CHAPTER 7
COMPARING THE NEW (TANF) WITH THE OLD (AFDC)

The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA; PL 104-193), the welfare-reform law enacted in 1996, ended the Aid to Families with Dependent Children (AFDC) program and replaced it with the Temporary Assistance for Needy Families (TANF) program. AFDC was an entitlement program that guaranteed benefits to all recipients whose income and resources were below state-determined eligibility levels. However, state-determined tests of financial need for cash assistance were subject to federal guidelines and limits. Under TANF, a federal block-grant program, states have the authority to determine eligibility requirements and benefit levels. Unlike AFDC, TANF is not an entitlement program. Because of this, there is no requirement that states aid, or apply uniform rules to, all families determined financially needy. (See Chapter 2 for the specific provisions of TANF.)

For several years prior to the passage of the controversial welfare-reform law, critics challenged many aspects of the existing program. On the one hand, many thought that a new welfare-to-work system would merely push welfare recipients deeper into poverty because former recipients would gain employment in low-wage service-sector jobs. On the other hand, many felt that the old entitlement system did not reward hard work and that it discouraged the formation and stability of two-parent families. Others charged that the program actually harmed recipients by creating "welfare dependency." Welfare dependency refers to individuals' spending a good part of their potential working lives on welfare and passing welfare dependency from one generation to another. Tied to the issue of welfare dependency was a growing belief that the living patterns of many of the poor supposedly contributed to their condition.

PUBLIC OPINION POLLS

In November 1996, following the passage of the welfare-reform law, a Gallup poll asked Americans their opinion of the new law and its probable success or failure in improving the welfare system. The majority (54 percent) of the respondents felt it would be a success, while 31 percent thought it would be a failure, and 15 percent had no opinion.

More than five years later, in early 2002, the Democratic polling firm Lake, Snell, Perry & Associates surveyed 1,002 Americans on their perception of the success of welfare reform. In Public Views on Welfare Reform and Children in the Current Economy, the pollsters found that 10 percent described welfare reform as "very successful," 46 percent judged it "somewhat successful," 24 percent thought that it had been "not too successful," and 12 percent considered it "not successful at all." Eight percent of respondents had no opinion or did not respond.

A BRIEF BACKGROUND OF AFDC

Because the U.S. welfare system was based on the Aid to Families with Dependent Children (AFDC) program for about sixty years, it is important to understand that program before comparing TANF to it. Following this brief background, the rest of the chapter will compare the old system with the new.

Part of the Social Security Act

The Great Depression of the 1930s brought enormous suffering to many Americans. The administration of President Franklin Delano Roosevelt (1933–45) introduced a large amount of social legislation designed to ease some of that misery. The Social Security Act (August 14, 1935) was the most significant piece of legislation passed during that time. Title IV of the act was a cash grant program that would enable states to aid needy children who lacked one or both parents. Renamed Aid to Families with Dependent Children (AFDC) in the 1950s, the program became active in all fifty states, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands in the 1960s.

Helping Widows

The primary goal of Title IV of the Social Security program was to provide economic support for children whose parent (usually the father) had died, had left, or had become disabled. The AFDC program was modeled after the many state Mother's Pension funds, which had provided assistance to single mothers, mainly widows.

The AFDC program was not controversial when it was first enacted. At that time, many women did not work, and widows were generally considered unemployable and morally deserving of aid. After all, it was not their fault that their husbands had died. Furthermore, during a time when there were few jobs, legislators, having a bias toward providing jobs to male breadwinners first, considered it wiser to pay a widow a small pension than to have her take a "man's" job. Finally, most legislators believed that a mother belonged in the home, raising her children and that AFDC support helped to maintain that situation. Since that time, widows and their children have been increasingly covered under the survivor's insurance provided by the Social Security Act.

Although congressional representatives were thinking mostly of widows, benefits were granted to poor mothers who were alone for reasons other than the deaths of their spouses. They did not expect that a significant percentage of those eligible for AFDC would be single mothers other than widows. Furthermore, no one at the time could have foreseen the huge increase in the number of female-headed households that would later lead to the large growth of the AFDC program. Finally, many legislators thought paying AFDC to mothers was a better alternative than having to pay to care for the children in orphanages, where many poor mothers had been forced to put their children when they could not afford to take care of them.

