An Overview of Section 104 - Detailed Analysis

In this analysis, the eleven subsections of Section 104 are arranged under eight subject headings.
References in brackets are to specific subsections of Section 104. The full text of Section 104 is
printed in the Appendix.

1. Programs Covered

Section 104 applies most notably to state programs implemented under the Temporary
Assistance for Needy Families (TANF) program, which is the replacement for Aid to Families with
Dependent Children (AFDC) [see subsection (a)(2)(A)].3 TANF replaces AFDC with a framework in
which states receive federal funds through block grants to design and operate their own welfare
programs, consistent with certain federal rules, including Section 104. TANF involves more than
just certifying eligibility for, and disbursing, welfare checks. The intent is that states will develop a
range of programs to assist the poor and needy to become self-sufficient. The goals of TANF are
well suited to extensive involvement by nongovernmental organizations, including churches and
other faith-based organizations, that have been successful in moving people from dependence to
self-reliance. Section 104 also applies to the food stamp, Medicaid, and Supplemental Security
Income (SSI) programs to the extent that these can be implemented by the states through
purchase-or-service contracts or voucher arrangements with nongovernmental service providers.4
(Contracts and vouchers are discussed in the next part.)

Under the Charitable Choice provision, states may contract with, or develop a voucher system
involving, both secular and faith-based organizations that provide a wide range of services, such
as:

Work. Faith-based providers or neighborhood groups could provide subsidized jobs or
community service positions, on-the-job training, job-search help, job-readiness preparation,
job-skills training, vocational education training, or GED programs.

Food. Churches, synagogues, or other religious institutions could provide subsidized meals,
operate food pantries, or offer nutrition, shopping, or food-budgeting help.

Maternity Homes. For unmarried minor mothers and expectant mothers who cannot remain with
their parents, states may collaborate with nongovernmental groups to provide maternity homes,
adult-supervised residential care, second-chance homes, or other suitable living arrangements.

Medical and Health Services. Faith-based providers and other nongovernmental organizations
could provide abstinence education, drug- and alcohol-treatment programs, vocational
rehabilitation services, or health clinics.

2. Financial Arrangements with Service Providers

Section 104 authorizes two types of governmental financial arrangements with independent
providers [see subsection (a)(1)]. One is purchase-of-service contracts by which government pays
providers to deliver specified services. Such contracts involve governmental provision of
assistance to beneficiaries by means of the government dealing "directly" with providers. The other
type of financial arrangement consists of government-provided certificates, vouchers, or other
forms of disbursement which a needy person may redeem for services at whichever eligible
provider he or she may choose. In this second case, government is providing assistance to
beneficiaries by dealing "indirectly" with independent providers and directly with beneficiaries.

In the case of TANF, states are authorized to use both "direct" and "indirect" means of paying for
services provided by independent organizations [subsection (a)(2)(A)]. For other programs subject
to Section 104, the provisions of the respective programs determine whether states are authorized
to use "direct," "indirect," or both forms of financial relations [subsection (a)(2)(B)].2.

3. Inclusion of Faith-based Providers

Section 104 leaves it up to the states whether to involve independent-sector providers of social
services or to provide all services through government agencies [subsection (a)(1)]. However, if a
state elects to involve any independent-sector providers, then it may not exclude religious providers
from consideration. Section 104 requires that in selecting providers the state may not discriminate
on account of a potential provider's religious character [subsection (c)].

4. Rights of Faith-based Providers

A primary purpose of Section 104 is to permit states to involve faith-based providers of social
services "on the same basis as any other nongovernmental provider" and "without impairing [their]
religious character" [subsection (b)]. Section 104 also protects the religious freedom of
beneficiaries, but does so in a manner that does not harm the religious character of faith-based
organizations.

A series of specific protections are established for faith-based organizations:

Institutional Autonomy and Control of Mission. Section 104 explicitly protects the autonomy of
any faith-based provider carrying out programs funded under PRWOR by providing that it "retain[s]
its independence from Federal, State, and local governments," including its "control over the
definition, development, practice, and expression of its religious beliefs" [subsection (d)( 1)]. This
language emphasizes that a participating faith-based provider does not become a "state actor" nor
relinquish its religious autonomy.

