Food Stamp Program; Excess Shelter Expense Limit and Standard Utility Allowances

DEPARTMENT OF AGRICULTURE

7 CFR Part 273

RIN 0584-AB59

Food Stamp Program; Excess Shelter Expense Limit and Standard

Utility Allowances

AGENCY: Food and Consumer Service, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This action proposes several changes in Food Stamp Program

rules relating to the limit on deductible excess shelter expenses and

use of standard utility allowances. The major change would implement a

provision of the Mickey Leland Childhood Hunger Relief Act as set forth

in the Omnibus Budget Reconciliation Act of 1993. The provision would

increase Program benefits to households that have no elderly or

disabled members by gradually increasing and then, in 1997, removing

the limit on the amount of excess shelter expenses these households can

deduct from their income to determine eligibility and benefits. The

changes in provisions for standard utility allowances would allow State

agencies to use allow use of additional standards and would simplify

requirements for determining entitlement to a standard.

DATES: Comments must be received on or before January 23, 1995 to be

assured of consideration.

ADDRESSES: Comments should be submitted to Judith M. Seymour,

Eligibility and Certification Regulation Section, Certification Policy

Branch, Program Development Division, Food and Consumer Service, USDA,

3101 Park Center Drive, Alexandria, Virginia, 22302, (703) 305-2496.

Comments may also be datafaxed to the attention of Ms. Seymour at (703)

305-2454. All written comments will be open for public inspection at

the office of the Food and Consumer Service during regular business

hours (8:30 a.m. to 5 p.m., Monday through Friday) at 3101 Park Center

Drive, Alexandria, Virginia, Room 720.

FOR FURTHER INFORMATION CONTACT: Questions regarding the proposed

rulemaking should be addressed to Ms. Seymour at the above address or

by telephone at (703) 305-2496.

SUPPLEMENTARY INFORMATION:

Classification

Executive Order 12866

This proposed rule has been determined to be economically

significant and was reviewed by the Office of Management and Budget.

Executive Order 13272

The Food Stamp Program is listed in the Catalog of Federal Domestic

Assistance under No. 10.551. For the reasons set forth in the final

rule in 7 CFR 3015, Subpart V and related Notice (48 FR 29115), this

Program is excluded from the scope of Executive Order 12372 which

requires intergovernmental consultation with State and local officials.

Regulatory Flexibility Act

This rule has been reviewed with regard to the requirements of the

Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Ellen Haas,

Under Secretary for Food, Nutrition, and Consumer Services, has

certified that this rule does not have a significant economic impact on

a substantial number of small entities. The changes will increase

benefits to food stamp recipients and simplify administration of the

Program by State and local welfare agencies.

Paperwork Reduction Act

This proposed rule does not contain reporting or recordkeeping

requirements subject to approval by the Office of Management and Budget

(OMB) under the Paperwork Reduction Act of 1980 (44 U.S.C. 3507).

Regulatory Impact Analysis

Need for Action

This action is required by section 13912(b) of Pub. L. 103-66,

which amended Section 5(e) of the Food Stamp Act to provide for

incremental increases in the excess shelter expense deduction in July

1994 and October 1995 and the elimination of the limit on the amount of

shelter expenses that may be deducted from the net income of a

household that does not contain an elderly or disabled member,

effective January 1, 1997.

Benefits

This action increases benefits to households with high shelter

expenses and simplifies administration of the Program by State and

local offices.

Costs

It is estimated that this action will increase the cost of the Food

Stamp Program by approximately $40 million in FY 1994, $125 million in

FY 1995, $190 million in FY 1996, $490 million in FY 1997, and $620

million in FY 1998.

Executive Order 12778

This rule has been reviewed under Executive Order 12778, Civil

Justice Reform. This rule is intended to have preemptive effect with

respect to any State or local laws, regulations or policies which

conflict with its provisions or which would otherwise impede its full

implementation. This rule is not intended to have retroactive effect

unless so specified in the ``Effective Date'' paragraph of this

preamble. Prior to any judicial challenge to the provisions of this

rule or the application of its provisions, all applicable

administrative procedures must be exhausted. In the Food Stamp Program

the administrative procedures are as follows: (1) for Program benefit

recipients--State administrative procedures issued pursuant to 7 U.S.C.

2020(e)(1) and 7 CFR 273.15; (2) for State agencies--administrative

procedures issued pursuant to 7 U.S.C. 2023 set out at 7 CFR 276.7 (for

rules related to non-quality control (QC) liabilities) or Part 284 (for

rules related to QC liabilities); (3) for Program retailers and

wholesalers--administrative procedures issued pursuant to 7 U.S.C. 2023

set out at 7 CFR 278.8.

