Food Stamp Program: Food Stamp Provisions of the Balanced Budget Act of 1997

DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 272 and 273

[Amt. No. 379]

RIN Number: 0584-AC63

Food Stamp Program: Food Stamp Provisions of the Balanced Budget

Act of 1997

AGENCY: Food and Nutrition Service, USDA.

ACTION: Interim rule.

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SUMMARY: This rule will implement two food stamp provisions of the

Balanced Budget Act of 1997. The first provision provides State

agencies the authority to exempt from the food stamp time-limit at

section 6(o)(2) of the Food Stamp Act of 1977 up to 15 percent of the

State's caseload that is subject to the requirement. The second

provision provides additional funding for administration of Food Stamp

Employment and Training programs. These two provisions enhance State

flexibility in exempting portions of a State agency's caseload from the

food stamp time limit and increase significantly the funding available

to create work opportunities for recipients that are subject to the

time limit.

DATES: This rule is effective November 2, 1999. Comments must be

received by November 2, 1999, in order to be assured of consideration.

ADDRESSES: Comments concerning this interim rule should be submitted to

John Knaus, Branch Chief, Program Development Division, Food Stamp

Program, Food and Nutrition Service, USDA, 3101 Park Center Drive,

Alexandria, Virginia 22302; telephone: (703) 305-2519. Comments may

also be datafaxed to the attention of Mr. Knaus at (703) 305-2486 or

sent electronically through the internet to: [email protected]

All written comments will be open for public inspection at the office

of the Food and Nutrition Service during regular business hours (8:30

a.m. to 5 p.m., Monday through Friday) at 3101 Park Center Drive,

Alexandria, Virginia, 22302, Room 720.

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FOR FURTHER INFORMATION CONTACT: Questions regarding this interim

rulemaking should be addressed to John Knaus, Branch Chief, at the

above address or by telephone at (703) 305-2519.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This interim rule has been determined to be economically

significant under Executive Order 12866 and Major under Public Law 104-

121, and was reviewed by the Office of Management and Budget.

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 in 7 CFR part 3015, subpart V and related Notice (48 FR 29115,

June 24, 1983), this Program is excluded from the scope of Executive

Order 12372 which requires intergovernmental consultation with State

and local officials.

Regulatory Flexibility Act

This action has been reviewed with regard to the requirements of

the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Shirley

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

certified that this action will not have a significant economic impact

on a substantial number of small entities. State welfare agencies and

political subdivisions will be affected to the extent they must

implement the provisions described in this action.

Executive Order 12988

This interim rulemaking has been reviewed under Executive Order

12988, 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.

Unfunded Mandate Analysis

Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub. L.

104-4, establishes requirements for Federal agencies to assess the

effects of their regulatory actions on State, local, and tribal

governments and the private sector. Under section 202 of UMRA, the

Department generally must prepare a written statement, including a cost

benefit analysis, for proposed and final rules with ``Federal

mandates'' that may result in expenditures to State, local, or tribal

governments, in the aggregate, or to the private sector, of $100

million or more in any one year. When such a statement is needed for a

rule, section 205 of the UMRA generally requires the Department to

identify and consider a reasonable number of regulatory alternatives

and adopt the least costly, more cost-effective or least burdensome

alternative that achieves the objectives of the rule.

This rule contains no Federal mandates (under the regulatory

provisions of Title II of the UMRA) which impose costs on State, local,

or tribal governments or to the private sector of $100 million or more

in any one year. Thus this rule is not subject to the requirements of

section 202 and 205 of the UMRA.

Paperwork Reduction Act

This interim rule contains information collections which are

subject to review by the Office of Management and Budget (OMB) under

the Paperwork Reduction Act of 1995 (Pub. L. 104-13) (44 U.S.C. 3507).

The reporting and recordkeeping burdens associated with the 15

percent exemption and the increased funding for State food stamp

employment and training programs authorized by the Balanced Budget Act

of 1997 (Balanced Budget Act) and addressed in this rule necessitated a

revision to a previously approved information collection activity, the

Employment and Training Program Report (FNS-583), approved under OMB

No. 0584-0339. Because the Balanced Budget Act mandated implementation

of the food stamp provisions addressed in this rule effective October

1, 1997, without regard as to whether regulations were promulgated to

implement them, FNS submitted an emergency request to OMB on February

17, 1998, to revise the information collection for the FNS-583 form to

reflect the requirements of the statute. FNS estimated the total annual

burden hours associated with the revised FNS-583 to be 195,363 hours--

182,643 hours for the work registration process, 2,762 hours for the 15

percent ABAWD exemption, and 9,958 hours for the E&T funding

requirements. OMB approved the burden estimate for the revised form for

six months, with an expiration date of August 31, 1998.

On April 27, 1998, FNS issued a notice in the Federal Register (63

FR 20567) describing in detail the revised collection of information

and requesting comments. FNS received no comments from the general

public or other public agencies about the information collection.

On September 23, 1998, FNS received an extension of OMB's approval

of the revised burden estimate for the FNS-583 through September 30,

2001.

Public Participation and Effective Date

The amendments to sections 6(o) and 16(h) of the Food Stamp Act of

1977 (Food Stamp Act) which are reflected in this rule were enacted on

August 5, 1997, as sections 1001 and 1002, respectively, of the

Balanced Budget Act, Title I, Pub. L. 105-33. The amendments were

effective October 1, 1997. Section 1005 of the Balanced Budget Act

required that regulations implementing sections 1001 and 1002 of the

Act be promulgated no later than one year after the date of enactment

of the amendments to the Food Stamp Act. In order to meet the

requirement of section 1005 of the Balanced Budget Act, Shirley

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

determined, pursuant to 5 U.S.C. 533(b)(3)(B), that public comment on

this rule prior to implementation is impracticable and that good cause

exists for making this rule effective less than 30 days after its

publication. However, because we believe that administration of the

rule may be improved by public comment, comments are solicited on this

rule for 60 days after publication. All comments received within the

comment period will be analyzed, and any appropriate changes will be

incorporated in the subsequent publication of a final rule.

Regulatory Impact Analysis

Need for Action

This action is needed to implement section 1005 of the Balanced

Budget Act. That section requires the Secretary of Agriculture to

promulgate regulations implementing the amendments made to the Act by

Title I of the Balanced Budget Act.

Benefits

The provisions of this rule will provide State agencies the ability

to exempt from the time limits at section 6(o)(2) of the Food Stamp Act

(7 U.S.C. 2015(o)(2)) an additional 15 percent of the State's caseload

subject to the requirement. It will also increase significantly the

funding available to State agencies to create work opportunities for

recipients subject to the time limit. Together the provisions, to the

extent that they are fully

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implemented by the States, will permit an estimated 84,000 recipients a

month who are subject to the time limit at section 6(o)(2) of the Food

Stamp Act to continue to receive Food Stamp Program benefits. Of these

recipients, 64,000 will be exempted under the 15 percent waiver

authority, with an additional 20,000 able to meet the work requirement

and thus retain eligibility due to the expanded E&T funding.

Costs

The amendments made by this rule will increase Food Stamp Program

expenditures by $1.4 billion over the next five years.

Background

On August 5, 1997, the President signed Public Law 105-33, the

Balanced Budget Act of 1997. The Balanced Budget Act includes several

provisions that affect the Food Stamp Program. This rule implements two

provisions of the Balanced Budget Act. The first provision provides

State agencies the authority to exempt from the time limit at section

6(o)(2) of the Food Stamp Act up to 15 percent of the State's caseload

subject to the requirement. The second provision provides additional

funding for administration of Food Stamp Program Employment and

Training (E&T) programs.

15 Percent Exemption

Background

On August 22, 1996 the President signed the Personal Responsibility

and Work Opportunity Reconciliation Act of 1996 (PRWORA) (Pub. L. 104-

193). Section 824 of the PRWORA amended section 6(o) of the Food Stamp

Act to provide that able-bodied adults without dependents (ABAWDs) can

only receive food stamps for 3 months in 3 years unless they are

working, participating in a work program 20 hours per week, or

participating in a workfare program. It exempts individuals from the

time limit if they are under 18 or over 50, medically certified as

physically or mentally unfit for employment, a parent or other

household member with responsibility for a dependent child, exempt from

work registration under 6(d)(2) of the Act, or pregnant. It provides

that individuals can regain eligibility if they work 80 hours in a 30

day period. Individuals maintain eligibility as long as they are

satisfying the work requirement. If the individual later loses the job,

he/she can receive an additional 3 months of food stamps while not

working. The additional 3 months must be consecutive and begins on the

date the individual notifies the State that he/she is no longer

working. It should be emphasized that PRWORA provides an individual the

opportunity to receive a maximum of 6 months of food stamps in a 3-year

period without meeting the work requirement, if the two 3-month periods

are interrupted by a period of work.

