Charitable Choice and Faith-Based Organizations

CRS Report for Congress
Charitable Choice Rules
and Faith-Based Organizations
Updated July 12, 2006
Joe Richardson
Domestic Social Policy Division


Congressional Research Service ˜ The Library of Congress

Charitable Choice Rules
and Faith-Based Organizations
Summary
President Bush’s Administration has advanced a “Charitable Choice” agenda
aimed at expanding the ability of faith-based organizations to provide federally
funded social services and encouraging states to do likewise. Charitable Choice rules
are intended to ensure that faith-based organizations participate more fully in
federally funded social service programs and offer services without abandoning their
religious character or infringing on the religious freedom of applicant/recipients.
They deal with issues such as faith-based organizations’ ability to remain
independent of governmental controls, to discriminate in their hiring practices, and
to conduct “inherently religious” activities while at the same time providing
government-funded services.
Prior to the Administration’s initiative, Congress enacted Charitable Choice
rules for Temporary Assistance for Needy Families (TANF), the Community
Services Block Grant (CSBG), and substance abuse prevention and treatment
programs. But, after Congress failed to enact Charitable Choice rules for more
programs, the Bush Administration issued an executive order (EO 13279) that
directed that most rules covered under the Charitable Choice rubric be followed by
a wide range of social service programs, unless otherwise directed by law. In
addition, the Administration and Congress have provided money for a range of
specific grants/projects in which faith-based organizations play a substantial role,
including the Compassion Capital Fund.
Charitable Choice rules represent a shift in how government treats religious
organizations applying for social service grants. They are intended to deny aid for
“inherently religious” activities — as opposed to the preexisting policy that generally
barred assistance to “pervasively sectarian” religious organizations.
For Congress, there is a continuing debate over whether to accept the existing
situation — where the executive order has effectively put in place most, but not all,
Charitable Choice principles for the bulk of social service programs, except where
barred by law — or challenge it, or enact the provisions of the executive order (and
possibly added rules) and cover more programs. Proponents of congressional action
are concerned that an executive order may not be “enough” to support the policy in
the longer term and would like to see some rules and programs not included in the
order added. Opponents of the executive order or writing Charitable Choice rules
into law are primarily worried over their implications for hiring discrimination and
the prospect that religious content may be infused into federally funded programs.
Most recently, pending changes to the Workforce Investment Act, the Older
Americans Act, the Community Services Block Grant, and Head Start law would
affect participation by faith-based organizations. In addition, a proposal to place into
law the terms of EO13279 has been advanced, and TANF Charitable Choice rules
have been extended through FY2010.
This report will be updated as events warrant.



Contents
What Are Charitable Choice Rules?...............................2
The Original 1996 Charitable Choice Rules.....................2
Community Services Block Grant (CSBG)
Charitable Choice Rules................................3
Substance Abuse Prevention and Treatment Program
Charitable Choice Rules................................4
H.R. 7 Charitable Choice Rules...............................4
EO 13279 Charitable Choice Principles/Regulations:
Expansion of Charitable Choice by Executive Order..........5
What Is the “Faith-Based Initiative”?..............................7
The Components of the Initiative.............................7
Funding .................................................8
How Do Charitable Choice Rules Differ
from Preexisting Practices?.................................10
Why Are Charitable Choice Rules Controversial?...................11
Are Charitable Choice Rules Being Litigated?......................13
What Are States Doing?........................................14
2005 Gulf Coast Hurricane Rules................................16
Additional Resources..........................................16
Recent Legislative Developments................................16
TANF ..................................................16
Workforce Investment Act (WIA)............................16
Older Americans Act (OAA)................................17
Community Services Block Grants (CSBG)....................17
Head Start...............................................17
Putting Executive Order 13279 into Law......................18



Charitable Choice Rules
and Faith-Based Organizations
“Charitable Choice” refers to a set of rules, established by legislation or
regulation, intended to enhance the ability of faith-based organizations to provide
federally funded services without impairing their religious character or the religious
freedom of beneficiaries/applicants.1 These rules have been strongly supported by
the Bush Administration. At present, only three federal program areas have specific
Charitable Choice rules stipulated in law: Temporary Assistance for Needy Families
(TANF), the Community Services Block Grant (CSBG), and substance abuse
prevention and treatment grants administered by the Substance Abuse and Mental
Health Services Administration (SAMHSA) under the Public Health Service Act.
Perhaps the broadest example of Charitable Choice rules are those established,
primarily for TANF, by the 1996 welfare reform law (P.L. 104-193).
After the 107th Congress took up, but did not approve, legislation to extend
Charitable Choice rules to cover many more programs (Title II of H.R. 7, the
Charitable Choice Expansion Act of 2001), the Bush Administration issued an
executive order that directed that most, but not all, rules covered under the Charitable
Choice rubric be followed by a wide range of social service programs — Executive
Order (EO) 13279, December 12, 2002. Attempts to expand the coverage of
Charitable Choice rules by law also failed in the 108th Congress.
The 109th Congress faces a continuing debate over whether to accept the existing
situation — where the EO has by regulation effectively put in place most, but not all,
Charitable Choice principles for the bulk of social service programs, except where
barred by law — or challenge it, or enact the provisions of the EO (and possibly other
rules it does not include) and cover more programs than now are covered by law.
Other items of related interest in the Charitable Choice arena include the role
of states/localities (which actually administer the majority of federal social service
grant money), litigation over the constitutionality of Charitable Choice rules (whether
set by law or regulation), and the status of, and funding for, the Compassion Capital
Fund (a program providing direct grants to faith- and community-based organizations
to help them expand their services).


1 Throughout this report, the terms “religious organization” and “faith-based organization”
are used interchangeably. When asked for a definition of “faith-based” by one commentor
on its Charitable Choice regulations, the Department of Health and Human Services (HHS)
said that it used the terms “religious organization” and “faith-based organization”
interchangeably and added that neither the U.S. Constitution nor relevant Supreme Court
precedents contain a comprehensive definition of religion or religious organization.