Growing AFDC Caseloads Lead to Reevaluation

In 1962, 3.5 million Americans were receiving AFDC. Just five years later, in 1967, the number had grown to five million. Eligibility rules had been expanded. Poor, rural African-Americans who had often been denied benefits were moving to the cities, which added to urban poverty. Community-action groups and advocates for the needy were helping the poor get benefits for which they were eligible. Divorces were increasing, and more babies were being born outside marriage. All these factors contributed to the increase in AFDC recipients, as well as a growing concern about caseloads, their cost, and the characteristics of the recipients.

CHANGING ATTITUDES TOWARD WOMEN.

The AFDC rolls and programs grew as divorced, separated, and never-married women sought help. While these women were still generally considered unemployable and best suited to staying at home with their children, many Americans considered that the behavior that led to such women receiving AFDC should disqualify them. They believed that a mother's single status was immoral and threatening to the ideal of the traditional family of a father, mother, and children. This led legislators and many others to look upon welfare as a moral issue. Since the 1970s, the stigma once attached to divorce and separation has nearly disappeared, and those concerned about the moral issues have focused primarily on the never-married mother.

Several other factors contributed to the changing attitudes toward women on welfare. In the 1960s the number of African-American women on the AFDC rolls began to increase. In the past, discriminatory practices had often prevented their receiving the assistance to which they were legally entitled. However, as these barriers slowly fell, the number of African-American women receiving support began to grow. The eventual overrepresentation of African-American women receiving AFDC payments tended to reinforce existing racial stereotypes and to lessen support for the AFDC program.

Finally, as the number of women entering the work-force grew, it seemed increasingly difficult to justify poor women receiving AFDC payments that allowed them to stay at home with their children. The "traditional" value that the mother belonged at home with her children was beginning to erode as a greater number of women began entering the workforce. Many people reasoned that welfare recipients should not be at home when many millions of nonpoor women were out in the labor force, either supporting themselves or increasing the family income. This attitude contributed greatly to the idea sometimes known as "workfare," in which the welfare recipient is expected to do some kind of work for his or her assistance, an old idea that has reappeared throughout American history.

AFDC-UP

As of October 1, 1990, states that operated AFDC were required to offer AFDC to children in two-parent families who were needy because one or both of their parents were unemployed. This program was called AFDCUP (unemployed parent). Eligibility for AFDC-UP was limited to families in which the principal wage earner was unemployed but had a history of working. States that did not have an unemployed parent program as of September 26, 1988, could limit benefits under the AFDC-UP program to as few as six months in any thirteen-month period. AFDC-UP was intended to eliminate one of the major criticisms of the AFDC program. Previously, recipients were eligible for AFDC in many cases only when there was no father in the house. This contributed to many poor fathers' leaving home as a survival strategy in order to permit their families to get welfare support. Many observers believed this weakened the structure of numerous poor families.

After years of criticism and suggested modifications, the controversial 1996 Personal Responsibility and Work Opportunity Reconciliation Act (PL 104-193) replaced the AFDC program with the TANF block-grant program. The rest of this chapter discusses the differences between the two programs.

FEDERAL SPENDING ON AFDC AND TANF

Table 7.1 shows the federal and state shares of the money spent on AFDC and related programs (1996 and earlier), and TANF (1997 and later). Prior to the enactment of TANF, the federal government reimbursed states for a portion of AFDC, the related expenditures for Emergency Assistance (EA), and Job Opportunity and Basic Skills (JOBS). Federal funds paid from 50 to 80 percent of the state AFDC benefit costs, depending on per capita income. In addition, the federal government paid 50 percent of the administrative costs for the programs. Of the $24.5 billion spent on TANF in 2001, federal funds accounted for 60 percent ($14.8 billion), while state funds made up the remaining 40 percent ($9.8 billion).

States were required to end the AFDC program and begin TANF by July 1, 1997, but many began the new system earlier. The federal block grant for TANF ($16.5 billion per year from 1997 through 2002) is based on each state's peak level of federal expenditures for AFDC and related programs; for most, this was the 1994 level. Federal conditions apply to the federally funded TANF, such as work-participation requirements, five-year time limits, child-support assignment and distribution, and aid to only those unwed minor parents living in an adult-supervised setting.