Background

1. Excess Shelter Cap--7 CFR 273.9(d)(5) and 273.9(d)(8)

Under current rules at 7 CFR 273.9(d)(5), households are entitled

to a deduction from income for excess shelter expenses, i.e., shelter

expenses (including rent or mortgage and utilities) that exceed 50

percent of the household's net income remaining after all other

deductions. For households with an elderly or disabled member (as

defined in 7 CFR 271.2), all of the excess shelter expenses are

deducted. For other households, only excess shelter expenses up to a

limit are deducted. This limit, usually referred to as the ``shelter

cap,'' is adjusted annually to reflect changes in the shelter, fuel,

and utilities components of housing costs in the Consumer Price Index

(CPI-U) published by the Bureau of Labor Statistics for the 12 months

ending the preceding June 30. In FY 1994, the cap is $207 for the

contiguous 48 States and the District of Columbia, $359 in Alaska, $295

in Hawaii, $251 in Guam, and $152 in the Virgin Islands.

Section 13912 of the Mickey Leland Childhood Hunger Relief Act

(Leland Act), Chapter 3, Title XIII of the Omnibus Budget

Reconciliation Act of 1993, Pub. L. 103-66, enacted August 10, 1993,

107 Stat. 312), amended section 5(e) of the Food Stamp Act of 1977 (as

amended), (the Act) 7 U.S.C. 2014(e), to provide for incremental

increases in the shelter cap and for the elimination of the cap

according to the following schedule:

1. Effective July 1, 1994 through September 30, 1995, the excess

shelter expense deduction shall not exceed $231 a month in the 48

contiguous States and the District of Columbia, $402 in Alaska, $330

in Hawaii, $280 in Guam, and $171 in the Virgin Islands.

2. Effective October 1, 1995 through December 31, 1996, the

excess shelter expense deduction shall not exceed $247 a month in

the 48 contiguous States and the District of Columbia, $429 in

Alaska, $353 in Hawaii, $300 in Guam, and $182 in the Virgin

Islands.

3. Effective January 1, 1997, the limit on the excess shelter

expense deduction is removed.

According to the legislative history of the Leland Act

(Congressional Record, S10725, August 6, 1993), the changes in the

shelter cap are designed to provide more food stamps to families with

especially high rent and utility bills. To implement section 13912 of

Pub. L. 103-66, 7 CFR 273.9(d)(8) will be amended to add the

statutorily imposed increased shelter cap amounts effective in July

1994 and October 1995 and to indicate that the shelter cap will be

eliminated effective January 1, 1997. Those regulatory changes are

mandated by statute and, in accordance with 5 U.S.C. 553(b)(3)(A), are

therefore not subject to public comment.

This action proposes to amend the homeless shelter expense

provisions of 7 CFR 273.9(d)(5) to eliminate the reference to the

excess shelter cap. Current regulations provide that State agencies may

develop their own standard estimate of the shelter expenses of

households in which all members are homeless and do not receive free

shelter throughout the month. State agencies that do not want to

develop their own standards may use the estimate provided by the

Department. The regulations provide that this homeless shelter estimate

will be updated annually using the same method as is used to index the

excess shelter cap. Since the excess shelter cap will be set at the

amounts established by the Leland Act beginning July 1, 1994 and will

be removed in January 1997, we are proposing to amend 7 CFR 273.9(d)(5)

effective July 1, 1994 to provide that the homeless shelter expense

estimate will be revised each October 1 to reflect changes in the

shelter, fuel, and utilities components of housing costs in the CPI-U

for the 12 months ending the preceding June 30. The homeless shelter

estimate will be adjusted on October 1, 1994 and each October 1

thereafter. State agencies will be notified of the amount by memorandum

prior to each change. State agencies will still have the option of

developing and using their own estimates.

2. Standard Utility Allowances--7 CFR 273.9(d)(6)

The legislative history of the Leland Act (Congressional Record,

S10725, August 6, 1993 and House Report 103-213, p. 924, August 4,

1993) indicates Congressional intent that the excess shelter expense

deduction be simple to administer and that the standard utility

allowance facilitate, rather than hinder, program simplification. We

have reviewed the regulations governing shelter expenses and utility

standards to determine how they might be improved. As a result, we are

proposing to revise 7 CFR 273.9(d)(6) in its entirety.

In section 5(e) of the Food Stamp Act (7 U.S.C. 2014(e)), Congress

authorized use of a standard utility allowance (standard) in computing

a household's excess shelter deduction to reduce the burden on State

agencies and households of having to report, verify, and calculate

actual utility costs. However, subsequent legislation and numerous

regulatory revisions have resulted in increasingly complicated

requirements for use of the standards. State agencies have complained

that current regulations are confusing and, by their very complexity,

defeat the purpose of using standards.

Rules published October 17, 1978 (43 FR 47846, 47865-66) required

State agencies to establish a standard utility allowance which

households could include in claiming their shelter costs. Households

that incurred costs for electricity and fuel for heating, cooling, or

cooking were allowed to use the State agency's single utility standard

which included these costs. Alternatively, States were allowed to

develop separate standards for each utility. A household incurring a

cost for any of these utilities was allowed the option of claiming

actual costs or the standard in the calculation of benefits.