What Are Charitable Choice Rules?
Charitable Choice rules are aimed at ensuring that faith-based organizations can
participate in federally funded social service programs “on the same footing” as other
nongovernmental providers and can offer services without abandoning their religious
character or infringing on the religious freedom of recipients.2 So far, they have
taken five different forms: (1) the original rules established by the 1996 welfare
reform law; (2) the rules enacted for the CSBG in 1998; (3) the rules legislated for
Public Health Service Act substance abuse prevention and treatment programs in
2000; (4) the provisions in H.R. 7 of the 107th Congress; and (5) the principles set
forth (and implemented by regulation) under the Bush Administration’s EO 13279.
The Original 1996 Charitable Choice Rules. Charitable Choice rules
were first laid out in the 1996 welfare reform law — Section 104 of the Personal
Responsibility and Work Opportunity Reconciliation Act, P.L. 104-193 — and cover
all states’ TANF activities, and, to a lesser degree (i.e., to the limited extent services
are provided), states’ administration of food stamps, Medicaid, and the Supplemental
Security Income (SSI) program. These rules, like the rest of the law governing
TANF (and certain other) programs, were set to expire on September 30, 2002;
however, a series of temporary extensions that were enacted kept them (and the rest
of TANF law) in force. On February 8, 2006, P.L. 109-171 (the Deficit Reduction
Act of 2005) was enacted. This law extends the life of TANF law (including its
Charitable Choice provisions) through FY2010.
The provisions of the 1996 law are probably the most far-ranging set of rules so
far set out and have been a basic model for Charitable Choice provisions since
enacted, proposed, or established by regulation. The law’s major Charitable Choice
provision bars government from discriminating against an organization applying to
provide publicly funded services on the basis of its religious character, so long as the
program is implemented in a manner consistent with the Establishment (of religion)
Clause of the First Amendment to the U.S. Constitution. Moreover, it stipulates the
following rules with regard to faith-based organizations applying for or receiving
public funds and applicants for/recipients of services —
!Religious organizations remain independent of government and
retain control over the definition, development, practice, and
expression of their religious belief.
!Government may not require religious organizations to change their
form of internal governance or to remove religious art and other
symbols as a condition of participation.


2 For details as to how the various Charitable Choice laws, proposals, and regulations differ
see (1) CRS Report RL31043, Public Aid to Faith-Based Organizations (Charitable Choice)th
in the 107 Congress: Background and Selected Issues, by David Ackerman; (2) CRS
Report RL31042, Charitable Choice: House-Passed Version of H.R. 7 Compared with
Existing Charitable Choice Laws, by Vee Burke; (3) CRS Report RS21924, Charitable
Choice: Expansion by Executive Action, by Joe Richardson; and (4) CRS Report RL31030,
Comparison of Proposed Charitable Choice Act of 2001 with Current Charitable Choice
Law, by Vee Burke.

!Faith-based organizations may discriminate on religious grounds in
their employment practices, regardless of their receipt of public
funds.
!Like other grantees/contractors, religious organizations’ use of
public funds is subject to audit — except that, when government
funds are segregated, only those moneys are subject to audit.
!Any party seeking to enforce its rights under Charitable Choice
provisions of law can assert a civil court action for relief against the
entity/agency allegedly committing a violation.
!No funds provided directly (as opposed to indirectly through
vouchers) may be spent for sectarian worship, instruction, or
proselytiz ation.3
!Federal Charitable Choice rules are not to be construed as
preempting any provision of a state’s constitution or laws regarding
aid to or through religious organizations.
!Faith-based organizations may not discriminate against beneficiaries
or potential beneficiaries on the basis of religion or religious belief.
!Government must provide accessible alternative providers where
individuals have an objection to the religious character of the
organization/institution from which they receive or would receive
services.
Community Services Block Grant (CSBG) Charitable Choice Rules.
In 1998, the 105th Congress enacted Charitable Choice language covering the CSBG
— Section 201 of P.L. 105-285. This law generally follows the provisions of the
1996 welfare reform act, but does not include its authority for civil actions for relief
in cases of violations, its stipulation that federal Charitable Choice rules do not
preempt state constitutions/laws, its requirement for alternative providers, or its
prohibition on discrimination against applicants/recipients based on religion or
religious beliefs.
Efforts to reauthorize the CSBG during the 108th Congress failed, in part due to
disagreement over provisions that would have amended the program’s Charitable
Choice rules to prohibit grantee discrimination in their hiring practices and mandated
that organizations separate their religious services/activities from programs using
CSBG funds. In the 109th Congress, a House bill providing for reauthorization (H.R.
341) is pending. It includes a relatively noncontroversial provision that would bar
CSBG grantees from discriminating against those seeking services based on religionth
or religious beliefs. However, as with the 108 Congress, it is likely that
amendments dealing with hiring practices and separation of religious4


services/activities will be offered if reauthorization legislation is pursued.
3 Provision of indirect aid in the form of vouchers means that a faith-based organization that
redeems a voucher may avoid this prohibition.
4 For more information on the CSBG and legislation affecting it, see CRS Report RL32872,
Community Services Block Grant (CSBG): Funding and Reauthorization, by Karen Spar and
Garrine P. Laney.

Substance Abuse Prevention and Treatment Program Charitable
Choice Rules. In 2000, the 106th Congress enacted two measures adding
Charitable Choice amendments to the law governing substance abuse prevention and
treatment services under Titles V and XIX of the Public Health Service Act —
Section 3305 of P.L. 106-310 and Section 1 of P.L. 106-554. These provisions
generally track those of the 1996 welfare reform law, except that it is unclear to what
extent their federal Charitable Choice rules could preempt state constitutions/laws
and to what degree basic Public Health Service Act employment nondiscrimination
provisions apply.
H.R. 7 Charitable Choice Rules. On July 19, 2001, the House passed the
Charitable Choice Expansion Act of 2001, Title II of H.R. 7 of the 107th Congress,
but it died in the Senate. This is the most recent comprehensive congressional action
on Charitable Choice rules.5
As with earlier laws, this measure generally followed the Charitable Choice
provisions of the 1996 welfare reform act, with some significant differences. It
would have extended coverage of Charitable Choice rules to a list of new programs:
e.g., juvenile delinquency/justice programs, crime prevention and aid to crime
victims’ and offenders’ families, housing programs, Workforce Investment Act
(WIA) programs, Older Americans Act (OAA) programs, programs dealing with
domestic violence, hunger relief activities, assistance for students obtaining
secondary school diploma equivalents and activities relating to outside-of-school-
hours programs. But it included no language regarding federal preemption of state
constitutions/laws and added provisions (1) stating that organizations getting direct
public funds must offer any religious activities on a voluntary basis and separate from
the assisted program and (2) when consistent with the purpose of a covered program,
allowing the federal government to require that some or all of the funds in a given
program be in the form of indirect aid like vouchers (aimed at permitting a faith-
based organization redeeming vouchers to avoid the general prohibition on using
funds for worship, instruction, or proselytization).