The Food Stamp Act, as amended by PRWORA, allows waivers of the

time limit for groups of individuals living in areas with an

unemployment rate of more than 10 percent or where there are not a

``sufficient number of jobs to provide employment for the

individuals.'' 7 U.S.C. 2015(o)(4)(A)(ii). Subsequent to the enactment

of PRWORA, the President signed the Balanced Budget Act. Section 1001

of the Balanced Budget Act amended section 6(o) of the Food Stamp Act

to allow State agencies to provide an exemption from the PRWORA-imposed

time limits of section 6(o) of the Food Stamp Act for up to 15 percent

of covered individuals. ``Covered individuals,'' as defined in section

6(o)(6)(ii), are those ABAWDs who are not: excepted under paragraph

6(o)(3) of the Food Stamp Act, covered by a waiver, complying with the

work requirement, or in their first or second three months of

eligibility. Section 1001 of the Balanced Budget Act gives the

Secretary the authority to estimate for Fiscal Year (FY) 1998 the

number of covered individuals in the State based on FY 1996 Quality

Control data and other factors the Secretary considers appropriate due

to the timing and the limitations of the data. It provides that

beginning in FY 1999, the number of exemptions will be adjusted to

reflect changes in (1) the State's entire caseload and (2) changes in

the proportion of the State's food stamp caseload covered by the ABAWD-

related waivers. Section 1001 of the Balanced Budget Act also amended

the Food Stamp Act to require that the Food and Nutrition Service (FNS)

adjust the number of exemptions assigned for a current fiscal year

based on the actual number of exemptions granted by the State agency in

the preceding year. Finally, it gives FNS the authority to require

whatever State reports it deems necessary to ensure compliance with the

15 percent exemption provisions. FNS has no discretion in implementing

this provision.

Because there are many requirements of the PRWORA and the Balanced

Budget Act which apply only to ABAWDs and the time limit, FNS is

creating a new regulatory section, Sec. 273.24 in this interim rule.

This interim rule will incorporate the Balanced Budget Act provisions

regarding the 15 percent exemptions into Sec. 273.24. All the PRWORA

provisions regarding ABAWDs and the time limit will be incorporated

into Sec. 273.24 once the proposed rule implementing those provisions

is finalized.

Determining How To Use the Exemptions

The Balanced Budget Act provides that State agencies may allow an

exemption from the time limits of section 6(o) of the Food Stamp Act of

up to 15 percent of covered individuals. The law does not prescribe how

the State agencies shall use the exemption authority. FNS recognizes

that there are many ways a State agency may want to use the exemption

authority. A State agency can, for example, exempt individuals pursuing

their General Equivalency Diploma (GED), individuals residing in the

balance of a county when only a partial county received a waiver under

section 6(o)(4) of the Food Stamp Act, or individuals in an area that

is geographically remote from the State's workfare sites. States could

also use the exemptions to extend for a certain time the eligibility of

individuals who have exhausted the time limit. Therefore, FNS will not

be prescribing categories or geographic areas for which these

exemptions must be used. Instead FNS will allow State agencies maximum

flexibility regarding the 15 percent exemption authority. State

agencies may apply the exemptions as they deem appropriate. At the same

time FNS would like to remind State agencies that along with the

flexibility they are afforded in terms of determining the exemption

criteria comes the responsibility for developing exemption policies

that comport with their number of exemptions. A State agency should

maximize the number of exemptions without exceeding the number of

exemptions allocated for the year.

Covered Individuals

Section 1001 of the Balanced Budget Act amended section 6(o)(6)(ii)

of the Food Stamp Act to provide that a State agency may provide an

exemption from the time limits of section 6(o) for covered individuals.

The Balanced Budget Act defined ``covered individuals'' as those ABAWDs

who are not: excepted under paragraph 6(o)(3) of the Food Stamp Act,

covered by a waiver under 6(o)(4) of the Food Stamp Act, complying with

the work requirement of 6(o)(2) of the Food Stamp Act, or in their

first or second three months of eligibility. FNS would like to clarify

that it is up to the State

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agency to decide whether or not an individual has to exhaust his/her

first and second three months in order to qualify for an exemption

under this provision. For example, a State agency may exempt every

ABAWD who resides in the part of a county that was not already waived

under 6(o)(4) regardless of whether or not they have exhausted their

first and second three months. However, a State agency may determine

that the best way to manage their finite number of 15 percent

exemptions is to require individuals to exhaust their first and second

three months before receiving an exemption under this provision.

Arriving at the By-State Numbers of Exemptions for FY 1998

The Balanced Budget Act also amended section 6(o) of the Food Stamp

Act to provide in paragraph (6)(C) that for FY 1998, a State agency may

provide a number of exemptions such that the average monthly number of

exemptions in effect during the fiscal year does not exceed 15 percent

of the number of covered individuals in the State in FY 1998, as

estimated by the Secretary, based on the FY 1996 Quality Control (QC)

data and other factors the Secretary considers appropriate due to the

timing and limitations of the survey.

In a memorandum dated September 4, 1997, FNS advised the State

agencies what their average number of monthly exemptions were for FY

1998. To arrive at the number of covered individuals for each State,

FNS began with the entire FY 96 QC data file, and then made adjustments

by:

Excluding recipients exempted from the ABAWD provisions

Excluding to the extent possible those non-citizens made

ineligible for food stamps after August 22, 1997

Excluding the number of recipients who were complying with

the work requirements

Excluding to the extent possible those people who were at

the time in their initial first three months of eligibility

Adjusting this data to reflect the actual change in each

State's caseload between FY 96 and FY 97 and the expected national

caseload change between FY 97 and FY 98, and

Excluding those individuals living in waived areas.

To arrive at 15 percent of the covered individuals, FNS multiplied

the number of covered individuals for each State by 15 percent.

Based on this methodology, FNS authorized for FY 1998 approximately

64,000 average monthly exemptions for ABAWDs nationwide and made

allocations from this total to the States. It is important to note that

the average number of exemptions allocated to each State for FY 1998

was based on the number of covered individuals in FY 1996 (before the

ABAWD time limits took effect) and, therefore, was likely greater than

15 percent of the number of covered individuals in areas that have

implemented the time limits.

Subsequent Fiscal Years

Determining the Number of Exemptions

The Balanced Budget Act amended section 6(o) of the Food Stamp Act

by adding paragraph (6)(D) (7 U.S.C. 2015(o)(6)(D)) to provide that for

FY 1999 and subsequent fiscal years, a State agency may exempt up to 15

percent of their unwaived, unemployed, childless able-bodied population

from the three-month time limit. The number of exemptions allotted each

State will reflect changes in the State's caseload and the proportion

of food stamp recipients covered by waivers granted under paragraph

6(o)(4) of the Food Stamp Act. FNS would like to clarify that the

amendment to section 6(o) of the Food Stamp Act made by section 1001 of

the Balanced Budget Act requires that the adjustments be based on

changes in States' entire caseloads and not just ABAWD caseloads as

stipulated in the Balanced Budget Act definition of caseload.

Adjusting the Exemptions Based on the Previous Year's Use

The Balanced Budget Act also amended section 6(o) of the Food Stamp

Act, again in paragraph (6)(D), to provide that for FY 1999 and each

subsequent fiscal year, the Secretary shall increase or decrease the

number of individuals who may be granted an exemption by a State agency

to the extent that the average monthly number of exemptions in effect

in the State for the preceding fiscal year is different than the

average monthly number of exemptions estimated for the State agency for

the preceding fiscal year. Therefore, if this level of exemptions is

not used by the end of the fiscal year, the State may carry over the

balance. If more exemptions are used than authorized in a fiscal year,

the State's allocation for the next year will be reduced. Final

information to make these adjustments will not be available until after

the start of each fiscal year. Therefore, based on preliminary

information, FNS will provide the State agencies with their average

monthly number of exemptions prior to the start of each fiscal year,

and will make adjustments based on final information if necessary.

Caseload Adjustments

Section 1001 of the Balanced Budget Act also amended section 6(o)

of the Food Stamp Act to provide that the Secretary shall adjust the

estimated number of covered individuals allocated for a State during a

fiscal year if the number of actual food stamp recipients in the State

varies by more than 10 percent, as determined by the Secretary, from

the State's average caseload for the 12-month period preceding June 30

(7 U.S.C. 2015(o)(6)(E)). FNS would like to clarify that the adjustment

will be based on the entire caseload and not just the ABAWD caseload.

FNS will make only one adjustment a year. If an adjustment is

necessary, FNS shall advise the State agencies during the third quarter

of each fiscal year.