To give State agencies more flexibility in operating the Program,

the Omnibus Budget Reconciliation Act of 1982, Pub. L. 97-253,

(September 8, 1982, 96 Stat. 775-6), made use of a standard utility

allowance a State agency option. In doing so, the use of the standard

became more complex. Use of a single standard that included heating or

cooling costs was restricted to those households that incurred heating

or cooling costs separately from their rent or mortgage. However,

households in public housing who were billed only for excess usage were

prohibited from using this standard. These households were required to

use actual expenses. The law also required State agencies to prorate

the standard among separate households who lived together and shared

heating or cooling expenses.

Interim regulations implementing the provisions of Pub. L. 97-253

were issued on November 16, 1982 (47 FR 51551) and made final on June

21, 1983 (48 FR 28190). (Readers may refer to the preambles of these

regulations for a full explanation of the changes.) The rules

implemented the prohibition against use of a heating or cooling

standard by households in public housing. In addition, the rules

provided that renters in private housing could receive the heating or

cooling standard only if the amount of heating or cooling usage was

established through a separate meter. Households not entitled to the

heating or cooling standard could claim actual costs.

Legislation governing the Low-Income Home Energy Assistance (LIHEA)

program also has had an effect on use of the heating or cooling

standard by households receiving LIHEA and further complicated this

policy. The Low-Income Home Energy Assistance Act of 1981, Title XXVI,

Pub. L. 97-35, enacted August 13, 1981, (42 U.S.C. 8621, et seq.)

required State agencies to exclude LIHEA payments from income in

assistance programs, including the Food Stamp Program. Under the food

stamp rules, households that received direct LIHEA payments and still

incurred a heating or cooling expense in excess of the LIHEA payments

were allowed use of the heating or cooling standard. However,

households that received LIHEA assistance in the form of vendor

payments made to the energy provider were not entitled to the heating

or cooling standard. Section 273.10(d)(1)(i) provided that any expense

covered by an excluded reimbursement or vendor payment was not

deductible. As early as 1981, lawsuits were filed challenging the

Department's position on this issue. (See Schmeige v. USDA, 693 F.2d 55

(8th Cir. 1982), Idaho v. Block, 784 F.2d 895 (9th Cir. 1986); and

Seban v. Block, 626 F. Supp. 545 (S.D. Ind. 1985)).

The Food Security Act of 1985, Pub. L. 99-198 (December 23, 1985)

amended the Food Stamp Act to provide that households which incurred

out-of-pocket heating or cooling expenses over and above their LIHEA or

similar energy assistance payments were entitled to receive a standard

allowance for heating or cooling costs. In the context of entitlement

to a heating or cooling standard, out-of-pocket expenses are those that

exceed any energy assistance payments made to or on behalf of the

household. The law allowed State agencies to develop two standard

allowances including heating or cooling expenses: One standard for

households that did not receive indirect energy assistance payments and

a second standard for households that received indirect payments and

incurred out-of-pocket heating or cooling expenses. (The preamble to

regulations published May 21, 1986, 51 FR 18744, 18746, contains a

complete explanation of the provisions.)

The amendments to the Food Stamp Act made by the Food Security Act

of 1985 were nullified by the Human Services Reauthorization Act of

1986, Pub. L. 99-425 (September 30, 1986), which included a provision

affecting the treatment of LIHEA payments in calculating an excess

shelter expense deduction. Section 504(e) of that law provided that

LIHEA payments must be treated consistently regardless of how the

payments are distributed to the household and that the full amount of

the payments was to be deemed expended by the household for heating or

cooling expenses.

A final rule published February 23, 1987 (52 FR 5434) amended 7 CFR

273.9(d)(6) and 7 CFR 273.10(d)(1)(i) to require State agencies to

consider energy expenses covered by LIHEA payments made to the energy

supplier on behalf of the household (indirect payments) as deductible

shelter expenses. State agencies were required to consider all

households receiving LIHEA as eligible to claim the heating or cooling

standard whether or not the household had any out-of-pocket expense.

The rule eliminated a State agency's option to use a separate heating

or cooling standard allowance for those households which received

indirect LIHEA payments.

State agencies have indicated that the legislative conflict between

the desire to avoid reducing a household's food stamp allotment when it

receives energy assistance and the principle that the heating or

cooling standard should be allowed only when a household actually

incurs an out-of-pocket heating or cooling expense has resulted in

regulations that are error-prone and difficult to administer. Numerous

policy memoranda and clarifications have been issued to assist State

agencies in determining the circumstances under which a household is

entitled to a heating or cooling standard. However, State agencies

continue to raise questions concerning use of the standard.

Within the constraints of the Food Stamp Act and legislation

governing the LIHEA program, we are proposing to revise 7 CFR

273.9(d)(6) to assist State agencies in using a heating or cooling

standard and to provide greater flexibility in developing other

standards. Under this proposal, provisions relating to standard utility

allowances would be organized into the following areas: (a) Developing

and updating standard utility allowances, (b) entitlement to a heating

or cooling standard, (c) household option, and (d) sharing utility

costs. We are also proposing to add the last sentence of current 7 CFR

273.9(d)(6)(i) regarding allowable cooling costs to the list of

allowable utility costs in 7 CFR 273.9(d)(5)(ii)(C) so that all

allowable utility costs are listed in one paragraph. The proposed

changes are discussed below.

a. Developing and updating standard utility allowances. Current

regulations at 7 CFR 273.9(d)(6)(i), (iii), (iv), (v), and (vi) set

forth the requirements for developing standard utility allowances. They

allow State agencies to use seasonal standards; annual standards that

do not have to be adjusted seasonally; separate standards for each

utility expense; or single utility standards that include the cost of

heating or cooking fuel, cooling, electricity, water, sewerage, garbage

or trash collection, and the basic service fee for one telephone.

