Bonus to Reward States for High Performance
Federal RegisterDec 6, 1999
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Administration for Children and Families
45 CFR Part 270
RIN 0970-AB66
Bonus to Reward States for High Performance
AGENCY: Administration for Children and Families, HHS.
ACTION: Proposed rule.
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SUMMARY: The Administration for Children and Families (ACF) is
proposing both work and non-work measures and a funds allocation
formula for awarding bonuses in FY 2002 and beyond to high performing
States under the Temporary Assistance for Needy Families Block Grant
(TANF program). We are proposing to award bonuses based on four work
measures (substantially the same work measures currently in effect for
the FY 1999 and FY 2000 awards) and three non-work measures. These are:
One measure on family formation and family stability (increase in the
number of children below 200 percent of poverty who reside in married
couple families); and two measures that support work and self-
sufficiency, i.e., participation by low-income working families in the
Food Stamp Program and participation in the Medicaid and Children's
Health Insurance Programs.
We are inviting public comment on both the proposed provisions and
on the development and use of additional measures, data sources, and
other provisions. Bonus funds of up to $200 million each year are
authorized for awards in fiscal years 1999 through 2003. The amount
awarded to each high performing State may not exceed five percent of
the State's family assistance grant. Earlier, we issued program
guidance covering bonus awards in FY 1999 and FY 2000. Guidance will
also be issued for the FY 2001 bonus awards.
DATE: You must submit comments by February 4, 2000.
ADDRESSES: You may mail comments to the Administration for Children and
Families, Office of Planning, Research and Evaluation, 7th Floor West,
370 L'Enfant Promenade, SW, Washington, DC 20447. You may also transmit
written comments electronically via the Internet. To transmit comments
electronically, or download an electronic version of the proposed rule,
you should access the ACF Welfare Reform Home Page at http://
www.acf.dhhs.gov/news/welfare/ and follow any instructions provided.
You may also hand-deliver comments at the street address below.
We will make all comments available for public inspection at the
Office of Planning, Research and Evaluation, 7th Floor West, 901 D
Street, SW, Washington, DC 20447, from Monday through Friday between
the hours of 9 a.m. and 4 p.m. EST. (This is the street address, as
opposed to the mailing address above.)
We will only accept written comments. In addition, all your
comments should:
Be specific;
Address only issues raised by the proposed rule, not the
law itself;
Where appropriate, propose alternatives;
Explain reasons for any suggestions, objections, or
recommended changes; and
Where possible, reference the specific section of the
proposed rule that you are addressing.
We will not acknowledge the individual comments we receive.
However, we will review and consider all comments that are germane and
are received during the comment period.
FOR FURTHER INFORMATION CONTACT: Sean Hurley, Director, Division of
Data Collection and Analysis, Office of Planning, Research and
Evaluation, ACF, at 202-401-9297.
Deaf and hearing-impaired individuals may call the Federal Dual
Party Relay Service at 1-800-877-8339 between 8 a.m. and 7 p.m. Eastern
time.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Legislative and Regulatory Background
A. The Temporary Assistance for Needy Families Program
B. Summary of the Statutory Provisions Applicable to High
Performance Bonus
C. External Consultation
D. Reader-Friendly Regulations
II. Background: Increasing Use of Performance Measurement
III. Major Issues in Developing Performance Measures
A. General Approach
B. Short-Term vs Long-Term Strategies
C. Formula and Distribution Issues
D. Measures
E. Data Sources
IV. FYs 1999, 2000, and 2001 Bonus Awards
V. Discussion of the Regulatory Provisions
A. Principles for a High Performance Bonus System
B. Section-by-Section Discussion of the Proposed Rule
VI. Discussion of Other Issues Related to Performance Measurement
A. Consideration of Issues Relating to Absolute Performance,
Performance Improvement, and Threshold Levels
B. Consideration of Alternate Ways to Structure the High
Performance Bonus to Ensure an Objective and Fair Competition: the
Impact of External Factors
C. Other Measures and Data Sources Considered
VII. Regulatory Impact Analyses
A. Executive Order 12866
B. Regulatory Flexibility Analysis
C. Assessment of the Impact on Family Well-Being
D. Paperwork Reduction Act
E. Unfunded Mandates Reform Act of 1995
F. Congressional Review
I. Legislative and Regulatory Background
A. The Temporary Assistance for Needy Families Program
Title I of the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996, Public Law 104-193, established the
Temporary Assistance for Needy Families (TANF) program at title IV-A of
the Social Security Act (the Act). TANF is a block grant program
designed to make dramatic reforms in the nation's welfare system. Its
focus is on moving recipients into work and turning welfare into a
program of temporary assistance, preventing and reducing the incidence
of out-of-wedlock births, and promoting stable two-parent families.
Other key features of TANF include provisions that emphasize program
accountability through financial penalties and rewards for high
performance.