Though TANF is called a block-grant program, it combines seven different grants, each having federal funding caps (limited maximums):

• State family-assistance grant—the $16.5 billion grant based on historic state welfare expenditures.
• Bonuses to reward decreases in illegitimacy—$20 million grant to each of the five states with the largest reduction in out-of-wedlock birth rates combined with a decline in abortion rates.
• Supplemental grants for population increases in certain states—formula grants to states with above-average population growth and below-average federal spending per poor person in AFDC and related programs.
• Bonuses to reward high-performance states—bonus funds for states meeting the goals of the TANF program.
• Welfare-to-work formula grants—matching grants to states to fund welfare-to-work initiatives targeting long-term welfare recipients, with an 85 percent pass-through of funds to localities (Job Training Partnership Act Service Delivery areas).
• Welfare-to-work competitive grants—grants competitively awarded to private industry councils and cities or counties with welfare-to-work projects.

• Contingency—fund-matching grants to states that experience high unemployment rates or increased food stamp caseloads.

Almost all of the TANF program funds the state family-assistance grant. This grant is capped at $16.5 billion for fiscal years 1997 through 2002 and was $1.5 billion more than the federal share of the AFDC and related programs in 1996.

Table 7.2 compares the federal and state shares of AFDC funding in 1995 and TANF funding in 2001. During this period, federal expenditures dropped by $1.3 billion and state spending dropped by $4.1 billion. In 2002 the federal share was $14.8 billion, a lower amount than the AFDC expenditures for each year from 1991 to 1996.

STATE SPENDING ON AFDC AND TANF

The welfare-reform law requires states to maintain at least 75 percent of their "historic state expenditures" (the state share of 1994 AFDC, EA, and JOBS expenditures). This cost-sharing requirement (in order to receive the full family-assistance grant) is called the maintenance-of-effort (MOE) level. If a state fails to meet the federal work requirements, its MOE level becomes 80 percent. Failure to meet the MOE level results in a dollar-for-dollar reduction of the state's family assistance grant. Table 7.3 provides historic state expenditures (i.e. 100 percent MOE level) for each state as well as the 75 percent and 80 percent MOE thresholds.

ELIGIBILITY AND BENEFIT PAYMENTS

Aid to Families with Dependent Children (AFDC)

Under the Aid to Families with Dependent Children program, states determined the eligibility of needy families with children. However, it had to be done within federal

guidelines. If the state determined that a family was financially needy, the family was guaranteed AFDC benefits.

The individual states defined "need" as what a person must have to exist: food, shelter, clothing, household supplies, utilities, and personal care items. States set their own benefits levels, established (within federal limitations) income and resource limits, and administered the program or supervised its administration. Eligible recipients received benefits no matter what the status of the economy, even in recessions and fiscal downturn. Eligibility for AFDC ended at a child's eighteenth birthday or, at state option, at a child's nineteenth birthday if the child was a full-time student in a secondary or technical school and was expected to complete the program before she or he reached age nineteen.

To receive AFDC payments, a family had to pass two tests. First, the family's gross income could not be greater than 185 percent of the need standard set by the state. For example, in Colorado, where the state had established a 1996 need standard of $421 per month for a three-person family, the family could earn no more than $779 per month to be eligible for AFDC. Second, the family's net income (income after taxes and certain other deductions) had to be below the state's payment standard (the amount the state pays), which in most states was below the need standard. (See Table 7.4.)

Need standards, based on 100 percent of "need," varied widely from state to state. For example, in 1996 the states of New Hampshire ($2,034), Washington ($1,252), Hawaii ($1,140), and Vermont ($1,148) believed the monthly cost of maintaining a basic life for a family of three in their respective states was much higher than did the states of Indiana ($320), Delaware ($338), Nebraska ($364), New Mexico ($389), Mississippi ($368), and the territories of the Virgin Islands ($300) and Puerto Rico ($360). The U.S. average need standard for a three-person family in 1996 was $675 a month, while the median (half were higher, half were lower) need standard among the fifty states and the District of Columbia was $645. (See Table 7.4.)

In addition, Table 7.4 shows typical 1996 maximum AFDC payments for three-member families. As in the need standards, states varied widely in typical monthly payments. In all cases, the typical maximum monthly AFDC payments were well below the 1996 federal poverty guidelines for a family of three ($12,516 annually, or $1,043 per month). The typical 1996 AFDC payments for a family of three in Alaska ($923), Hawaii ($712), New York, Suffolk County ($703), Connecticut ($636), Vermont ($650), and California ($607) were much higher than in Mississippi ($120), Alabama ($164), Tennessee ($185), Texas ($188), and Louisiana ($190). The U.S. average payment for a family of three was $399, and the median payment was $389.

