The 1996 welfare reform law--the Personal Responsibility and Work Opportunity Reconciliation Act--has contradictory aspects. It gives the states greatly increased fiscal flexibility and at the same time sets extensive and elaborate new behavioral requirements. The dynamics of welfare since the passage of the Social Security Act in 1935 have been for the national government to set a framework for action by the states that on the whole has been liberal. Now, the framework of national law and the pressures it applies are conservative. The pressure is on the liberal states to terminate welfare benefits and put teeth into work and related family and school behavioral requirements. One of the surprises so far in the operation of the new law is the degree to which it has promoted"second-order devolution" from states to localities. Another surprise is a corresponding and longer standing devolution movement whereby state and local governments have assigned increased levels of responsibility to nonprofit organization groups. It is not so much "privatization" that has occurred in social policy, as "nonprofitization," although increased contracting with private providers has also been emphasized. The most crucial start-up challenge is the creation of information systems to manage state and local welfare and social programs and track recipients during and after they receive cash benefits and social services. A shared federal-state approach to create these systems is recommended. (YLB)