Food Stamp Program: Failure to Comply with Federal, State, or Local Welfare Assistance Program Requirements

DEPARTMENT OF AGRICULTURE

Food and Consumer Service

7 CFR Parts 272 and 273

[Amendment No. 369]

RIN 0584-AC08

Food Stamp Program: Failure to Comply with Federal, State, or

Local Welfare Assistance Program Requirements

AGENCY: Food and Consumer Service, USDA.

ACTION: Final rule.

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SUMMARY: This action amends Food Stamp Program regulations to prohibit

an increase in food stamp benefits when a household's benefit from

another

[[Page 19156]]

Federal, State or local means-tested assistance program decreases as a

result of a penalty imposed on the household for intentionally failing

to comply with a requirement of the other program. This regulatory

change is necessary to more fully implement congressional intent that

the Food Stamp Program reinforce, not mitigate, another program's

penalties.

EFFECTIVE DATE: This final action is effective May 31, 1996. State

agencies must implement no later than November 27, 1996.

FOR FURTHER INFORMATION CONTACT: Questions regarding the rulemaking

should be addressed to Margaret Batko, Supervisor, Eligibility and

Certification Regulation Section, Certification Policy Branch, Program

Development Division, Food Stamp Program, Food and Consumer Service,

USDA, 3101 Park Center Drive, Alexandria, Virginia 22302. Ms. Batko may

also be reached by telephone at (703) 305-2496.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rulemaking has been determined to be significant for purposes

of Executive Order 12866, and therefore, has been reviewed by the

Office of Management and Budget.

Executive Order 12778

This rulemaking has been reviewed under Executive Order 12778,

Civil Justice Reform. The rule is intended to have preemptive effect

with respect to any state or local laws, regulations or policies that

conflict with its provisions or that would otherwise impede its full

implementation. The rule is not intended to have retroactive effect.

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)(10) 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

Executive Order 12372

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 and related Notice(s) to 7 CFR part 3105, subpart V (48 FR 29115,

June 24, 1983; or 48 FR 54317, December 1, 1983, as appropriate), this

Program is excluded from the scope of Executive Order 12372 which

requires intergovernmental consultation with State and local officials.

Regulatory Flexibility Act

This rulemaking has also been reviewed with respect to the

requirements of the Regulatory Flexibility Act of 1980 (Pub. L. 96-354,

94 Stat. 1164, September 19, 1980). William E. Ludwig, Administrator of

the Food and Consumer Service (FCS), has certified that this action

would not have a significant economic impact on a substantial number of

small entities. The changes would affect food stamp applicants and

recipients who intentionally fail to comply with other Federal, State

or local welfare assistance program requirements. The rulemaking also

affects State and local welfare agencies which administer the Food

Stamp Program.

Paperwork Reduction Act

This rulemaking does not contain additional 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).

Background

Section 164 of the Food Stamp Act Amendments of 1982 (Pub. L. 97-

253, Title I, Subtitle E, Sept. 8, 1982) amended Section 8 of the Food

Stamp Act of 1977 (Act) to add a new paragraph (d) which prohibits an

increase in food stamp benefits due to a decrease in household income

resulting from a penalty levied by a Federal, State, or local welfare

or public assistance program for an intentional failure to comply with

the other program's requirements. 7 U.S.C. 2017(d). Currently, the

regulations at 7 CFR 273.11(k) limit the prohibition against increasing

food stamp benefits to situations in which a household's welfare or

public assistance benefits have been reduced because of agency

recoupment. If the recoupment was precipitated by a finding of an

intentional program violation, food stamp eligibility and benefit

levels are calculated without regard for the amount of the reduction in

assistance due to the recoupment. On

August 8, 1995, at 60 FR 40311, we proposed to expand the current

prohibition on increases in food stamp benefits to include all

situations in which a decrease (reduction, suspension or termination)

in assistance income occurs as a result of a penalty being imposed for

an intentional failure to comply with a Federal, State, or local

welfare or public assistance program requirement. The proposal provided

that State agencies would calculate food stamp benefits using the

benefit amount which would have been issued by the other program if no

penalty had been applied against that program's benefit amount.