Most AFDC families were eligible for and received food stamps, an important supplement to the cash assistance paid under AFDC. Table 7.4 shows the combined benefit amounts and their percentage of 1996 poverty guidelines (based on the guideline for a family of three in

the forty-eight contiguous states). Of the 50 states, Mississippi had the lowest combined benefits ($433), which amounted to 40 percent of the poverty rate ($1,082 a month). Hawaii had the highest at $1,183, or 95 percent of Hawaii's poverty rate of $1,244 per month.

In 1996, in almost four-fifths (78 percent) of the states and territories, typical payment amounts were well below the state-established need standards. Only one-fifth (22 percent) of the states/territories had typical payment amounts equal to their need standard for a three-person family. In 1980 payments were more likely to equal need standards; thirty-two states and territories (60.4 percent) had payments equal to need standards. Measured in constant (1996) dollars, the average need standard declined by 30 percent from 1970 to 1996, while the maximum benefit declined by 51 percent.

Similarly, typical monthly AFDC payments dropped sharply in real value (buying power). The typical monthly payment per family changed from $178 in 1970 to $377 in 1995. However, in constant 1995 dollars, the typical benefit fell from $704 in 1970 to $377 in 1995, a 46 percent drop. Because the average family size became smaller over this period, average benefits per person dropped less sharply (25.8 percent). (See Table 7.5.)

Temporary Assistance for Needy Families (TANF)

Under the Temporary Assistance for Needy Families program, states decide how much to aid a needy family. No federal guidelines exist for determining eligibility and no requirement mandates that states aid all needy families. Though TANF does not require states to have a need standard or a gross income limit, as did AFDC, many states have based their TANF programs in part on their earlier practices.

The maximum benefit is the amount paid to a family with no countable income. (Federal law specifies what income counts toward figuring benefits and what income, such as child support, is to be disregarded by the state.) The maximum benefit is only to be paid to those families that comply with TANF's work requirements or other program

requirements established by the state, such as parental and personal responsibility rules.

Though most states vary benefits according to family size, some eliminate or restrict benefit increases due to the birth of a new child to a recipient already receiving benefits. Instead benefits depend on family size at the time of enrollment in sixteen states. Idaho pays a flat monthly grant that is the same regardless of family size. Wisconsin pays benefits based on work activity of the recipient and not on family size. Five states provide an increase in benefits to TANF families following the birth of an additional child.

In a comparison of AFDC and TANF maximum benefits for a family of three, the majority of states did not change their maximum benefits between January 1995 and January 2000. When inflation is taken into account, the value of benefits in most states has actually declined. (See Table 7.6.)

Most families receiving TANF benefits are also eligible for food stamps. A single benefit determination is made for both cash and food assistance. Though the eligibility and benefit amounts for TANF are determined by the states, food stamp eligibility and benefit amounts are determined by federal law and are consistent in all states.

Food stamp benefits, administered by the U.S. Department of Agriculture, are not counted in determining the TANF cash benefit. However, TANF benefits are considered part of a family's countable income in determining food stamp benefits, which are reduced 30 cents for each dollar of countable income. Therefore, food stamp benefits are higher in states with lower TANF benefits and vice versa. As of January 1, 2003, combined monthly benefits for a family of three were lowest in Mississippi ($525), Puerto Rico ($532), Tennessee ($535), Texas ($546), and Arkansas ($549). Alaska ($1,157) and Hawaii ($1,012) had the highest combined benefit for a family of three. (Poverty guidelines are higher in these two states because of higher costs of living.) Other states that paid the most in benefits included Vermont ($902), California ($881 in region 1), and New York ($898 in Suffolk County). (See Table 7.7.)

HOW MANY GET AFDC AND TANF BENEFITS?

The number of AFDC recipients increased sharply in the early 1970s and then generally leveled off somewhat until 1979. During the economic downturn of 1979–81, the number of cases increased 10 percent. In 1982, following the passage of the Omnibus Budget Reconciliation Act (OBRA), the number of family participants dropped by 8 percent. The OBRA legislation included provisions that restricted AFDC eligibility.

Participation increased again in 1983 as the United States suffered its worst recession since World War II. Participation remained fairly steady but began to increase again in 1990. By 1994 the number of recipients had grown to 14.2 million, a 24 percent increase in only four years. In 1996, the last year for AFDC, the number of recipients had dropped to 12.6 million from the record high in 1994. The number of AFDC families also increased between 1990 and 1994, from nearly four million to more than five million (again, a record high). In 1996 AFDC families numbered close to 4.5 million. (See Table 7.8.)

