Federal agencies have broad authority to propose and implement regulations related to their statutory mandate and responsibilities. The APA establishes the process agencies must follow when proposing and implementing regulations, or rulemaking, which it defines as the process of “formulating, amending, or repealing a rule.”
Federal regulations governing the CCDF are found in Title 45 of the Code of Federal Regulations. Specifically, 45 C.F.R. § 98.56 establishes “restrictions on the use of funds.” Restrictions include prohibitions on the expenditure of CCDF funds for the construction of child care facilities, duplicative services already provided by public schools, and for grants or contracts for religious worship or instruction. Adding to that list a subsection with the following language would prohibit the deduction of union dues from CCDF benefits:
(f) Third-party payments. No funds may be paid, directly or indirectly, to, or deducted from providers’ payments for, any membership organization, labor union, or political fund. No fiscal agent or other intermediary that contracts with or makes payments to providers may deduct funds from providers’ payments for any membership organization, labor union, or political fund.
To prohibit dues skimming of TANF child care benefits, ACF could amend 45 C.F.R. § 263.11, which establishes proper and improper state expenditures of TANF funds. This regulation expressly permits state expenditures of TANF funds “that are reasonably calculated to accomplish the purposes of TANF,” which are listed in § 260.20 as follows:
(a) Provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives;
(b) End the dependence of needy parents on government benefits by promoting job preparation, work, and marriage;
(c) Prevent and reduce the incidence of out-of-wedlock pregnancies and establish annual numerical goals for preventing and reducing the incidence of these pregnancies; and
(d) Encourage the formation and maintenance of two-parent families.
45 C.F.R. § 263.11(b) considers funds expended “in violation” of these purposes to be “a misuse of funds.” Additionally, the regulation considers improper expenditures outlined in §§404 and 408 of the Social Security Act, §115(a)(1) of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, and 45 C.F.R. Part 75 to be misuses of funds. None of these laws or regulations permits or acknowledges deducting union dues from TANF benefits.
The ACF could make a strong argument that under the current rules union dues skimming is not “reasonably calculated to accomplish the purpose of TANF.” Nevertheless, a rulemaking proposal would still be the most effective way to explicitly prohibit labor union dues skimming of TANF child care benefits. ACF could successfully end union dues skimming of TANF child care benefits by proposing rulemaking that adds the following subsection to 45 C.F.R. § 263.11:
(c) The payment of funds to any membership organization, labor union, or political fund will be considered a misuse of funds, regardless of whether the payment is made directly, indirectly, or via payroll deduction.
In the event that a state misuses TANF funds, 45 C.F.R. § 263.10 requires the HHS secretary to reduce the offending state’s grant amount in the fiscal year following the misuse by an amount equal to the amount misused. Further, if a state fails to show that its misuse was unintentional, HHS may withhold an additional 5 percent of the state’s total grant award.
 5 U.S.C. §§551-559; 5 U.S.C. § 551(5).