U.S. Sen. Dan Coats (R-Ind.) likes to tell the story of the Gospel Mission, a drug-treatment center for homeless men not far from the nation's Capitol. Under the leadership of John Woods, the mission successfully rehabilitates two-thirds of those who seek treatment there.

Just three blocks away is a government-operated shelter with similar goals. But even though it spends 20 times more per person, that shelter boasts only a 10 percent success rate. Coats has an explanation for the disparity: "The Gospel Mission succeeds because it provides more than a meal, more than a drug treatment. It is in the business of spreading the grace of God."

In recent decades, faith-based charities such as the Gospel Mission have been required to succeed on their own. Concerns about the separation of church and state have prevented them from receiving government aid. But all that will change if lawmakers retain what has become known as the "charitable choice" clause as part of legislation aimed at welfare reform.

U.S. Sen. John Ashcroft (R-Mo.) proposed the charitable-choice initiative. Approved in September as part of the Senate's welfare-reform bill, it prohibits discrimination against a social service organization "on the basis that the organization has a religious character."

This means that faith-based charities could contract with all levels of government—or receive funds in the form of vouchers or certificates—without having to change or suppress their religious identity. The legislation specifies that religious charities receiving government funds may require employees to "adhere to [their] religious tenets and teachings" and to submit to organizational rules "regarding the use of drugs or alcohol." Participating religious organizations ...