Next Step in Reforming Welfare Act

Next Step in Reforming Welfare Act - Amends part A (Temporary Assistance for Needy Families) (TANF) of title IV of the Social Security Act (SSA) to revise and extend the TANF program, with changes: (1) continuing certain grants, including State family assistance grants; (2) providing additional grants for States with low Federal funding per poor child; (3) making reduction of the extent and severity of poverty and the promotion of self-sufficiency among families with children an additional purpose of TANF; and (4) replacing the caseload reduction credit with employment credit to reward States in which families leave welfare for work Amends SSA title XX (Block Grants to States for Social Services) to increase funding for the social services block grant, and SSA title IV part A to provide for an increase in general child care entitlement funding.

Authorizes the Secretary of Health and Human Services to award grants to: (1) States and counties to pay the Federal share of the costs involved in improving the administration of low-income family with children support programs; and (2) nonprofit organizations and localities to promote participation in, and distribute information about and develop service centers for, low-income family with children support programs.

Amends SSA title IV part A to: (1) change assessments for individual responsibility plans; (2) require State TANF plans to account for how the State intends to establish goals and take action to improve initial earnings, job advancement, and employment retention for individuals in and individuals leaving the program; (3) direct the Secretary to provide grants to States and localities for certain related research, evaluation, technical assistance, and demonstration projects; and (5) change work related requirements.

Amends SSA title IV parts A and D (Child Support and Establishment of Paternity) with respect to a family formation fund and increased child support payments to families.

Amends the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 to waive the five-year limited eligibility of qualified aliens for Federal means-tested public benefits in the case of TANF and SSI (SSA title XVI (Supplemental Security Income)) benefits.

Amends SSA title IV part A to ban the use of Federal TANF funds to replace State or local spending that does not meet the definition of qualified State expenditures.