 TANF payments

    Section 3 delays TANF payments to States from September 30, 
2002 to October 1, 2002.

Section 4. TANF ``high performance'' bonus

    Section 4 rescinds in FY 2002 $319 million of the $600 
million yet to be awarded in TANF ``high performance'' bonuses 
to States. It then reappropriates the funds in FY 2003.

                       III. CONGRESSIONAL ACTION

    On May 23, 2001, S. 942 was introduced in the Senate. On 
May 22, 2001, a companion measure, H.R. 1930 had been 
introduced in the House by Representatives Kevin Brady (R-TX) 
and Lloyd Doggett (D-TX).
    On July 17, 2001, the Finance Committee scheduled a markup 
of S. 942 but was unable to complete it because of unrelated 
circumstances.
    On November 1, 2001, the Finance Committee approved S. 942, 
as amended, on a voice vote, and ordered the bill reported to 
the full Senate without further amendment.

            IV. VOTE OF THE COMMITTEE IN REPORTING THE BILL

    In compliance with section 133 of the Legislative 
Reorganization Act of 1946, the committee states that S. 942 
was ordered favorably reported, with an amendment, by voice 
vote with a quorum present on November 1, 2001.

                    VI. BUDGETARY IMPACT OF THE BILL


               Congressional Budget Office Cost Estimate


S. 942--TANF Supplemental Grants Act of 2001

    Summary: S. 942 would extend the Supplemental Grants for 
Population Increases under the Temporary Assistance for Needy 
Families (TANF) program through 2002. States would receive 
grants funded at the 2001 level totaling $319 million. The bill 
would delay some other payments to states from 2002 to 2003. 
Overall, enacting the bill would reduce direct spending by $20 
million in 2002, but would increase such spending by $135 
million in 2003 and $315 million over the 2002-2011 period. 
Because the bill would affect direct spending, pay-as-you-go 
procedures would apply.
    S. 942 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA). 
Overall, the bill would authorize an increase in grant funding 
to states of $319 million; CBO estimates that most of those 
funds would be spent over the 2002-2011 period.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 942 is shown in the following table. The 
costs of this legislation fall with budget function 600 (income 
security).
    Seventeen states that had lower-than-average TANF grants 
per poor person or had increasing populations received 
Supplemental Grants each year for 1998 through 2001. S. 942 
would provide Supplemental Grants totaling $319 million to 
those states in 2002. Because many states have not been 
spending their entire TANF grant or have balances from prior 
years, CBO assumes that states would not spend the new funds 
quickly. CBO estimates that states would spend $90 million in 
2002 and $25 million each year thereafter until the money is 
spent. We estimate that such spending would total $190 million 
over the 2002-2006 period.

----------------------------------------------------------------------------------------------------------------
                                                                       By fiscal year, in millions of dollars--
                                                                    --------------------------------------------
                                                                       2002     2003     2004     2005     2006
----------------------------------------------------------------------------------------------------------------
                                           CHANGES IN DIRECT SPENDING

Extend supplemental grants through 2002 at $319 million:
    Budget authority...............................................      319        0        0        0        0
    Estimated outlays..............................................       90       25       25       25       25
Delay TANF payments to states:
    Budget authority...............................................        0        0        0        0        0
    Estimated outlays..............................................     -110      110        0        0        0
Rescind $319 million of budget authority for the high-performance
 bonus in 2002 and restore it in 2003:
    Budget authority...............................................     -319      319        0        0        0
    Estimated outlays..............................................        0        0        0        0        0
Total changes:
    Budget authority...............................................        0      319        0        0        0
    Estimated outlays..............................................      -20      135       25       25       25
----------------------------------------------------------------------------------------------------------------

    In addition, the bill specifies that any TANF payments that 
would otherwise be sent to states on September 30, 2002, would 
instead be sent on October 1, 2002. Based on recent spending 
patterns, CBO estimates that $110 million of payments would be 
moved from fiscal year 2002 to fiscal year 2003.
    Finally, the bill would rescind $319 million in budget 
authority for a TANF bonus to high-performing states in 2002 
and re-appropriate the money in 2003. The Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 
appropriated $1 billion for high-performance bonuses for the 
1999-2003 period. Based on the current schedule for awarding 
grants, $400 million would not be awarded until 2003 anyway, so 
this provision would not affect the level or timing of payments 
to states.
    Pay-as-you-go-considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. The 
following table displays CBO's estimate of the direct spending 
effects of S. 942. For the purposes of enforcing pay-as-you-go 
procedures, only the effects in the budget year and the 
succeeding four years are counted.