In an effort to ease confusion and clarify the rules regarding the

establishment of utility standards, we are proposing to consolidate the

current rules into a single, revised paragraph, 7 CFR 273.9(d)(6)(i).

At the same time, we are proposing several changes in existing policy.

The changes in policy are described below.

Several State agencies have requested and have been granted waivers

to use a combined standard for all nonheating or noncooling expenses.

As justification for their waiver requests, State agencies cite

difficulty in obtaining verification for utility expenses and,

consequently, increased errors relating to shelter costs when

certifying households. To provide greater State agency flexibility

without the need for waivers and to reduce the error-prone use of

actual utility expenses, we are proposing in 7 CFR 273.9(d)(6)(i) to

allow State agencies to develop standard utility allowances for

individual utilities and a combination of utilities. As provided in

current regulations, the allowances may be seasonal or annualized to

include costs for all seasons and may be varied by household size or

geographic location. Although the proposal for a combined standard is

not as broad as some standards currently in use, we believe it would

provide some additional flexibility to State agencies and would reduce

the number of cases in which workers must verify actual expenses

without greatly increasing Program costs.

As provided in current 7 CFR 273.9(d)(6)(i) and under our proposal,

State agencies would not be permitted to develop a separate standard or

decrease the heating or cooling standard for households that receive

LIHEA payments. However, a State agency would be able to develop and

use a separate heating/cooling standard for households that receive

energy assistance other than energy assistance provided under the Low-

Income Home Energy Assistance Act of 1981. In developing other standard

utility allowances, State agencies would be required to include only

the allowable costs identified in 7 CFR 273.9(d)(5)(ii)(C). No

additional costs could be added.

Therefore, under the proposed revision of 7 CFR 273.9(d)(6)(i),

State agencies would be allowed to develop the following standards: (a)

A separate standard for each type of utility expense; (b) a standard

that includes heating or cooling costs; (c) a telephone standard; and

(d) a combined standard that includes electricity, water, sewerage, and

garbage or trash collection and is available only to households that

incur the cost of electricity and either water or sewerage. State

agencies would be allowed to add the telephone standard to a separate

standard for electricity, for example, for households that incur both

expenses. The telephone standard could also be added to the combined

standard to allow use of a standard for households that incur costs for

electricity, sewerage or water, and telephone.

State agencies could use the heating or cooling standard for

households that incur a heating or cooling cost and an individual

standard for households that incur an expense for only one utility,

such as electricity. Because State agencies may develop a variety of

standards, the proposed rule specifies that no household shall receive

more than one standard for the same utility expense. For example, if

the State agency's combined standard includes the expense of a basic

telephone, a household that receives the combined standard would not

also be entitled to a separate telephone standard. Households whose

only utility expense is for a telephone would be entitled to the

telephone standard only.

The proposal would require State agencies that develop new standard

utility allowances to use FCS-approved methodologies. The State agency

would be required to review the standards annually and submit revised

amounts to FCS for approval. State agencies would be required to submit

methodologies used in developing and updating standards to FCS every 3

years. They would also be required to submit the methodologies when

they are revised or upon a request from FCS. We are requiring State

agencies to submit methodologies every 3 years so that we will be able

to monitor State agency development and use of standards.

b. Entitlement to a heating or cooling standard. Another complex

and confusing area of policy involving standard utility allowances is

determining who is entitled to a standard that includes heating or

cooling costs. We are proposing in revised Sec. 273.9(d)(6)(ii) to

clarify and simplify these rules. In doing so, we are attempting to

eliminate inequities that exist in the application of current policy.

Current regulations at 7 CFR 273.9(d)(6)(ii) provide that a heating

or cooling standard shall be made available only to households that

incur out-of-pocket heating and cooling costs separately from their

rent or mortgage and to households that receive LIHEA. Renters must be

billed on a monthly basis by their landlords for actual usage as

determined through individual metering to be entitled to use the

standard. Recipients of indirect energy assistance payments other than

LIHEA must incur expenses in excess of the payments during the

certification period to qualify for the heating or cooling standard.

Households in public or private housing with a central meter who are

billed only for excess usage are not permitted to use the standard. A

household not entitled to the standard can claim actual expenses.

As indicated above, provisions of interim regulations published

November 16, 1982 (47 FR 51551) and finalized June 21, 1988 (48 FR

28190) limited use of the heating or cooling standard by households in

public or private housing to those households whose costs could be

verified by separate metering. Previously, households in public or

private housing who could verify that they incurred heating or cooling

costs separately from their rent were entitled to use the heating or

cooling standard. Although these households were no longer entitled to

a heating or cooling standard under food stamp rules, they were

entitled to the heating or cooling standard if they received LIHEA.

