[Congressional Record Volume 141, Number 11 (Thursday, January 19, 1995)]
[Senate]
[Pages S1223-S1232]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LIEBERMAN:
  S. 246. A bill to establish demonstration projects to expand 
innovations in State administration of the aid to families with 
dependent children under title IV of the Social Security Act, and for 
other purposes; to the Committee on Finance.


                   the welfare reforms that work act

  Mr. LIEBERMAN. Mr. President, today I am introducing the Welfare 
Reforms That Work Act of 1995. The welfare system is in crisis. The 
United States has one of the most expensive welfare systems in the 
world. But 20 percent of America's children are poor, a higher 
percentage than any other industrialized country. The welfare system is 
a disaster for those who are on it and those who pay for it.
  This Congress has a historic opportunity to begin to fix this 
disaster. The primary welfare program--Aid to Families With Dependent 
Children [AFDC]--is viewed by those participating in it and those 
paying for it as a failure. It is failing at its primary task, moving 
people into the work force. Worse yet, it is contributing to the cycle 
of poverty. By rewarding single parents who don't work, don't marry, 
and have additional children out of wedlock, the current system demeans 
our most cherished values and deepens society's most serious problems. 
Democrats, Republicans, and the American [[Page S1224]] public agree 
that the system must be changed.
  But little consensus exists on how best to reform the system so that 
it promotes work and family. Last year both President Clinton and 
Republicans in Congress proposed legislation that would impose time 
limits and work requirements on welfare recipients and would begin to 
turn welfare incentives around. But in this Congress some have gone 
further. The Republican Contract With America proposes, among other 
things, ending benefits abruptly for teenage mothers who have children 
out of wedlock. More recently some Members have advocated giving the 
States total control of AFDC and other Federal welfare programs, ending 
the entitlement status of these programs, and capping Federal outlays.
  While I believe that each of these ideas should be tested to see if 
they will produce better results than the current failed welfare 
system, I cannot support mandating any of them nationally because no 
one knows whether they will work. If Congress imposes them nationally 
and they do not work, millions of children's lives will be put at risk.
  While I am pleased to see that my colleagues are advocating State 
flexibility, I am concerned about their blank-check approach. I agree 
that States should be the testing ground for bold programmatic changes. 
But handing the AFDC Program over to the States with no strings 
attached does not guarantee reform and may produce national division 
and welfare shopping. And, placing caps on block grants works against 
State flexibility by limiting State experiments to those that save 
money in the short term but may do nothing to promote work and 
reconstruct families in the long term. The American people are asking 
us to reform, not eliminate, the way we are carrying out our 
responsibility to help poor children.
  Mr. President, today I am proposing an alternative welfare reform 
approach that I hope will meet our welfare reform goals in a way that 
is acceptable to both sides of the aisle--the Welfare Reforms That Work 
Act. The bill would allow States to test--with appropriate Federal 
oversight--bold welfare reform initiatives that are promising but 
unproven, and that involve some human or financial risk. It would also 
establish a process for identifying successful reform approaches--
welfare reforms that work--that can be applied nationally. The bill 
does not preclude our mandating immediately those reforms about which 
there is growing agreement--such as requiring unwed teenage mothers to 
live at home as a condition of receiving welfare payments--and which 
involve limited human risk or Federal expense.
  States should be at the forefront of reform for three reasons. First, 
a State-based approach is financially prudent. Some reforms that merit 
testing--including imposing time limits and work requirements or 
expanding residential child care options, including orphanages--will 
cost money in the short term. In an article in the New Republic, Paul 
Offner of the Senate Finance Committee staff advises us to learn an 
important lesson from the 1988 Family Support Act: overly ambitious and 
underfunded reform efforts are doomed to failure. They do little to 
change the expectations of those working in the system or those using 
it. My bill would allow States to fund ambitious changes at the more 
affordable city, county, or State level.
  Second, a State-driven approach allows us to test bold changes 
responsibly. We have few proposed reforms that we know will work, and 
those that have been tested, such as the model education and training 
programs launched in California and Florida, have delivered only 
marginal results to date. In a recent Wall Street Journal James Q. 
Wilson bluntly confessed that he simply does not know what reforms will 
work.
  Absent better information, we would be wise to heed the advice of 
proverbs and avoid zealous acts without knowledge. Changes to welfare 
are consequential. They affect people's lives, children's lives. Under 
my bill States could test bold welfare rules changes--such as totally 
denying benefits to teenage mothers or establish orphanages--but only 
if the States can ensure that children are not unintended victims of 
these tests. As we try to change the behavior of parents, we must not 
cause more pain to the children.
  Third, States are eager and able to lead our reform efforts. In 
testimony last year before the Senate Finance Committee's Subcommittee 
on Social Security and Family Policy, the American Public Welfare 
Association [APWA] and other State organizations indicated their strong 
desire to pursue innovative strategies. When I introduced S. 1932, a 
similar State-based welfare reform bill last year, all 11 States that 
commented on the bill praised the bill's general approach.
  States are already leading the way. Over half the States have 
proposed reforms and received waivers from Federal rules under section 
1115 of the Social Security Act to implement their proposed changes. My 
own State of Connecticut recently received a waiver to implement a 
comprehensive reform initiative.
  But the waiver process does not go far enough. In testimony before 
the House Committee on Government Operations last September, the APWA, 
State welfare administrators, and other witnesses testified that the 
budget neutrality requirement of the current process creates a 
substantial barrier to reform. As States seek to promote work and 
family through changing eligibility rules, it give States an incentive 
to test sticks but not carrots. Witnesses at the hearing urged that the 
Federal Government share in the cost of demonstrations programs, make 
the results of demonstrations readily available, and tallow States to 
adopt, without a waiver, those demonstrations that prove effective. In 
other words, we must be honest and acknowledge that we may have to 
spend a little more money in the short run to save a lot more money and 
a lot more lives in the long run.
  My bill addresses these and other concerns voiced by States about the 
current waiver process. To ensure that States will be able to test the 
broadest array of reforms, my bill authorizes $675 million over 5 years 
to support demonstration projects and independent program evaluations. 
Half of these funds would support innovative pilot programs specified 
in the bill, and the remaining half would fund other State-proposed 
demonstrations. Demonstration projects would last up to 5 years. States 
would report on progress annually. As results of interim and final 
reports on State tests become available, the Secretary of the 
Department of Health and Human Services [HHS] will submit legislation 
to Congress to provide for the national implementation of successful 
programs. As a result of this process, those innovations that proved 
successful could be rapidly adopted by other States or imposed 
nationwide.
  The bill promotes State-initiated welfare reforms that meet what I 
believe should be our four main reform goals: moving welfare recipients 
into the work force; strengthening families, stopping illegitimate 
births and breaking the cycle of welfare dependency; increasing child 
support collection and paternal responsibility, and improving the 
delivery of welfare services.


title i authorizes initiatives to move welfare recipients into the work 
                                 force

  We must make returning to work the primary focus of the welfare 
system. The current system demands little of people on welfare. It 
often impedes, rather than empowers, those who seek to return to the 
work force. If an AFDC mother goes back to work, her income increases 
only minimally--often not enough to cover child care--and she loses her 
Medicaid benefits. She is likely to be economically worse off if she 
returns to the work force, so she stays on welfare.
  Title I includes initiatives to move people on welfare into the work 
force. Two pilot programs focus on teenage parents--those at greatest 
risk for long-term welfare dependency. The first allows States to 
condition AFDC benefits for single parents under 20 years of age on: 
first, attending school, participating in job training or holding a 
job; and second, living at home. The second allows States to include 
young AFDC clients in the Job Corps--a successful, residential 
antipoverty program for youths 16 to 22 years of age.
  Title I also allows States to require 30 days of State-assisted job 
search or, where appropriate, substance abuse treatment, during the 
usual lag time between application for and receipt of 
[[Page S1225]] benefits. Welfare clients should be engaged in job 
search from the day they first seek a welfare grant. Other provisions 
in this title assist people on welfare in accumulating assets to invest 
in education or to start a small business.


 title II authorizes initiatives to strengthen families and break the 
                      cycle of welfare dependency

