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SEC. 101. WORK PARTICIPATION REQUIREMENTS.

(a) IN GENERAL- Section 407 of the Social Security Act (42 U.S.C. 607) is amended by striking all that precedes subsection (b)(3) and inserting the following:

`SEC. 407. WORK PARTICIPATION REQUIREMENTS.

`(a) PARTICIPATION RATE REQUIREMENTS- A State to which a grant is made under section 403 for a fiscal year shall achieve a minimum participation rate equal to not less than--

`(1) 50 percent for fiscal year 2003;

`(2) 55 percent for fiscal year 2004;

`(3) 60 percent for fiscal year 2005;

`(4) 65 percent for fiscal year 2006; and

`(5) 70 percent for fiscal year 2007 and each succeeding fiscal year.

`(b) CALCULATION OF PARTICIPATION RATES-

`(1) AVERAGE MONTHLY RATE- For purposes of subsection (a), the participation rate of a State for a fiscal year is the average of the participation rates of the State for each month in the fiscal year.

`(2) MONTHLY PARTICIPATION RATES; INCORPORATION OF 40-HOUR WORK WEEK STANDARD-

`(A) IN GENERAL- For purposes of paragraph (1), the participation rate of a State for a month is--

`(i) the total number of countable hours (as defined in subsection (c)) with respect to the counted families for the State for the month; divided by

`(ii) 160 multiplied by the number of counted families for the State for the month.

`(B) COUNTED FAMILIES DEFINED-

`(i) IN GENERAL- In subparagraph (A), the term `counted family' means, with respect to a State and a month, a family that includes a work-eligible individual and that receives assistance in the month under the State program funded under this part, subject to clause (ii).

`(ii) STATE OPTION TO EXCLUDE CERTAIN FAMILIES- At the option of a State, the term `counted family' shall not include--

`(I) a family in the first month for which the family is a recipient of assistance under the State program; or

`(II) a family in which the youngest child has not attained 12 months of age, except to the extent that the State, on a case-by-case basis, has elected to permit or require the family to engage in direct work activities or other activities specified by the State.

`(iii) STATE OPTION TO INCLUDE INDIVIDUALS RECEIVING ASSISTANCE UNDER A TRIBAL FAMILY ASSISTANCE PLAN OR TRIBAL WORK PROGRAM- At the option of a State, the term `counted family' may include families in the State that are receiving assistance under a tribal family assistance plan approved under section 412 or under a tribal work program to which funds are provided under this part.

`(C) WORK-ELIGIBLE INDIVIDUAL DEFINED- In this section, the term `work-eligible individual' means an individual--

`(i) who is married, or is a single head of household; and

`(ii) whose needs are (or, but for sanctions under this part that have been in effect for more than 3 months (whether or not consecutive) in the preceding 12 months or under part D, would be) included in determining the amount of cash assistance to be provided to the family under the State program funded under this part.'.

(b) REVISION OF CASELOAD REDUCTION CREDIT- Section 407(b)(3)(A)(ii) of such Act (42 U.S.C. 607(b)(3)(A)(ii)) is amended to read as follows:

`(ii) the average monthly number of families that received assistance under the State program funded under this part during--

`(I) if the fiscal year is fiscal year 2003, fiscal year 1996;

`(II) if the fiscal year is fiscal year 2004, fiscal year 1998;

`(III) if the fiscal year is fiscal year 2005, fiscal year 2001; or

`(IV) if the fiscal year is fiscal year 2006 or any succeeding fiscal year, the then 4th preceding fiscal year.'.

(c) COUNTABLE HOURS- Section 407 of such Act (42 U.S.C. 607) is amended by striking subsections (c) and (d) and inserting the following:

`(c) COUNTABLE HOURS-

`(1) DEFINITION- In subsection (b)(2), the term `countable hours' means, with respect to a family for a month, the total number of hours in the month in which any member of the family who is a work-eligible individual is engaged in a direct work activity or other activity specified by the State, subject to the other provisions of this subsection.