Although both the number of recipients and the number of cases (families) increased most years until 1994, the number of recipients per case declined significantly after the late 1960s. The number of recipients per case is figured by dividing the number of recipients by the number of families (cases). In 1969 the average AFDC family size was four recipients. By 1973 the number had dropped to 3.5. By 1980 the average number of recipients per family was 2.9, and in 1996 the average number per family was 2.8. (See Table 7.8.) Family size declined further under TANF, to 2.5 recipients per family in 2002.

Following the enactment of the welfare-reform law, caseloads for families dropped by 59.1 percent from 1994 to 2002. In thirty-six states and territories, caseloads fell by 50 percent or more. Seven states showed caseload reductions of more than 70 percent: Wyoming (91.2 percent), Idaho (83.9 percent), Illinois (80 percent), Florida (76.1 percent), Wisconsin (75.4 percent), Louisiana (72.7 percent), and Colorado (70.9 percent). (See Table 7.9.)

California continued to have the largest TANF caseload, with a monthly average of 501,000 in 2001. New York was second with a monthly average of 258,000 families. Together California and New York account for one-third of total TANF families and one-half of total TANF cash payments.

CHARACTERISTICS OF AFDC/TANF RECIPIENTS

Children make up the majority of AFDC/TANF recipients. The proportion of children receiving benefits remained relatively steady from 1980 to 1999. In 1980,

69.1 percent of AFDC recipients were children. Of the 5.1 million Americans who received TANF support in 2002, about 3.8 million (74.5 percent) were children. Meanwhile, the percentage of all children on AFDC/TANF fell from 11.5 percent in 1980 to 5.3 percent in 2002. (See Table 7.8.)

While one of the major criticisms of the AFDC program was that welfare mothers had many children in order to get additional benefits, the average AFDC family had only two children in 1980. Between 1980 and 2002 the number of children in the average AFDC/TANF family changed very little; in 2002 there were on average 1.9 children per family.

In 1999 most children receiving TANF benefits were children of the head of household in TANF families; 8 percent were grandchildren of the head of the household. In cases where only the child received TANF benefits, 63 percent lived with their parents and 23 percent with grandparents.

In 2001 African-American families were 39 percent of the TANF cases; white families, 30.1 percent; Hispanics, 26 percent; Asians, 2.1 percent; and Native Americans, 1.3 percent. This represents a decline in the percentage of white recipients (down from 38.9 percent in 1992), Asian recipients (down from 2.8 percent) and Native American recipients (down from 1.4 percent) and an increase in the percentage of African-American recipients (up from 37.2 percent) and Hispanic recipients (up from 17.8 percent). (See Table 7.10.)

The proportions of Asian or Native American children receiving benefits remained relatively stable from 1992 to 2001. During the same period, the percentage of all Hispanic child beneficiaries increased from 18.7 percent to 27.8 percent, and the proportion of African-American child beneficiaries

increased from 38.5 percent to 40.8 percent. The percentage of all white child beneficiaries dropped from 33.9 percent to 25.6 percent. (See Table 7.10.)

The majority of adults receiving TANF benefits between October 2000 and September 2001 had a high school education or less. Almost half (49 percent) had completed twelve years of schooling, and only 3.1 percent had education beyond high school. (See Table 7.11.)

The percentage of AFDC and TANF adults who were employed increased dramatically between 1990 and 2001, from 7 percent in 1990 to 26.7 percent in the period between October 2000 and September 2001.

AFDC recipients were likely to participate in one or more other programs. TANF recipients are also eligible for other types of assistance. Of the almost 4.6 million families on AFDC in 1996, 89.3 percent received food stamps. In 2001, 80.8 percent of TANF families received food stamps. Almost all families (99.6 percent) received Medicaid. TANF families received an average of $351.26 in cash assistance per month between October 2000 and September 2001. Family income from all other sources averaged $592.87 per month. (See Table 7.11). (For a more complete discussion of participation of TANF recipients in multiple programs, see Chapter 6.)

Although the largest expenditure for most families is for shelter, only about 20 percent of TANF families

received subsidized housing assistance in 2001. The availability of public housing and rent subsidies varies significantly by state/territory, with Guam, Illinois, Iowa, Utah, the Virgin Islands, and Virginia providing no housing assistance, and Connecticut, the District of Columbia, Massachusetts, Montana, North Dakota, Puerto Rico, Rhode Island, and South Dakota providing assistance to more than 30 percent of their TANF families (See Table 7.12.) See Chapter 8 for more information on federal housing.