Reporting

Finally, the Balanced Budget Act amended section 6(o) of the Food

Stamp Act by adding paragraph (6)(G) to provide that the State agency

shall submit such reports to the Secretary as the Secretary determines

are necessary to ensure compliance with this provision. In order to

monitor State's use of the exemptions and to provide assistance if

necessary, FNS has determined that the State agency shall track and

report the number of cases exempt under the 15 percent criteria. State

agencies shall track the exemptions any way they deem appropriate.

State agencies shall report the numbers to the FNS regional offices on

a quarterly basis on the employment and training report (Form FNS-583),

as provided for in Sec. 273.7(c)(6).

Quality Control Issues

Since State agencies have complete discretion in determining which

recipients will receive exemptions, FNS will not be proscribing

categories or geographic areas. Therefore, QC will not evaluate States'

actual exemption decisions against the exemption criteria they have

adopted under the 15 percent criteria. However, in order to distinguish

cases that are exempt under the 15 percent criteria from cases that are

exempt under section 6(o) of the Food Stamp Act, covered by a waiver,

or fulfilling the work requirement (which will be evaluated by QC),

State agencies need to clearly identify those cases that are exempt

under the 15 percent criteria. For example, a State agency decides to

exempt everyone over the age of 45. QC pulls a case where the State

agency exempted someone who is 43. Even though the State agency

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exempted someone under 45, the case would not be in error because the

State agency can use the 15 percent exemption anyway it chooses. To

avoid an error, however, the State agency must have documented in the

casefile that the person was exempted under the 15 percent criteria.

Additional Funding for Food Stamp Employment and Training Programs

Background

Current Food Stamp Program regulations at section 273.7(d) contain

rules governing State agency use of Federal E&T grants. Current

regulations require FNS to allocate an annual Federal E&T grant to

State agencies based on the number of work registrants in each State

compared to the number of work registrants nationwide. The grant is 100

percent Federally funded and requires no State match. Under current

regulations, each State agency must receive at least $50,000 in 100

percent Federal funds. State agencies are required to use their E&T

grants to fund the administrative costs of planning, implementing and

operating E&T programs. FNS pays 50 percent of all other administrative

costs above those covered by the 100 percent Federal grant that State

agencies incur in operating their E&T programs.

Section 1002 of the Balanced Budget Act provided an additional $599

million over five years in 100 percent Federal funding for the

operation of the E&T programs. It also amended section 16(h)(1) of the

Food Stamp Act (7 U.S.C. 2025(h)(1)), to require that all 100 percent

Federal E&T funding remain available to FNS to allocate to States until

expended.

The apparent intent behind the additional E&T funding provided by

the Balanced Budget Act is to enable State agencies to provide

additional work opportunities for individuals subject to the 3-month

Food Stamp Program time limit discussed in the first section of this

preamble. By providing State agencies with the resources to create more

work opportunities, the supplemental funding will help insure that it

is only those individuals who deliberately choose not to satisfy the

program's work requirements who lose their eligibility and not those

who are willing to work but cannot find opportunities to do so.

Increased Funding Levels

Section 1002 of the Balanced Budget Act significantly increased the

amount of 100 percent Federal funding available to State agencies for

the operation of Food Stamp E&T programs. Section 817 of PRWORA amended

section 16(h)(1) of the Food Stamp Act to provide $405 million in 100

percent Federal E&T funding for FYs 1998 through 2002. The Balanced

Budget Act further amended section 16(h)(1) of the Food Stamp Act to

increase that amount by $599 million. It also amended section 16(h)(1)

of the Food Stamp Act to require that all 100 percent Federal E&T

funding remain available to FNS to allocate to States until expended.

Whereas all State agencies are eligible to receive some percentage

of the 100 percent Federal E&T funding provided under PRWORA, section

1002 of the Balanced Budget Act further amended section 16(h)(1) to

require that for a State agency to receive an allocation of the

additional or ``supplemental'' funding provided under that Act, the

State agency must maintain its level of expenditure of State funds on

E&T and optional workfare programs at a level that is not less than the

level of State agency expenditures on such programs in FY 1996.

Therefore, only State agencies that choose to meet this maintenance of

effort requirement are eligible to receive a portion of the

supplemental Federal E&T funding provided by the Balanced Budget Act.

The Balanced Budget Act's maintenance of effort requirement is

discussed in greater detail below.

Allocation of E&T Grants

Current regulations at Sec. 273.7(d)(1)(i)(A) require that

nonperformanced-based, 100 percent Federal E&T funding be allocated

among States based on the number of work registrants in each State

relative to the total number of work registrants nationwide. In order

to target Federal E&T funding toward serving recipients subject to the

time limit at section 6(o)(2) of the Food Stamp Act, the Balanced

Budget Act amended section 16(h)(1) of the Food Stamp Act to require

that in FY 1998 E&T grants be allocated among States based on (1)

changes in each State's caseload (defined as the average monthly number

of individuals receiving food stamps during the 12-month period ending

the preceding June 30); and (2) each State's portion of food stamp

recipients who are not eligible for an exception under section 6(o)(3)

of the Food Stamp Act to the work requirement at section 6(o)(2). The

Balanced Budget Act further amended section 16(h) to require that in

FYs 1999 through 2002, E&T grants be allocated to States based on (1)

changes in each State's caseload; and (2) each State's portion of food

stamp recipients who are not eligible for an exception under section

6(o)(3) of the Food Stamp Act who (A) do not reside in an area of the

State granted a waiver to the work requirement under section 6(o)(4) of

the Food Stamp Act, or (B) do reside in an area of the State granted a

waiver to the work requirement under section 6(o)(4) of the Food Stamp

Act if the State agency provides E&T services in the area to food stamp

recipients who are subject to the work requirement. This rulemaking

amends food stamp regulations at Sec. 273.2(d)(1)(i)(C) to describe the

new procedures for allocating Federal E&T grants.

Section 1002 of the Balanced Budget Act further amended section

16(h) of the Food Stamp Act to require that, for purposes of

determining each State's allocation of the Federal E&T grant in a

fiscal year, FNS estimate the portion of food stamp recipients residing

in each State who are not eligible for an exception under section

6(o)(3) of the Food Stamp Act using the 1996 QC survey data. This

rulemaking amends food stamp regulations at Sec. 273.2(d)(1)(i)(D) to

incorporate this requirement.

In accordance with the requirements of the Balanced Budget Act, FNS

used the following three-step process to determine each State's

allocation of Federal E&T funds in FY 1998:

1. Determine Population Not Excepted from Work Requirement. FNS

estimated the portion of food stamp recipients residing in each State

who are not eligible for an exception under section 6(o)(3) of the Food

Stamp Act to the work requirement at section 6(o)(2) of that Act using

the 1996 QC survey data.

2. Adjust for Expected Caseload Changes. FNS determined the actual

changes in each State's caseload between FY 96 and FY 97 and the

expected change in national caseload between FY 97 and FY 98. These

adjustments provided a caseload adjustment percentage for each State

that FNS used to modify the FY 96 QC data to represent, as closely as

possible, the population in each State in FY 98 that is not eligible

for an exception under section 6(o)(3) of the Food Stamp Act.

3. Determine the State-By-State Allocation of the 100 percent

Federal E&T Grant. FNS established the percentage basis for the E&T

allocation by dividing each State's estimated FY 98 population of

recipients not eligible for an exception under section 6(o)(3) of the

Food Stamp Act by the national estimate of that population in FY 98.

FNS then multiplied the resulting percentage by both the base Federal

E&T appropriation of $81 million provided under PRWORA and the

supplemental appropriation of $131 million provided

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under the Balanced Budget Act to determine each State's share of base

and supplemental E&T funds. All State agencies were eligible for the

base allocation. To receive a supplemental allocation, a State agency

must meet its maintenance of effort requirement as described below.

To determine each State agency's allocation of 100 percent Federal

E&T funds in FYs 1999 through 2002, FNS will follow the same three-step

procedure as described above, except that in estimating the number of

recipients in each State not eligible for an exception under section

6(o)(3) of the Food Stamp Act, FNS will adjust FY 96 QC data by

eliminating recipients eligible for an exception under section 6(o)(3)

who reside in an area of the State granted a waiver to the work

requirement under section 6(o)(4) of the Food Stamp Act except if the

State agency provides E&T services in the area to food stamp recipients

who are subject to the work requirement. (FNS estimates that 30 out of

the 39 State agencies which had waivers under section 6(o)(4) in April

1998 provided E&T services in at least some of the waived areas). FNS

will also adjust QC data to reflect caseload changes for the

appropriate fiscal years.