Comments on the proposed rulemaking were solicited from interested

parties for 45 days. A total of 30 comment letters were received; 26

from State and local welfare agencies, three from legal aid groups, and

one from the general public. All letters which specifically addressed

the provisions of the proposed rulemaking were considered in developing

the final rule. The remaining sections of the preamble address the

significant issues raised by commenters.

State welfare agencies generally supported the proposed rule but

had varying degrees of concern relative to: the lack of a definition of

``intentional failure to comply''; what constitutes a penalty; and the

food stamp benefit calculation procedure. The legal aid groups opposed

the provision stating concern about the impact on the nutritional

levels of children and lack of due process protection for the affected

households.

Who Does the Provision Apply To?

The proposed rule specified that the expansion in the prohibition

on increases in food stamp benefits based on a reduction in income from

assistance programs would apply to acts of intentional noncompliance

with Federal, State, or local welfare or public assistance programs

which are means-tested and distribute publicly funded benefits.

Historically, we have always made a distinction between welfare or

public assistance programs and other types of Federal, State or local

programs by categorizing welfare and public assistance programs as

``means-tested'' programs. It has come to our attention that there may

be Federal, State or local programs in existence which are means-tested

but are not generally considered to be welfare or public assistance.

Therefore, it is not enough to provide that this rule affects ``means-

tested'' programs only. The final clarifies that the provision only

applies to means-test programs governed by welfare or public assistance

laws or regulations.

One commenter asked that the final provision be revised to require

that individuals who are receiving Social Security Disability Insurance

(SSDI) payments because of drug addiction and/or alcoholism and who do

not comply with Federal treatment requirements be covered by the final

rule. Since SSDI is not means-tested

[[Page 19157]]

assistance or generally considered to be welfare or public assistance,

the final rule would not apply when a reduction in SSDI benefits occurs

for failure to comply with a Federal treatment program requirement. We

believe it would not be administratively permissible to create an

exception for this particular benefit program situation without express

congressional direction.

At least one State agency and the legal aid groups recommended that

the term ``intentional'' be defined. Some of these commenters also

recommended that we require the other Federal, State and local agencies

to use clear and convincing evidence in making a determination of

intentional noncompliance or that the food stamp caseworker be required

to at least take into consideration the Food Stamp Program's ``good

cause'' provisions prior to taking action to prohibit an increase in

food stamp benefits.

As stated in the preamble of the proposed rulemaking, the Food

Stamp Program will not be involved in the determination of whether or

not an individual intentionally failed to comply with another program's

requirement and whether or not there was good cause for the

noncompliance. It should be noted, however, that a State or local

worker may be responsible for many of the other welfare or public

assistance programs. Thus, it is conceivable that such worker may be

directly/indirectly involved in the determination of intentional

failure to comply with another program's requirements. For the purpose

of determining individual food stamp benefit levels, we intend that

food stamp workers only verify if a known decrease in a household's

benefits under another welfare or public assistance program is due to a

determination by the other program of intentional failure to comply. If

the determination is not specifically identified by the other program

as an ``intentional'' failure to comply, the prohibition on increased

food stamp benefits would not apply.

One commenter recommended that the word ``intentional'' be dropped

from the final rule so that it would apply to all acts of

noncompliance. Another commenter also stated that the prohibition on

increases in food stamp benefits should apply to any act of

noncompliance provided there are appropriate opportunities to establish

good cause and to ensure that the household was aware of the obligation

before sanctions were imposed. We do not have the discretion to expand

the coverage of the prohibition to any act of noncompliance. Section

8(d) of the Act applies only to acts of intentional failure to comply

with another welfare or public assistance program's requirements. These

commenters may be interested to know that there is pending legislation

being considered by Congress that, if passed, would expand the coverage

of Section 8(d) to include any act of noncompliance.