TANF replaced the national welfare program known as Aid to Families
with Dependent Children (AFDC) which provided cash assistance to needy
families on an entitlement basis. It also replaced the related programs
known as the Job Opportunities and Basic Skills Training (JOBS) program
and the Emergency Assistance (EA) program.
The new TANF program went into effect on July 1, 1997, except in
States that elected to submit a complete plan and implement the program
at an earlier date. We published a Notice of Proposed Rulemaking (NPRM)
to implement the work, penalties, and data collection provisions of the
TANF program in the Federal Register on November 20, 1997 (62 FR
62124). A final TANF rule was published April 12, 1999 (64 FR 17720).
We have also published a number of other related regulations, including
rules covering annual reports of State child poverty rates in relation
to the TANF program (NPRM published September 23, 1998 (63 FR 50837)
and bonuses to reward decreases in illegitimacy (final rule published
April 14, 1999 (64 FR 18484)).
[[Page 68203]]
The new law reflects widespread, bipartisan agreement on a number
of key principles:
Welfare reform should help move people from welfare to
work.
Welfare should be a short-term, transitional experience,
not a way of life.
Parents should receive the child care and the health care
they need to protect their children as they move from welfare to work.
Child support programs should become tougher and more
effective in securing support from noncustodial parents.
Because many factors contribute to poverty and dependency,
solutions to these problems should not be ``one size fits all.'' The
system should allow States, Indian tribes, and localities to develop
diverse and creative responses to these problems.
The Federal government should place more emphasis on
program results.
Under section 401(a)(1) of the Act, States (and certain Indian
tribes) have the authority to use Federal welfare funds ``in any manner
that is reasonably calculated to accomplish the purpose'' of the new
program. It provides them broad flexibility to set eligibility rules
and decide what benefits are most appropriate. In short, it offers
States an opportunity to try new, far-reaching changes that can respond
more effectively to the needs of families within their own unique
environments.
B. Summary of the Statutory Provisions Applicable to the High
Performance Bonus
Section 403(a)(4) of the Act requires the Secretary to award
bonuses to ``high performing States.'' (Indian tribes are not eligible
for these bonuses.) The term ``high performing State'' is defined in
section 403(a)(4)(E) to mean those States that are most successful in
achieving the goals and purposes of the TANF program as specified in
section 401(a) of the Act. These goals and purposes are to--
(1) Provide assistance to needy families so that children may be
cared for in their own homes or in the homes of relatives;
(2) End the dependence of needy parents on government benefits by
promoting job preparation, work, and marriage;
(3) Prevent and reduce the incidence of out-of-wedlock pregnancies
and establish annual numerical goals for preventing and reducing the
incidence of these pregnancies; and
(4) Encourage the formation and maintenance of two-parent families.
Section 403(a)(4)(B) specifies that the bonus award for a fiscal
year will be based on a State's performance in the previous fiscal year
and may not exceed five percent of the State's TANF grant.
The statute at section 403(a)(4)(C) requires the Department to
develop a formula for measuring State performance. This formula must be
developed in consultation with the National Governors' Association
(NGA) and the American Public Welfare Association, now the American
Public Human Services Association (APHSA).
Section 403(a)(4)(D) requires the Secretary to use the formula
developed to assign a score to each eligible State for the fiscal year
preceding the bonus year and prescribe a performance threshold as the
basis for awarding the bonus. Section 403(a)(4)(D) also specifies that
$1 billion (or an average total of $200 million each year) will be
awarded over five years, beginning in FY 1999.
C. External Consultation
As we have done with all regulations related to the TANF program,
we implemented a broad consultation strategy prior to drafting these
proposed regulations. In addition, as required by section 403(a)(4)(C),
we consulted intensively with representatives of the NGA and the APHSA
on the development of provisions for awarding high performance bonus
funds. We met with staff of these two national organizations as well as
staff of the National Conference of State Legislatures (NCSL) and
approximately 30 representatives of States who participated by
conference call hookup on a regular basis over a period of
approximately nine months.
We want to express our appreciation to these national organizations
and to the representatives of their State members who provided expert
information, analysis, and in-depth programmatic knowledge. We also
appreciated the commitment they displayed and their willingness to
approach these discussions in such a collegial manner.
We also consulted with a number of other audiences: Researchers,
data experts, and academics; other Federal and non-Federal agencies
which had developed or were in the process of developing performance
measures for their programs; and representatives of a broad range of
non-profit, advocacy, and community-based programs.
These consultations were very useful in helping us identify key
issues, evaluate policy options, develop the program guidance that will
be used to award bonuses in FY 1999 and FY 2000, and formulate the
proposals set forth in this NPRM. (The program guidance for the awards
to be made in FY 1999 is found in TANF-ACF-PI-98-1 and TANF-ACF-PI-98-
5; the guidance for the FY 2000 awards is found in TANF-ACF-PI-99-1,
March 3, 1999.)