  Current Federal welfare rules discourage family unification and 
encourage out-of-wedlock childbearing. This title seeks to turn these 
incentives around. It recognizes that while welfare is a privilege 
granted by Government, not a right for parents, the States and the 
Federal Government have a moral responsibility to ensure the well-being 
of American children.
  The title seeks to address what is perhaps the most compelling and 
difficult challenge of welfare reform, to discourage out-of-wedlock 
births without harming children. An increasing percentage of those 
entering the welfare system are never-married mothers at greatest risk 
of long-term welfare dependency. Between 1983 and 1992, families headed 
by unwed mothers accounted for about four-fifths of the growth in 
people on welfare, and at least 40 percent of never-married mothers 
receiving AFDC remain in the system for 10 years or more.
  Never-married teen parents are particularly likely to fall into long-
term welfare dependency. More than one half of welfare spending goes to 
women who first gave birth as teens. As William Raspberry noted last 
winter in a Washington Post column aptly entitle ``Out of Wedlock, Out 
of Luck,'' children born to parents who had their first child out-of-
wedlock before they finished high school and reached the age of 20 are 
``almost guaranteed a life of poverty.'' In other words, they and their 
parents are almost guaranteed a life on welfare. Citing William A. 
Galston's analyses, Raspberry notes that a startling 79 percent of 
children in this category lived in poverty in 1992. In contrast, only 8 
percent of children whose parents had achieved all three milestones--
marriage, graduation, and the 20th birthday--before having their first 
child were living in poverty.
  The potential effect of welfare on illegitimacy has taken center 
stage in the welfare reform debate but there is considerable 
disagreement about its effects. David Ellwood, economist and Department 
of Heath and Human Services official, has found little evidence that 
welfare contributes to the increase in illegitimacy. In his book, 
``Poor Support,'' he points to several other concurrent social changes 
that are likely contributors to the increase--the growing percentage of 
women in the work force, the drop in earnings and rise in unemployment 
among young men, and changes in attitudes toward marriage.
  Others interpret the data differently. Most notably, Charles Murray 
believes that welfare is the primary cause of the increase in 
illegitimate births. In a catalytic Wall Street Journal article 
published October 29, 1993, Murray argues that welfare has reduced the 
economic penalty associated with out-of-wedlock childbearing and, in 
turn, has reduced the social stigma associated with it. He concludes 
that the removal of both of these disincentives has led to more out-of-
wedlock births. Based on this conclusion, Murray recommends the 
dramatic step of ending welfare altogether. Murray acknowledges that 
his approach may put this generation of children at risk and advocates, 
among other things, Government investment in new facilities to care for 
these children--thus the ensuing brouhaha about orphanages--just the 
kinds of facilities this act would enable states to create.
  The stigma of illegitimacy was not just an accident of social 
history; it was a societal attempt to protect children. Today, the 
stigma is largely gone and so the children have suffered terribly. 
Raspberry's previously mentioned article cites polling results 
indicating that 70 percent of Americans aged 18 to 34 believe that 
people having children out of wedlock do not deserve any moral 
reproach. That is an outrageous result, one that we must turn around 
because the decision to bear a child has profound moral and human 
content. We must infuse our children with a clear understanding of the 
consequences of teenage childbearing. We must teach them that it is 
wrong to have children unless you are married, always morally wrong for 
the mother and father, and usually horrible for the child and the 
mother.
  Few would argue that a national campaign to discourage unmarried 
teenagers from having children is not a good thing to do. Indeed, 
Senate Minority leader Daschle introduced a bill, S. 8, on the first 
day of this session to combat teen pregnancy. His bill, among other 
things, would require unwed mothers under age 18 to live at home or in 
an alternative adult-supervised living arrangement as a condition of 
receiving AFDC. This measure seems appropriate; it would eliminate the 
incentive teenagers now have to bear a child so they can move out of 
the house, and it imposes little risk to the children of teenagers who 
have a child anyway.
  The more difficult question for those of us working on welfare reform 
is this: Should we pursue changes in welfare policy--such as cutting 
off benefits to teenage mothers--that may discourage out-of-wedlock 
births but would put children at risk? Some might say no, believing 
that there is little correlation between welfare and out-of-wedlock 
births. The empirical evidence is generally viewed as inconclusive. But 
some controlled studies have demonstrated a positive association 
between welfare payments and out-of-wedlock births, and my own 
conversations with teenage mothers bears this out.
  If we choose to reduce or eliminate AFDC grants to deter 
childbearing, however, we should acknowledge that a portion of the 
current and potential welfare population--perhaps a small but 
significant portion--is unlikely to respond to stronger inducements and 
penalties and will continue to have children society must provide for. 
In a Los Angeles Times article published last January, Adela de la 
Torre, an economist at California State University at Long Beach, 
writes that the children of such parents ``become victims of trickle 
down welfare programs * * * if we deem the parent unfit for welfare 
support, the child, too, loses.'' De la Torre rejects the notion that 
building stronger parental inducements into the welfare system will 
change the behavior of all parents and calls instead for a more child-
centered social service agenda that recognizes and serves the needs of 
children in a more direct, comprehensive, and integrated fashion. She 
makes an important point.

  Similarly, Thomas Corbett of the University of Wisconsin asks in a 
spring, 1993 Focus article whether it is ``compassionate to throw a 
little bit of welfare into troubled families and do little else to aid 
the children?'' The answer is, of course, relative. AFDC reflects our 
best intentions toward these children, but it has more often failed 
them. Whether cash payments to unresponsive parents is the most 
compassionate approach, Corbett concludes, ``depends partly on how many 
children are involved and whether we can design and finance the 
technologies required to assist them.''
  It is incumbent on us, as part of welfare reform, to explore the 
alternatives to a largely parent-based system, and find the answers to 
his question. Title II of the bill supports State efforts to do just 
that. Section 201 allows States to shift part or all of AFDC payments 
to block grants and combine the grants with other funds available under 
this bill to care for children, strengthen families, and implement 
other reforms. In contrast to the Republican block grant proposals, 
however, the provision requires the Secretary of HHS to ensure that 
States pursuing the Block Grant Program protect the well-being of 
affected children. Title II supports other demonstrations as well, 
including pilots that discourage welfare recipients from having 
additional children while on welfare by denying benefit increases for 
additional children and pilots to test innovative teen pregnancy 
prevention programs.


 title iii of the bill authorizes state initiatives to increase child 
             support collection and paternal responsibility

  Too often absent parents, typically fathers, are not held accountable 
for their children's care. The Federal Government must also take the 
lead in improving child support enforcement. As a starting point, we 
should fully implement the recommendations of the U.S. 
[[Page S1226]] Commission on Interstate Child Support. In the last 
Congress Senator Bill Bradley, a member of the Commission, introduced 
S. 689, the Interstate Child Support Enforcement Act, to implement the 
Commission's recommendations. My Connecticut colleague, Congresswoman 
Kennelly, also a Commission member, introduced a similar bill, H.R. 
1961, in the House. This year I will again support Senator Bradley's 
legislation which will, among other things: Mandate hospital-based 
paternity acknowledgement programs; require employers to submit 
W-4 forms for all new employees to State child support 
enforcement agencies; and provide States the authority they need to 
assert jurisdiction over nonresident parents. The era of deadbeat dads 
should end.
  While improving interstate coordination is critical to strengthening 
child support enforcement, State innovation should play a role as well. 
Title III of my bill authorizes State efforts to improve child support 
collection and paternity establishment. To strengthen welfare 
recipients incentives to work with authorities to collect child 
support, it would allow States to increase the child support disregard 
from $50 to a higher level decided by the State. States could also hold 
parents accountable for the child support obligations of their minor 
children. Additionally, States could propose their own demonstrations 
projects to increase paternity establishment and improve child support 
collection.


     title IV authorizes initiatives to diversify and improve the 
                    performance of welfare services

  Changing the welfare system to move people back into the work force 
and to better serve the needs of children will require changing the way 
the welfare bureaucracy does business. Too many welfare workers focus 
on whether and how to get a welfare check to the recipient rather than 
how to get the recipient off of welfare and back to work. Many welfare 
offices don't know how many children they have in foster care. Many 
still operate out of cardboard files and lose people in the shuffle of 
paper. Offices often suffer from interagency rivalry and bureaucratic 
bickering. It is tragic when a child suffers needlessly because the 
system fails under the weight of its own inefficiency.
  This need not happen. Some innovative States and municipalities have 
tried to make their welfare systems more efficient and service 
oriented. At a hearing I held in the last Congress, Carmen Nazario, the 
Secretary of Health and Human Services in Delaware, testified that her 
State has brought public and private social services together in a 
single location and is now developing a computer network to link 
programs.
  David Truax from the Maryland Department of Human Resources described 
a second approach to improving services. Maryland now provides each 
participant with a debit card that has AFDC, food stamps, and general 
assistance benefits on it. Electronic benefit transfer [EBT] cards have 
several advantages: They preclude the trading of food stamps for drugs; 
they introduce people to the banking system; they make it easier for 
them to budget their money since they don't have to cash one single 
check, and they reduce recipients vulnerability to crime.
  Further, offices should encourage and empower, not discourage and 
demean, those they serve. It can be done. America Works, a private 
organization that trains people on welfare for work and places them in 
jobs, provides proof. During my visit to their Hartford, CT, office I 
found that clients felt they were getting the help they needed to 
succeed, and were motivated and optimistic. I asked one young woman who 
had just completed her training if she expected to be placed 
successfully in a job. She responded with enthusiasm, ``absolutely.'' 
This spirit does not typically pervade traditional welfare offices.
  Most important, welfare offices should be held accountable for 
results. They need to make the shift from writing checks to moving 
people on welfare into jobs. To promote this change, we should seek to 
establish competition among agencies and greater choice for people on 
welfare. We should encourage public agencies to contract with effective 
private sector companies and to better reward those public employees 
who successfully help people become self-sufficient.
  Title IV supports initiatives to diversify and improve the 
performance of welfare services. It supports State pilots to provide 
incentives to private sector, for-profit and nonprofit groups to place 
people on welfare in private sector jobs. Companies would keep a 
portion of welfare savings as payment for successful job placements. 
Title IV also supports State pilots to improve the performance of 
welfare office employees through, for example, providing direct bonuses 
to employees and judging their performance based on their clients' 
progress toward self-sufficiency.
  In addition, title IV incorporates legislation I introduced earlier 
this month with Senators Domenici, Feinstein, Pressler, and Hatfield to 
remove a Federal barrier to improving services. That bill, S. 131, the 
Electronic Benefits Regulatory Relief Act of 1995, exempts EBT cards 
from the Federal Reserve Board's regulation E. Regulation E limits 
cardholder liability to $50 for lost or stolen cards--a policy that 
promotes fraud and makes EBT Programs costly for States. Earlier this 
month the Vice President issued the first report from the EBT task 
force and called for nationwide implementation. Without passage of this 
provision, that goal will not be reached.