`(2) LIMITATIONS- Subject to such regulations as the Secretary may prescribe:

`(A) MINIMUM WEEKLY AVERAGE OF 24 HOURS OF DIRECT WORK ACTIVITIES REQUIRED- If the work-eligible individuals in a family are engaged in a direct work activity for an average total of fewer than 24 hours per week in a month, then the number of countable hours with respect to the family for the month shall be zero.

`(B) MAXIMUM WEEKLY AVERAGE OF 16 HOURS OF OTHER ACTIVITIES- An average of not more than 16 hours per week of other activities referred to in paragraph (1) may be considered countable hours in a month with respect to a family.

`(3) SPECIAL RULES- For purposes of paragraph (1):

`(A) PARTICIPATION IN QUALIFIED ACTIVITIES-

`(i) IN GENERAL- If, with the approval of the State, the work-eligible individuals in a family are engaged in 1 or more qualified activities for an average total of at least 24 hours per week in a month, then all such engagement in the month shall be considered engagement in a direct work activity, subject to clause (iii).

`(ii) QUALIFIED ACTIVITY DEFINED- The term `qualified activity' means an activity specified by the State, including a program meeting such standards and criteria as the State may specify consistent with the purposes of this part, such as--

`(I) substance abuse counseling or treatment;

`(II) rehabilitation treatment and services;

`(III) work-related education or training directed effectively at enabling the family member to work; or

`(IV) job search or job readiness assistance.

`(iii) LIMITATION- Clause (i) may not be applied to a family for more than 3 months in any period of 24 consecutive months.

`(B) SCHOOL ATTENDANCE BY TEEN HEAD OF HOUSEHOLD- A family shall be considered to be engaged in a direct work activity for an average of 40 hours per week in a month if the family includes an individual who is married or is a single head of household who has not attained 20 years of age, and the individual--

`(i) maintains satisfactory attendance at secondary school or the equivalent in the month; or

`(ii) participates in education directly related to employment for an average of at least 20 hours per week in the month.

`(d) DIRECT WORK ACTIVITIES- In this section, the term `direct work activities' means--

`(1) unsubsidized employment;

`(2) subsidized private sector employment;

`(3) subsidized public sector employment;

`(4) on-the-job training ;

`(5) supervised work experience; or

`(6) supervised community service.

(d) PENALTIES AGAINST INDIVIDUALS- Section 407(e) of such Act (42 U.S.C. 607(e)) is amended--

(1) in paragraph (1), in the matter that precedes subparagraph (A)--

(A) by striking `work' and inserting `activities'; and

(B) by inserting `and the family does not otherwise engage in activities in accordance with the self-sufficiency plan established for the family pursuant to section 408(b) for the number of hours required by the self-sufficiency plan,' before `the State shall'; and

(2) in paragraph (2)--

(A) in the matter that precedes subparagraph (A), by striking `work' and inserting `activities'; and

(B) in subparagraph (A), by striking `work' and inserting `activity'.

(e) CONFORMING AMENDMENTS-

(1) Section 404(k)(1)(D) of such Act (42 U.S.C. 604(k)(1)(D)) is amended by striking `work activities (as defined in section 407(d)' and inserting `direct work activities'.

(2) Section 407(b) of such Act (42 U.S.C. 607(b)) is amended by striking paragraphs (4) and (5).

(3) Section 407(f) of such Act (42 U.S.C. 607(f)) is amended in each of paragraphs (1) and (2) by striking `work activity described in subsection (d)' and inserting `direct work activity'.

(4) The heading of section 409(a)(14) of such Act (42 U.S.C. 609(a)(14)) is amended by inserting

`OR REFUSING TO ENGAGE IN ACTIVITIES UNDER A FAMILY SELF-SUFFICIENCY PLAN' after `WORK'.

SEC. 102. UNIVERSAL ENGAGEMENT POLICY.