One commenter noted that penalties for noncompliance with certain

child support enforcement provisions do not result in actual reductions

of benefits; instead, the penalty imposed is a denial of benefits. For

example, the Aid to Families with Dependent Children (AFDC) program in

some States requires that an unmarried parent identify a child's other

parent. If the applicant-parent refuses to provide the requested

information, benefits are denied. The commenter suggested that

Sec. 273.11(k) be applied to these situations. In the scenario

suggested by this commenter, household income for purposes of

determining eligibility for food stamp benefits would be the amount of

AFDC the household would have received had the household provided the

requested information.

We do not have the discretion to adopt this suggestion. The

language of section 8(d) of the Act provides that there be no increase

in food stamp benefits when benefits under another Federal, State or

local welfare or public assistance program are decreased due to

intentional noncompliance. It is clear from the statutory language that

Congress' intent was to limit the application to situations where

benefits are being received and then decreased due to an intentional

act of noncompliance. In the suggested situation benefits are never

received so they can not be decreased. However, there is pending

legislation under consideration by Congress that would make compliance

with child support enforcement requirements a condition of eligibility

for food stamp benefits.

In reviewing comments on who the provision should apply to, it came

to our attention that in the preamble of the August 8 proposed rule we

made reference to welfare assistance and public assistance

interchangeably. Yet we inadvertently failed to include a reference to

public assistance in the actual regulatory text of the proposed rule.

We are correcting this oversight in this rulemaking. In addition, the

final rule clarifies that State agencies shall define what constitutes

a welfare assistance program or a public assistance program. The only

requirement for the State agency selection of appropriate programs is

that they be means-tested and distribute public funds.

How Should the Provision Be Applied?

Household vs. Individual

One commenter noted that AFDC programs in certain States allow

State agencies to terminate cash assistance to not only an individual

who has failed to comply with program requirements, but also to other

household members. This commenter recommended that the prohibition on

increases in food stamp benefits for deceases in other types of

assistance be limited to that part of the welfare benefit decrease

representing the benefit share of the individual who intentionally

failed to comply, not the entire household's benefits. We are not

adopting this suggestion. It is clear from the language of the Act that

the prohibition on increased food stamp benefits required by Section

8(d) applies to a household and not simply individual household

members. We do not have the authority to create regulatory distinctions

in conflict with the express language of the Act.

Family Cap

Some State agencies are implementing welfare reform programs which

include a ``family cap'' requirement. The family cap requirement

provides that if an individual has another child while receiving

assistance under the program, the family will not receive an increase

in assistance for the additional child. One commenter suggested that

some State agencies may consider the act of having the additional child

to be an ``intentional failure to comply'' with the rules and

regulations of the assistance program. This commenter claimed that

under the terms of the August 8 proposed rule, an increase in food

stamp benefits for the additional member would not be allowed. This

commenter suggested that we modify the proposed rule to allow increases

in food stamp benefits in these situations regardless of State

penalties.

The commenter misinterpreted the intent and impact of the proposed

rule. In the situation noted by the commenter, the family's current

assistance would not be decreased; rather, the family would not be

entitled to increased assistance for the additional member. The

proposed rule specifically stated that the prohibition on increased

food stamp benefits would not apply in situations where the household's

benefits under another program are frozen at the current level due to

an act of intentionally failing to comply with a requirement of that

program.

[[Page 19158]]

Food Stamp Program Work Sanctions

Current rules at 7 CFR 273.7(g)(2) provide that individuals who

fail to comply, whether intentionally or not, with a work requirement

under Title IV of the Social Security Act or an unemployment

compensation work requirement, where such work requirement is

comparable to a food stamp work requirement, shall be treated as though

the individual had failed to comply with the food stamp requirement and

the client shall be subject to a food stamp penalty. One commenter

questioned if the August 8 proposed rule would take precedence over 7

CFR 273.7(g)(2). It would not. The provision at 7 CFR 273.7(g)(2)

imposes a food stamp sanction for noncompliance with certain work

requirements. The proposed changes to 7 CFR 273.11(k) would have

prevented an increase in food stamp benefits when a household was

sanctioned by another Federal, State or local means-tested welfare or

public assistance program for noncompliance. We have revised the final

rule to clarify that Sec. 273.11(k) does not apply in cases where

individuals or households are sanctioned for noncompliance with a food

stamp work requirement pursuant to 7 CFR 273.7(g)(2).