finally, title v authorizes offsetting expenditure reductions to ensure 
                       the bill is budget neutral

  In other words, the bills pay for itself. Specifically, it eliminates 
the three-entity rule. Currently, an individual farmer can qualify for 
up to $125,000 per year in certain Government subsidies. If he forms 
two other business entities with two other individuals (say, a friend 
and a sister), each of these entities can qualify for another $125,000 
per year. So the individual farmer can receive up to $250,000 in 
subsidies per year--$125,000 for his first business entity, and half of 
$125,000 for each of his second and third entities. My bill says, 
``enough is enough,'' and caps the amount of agricultural subsidies any 
one person gets from the Federal Government at $125,000. A preliminary 
Congressional Budget Office estimate indicates this change will save 
$675 million over 5 years, money that is better spent on the truly 
needy.
  Americans continue to show concern for the poor, and particularly 
poor children. A 1994 poll commissioned by the Children's Defense Fund 
and others found that 64 percent of Americans believe we should spend 
more on poor children. But the same poll found that 55 percent think we 
spend too much on welfare, and 68 percent think we should not increase 
payments to parents for any additional children they have while on 
welfare.
  Our current approach to helping the poor is clearly not working. The 
goal of welfare reform is to shake up the status quo which promotes 
dependency, illegitimacy, and social disfunctions like crime into a 
system that promotes work, family, and responsibility and protects 
children from a life of poverty. The Federal Government does not have a 
ready formula for how to achieve this goal. I concur with my colleagues 
who say that we should look to the States for answers. But we must 
proceed in a way that meets our obligation to ensure the well-being of 
all of America's children. Our aim should be to make sure that this 
generation of welfare children do not become the next generation of 
welfare parents. This bill offers an approach to do just that.
  Mr. President, I ask unanimous consent that the text of the bill and 
additional material be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 246

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Welfare 
     Reforms That Work Act''.
       (b) Table of Contents.--The table of contents of this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Purpose.
Sec. 3. Definitions.
Sec. 4. General provisions relating to demonstration 
              projects. [[Page S1227]] 
Sec. 5. Authorization of appropriations.

  TITLE I--INITIATIVES TO MOVE WELFARE RECIPIENTS INTO THE WORK FORCE

Sec. 101. Demonstration projects which condition AFDC benefits for 
              certain individuals on school attendance or job training, 
              limit the time period for receipt of such benefits, and 
              require teenage parents to live at home.
Sec. 102. Pilot Job Corps program for recipients of Aid to Families 
              with Dependent Children.
Sec. 103. Demonstration projects requiring up-front 30-day assisted job 
              search, or substance abuse treatment before receiving 
              AFDC benefits.
Sec. 104. Disregard of education and employment training savings for 
              AFDC eligibility.
Sec. 105. Incentives and assistance in starting a small business.
Sec. 106. Increased emphasis in JOBS program on moving people into the 
              work force.
Sec. 107. Additional demonstration projects to move AFDC recipients 
              into the work force.

  TITLE II--INITIATIVES TO STRENGTHEN FAMILIES AND BREAK THE CYCLE OF 
                           WELFARE DEPENDENCY

Sec. 201. Demonstration projects to establish child centered programs 
              through conversion of certain AFDC and JOBS payments into 
              block grants.
Sec. 202. Demonstration projects providing no additional benefits with 
              respect to children born while a family is receiving AFDC 
              and allowing increases in the earned income disregard.
Sec. 203. Demonstration projects providing incentives to marry.
Sec. 204. Demonstration projects reducing AFDC benefits if school 
              attendance is irregular or preventive health care for 
              dependent children is not obtained.
Sec. 205. Demonstration projects to develop community-based programs 
              for teenage pregnancy prevention and family planning
Sec. 206. Additional demonstration projects to strengthen families and 
              break the cycle of welfare dependency.

 TITLE III--CHANGES TO FEDERAL LAWS AND STATE INITIATIVES TO INCREASE 
               CHILD SUPPORT AND PATERNAL RESPONSIBILITY

Sec. 301. Demonstration projects to increase paternity establishment.
Sec. 302. Demonstration projects to increase child support collection.

   TITLE IV--INITIATIVES TO DIVERSIFY AND IMPROVE THE PERFORMANCE OF 
                            WELFARE SERVICES

Sec. 401. Demonstration projects for providing placement of AFDC 
              recipients in private sector jobs.
Sec. 402. Demonstration projects providing performance-based incentives 
              for State public welfare providers.
Sec. 403. Electronic benefit transfers.

               TITLE V--OFFSETTING EXPENDITURE REDUCTIONS

Sec. 501. Offsetting expenditure reductions.

     SEC. 2. PURPOSE.

       The purposes of this Act are--
       (1) to promote bold State initiated welfare reforms that 
     will--
       (A) move welfare recipients into the work force,
       (B) strengthen families,
       (C) break the cycle of welfare dependence,
       (D) increase child support collection and paternal 
     responsibility, and
       (E) improve the delivery of welfare services; and
       (2) to make immediate State-by-State changes to the 
     existing system while establishing a process for identifying 
     successful reform approaches that can be applied nationally.

     SEC. 3. DEFINITIONS.

       For purposes of this Act:
       (1) Aid to families with dependent children.--The term 
     ``aid to families with dependent children'' has the meaning 
     given to such term by section 406(b) of the Social Security 
     Act (42 U.S.C. 606(b)).
       (2) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.

     SEC. 4. GENERAL PROVISIONS RELATING TO DEMONSTRATION 
                   PROJECTS.

       (a) Applications.--
       (1) In general.--Each State desiring to conduct a 
     demonstration project under this Act shall prepare and submit 
     to the Secretary an application in such manner and containing 
     such information as the Secretary may require. The Secretary 
     shall actively encourage States to submit such applications.
       (2) Approval.--The Secretary shall consider all 
     applications received from States desiring to conduct 
     demonstration projects under this Act and shall approve such 
     applications in a number of States to be determined by the 
     Secretary, taking into account the overall funding levels 
     available under section 5.
       (3) Consideration of research needs and purposes.--The 
     Secretary shall pursue a broad range of reforms consistent 
     with the purposes of this Act and with research needs in 
     approving demonstration projects under this Act.
       (b) Duration.--A demonstration project under this Act shall 
     be conducted for not more than 5 years plus an additional 
     time period of up to 12 months for final evaluation and 
     reporting. The Secretary may terminate a project if the 
     Secretary determines that the State conducting the project is 
     not in substantial compliance with the terms of the 
     application approved by the Secretary under this Act.
       (c) Evaluation Plan.--
       (1) In general.--Each State conducting a demonstration 
     project under this Act shall submit an evaluation plan 
     (meeting the standards developed by the Secretary under 
     paragraph (2)) to the Secretary not later than 90 days after 
     the State is notified of the Secretary's approval for such 
     project. A State shall not receive any Federal funds for the 
     operation of the demonstration project or be granted any 
     waivers of the Social Security Act necessary for operation of 
     the demonstration project until the Secretary approves such 
     evaluation plan.
       (2) Standards.--Not later than 3 months after the date of 
     the enactment of this Act, the Secretary shall develop 
     standards for the evaluation plan required under paragraph 
     (1) which shall include the requirement that an independent 
     expert entity provide an evaluation of each demonstration 
     project to be included in the State's annual and final 
     reports to the Secretary under subsection (d)(1).
       (d) Reports.--
       (1) State.--A State that conducts a demonstration project 
     under this Act shall prepare and submit to the Secretary 
     annual and final reports in accordance with the State's 
     evaluation plan under subsection (c)(1) for such 
     demonstration project.
       (2) Secretary.--The Secretary shall prepare and submit to 
     the Congress annual reports concerning each demonstration 
     project under this Act.
       (e) Legislative Proposal.--
       (1) Evaluations.--
       (A) In general.--On each of the dates described in 
     subparagraph (B), the Secretary shall evaluate the 
     demonstration projects based on the reports received from 
     each State under subsection (d)(1) and if the Secretary 
     determines that any of the reforms in the demonstration 
     projects will be effective in achieving the purposes of this 
     Act, the Secretary shall submit proposed legislation to the 
     Congress to--
       (i) implement such successful reforms nationally if 
     appropriate, or
       (ii) give States the option of adopting a successful reform 
     in a State plan approved under section 402 of the Social 
     Security Act (42 U.S.C. 602) where the reform may be 
     effective in some States but not in others.