5 In other action, the House voted to eliminate provisions in Head Start law and the
Workforce Investment Act (WIA) that forbid religious service providers to discriminate on
religious grounds in their employment practices; votes were taken on May 8, 2003 (H.R.
1261, WIA) and July 25, 2003 (H.R. 2210, Head Start). On Apr. 3, 2003, the Senate passed
S. 476 (the CARE Act) without provisions that Senator Santorum had sought for “equal
treatment” of religious organizations as providers of federally funded social services. To
win passage of the CARE Act, which contained provisions that would have expanded tax
incentives for charitable giving, increased funding for the Social Services Block Grant, and
established new tax-credit-financed Individual Development Accounts, Senator Santorum
agreed to a compromise version that added technical assistance (a “Compassion Capital
Fund”) and funding for maternity group homes, but lacked an equal treatment (Charitable
Choice) title. On Sept. 17, 2003, a new version of H.R. 7, entitled the Charitable Giving
Act, was passed by the House. It provided for tax incentives for charitable donations, would
have authorized Compassion Capital Fund grants and funding for maternity group homes,
and would have extended expiring provisions for Individual Development Accounts.
However, it did not include Charitable Choice language or more funding for the Social
Services Block Grant.

EO 13279 Charitable Choice Principles/Regulations: Expansion of
Charitable Choice by Executive Order. After the Senate failed to approve theth
House-passed bill (H.R. 7 of the 107 Congress) to extend Charitable Choice rules
on new terms to a wider range of programs, President Bush issued an Executive
Order (EO) directing most Cabinet departments and the Agency for International
Development to adopt what he identified as Charitable Choice “principles” and
“policymaking criteria” in the regulations governing their social service programs,
to the extent permitted by law. With some notable exceptions, these principles/
criteria (and the regulations implementing them) largely follow the rules set out in
H.R. 7 as passed by the House in 2001.
The EO says that faith-based organizations “should be eligible” to compete for
federal financial assistance used to support social service programs without impairing
their independence, autonomy, and religious expression/character, and that no
organization “should be discriminated against” as a provider of federally funded
social services on the basis of religion or religious belief. Covered “social service
programs” are defined broadly to include all programs administered by the federal
government, or by a state/local government using federal financial assistance, that
provide services directed at reducing poverty, improving opportunities for low-
income children, revitalizing low-income communities, helping low-income families6
and individuals to become self-sufficient, or otherwise aiding people in need.
The principles set forth in EO13279 bar faith-based organizations from using
direct federal financial assistance to support any “inherently religious” activity (such
as worship, religious instruction, or proselytization) and specify that organizations
that engage in inherently religious activities must offer them to beneficiaries
separately in time and location from programs/services supported with direct federal
funds. Participation in religious activities must be voluntary for service recipients.
On the other hand, faith-based organizations may use their facilities to provide
federally funded social services without removing or altering religious symbols or
changing religious terms in their name, select board members on a religious basis,
and include religious references in mission statements and other chartering/governing
documents. As with most earlier Charitable Choice initiatives, the EO forbids a
religious organization from discriminating against beneficiaries or potential
beneficiaries on the basis of religion, religious belief, or lack of religious belief.


6 Examples given in the EO include child care services, protective services for children and
adults, foster care and adoption services, services to meet special needs, transportation
assistance, job training and employment services, information/referral/counseling services,
services related to soup kitchens and food banks, health support services, literacy promotion
activities, mentoring services to prevent and treat juvenile delinquency and substance abuse,
services related to domestic violence, and housing assistance. Expansion under the EO is
covered with more detail in (1) The Expanding Administrative Presidency: George W. Bush
and the Faith-Based Initiative, a report authored by Anne Farris, Richard P. Nathan, and
David J. Wright and issued under by the Roundtable on Religion and Social Welfare Policy
(see the Additional Resources section of this report for the Roundtable’s website) and (2)
CRS Report RS21924, Charitable Choice: Expansion by Executive Action, by Joe
Richardson.

Absent from EO 13279 are three major provisions of H.R. 7 as passed by the
House in 2001: (1) authority to convert assistance into vouchers (or some other form
of indirect aid),7 (2) a provision dealing with a faith-based organization’s right to
discriminate on religious grounds in their employment practices,8 and (3) language
requiring that alternative service providers be furnished for beneficiaries objecting
to the religious character of a provider. Also missing from EO 13279 are provisions
in the original 1996 welfare reform law dealing with (1) audits, (2) enforcement
through court action, and (3) preemption of state/local laws.9
To carry out the principles set out by the Executive Order, the Departments of
Agriculture, Education, Health and Human Services, Housing and Urban
Development, Justice, Labor, and Veterans Affairs, as well as the Agency for
International Development have issued a series of regulations. Information about
these regulations, as well as certain other policy changes are available at
[ h ttp://www.whitehouse.gov/government/fbci/regulatory-changes.html] .
Finally, EO 13279 also amended an existing executive order (EO 11246, dating
from 1965) concerning employment discrimination to specify that religious
organizations that contract to provide goods or services directly to the federal
government or participate in federally assisted construction contracts can
discriminate on religious grounds in their employment practices, and the Labor
Department has followed up with a regulatory revision.10