Current regulations at Sec. 273.7(d)(1)(i)(B) require that each

State agency receive at a minimum $50,000 in 100 percent Federal E&T

funding a year. The Balanced Budget Act left this requirement

unchanged. In order to ensure that each State agency receives a minimum

allocation of $50,000, FNS shall reduce the grant of each State agency

that is allocated to receive more than $50,000, if necessary,

proportionate to the number of food stamp recipients not eligible for

an exception under section 6(o)(3) of the Food Stamp Act that reside in

the State as compared to the total number of such recipients in all the

State agencies receiving more than $50,000. The funds from the

reduction shall be distributed to State agencies initially allocated to

receive less than $50,000 so that they receive the $50,000 minimum.

This rulemaking amends Food Stamp Program regulations at

Sec. 273.2(d)(1)(i)(E) to incorporate this requirement.

Current regulations at Sec. 273.7(d)(1)(i)(D) provide that FNS may

reallocate unexpended 100 percent Federal E&T grants during a fiscal

year if a State agency will not expend all of its E&T grant. The

Balanced Budget Act contains the same requirement except it provides

FNS the authority to reallocate unexpended funds in the fiscal year

that those funds are allocated or the next fiscal year. This rulemaking

amends Food Stamp Program regulations at Sec. 273.2(d)(1)(i)(F) to

incorporate this requirement.

Use of Funds

The Balanced Budget Act amended section 16(h)(1)(E) of the Food

Stamp Act to require that at least 80 percent of the 100 percent

Federal E&T grant a State agency receives in a fiscal year, including

both the base allocation for which each State agency is eligible and

the supplemental allocation available only to State agencies that

choose to meet their maintenance of effort requirement, be earmarked to

serve food stamp recipients who are not eligible for an exception under

section 6(o)(3) of the Food Stamp Act and who are placed in and comply

with either a workfare program that meets the requirements of section

20 of the Food Stamp Act, 7 U.S.C. 2029, or a comparable program

established by a State or political subdivision of a State, or a work

program for 20 hours or more per week. The 80 percent use of funds

requirement applies to any grant of 100 percent Federal E&T funds a

State receives in a fiscal year, including both the initial grant

received by a State at the beginning of a fiscal year and any grant

composed of reallocated funding which a State receives during a fiscal

year. State funds, including State monies expended to satisfy a State

agency's maintenance of effort requirement as described in the next

section, are not subject to the requirement.

The remaining 20 percent of a State's 100 percent Federal E&T grant

may be used to provide work activities for food stamp recipients who

are eligible for an exception under section 6(o)(3) of the Food Stamp

Act, or on work activities that do not qualify either as work or

workfare programs under sections 6(o)(2)(B) and (C) of the Food Stamp

Act, such as job search or job search training programs for any food

stamp recipient.

Although the language of section 1002 of the Balanced Budget Act

which amends section 16(h)(1)(E) of the Food Stamp Act might be

interpreted as requiring that a specified dollar amount (not less than

80 percent of the funds actually received by a given State agency) must

be expended by the State agency to serve ABAWDs in qualifying

activities, such an interpretation would necessitate an accounting of

each dollar expended by a State so that no less than 80 cents could be

used to serve ABAWDs in qualifying activities and, conversely, not more

than 20 cents could be expended for other allowable E&T costs. In

addition, if a State agency wished to expend the full 20 percent of its

allocation permitted to be used for unrestricted E&T activities, it

would be required to expend all of the amount allocated to it in order

to meet the 80 percent requirement. However, because nothing in the

Balanced Budget Act specifies that 80 percent of the funds which are

restricted to serving ABAWDs in qualifying activities must be expended

before a State agency may expend any of the 20 percent which may be

used for other E&T purposes, the Department is permitting State

agencies to spend the 20 percent of their E&T allocations that are

available for non-ABAWD activities independent of whether they spend

any of the 80 percent of their E&T grants that are earmarked for

ABAWDs. This interpretation of Section 1002 of the Balanced Budget Act

will significantly increase State flexibility in operating their E&T

programs.

State agencies, therefore, are not required to utilize all or any

of the 80 percent of their 100 percent E&T grant earmarked to serve

participants subject to the work requirement but may operate their E&T

programs utilizing only the 20 percent of their grant available to

serve non-ABAWDs and to be spent on non-qualifying activities. If a

State agency chooses not to spend some or any of the 80 percent of its

E&T grant earmarked for ABAWDs and ABAWD qualifying activities,

however, FNS may reallocate the unexpended funds to other State

agencies as it considers appropriate and equitable in accordance with

regulations at Sec. 273.2(d)(1)(i)(F).

If a State agency spends more than 20 percent of the 100 percent

E&T grant it receives for a fiscal year to provide work activities for

food stamp recipients eligible for an exception under section 6(o)(3)

of the Act, or on activities that do not qualify either as work or

workfare programs under sections 6(o)(2)(B) and (C) of the Food Stamp

Act, the allowable costs incurred that are in excess of the 20 percent

threshold will be reimbursed at the normal administrative 50-50 match

rate.

One hundred percent E&T funds that a State expends on ABAWDs who

reside in an area of a State granted a waiver under section 6(o)(4) of

the Food Stamp Act or on ABAWDs who have been granted an exemption

under section 6(o)(6) of the Act will count toward the 80 percent

expenditure requirement so long as the funds are spent creating

activities that meet the requirements of sections 6(o)(2)(B) and (C).

This rulemaking amends food stamp regulations to add a new section

that contains the requirements for State agency use of Federal 100

percent E&T

[[Page 48252]]

funding established by the Balanced Budget Act. The new section will be

designated Sec. 273.7(d)(1)(ii) and titled ``Use of funds.'' Former

Sec. 273.7(d)(1)(ii), which contained requirements for reimbursements

for E&T program participants, will be redesignated Sec. 273.7(d)(1)(v)

and remain unchanged except for changes to several cite references.

Regulations currently contained at Sec. 273.7(d)(1)(i)(E), (F), and

(G), list additional requirements for use of Federal 100 percent E&T

funds. Current regulations at Sec. 273.7(d)(1)(i)(E) require that

Federal 100 percent E&T grants be used only for the purposes of funding

the administrative costs of planning, implementing, and operating E&T

programs and not for funding other activities, such as work

registration or sanctioning activities. Current regulations at

Sec. 273.7(d)(1)(i)(F) require that State agencies have an E&T plan

approved by FNS prior to receiving any Federal 100 percent E&T funding.

Current regulations at Sec. 273.7(d)(1)(i)(G) prohibit State agencies

from using Federal 100 percent E&T funding to supplant nonfederal funds

for existing educational services and activities that are part of

allowable E&T components. This rulemaking makes no changes to the

content of any of the three provisions but moves them all to revised

Sec. 273.7(d)(1)(ii) in order that all requirements concerning use of

Federal 100 percent E&T funds may be in the same location. Current

regulations at Sec. 273.7(d)(1)(i)(E), (F), and (G) will be

redesignated as Sec. 273.7(d)(1)(ii)(E), (F), and (G), respectively.

As noted above, section 824 of the PRWORA amended section 6(o) of

the Food Stamp Act to provide that ABAWDs can only receive food stamps

for 3 months in 3 years unless they are working, participating in a

workfare program, or participating in a work program for 20 hours or

more per week. Section 824 defined a work program as a program operated

under the Job Training Partnership Act (JTPA), a program under section

236 of the Trade Act of 1974, or an E&T program operated or supervised

by the State or a political subdivision that meets standards approved

by the Governor of the State, other than a job search or job search

training program. On August 7, 1998, President Clinton signed the

Workforce Investment Act of 1998 (WIA) (Pub. L. 105-220). Section 199

of the WIA repeals the JTPA effective July 1, 2000. Section 199(A) of

that Act requires that all references in any other law to the JTPA be

deemed to refer to the corresponding provision in the WIA. To address

this change, the new regulations at Sec. 273.7(d)(1)(ii)(A) define a

qualifying work program as one operated under the JTPA or, after July

1, 2000, one that was previously operated under the JTPA that is now

operated under the WIA, a program under section 236 of the Trade Act of

1974, or an E&T program operated or supervised by the State or a

political subdivision that meets standards approved by the Governor of

the State, other than a job search or job search training program.

Maintenance of Effort

Section 1002 of the Balanced Budget Act also amended section

16(h)(1)(F) of the Food Stamp Act to require that, in order for a State

agency to receive its portion of the supplemental E&T funds allocated

under the Balanced Budget Act in any fiscal year, that State agency

must spend in that fiscal year at least the same amount of State funds

it spent in FY 96 to administer E&T and the optional workfare program

(if one was available).