     The proposed legislation shall take into account factors 
     important to implementing local demonstration projects on a 
     national scale, including variation in population density and 
     poverty.
       (B) Dates for evaluation and submission.--A date is 
     described in this subparagraph, if it is a date that is--
       (i) 2 years after the date of the enactment of this Act,
       (ii) 4 years after the date of the enactment of this Act, 
     or
       (iii) not later than 6 months after the date the Secretary 
     receives the last final report due under subsection (d)(1) 
     with respect to a demonstration project.
       (2) Other legislative submissions.--At any time other than 
     a date described in paragraph (1)(B), if the Secretary 
     determines that a reform in a demonstration project is ready 
     to be implemented on a national scale or to be made a State 
     option, the Secretary may submit proposed legislation to the 
     Congress to implement the reform.
       (f) Clearinghouse.--The Secretary shall establish and 
     maintain a clearinghouse to collect and disseminate to State 
     officials and the public current information on approved 
     demonstration projects, and on interim and final reports 
     submitted under subsection (d)(1) with respect to 
     demonstration projects. To the extent practicable, 
     clearinghouse information shall be made available through 
     electronic format.
       (g) Provisions Subject To Waiver.--The Secretary may waive 
     such requirements of title IV of the Social Security Act (42 
     U.S.C. 601 et seq.) as the Secretary determines to be 
     necessary to carry out the purposes of the demonstration 
     projects established under this Act.
       (h) Expenditures Otherwise Included Under the State Plan.--
     The costs of a demonstration project under this Act which 
     would not otherwise be included as expenditures under the 
     applicable State plan under title IV of the Social Security 
     Act (42 U.S.C. 601 et seq.) shall to the extent and for the 
     period prescribed by the Secretary, be regarded as 
     expenditures under the applicable State plan under such 
     title, or for administration of such State plan or plans, as 
     may be appropriate.

     SEC. 5. AUTHORIZATION OF APPROPRIATIONS.

       (a) In General.--There is authorized to be appropriated 
     $150,000,000 for each of fiscal years 1996 and 1997, and 
     $125,000,000 for each of fiscal years 1998, 1999, and 2000 to 
     carry out the provisions of sections 4(c), 4(d), 101, 103, 
     105(b), 105(c), 105(d), 107, 201, 202, 203, 204, 205, 206, 
     207, 301, and 302. [[Page S1228]] 
       (b) Allocation of Funds.--Of the amount appropriated 
     pursuant to subsection (a), the Secretary shall obligate--
       (1) 50 percent of such amount to--
       (A) offset any increase in the amount of the Federal share 
     resulting from any demonstration project established under a 
     section described in subsection (a) (other than demonstration 
     projects established under sections 107 and 207 of this Act); 
     and
       (B) to the extent such amount remains after any such 
     offset--
       (i) increase the otherwise applicable Federal share rate 
     under a State plan under title IV of the Social Security Act 
     (42 U.S.C. 601 et seq.) for such demonstration projects; and
       (ii) increase the amount of a State's block grant under the 
     demonstration project under section 201 of this Act; and
       (2) 50 percent of such amount to--
       (A) offset any increase in the amount of the Federal share 
     resulting from any demonstration project established under 
     sections 107 and 207 of this Act; and
       (B) to the extent such amount remains after any such offset 
     increase the otherwise applicable Federal share rate under a 
     State plan under title IV of the Social Security Act (42 
     U.S.C. 601 et seq.) for such demonstration projects.
       (c) Reservation of Certain Amounts Until Final Report 
     Submitted.--The Secretary shall reserve 10 percent of any 
     amounts obligated to a State for a demonstration project 
     under subsection (b), and shall not pay such reserved amounts 
     until such State has submitted a final report on such 
     demonstration project.
  TITLE I--INITIATIVES TO MOVE WELFARE RECIPIENTS INTO THE WORK FORCE

     SEC. 101. DEMONSTRATION PROJECTS WHICH CONDITION AFDC 
                   BENEFITS FOR CERTAIN INDIVIDUALS ON SCHOOL 
                   ATTENDANCE OR JOB TRAINING, LIMIT THE TIME 
                   PERIOD FOR RECEIPT OF SUCH BENEFITS, AND 
                   REQUIRE TEENAGE PARENTS TO LIVE AT HOME.

       (a) Establishment.--The Secretary shall provide for 
     demonstration projects described in subsection (b) in States 
     with applications approved under this Act.
       (b) Project Described.--
       (1) In general.--Except as provided in paragraph (2), each 
     State conducting a demonstration project under this section 
     shall provide that--
       (A) a family described in paragraph (3) shall not receive 
     aid to families with dependent children--
       (i) unless the individual described in paragraph (3)(A) is, 
     for a minimum of 35 hours a week--

       (I) attending school,
       (II) studying for a general equivalency diploma, or
       (III) participating in a job, job training, or job 
     placement program; and

       (ii) except in the case of a situation described in clause 
     (i) through (v) of section 402(a)(43)(B) of the Social 
     Security Act (42 U.S.C. 602(a)(43)(B))--

       (I) such individual is residing in a place of residence 
     maintained by a parent, legal guardian, or other adult 
     relative of such individual as such parent's, guardian's, or 
     adult relative's own home, or residing in a foster home, 
     maternity home, or other adult-supervised supportive living 
     arrangement, and
       (II) such aid (where possible) shall be provided to the 
     individual's parent, legal guardian, or other adult relative 
     on behalf of such individual and the individual's dependent 
     child; and

       (B) such family shall be entitled to receive such aid for a 
     time period determined appropriate by the State which shall, 
     at a minimum, permit such individual to complete the 
     activities described in subparagraph (A)(i).
       (2) Limitation.--A State conducting a demonstration project 
     under this section shall not apply the provisions of 
     paragraph (1) to a family unless--
       (A) the State has made adequate child care available to 
     such family;
       (B) the State has paid all tuition and fees applicable to 
     the activities described in paragraph (1)(A); and
       (C) such application does not endanger the welfare and 
     safety of a dependent child who is a member of such family.
       (3) Family described.--A family described in this paragraph 
     is a family which--
       (A) includes a parent under 20 years of age;
       (B) includes at least 1 dependent child of such parent; and
       (C) does not include a child under 6 months of age.

     SEC. 102. PILOT JOB CORPS PROGRAM FOR RECIPIENTS OF AID TO 
                   FAMILIES WITH DEPENDENT CHILDREN.

       Section 433 of the Job Training Partnership Act (29 U.S.C. 
     1703) is amended by adding at the end the following new 
     subsection:
       ``(f)(1) The Secretary may enter into appropriate 
     agreements with agencies as described in section 427(a)(1) 
     for the development of pilot projects to provide services at 
     Job Corps centers to eligible individuals--
       ``(A) who are eligible youth described in section 423;
       ``(B) whose families receive aid to families with dependent 
     children under part A of title IV of the Social Security Act 
     (42 U.S.C. 601 et seq.); and
       ``(C) who are mothers of children who have not reached the 
     age of compulsory school attendance in the State in which the 
     children reside.
       ``(2) A Job Corps center serving the eligible individuals 
     shall--
       ``(A) provide child care at or near the Job Corps center 
     for the individuals;
       ``(B) provide the activities described in section 428 for 
     the individuals; and
       ``(C) provide for the individuals, and require that each 
     such individual participate in, activities through a parents 
     as teachers program that--
       ``(i) establishes and operates parent education programs, 
     including programs of developmental screening of the children 
     of the eligible individuals;
       ``(ii) provides group meetings and home visits for the 
     family of each such individual by parent educators who have 
     had supervised experience in the care and education of 
     children and have had training; and
       ``(iii) provides periodic screening, by such parent 
     educators, of the educational, hearing, and visual 
     development of the children of such individuals.
       ``(3) The Secretary shall prescribe specific standards and 
     procedures under section 424 for the screening and selection 
     of applicants to participate in pilot projects carried out 
     under this subsection. In addition to the agencies described 
     in the second sentence of such section, such standards and 
     procedures may be implemented through arrangements with 
     welfare agencies.
       ``(4) As used in this subsection:
       ``(A) The term `developmental screening' means the process 
     of measuring the progress of children to determine if there 
     are problems or potential problems or advanced abilities in 
     the areas of understanding and use of language, perception 
     through sight, perception through hearing, motor development 
     and hand-eye coordination, health, and physical development.
       ``(B) The term `parent education' includes parent support 
     activities, the provision of resource materials on child 
     development and parent-child learning activities, private and 
     group educational guidance, individual and group learning 
     experiences for the eligible individual and child, and other 
     activities that enable the eligible individual to improve 
     learning in the home.''.