Therefore, State agencies had to determine which households would or

would not receive LIHEA before food stamp eligibility and benefits

could be determined. This presented a problem for State agencies,

particularly when there was no easy method for exchanging information

with the LIHEA agency. Although this policy has been in effect for some

time now, State agencies still experience difficulty in anticipating

entitlement to a heating or cooling standard when a household is

entitled solely because of receipt of LIHEA payments.

Our first proposed change to the rules governing the use of a

heating or cooling standard is to provide direct entitlement to a

standard by households in private housing who have heating or cooling

costs apart from or in addition to their rent. Under the proposal,

these households would be entitled to use the heating or cooling

standard even if their actual utility usage is not determined by

separate metering.

The amount of the expense could be determined and verified by means

other than separate metering, such as a statement from the landlord.

If, in addition to rent, the landlord charges a flat amount for

utilities each month which includes the cost of heating or cooling, the

household would be entitled to the heating or cooling standard.

Regulations at 7 CFR 273.2(f)(1)(iii) do not require State agencies to

verify entitlement to a standard allowance. However, entitlement to a

standard may be verified if it is questionable, as provided in 7 CFR

273.2(f)(2)(i) or under 7 CFR 273.2(f)(3) as a State agency option. The

proposed rule retains the statutory prohibition against use of the

heating or cooling standard by households in public housing.

This proposed change would extend use of the standard to households

that live separately but share a utility meter. Under current policy,

if two households live separately but have one meter, the households

are prohibited from sharing the standard, and the State agency cannot

grant the standard to both households even though both incur heating or

cooling costs. Under the proposed change, the State agency would be

required to grant the full heating or cooling standard to both

households if both incur or anticipate incurring out-of-pocket heating

or cooling expenses separately from their rent or receive or anticipate

receiving LIHEA.

A second proposed change in the standard utility allowance rules

stems from numerous policy questions that have been raised regarding

when and how often a household has to incur an expense in order to be

eligible for an annualized heating or cooling standard. As indicated

above, State agencies currently may choose between seasonal heating or

cooling standards and an annualized standard that includes year-round

heating and cooling costs. State agencies have complained that

regulations and policy regarding use of an annualized standard are

confusing and difficult to administer. We are proposing in this rule to

simplify the regulations for determining when a household is entitled

to an annualized standard utility allowance that includes heating or

cooling costs.

Annualized standards represent the average monthly heating and

cooling costs for the entire year. This means that in some months

during the year, and perhaps during the certification period, the

household may not have any heating or cooling costs. For example, a

household that previously had no heating or cooling costs applies in

June and does not anticipate incurring any heating or cooling costs

during the summer months. However, the household will incur heating

costs in the fall. Regulations at 7 CFR 273.10(d)(4) provide that the

State agency shall calculate a household's expenses based on the

expenses the household expects to be billed for during the

certification period. Therefore, if the household above is certified

for three summer months and incurs no heating or cooling costs, the

household is not entitled to an annualized standard that includes

heating costs. If the household is certified for six months and

anticipates incurring heating costs in the fall, however, it is

entitled to the heating standard. State agencies have complained that

this policy is difficult to administer and can result in inequities.

To reduce the problems associated with determining when a household

is entitled to an annualized heating or cooling standard, we are

proposing in this rule that a household that currently incurs or

expects to incur out-of-pocket heating or cooling costs during the next

heating or cooling season (except a household in public housing with a

central meter where the household is billed only for excess usage) is

entitled to an annualized heating or cooling standard regardless of

when the certification period begins or ends.

This rule further proposes that the household shall continue to be

entitled to the standard until it no longer expects to incur heating or

cooling costs during the next heating or cooling season. The State

agency would be required to reexamine a household's entitlement to the

heating or cooling standard at recertification, when the household

moves, or when the household voluntarily reports a change affecting

entitlement to the standard.

Under this proposal, a household with no heating or cooling costs

which is certified for three summer months and which expects to be

billed for heating costs in the fall would be entitled to a heating or

cooling standard at the time of certification. Also, a household that

incurred no heating or cooling expenses in the past which moves to a

living arrangement where it will incur heating costs in the next

heating season would be allowed the annualized standard from the time

of the move. If a State agency uses seasonal standards, households

would be entitled to the appropriate seasonal standard if they incur or

expect to incur a qualifying expense (or receive or expect to receive a

LIHEA payment) during the season covered by the standard.

We believe this proposal is more equitable and easier to administer

than current policy. We would appreciate specific comments supporting

the proposal or pointing out any problems with the proposed change.