Administrative Problems

Some commenters claimed that they would not be able to comply with

Sec. 273.11(k) in situations involving intentional failures to comply

with the requirements for receiving Supplemental Security Income (SSI)

benefits because SSI benefits are not determined by the State or local

welfare agency. These commenters believe they will not receive

cooperation from SSI offices in obtaining the necessary information.

One commenter suggested exempting SSI from the programs covered by

Sec. 273.11(k). Another commenter suggested we incorporate

Sec. 273.11(k) a mandate that the necessary information be included in

the SDX data base maintained by SSA.

Section 8(d) of the Act does not provide us with the latitude to

treat SSI differently than other means-tested welfare or public

assistance programs. Further, the statute does not give us the latitude

to require adjustments in the SDX data base. States and localities will

have to work with all the associated programs to share the information

necessary to comply with the requirements of this final rule. However,

we do recognize that the other agencies may not cooperate in providing

the necessary information, or cannot do so due to information

disclosure laws. Therefore, we are amending the final rule to provide

that if a State agency is unsuccessful in obtaining information from

another program necessary to enable it to comply with this rulemaking,

the State agency will not be held responsible for such noncompliance.

Most commenters believed the requirements of the August 8 proposed

rule would be too complex to administer, would result in the need to

make costly changes to computer systems, and would be prone to error.

Alternatives suggested by commenters included: Allowing State agencies

an option to implement or not implement the provision; allowing State

agencies to implement in a manner which works best for the State--such

as allowing a State option to determine what constitutes a penalty; or

allowing a State option to use a standard amount to be deemed as food

stamp income through the duration of the penalty period imposed by the

other program; or allowing a State to impose the same penalty against

food stamp benefits as imposed against the benefits of the other

program; or allowing a State agency to freeze the amount of the

benefits under the affected program through the duration of the

penalty.

We cannot allow a State agency to choose not to implement

Sec. 273.11(k). Section 8(d) of the Act clearly mandates that there

will be no increase in food stamp benefits when a household's benefits

under another program are decreased due to an intentional failure to

comply with a requirement of that program. This rulemaking expands on

the current provision to more fully reflect congressional intent.

We also cannot adopt the suggestion of allowing a State agency to

impose the same penalty against the food stamp benefit as was imposed

against benefits under the program in which the noncompliance occurred.

The statute does not provide an option to reduce, suspend or terminate

the household's current food stamp benefit level; the statute only

prohibits an increase in food stamp benefits for noncompliance with

another program's requirements. However, pending legislation, if passed

as currently written, would provide such flexibility to a State agency.

While we cannot adopt some of the alternatives suggested by

commenters, some of the other alternatives mentioned may be more

feasible and cost-effective than our proposed procedures. In the

interest of State flexibility and our intent to eliminate prescriptive

regulations where possible, we are revising the final provision to

allow State agencies to implement the prohibition on food stamp benefit

increases in a manner which works best for that State. However, to

ensure that State agencies implement the provision within the confines

of the current statutory parameters, we are revising proposed

Sec. 273.11(k) to include the following minimum requirements:

1. State agencies shall apply Sec. 273.11(k) to prevent increases a

household's food stamp benefits when benefits under another Federal,

State or local means-tested welfare or public assistance program are

decreased (reduced, terminated, or suspended) due to a determination by

the other program of an act of intentional failure to comply with a

requirement of such program. Section 273.11(k) does not apply with

regard to cases of noncompliance which meet the requirements of 7 CFR

273.7(g)(2). If the State agency is not successful in obtaining the

necessary cooperation from the other program to enable it to comply

with the requirements of Sec. 273.11(k), the State agency shall not be

held responsible for noncompliance so long as the State agency has made

a good faith effort to obtain the information.

2. State agencies shall not reduce, suspend or terminate a

household's current food stamp benefit level when the household's

benefits under another means-tested welfare or public assistance

program have been decreased due to an intentional failure to comply

with a requirement of that program, except as provided at 7 CFR

273.7(g)(2).