     SEC. 103. DEMONSTRATION PROJECTS REQUIRING UP-FRONT 30-DAY 
                   ASSISTED JOB SEARCH, OR SUBSTANCE ABUSE 
                   TREATMENT BEFORE RECEIVING AFDC BENEFITS.

       (a) Establishment.--The Secretary shall provide for 
     demonstration projects described in subsection (b) in States 
     with applications approved under this Act.
       (b) Project Described.--
       (1) In general.--Except as provided in paragraph (2), each 
     State conducting a demonstration project under this section 
     shall require a parent or other relative of a dependent child 
     to undergo 30 days of assisted job search or substance abuse 
     treatment (or both) before the family may receive aid to 
     families with dependent children as part of the application 
     process for the receipt of such aid.
       (2) Limitation.--A State conducting a demonstration project 
     under this section shall not apply the provisions of 
     paragraph (1) to a family unless--
       (A) all of the dependent children in the family are over 6 
     months of age;
       (B) the State has made adequate child care available to 
     such family;
       (C) the State has paid all fees applicable to the 
     activities described in paragraph (1); and
       (D) such application does not endanger the welfare and 
     safety of a dependent child who is a member of such family.

     SEC. 104. DISREGARD OF EDUCATION AND EMPLOYMENT TRAINING 
                   SAVINGS FOR AFDC ELIGIBILITY.

       (a) Disregard as Resource.--Subparagraph (B) of section 
     402(a)(7) of the Social Security Act (42 U.S.C. 602(a)(7)) is 
     amended--
       (1) by striking ``or'' before ``(iv)'', and
       (2) by inserting ``, or (v) except in the case of the 
     family's initial determination of eligibility for aid to 
     families with dependent children, any amount up to $10,000 in 
     a qualified education and employment account (as defined in 
     section 406(i)(1))'' before ``; and''.
       (b) Disregard as Income.--
       (1) In general.--Subparagraph (A) of section 402(a)(8) of 
     such Act (42 U.S.C. 602(a)(8)) is amended--
       (A) by striking ``and'' at the end of clause (vii), and
       (B) by inserting after clause (viii) the following new 
     clause:
       ``(ix) shall disregard any qualified distributions (as 
     defined in section 406(i)(2)) made from any qualified 
     education and employment account (as defined in section 
     406(i)(1)) while the family is receiving aid to families with 
     dependent children; and''.
       (2) Nonrecurring lump sum exempt from lump sum rule.--
     Section 402(a)(17) (42 U.S.C. 602(a)(17)) is amended by 
     adding at the end the following: ``; and that this paragraph 
     shall not apply to earned and unearned income received in a 
     month on a nonrecurring basis to the extent that such income 
     is placed in a qualified education and employment account (as 
     defined in section 406(i)(1)) the total amount which, after 
     such placement, does not exceed $10,000.''.
       (c) Qualified Education and Employment Accounts.--Section 
     406 of such Act (42 U.S.C. 606) is amended by adding at the 
     end the following:
       ``(i)(1) The term `qualified education and employment 
     account' means a mechanism established by the State (such as 
     escrow accounts or education savings bonds) that allows 
     savings from the earned income of a dependent child or parent 
     of such child in a [[Page S1229]] family receiving aid to 
     families with dependent children to be used for qualified 
     distributions.
       ``(2) The term `qualified distributions' means 
     distributions from a qualified education and employment 
     account for expenses directly related to the attendance at an 
     eligible postsecondary or secondary institution or directly 
     related to improving the employability (as determined by the 
     State) of a member of a family receiving aid to families with 
     dependent children.
       ``(3) The term `eligible postsecondary or secondary 
     institution' means a postsecondary or secondary institution 
     determined to be eligible by the State under guidelines 
     established by the Secretary.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to payments under part A of title IV of the 
     Social Security Act (42 U.S.C. 601 et seq.) for calendar 
     quarters beginning on or after January 1, 1995.

     SEC. 105. INCENTIVES AND ASSISTANCE IN STARTING A SMALL 
                   BUSINESS.

       (a) Authority for States To Permit Certain Self-Employment 
     Program Participants a One-Time Election To Purchase Capital 
     Equipment for a Small Business in Lieu of Depreciation; 
     Repayments by Such Persons of the Principal Portion of Small 
     Business Loans Treated as Business Expenses for Purposes of 
     AFDC.--
       (1) Amendments to the social security act.--Section 
     402(a)(8) of the Social Security Act (42 U.S.C. 602(a)(8)) is 
     amended--
       (A) in subparagraph (B)(ii)(II), by striking ``and'' after 
     the semicolon;
       (B) by redesignating subparagraph (C) as subparagraph (D); 
     and
       (C) by inserting after subparagraph (B) the following new 
     subparagraph:
       ``(C) provide that, in determining the earned income of a 
     family any of the members of which owns a small business and 
     is a participant in a self-employment program offered by a 
     State in accordance with section 482(d)(1)(B)(ii), the State 
     may--
       ``(i)(I) during the 1-year period beginning on the date the 
     family makes an election under this clause, treat as an 
     offset against the gross receipts of the business the sum of 
     the capital expenditures for the business by any member of 
     the family during such 1-year period; and
       ``(II) allow each such family eligible for aid under this 
     part not more than 1 election under this clause; and
       ``(ii) treat as an offset against the gross receipts of the 
     business--
       ``(I) the amounts paid by any member of the family as 
     repayment of the principal portion of a loan made for the 
     business; and
       ``(II) cash retained by the business for future use by the 
     business; and''.
       (2) Amendment to the internal revenue code of 1986.--
     Section 167 of the Internal Revenue Code of 1986 (relating to 
     depreciation) is amended by redesignating subsection (g) as 
     subsection (h) and by inserting after subsection (f) the 
     following new subsection:
       ``(g) Certain Property of AFDC Recipients Not 
     Depreciable.--No depreciation deduction shall be allowed 
     under this section (and no depreciation or amortization 
     deduction shall be allowed under any other provision of this 
     subtitle) with respect to the portion of the adjusted basis 
     of any property which is attributable to expenditures treated 
     as an offset against gross receipts under section 
     402(a)(8)(C)(i) of the Social Security Act.''.
       (3) Effective date.--
       (A) Social security act amendments.--The amendments made by 
     paragraph (1) shall apply to payments made under part A of 
     title IV of the Social Security Act (42 U.S.C. 601 et seq.) 
     on or after January 1, 1996.
       (B) Internal revenue code amendment.--The amendments made 
     by paragraph (2) shall apply to property placed in service on 
     or after January 1, 1996.
       (b) Demonstration Projects Establishing Public-Private 
     Partnerships for Technical Assistance to Self-Employed AFDC 
     Recipients.--
       (1) In general.--The Secretary shall provide for 
     demonstration projects to be conducted in States with 
     applications approved under this Act under which one or more 
     partnerships are developed between State agencies and 
     community businesses or educational institutions to provide 
     assistance to eligible participants.
       (2) Eligible participants.--For purposes of this 
     subsection, the term ``eligible participants'' means--
       (A) individuals who are receiving aid to families with 
     dependent children; and
       (B) individuals who cease to be eligible to receive such 
     aid who have been participating in a demonstration project 
     conducted by a State under this subsection.
       (3) Permissible expenditures.--Funds from any demonstration 
     project conducted under this subsection may be used to pay 
     the costs associated with developing and implementing a 
     process through which businesses or educational institutions 
     would work with the State agency to provide assistance to 
     eligible participants seeking to start or operate small 
     businesses, including--
       (A) mentoring;
       (B) training for eligible participants in administering a 
     business;
       (C) technical assistance in preparing business plans; and
       (D) technical assistance in the process of applying for 
     business loans, marketing services, and other activities 
     related to conducting such small businesses.
       (c) Demonstration Projects for Training AFDC Recipients as 
     Self-Employed Providers of Child Care Services.--
       (1) In general.--The Secretary shall provide for 
     demonstration projects to be conducted in States with 
     applications approved under this Act under which one or more 
     partnerships are developed between State agencies and 
     community businesses or educational institutions to provide 
     assistance to eligible participants in the establishment and 
     operation of child care centers in the home or in the 
     community which would provide child care services.
       (2) Eligible participants.--For purposes of this 
     subsection, the term ``eligible participants'' means--
       (A) individuals who are receiving aid to families with 
     dependent children; and
       (B) individuals who cease to be eligible to receive such 
     aid who have been participating in a demonstration project 
     conducted by a State under this subsection.
       (3) Permissible expenditures.--Funds from any demonstration 
     project conducted under this subsection may be used to pay 
     the costs associated with developing and implementing a 
     process through which businesses or educational institutions 
     would work with the State agency to provide assistance to 
     train eligible participants to provide licensed child care 
     services, including--
       (A) mentoring;
       (B) training in the provision of child care services;
       (C) training for eligible participants in administering a 
     business;
       (D) training in early childhood education;
       (E) technical assistance in preparing business plans;
       (F) technical assistance in the process of applying for 
     loans, marketing services, qualifying for Federal and State 
     programs, and other activities related to the provision of 
     child care services; and
       (G) technical assistance in obtaining a license and 
     complying with Federal, State, and local regulations 
     regarding the provision of child care.
       (d) Demonstration Project To Promote Ownership of Family-
     Owned Businesses by AFDC Recipients.--
       (1) Establishment.--The Secretary shall provide for 
     demonstration projects described in paragraph (2) in States 
     with applications approved under this Act.
       (2) Project described.--Each State conducting a 
     demonstration project under this subsection shall develop a 
     program under which the State shall--
       (A) encourage incentives for families receiving aid to 
     families with dependent children to work together as managers 
     and employees in family-owned businesses;
       (B) develop State and private partnerships for making or 
     guaranteeing small business loans, including seed money, 
     available to such families;
       (C) provide such families with technical training in small 
     business management, accounting, and bookkeeping;
       (D) regularly evaluate the status of the recipients of 
     assistance under the project; and
       (E) continue a transitional period of benefits under title 
     IV and title XIX of the Social Security Act for recipients of 
     assistance under the project until such time as the State 
     determines such family is self-sufficient.