Although food stamp households are categorically eligible for

LIHEA, not all food stamp households receive the assistance, either

because they do not apply for it or because LIHEA funds run out before

all eligible households can be served. This makes it extremely

difficult for State agencies to know in advance whether or not a

household will receive LIHEA and be entitled to the standard. To grant

the standard beginning with the month the household reports receipt of

LIHEA would not meet the intent of the LIHEA legislation. Therefore, we

are also proposing in revised Sec. 273.9(d)(6)(ii) that the State

agency shall allow a heating or cooling standard to households that

receive or anticipate receiving LIHEA in the next heating or cooling

season. These households shall continue to be entitled to the standard

until they no longer receive or anticipate receiving LIHEA in the next

heating or cooling season. The State agency would consult with the

household concerning the household's intention to apply for LIHEA,

determine whether or not the household received LIHEA for the previous

season at the same address, and contact the LIHEA agency if necessary

to determine the availability of funds and the likelihood that the

household will receive energy assistance. The case worker would

document the case file to support the decision to allow or deny use of

the standard.

Current regulations at 7 CFR 273.9(d)(6)(ii)(C) require that

households incur recurring costs for heating or cooling in order to

qualify for a heating or cooling standard. The regulations are

confusing in that they specify that the household must be billed

regularly, but, if the household is not billed regularly, it may use

the standard between billing periods if it is otherwise eligible to use

the standard. Under this proposed revision, the regulatory provisions

for billing would not be needed. Entitlement to the heating or cooling

standard would be based on anticipated expenses. Most households that

are responsible for paying heating or cooling expenses have these

expenses on a recurring basis. Therefore, we are proposing to remove

the provisions regarding recurring costs from the regulations. We are

also proposing to remove the provisions in 7 CFR 273.9(d)(6)(ii)(C) and

7 CFR 273.10(d)(6) regarding households that incur out-of-pocket

expenses for heating or cooling in excess of non-LIHEA energy

assistance. These provisions would also be unnecessary under the

proposed revision of the regulations. Any household that receives LIHEA

or incurs an out-of-pocket expense for heating or cooling (except a

household in public housing billed only for excess usage) would be

entitled to an annualized heating or cooling standard.

We are also proposing a conforming amendment to 7 CFR 273.10(d)(3)

to provide that standard utility allowances shall be allowed in

accordance with 7 CFR 273.9(d)(6). This change is necessary because the

provisions allowing the averaging of fluctuating expenses and the

determination of entitlement to an annualized heating or cooling

standard based upon anticipated heating or cooling costs are exceptions

to the provisions regarding billed expenses in 7 CFR 273.10(d)(2) and

anticipating expenses in 7 CFR 273.10(d)(4).

c. Household option. Current regulations at 7 CFR 273.9(d)(6)(vii)

require State agencies to advise households at the time of

certification that, except for the telephone allowance, they may deduct

their actual verified utility costs or the standard allowance

throughout the certification period. The State agency is also required

to advise households that they may switch between the use of actual

utility costs and the standard at the time of recertification and one

additional time during each twelve-month period.

State agencies have pointed out that households may move from one

residence to another more frequently than once a year. Current policy

is that the household's eligibility for the heating or cooling standard

must be redetermined at the time of the move. We have granted waivers

to several State agencies to allow households to choose between actual

expenses or the standard when the household moves without having the

choice count as a ``switch.''

This rule proposes to include the provisions of current 7 CFR

273.9(d)(6)(vii) regarding the household option to use a standard or

actual costs in revised Sec. 273.9(d)(6)(iii). The proposed rule also

adds a provision requiring State agencies to give households that move

the option of actual expenses or a standard utility allowance based on

circumstances at the new address. When a household reports a move, it

would be the State agency's responsibility to redetermine the

household's entitlement to a standard and give the household the

opportunity to choose between actual costs and the standard, if the

household is entitled to the standard. Households that report a move

would be granted the standard on the same basis as applicants. If the

household anticipates that it will receive LIHEA or incur out-of-pocket

heating or cooling expenses during the next heating or cooling season

at the new address, it would be allowed use of the standard. The

household's choice of a standard or actual costs when it moves would

not be considered a switch.

Current regulations at 7 CFR 273.9(d)(6)(iii)(C) provide that the

State agency may mandate use of the telephone allowance even if actual

telephone costs are higher. This provision was included in the

regulations because of the concern of State agencies that use of actual

telephone costs would be extremely error-prone. We believe that use of

an adequate telephone standard increases the administrative efficiency

of determining a household's excess shelter expense without any

significant adverse effect on households. Therefore, we are proposing

to retain the provision of current 7 CFR 273.9(d)(6)(v)(C) concerning

the telephone allowance and incorporate it in revised

Sec. 273.9(d)(6)(iii).

d. Prorating standard utility allowances. Under section 5(e) of the

Food Stamp Act, State agencies are required to prorate a heating or

cooling standard among households that live together and share the

heating or cooling expense. Current regulations at 7 CFR

273.9(d)(6)(viii) require State agencies to prorate a standard

allowance among households that live together and share utility

expenses. It is not clear in the regulations whether proration is

limited to the heating or cooling standard or whether other standards,

such as a telephone standard, must also be prorated among the

households contributing to the payment of the utility cost. Questions

have arisen concerning proration of a heating or cooling standard when

one household pays for heat, for example, and another household pays

for the water. We believe it is equitable to prorate any standard among

the households sharing the expense included in the standard.