LENGTH OF TIME ON WELFARE

A number of studies have investigated the length of time AFDC recipients received assistance. While most

recipients left the program after a fairly short period, many returned later, potentially cycling in and out of welfare a number of times. Therefore, researchers measured not just the length of a given spell but also the total time of all spells in an individual's lifetime.

An analysis of AFDC recipients by the U.S. Department of Health and Human Services revealed that almost half of AFDC recipients beginning any given spell received assistance for two or fewer years; 19 percent had welfare spells longer than seven years. For persons beginning their first AFDC spell, 36.5 percent spent less than two years on AFDC in their lifetimes, and 29 percent spent eight or more years.

In "Targeting Would-Be Long-Term Recipients of AFDC" (Princeton, NJ: Mathematica Policy Research, 1986), David T. Ellwood found that marital status was the single most powerful predictor of long-term welfare receipt. Single women receiving welfare averaged nine years on AFDC and represented 40 percent of those receiving welfare benefits at any one time. Thirty-nine percent were predicted to receive AFDC for ten years or more.

Under TANF, most states have imposed a lifetime limit of five years for the receipt of benefits for adults, although states are allowed to provide benefits for longer to hardship cases or victims of domestic violence. Some states have set limits lower than sixty

months. Families in which there is no adult head of household are exempt from time limits. New studies of the duration of time on welfare of adult TANF recipients continue to be undertaken.

TEEN MOTHERS AND WELFARE

TANF contains provisions to encourage two-parent families and reduce out-of-wedlock births. Several provisions deal specifically with the reduction of births among teen mothers. According to Rebecca A. Maynard, in Kids Having Kids: A Robin Hood Foundation Special Report on the Costs of Adolescent Childbearing (New York, NY: Robin Hood Foundation, 1996), 70 percent of teen mothers received welfare and approximately 40 percent stayed on AFDC for five years or more. Teen mothers tend to have less education and fewer job skills. The Family Planning Councils of America (FPCA) estimates that approximately 80 percent of children whose unmarried mother did not graduate from high school live in poverty.

The birth rate for unmarried teens is high, although it declined in the 1990s. (See Figure 7.1.) Between 1991 and 2002 the birth rate for fifteen to seventeen year olds fell by about a third (from over thirty births per 1,000 unmarried women to just over twenty).

Births to teenagers represent a concern to society because teen mothers tend to have less education and less ability to support and care for their children. In addition, according to Maynard, in Kids Having Kids, babies born to teen mothers are:

• More likely to be born prematurely and to be of low birth weight.
• At risk for health problems, lower cognitive skills, and behavioral problems.
• Less likely to grow up in homes with their fathers, possibly causing emotional as well as financial problems.
• At greater risk to be abused.

According to "Kids Having Kids," a report published in 1996 by the Robin Hood Foundation in New York City, teen parents under age seventeen cost the United States close to $7 billion per year in direct costs such as public assistance, health care, and foster care, and indirect costs such as loss of tax revenues. These negative consequences motivated Congress to include provisions in the welfare-reform legislation to encourage the reduction of the incidence of births to unmarried women, with emphasis on teenagers.

To receive TANF benefits, states were required to submit plans detailing their efforts to reduce out-of-wedlock births, especially among teenagers. In order to be eligible for TANF benefits, unmarried minor parents are required to remain in high school or its equivalent as well as to live in an adult-supervised setting. One provision in the law allows for the creation of second-chance homes for teen parents and their children, a type of home that already existed in some states. These homes require that all residents either enroll in school or participate in a job-training program. They also provide parenting and life skills classes as well as counseling and support services.

A performance bonus that is separate from the TANF block grant rewards states for reductions in births outside of marriage combined with a decline in the abortion rate. Grant money is also available for states to implement abstinence-only education programs. In addition, the welfare-reform law directs the Department of Health and Human Services to provide a strategy to prevent unmarried teen pregnancies and to ensure that 25 percent of the communities in the United States implement a teen pregnancy prevention program. These measures supplement already-existing federal and state efforts. Five states were awarded bonuses of $100 million in 1999 and 2000, and three states were awarded a total of $75 million in 2001 for successfully reducing the percentage of out-of-wedlock births.