     For purposes of this paragraph, a family-owned business may 
     include other relatives of the family receiving aid to 
     families with dependent children regardless if such relatives 
     are also receiving aid to families with dependent children.

     SEC. 106. INCREASED EMPHASIS IN JOBS PROGRAM ON MOVING PEOPLE 
                   INTO THE WORK FORCE.

       Section 481(a) of the Social Security Act (42 U.S.C. 
     681(a)) is amended by adding at the end the following new 
     sentence: ``It is further the purpose of this part to 
     encourage individuals receiving education and training to 
     enter the permanent work force by developing programs through 
     which such individuals enter the work force and then receive 
     post-employment education and training.''.

     SEC. 107. ADDITIONAL DEMONSTRATION PROJECTS TO MOVE AFDC 
                   RECIPIENTS INTO THE WORK FORCE.

       (a) Establishment.--The Secretary shall provide for 
     additional demonstration projects described in subsection (b) 
     in States with applications approved under this Act.
       (b) Project Described.--Each State conducting a 
     demonstration project under this section shall develop a 
     program or programs to better move recipients of aid to 
     families with dependent children into the work force.
  TITLE II--INITIATIVES TO STRENGTHEN FAMILIES AND BREAK THE CYCLE OF 
                           WELFARE DEPENDENCY

     SEC. 201. DEMONSTRATION PROJECTS TO ESTABLISH CHILD CENTERED 
                   PROGRAMS THROUGH CONVERSION OF CERTAIN AFDC AND 
                   JOBS PAYMENTS INTO BLOCK GRANTS.

       (a) Establishment.--The Secretary shall provide for 
     demonstration projects described in subsection (b) in States 
     with applications approved under this Act.
       (b) Project Described.--
       (1) In general.--Each State conducting a demonstration 
     project under this section shall elect to receive payments 
     under paragraph (2) in lieu of--
       (A) all payments to which the State would otherwise be 
     entitled to under section 403 of the Social Security Act (42 
     U.S.C. 603) for aid to families with dependent children under 
     part A of title IV of such Act or the job opportunities and 
     basic skills training program under part F of such title; 
     or [[Page S1230]] 
       (B) any portion of the payment described in subparagraph 
     (A) to which the State would otherwise be entitled under such 
     section for benefits (identified by the State) under part A 
     or part F of such title for populations (identified by the 
     State) who receive such benefits.
       (2) Payment.--The Secretary shall make payment under this 
     paragraph for each year of the project in an amount equal 
     to--
       (A) during fiscal year 1996--
       (i) 100 percent of the total amount to which the State was 
     entitled under section 403 of the Social Security Act (42 
     U.S.C. 603) for aid to families with dependent children under 
     part A of title IV of such Act or the job opportunities and 
     basic skills training program under part F of such title; or
       (ii) the amount to which the State was entitled to under 
     such section for those benefits and populations identified by 
     the State in paragraph (1)(B),

     for fiscal year 1995 plus the product of such amount and the 
     percentage increase in the consumer price index for all urban 
     consumers (U.S. city average) during such fiscal year; and
       (B) during each subsequent fiscal year, the amount 
     determined under this paragraph in the previous fiscal year 
     plus the product of such amount and the percentage increase 
     in such consumer price index during such previous fiscal 
     year.
       (3) Description of activities.--
       (A) In general.--Each State which is paid under paragraph 
     (2) shall expend the amount received under such paragraph and 
     the amount, if any, made available to such State under 
     section 5(b)(1)(B)(ii) for one or more of the following 
     purposes:
       (i)(I) Establish residential programs for teenage mothers 
     with dependent children where education, job training, 
     community service, or other employment is provided.
       (II) Support the pilot project described in section 433(f) 
     of the Jobs Training Partnership Act, as added by section 102 
     of this Act, to provide such services to teenage mothers with 
     dependent children.
       (ii) Establish programs to promote, expedite, and ensure 
     adoption of children, particularly neglected or abused 
     children.
       (iii) Expand child care assistance for the children of 
     needy working parents (as determined by the State).
       (iv) Establish residential schooling with appropriate 
     support services for children from needy families (as 
     determined by the State) enrolled at the request of the 
     parents of such children.
       (v) Establish other services which will be provided 
     directly to children from needy families (as determined by 
     the State).
       (vi) Implement other reforms consistent with this Act.
       (4) Community-based activities.--The Secretary shall ensure 
     that each State receiving a grant under this section--
       (A) takes adequate steps to assure the well-being of the 
     children affected by the State's receipt of the grant; and
       (B) to the fullest extent possible, utilizes the grant 
     under this section to support community-based services in 
     communities affected by the State's receipt of the grant.

     SEC. 202. DEMONSTRATION PROJECTS PROVIDING NO ADDITIONAL 
                   BENEFITS WITH RESPECT TO CHILDREN BORN WHILE A 
                   FAMILY IS RECEIVING AFDC AND ALLOWING INCREASES 
                   IN THE EARNED INCOME DISREGARD.

       (a) Establishment.--The Secretary shall provide for 
     demonstration projects described in subsection (b) in States 
     with applications approved under this Act.
       (b) Project Described.--If a child is born to a family 
     after the date on which such family begins receiving aid to 
     families with dependent children, a State conducting a 
     demonstration project under this section--
       (1) shall not take such child into account in determining 
     the need of such family for such aid; and
       (2) shall increase the amounts disregarded from earned 
     income under section 402(a)(8)(A) of the Social Security Act 
     (42 U.S.C. 602(a)(8)(A)).

     SEC. 203. DEMONSTRATION PROJECTS PROVIDING INCENTIVES TO 
                   MARRY.

       (a) Aid to Two-Parent Families.--
       (1) Establishment.--The Secretary shall provide for 
     demonstration projects described in paragraph (2) in States 
     with applications approved under this Act.
       (2) Project described.--
       (A) In general.--Each State conducting a demonstration 
     project under this subsection shall not apply the 
     requirements described in subparagraph (B) to a parent of a 
     dependent child who is married to the natural parent of such 
     child.
       (B) Requirements waived.--The requirements described in 
     this subparagraph are:
       (i) The work history requirement described in section 
     407(b)(1)(A)(iii) of the Social Security Act (42 U.S.C. 
     607(b)(1)(A)(iii)).
       (ii) The 100-hour rule under section 233.100(a)(1)(i) of 
     title 45, Code of Federal Regulations.
       (b) Increase in Stepparent Earned Income Disregard.--
       (1) Establishment.--The Secretary shall provide for 
     demonstration projects described in paragraph (2) in States 
     with applications approved under this Act.
       (2) Project described.--For purposes of making 
     determinations for any month under section 402(a)(7) of the 
     Social Security Act (42 U.S.C. 602(a)(7)), each State 
     conducting a demonstration project under this subsection 
     shall modify the income disregards provided in subparagraphs 
     (A) through (D) of section 402(a)(31) of such Act (42 U.S.C. 
     602(a)(31)) in order to decrease the amount of income 
     determined under such section with respect to a dependent 
     child's stepparent.