The current provision indicates that if the State agency is unable

to accurately determine the pro rata share of utility costs paid by the

parties, the State agency may use the actual utility costs paid by each

household. The regulations provide that under no circumstances shall

the total amount of utility costs used to determine the amount of the

deduction exceed the total amount of actual utility costs for the

residence.

Under this proposed rule, households would be able to share a

standard or claim actual verified costs. They would not be allowed to

use a combination of these methods in claiming a deduction for utility

expenses. That is, State agencies could not allow one household to

claim a share of the utility standard and allow another household

sharing the expense to claim actual costs. We believe that allowing a

combination of actual expenses and a share of the standard is

burdensome on State agencies.

Under this proposal, the total allowable deduction for the

residence would not exceed actual costs or one standard allowance. If

one household pays all the utility expenses, that household would be

entitled to the applicable standard or could claim actual costs. The

household that did not pay any utility costs would not be able to claim

any actual utility costs or any part of a standard. If one household

pays for heat and the other household pays another expense, such as

water, a standard that includes the costs of heating and water would be

prorated between the households according to a method established by

the State agency.

We propose to provide in revised Sec. 273.9(d)(6)(iv) of this rule

that the State agency shall prorate any utility standard among all

parties incurring an expense covered by the standard or allow actual

costs incurred by each party. The State agency would be able to

determine the proration method if a standard is prorated.

Corrections

We are taking this opportunity to correct the reference in the

first sentence of 7 CFR 273.12(a)(1)(i) to the joint processing

regulations. The correct citation is 7 CFR 273.2(j)(3).

Implementation

In accordance with the requirements of section 13971(b)(6) of Pub.

L. 103-66, this rule provides that the increase in the excess shelter

expense deduction to $231 in the 48 contiguous States and the District

of Columbia ($402 in Alaska, $330 in Hawaii, $280 in Guam, and $171 in

the Virgin Islands) will be effective and must be implemented on July

1, 1994; that the increase to $247 in the 48 contiguous States and the

District of Columbia ($249 in Alaska, $353 in Hawaii, $300 in Guam, and

$182 in the Virgin Islands) will be effective and must be implemented

on October 1, 1995; and that removal of the excess shelter deduction

limit will be effective and must be implemented on January 1, 1997. The

changes in provisions for the homeless shelter estimate in 7 CFR

273.9(d)(5)(i) will be effective July 1, 1994. State agencies are

required to adjust all cases on January 1, 1997 to reflect the

deduction for all allowable excess shelter expenses. Restored benefits

must be provided to all households whose cases are not adjusted on the

required implementation date. Variances resulting from implementation

of the final rule would be excluded from quality control consideration

for 120 days from the required implementation date in accordance with

section 13951 of Pub. L. 103-66.

We are proposing that the changes in requirements for standard

utility allowances made by this rule be effective and implemented 120

days after publication of the final rule. The affected regulatory

sections are: 7 CFR 273.9(d)(5)(ii)(C), 273.9(d)(6), 273.10(d)(3),

273.10(d)(6), and 273.12(a)(1)(i). State agencies would be required to

adjust the cases of ongoing households at the next recertification, at

household request, or when the case is next reviewed, whichever comes

first. Variances resulting from implementation of the provisions of the

final rule shall be excluded from error analysis for 120 days from the

required implementation date.

List of Subjects in 7 CFR Part 273

Administrative practice and procedure, Aliens, Claims, Food stamps,

Fraud, Grant programs-social programs, Penalties, Records, Reporting

and recordkeeping requirements, Social security, Students.

Accordingly, 7 CFR Part 273 is proposed to be amended as follows:

1. The authority citation for Part 273 continues to read as

follows:

Authority: 7 U.S.C. 2011-2032.

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

2. In Sec. 273.9:

a. the sixth and seventh sentences of paragraph (d)(5)(i) are

removed, and one new sentence is added in its place;

b. paragraph (d)(5)(ii)(C) and paragraph (d)(6) are revised; and

c. the fourth sentence of paragraph (d)(8)(i) is amended by

removing the word ``thereafter,'' and adding the words ``thereafter

through October 1, 1993,'' in its place and by adding three sentences

at the end of the paragraph.

The additions and revision read as follows:

Sec. 273.9 Income and deductions.

* * * * *

(d) Income deductions. * * *

(5) Shelter costs.

(i) Homeless households. * * * The Department will revise the

homeless shelter expense estimate each October 1 to reflect changes in

the shelter, fuel, and utilities components of housing costs in the

CPI-U for the 12 months ending the preceding June 30 and will notify

State agencies of the adjusted amount. * * *

(ii) Household shelter deduction. P* * *

(C) The cost of heating and cooking fuel, cooling (verifiable

expenses relating to the operation of air conditioning systems or room

air conditioners), electricity, water, sewerage, garbage and trash

collection, the basic service fee for one telephone (including tax on

the basic fee), and fees charged by the utility provider for initial

installation of the utility. One-time deposits shall not be included as

shelter costs.

