Due to federal budget cuts in 2005-06, 11 family literacy programs in Pennsylvania switched from federal Even Start to state (Act 143) funding. Simultaneously, state welfare requirements stipulated that in most circumstances adult education is not an allowable work activity for welfare recipients over age 20. This study examined how these policy changes affected 10 Pennsylvania family literacy programs. The study reveals that the combination of these policy changes, coupled with the need to meet state standards, created distinctive challenges for programs, especially in student recruitment. Secondly, the effects of the policies were mediated by factors such as program size, structure, and geographic location, local infrastructure (e.g., transportation), and program participants' characteristics. Thirdly, the Act 143 and welfare policies had numerous, unintended ripple effects, affecting multiple programmatic areas and transcending the boundaries of government agencies. Fourthly, the findings show that the effects of policy changes are diverse and contradictory, simultaneously opening some opportunities while foreclosing others. Finally, the study illustrates the creative, resourceful ways that family literacy professionals respond to shifting policies.