7 As noted earlier, indirect aid may be used for religious activities because organizations
would receive funds only as a result of private choices of beneficiaries.
8 The EO does not include language on employment discrimination. But two publications
of the White House Office of Faith-Based and Community Initiatives make clear the
Administration’s stance that, barring contrary provisions of law (like the laws governing the
Head Start program and Workforce Investment Act programs), faith-based organizations
receiving federal funds are to be allowed to discriminate in employment — (1) Protecting
the Civil Rights and Religious Liberty of Faith-Based Organizations: Why Religious Hiring
Rights Must Be Preserved and (2) Guidance for Faith-Based and Community Organizations
on Partnering with the Federal Government. Moreover, in the SAMSHA’s final rule
implementing the EO, the Bush Administration held that the Public Health Service Act’s
general nondiscrimination hiring rules are “inapplicable” to religious organizations
demonstrating that they would substantially burden their exercise of religion. The
Administration maintained that the Religious Freedom Restoration Act of 1993 (P.L. 103-
141) forbids the government from substantially burdening a person’s exercise of religion
unless this is the least restrictive way of furthering a compelling government interest. See
the Federal Register of September 30, 2003 (68 FR 56429-56449).
9 Although the EO contains no provisions as to audits, a publication of the White House
Office of Faith-Based and Community Initiatives — Guidance to Faith-Based and
Community Organizations on Partnering with the Federal Government — notes that, like
the rule in the 1996 law, audits should be limited to federal funds (when segregated).
10 EO 11246 applies to a “contract for the construction, rehabilitation, alteration, conversion,
extension, or repair of buildings, highways, or other improvements to real property.” It is
applicable to all federally assisted construction contracts that arise in the course of carrying
out a “federal grant, contract, loan, insurance, or guarantee....” Also, see CRS Report
RL32195, Charitable Choice: Legal and Constitutional Issues, by Angie Welborn.

What Is the “Faith-Based Initiative”?
The Components of the Initiative. Soon after taking office in 2001,
President Bush put forward an agenda to “enlist, equip, empower, and expand the
heroic works of faith-based and community groups across America.” It included an
expansion of tax incentives for charitable giving — covered in a separate report
(CRS Report RS21144, Tax Incentives for Charity: An Overview of Legislative
Proposals, by Jane G. Gravelle) — and extension of Charitable Choice rules (see
the discussion of Charitable Choice rules above) to most federally supported social
service programs. Of particular concern was assurance that smaller, congregation-
based organizations would be helped in competing for social services grant money.
As already discussed, Congress has not enacted an expansion of Charitable Choice
rules beyond those put in law in 1996, 1998, and 2000, but the Administration has
put in place most Charitable Choice rules for many federally supported social service
programs through an executive order (EO 13279) and accompanying regulations.
As part of his faith-based initiative, the President also has established a White
House Office of Faith-Based and Community Initiatives (EO 13199) and has set up
Centers for Faith-Based and Community Initiatives in 11 agencies: the Departments
of Agriculture, Commerce, Education, Health and Human Services, Homeland
Security, Housing and Urban Development, Justice, Labor, and Veterans Affairs, as
well as the Small Business Administration and the Administration for International
Development (EO 13198, EO 13199, EO 13280, EO 13342, EO13397).11 These
offices have the role of ensuring that faith-based and community organizations have
improved access to social services program funding.
A fourth component of the initiative is the Compassion Capital Fund, a
program operated by the Department of Health and Human Services’ Administration
for Children and Families that provides direct grants to faith- and community-based
organizations to help them expand their services. This program is covered in a
separate report, CRS Report RS21844, The Compassion Capital Fund: Brief Facts
and Current Developments, by Joe Richardson.
In addition to the Compassion Capital Fund, the initiative also is perceived to
encompass a number of specific projects in which faith-based organizations play (or
are expected to play) a substantial role: e.g., the SAMSHA’s “Access to Recovery”
grants for substance abuse treatment, a matching grant program to mentor children
of prisoners, a prisoner pre-release pilot project, a maternity group home program,
a pilot project to increase participation of faith-based organizations in community
development programs, responsible fatherhood projects, and “anti-gang” efforts
directed at youth. And several agencies have used pre-existing authorities to fashion
initiatives that are primarily focused on faith-based and community organizations:
e.g., the National Nonprofit Humanitarian Initiative run by the Agriculture
Department’s Farm Service Agency, a Labor Department competitive grant pilot
project for “grassroots” faith-based and community organizations supporting existing
job training/placement efforts and providing post-job-placement services.


11 The Department of Homeland Security center for faith-based and community initiatives
is the most recently created (E0 13397; March 7, 2006).

A sixth component of the President’s initiative is encouraging states to adopt
Charitable Choice principles in their grant-making policies, both for federal funds
they administer and state money. Under EO 13279, federal agencies with oversight
of social service funds that states actually administer are changing the federal rules
governing the use of these funds to ensure that Charitable Choice principles and
policies are followed. A later section of this report — entitled What Are States
Doing? — covers state activity.
Finally, the President’s initiative includes a continuing series of (1) regional
conferences giving a general overview of the initiative, information about the federal
funding process and available funding opportunities, and requirements on recipients
of federal funding and (2) targeted workshops offering federal grant-writing
instruction. In both cases, the events encompass background on the basic elements
of Charitable Choice rules and are supported, and often sponsored, by the federal
agencies responsible for making grants. The White House Office of Faith-Based and
Community Initiatives also plays a significant role in many of these meetings and has
sponsored national conferences on opportunities for faith-based (and community-
based) organizations.
Funding. There is no “pot” of federal money specifically for social services
provided by faith-based (and community) organizations under the President’s
initiative. The closest approximation is funding provided by the Compassion Capital
Fund, which helps faith-based and community organizations build their ability to tap
funding sources and provide services (but does not make grants for the actual
provision of services) — see CRS Report RS21844, The Compassion Capital Fund:
Brief Facts and Current Developments, by Joe Richardson.
Instead, funding for faith-based organizations providing social services can
come (1) directly through federally administered (generally, competitive) grants
under regular social service programs, (2) indirectly as sub-grants from federal
agency awards, or (3) through federal formula grant programs where the award
decisions as to how to spend federal money are made by states or localities. A
complete picture of the extent to which faith-based organizations are receiving social
service dollars with the advent of the President’s initiative is not available. However,
information gathered by two sources — the White House Office of Faith-Based and
Community Initiatives and the Roundtable on Religion and Social Welfare Policy —
provides a sketch of how they fare in obtaining direct federally administered funding.
According to the White House Office of Faith-Based and Community
Initiatives, in FY2005, a total of $2.15 billion in funding for faith-based
organizations was provided under 130 federally administered competitive grant
programs for social services run by six departments (Agriculture, Education, Health
and Human Services, Housing and Urban Development, Justice, and Labor) and 28
“program areas” at the Agency for International Development (AID). This12
represented 11% of the $19.7 billion spent by the surveyed programs. The three