(a) MODIFICATION OF STATE PLAN REQUIREMENTS- Section 402(a)(1)(A) of the Social Security Act (42 U.S.C. 602(a)(1)(A)) is amended by striking clauses (ii) and (iii) and inserting the following:

`(ii) Require a parent or caretaker receiving assistance under the program to engage in work and alternative self-sufficiency activities (as defined by the State), consistent with section 407(e)(2).

`(iii) Require families receiving assistance under the program to engage in activities in accordance with family self-sufficiency plans developed pursuant to section 408(b).'.

(b) ESTABLISHMENT OF FAMILY SELF-SUFFICIENCY PLANS- Section 408(b) of such Act (42 U.S.C. 608(b)) is amended to read as follows:

`(b) FAMILY SELF-SUFFICIENCY PLANS-

`(1) IN GENERAL- A State to which a grant is made under section 403 shall--

`(A) establish for each family receiving assistance under the State program funded under this part a self-sufficiency plan that specifies appropriate activities described in the State plan submitted pursuant to section 402, including direct work activities as appropriate designed to assist the family in achieving their maximum degree of self-sufficiency;

`(B) require, at a minimum, each member of the family who is a work eligible individual (as defined in section 407(b)(2)(C)) to participate in activities in accordance with the self-sufficiency plan;

`(C) monitor the participation of such family members in the activities and the progress of the family toward self-sufficiency;

`(D) regularly review the self-sufficiency plan; and

`(E) revise the self-sufficiency plan as appropriate.

`(2) TIMING- The State shall comply with paragraph (1) with respect to a family--

`(A) in the case of a family that, as of October 1, 2002, is not receiving assistance from the State program funded under this part, not later than 60 days after the family first receives assistance on the basis of the most recent application for the assistance; or

`(B) in the case of a family that, as of such date, is receiving the assistance, not later than 180 days after October 1, 2002.

`(3) STATE DISCRETION- A State shall have sole discretion, consistent with section 407, to define and design activities for families for purposes of this subsection, and to develop methods for monitoring and reviewing progress pursuant to this subsection.'.

(c) PENALTY FOR FAILURE TO ESTABLISH FAMILY SELF-SUFFICIENCY PLAN- Section 409(a)(3) of such Act (42 U.S.C. 609(a)(3)) is amended--

(1) in the paragraph heading, by inserting `OR ESTABLISH FAMILY SELF-SUFFICIENCY PLAN' after `RATES'; and

(2) in subparagraph (A), by inserting `or 408(b)' after `407(a)'.

SEC. 103. WORK-RELATED PERFORMANCE OBJECTIVES.

(a) STATE PLAN MODIFICATIONS- Section 402(a)(1) of the Social Security Act (42 U.S.C. 602(a)(1)) is amended--

(1) in subparagraph(A), by adding at the end the following:

`(vii) The document shall--

`(I) describe how the State will pursue ending dependence of needy parents on government benefits by promoting job preparation and work;

`(II) include specific numerical and measurable performance objectives for accomplishing the purpose so described, which shall include objectives consistent with the criteria used by the Secretary in establishing performance targets under section 403(a)(4)(B) if available; and

`(III) describe the methodology that the State will use to measure State performance in relation to each such objective.

`(viii) The document shall describe any strategy and program the State may be undertaking to address--

`(I) employment retention and advancement for recipients of assistance under the State program funded under this part, including placement into high-demand jobs;

`(II) services for struggling and noncompliant families and clients with special problems; and

`(III) program integration, including the extent to which TANF employment and training services are provided through the One-Stop Career Center system created under the Workforce Investment Act of 1998, and the extent to which former recipients of such assistance have access to additional core, intensive, or training services funded through such Act.'; and

(2) in subparagraph (B), by striking clause (iv).

