This report presents data from research on New York state and city compliance with changes in federal welfare laws. It outlines how children and families are faring after 5 years of welfare reform (e.g., caseloads have dropped, but child poverty persists, families leave welfare for low paying jobs and unstable work, and family homelessness is rising dramatically). It examines state and city welfare policy changes and discusses challenges to reauthorizing the Temporary Assistance to Needy Families (TANF) Block Grant. It recommends changes to the federal Personal Responsibility and Work Opportunities Reconciliation Act (PRWORA) that will help families move off of welfare and maintain stable employment (e.g., Congress and the President should maintain the current TANF Block Grant allocation to the states, at level funding and indexed for inflation, and they should amend federal PRWORA to cover legal immigrants). Finally, the report includes recommendations for changes to city and state policy and family support in maintaining employment and gaining financial stability (e.g., the Eligibility Verification Review process should be eased so families are not erroneously removed from the welfare rolls when still in need of assistance, and New York City and state should provide a baby bond to every child). (SM)