12 Further details on federal competitive grant spending through faith-based organizations
are available at the website for the White House Office of Faith-Based and Community
(continued...)

agencies having the largest pools of funding available for competitive grant programs
for which faith-based organizations would be eligible reported 7% (the Department
of Health and Human Services, 67 programs), 14% (the AID, 28 program areas), and
24% (the Department of Housing and Urban Development, 11 programs). The White
House office also reports that direct federal support for faith-based organizations has
increased over the past few years.
For the five agencies providing information for FY2003 through FY2005 (the
Departments of Education, Health and Human Services, Housing and Urban
Development, Justice, and Labor), money going to faith-based organizations went up
from 8.1% of the total available under the surveyed programs in FY2003 to 10.3%
in FY2005. And the dollar amount they received rose from $1.17 billion in FY2003
to $1.4 billion in FY2005, even as the total available shrunk somewhat from $14.5
billion in FY2003 to $13.7 billion in FY2005.13
When the two agencies for which data are available only for FY2004 and
FY2005 (the Agriculture Department and the Agency for International Development)
are included in the White House figures, a similar trend is evident. Total (seven-
agency) funding for faith-based organizations went from 10.3% ($2 billion) in
FY2004 to 10.9% ($2.15 billion) in FY2005; however, total dollars available also
increased by about the same amount, from $19.5 billion (FY2004) to $19.7 billion
(FY2005).
On the other hand, a separate study done under the auspices of the Roundtable
on Religion and Social Welfare Policy presents a somewhat different picture.14 It
indicates that faith-based organizations (1) received a steady 17%-18% of funding
under the 99 programs or “program areas” (in nine agencies) it tracked over the
FY2002-FY2004 period and (2) saw their share of grants rise from 11.6% to 12.8%.
However, while the number of participating faith-based organizations and grants to


12 (...continued)
Initiatives [http://www.whitehouse.gov/government/fbci], under the heading Data
Collection. Spending figures do not include sub-grants through intermediary organizations
or grants of federal funds administered by states and localities. As such, they are
underestimates.
13 Another way to look at the degree of support for faith-based organizations is the portion
of grants (not dollars) they receive; this is especially important because many are
congregation-based groups running small projects (specifically targeted for help under the
faith-based initiative). For example, according to the White House office, the number of
faith-based organization grants given by surveyed programs in the five agencies with
FY2003-FY2005 figures went up markedly, from 1,634 (FY2003) to 2,250 (FY2005).
14 This study — Getting a Piece of the Pie: Federal Grants to Faith-Based Social Service
Organizations — is available through the Roundtable’s website (see this report’s section on
additional resources). Primarily because this study attempts to track grant-making policy
over the three-year time period (and, for example, does not include grants under initiatives
begun after 2002), it is substantially less comprehensive than the year-by-year “snapshots”
represented by the data used by the White House Office of Faith-Based and Community
Initiatives discussed above. For example, in FY2004, it covers over 20% fewer
programs/program areas and a “pool” of grant awards totaling only 20% ($3.5 billion) of the
White House office total available funding estimate ($19.5 billion).

these organizations grew (14% and 28%, respectively), the actual dollar amount
received declined by 6.6% (from $670 million to $626 million). This study also
notes that, in the 2002-2004 period, grants to the faith-based organizations it
surveyed shifted to larger organizations (as opposed to smaller, congregation-based
groups).
How Do Charitable Choice Rules
Differ from Preexisting Practices?
Charitable Choice rules represent a shift in how the government treats faith-
based organizations applying for social service grants. The pre-existing general
policy often barred aid to “pervasively sectarian” organizations (unless they
segregated their government-provided funding or government-supported services, or
provided a service/benefit that was effectively secular in nature). Under Charitable
Choice rules, aid is denied for “inherently religious” activities, like worship, religious
instruction, or proselytization (unless they are indirectly funded through vouchers and
the like). Examples of this change include allowing religious organizations and staff
to receive government funds (as long as they separate their religious activities from
the provision of government-funded services in time and place), permission to use
government money for construction projects (to the extent money is devoted to non-
religious purposes), allowing religious symbols and mission statements, and authority
for discrimination in employment practices.
Under pre-Charitable Choice practices, many faith-based organizations
participated in federally supported programs. Federal grants typically provided that
private or nonprofit entities were eligible to participate, including religious and other
private organizations. For example, religious organizations have and continue to run
major portions of Head Start, housing, Older Americans Act, employment and
training, emergency feeding/housing (like soup kitchens and homeless housing
initiatives), and school meal programs, as well as activities financed through Child
Care and Development Block Grants and Social Services Block Grants. Such entities
as religiously-sponsored schools and local organizations, Catholic Charities USA,
Lutheran Services in America, the Salvation Army, United Jewish Communities,
Habitat for Humanity, and numerous other religiously affiliated or religiously
sponsored organizations have long participated in publicly funded social service
programs. These groups often are incorporated separately from their sponsoring
religious organization and have tax-exempt status under Section 501(c)(3) of the
Internal Revenue Code; they also tend to be relatively large organizations.
However, interpretations and applications of the Establishment (of religion)
Clause of the First Amendment to the U.S. Constitution, as well as policy decisions
by administrators, generally required programs operated by religious groups that
receive direct federal funding to be essentially secular in nature if they wish to15
receive federal funds. Religious symbols and art have sometimes had to be
removed; religious worship, instruction, proselytizing have been barred as a
condition for receipt of government money; and construction financed with federal