3. State agencies must adjust food stamp benefits when eligible

members are added to the food stamp household regardless of whether or

not the household is prohibited from receiving benefits for the member

under another Federal, State or local means-tested welfare or public

assistance program.

4. Changes in household circumstances which are not related to a

penalty imposed by another Federal, State or local means-tested welfare

or public assistance program shall not be affected by this provision.

Cases of Recoupment and Reduction

One commenter noted that the proposed rule implied that it only

applied in situations where overissued benefits received due to

intentional noncompliance with a program requirement are being recouped

or a reduction in benefits is being applied as a fiscal penalty for

intentional noncompliance. This commenter questioned how food stamp

benefits would be calculated in situations in which a household is

subject to both a recoupment and a reduction for the same act of

intentional noncompliance.

[[Page 19159]]

As stated earlier, the final rule will allow State agencies to

implement the provision in a manner which works best for that State

agency. Thus, State agencies would establish their own procedures to

address this situation.

Notice to Clients

The legal aid groups that commented believed that households

affected by application of Sec. 273.11(k) should receive a food stamp

notice from State agencies explaining why their food stamp benefits are

not going up, and informing them that they are entitled to a hearing on

the issue of whether their program violation was intentional.

Current regulations at 7 CFR 273.13 require State agencies to

provide households with timely and adequate notice when reducing or

terminating food stamp allotments. Section 273.11(k) does not result in

a reduction, termination, or suspension of a household's current food

stamp benefit amount. Thus, State agencies are not obligated to provide

a notice of adverse action or adequate notice. However, the State

agency may provide such a notice at its option.

Additionally, a household would not be entitled to a separate and

distinct food stamp fair hearing on the issue of intent. The

determination of intentional failure must be made by the other program

for the food stamp prohibition to take affect. A separate and distinct

food stamp fair hearing to appeal another program's determination of

intent would place the Food Stamp Program in a position of second

guessing another program's determination. Of course, a State or local

worker who deals with multiple welfare or public assistance programs

may be directly or indirectly involved in the initial determination of

intent or client appeal of such determinations.

Several commenters raised concerns about how to calculate the food

stamp benefit in situations where the person's benefits from another

program are suspended or terminated due to an intentional failure to

comply, especially in cases of long periods of suspension or indefinite

termination of benefits. The commenters were particularly concerned

about cases for which benefits are terminated indefinitely and the

recipient never reapplies for those program benefits again. They felt

that it would be virtually impossible to track such cases. One

commenter suggested exempting such cases from the provision. Another

commenter recommended placing a time limit on the prohibition on

increased food stamp benefits in Sec. 273.11(k) for such cases. Still

another commenter recommended limiting the application of

Sec. 273.11(k) to the time it takes to repay the overpayment or to the

time the recipient begins to cooperate, whichever is less.

Section 8(d) of the Act clearly states that the prohibition against

increasing food stamp benefits shall apply for the duration of the

penalty imposed by the welfare or public assistance program. Therefore,

we do not have the discretion to allow State agencies to place time

restrictions on the application of Sec. 273.11(k). Moreover, we do not

agree that cases with long penalties should be exempt from the

prohibition. Generally, the more serious the act of intentional

noncompliance, the more serious the fiscal penalty and/or the longer

the penalty period. To do as the commenter has asked would result in

the more serious cases of intentional noncompliance receiving an

increase in food stamp benefits, while persons still receiving benefits

even though reduced for a much lesser degree of intentional

noncompliance could not receive an increase in food stamp benefits.

Implementation

The proposed rule provided that State agencies would be required to

implement the rule when final on the first day of the first month

beginning 120 days after publication of the final rulemaking. The 120-

day time period between publication and required implementation was

proposed to provide State agencies with sufficient lead time to

reprogram or train employees before implementing the new Program

requirement. It has come to our attention that some State agencies may

be able to implement sooner and would like to do so while other State

agencies believe the lead time is too short. We agree that State

agencies should have the flexibility to either implement soon after

publication or to have more lead time. Accordingly, this final rule

provides that State agencies must implement Sec. 273.11(k) ``no later

than'' 210 days from the date of publication in the Federal Register.

