The federal Deficit Reduction Act of 2005 significantly raises the required work participation rates for California’s low-income families in the CalWORKs program. Failure to meet these higher participation rates would result in annual federal penalties which begin in 2008-09 at $173 million We present a range of strategies for meeting this challenge including: increasing participation among existing recipients, bringing former recipients who are employed back into the participation calculation, and establishing separate programs for those who may face substantial barriers to work.