State agencies are required to meet the maintenance of effort

requirement only if they wish to spend some or all of the supplemental

E&T allocation provided under the Balanced Budget Act. State agencies

that chose not to utilize any of the supplemental allocation for which

they are eligible are not required to satisfy the maintenance of effort

requirement. If a State agency chooses not to meet its maintenance of

effort requirement, the supplemental allocation for which it was

eligible will be reallocated to other States in accordance with

regulations at Sec. 273.7(d)(1)(i)(F).

In order to increase State flexibility in operating E&T programs,

FNS is not requiring State agencies to expend all of their required

maintenance of effort funds before they begin spending their

supplemental E&T grants. Instead, FNS is requiring those State agencies

which plan to spend the supplemental allocation for which they are

eligible in a fiscal year to provide in their annual State E&T plans

good faith assurance that they will meet their maintenance of effort

requirement. This rulemaking amends E&T State plan requirements at

Sec. 273.7(c)(4)(ii) to add this requirement. At the end of each fiscal

year, FNS will review State expenditures for operating food stamp E&T

programs to ensure that State agencies which noted in their E&T plans

that they intended to meet their maintenance of effort (MOE)

requirements did in fact do so.

In accordance with the requirements of section 1002 of the Balanced

Budget Act, State funds that are expended to meet a State's MOE

requirement are not subject to the use of funds requirement that at

least 80 percent of a State agency's E&T grant be earmarked to serve

individuals subject to the work requirement at section 6(o)(2) of the

Food Stamp Act and to operate activities that meet the requirements of

sections (6)(o)(2)(B) and (C).

State agencies may not count participant reimbursements as part of

their maintenance of effort expenditure, as this is prohibited under

section 16(h)(3) of the Food Stamp Act. The only exception is in the

case of optional workfare programs in which reimbursements to

participants for work-related expenses are counted as part of the State

agency's administrative expenses. The only State agencies that operated

optional workfare programs in FY 96 were Florida, North Carolina,

Wisconsin, Arkansas, and Colorado. They are the only State agencies

that may apply this exception.

This rulemaking amends food stamp regulations to add a new section

that contains the maintenance of effort requirements established by the

Balanced Budget Act. The new section will be designated

Sec. 273.7(d)(1)(iii) and titled ``Maintenance of Effort.'' Former

Sec. 273.7(d)(1)(iii), which provided for a 50 percent Federal match

for administrative costs incurred by State agencies in operating E&T

programs, will be redesignated Sec. 273.7(d)(1)(vi).

Component Costs

Section 1002 of the Balanced Budget Act amended section 16(h)(1) of

the Food Stamp Act to require FNS to monitor State expenditures of 100

percent Federal E&T funding, including the costs of individual

components of State E&T programs. The Balanced Budget Act also provided

FNS the discretion to set reimbursable costs for individual components

of State E&T programs, making sure that the amount spent or planned to

be spent on the components reflect the reasonable cost of efficiently

and economically providing components appropriate to recipients'

employment and training needs.

FNS has determined that setting reimbursement rates for E&T

activities is necessary to promote the intent of the increased E&T

funding, which was to create a sufficient number of work opportunities

so that as many food stamp recipients as possible who are subject to

the work requirement that wish to work can be given the opportunity to

do so before losing eligibility for the program. Use of the

reimbursement rates will help to ensure that the maximum number of work

opportunities can be created with the available funds, thus potentially

[[Page 48253]]

keeping as many ABAWDs as possible eligible for the program.

FNS recognizes, however, that use of the reimbursement rates will

significantly increase State administrative burdens. Therefore, FNS is

operating a one-year demonstration to test an alternative to the

reimbursement rates. Under the alternative, a State agency may spend

its Federal 100 percent E&T allocation without consideration of per

slot costs if the State agency commits to offering a work opportunity

to every ABAWD applicant or recipient who has exhausted the food stamp

time limit. The alternative to the reimbursement rates is discussed in

more detail below.

The reimbursement rates represent FNS' estimate of the reasonable

cost of efficiently and economically providing the work opportunities.

The rates apply to all 100 percent Federal E&T funds which a State

expends to provide work activities that meet the requirements of

section 6(o)(2)(B) and (C) of the Food Stamp Act for food stamp

recipients who are (1) subject to the work requirement at section

6(o)(2), exempt from the requirement because they reside in an area of

a State granted a waiver under section 6(o)(4), or (3) granted an

exemption from the requirement under section 6(o)(6) of the Act. The

rates do not apply to expenditures of the 20 percent of a State's 100

percent E&T grant that is not earmarked for ABAWDs, unless those funds

are used to create qualifying workfare and education and training slots

for ABAWDs.

The reimbursement rates went into effect on October 1, 1998. For FY

1998, the reimbursement rates did not apply and State agencies were

reimbursed for their actual costs in creating work slots. States were

notified of the reimbursement rates by memorandum from FNS regional

offices in February 1998. The amount of the reimbursement rates, which

is discussed below, may be revised based on cost data submitted by

State agencies. If the rates are revised, FNS will inform States of the

new rates through a policy memorandum.

In determining the reimbursement rates, FNS utilized available

information on the costs of providing E&T components that meet the

requirements of section 6(o)(2)(B) and (C). Because State agencies have

generally emphasized in their E&T programs activities such as job

search and job club that are expressly prohibited as qualifying work

programs under sections 6(o)(2)(B) and (C), FNS had little information

that is directly applicable in establishing reimbursement rates for

qualifying work activities. However, information from job search

activities was used as a basis for extrapolating certain costs, such as

for intake and monitoring, that are common to workfare and education

and training programs. FNS, therefore, has been able to use the

information it has available, in combination with information from

other sources, including a study of workfare programs conducted by the

Manpower Demonstration Research Corporation,\1\ to establish what it

believes to be a reasonable estimate of the maximum costs State

agencies will need to spend to provide workfare and education and

training slots for recipients not eligible for an exception under

section 6(o)(3).

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

\1\ Unpaid Work Experience for Welfare Recipients: Findings and

Lessons from MDRC Research, 1993. Thomas Brock, David Butler, David

Long.

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

FNS has established one reimbursement rate for both workfare and

20-hour a week work program components. However, because FNS recognizes

the uncertain level of compliance with various work requirements among

the childless, able-bodied adult population subject to the work

requirement at section 6(o)(2), it has set two levels for the

reimbursement rate--one level for filled work slots and the other for

unfilled or ``offered'' work slots. A slot is ``filled'' when a

participant reports to a work or training site to begin his or her work

activities. A slot is ``offered'' when a bona fide workfare or training

opportunity is made available to a participant (i.e., the participant

is told to report to a work site at a given date and time) but the

participant either refuses the assignment or does not report. This two-

tiered rate structure insures that a State agency is not denied

reimbursement for costs it incurred in creating work opportunities when

program participants choose not to comply with program work

requirements.

It should be noted that under the reimbursement rate structure

State agencies are reimbursed not for simply creating qualifying

workfare or 20-hour-a week education/training slots but for placing, or

offering to place, participants who are subject to the food stamp work

requirement in those slots. A State agency that assigns two ABAWDs to

the same work slot (one to work four hours in the morning, the other

four hours in the afternoon), would claim reimbursement for two filled

slots since two ABAWDs are retaining eligibility for the program. A

State agency that assigns one ABAWD to two slots in one month, a

workfare slot and a 20-hour-a-week education and training slot, may

only claim reimbursement for one filled slot for that month because

only one ABAWD is retaining eligibility for the program.

The reimbursement rates currently are as follows:

Offered Work Slot: $30

Filled Work Slot: $175

These rates represent the maximum amount of 100 percent Federal

funds that FNS will reimburse State agencies for their expenditures in

providing workfare and work program slots that meet the requirements of

section 6(o)(2)(B) and (C). The rates represent a monthly average per

slot cost, although reconciliation will be conducted on a yearly, not

monthly, basis.

To apply the rates, FNS will sum the number of filled and unfilled

slots a State agency reports at the end of a fiscal year and multiply

each by the appropriate rate. FNS will add the two resulting sums and

compare that against the State's actual expenditure of Federal E&T

money for that year. If the amount spent is less than the amount

allowed under the rates, the actual amount would be paid out of the E&T

grant. If the amount spent by the State agency exceeds the amounts

allowed under the rates, the State agency will be required to pay that

excess amount out of their own funds (which would be eligible for the

standard 50 percent administrative cost Federal match). This procedure

allows State agencies to average the cost of creating slots--i.e.,

balance the cost of higher priced slots with lower costing slots--and

still fall within the rate structure.