Control of Governance. Faith-based providers may not be required to alter their form of internal
governance to be eligible for participation [subsection (d)(2)]. The structural form of religious
organizations is often dictated by religious doctrine, and ecclesiastical polity is here protected.5
Similarly, states may not require a faith-based provider to change its officers or directors on the
grounds that they do not reflect a particular religious, ethnic, racial, or gender mix, nor may states
exclude a faith-based provider from eligibility on such grounds.

Maintenance of Religious Environment. No state may require a faith-based provider, in order to
be eligible to participate, to remove from its property "religious art, icons, scripture, or other
symbols" [subsection (d )( 2)1. Participating faith-based providers need not strip their facilities of
crosses, Stars of David, scriptural quotations, religious apparel, or other visual signs of religious
commitment.

Control of Employment Policy. Section 104 affirms the right of faith-based providers to utilize
religious standards in the terms and conditions of their personnel policies [subsection (f)]. Title VII
of the Civil Rights Act of 1964 established an exemption for religious organizations from the
general ban against religious discrimination in hiring.6 That exemption is here explicitly affirmed
for faith-based organizations participating in federally funded welfare programs covered under
Section 104.

Faith-based organizations remain subject to other applicable nondiscrimination laws. The
anti-discrimination requirements of federal civil-rights laws regarding age, sex, disability, race,
color, and national origin remain in force.7 In addition, state and local anti-discrimination laws are
still applicable and are unaffected by Section 104, unless they infringe the religious autonomy of
providers secured by the Section.8

Limited Audits. Section 104 further secures the autonomy of participating faith-based
organizations by giving them the opportunity to limit the scope of fiscal audits. If they choose, they
may establish separate accounts for the receipt of federal monies under these programs,
segregating such funds from other income, especially nongovernmental funds. If they do so, then
only the accounts that receive or disburse federal funds are subject to audit [subsection (h)]. It
would be prudent for providers to take advantage of this option and not commingle private
donations and grants with government funds.

5. Restrictions on Funding

a. Purchase-of-Service Contracts

One goal of Charitable Choice is to involve faith-based providers in delivering welfare services
"without impairing the religious character of such organizations" [subsection (b)]. Section 104
explicitly provides that a participating faith-based organization shall retain its independence from
Federal, State, and local governments," including maintaining its "control over the definition,
development, practice, and expression of its religious beliefs" [subsection (d)(1)].

In enacting Section 104, the object of Congress was the public purpose of helping the poor and
needy, not the advancement of religion. Section 104 anticipates and intends that states will
contract with faith-based providers that manifest a distinct religious identity on an equal basis with
other independent providers. However, what states are purchasing through contracts with
faith-based providers are services which fulfill the public purpose of PRWOR to aid the needy in
specific ways.

When a state makes a purchase-of-service contract with a faith-based provider, none of the federal
funds transferred to the provider may be "expended for sectarian worship, instruction, or
proselytization" [subsection (j)]. This prohibition reflects the constitutional requirement that
government may not establish religion and ensures that federal funds are not used in a manner
that suggests that the government is endorsing the religion of a faith-based organization. The
prohibition should not be construed to require that a faith-based provider diminish or eliminate its
religious character or its religiously inspired way of providing services. The key is that government
funds the religious organization in order to provide services that satisfy the public secular purpose
of PRWOR.

Charitable Choice implements the governmental neutrality mandated by the Constitution by
requiring that a state treat equally all providers, faith-based or secular, if it decides to turn to the
independent sector to provide services to the needy.9 It protects the religious liberty of
beneficiaries, some of whom may object to receiving services from a faith-based provider, by
ensuring that they have a choice of a different provider [subsection (e), discussed below].