* * * * *

(6) Standard utility allowances--(i) Developing and updating

standard utility allowances. A State agency may develop the following

standard utility allowances (standards) to be used in place of actual

costs in determining a household's excess shelter deduction: a separate

standard for each type of utility expense; a single standard for all

utilities that includes heating or cooling costs; a telephone standard;

and a combined standard that includes electricity, water, sewerage, and

garbage or trash collection that is available only to households that

incur the costs of electricity and either water or sewerage. The State

agency shall submit proposed standards to FCS for approval. The State

agency shall update the standards annually and submit revised amounts

to FCS for approval. State agencies shall submit methodologies used in

developing and updating standards to FCS for review every 3 years, when

there is a change in the methodology, and upon a request from FCS.

State agencies may use a heating or cooling standard, a combined

standard, and individual standards. However, they shall not allow

households the use of two standards that include the same expense. The

State agency may elect to use seasonal standards that include heating

or cooling costs or an annual standard that does not have to be

adjusted seasonally. The State agency may vary the allowance by factors

such as household size or geographical area. Only utility costs

identified in paragraph (d)(5)(ii) of this section shall be used in

developing standards. The State agency shall not use a reduced standard

for households that receive assistance under the Low-Income Home Energy

Assistance Act (LIHEAA) of 1981. Households shall be allowed to use

standards that include heating or cooling costs in accordance with

paragraphs (d)(6)(ii), (d)(6)(iii) and (d)(6)(iv) of this section.

Households whose only utility expense is for a telephone are entitled

to only the separate telephone standard if one has been developed by

the State agency.

(ii) Entitlement to a heating or cooling standard. A standard with

a heating or cooling component shall be made available to households

that incur heating or cooling expenses separately from their rent or

mortgage or expect to incur such expenses in the next heating or

cooling season, except households in public housing units which have

central utility meters and charge households only for excess utility

costs. Households that receive assistance under the LIHEAA but do not

incur out-of-pocket heating or cooling expenses are also entitled to a

standard that includes a heating or cooling component on the same basis

as households that incur such costs. Households that receive other

indirect energy assistance are entitled to a standard that includes

heating or cooling only if they incur out-of-pocket expenses for

heating or cooling costs. Entitlement to an annualized heating or

cooling standard shall continue until the household no longer incurs or

expects to incur a heating or cooling expense or no longer receives or

expects to receive a LIHEAA payment during the next heating or cooling

season. If the State agency elects to use seasonal standards, the State

agency shall ensure that a standard is provided only to households that

incur or expect to incur an expense that would entitle the household to

the standard or receive or expect to receive a LIHEAA payment during

the season covered by the standard.

(iii) Household option. The State agency shall advise a household

at the time of certification and whenever it reports a move that it may

deduct verified actual utility costs (for any allowable expense

identified in paragraph (d)(5)(ii)(C) of this section) it incurs rather

than the standard (except for the telephone standard) throughout the

certification period if actual expenses are more than the standard or

the household is not eligible for the standard. The State agency may

require use of the telephone standard for the cost of basic telephone

service even if actual costs are higher. The State agency shall also

inform the household that it may switch between use of actual utility

costs and the standard at recertification and one additional time

during each twelve-month period.

(iv) Sharing utility expenses. If a household lives with and shares

utility expenses with another individual, another household, or both,

the State agency shall prorate a standard among the household and the

other individual, household, or both, or allow the actual costs of each

household. The State agency shall determine the proration method if a

standard is used.

* * * * *

(8) Adjustment of shelter deduction. (i) * * * Effective July 1,

1994 through September 30, 1995, the excess shelter expense deduction

shall not exceed $231 a month in the 48 contiguous States and the

District of Columbia, $402 in Alaska, $330 in Hawaii, $280 in Guam, and

$171 in the Virgin Islands. Effective October 1, 1995 through December

31, 1996, the excess shelter expense deduction shall not exceed $247 a

month in the 48 contiguous States and the District of Columbia, $429 in

Alaska, $353 in Hawaii, $300 in Guam, and $182 in the Virgin Islands.

Effective January 1, 1997, the limit on the excess shelter expense

deduction is removed.

* * * * *

3. In Sec. 273.10:

a. paragraph (d)(3) is amended by adding a new sentence after the

first sentence.

b. paragraph (d)(6) is removed, and paragraph (d)(7) is

redesignated as paragraph (d)(6).

The addition reads as follows:

Sec. 273.10 Determining household eligibility and benefit levels.

* * * * *

(d) Determining deductions. * * *

(3) Averaging expenses. * * * Households shall be allowed to use

annualized standard utility allowances in accordance with

Sec. 273.9(d)(6). * * *

* * * * *

Sec. 273.12 [Amended]

4. In 273.12, the first sentence of paragraph (a)(1)(i) is amended

by removing the citation ``Sec. 273.2(j)(2)'' and adding in its place

the citation ``Sec. 273.2(j)(3)''.

Dated: November 15, 1994.

Ellen Haas,

Under Secretary for Food, Nutrition, and Consumer Services.

[FR Doc. 94-28830 Filed 11-21-94; 8:45 am]

BILLING CODE 3410-30-P