In addition, one commenter asked if we intend that Sec. 273.11(k)

apply to pending cases of intentional failure to comply with another

program's requirements. The final rule also clarifies that

Sec. 273.11(k) only affects those cases where a pertinent decrease in

the household's benefits from another program occurs on or after the

effective date of this final rulemaking.

Some State agencies commented that their computer systems are

designed to automatically update food stamp benefits when public

assistance benefits change. Until their computers can be reprogrammed,

the State agencies would have to manually bypass this automatic update

process which will increase administrative burden and result in errors.

These commenters suggested that variances in food stamp allotments due

to this regulation be excluded from the quality control error

determination. In accordance with Section 16(c)(3) of the Act,

variances resulting from implementation of a new rule change are

excluded from error analysis for 120 days from the required

implementation date of the rule change. Some State agencies may

implement earlier than the required implementation date, in such cases

the 120-day count begins on the actual date of implementation by the

State agency. We do not have the discretion to exclude variances for a

longer period of time. State agencies which plan to implement earlier

than the required date are reminded to follow the procedures at 7 CFR

275.12(d)(2)(vii)(A).

List of Subjects

7 CFR Part 272

Alaska, Civil rights, Food stamps, Grant programs--social programs,

Reporting and recordkeeping requirements.

7 CFR Part 273

Administrative practice and procedures, Aliens, Claims, Food

stamps, Grant programs--social programs, Penalties, Reporting and

recordkeeping requirements, Social security, Students.

Accordingly, 7 CFR Parts 272 and 273 are amended as follows:

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

1. The authority citation of Parts 272 and 273 continues to read as

follows:

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

2. In Sec. 272.1, a new paragraph (g)(145) is added to read as

follows:

Sec. 272.1 General terms and conditions.

* * * * *

(g) Implementation. * * *

(145) Amendment No. 369. The provisions of Amendment No. 369 are

effective May 31, 1996. State agencies must implement no later than

November 27, 1996. The provisions of this amendment are applicable for

determinations of intentional failure to comply made on or after the

effective date of the amendment.

[[Page 19160]]

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

Sec. 273.9 [Amended]

3. In Sec. 273.9, the second sentence of paragraph (b)(5)(i) is

amended by removing the words ``for purposes of recouping from a

household an overpayment which resulted from the household's

intentional failure to comply with the other program's requirements''.

4. In Sec. 273.11, paragraph (k) is revised to read as follows:

Sec. 273.11 Action on households with special circumstances.

* * * * *

(k) Failure to comply with another assistance program's

requirements. A State agency shall not increase food stamp benefits

when a household's benefits received under another means-tested

Federal, State or local welfare or public assistance program, which is

governed by welfare or public assistance laws or regulations and which

distributes public funds, have been decreased (reduced, suspended or

terminated) due to an intentional failure to comply with a requirement

of the program that imposed the benefit decrease. This provision does

not apply in the case of individuals or households subject to a food

stamp work sanction imposed pursuant to 7 CFR 273.7(g)(2). State agency

procedures shall adhere to the following minimum conditions:

(1) This provision must be applied to all applicable cases. If a

State agency is not successful in obtaining the necessary cooperation

from another Federal, State or local means-tested welfare or public

assistance program to enable it to comply with the requirements of this

provision, the State agency shall not be held responsible for

noncompliance as long as the State agency has made a good faith effort

to obtain the information.

(2) A State agency shall not reduce, suspend or terminate a

household's current food stamp allotment amount when the household's

benefits under another applicable assistance program have been

decreased due to an intentional failure to comply with a requirement of

that program.

(3) A State agency must adjust food stamp benefits when eligible

members are added to the food stamp household regardless of whether or

not the household is prohibited from receiving benefits for the

additional member under another Federal, State or local welfare or

public assistance means-tested program.

(4) Changes in household circumstances which are not related to a

penalty imposed by another Federal, State or local welfare or public

assistance means-tested program shall not be affected by this

provision.

Dated: April 23, 1996.

Ellen Haas,

Under Secretary for Food, Nutrition, and Consumer Services.

[FR Doc. 96-10786 Filed 4-30-96; 8:45 am]

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