In deciding whether to contract with a faith-based provider to deliver a service, a state should focus
not on the religion of the provider but rather on its record or prospects of successfully providing the
authorized welfare service. As with any other provider, the chief concern of the state is whether the
program of the faith-based organization fulfills the public purpose of helping the poor and needy.
10

b. Voucher Funds

PRWOR funds that are indirectly received by faith-based organizations by means of vouchers,
certificates, and other redeemable disbursements are explicitly not subjected to the restriction
against being expended for worship or proselytization [subsection (j)].

The key difference is that the flow of federal funds to a faith-based provider is direct in the case of
contracts and indirect when it is due to a beneficiary's decision to redeem a voucher with such a
provider.11 An explicit prohibition on expending federal funds for sectarian religious activities is not
needed with vouchers because there cannot be even the appearance of a government
establishment of religion when it is the beneficiary who, free to choose among providers, decides
to redeem a voucher at a faith-based provider.12

A state, of course, will only authorize a faith-based provider to redeem vouchers if that organization
provides authorized services to the needy. The absence of the subsection (j) prohibition does not
change the public purpose to be served by the use of vouchers provided to beneficiaries.

6. Rights of Beneficiaries

Section 104 secures the religious rights of beneficiaries primarily by ensuring a choice of
providers. When a state enables a beneficiary to secure benefits by means of a voucher, certificate,
or another form of indirect payment, then it is the disbursement mechanism itself that secures to
beneficiaries the opportunity to choose between different service providers.

In the case of purchase-of-service contracts, Section 104 specifies that a beneficiary who objects
to receiving social services from a religious provider has the right to receive services from another
provider [subsection (e)].13 The state must ensure that the alternative assistance is of no lesser
value, that it is available within a reasonable period of time, and that the alternative provider is
accessible to the beneficiary. States should ensure that beneficiaries are aware of the range of
providers and of their right to receive services from a non-religious provider.

Section 104 further protects the religious rights of beneficiaries by requiring that religious providers
may not discriminate against beneficiaries "on the basis of religion, a religious belief, or refusal to
actively participate in a religious practice" [subsection (g)]. This requirement applies to all
faith-based providers, whether they redeem vouchers or have contracted to provide services. Thus,
a provider may not exclude from its programs beneficiaries belonging to other denominations,
churches, or religions. A provider cannot require a beneficiary to adopt a particular religious creed
or tenet of faith. A provider cannot deny services to a beneficiary who refuses to participate in a
treatment activity that is religious.

Beneficiaries who do not wish to participate in religious activities may not disrupt such activities,
impede other beneficiaries from taking part in them, or demand that the faith-based organization
refrain from engaging in such activities. Faith-based providers have the right to offer such activities.
Disruption may be construed as an objection to the religious nature of the provider, and the
beneficiary should be directed to an alternative source of services.

7. Preemption of State Law

All federal block-grant funds subject to Section 104 must be administered in accord with the
principles of Charitable Choice. If a state commingles such federal funds with state funds, then all
of the funds must be administered in accord with the principles of Section 104. This follows from
the Supremacy Clause of the U.S. Constitution, which provides that rights granted by
congressional action preempt any state or local laws to the contrary.

Section 104 includes an option for states with constitutions that restrict the expenditure of public
funds at faith-based organizations [subsection (k)]. In such a case, state authorities have the
option of segregating the federal funds from state funds, administering the former in accord with
the requirements of Section 104 while administering the state monies in accord with the state's
own more restrictive laws.14 However, Congress intended to discourage segregation of funds.15
The option exists only to accommodate states with restrictive constitutions. The intent is to
maximize the equal opportunity for faith-based organizations to participate in federally funded
welfare programs under PRWOR, and not to enable restrictive state rules to be used to disallow
participation by religious providers.

8. Legal Action to Secure Rights

Both providers and beneficiaries who believe that their Section 104 rights have been violated may
bring a civil lawsuit asking the court to order the alleged governmental violator to comply with the
requirements of Section 104 [subsection (i)]. State courts have exclusive jurisdiction.16