FNS is confident that State agencies will be able to create work

opportunities within the fiscal constraints set by the rates. Not only

will State agencies be able to average the costs of more expensive and

less expensive work slots over a fiscal year, but the two-tiered rate

structure enables State agencies to effectively claim reimbursement for

more than the fixed rate for a filled slot. Although the reimbursement

rate for a filled slot is $175, State agencies can claim an additional

$30 reimbursement if the slot is turned down by one participant before

being accepted by another. For example, if a work slot is refused by

four participants before being accepted by a fifth, the State agency

may claim reimbursement for offering the slot four times, or $120, in

addition to claiming a $175 reimbursement for filling the slot. In

other words, the State agency could claim $295 under this example for

the cost of creating one work slot.

A State agency may not claim reimbursement for a filled slot for a

participant who is satisfying the work

[[Page 48254]]

requirement by working 20 hours or more a week. In this case, the State

agency is incurring no reimbursable E&T cost (costs associated with

monitoring the participant's employment would be included as

certification costs).

As noted above, FNS may revise the amount of the reimbursement

rates based on actual data on the cost of creating work slots compiled

by State agencies. This information may be forwarded to FNS at the

address noted earlier in this document. FNS would also be interested in

obtaining from States examples of the types of E&T components that

States would like to operate for ABAWDs which they are not currently

operating, either because the components cannot be supported under the

existing reimbursement rate structure or for some other reason. States

should provide estimates of the costs of these components.

This rulemaking amends food stamp regulations to add a new section

that contains requirements regarding E&T components costs. The new

section will be designated Sec. 273.7(d)(1)(iv) and titled ``Component

Costs.'' Former Sec. 273.7(d)(1)(iii), which provides that enhanced

cost-sharing for placement of workfare participants in paid employment

be available only for placements that occur through optional workfare

programs funded under Sec. 273.22(g), will be redesignated

Sec. 273.7(d)(1)(vii).

Reporting Requirements

Current regulations at Sec. 273.7(c)(6) contain requirements for

State agency reporting of monthly figures for E&T program participants.

Current regulations at Sec. 273.7(d)(3) contain the requirements for

State agency reporting of expenditures on food stamp E&T programs.

Because of the new restrictions on the use of Federal 100 percent

E&T funding imposed by the Balanced Budget Act and described in this

rulemaking, FNS is increasing the reporting burden on State agencies

with regard to E&T programs. Although increased reporting requirements

impose increased administrative burdens on States, FNS concluded that

increasing State reporting requirements for E&T activities was the

simplest and most efficient means for monitoring State compliance with

the 80-20 use of funds requirement and the component cost reimbursement

rates, both described earlier in this memorandum.

In addition to submitting all the information previously required

under Sec. 273.7(c)(6) and Sec. 273(d)(3), State agencies must report

the number of workfare and 20-hour-a-week education and training slots

they created to serve recipients subject to the work requirement at

section 6(o) of the Food Stamp Act. This information must be broken out

to show the number of slots that were filled and the number that were

offered. State agencies must further break out the information to show

the number of slots that were created in areas of a State that have

received a waiver in accordance with section 6(o)(4) and in non-waived

areas (this information will be used by FNS to evaluate the impact on

participants subject to the work requirement of allowing State agencies

to spend the 80 percent of their 100 percent Federal E&T grant on

ABAWDs not in danger of losing eligibility). State agencies must also

report the amount of Federal 100 percent E&T funding spent on workfare

slots and on qualifying 20-hour-a-week work program slots that were

created to serve recipients subject to the work requirement at section

6(o). This information must be included on the Employment and Training

Program Report (FNS-583).

In this rulemaking we are amending food stamp regulations at

Sec. 273.7(c)(6) and Sec. 273(d)(3) to incorporate the new reporting

requirements.

Alternative to the Reimbursement Rates

Although FNS believes that the reimbursement rate structure will be

effective in creating a sufficient number of work opportunities to

insure that most ABAWDs who want to work will be provided the

opportunity to do so before losing eligibility for the Food Stamp

Program, we are also interested in exploring alternatives to the rate

structure which will provide State agencies greater flexibility while

at the same time satisfying the intent behind the increased funding

provided under the Balanced Budget Act. To this end, FNS will operate

in FY 1999 a one-year demonstration under which a State agency may

spend its Federal 100 percent E&T allocation without consideration of

per slot costs if the State agency commits to offering a work

opportunity to every ABAWD applicant or recipient who has exhausted the

time limit and does not reside in an area of a State that has a

received a waiver in accordance with section 6(o)(4) or has not already

received an exemption from the work requirement in accordance with

section 6(o)(6).

FNS will monitor whether State agencies approved for this

alternative are meeting their commitment to offer work opportunities to

all ABAWDs that have exhausted the time limit. In addition, QC errors

will be cited against a State agency operating under this alternative

if it terminated an ABAWD from the program, denied his or her

application because of the time limit without offering the ABAWD a work

slot, or issued benefits to an individual that had exhausted his or her

three months of eligibility but was not offered a slot. A State agency

that does not appear to be meeting its commitment, or that has a

significant number of such QC errors will be required to correct its

operation or be denied this alternative if FNS allows it in future

years.

The State agencies that operate under this alternative must still

meet the requirement that not less than 80 percent of the 100 percent

Federal funds the State agency expends in a fiscal year be spent on

activities that meet the requirements of sections 6(o)(2)(B) and (C) of

the Food Stamp Act.

The criteria FNS shall use to select the State agencies that may

participate in the alternative shall include the following factors:

The size of a State agency's ABAWD caseload;

The State agency's ability to offer a work opportunity to every

ABAWD applicant and participant that has exhausted the time limit;

The State agency's procedures for monitoring its compliance with

the requirements of the demonstration; and

The State agency's plans for taking corrective action if compliance

is not being met.

FNS welcomes comments from States on the alternative program. FNS

would also be interested in obtaining from States other proposals for

alternatives or modifications to the rate structure, such as providing

States a temporary exemption from the rates to start new food stamp E&T

programs in areas not previously served or to expand the capacity of

existing programs so that all ABAWDs reaching the time limit can be

provided with qualifying work opportunities.

Because FNS is operating the reimbursement rate alternative as a

one year demonstration that began on October 1, 1998, we are not

including in this interim rule regulations on the alternative program.

However, depending on the comments received on this program and FNS'

evaluation of the demonstration, FNS may elect to implement the

reimbursement rate alternative as a permanent program available to all

States. If a permanent program is implemented, regulations will be

issued, possibly in the final version of this interim rule.

[[Page 48255]]

Report to Congress

Section 1002(b) of the Balanced Budget Act requires that not later

than 30 months after the date of enactment of the Act, The Secretary of

Agriculture must submit to the Committee on Agriculture of the House of

Representatives and the Committee on Agriculture, Nutrition, and

Forestry of the Senate a report regarding whether the increased E&T

funds provided under section 1002 of the Balanced Budget Act have been

used by State agencies to increase the number of work slots for

recipients subject to the food stamp time limit at section 6(o) of the

Food Stamp Act (7 U.S.C. 2015(o)) in employment and training programs

and workfare in the most efficient and effective manner practicable.

In order to complete the required report, the Department of

Agriculture released a Request for Proposals in April 1998 in which it

solicited bids from parties interested in conducting the study. In

September 1998, the contract to complete the E&T study was awarded to

Health Systems Research, an independent research group.

Implementation

State welfare agencies have been instructed through agency

directive to implement the provisions of the BBA without waiting for

formal regulations. Sections 1001 (15 percent exemption) and 1002

(increased E&T funding) were required to be implemented as of October

1, 1997. The changes in this rule are effective and must be implemented

November 2, 1999. Any variances resulting from implementation of the

provisions of this amendment shall be excluded from error analysis for

120 days from this required implementation date in accordance with

Sec. 275.12(d)(2)(vii).

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

and recordkeeping requirements, Social Security, Students.

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

1. The authority citation for 7 CFR parts 272 and 273 continues to

read as follows:

Authority: 7 U.S.C. 2011-2036.

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

2. In Sec. 272.1, paragraph (g)(156) is added to read as follows:

Sec. 272.1 General terms and conditions.

* * * * *

(g) Implementation. * * *

(156) Amendment No. 379. The provision of Amendment No. 379

regarding the 15-percent exemption and additional funding for E&T is

effective and must be implemented no later than November 2, 1999. Any

variances resulting from implementation of the provisions of this

amendment shall be excluded from error analysis for 120 days from this

required implementation date in accordance with Sec. 275.12(d)(2)(vii)

of this chapter.