We would like to emphasize that we are publishing these regulations
as a proposed rule. Thus, all interested parties have the opportunity
to state their views and react to the specific policies we are
proposing for awards in FY 2002 and FY 2003 (and any subsequent fiscal
years for which Congress authorizes and appropriates funds). We will
review all comments we receive during the comment period and take them
into consideration before issuing a final rule.
D. Reader-Friendly Regulations
In its latest Document Drafting Handbook, the Office of the Federal
Register supports the efforts of the National Partnership for
Reinventing Government to encourage Federal agencies to produce more
reader-friendly regulations and to use plain language in developing all
new documents and regulations. In drafting this proposed rule, we have
paid close attention to this guidance and tried to draft a rule that
achieves these goals.
II. Background: Increasing Use of Performance Measurement
The TANF provisions for a high performance bonus and a bonus to
reward a decrease in State illegitimacy ratios represent only two
recent examples of Administration and Congressional efforts to increase
accountability and reward performance among federally-funded programs.
These bonus provisions also reflect a growing interest in and movement
toward the use of performance measurement by both the public and the
private sector. The list below includes examples of such efforts and
initiatives that we reviewed as a part of the development of this NPRM.
It also provides historical and substantive context for public review
of the measures we have proposed in the NPRM.
A. Federal Activities
The National Performance Review (now the National
Partnership for Reinventing Government), under the leadership of the
Vice President, has emphasized customer service standards, benchmarking
against the best in the business, and rewarding outstanding results
achieved by Federal agencies and offices.
[[Page 68204]]
In May 1997, the National Partnership for Reinventing
Government identified 31 ``Reinvention Impact Centers'' (now ``High
Impact Agencies'') to implement identified improvements. It selected
the Administration for Children and Families (ACF) as one of 19
agencies to achieve measurable goals by October 2000. ACF's performance
is being measured against four ``high impact goals.''
Congress enacted the Government Performance and Results
Act of 1993 (GPRA) to create a comprehensive strategic planning and
performance measurement system for the Federal government. Under this
law, all Federal agencies must develop multi-year strategies, identify
long-term goals and objectives, and prepare annual performance plans on
a program-by-program basis. To the extent feasible, the levels of
performance and specific indicators must be objective, quantifiable,
measurable, and focused on outcomes and accomplishments rather than
activities and processes.
One of the early GPRA pilot programs, the Office of Child
Support Enforcement (OCSE) in ACF, worked with States to reach
consensus on national goals and objectives, and OCSE then negotiated
voluntary performance agreements with each State specifying intended
program outcomes for establishing paternities and obtaining child
support orders and collections.
In the Welfare Indicators Act of 1994, Congress required
the Department to measure and report annually on indicators of welfare
receipt in three Federal means-tested programs: AFDC, Supplemental
Security Income (SSI), and the Food Stamp program. The purpose of the
report is to provide the public with generally accepted data in order
to evaluate the progress of reducing the rate and duration of welfare
receipt.
Congress included in the Balanced Budget Act of 1997, Pub.
L. 105-33, a provision authorizing the Department of Labor to award
performance bonuses in the Welfare-to-Work program. (See Notice of
Welfare-to-Work performance bonus criteria, published November 23, 1998
(63 FR 64832).) This legislation specified that 50 percent of funds for
job placement contracts be held until an individual has been on the job
for at least six months.
Since 1982, the Job Training Partnership Act program has
required States and local service agencies to report data on client
outcomes and has provided corresponding incentives and sanctions on the
basis of that outcome data.
``Healthy People 2000,'' initiated in 1985, represents an
early effort by DHHS to develop a national prevention strategy for
improving the health of the American people. This strategic plan
defines broad goals and targeted objectives in 22 priority areas and
involves a national consortium of nearly 300 national membership
organizations, all State Health Departments, and others working to
achieve these goals. The Department is currently developing the next
ten-year plan, ``Healthy People 2010.'' We expect the new plan to
include 26 national objectives.
The Federal Interagency Forum on Child and Family
Statistics, formally established by Executive Order in April 1997,
issues an annual data report, ``America's Children: Key National
Indicators of Well-Being,'' that uses Federal statistical data to
monitor the well-being of the Nation's children. Twenty-five key
indicators cover a wide range of conditions that impact children,
including economic security, health, behavioral and social environment,
and education.
The Department is using Public Health Performance
Partnerships as a new way of managing grant relationships with States
for programs within the Substance Abuse and Mental Health Services
Administration and the Centers for Disease Control and Prevention.
These Partnerships will identify performance measures to clarify
program goals and objectives and document specific performance. They
offer States increased flexibility in program management but require an
account of the results achieved.
Child Trends, Inc., a private research organization,
prepares an annual report entitled ``Trends in the Well-Being of
America's Children and Youth'' for the DHHS Office of the Assistant
Secretary for Planning and Evaluation.
