After the death of the Charitable Choice Expansion Act of 2001 (Title II of H.R. 7), President Bush issued an executive order directing several Cabinet departments to adopt charitable choice rules in their social service programs. These rules seek to promote the use of religious groups as providers of social services while protecting the religious freedom of beneficiaries. In response to the order, several departments have made final regulatory changes, and other departments have proposed changes in rules. For faith-based initiative projects during FY2004, Congress appropriated $103 million (P.L. 108-199); and for FY2005, the President's budget requests $165 million. The 108th Congress resumed efforts to pass tax incentives for private giving (S. 476, passed by the Senate, and H.R. 7, passed by the House). However, these bills do not contain basic charitable choice rules. Opposition to charitable choice has brought together a coalition of religious and secular groups who, for different reasons, want to maintain separation of church and state -- the former to protect their independence and sense of mission, the latter to guard against use of public funds for religious activities. In two cases concerning a Wisconsin faith-based program for drug addicts (Faith Works), direct government funding of religious activity has been found unconstitutional, but indirect funding (by voucher) has been found constitutional. In a related case, the U.S. District Court for the District of Columbia on July 2, 2004, found unconstitutional awards made to AmeriCorps participants who were placed as teachers in sectarian schools and who engaged in religious instruction and activities during the school day. For legal and constitutional issues raised by charitable choice, see CRS Report RL32195. This report will be updated for developments.

The Senate Finance Committee version of H.R. 7, approved on July 16, 2002, does not contain the "charitable choice" title of the House-passed H.R. 7; nor does it include a compromise "faith-based" provision (from S. 1924 as introduced) that sought to assure equal treatment for nongovernmental providers of almost all federally-funded social services. Remaining in the Senate Finance bill are tax incentives to promote private giving. The Charitable Choice Act of 2001 (Title II of the House bill) would apply its rules, which are significantly different from those in four existing charitable choice laws, to nine new program areas.

Too often, say its critics, U.S. domestic policy is founded on ideology rather than evidence. Take "Charitable Choice": legislation enacted with the assumption that faith-based organizations can offer the best assistance to the needy at the lowest cost. The Charitable Choice provision of the 1996 Welfare Reform Act—buttressed by President Bush's Faith-Based Initiative of 2000—encouraged religious organizations, including congregations, to bid on government contracts to provide social services. But in neither year was data available to prove or disprove the effectiveness of such an approach. Charitable Choice at Work fills this gap with a comprehensive look at the evidence for and against faith-based initiatives. Sheila Suess Kennedy and Wolfgang Bielefeld review the movement's historical context along with legal analysis of constitutional concerns including privatization, federalism, and separation of church and state. Using both qualitative and, where possible, statistical data, the authors analyze the performance of job placement programs in three states with a representative range of religious, political, and demographic traits—Massachusetts, Indiana, and North Carolina. Throughout, they focus on measurable outcomes as they compare non-faith-based with faith-based organizations, nonprofits with for-profits, and the logistics of contracting before and after Charitable Choice. Among their findings: in states where such information is available, the composition of social service contractor pools has changed very little. Reflecting their varied political cultures, states have funded programs differently. Faith-based organizations have not been eager to seek government contracts, perhaps wary of additional legal restraints and reporting burdens. The authors conclude that faith-based organizations appear no more effective than secular organizations at government-funded social service provision, that there has been no dramatic change in the social welfare landscape since Charitable Choice, and that the constitutional concerns of its detractors may be valid. This empirical study penetrates the fog of the culture wars, moving past controversy over the role of religion in public life to offer pragmatic suggestions for policymakers and organizations who must decide how best to assist the needy.

The 107th Congress did not pass tax incentives for private giving or legislation intended to assure equal treatment of religious organizations as providers of social services (provisions in S. 1924, the original CARE bill). The House voted to extend charitable choice rules to numerous new programs (H.R. 7), as the President urged, but the Senate refused. However, in an Executive Order, President Bush on December 12, 2002, directed six cabinet-level departments and the Agency for International Development (AID) to bring policies concerning social service programs into line with charitable choice principles set forth in the Order.