15 For more information, see CRS Report RL32195, Charitable Choice: Legal and
Constitutional Issues, by Angie Welborn.

money has been denied to faith-based groups. Moreover, faith-based entities in
which religion is a pervasive element in all that they do, have (until recently) been
found to be “pervasively sectarian” and, in many cases, forbidden government aid.
This view was put forward by the Clinton Administration in statements
following on or accompanying signing the 1996 welfare reform law, the 1998 CSBG
amendments, and the two substance abuse prevention and treatment program
measures enacted in 2000 mentioned above. These statements typically noted that
it was the Administration’s position that it would be “unconstitutional if and to the
extent it [the Charitable Choice provision] were construed to permit governmental
funding of pervasively sectarian organizations, as the term has been defined by the
courts” and construed the law in question as “forbidding the funding of pervasively
sectarian organizations and as permitting Federal, State, and local governments
involved in disbursing ... funds to take into account the structure and operations of
a religious organization in determining whether such an organization is pervasively
sect ari an.”16
Why Are Charitable Choice Rules Controversial?
Charitable Choice rules have effectively overturned long-standing practice
governing how faith-based organizations are treated when applying for government
assistance. In effect, Charitable Choice rules change the ground rules for faith-based
organizations applying for government grants; they are to be judged by whether their
“activities”are government-funded rather than by their religious “character.”
While government aid provided through religious organizations, in itself, is not
a major point of controversy, the conditions attached to this assistance are.17 Many
of the specifics of Charitable Choice rules and how they are implemented are of
concern to opponents. They include the lifting of limits on hiring discrimination by
grantees, the possibility of a clash between Charitable Choice rules and state/local
laws and state constitutional provisions, the potential for conversion of benefits to
indirect (e.g., voucher) aid in order to avoid prohibitions against spending on
religious activities, rules regarding alternative service providers where
applicants/recipients object because of the religious character of the program, and
provisions that may allow recipient faith-based organizations to infuse religious


16 See (1) comments accompanying the Clinton Administration’s “Proposed Correcting
Amendments to P.L. 104-193, the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (PRWORA), (2) comments in President Clinton’s “Statement
on Signing the Community Opportunities, Accountability, and Training and Educational
Services Act of 1998 [P.L. 105-285], October 27, 1998,” (3) comments in President
Clinton’s “Statement on Signing the Children’s Health Act of 2000 [P.L. 106-310], October
17, 2000,” and (4) comments in President Clinton’s “Statement on Signing the Consolidated
Appropriations Act, FY2001 [P.L. 106-554], December 21, 2000.” It is important to note
that court interpretations relating to the “pervasively sectarian” test (and other related issues)
have been changing; see CRS Report RL32195, Charitable Choice: Legal and
Constitutional Issues, by Angie Welborn.
17 Charitable Choice opponents have not objected to the array of government aid through
faith-based organizations pre-dating Charitable Choice rules.

content (not necessarily “worship, religious instruction, or proselytization,” which
are denied funding) into their federally funded social service programs (e.g., the
potential weakness of audit mechanisms and the vagueness, or potentially narrow
interpretation, of provisions relating to religious content in the services provided).18
Charitable Choice supporters claim that:
!Pre-Charitable-Choice rules effectively discriminated against
religious organizations, particularly smaller “congregation-based”
projects/organiz ations;
!Pre-Charitable-Choice rules often interfered with what supporters
see as religious organizations’ right (under Title VII of the Civil
Rights Act) to use religious criteria in their hiring practices, limiting
their access to federal aid;19
!Faith-based programs can attract volunteer time; staff have a “sense
of mission” that inspires those they serve; these organizations often
help in ways typical government aid cannot (providing love and
friendship, as well as services, meals, training, and guidance);
!Charitable Choice rules have been written to protect constitutional
values regarding the practice of religion and the religious liberty of
beneficiaries;
!Charitable Choice rules protect the religious character of faith-based
service providers and help ensure that their strengths and
commitment can be brought into play in providing services.
Others maintain that:
!Charitable Choice rules may lead to the use of government funds to
promote religious practices or beliefs given the difficulty of
separating religious activities/content from government-supported
services;
!Since money is fungible, government funds given for a secular
purpose could indirectly help fund a faith-based organization’s
religious purposes, undermining governmental neutrality toward
religion;


18 As to the final concern about the ability to separate religious activities/content and
services being funded, the recent settlement of a case (American Civil Liberties Union of
Massachusetts v. Leavitt, see the following section on Are Charitable Choice Rules Being
Litigated?) has provided what some see as a potential model guidance for grantees. It
includes a list of required “safeguards” on how to allocate costs and separate programs,
presentations by site and time, religious materials and advertisements, and any invitation to
a religious program from federally funded activities.
19 For more information on the “Title VII” employment discrimination debate, see (1) CRS
Report RL32195, Charitable Choice: Legal and Constitutional Issues, by Angie Welborn,
and (2) the March 2, 2005, House floor debate over H.R. 27 (amendments to the Workforce
Investment Act).

!Increased participation in social service programs may, if overall
funding does not rise, lead to reduced support for secular providers
with proven track records.
!Charitable Choice rules can require the government to decide what
is a legitimate “religion,” and what constitutes “worship”
“preaching,” and “proselytizing”;
!Expansion of direct grants to religious groups could make churches
dependent on government, eroding their mission and tending to
secularize them; and
!Charitable Choice rules promote government-funded discrimination
by allowing religious organizations to hire and fire on the basis of
religion using federal dollars.20
Are Charitable Choice Rules Being Litigated?21
Yes. According to two recent publications by the Roundtable on Religion and
Social Welfare Policy — Partnerships Between Government and Faith-Based
Organizations: The State of the Law - 2004 and The State of the Law 2005: Legal
Developments Affecting Partnerships Between Government and Faith-Based
Organizations 22 — several significant court cases relating to Charitable Choice rules
are of particular interest.
!In Locke v. Davey, the U.S. Supreme Court upheld states’ authority
to maintain their own policies regarding church-state separation.
!In American Jewish Congress v. Corporation for National and
Community Service, the U.S. District Court for the District of
Columbia held unconstitutional various religion-related aspects of the
AmeriCorps Educational Award program. However, the U.S. Court
of Appeals for the District of Columbia Circuit reversed this
decision. The Court of Appeals’ primary holding was that
AmeriCorps rules are not unconstitutional in that individuals who
fulfill their AmeriCorps service at religious institutions and opt to
teach religion may count only time spent on non-religious activities
toward their counted service hours, are prohibited from wearing the
AmeriCorps logo when doing so, and have made a personal choice
to do so.
!In Freedom from Religion Foundation, Inc. (and others) v. Jim
Towey, Director of the White House Office of Faith-Based and
Community Initiatives et al., a U.S. District Court dismissed virtually
all of the claims challenging the general purport of federal Charitable


20 See footnote 19 above.
21 See also (1) CRS Report RL32195, Charitable Choice: Legal and Constitutional Issues,
by Angie Welborn, and (2) CRS Report RL31043, Public Aid to Faith-Based Organizationsth
(Charitable Choice) in the 107 Congress: Background and Selected Legal Issues, by
David Ackerman.
22 These reports and updates on current cases are available at the Roundtable’s website,
[ h t t p : / / www.r e l i gi ona nds oc i a l pol i c y.or g] .