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

3. In Sec. 273.7:

a. A fourth sentence is added to the end of paragraph (c)(4)(ii).

b. New paragraphs (c)(6)(vi) and (c)(6)(vii) are added;

c. Paragraph (d)(1)(i) is revised.

d. Paragraphs (d)(1)(ii), (d)(1)(iii), and (d)(1)(iv) are

redesignated as (d)(1)(v), (d)(1)(vi) and (d)(1)(vii), respectively;

e. Newly redesignated paragraph (d)(1)(v) is amended by removing

references to ``(d)(1)(ii)(A)'' and ``(d)(1)(ii)(B)'' wherever they

appear, and by adding in their place references to ``(d)(1)(v)(A)'' and

``(d)(1)(v)(B)''.

f. New paragraphs (d)(1)(ii), (d)(1)(iii), and (d)(1)(iv) are

added;

g. A fourth sentence is added to paragraph (d)(3).

The revisions and additions read as follows:

Sec. 273.7 Work requirements.

* * * * *

(c) State agency responsibilities. * * *

(4) * * *

(ii) * * * A State agency which intends to spend the supplemental

E&T grant allocation for which it is eligible in a fiscal year in

accordance with paragraph (d)(1)(i)(B) of this section must declare its

intention to maintain its level of expenditures for E&T and workfare at

a level not less than the level of such expenditures in FY 1996.

* * * * *

(6) * * *

(vi) The number of filled and offered slots created under a

workfare program as described in Sec. 273.22 or a comparable program

that are intended to serve recipients subject to the work requirement

at section 6(o) of the Food Stamp Act. This information must be broken

out to show the number of slots that were created in areas of the State

that have received a waiver in accordance with section 6(o)(4) of the

Food Stamp Act and in non-waived areas;

(vii) The number of filled and offered slots created under a 20-

hour-a-week work program as described in paragraph (d)(1)(ii)(A) of

this section that are intended to serve recipients subject to the work

requirement at section 6(o) of the Food Stamp Act. This information

must be broken out to show the number of slots that were created in

areas of the State that have received a waiver in accordance with

section 6(o)(4) of the Food Stamp Act and in non-waived areas;

* * * * *

(d) Federal financial participation. (1) Employment and training

grants.--(i) Allocation of grants. Each State agency will receive an

E&T program grant for each fiscal year to operate an E&T program. The

grant will consist of a base amount that requires no State matching and

a supplemental amount which will be available only to those State

agencies that elect to meet their maintenance of effort requirements as

described in paragraph (d)(1)(iii) of this section.

(A) In determining each State agency's base 100 percent Federal E&T

grant amount for FYs 1998 through 2002, FNS will apply the percentage

determined in accordance with paragraph (d)(1)(i)(C) of this section to

the total amount of 100 percent Federal E&T grant provided under the

Personal Responsibility and Work Opportunity Reconciliation Act of 1996

for each fiscal year.

(B) In determining each State agency's supplemental 100 percent

Federal E&T grant amount for FYs 1998 through 2002, FNS will apply the

percentage determined in accordance with paragraph (d)(1)(i)(C) of this

section to the total amount of 100 percent Federal E&T grant provided

under the Balanced Budget Act of 1997 for each fiscal year.

(C) Except as otherwise provided in paragraph (d)(1)(i)(F) of this

section, effective in FY 1998, Federal funding for E&T grants,

including both the base and supplemental amounts, shall be allocated on

the basis of food stamp recipients in each State who are not eligible

for an exception under section 6(o)(3) of the Food Stamp Act as a

percentage of such recipients nationwide. Effective in FY 1999, Federal

funding for E&T grants shall be allocated on the basis of food stamp

recipients in each State who are not eligible for an exception under

section 6(o)(3) of the Food Stamp Act and who either do not reside in

an area subject

[[Page 48256]]

to a waiver granted in accordance with section 6(o)(4) of the Food

Stamp Act or do reside in an area subject to a waiver in which the

State agency provides employment and training services to food stamp

recipients who are not eligible for an exception under section 6(o)(3)

of the Food Stamp Act as a percentage of such recipients nationwide.

(D) FNS shall determine each State's percentage of food stamp

recipients not eligible for an exception under section 6(o)(3) of the

Food Stamp Act using FY 1996 Quality Control survey data adjusted for

changes in each State's caseload.

(E) Effective in FY 1998, no State agency shall receive less than

$50,000 in Federal E&T funds. To insure that no State agency receives

less than $50,000 in FY 1998, each State agency that is allocated to

receive more than $50,000 shall have its grant reduced, if necessary,

proportionate to the number of food stamp recipients in the State who

are not eligible for an exception under section 6(o)(3) of the Food

Stamp Act as compared to the total number of such recipients in all the

State agencies receiving more than $50,000. The funds from the

reduction shall be distributed to State agencies initially allocated to

receive less than $50,000. To insure that no State agency receives less

than $50,000 in FY 1999 and subsequent years, each State agency that is

allocated to receive more than $50,000 shall have its grant reduced, if

necessary, proportionate to the number of food stamp recipients in the

State who are not eligible for an exception under section 6(o)(3) of

the Food Stamp Act, and who do not reside in an area subject to a

waiver granted in accordance with section 6(o)(4) of the Food Stamp Act

or who do reside in an area subject to a waiver in which the State

agency provides employment and training services to food stamp

recipients who are not eligible for an exception under section 6(o)(3)

of the Food Stamp Act as compared to the total number of such

recipients in all the State agencies receiving more than $50,000. The

funds from the reduction shall be distributed to State agencies

initially allocated to receive less than $50,000 so that they receive

the $50,000 minimum.

(F) If a State agency will not expend all of the funds allocated to

it for a fiscal year under paragraph (d)(1)(i)(C) of this section, FNS

shall reallocate the unexpended funds to other States during the fiscal

year or the subsequent fiscal year as it considers appropriate and

equitable.

(ii) Use of funds. (A) Not less than 80 percent of the funds a

State agency receives in a fiscal year under paragraph (d)(1)(i) of

this section shall be used to serve food stamp recipients who are not

eligible for an exception under section 6(o)(3) of the Food Stamp Act

and who are placed in and comply with either a workfare program as

described in Sec. 273.22 or a comparable program, or a work program for

20 hours or more per week. A qualifying work program is a program

operated under the JTPA or, after July 1, 2000, a program that was

previously operated under the JTPA that is now operated under the

Workforce Investment Act, a program under section 236 of the Trade Act

of 1974, or an E&T program operated or supervised by the State or a

political subdivision that meets standards approved by the Governor of

the State, including programs described in paragraphs (f)(1)(iv),

(f)(1)(v), (f)(1)(vi) and (f)(1)(vii) of this section. Job search and

job search training programs as described in paragraphs (f)(1)(i) and

(f)(1)(ii) of this section do not meet the definition of qualifying

work program.

(B) Funds which a State agency receives in a fiscal year under

paragraph (d)(1)(i) of this section which are used to serve food stamp

recipients who are not eligible for an exception under section 6(o)(3)

of the Food Stamp Act but who either reside in an area of a State

granted a waiver under section 6(o)(4) of the Food Stamp Act or have

been granted an exemption under section 6(o)(6) of that Act and which

are expended on qualifying work activities as described in paragraph

(d)(1)(ii)(A) of this section shall count toward a State's 80 percent

expenditure.

(C) Not more than 20 percent of the funds a State agency receives

in a fiscal year under paragraph (d)(1)(i) of this section may be used

to serve households eligible for an exception under section 6(o)(3) of

the Food Stamp Act or on work activities that do not meet the

definition of qualifying work activities as described in paragraph

(d)(1)(ii)(A) of this section. E&T funds expended in accordance with

this paragraph (d)(1)(ii)(C) may be spent independent of whether or not

the State agency expends any Federal funds that meet the requirements

of paragraph (d)(1)(ii)(A) of this section. E&T funds expended in

accordance with this paragraph (d)(1)(ii)(C) are not subject to the

component cost reimbursement rates described in paragraph (d)(1)(iv) of

this section.

(D) If at the end of a fiscal year, FNS determines that a State

agency has spent more than 20 percent of the Federal E&T funds it

receives for that fiscal year under paragraph (d)(1)(i) of this section

to serve food stamp recipients who are eligible for an exception under

section 6(o)(3) of the Food Stamp Act or on work activities that do not

meet the definition of qualifying work activities as described in

paragraph (d)(1)(ii)(A) of this section, it shall reimburse States for

allowable costs incurred in excess of the 20 percent threshold at the

normal administrative 50-50 match rate.