B. Non-governmental Activities
Non-governmental groups are also providing leadership in
highlighting policy and program issues and pressing for accountability
and performance measurement. For example--
A national foundation, the Annie E. Casey Foundation, has
provided funds since 1985 to create an annual data book on child and
family well-being that focuses on indicators of State-level
performance. The ``KIDS COUNT DATA BOOK'' enables States and others to
compare the status of ten indicators of child well-being. The Casey
Foundation also issues ``CITY KIDS COUNT,'' a data book on the well-
being of children in large cities.
The United Way of America has established a resource
network to assist local United Ways in implementing systems for
measuring local program performance.
A citizen's group in Los Angeles publishes the mortality
rates for patients of individual physicians.
In Florida, a taxpayer's organization regularly reports
measures of productivity and performance by State agencies.
Case Western Reserve University's Center on Urban Poverty
and Social Change compiles community data from roughly 20 sources into
a publicly-accessible database for the Cleveland, Ohio area.
The Citizen's League of Greater Cleveland publishes
``Rating the Region,'' which compares that metropolitan area with 25
others on a variety of measures, from the strength of its business
climate to the quality of its education system and government.
(Citizens groups in Jacksonville, Pittsburgh, St. Louis, Seattle, and
Philadelphia have also published regional comparisons.)
C. State and Local Governmental Activities
In the late 1980s and early 1990s, some States took the
lead in developing State benchmarks or measurement goals to guide
public policy and public expenditures. The ``Oregon Option'' and
``Minnesota Milestones'' are examples of State-wide efforts that
include executive and legislative involvement as well as extensive
citizen input.
An August 1997 National Governors' Association report
found that 20 States were establishing performance standards for their
entire workforce development systems.
Some State and local governments are innovators in their
efforts to manage based on performance. For example, Ohio counties can
select various consolidation of funding and spending options.
``Partnership counties,'' for example, operate under an agreement that
provides incentive funds for performance measures such as exceeding the
all family or the two-parent participation rate or decreasing out-of-
wedlock births.
Several States are contracting with private organizations
to provide employment-related assistance and services, basing payment
on performance.
The Wisconsin Works (W-2) program has established
performance benchmarks for local welfare agencies and allows outside
contractors and non-profit organizations to compete for service
contracts in those cases where
[[Page 68205]]
local agencies fail to meet performance goals. The W-2 program also
provides funding incentives. Counties receive 80 percent of their
annual budget on a cost reimbursement basis. The balance of the funds
is placed in a statewide pool from which counties are rewarded based on
performance, e.g., the number of persons entering full-time employment.
A recent report from Mathematica Policy Research, Inc.,
details the Pennsylvania Department of Welfare's early experiences with
implementing the ``Community Solutions'' initiative, a set of voluntary
programs operated throughout the State to provide pre-and post-
employment services to TANF recipients. This initiative is performance
based; contractors receive payment based on the number of clients who
achieve specific employment goals such as placement in full-time
employment, placement in a job that offers medical benefits within six
months of hire, and continuous employment for at least 12 months after
placement.
III. Major Issues in Developing Performance Measures
In implementing the high performance bonus provision, we faced a
significant challenge in developing a performance measurement system
for the new TANF program. Although there is considerable activity in
this area in both the public and private sector, performance
measurement is a field in the early stages of development. Currently,
no single, agreed-upon approach for measuring performance exists. In
addition, in relation to measuring performance in the TANF program, we
identified a number of difficult and inter-related questions and
issues. We have listed many of the major issues below and invite
comment on how we have addressed them in the proposed rule.
A. General Approach
What is the purpose of the bonus award? What outcomes should we be
trying to influence through performance bonuses? Should we reward
accomplishment (comparing one State with another) or improvement
(comparing one State with its own previous record) or both? Does the
bonus represent only a reward for State achievement or does it also
represent an incentive to other States for improved performance? Should
we focus on awards for innovation and creativity? Should the system
reward only a few States or a larger number of States?
B. Short-term vs Long-term Strategies
Should we approach our task with the idea of developing interim
measures for the short-term and working on more rigorous (e.g., more
refined, sophisticated, or specific) measures over time as we learn
more about the nature of State TANF programs, as better data become
available, and as we get more experience with the high performance
bonus award process itself? Should we award $200 million each year in
bonuses or award less money in the initial years, rolling unused funds
into increased awards in the out-years?
C. Formula and Distribution Issues
Should we develop a single, composite formula for awarding bonuses,
or several formulae? Should the formula be designed to include several
categories of performance? Should States be allowed to choose the
categories in which they wish to compete? Should the formula include a
pre-determined standard of performance with bonuses being awarded only
if the State exceeds the standard? How can we avoid unintended effects
or perverse consequences of a particular formula design? Should funds
be divided equally among the measures? Since a State cannot receive a
bonus greater than five percent of its Family Assistance Grant, how
should funds be re-distributed if a State's award exceeds this amount?