----------------------------------------------------------------------------------------------------------------
                                                          By fiscal year, in millions of dollars--
                                          ----------------------------------------------------------------------
                                            2002    2003   2004   2005   2006   2007   2008   2009   2010   2011
----------------------------------------------------------------------------------------------------------------
Changes in outlays.......................     -20    135     25     25     25     25     25     25     25     25
Changes in receipts......................                              Not applicable
----------------------------------------------------------------------------------------------------------------

    Estimated impact on State, local, and tribal governments: 
S. 942 contains no intergovernmental mandates as defined in 
UMRA. Overall, the bill would authorize an increase in grant 
funding to states of $319 million; CBO estimates that most of 
those funds would be spent over the 2002-2011 period.
    Estimated impact on the private sector: S. 942 contains no 
private-sector mandates as defined in UMRA.
    Estimate prepared by: Federal costs: Sheila Dacey; impact 
on State, local, and tribal governments: Leo Lex; impact on the 
private sector: Bruce Vavrichek.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                VII. REGULATORY IMPACT AND OTHER MATTERS

     In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the committee states that the 
bill will not significantly regulate any individuals or 
businesses, will not affect the personal privacy of 
individuals, and will result in no significant additional 
paperwork.
     The following information is provided in accordance with 
section 423 of the Unfunded Mandates Reform Act of 1995 (Pub. 
L. No. 104-4). The committee has determined that the bill 
contains no intergovernmental mandates, as defined in UMRA, and 
would not affect the budgets of State, local, or tribal 
governments.

                  VIII. ADDITIONAL VIEWS OF MR. GRAHAM

    I am pleased that the Senate Finance Committee approved the 
``TANF Supplemental Grants Act of 2001,'' sponsored by Senator 
Kay Bailey Hutchison and me.
    The TANF program, created by the 1996 welfare reform law, 
gives crucial assistance to 17 States which either receive the 
least welfare funds per person or, like Florida, have high 
rates of population growth.
    The extension will mean an estimated $60 million to Florida 
in fiscal year 2002 and significant TANF funds for 16 other 
States including Alaska, Arizona, Arkansas, Louisiana, 
Mississippi, Montana, New Mexico, Tennessee, Texas and Utah. 
This program has been critical to the success of welfare reform 
in many of these States.
    These grants were included in the 1996 welfare law to 
reduce the very large disparity in TANF funding between poorer 
and wealthier States. When we designed the TANF program to 
replace Aid for Families with Dependent Children (AFDC) in 
1996, the new grants were based on peak Federal spending for 
AFDC and related programs, based on fiscal year 1994 spending 
levels.
    This funding structure reinforced the existing, significant 
disparities in funding per poor child, which varied from as low 
as $400 in some States to more than $2,000 in others. Without a 
change in the funding structure, poorer States would have found 
themselves unable to provide adequate child care, 
transportation and other critical tools needed to help their 
citizens move from welfare to work.
    If this bill is not passed into law, several States will be 
forced to scale back their welfare reform efforts, which have 
shifted in recent years to include support services for low-
income working families and efforts to address the multiple 
barriers to employment that face a substantial share of the 
families that remain on welfare.
    In these difficult economic times, States will require all 
available resources to provide cash assistance and work support 
services to low-income families who have been displaced from 
their jobs. This bill will give these States the tools 
necessary to do just that.

                      IX. CHANGES IN EXISTING LAW

     In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

SOCIAL SECURITY ACT

           *       *       *       *       *       *       *


TITLE IV--GRANTS TO STATES FOR AID AND SERVICES TO NEEDY FAMILIES WITH 
CHILDREN AND FOR CHILD-WELFARE SERVICES

           *       *       *       *       *       *       *


   Part A--Block Grants to States for Temporary Assistance for Needy 
Families

           *       *       *       *       *       *       *


                            grants to states

    Sec. 403. (a) Grants.--
          (1) Family assistance grant.--

           *       *       *       *       *       *       *

          (3) Supplemental grants for population increases in 
        certain stages.--

           *       *       *       *       *       *       *

                  (G) Budget scoring.--Notwithstanding section 
                257(b)(2) of the Balanced Budget and Emergency 
                Deficit Control Act of 1985, the baseline shall 
                assume that no grant shall be made under this 
                paragraph after fiscal year 2001.
                  (H) Reauthorization of grants for fiscal year 
                2002.--Nothwithstanding any other provision of 
                this paragraph--
                          (i) any State that was a qualifying 
                        State under this paragraph for fiscal 
                        year 2001 or any prior fiscal year 
                        shall be entitled to receive from the 
                        Secretary for fiscal year 2002 a grant 
                        in an amount equal to the amount 
                        required to be paid to the State under 
                        this paragraph for the most recent 
                        fiscal year in which the State was a 
                        qualifying State;
                          (ii) subparagraph (G) shall be 
                        applied as if ``2002'' were substituted 
                        for ``2001''; and
                          (iii) out of any money in the 
                        Treasury of the United States not 
                        otherwise appropriated, there are 
                        appropriated for fiscal year 2002 such 
                        sums as are necessary for grants under 
                        this subparagraph.

           *       *       *       *       *       *       *