A bill to amend the Social Security Act to provide for the conduct of pilot and demonstration projects to test whether requiring programs for the provision of education or vocational training for caretaker parents with pre-school children under the AFDC program will assist them in leaving the AFDC rolls quickly and in securing gainful long-term employment at earnings levels sufficient to maintain their families without subsidies.

Amends part A (General Provisions) of title XI of the Social Security Act to direct the Secretary of Health and Human Services to invite each State having an approved plan under part A (Aid to Families with Dependent Children) of title IV of the Social Security Act to submit an application to establish and conduct a demonstration project for the purpose of testing whether the provision of mandatory education or vocational training (or both) for the caretaker parents of dependent children under six years of age in families receiving AFDC would enable such families to leave the AFDC rolls quickly and assist such parents in securing long-term gainful employment at earnings levels sufficient to maintain their families without public assistance.

Requires any State desiring to establish and conduct such a demonstration project to submit an application to the Secretary within six-months after the enactment of this Act. Requires the application to include assurances that the proposed project would be permitted under applicable State and local law. Directs the Secretary to consider all applications submitted and to approve ten of the proposed projects within nine months after the enactment of this Act. Requires six of the approved projects to be located in urban areas and four to be located in predominantly rural areas. Prohibits the approval of a project unless: (1) it is of sufficient size and scope to demonstrate program and cost effectiveness and to permit the drawing of valid inferences for evaluation and permit the drawing of valid inferences for evaluation and policy recommendations; (2) it will be conducted for a period of not less than three nor more than five years; (3) it covers all caretaker parents in families which are eligible for aid under the applicable State plan and which include one or more children under six years of age; and (4) it complies fully with all other requirements and will contribute to the purposes of this Act.

Defines "caretaker parent" to mean the parent of a dependent child under age six with whom such child is living, who is personally providing care for such child, who is eligible for AFDC, and who is or would be exempt from the manpower services, training, and employment registration requirements because that parent personally provides care for such child.

Directs a State, in conducting an approved demonstration project to: (1) offer each caretaker parent in a jurisdiction involved an opportunity to participate in the project; (2) establish an individualized program for the education or vocational training of each participating caretaker parent; and (3) permit such parent to receive education or training under the program so established (from the time the youngest child in the care of such parent is six-months old, or earlier with a physician's written permission) until either the parent is employed and self-sufficient, the parent is no longer a caretaker parent, or the family has become ineligible for aid. Permits a State to make participation in the project by caretaker parents in the State mandatory rather than voluntary. Permits a jurisdiction within a State to make participation mandatory, if the State does not exercise its option.

Directs the Secretary to pay each State with an approved demonstration project 90 percent of the costs incurred by the State in establishing and carrying out such project. Requires the remainder of the costs incurred to be paid from non-Federal sources.

Requires the education or training for caretaker parents in such program to meet the following requirements: (1) for caretaker parents without a high school diploma; (2) after receipt of such diploma (or in the case of an individual already having a high school diploma or better), the caretaker parent must participate in an approved post-secondary education program, an approved vocational education program, or a program of employment and training under auspices of the Job Training Partnership Act; (3) the award of an academic scholarship to a caretaker parent shall not result in any loss of eligibility or benefits under AFDC or any other public assistance program, so long as the scholarship payments are made directly to the appropriate educational institution; (4) the education and training must include instruction in family management and life skills, employment and job search training, career counseling, and community-supported recreational activities; (5) appropriate English language and adjustment training must be provided for caretaker parents from immigrant groups who have language or cultural adjustment difficulties; (6) special training must be provided for physically handicapped participants; (7) education and training for each participate in the project must be provided for at least 20 hours per week and must be coordinated with available child care services; (8) any caretaker parent who has completed all of the education and training required by this Act shall remain a participant in the project for 20 hours a week of job search and placement assistance (with associated child care) until either the parent is employed and self-sufficient, the parent is no longer a caretaker parent, or the family has become ineligible for AFDC. Provides that in the case of a caretaker parent who ceases to be a participant in the project because he or she has completed all of the education and training required by this Act and has become employed: (1) the parent will be provided with child care services, as necessary, without charge for a six-month period, and for an additional six-month period subject to the payment of a gradually increasing portion of the cost of such services; and (2) the parent shall be considered for a 12-month period to be still a project participant for purposes of receiving Medicaid (title XIX of the Social Security Act).

Requires all of the child care and transportation which is necessary for a caretaker parent to participate in a demonstration project to be included, without charge to the caretaker parent, as a part of the project.

Requires each approved project to be designed so as to provide an effective demonstration of: (1) the planning and design of quality and cost-effective approaches to child and infant care, utilizing group services provided by the participants themselves or utilizing any other child care services which may be available; (2) the cost-effective utilization of existing publicly-funded educational, vocational, and other training programs; (3) coordination with other community service providers, including job developers; and (4) cost- effective and creative approaches to the utilization of transportation facilities.

Prohibits participation in an approved project by a caretaker parent from resulting in any loss of eligibility or benefits under AFDC or any other public assistance program.

Provides that if any caretaker parent refuses to undergo any education or training required by this Act or otherwise fails to participate in an approved demonstration project, without a reasonable basis for such refusal or failure as determined on medical, psychological, psychiatric, or other grounds by an appropriate licensed practitioner in accordance with regulations prescribed by the Secretary (subject to a State being granted a waiver): (1) such parent's needs shall not be taken into account in determining need under AFDC with respect to the parent's family; and (2) any AFDC payments shall be made in the form of protective payments.

Permits any State whose application for a demonstration project is approved to submit to the Secretary a request for the waiver of any requirement which would otherwise apply with respect to the project under title XI or title IV of the Social Security Act. Directs the Secretary, if authorized, to approve the request upon a determination that the waiver is necessary in order for the project to accomplish its purpose.

Requires each approved demonstration project to have a voluntary advisory group to assist in developing the program and in monitoring the project.

Sets forth reporting requirements (including reports to Congress). Requires each State in which a demonstration project is located to submit to the Secretary such information as the Secretary may require concerning a project.

Authorizes appropriations.