(b) REPORT ON ANNUAL ACHIEVEMENT OF PERFORMANCE GOALS- Section 411 of such Act (42 U.S.C. 611) is amended by adding at the end the following:

`(c) ANNUAL REPORT ON ACHIEVEMENT OF PERFORMANCE GOALS- Beginning with fiscal year 2004, not later than 3 months after the end of each fiscal year, each eligible State shall submit to the Secretary a report on achievement and improvement during the preceding fiscal year under the numerical objectives referred to in section

402(a)(1)(A)(vii), using the measurement methodology described in such section.'.

(c) ANNUAL RANKING OF STATES- Section 413(d)(1) of such Act (42 U.S.C. 613(d)(1)) is amended by striking `long-term private sector jobs' and inserting `private sector jobs, the success of the recipients in retaining employment, the ability of the recipients to increase their wages,'.

(d) PERFORMANCE IMPROVEMENT- Section 413 of such Act (42 U.S.C. 613) is amended by adding at the end the following:

`(k) PERFORMANCE IMPROVEMENT- The Secretary, in consultation with States, shall develop uniform performance measures designed to assess the degree of effectiveness, and the degree of improvement, of State programs funded under this part in accomplishing the work-related purposes of this part.'.

SEC. 104. BONUS TO REWARD EMPLOYMENT ACHIEVEMENT.

Section 403(a)(4) of the Social Security Act (42 U.S.C. 603(a)(4)) is amended to read as follows:

`(4) BONUS TO REWARD EMPLOYMENT ACHIEVEMENT-

`(A) IN GENERAL- The Secretary shall make a grant in accordance with this paragraph to each State for each bonus year for which the State achieves or exceeds the employment performance targets established for the State under subparagraph (B) for the fiscal year that precedes the bonus year.

`(B) FORMULA FOR MEASURING STATE PERFORMANCE; EMPLOYMENT PERFORMANCE TARGETS-

`(i) Not later than 1 year after the date of the enactment of this paragraph, the Secretary, in consultation with States and the Secretary of Labor, shall develop a formula for measuring State performance with respect to employment entry, job retention, and increased earnings from employment for families receiving assistance under the State program funded under this part.

`(ii) The Secretary, in consultation with a State, shall specify annual performance targets for each State with respect to the objectives outlined in the formula developed under clause (i).

`(C) AMOUNT OF GRANT-

`(i) IN GENERAL- Subject to clause (ii) of this subparagraph, the Secretary shall determine the amount of the grant payable under this paragraph to a State for a bonus year referred to in subparagraph (A).

`(ii) LIMITATIONS-

`(I) The amount payable to a State under this paragraph for a bonus year shall not exceed 5 percent of the State family assistance grant.

`(II) The average annual total amount of grants made under this paragraph for each bonus year shall be $100,000,000.

`(III) The total amount of grants made under this paragraph for all bonus years shall equal $500,000,000.

`(D) BONUS YEAR DEFINED- In this paragraph, the term `bonus year' means each of fiscal years 2004 through 2008.

`(E) APPROPRIATION- Out of any money in the Treasury of the United States not otherwise appropriated, there are appropriated for fiscal years 2004 through 2008 $500,000,000 for grants under this paragraph.

`(F) SENSE OF THE CONGRESS- It is the sense of the Congress that in developing the bonus to reward employment achievement under this paragraph, the Secretary and States should consult with the Secretary of Labor so that measures for employment achievement under State programs funded under this part are consistent with the core indicators of performance which States report under subclauses (I) through (III) of section 136(b)(2)(A)(i) of the Workforce Investment Act of 1998.'.

TITLE II--AMENDMENTS TO THE CHILD CARE AND DEVELOPMENT BLOCK GRANT ACT OF 1990

SEC. 201. SHORT TITLE.

This title may be cited as the `Caring for Children Act of 2002'.

SEC. 202. GOALS.

Section 658A(b) of the Child Care and Development Block Grant Act of 1990 (42 U.S.C. 9801 note) is amended--

(1) in paragraph (3) by striking `encourage' and inserting `assist',

(2) in paragraph (4) by striking `and' at the end,

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