For what purposes may a State use bonus award funds?
D. Measures
What specific measures should we use? Should the measures address
each of the goals in section 401 of the Act? If not, which goals should
receive priority? Should we identify a broad set of measures or focus
on a more limited set of key measures? Should we focus primarily on
work-related measures--a major goal of TANF? Should individual measures
be tied to the TANF population only or to the entire State population?
Should the measures be quantifiable or should some measures be
qualitative, e.g., patterned after the Baldridge Awards with a panel of
judges selected from a mix of national organizations and looking at
such criteria as leadership, collaboration, worker-client
relationships, customer satisfaction? Should we propose a set of core
measures against which all States would compete and a set of optional
measures against which States could choose to compete? Should there be
State-identified measures?
E. Data Sources
What data sources are available? How reliable, objective, and
verifiable are they? What would be the administrative burden associated
with alternative data sources? Will the data be comparable across
States? What data may be expected to be available in the future? Should
all data be verified before awards are made? What data validation
parameters should be undertaken? Should we limit the measures to those
that could be reasonably validated or collected from ``independent''
sources? Should we limit the measures to those for which all States
have data or reasonable access to data?
IV. FYs 1999, 2000, and 2001 Bonus Awards
We would have preferred to set the formula for all years through
rulemaking. However, FY 1998 (and FY 1997 in relation to improvement
measures) was the first year in which State performance would be
measured in order to make first year bonus awards in FY 1999. We were
not able to conduct adequate consultations and complete a formal
rulemaking process in order to advise States, in a timely way, how we
would be assessing their performance in FY 1998 and FY 1999 in order to
make awards in FY 1999 and FY 2000. Therefore, we decided to issue
program guidance covering the first two performance years without the
benefit of a formal rulemaking process.
We issued two Program Instructions covering bonus awards for FY
1999. Following the extensive external consultation noted above, and
consideration of comments received on draft proposals, we issued a
Program Instruction to States on March 17, 1998 (TANF-ACF-PI-98-1),
specifying the allocation formula and performance measures we would use
to make FY 1999 bonus awards.
The first Program Instruction grew out of our consultations with
NGA, APHSA, NCSL, and State representatives. From February through July
1997, we scheduled bi-weekly discussions with these groups covering the
principles underlying a performance system, the viability of individual
measures and data options, and the general allocation and distribution
rules. In July 1997, we shared a ``preliminary proposal'' with our
State partners and other interested parties, including advocates and
technical and policy experts, on which we received wide-ranging and
very helpful comments.
Based on the comments we received and further consultations, we
incorporated a number of changes to our initial proposal, and issued
the March 1998 Program Instruction. We made a few additional technical
changes and clarifications before issuing the
[[Page 68206]]
reporting form (ACF-200) on August 13, 1998 (TANF-ACF-PI-98-5, OMB No.
1970-0180).
We issued program guidance for the FY 2000 bonus awards on March 3,
1999 (TANF-ACF-PI-99-1).
We plan to issue guidance for the bonuses to be awarded in FY 2001
since final rules will not be published until well into the performance
years for these awards. (Awards in FY 2001 will be based on information
from States for FY 2000 and FY 1999 (improvement measure).)
V. Discussion of the Regulatory Provisions
A. Principles for a High Performance Bonus System
Given the substantive and technical complexities associated with
the development of high performance bonus measures, NGA and APHSA
developed a set of principles they believed should apply to a high
performance bonus system. We believed that these principles offered a
positive approach to and useful criteria for developing a bonus award
system while avoiding major pitfalls. We also found these principles
helpful as we addressed specific issues in developing the NPRM.
The NGA/APHSA principles stated that a high performance bonus
system should:
Be simple, credible, quantifiable, understandable to the
public, and consistent with the goals of the law;
Focus on outcomes rather than process;
Take varying State economic circumstances and policies
into account and not impede the flexibility provided to States under
Public Law 104-193;
Minimize double jeopardy or reward. (For example, the law
already provides bonuses for reducing out-of-wedlock births, a caseload
reduction credit, and penalties and incentives related to child support
enforcement and paternity establishment);
Avoid additional data collection requirements and costs
and build on existing systems;
Avoid unintended consequences;
Focus on positive rather than negative measures; and
Reflect the strong emphasis on employment and self-
sufficiency in the Federal law and in the States' implementation of the
law. This emphasis should influence the measures included in the system
and the distribution of bonus funds.
B. Section-by-Section Discussion of the Proposed Rule
We believe the central goal of the TANF program is to move welfare
recipients into work, and we are committed to specific work measures as
a basis for awarding high performance bonuses. In addition, the law
also works to ensure that the needs of low-income children and families
are met. The Department has underway several studies to monitor changes
in the situations of needy children and families after enactment of the
TANF program, e.g., how certain children are affected by the provisions
of the new law. The statute also requires us to track whether a State's
child poverty rate increased as the result of the TANF program in the
State and requires States to initiate corrective actions when such
increases occur.