(E) State agencies must use E&T program grants to fund the

administrative costs of planning, implementing and operating food stamp

E&T programs in accordance with approved State agency E&T plans. E&T

grants must not be used for the process of determining whether an

individual must be work registered, the work registration process, or

any further screening performed during the certification process, nor

for sanction activity that takes place after the operator of an E&T

component reports noncompliance without good cause. For purposes of

this paragraph (d)(1)(ii)(E), the certification process is considered

ended when an individual is referred to an E&T component for assessment

or participation. E&T grants must also not be used to reimburse

participants under paragraph (d)(1)(ii) of this section, since these

reimbursements which include dependent care and job-related

transportation costs are provided for in a separate 50:50 Federal/State

matching grant. Lastly, E&T grants must not be used to subsidize the

wages of participants, as reflected in current regulations, and in view

of section 16(b) of the Food Stamp Act, added by the Personal

Responsibility and Work Opportunity Reconciliation Act of 1996, which

provides authority for food stamp recipients who also participate in

TANF and other public assistance programs to have their food stamp

benefits paid directly to employers.

(F) A State agency's receipt of the E&T program grant as allocated

under paragraph (d)(1)(i) of this section is contingent on FNS'

approval of the State agency's E&T plan. If an adequate plan is not

submitted, FNS may reallocate a State agency's grant among other State

agencies with approved plans. Non-receipt of an E&T program grant does

not release a State agency from its responsibility under paragraph

(c)(3) of this section to operate an E&T program or from sanctions for

insufficient performance.

(G) Federal funds made available to a State agency to operate a

component under paragraph (f)(1)(vi) of this section must not be used

to supplant nonfederal funds for existing educational services and

activities that promote the purposes of this component. Education

expenses are approvable to the extent that E&T

[[Page 48257]]

component costs exceed the normal cost of services provided to persons

not participating in an E&T program.

(iii) Maintenance of Effort. (A) To be eligible for a grant derived

from the supplemental level of E&T funding described in paragraph

(d)(1)(i)(B) of this section, a State agency must maintain State

expenditures on E&T programs and workfare at a level not less than the

level of such expenditures in FY 1996. A State agency need not expend

all of its required maintenance of effort funds before it begins

spending its supplemental E&T grant. A State agency which intends to

spend the supplemental allocation for which it is eligible in a fiscal

year must, in accordance with paragraph (c)(4)(ii) of this section,

declare in its State E&T plan for that fiscal year its intention to

maintain its level of expenditures for E&T and workfare at a level not

less than the level of such expenditures in FY 1996.

(B) State funds which a State agency expends in order to meet its

maintenance of effort requirement are not subject to the requirements

of paragraph (d)(1)(ii) of this section.

(C) Participant reimbursements paid through State funds shall not

count toward a State agency's maintenance of effort requirement, except

in the case of optional workfare programs in which reimbursements to

participants for work-related expenses are counted as part of the State

agency's administrative expenses in accordance with section 20(g)(1) of

the Food Stamp Act.

(iv) Component costs. FNS shall monitor State agencies'

expenditures of 100 percent Federal E&T funds, including the costs of

individual components of State agencies' programs.

(A) Federal 100 percent E&T funds that State agencies expend in

accordance with paragraph (d)(1)(ii)(A) of this section are subject to

component cost reimbursement rates. The rates represent the maximum

amount of 100 percent Federal funds that FNS will reimburse States on

average each month for their expenditures in providing work

opportunities or ``slots'' that meet the requirements of section

(6)(o)(2)(B) and (C) of the Food Stamp Act.

(B) Separate reimbursement rates will apply for filled slots and

for offered slots. A slot is ``filled'' when a participant reports to a

work or training site to begin his or her work activities. A slot is

``offered'' when a bona fide workfare or training opportunity is made

available to a participant (i.e., the participant is told to report to

a work site at a given date and time) but the participant either

refuses the assignment or does not report.

(C) A State agency may claim reimbursement for only one filled slot

per participant per month. A State agency that assigns one participant

to two slots in the same month, for example a workfare slot and a 20-

hour-a-week training slot, may only claim reimbursement for one filled

slot in that month.

(D) Reconciliation will be conducted on a yearly basis. When

applying the rate, FNS will sum the number of filled and offered slots

a State agency reports for a fiscal year and multiply each by the

appropriate rate. FNS will add the two resulting sums and compare that

against the State agency's actual expenditure of Federal 100 percent

E&T money for that fiscal year. If the amount spent is less than the

amount allowed under the rates, the actual amount would be paid out of

the State agency's 100 percent Federal E&T grant for that fiscal year.

If the amount spent by the State agency exceeds the amounts allowed

under the rates, the State agency will be required to pay that excess

amount. State funds used to cover any shortfalls will be eligible for

the standard 50 percent Federal match in accordance with paragraph

(d)(1)(vi) of this section and Sec. 273.22(g).

* * * * *

(3) Fiscal recordkeeping and reporting requirements. * * * States

shall include as footnotes to the FNS-269 the amount of Federal 100

percent E&T funding spent on slots created under a workfare program as

described in Sec. 273.22 or a comparable program, and the amount of

Federal 100 percent E&T funding spent on slots created under a 20-hour-

a-week work program as described in paragraph (d)(1)(ii)(A) of this

section.

* * * * *

4. A new Sec. 273.24 is added to read as follows:

Sec. 273.24 15 Percent exemption authority for able-bodied adults.

(a) Definitions. For purposes of the food stamp time limit, the

terms below have the following meanings:

(1) Caseload means the average monthly number of individuals

receiving food stamps during the 12-month period ending the preceding

June 30.

(2) Covered individual means a food stamp recipient, or an

individual denied eligibility for food stamp benefits solely due to

paragraph 6(o)(2) of the Food Stamp Act who:

(i) Is not exempt from the work requirements under paragraph

6(o)(3) of the Food Stamp Act,

(ii) Does not reside in an area covered by a waiver granted under

paragraph 6(o)(4) of the Food Stamp Act,

(iii) Is not fulfilling the work requirements of 6(o)(2) of the

Food Stamp Act by working 20 hours a week averaged monthly,

participating and complying with the requirements of a work program for

20 hours or more per week, participating in and complying with the

requirements of a program under section 20 or a comparative program

established by a State or political subdivision of a State,

(iv) Is not receiving food stamp benefits during the 3 months of

eligibility provided under paragraph 6(o)(2) of the Food Stamp Act, and

(v) Is not receiving food stamp benefits under paragraph 6(o)(5) of

the Food Stamp Act.

(b) General rule. Subject to paragraphs (c) through (e) of this

section, a State agency may provide an exemption from the time limits

of paragraph 6(o)(2) of the Food Stamp Act for covered individuals.

Exemptions do not count towards a State's allocation if they are

provided to an individual who is otherwise exempt from the time limit

during that month.

(1) Fiscal year 1998. A State agency may provide a number of

exemptions such that the average monthly number of exemptions in effect

during FY 1998 does not exceed 15 percent of the number of covered

individuals in the State in FY 1998, as estimated by FNS, based on FY

1996 quality control data, and other factors FNS deems appropriate.

(2) Subsequent fiscal years. For FY 1999 and each subsequent fiscal

year, a State agency may provide a number of exemptions such that the

average monthly number of exemptions in effect during the fiscal year

does not exceed 15 percent of the number of covered individuals in the

State, as estimated by FNS, and adjusted by FNS to reflect changes in:

(i) The State's caseload, and

(ii) FNS' estimate of changes in the proportion of food stamp

recipients covered by waivers granted under paragraph 6(o)(4) of the

Food Stamp Act.

(c) Adjustments will be made as follows:

(1) Caseload adjustments. FNS shall adjust the number of covered

individuals estimated for a State under paragraphs (c) and (d) of this

section during a fiscal year if the number of food stamp recipients in

the State varies from the State's caseload by more than 10 percent, as

estimated by FNS.

(2) Exemption adjustments. During FY 1999 and each subsequent

fiscal year, FNS shall adjust the number of exemptions allocated to a

State agency based on the number of exemptions in

[[Page 48258]]

effect in the State for the preceding fiscal year.

(i) If the State agency does not use all of its exemptions by the

end of the fiscal year, FNS shall increase the estimated number of

exemptions allocated to the State agency for the subsequent fiscal year

by the remaining balance.

(ii) If the State agency exceeds its exemptions by the end of the

fiscal year, FNS shall reduce the estimated number of exemptions

allocated to the State agency for the subsequent fiscal year by the

corresponding number.

(d) Reporting requirement. The State agency shall track the number

of exemptions used each month and report this number to the regional

office on a quarterly basis as an addendum to the quarterly employment

and training report (Form FNS-583) required by Sec. 273.7(c)(6).

(e) Other Program rules. Nothing in this section shall make an

individual eligible for benefits under the Food Stamp Act if the

individual is not otherwise eligible for benefits under the other

provisions of the Food Stamp Act.

Dated: August 23, 1999.

Julie Paradis,

Acting Under Secretary, Food, Nutrition and Consumer Services.

[FR Doc. 99-23017 Filed 9-2-99; 8:45 am]

BILLING CODE 3410-30-P