     SEC. 204. DEMONSTRATION PROJECTS REDUCING AFDC BENEFITS IF 
                   SCHOOL ATTENDANCE IS IRREGULAR OR PREVENTIVE 
                   HEALTH CARE FOR DEPENDENT CHILDREN IS NOT 
                   OBTAINED.

       (a) Establishment.--The Secretary shall provide for 
     demonstration projects described in subsection (b) in States 
     with applications approved under this Act.
       (b) Project Described.--
       (1) In general.--Each State conducting a demonstration 
     project under this section shall reduce the amount of aid to 
     families with dependent children received by a family if the 
     State agency determines that one or both (at the State's 
     option) of the following conditions exist:
       (A) A member of such family is attending school or 
     participating in a course of vocational or technical training 
     and such family member is absent from such school or training 
     with no excuse for more than a number of days per month 
     determined appropriate by the State.
       (B) A member of such family is a child under the age of 6 
     who has not received appropriate immunizations (as determined 
     by the State).
       (2) Limitation.--Each State conducting a demonstration 
     project under this section shall establish procedures which 
     ensure that no reduction in aid to families with dependent 
     children under paragraph (1) will endanger the welfare and 
     safety of any dependent child.

     SEC. 205. DEMONSTRATION PROJECTS TO DEVELOP COMMUNITY-BASED 
                   PROGRAMS FOR TEENAGE PREGNANCY PREVENTION AND 
                   FAMILY PLANNING

       (a) Establishment.--The Secretary shall provide for 
     demonstration projects described in subsection (b) in States 
     with applications approved under this Act.
       (b) Project Described.--Each State conducting a 
     demonstration project under this section shall develop a 
     community-based program for teenage pregnancy prevention and 
     family planning.

     SEC. 206. ADDITIONAL DEMONSTRATION PROJECTS TO STRENGTHEN 
                   FAMILIES AND BREAK THE CYCLE OF WELFARE 
                   DEPENDENCY.

       (a) Establishment.--The Secretary shall provide for 
     additional demonstration projects described in subsection (b) 
     in States with applications approved under this Act.
       (b) Project Described.--Each State conducting a 
     demonstration project under this section shall develop a 
     program or programs to strengthen families and break the 
     cycle of welfare dependency.
 TITLE III--CHANGES TO FEDERAL LAWS AND STATE INITIATIVES TO INCREASE 
               CHILD SUPPORT AND PATERNAL RESPONSIBILITY

     SEC. 301. DEMONSTRATION PROJECTS TO INCREASE PATERNITY 
                   ESTABLISHMENT.

       (a) Establishment.-- The Secretary shall provide for 
     demonstration projects described in subsection (b) in States 
     with applications approved under this Act.
       (b) Project Described.--Each State conducting a 
     demonstration project under this section shall develop a 
     program to increase paternity establishment.

     SEC. 302. DEMONSTRATION PROJECTS TO INCREASE CHILD SUPPORT 
                   COLLECTION.

       (a) Establishment.--The Secretary shall provide for 
     demonstration projects described in subsection (b) in States 
     with applications approved under this Act.
       (b) Project Described.--Each State conducting a 
     demonstration project under this section shall increase the 
     State's child support collection efforts through one or more 
     of the following methods:
       (1) Enhanced child support enforcement and collection, 
     including holding a parent accountable for supporting any 
     children of the parent's minor children.
       (2) Applying section 402(a)(8)(vi) of the Social Security 
     Act (42 U.S.C. 602(a)(8)(vi)) by substituting an amount 
     greater than $50 (to be determined by the State) for ``$50'' 
     each place such dollar amount appears.
       (3) Any other method that the State deems appropriate.
   TITLE IV--INITIATIVES TO DIVERSIFY AND IMPROVE THE PERFORMANCE OF 
                            WELFARE SERVICES

     SEC. 401. DEMONSTRATION PROJECTS FOR PROVIDING PLACEMENT OF 
                   AFDC RECIPIENTS IN PRIVATE SECTOR JOBS.

       (a) Establishment.--The Secretary shall provide for 
     demonstration projects described in subsection (b) in States 
     with applications approved under this Act.
       (b) Project Described.--Each State conducting a 
     demonstration project under this section shall--
       (1) contract with private for-profit and nonprofit groups 
     to provide any individual receiving aid to families with 
     dependent children with training, support services, and 
     placement in a private sector job which permits such 
     individual to cease receiving aid to families with dependent 
     children; and
       (2) upon employment of such individual, pay such groups a 
     negotiated portion of the total amount that such individual's 
     family [[Page S1231]] would have received over the course of 
     the year in which such individual began such employment in 
     the form of aid to families with dependent children.

     SEC. 402. DEMONSTRATION PROJECTS PROVIDING PERFORMANCE-BASED 
                   INCENTIVES FOR STATE PUBLIC WELFARE PROVIDERS.

       (a) Establishment.--The Secretary shall provide for 
     demonstration projects to establish performance-based 
     incentives for State public welfare providers in States with 
     applications described in subsection (b)(1) which are 
     approved under this Act.
       (b) Applications.--
       (1) Application described.--An application described under 
     this paragraph is an application which--
       (A) identifies the State offices or administrative units 
     which will participate in the demonstration project;
       (B) describes indicators of employee or program performance 
     based on outcome measures for--
       (i) training and education;
       (ii) job search and placement assistance;
       (iii) child support collection;
       (iv) teen pregnancy prevention programs; and
       (v) any other program objective that the State finds 
     appropriate;
       (C) describes budgetary incentives for program performance, 
     including direct financial incentives for employees where 
     appropriate;
       (D) describes a process for developing, in cooperation with 
     employees of participating offices or units, a job evaluation 
     system based on performance measures; and
       (E) describes the way in which State public welfare 
     providers, private providers, welfare clients, and members of 
     the community have been or shall be involved in the planning 
     and implementation of a performance based welfare delivery 
     system.
       (2) Technical assistance.--The Secretary shall provide a 
     State desiring to submit an application for a demonstration 
     project under this section with technical assistance in 
     preparing an application described under paragraph (1).

     SEC. 403. ELECTRONIC BENEFIT TRANSFERS.

       Section 904(d) of the Electronic Fund Transfer Act (15 
     U.S.C. 1693b(d)) is amended--
       (1) by inserting ``(1)'' after ``(d)''; and
       (2) by adding at the end the following new paragraph:
       ``(2)(A) The disclosures, protections, responsibilities, 
     and remedies created by this title or any rules, regulations, 
     or orders issued by the Board in accordance with this title, 
     do not apply to an electronic benefit transfer program 
     established under State or local law, or administered by a 
     State or local government, unless the payment under such 
     program is made directly into a consumer's account held by 
     the recipient.
       ``(B) Subparagraph (A) does not apply to employment related 
     payments, including salaries, pension, retirement, or 
     unemployment benefits established by Federal, State, or local 
     governments.
       ``(C) Nothing in subparagraph (A) alters the protections of 
     benefits established by any Federal, State, or local law, or 
     preempts the application of any State or local law.
       ``(D) For purposes of subparagraph (A), an electronic 
     benefit transfer program is a program under which a Federal, 
     State, or local government agency distributes needs-tested 
     benefits by establishing accounts to be accessed by 
     recipients electronically, such as through automated teller 
     machines, or point-of-sale terminals. A program established 
     for the purpose of enforcing the support obligations owed by 
     absent parents to their children and the custodial parents 
     with whom the children are living is not an electronic 
     benefit transfer program.''.
               TITLE V--OFFSETTING EXPENDITURE REDUCTIONS

     SEC. 501. OFFSETTING EXPENDITURE REDUCTIONS.

