On September 13, the Department of Health and Human Services (DHHS) awarded a total of $100 million to four states and the District of Columbia for having the greatest declines in out-of-wedlock childbearing between 1994 and 1997 while also showing a reduction in abortions. The award—the first of four annual "illegitimacy bonuses," enacted by Congress as part of the 1996 welfare reform law—was split evenly among Alabama, California, Massachusetts, Michigan and the District of Columbia.

Nationwide, only 11 states and the District of Columbia experienced a decrease in the ratio of out-of-wedlock births to total births between 1994-1995 and 1996-1997. The largest decline, 5.7%, occurred in California; in the other winning jurisdictions, declines ranged from 1.5% to 3.7%. Puerto Rico experienced the largest increase, 21.1%, followed by North Dakota at 10.0%. Nationally, the ratio of nonmarital births to total births remained constant between the two time periods at 32.4%; among the states in 1997, it ranged from a low of 16.6% in Utah to 45.4% in Mississippi and 63.6% in the District of Columbia.

Under regulations issued in April, DHHS used birth data submitted by the states to calculate the changes, which include births to all women, not just welfare recipients or teenagers. The department informed the five eventual recipients in early August that they were "potentially eligible" to share the bonus; those states were then required to submit data demonstrating that their most recent abortion-to-live-birth ratio was lower than it had been in 1995.

DHHS officials have declined to speculate on the reasons why the winning jurisdictions experienced the largest declines in nonmarital births. According to a study published in April by The Alan Guttmacher Institute, while 34 states reported activities to reduce such births in an effort to qualify for the bonus, the activities cited varied widely in scope and often included long-standing programs rather than new initiatives. Moreover, it is doubtful that this first round of bonuses, which were based on data from 1996 and 1997, was affected by bonus-inspired initiatives; the welfare reform law was not enacted until August 1996, and many initiatives aimed at reducing nonmarital births were not implemented until FY 1998 or FY 1999.