Choice rules. However, the U.S. Court of Appeals for this Circuit
has reinstated significant portions of the lawsuit.
!In Lown (and others) v. the Salvation Army, Inc,; Commissioner,
New York City Administration for Children’s Services (and others)
a U.S. District Court was asked to decide the extent to which civil
rights laws or the Constitution preclude government financing of
faith-based organizations that prefer co-religionists in their
employment practices. The Court dismissed significant portions of
the plaintiffs’ case, but other major issues are still pending.
!In Americans United for Separation of Church and State v. Prison
Fellowship Ministries (and others), a U.S. District Court is called on
to decide on a challenge to constitutionality of a program that uses
religious means to prepare prisoners to return to society as
“productive and law-abiding citizens.”
!In Moeller v. Bradford County, a U.S. District Court is asked to rule
on a challenge that a program run under a government grant to a
correctional facility is unconstitutionally suffused with religious
activities and employs only those of its faith in violation of
constitutional and statutory prohibitions.
!In ACLU of Massachusetts v. Leavitt (Secretary of Health and Human
Services), a settlement was reached regarding federal grants to Silver
Ring Thing for a sexual abstinence education program, which, it was
alleged, improperly included religious messages and proselytization.
While grants to Silver Ring Thing have been terminated, the
settlement contains a significant and detailed list of required
“safeguards” that the Department of Health and Human Services
crafted for use in bringing the program into compliance. This list is
viewed by some as a useful “blueprint” for grantee compliance with
some of the limits inherent in Charitable Choice rules.23
What Are States Doing?
Part of Bush Administration’s Charitable Choice agenda is an effort to encourage
states to pursue Charitable Choice initiatives and open up grants they administer with
federal (and their own) funds to faith-based programs. State and local governments
using federal financial assistance for social services programs are supposed to adhere
to the principles of EO 13279, to the extent the regulations governing their use of
federal money have been changed to reflect it. Moreover, more than 30 states have
set up offices or liaisons for faith-based and community initiatives that perform
outreach and other functions similar to those carried out by the various federal offices
for faith-based and community initiatives.24


23 The terms of the settlement, including the appended list of “safeguards required,” can be
found at [http://www.religionandsocialpolicy.org/docs/legal/cases/SRT-HHS-
ACLU_Settleme nt%202-24-06.pdf].
24 State contacts (and federal offices) may be identified through the White House faith-based
and community initiative website [http://www.whitehouse.gov/government/fbci/].

State actions are important because the majority of social service assistance is
administered through state agencies that receive federal support, not directly by
federal agencies. However, a number of states (and localities) have rules built into
their constitution (e.g., so-called “Blaine Amendments”), or set up by law, that may
limit their ability to expand the use of faith-based organizations in providing services
— e.g., employment discrimination provisions, limits on giving funds to religious
organizations.25 And others may be reluctant to revise long-standing policies, be
unsure of how to make changes, or already have substantial faith-based organization
participation. To date, there is only a limited amount of information about how
extensively states are pursuing a policy of expanded grant-making to faith-based
groups.
A first-time-ever survey of a very small sample of state and locally administered
federal programs released by the White House Office of Faith-Based and Community
Initiatives shows relatively small percentages of FY2004 funding going to faith-based
organizations, when compared to federally administered grant programs: 5.5% in the
Department of Justice Juvenile Justice Part IIB program, 2.9% in the Education
Department’s 21st Century Community Learning Centers program, 2.3% in the Labor
Department’s Workforce Investment Act (WIA) Youth programs, 2.2% under the
Department of Housing and Urban Development’s Community Development Block
Grant, and 1.7% in the Agriculture Department’s Special Supplemental Nutrition
Program for Women, Infants, and Children (the WIC program).26 On the other hand,
in a sixth surveyed program, the Child Care and Development Fund (which typically
provides benefits through vouchers under which recipients choose their provider), a
representative survey found that faith-based organizations comprise 33% of
participating child care centers.
A separate study published by the Roundtable on Religion and Social Policy —
Scanning the Policy Environment for Faith-Based Social Services in the United
States: What Has Changed Since 2002, Results of a 50-State Study — describes a
notable (but minimally quantifiable) increase in state-level activity related to
provision of social services by faith-based organizations. For example, it found that
the majority of states have enacted legislation with reference to faith-based
organizations over the last two years, that there has been a large increase in the
number of states with offices or liaisons for faith-based organizations, that more than
half of the states engaged in significant administrative activities to affect government
partnerships with faith-based social service providers, and that more than 20% of
states had provided capacity-building or start-up grants to make it easier for faith-
based organizations to compete for grants and contracts. This report, and other
information sources (including some state case studies), is available at the website for
the Roundtable on Religion and Social Policy (see the section on Additional


25 For more information, see The State of the Law — 2005: Legal Developments Affecting
Partnerships Between Government and Faith-Based Organizations. This report is available
at the website of the Roundtable on Religion and Social Welfare Policy
[ h t t p : / / www.r e l i gi ona nds oc i a l pol i c y.or g] .
26 See the earlier discussion of funding for the faith-based initiative for the higher federally
administered program percentages.