       (a) In General.--Subparagraph (C) of section 1001(5) of the 
     Food Security Act of 1985 (7 U.S.C. 1308(5)(C)) is amended to 
     read as follows:
       ``(C) In the case of corporations and other entities 
     included in subparagraph (B) and partnerships, the Secretary 
     shall attribute payments to natural persons in proportion to 
     their ownership interests in an entity and in any other 
     entity, or partnership, that owns or controls the entity, or 
     partnership, receiving the payments.''.
       (b) Removal of 3-Entity Rule.--Section 1001A(a)(1) of the 
     Food Security Act of 1985 (7 U.S.C. 1308-1(a)(1)) is 
     amended--
       (1) in the first sentence--
       (A) by striking ``substantial beneficial interests in more 
     than two entities'' and inserting ``a substantial beneficial 
     interest in any other entity''; and
       (B) by striking ``receive such payments as separate 
     persons'' and inserting ``receives the payments as a separate 
     person''; and
       (2) by striking the second sentence.
       (c) Effective Date.--The amendments made by this section 
     shall take effect on October 1, 1995.
                                                                    ____


               The Welfare Reforms That Work Act--Summary

       Sections 1-4.--Purpose of bill and general provisions 
     relating to state pilot projects:
       Sec. 2. States that the purpose of the bill is to promote 
     bold State-initiated welfare reforms to move welfare 
     recipients into the work force; strengthen families; break 
     the cycle of welfare dependency; increase child support 
     collection and paternal responsibility; and improve the 
     delivery of welfare services. The bill is designed to make 
     immediate State-by-State changes to the existing system while 
     establishing a process for identifying successful reform 
     approaches that can be applied nationally. The bill reflects 
     the findings that: the current welfare system is failing 
     children and contributing to the cycle of poverty and other 
     societal ills; mandatory job training and many other 
     incremental reforms tested to date have had minimal effects 
     on welfare dependency; and the States are best positioned to 
     test far-reaching reform proposals that involve some human or 
     financial risk. While this bill in no way precludes national 
     reforms such as time-limits, work requirements or requiring 
     teenage parents to live at home, it gives States the central 
     reform role and provides the authority and resources they 
     need to pursue bold and untested reforms.
       Sec. 4. Sets forth general provisions relating to 
     demonstration projects. Authorizes $150 million/yr for the 
     first two years and $125 million/yr in the following three 
     year to support pilots and evaluations of pilots, and 
     requires States to have evaluation plans approved by the 
     Department of Health and Human Services (HHS) before 
     receiving funds. A portion of these funds would support 
     innovative pilot programs not specified in the bill but 
     proposed by States. Demonstration projects could last up to 5 
     years. States would report on progress annually. As results 
     of interim and final reports become available, the Secretary 
     of HHS will submit legislation to Congress to implement 
     promising reforms nationally.


  title I.--initiatives to move welfare recipients into the work force

       From the first day that an individual applies for welfare, 
     the primary focus of welfare offices should be to help that 
     person move into the work force. A welfare grant should be 
     conditioned on responsible behavior. This Title supports 
     state reforms to move welfare recipients into the work force.
       Sec. 101. Supports State pilots to condition AFDC benefits 
     for single parents under 20 years of age with at least one 
     dependent child and no children under 6 months of age on 
     attending school or participating in a job or job training 
     program for a minimum of 35 hours per week and on living at 
     home. States would also impose a time limit (not specified) 
     on benefits, and make child care available during training 
     and work activities. Since the program would be expensive, it 
     targets those at greatest risk of long-term welfare 
     dependency--teenage mothers.
       Sec. 102. Authorizes the Secretary of HHS to establish a 
     pilot program with the Jobs Corps (a successful, residential 
     anti-poverty program for youths 16-22 years of age) targeting 
     teenage mothers on AFDC with below school-age children. The 
     pilot would include a Parents-as-Teachers type program 
     designed to teach parents how to help prepare their children 
     for school and learning.
       Sec. 103. Supports State pilots to require 30 days of 
     assisted job search or, where appropriate, substance abuse 
     treatment immediately following application for AFDC, 
     coinciding with the usual lag time between application for 
     and receipt of benefits. Applicants would have to complete 
     the assigned activities before receiving AFDC payments.
       Sec. 104. A national change to permit States to allow AFDC 
     families to save money (up to $10,000) for education and 
     training or starting a small business.
       Sec. 105. Expands on legislation introduced in 1993 with 
     Senator Dodd.
       A national change to permit States to help recipients start 
     a small business by allowing participants a one-time election 
     to fully deduct capital equipment purchases in one year;
       Supports State pilots to establish public-private 
     partnerships to provide technical assistance to self-employed 
     AFDC recipients;
       Supports State pilots to train AFDC recipients as self-
     employed providers of child care services; and
       Supports State pilot projects to promote ownership of 
     extended family-owned businesses by AFDC recipients. Would 
     provide incentives and assistance for families receiving aid 
     to families with dependent children to work together as 
     managers and employees in extended family-owned businesses.
       Sec. 106. Amends JOBS provisions to emphasize efforts to 
     move people into the work force over training and education.
       Sec. 107. Supports additional demonstration projects 
     proposed by States to move AFDC recipients into the work 
     force.


 Title II.--Initiatives to Strengthen Families and Break the Cycle of 
                           Welfare Dependency

       The current Federal welfare rules discourage family 
     unification and encourage out-of-wedlock childbearing. The 
     most serious victims of these policies are children born into 
     poor, unstable families. This Title supports State reforms 
     that promote parental responsibility and family unity. It 
     recognizes that while welfare is a privilege for parents, 
     States and the Federal government have a moral responsibility 
     to ensure the well-being of all American children.
       Sec. 201. Supports State pilots to establish child centered 
     programs through conversion of AFDC and JOBS payments into 
     block grants, plus funds available under other sections of 
     this bill. States could apply portions of funds to: (1) 
     establish residential homes for teenage mothers with 
     children, including [[Page S1232]] supporting the pilot 
     project described in section 102; (2) expand programs to 
     expedite and improve adoption of children; (3) expand child 
     care assistance for needy children of working families; (4) 
     establish supportive residential schools for children 
     enrolled at the request of their parents; (5) provide other 
     services directly to needy children; and (6) fund other 
     programs that are consistent with the purposes of the Act. 
     The Secretary of HHS, in reviewing the application, must 
     ensure that the State's program will protect the well-being 
     of affected children.
       Sec. 202. Supports State pilots to discourage welfare 
     recipients from having additional children while on welfare 
     and increase the financial reward for work. Recipients who 
     had a second child would not get additional benefits but 
     would be allowed to keep a higher portion of job earnings.
       Sec. 203. Supports State pilots to improve incentives to 
     get married. States would disregard to a greater extent the 
     second parent's earnings and work patterns in determining 
     benefits.
       Sec. 204. Supports State pilots to reduce AFDC benefits if 
     school attendance of mother or child is irregular or 
     preventive health care for the dependent children is not 
     attained.
       Sec. 205. Supports State demonstrations of innovative 
     teenage pregnancy prevention programs.
       Sec. 206. Supports additional demonstration projects 
     proposed by States to strengthen families and break the cycle 
     of welfare dependency.


 title iii.--changes to federal laws and state initiatives to increase 
          child support collection and paternal responsibility

       Increased child support enforcement and paternity 
     establishment must be part of the welfare reform. Too often 
     absent parents, typically fathers, are not held accountable 
     for their children's care. In the last Congress Senator 
     Bradley introduced and I cosponsored the comprehensive 
     Interstate Child Support Enforcement Act, which I will 
     support again this year. My bill authorizes additional State 
     efforts to improve child support collection and paternity 
     establishment.
       Sec. 301. Supports demonstration projects to increase 
     paternity establishment.
       Sec. 302. Supports demonstration projects to increase child 
     support collection, including: increasing the child support 
     disregard, from $50 to a higher level decided by the state; 
     and, holding parents accountable for child support 
     obligations of their minor children.


title iv.--initiatives to diversify and improve performance of welfare 
                                services

       Welfare offices are notoriously bureaucratic and 
     unresponsive. Under current Federal laws, they have few 
     incentives and some disincentives to improve performance. 
     This Title supports state efforts to promote competition 
     among welfare service providers and to implement performance-
     based management programs in welfare offices. It also removes 
     a current Federal impediment to the use of electronic benefit 
     transfer ``smart cards.''
       Sec. 401. Supports State pilots to provide incentives to 
     private sector, for profit and non-profit groups to place 
     welfare recipients in private sector jobs. Companies would 
     keep a portion of welfare savings as payment for successful 
     job placements.
       Sec. 402. Supports State pilots to implement performance-
     based management systems for public welfare providers.
       Sec. 403. To promote the use of electronic benefit transfer 
     (EBT) ``smart cards'' that reduce fraud and improve services, 
     this section exempts state EBT programs from the Federal 
     Reserve Board's ``Regulation E.'' Reg. E currently limits 
     cardholder liability to $50 for lost or stolen cards--a 
     policy that promotes fraud and makes EBT programs costly for 
     States.


              title v.--offsetting expenditure reductions

       Sec. 501. Eliminates the ``three-entity'' rule, reducing 
     the amount of certain Federal subsidies individual farmers 
     can receive from $250,000 to $125,000 per year.
                                 ______