Bonus awards in FY 1999 and FY 2000 will be based solely on
measures addressing the goal of work. However, the Department has been
interested in developing a broader set of measures that more fully
reflect other purposes and goals of the TANF program, as have the NGA,
APHSA, NCSL, Congress, and others. We sought to develop measures that
would address other purposes but, until recently, were unable to
identify measures for which we had a reliable data source. In our
consultations with States, Congress, national organizations, and
experts, these groups have recommended the inclusion of other purposes
and measures. Given the potential availability of a new data source, we
are proposing both work and non-work measures in this NPRM to address
three of the statutory purposes: work, child and family well-being, and
family formation and family stability.
In summary, we are proposing to:
Award bonuses beginning in FY 2002 based on four work
measures (substantially the same work measures currently in use for FY
1999 and FY 2000 bonus awards);
Award bonuses beginning in FY 2002 based on three non-work
measures: one measure on family formation and family stability
(increase in the number of children below 200 percent of poverty who
reside in married couple families) and two measures that support work
and self-sufficiency, i.e., participation by low-income working
families in the Food Stamp Program and participation in the Medicaid
and the Children's Health Insurance Program (CHIP);
Use one of two alternative sources of data for the four
work measures; we are exploring the possibility of using information
from the National Directory of New Hires as one of the data sources;
Use data from the Census Bureau's decennial and annual
demographic programs as the data source for two of the three non-work
measures. i.e., the measure on family formation and stability and the
measure on participation in the Food Stamps Program; to measure
performance on Medicaid/CHIP participation, States will match TANF data
with data on Medicaid/CHIP enrollment;
Award bonuses to the ten States with the highest scores in
each measure;
Specify an allocation of funds for each measure in FYs
2002 and FY 2003 (and beyond, if high performance bonus awards are
subsequently authorized); we would award $140 million to the work
measures and $60 million to the non-work measures:
Create an annual review process, as needed, if future
modifications and technical changes are necessary to these performance
components; and
Reiterate the requirement in Sec. 265.3(d) of this chapter
that, if a State wishes to receive a high performance bonus, it must
file the information in Sections One and Three of the SSP-MOE Data
Report.
We have taken this approach for several reasons. First, we continue
to believe that, given the primary focus of the TANF program on work,
we should reward States for their efforts in this area. Our funds
allocation proposals also reflect the importance we place on measuring
and rewarding State performance directed towards work. In addition, a
potential new data source may be available (i.e., the National
Directory of New Hires) that could serve as a research data source and
would provide more comparable and reliable national data.
Second, as we noted earlier, we received strong encouragement in
our external consultations to address the other purposes of the TANF
program in addition to work. (The law explicitly ties the bonus to the
four purposes in section 401(a) of the Act.) We believe States should
be rewarded not only for their accomplishments in the area of work and
self-sufficiency but also for their efforts in addressing other
purposes, e.g., assisting needy families, promoting marriage,
preventing and reducing the incidence of out-of-wedlock births, and
encouraging two-parent families.
The non-work measures reflect our concern that the lives of
children and families, particularly low-income children and families,
should be a focus of attention in relation to the TANF program. We also
believe that families are one of the strongest factors in developing
and sustaining high levels of individual competence and functioning in
our complex society. In addition, we believe that Medicaid and Food
Stamps are critical supports for many working
[[Page 68207]]
families as they move towards self-sufficiency through employment.
State performance to ensure that eligible families receive Food Stamps
and Medicaid address two of the statutory goals of the TANF program:
Providing assistance to needy families so that children may be cared
for in their own homes and ending the dependence of needy parents on
government benefits by promoting job preparation and work. Receipt of
Medicaid and Food Stamps also helps make it possible for families to
move off of welfare into employment and to progress on the job to
eventual full independence.
We anticipate that national data may also be available to measure
performance directed towards these goals, i.e., from the Census
Bureau's decennial and annual demographic programs. We expect these
data to be available in time to make bonus awards in FY 2002.
Finally, we have proposed an annual review process that reflects
our concern that we have had very little experience with a high
performance bonus system. We are aware that not all elements in the
proposed bonus award process are fully established. We may need to make
changes and adjustments after the final rule is published, and we
believe we need to allow for an opportunity and mechanism to do this.
We would use the review process, which might include consultations, as
appropriate, a tool for making technical changes and issuing guidance,
but not for changing the basic allocation of funds or adding new
measures.
Our aim for future bonus awards is that they reflect the outcome
goals of TANF, remain as simple as possible to understand and
administer, and incorporate the best information available.
The preamble includes a section-by-section discussion of the NPRM
and a discussion of other issues related to performance measurement
including other measures and data sources that we considered but have
not included in this NPRM. We welcome comment on our specific
regulatory proposals, on the issues raised earlier in developing this
NPRM, on the alternate measures and data sources we considered but did
not include in our regulatory proposals, on provisions we may have
overlooked, and on the policy options and questions we have raised
throughout this preamble.