Resources below) under the headings Comprehensive Resource Pages, Faith-Based
Initiatives and the States.
2005 Gulf Coast Hurricane Rules
Virtually all federally supported programs dealing with the 2005 Gulf Coast
hurricanes followed their regular rules regarding help delivered through faith-based
organizations (including recent regulatory changes opening up participation to faith-
based organizations). However, subject to some controversy, the Federal Emergency
Management Agency (FEMA) changed its prior rules so that faith-based organizations
would be eligible for reimbursement for a wide array of costs — basic provisions (like
food, water, blankets), facilities (rent, expenses for operation, modification, and
repair), and services (medical care, counseling, and security). Relatively
comprehensive information (and links to other websites) relating to faith-based
organizations and disaster response (including reference to a review of legal issues
arising from the involvement of faith-based organizations in federal disaster response
efforts) can be found at the website for the Roundtable on Religion and Social Policy
(see the section on Additional Resources below) under the headings Comprehensive
Resource Pages, Religious Organizations in Disaster Response.
Additional Resources
Two important organizations closely follow issues relating to government and
faith-based organizations and Charitable Choice and regularly update their websites:
(1) the White House Office of Faith-Based and Community Initiatives at27
[http://www.whitehouse.gov/government/fbci/] and (2) the Roundtable on Religion
and Social Welfare Policy at [http://www.religionandsocialpolicy.org].
Recent Legislative Developments
TANF. The Deficit Reduction Act of 2005 (P.L. 109-171; enacted February 8,
2006) extends the life of the law governing Temporary Assistance for Needy Families
(TANF), including its Charitable Choice provisions, discussed in this report’s section
entitled “The Original 1996 Charitable Choice Rules, through FY2010.”
Workforce Investment Act (WIA).28 WIA reauthorization legislation is
pending. On March 2, 2005, the House passed the Job Training Improvement Act
(H.R. 27; H.Rept. 109-9). This bill governs various activities conducted and funded
under the WIA. Among other amendments, it would give grantees that are religious
organizations an exemption from the WIA’s general rule barring providers from
discriminating in their employee hiring practices on religious grounds (similar to
provisions in the House-passed WIA amendments of 2003 (H.R. 1261). A House


27 This contact includes links to the offices of faith-based and community initiatives in
individual federal agencies and states.
28 For more information on the WIA and WIA reauthorization, see CRS Report RL32778,
Workforce Investment Act of 1998 (WIA): Reauthorization of Job Training Programs in theth

109 Congress, by Ann Lordeman.



floor amendment to delete this amendment, and thereby retain the WIA employment
discrimination rule covering religious groups that are grantees, was defeated. The
Senate version of the WIA legislation, H.R. 27, as passed by the Senate on June 29,

2006 (incorporating the text of S. 1021), would not change existing law.


Older Americans Act (OAA). As with the WIA, legislation reauthorizing
provisions of the Older Americans Act (OAA) is pending. The House version — the
Senior Independence Act of 2006; H.R, 5293; H.Rept. 109-493; approved by the
House on June 21, 2006 — includes amendments that would explicitly incorporate
faith- and community-based organizations into various activities funded under the
OAA. Faith- and community-based organizations could serve as “benefits enrollment
centers” providing outreach and application services for benefit programs like food
stamps, Medicaid, and the Supplemental Security Income (SSI) program. The federal
Assistant Secretary for Aging, in charge of most OAA programs, would be required
to develop a “comprehensive strategy” for utilizing older individuals in addressing
local needs — including engagement of older persons in faith- and community-based
organizations. And, under the Older American Community Service Employment-
Based Training program (a renamed and revised version of the current Title V Older
American Community Service Employment program), faith- and community-based
organizations are specifically listed as potentially eligible to carry out the program’s
work experience activities. On the other hand, the Senate version of OAA
reauthorization (S. 3570; ordered reported on June 28, 2006) includes only the
provision relating to participation by faith- and community-based organizations as
benefits enrollment centers.
Community Services Block Grants (CSBG).29 As with WIA and OAA
reauthorization legislation, CSBG reauthorization is pending. On January 25, 2005,
Representative Osborne (and other Republican Members, including the chairman of
the House committee of jurisdiction) introduced the Improving the Community
Services Block Grant Act of 2005 (H.R. 341). Among other amendments to the law
governing CSBG, this bill proposes to add a provision barring providers that are
religious organizations from discriminating against beneficiaries (or potential
beneficiaries) on the basis of religion or religious belief.30 It does not, however,
include more controversial proposals that would delete some existing CSBG
Charitable Choice rules (e.g., those allowing grantees to discriminate in hiring).
Head Start.31 As with WIA, OAA, and CSBG reauthorization legislation, Head
Start reauthorization is pending. On September 22, 2005, the House passed a Head
Start reauthorization measure (H.R. 2123), which, as amended on the House floor,
includes a provision changing Head Start law to allow faith-based providers to


29 For more information on the CSBG and CSBG reauthorization (including discussion of
proposals related to faith-based organizations in earlier Congresses), see CRS Report
RL32872, Community Services Block Grants (CSBG): Funding and Reauthorization, by
Karen Spar and Garrine P. Laney.
30 As noted earlier, CSBG law does not now include this feature of Charitable Choice rules.
31 For more information on Head Start and Head Start reauthorization (including discussion
of proposals related to faith-based organizations in earlier Congresses), see CRS Report
RL30952, Head Start: Background and Issues, by Melinda Gish.

discriminate in hiring based on religion. The current Senate version of the Head Start
reauthorization bill (S. 1107) does not include a similar faith-based hiring provision.
Putting Executive Order 13279 into Law.32 On March 2, 2005,
Representative Green introduced a bill entitled the Tools for Community Initiatives
Act (H.R. 1054). This bill would establish an Office of Faith-Based and Community
Initiatives in the Executive Office of the President charged with encouraging faith-
based and community initiatives and working to eliminate federal barriers to the
participation of faith- and community-based entities in federal programs. In effect,
it proposes to put into law the provisions of Executive Order 13279 (and its
accompanying executive orders). Hearings on this bill were held on May 3 and June
21, 2005 — before the House Government Reform Committee’s Subcommittee on
Criminal Justice, Drug Policy, and Human Resources. No further action has been
taken.


32 For a discussion of Executive Order 13279 (and its accompanying executive orders), see
the earlier part of this report entitled “What Are Charitable Choice Rules?”