Following is a discussion of the regulatory provisions in this
part, in the order of the regulatory text.
Section 270.1--What Does This Part Cover?
This section specifies the scope and content of part 270.
Section 270.2--What Definitions Apply to This Part?
In this section we are proposing definitions for terms used in this
part. To the extent possible, we are proposing definitions that are
consistent with those in other TANF rules.
We use the term ``Act'' to refer to the Social Security Act, as
amended, e.g., by the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (PRWORA), the Balanced Budget Act of 1997,
and any future amendments.
We are proposing a definition of ``bonus year'' to mean the year in
which bonus funds are awarded and to clarify the fiscal years covered
by this NPRM, i.e., FYs 2002 and 2003 and any subsequent fiscal year
for which Congress authorizes and appropriates bonus funds.
This definition differs from the statutory definition in section
403(a)(4)(E)(i) of the Act in that the statute specifies that bonuses
will be awarded in each of the fiscal years 1999 through 2003. There
are two reasons for the difference. First, the NPRM does not address
FYs 1999 through 2001 because, as discussed earlier, we decided to make
awards in these years based on program guidance so that States would
have advance notice of the measures that would be used. Second, we have
proposed, as a part of this definition, to cover future bonus years
should Congress authorize and appropriate bonus funds. This will allow
us to continue to use the provisions of this part in making future
bonus awards.
We have proposed a definition of ``comparison year'' to mean the
fiscal year preceding the ``performance year,'' which we have also
defined. We need this definition to clarify that, for two of the
proposed work measures (the improvement measures), we are looking not
only at data in the performance year, but also in the year that
precedes the performance year, i.e., the ``comparison year.''
Because the terms ``bonus year'' and ``performance year'' are based
on the fiscal year, we have included a definition of ``fiscal year''
for clarity.
We have proposed a definition of ``performance year'' to mean the
fiscal year immediately preceding the ``bonus year.'' This clarifies
that the year for which we will measure performance is the year
preceding the year in which we will award the bonus as specified in
section 403(a)(4)(D) of the Act. (As discussed earlier in the
definition of ``comparison year,'' we will base performance for two
work measures (the improvement measures) on the degree of improvement
in performance between the performance year and the comparison year.)
We include a definition of ``separate State program'' and ``SSP-MOE
Data Report'' for clarity regarding reporting of data. The first
definition is taken from the final TANF rule published April 12, 1999
(64 FR 17720). The second definition is self-explanatory.
We propose a definition of ``State'' to mean each of the 50 States
of the United States, the District of Columbia, the Commonwealth of
Puerto Rico, the United States Virgin Islands, Guam, and American
Samoa. This definition is consistent with the definition in section
419(a)(5) of the Act.
We have included a definition of the ``Food Stamp Program'' and
have explained the following acronyms: ``CHIP'' is the Children's
Health Insurance Program described in title XXI of the Social Security
Act, ``HCFA'' is the Health Care Financing Administration, ``Medicaid''
is a State program of medical assistance operated in accordance with a
State plan under title XIX of the Social Security Act, and ``MSIS'' is
the Medicaid Statistical Information System. We also propose to use the
acronym ``TANF'' for the Temporary Assistance for Needy Families
program.
We use the term ``we'' throughout the regulatory text and preamble.
The term ``we'' (and any other first person plural pronouns) means the
Secretary of Health and Human Services or any of the following
individuals or organizations acting in an official capacity on the
Secretary's behalf: The Assistant Secretary for Children and Families,
the Department of Health and Human Services, and the Administration for
Children and Families.
Section 270.3--What Is the Annual Maximum Amount We Will Award and the
Maximum Amount That a State Can Receive Each Year?
In paragraph (a), we propose to award $200 million in bonus funds
for each of fiscal years 2002 and 2003 and any subsequent years if
Congress authorizes the continuation of the bonus awards and
appropriates funds. Section 403(a)(4)(D)(ii)(I) of the Act states that
``the average annual total amount of grants to be made under this
paragraph for each bonus year equals $200,000,000.'' We have
interpreted this statement to mean that the actual amount of bonus
funds awarded for
[[Page 68208]]
each bonus year could vary as long as a total of $1 billion was awarded
over the five year period. However, after consultation with interested
parties, we believe that we would foster the positive effects of the
bonus by aiming to award $200,000,000 in each of these bonus years. We
believe that a fixed, substantial award amount each bonus year provides
States with a significant incentive that remains constant and promotes
continuity of effort. Of course, the bonus amounts for fiscal years
beyond FY 2003 will be determined based on any new authorizations and
appropriations.
In paragraph (b) of this section, we specify that the amount
payable to a State for a bonus year may not exceed five percent of the
State's family assistance grant, as specified in section
403(a)(4)(B)(ii) of the Act. See the Appendix to this NPRM for a list
of the potential maximum amounts that could be awarded to each State
annually, based on the statutory limitation.
Section 270.4--On What Measures Will We Base the Bonus Awards?
In paragraph (a) of this section, we propose to base the high
performance bonus awards on four work measures and three non-work
measures.
These proposed provisions reflect the importance we place on work
as a primary goal of TANF. They also reflect our concern that the lives
of children and families in the State, particularly low-income children
and families, should also be a focus of our attention in relation to
the TANF program.
As discussed more fully below in Sec. 270.6, States may select the
work measures on which they wish to compete, and they will be ranked on
these measures. Because we will be using Census Bureau data as the data
source for the measure on family formation and family stability and the
measure on participation in the Food Stamp Program, we will rank all
eligible States on these measures. For the measure on participation in
Medicaid/CHIP, we will obtain data from States based on matching
records of individuals leaving TANF assistance with Medicaid/CHIP
enrollment records. We will also rank all eligible States on this
measure. We emphasize that, if a State wishes to be considered for a
bonus in relation to any measure, it must submit the information in
Sections One and Three of the SSP-MOE Data Report.
Work Measures
In paragraph (b), we propose that, beginning in FY 2002, we will
measure State performance based on four work measures. States may
compete on one, any number of, or none of these work measures. We will
score and rank competing States and award bonuses to the ten States
with the highest scores in each measure.
We are proposing these four measures because we believe that work
measures most directly promote the purpose of TANF as stated in section
401 of the Act, i.e., ``increase the flexibility of States in operating
a program designed to end the dependence of needy parents on government
benefits by promoting job preparation, work, and marriage * * *.''
In addition, these work measures relate to three of the four
statutory goals. While they relate most directly to goal two, (i.e., to
``end the dependence of needy parents on government benefits by
promoting job preparation, work, and marriage),'' they also address
goal one indirectly, (i.e., to ``provide assistance to needy families
so that children may be cared for in their own homes or in the homes of
relatives'') as the provision of temporary cash assistance and other
services leading to employment strengthens families and help keep them
together. We also believe the work measures support the maintenance of
families in goal four, (i.e., to ``encourage the formation and
maintenance of two-parent families'') as a substantial body of evidence
indicates that continued unemployment is associated with an increased
incidence of marital break-up.
The four work measures are: Job Entry; Success in the Work Force
(Job Retention and Earnings Gain); and improvement from the prior
fiscal year in each of these measures.
We will use the proposed measures to measure State performance
along three parameters of employment: the extent to which States are
moving recipients into the work force, the degree to which recipients
are able to remain in the work force, and the quality of the
recipients' jobs. In different ways, all four measures reflect a
State's success in moving families from welfare to work. Full success
requires not only getting recipients into jobs, but also keeping them
in jobs and increasing earnings in order to reduce dependency and
enable families to support themselves over the long term. Our measures
address all these aspects of success.
Overall, we believe these measures reflect the critical importance
of and emphasis on work in the TANF program; are generally consistent
with State data collection efforts; and reflect substantial agreement
that, taken together, positive outcomes on these measures would be
associated with achievement of employment-based self-sufficiency.
In paragraph (b)(3), we propose that States have the option to
compete on one, any number of, or none of the work measures specified
in this section. The opportunity to compete for one or more work
measures furthers Congressional intent to support State flexibility in
the design and operation of their TANF programs. We also know that
States are in different stages of implementing the TANF program, have
diverse programmatic emphases, and vary in their current levels of
performance. We believe that offering States the option to choose from
a list of work measures allows States that have different work
philosophies to compete fairly for bonuses and compete in the areas of
their highest achievement. Compared to a single measure, multiple
measures are less likely to distort State policy decisions or to cause
unintended consequences.
We discuss our proposal to award the bonus to the ten States with
the highest scores in each measure in the preamble discussion of
Sec. 270.6.
Measures for Supporting Working Families
One of the key goals of welfare reform is to support and sustain
working families. Food Stamps and Medicaid are potentially essential
supports during the period when families are working but are not yet
earning at the level that will enable them to achieve full self-
sufficiency. The Administration and others have expressed concern at
the falling levels of coverage in these programs. Therefore, we have
implemented a variety of strategies to prompt States to reach working
families who are eligible.
Food Stamps
Like child care, the Earned Income Tax Credit, and Medicaid,
receipt of food stamps is an important support for working families.
Our colleagues at U.S. Department of Agriculture (USDA) are committed
to working with States to ensure that eligible families obtain food
stamps. Families with incomes up to 130 percent of the poverty line, or
$17,748 for a family of three, can be eligible for food stamps. A
typical family of three with a full time worker earning the minimum
wage can get $220 a month in food stamps.
In recent years, States have taken remarkable action to
revolutionize the welfare system. A strong economy combined with
innovative State policies and an unyielding commitment to helping
families become self-sufficient as they move from welfare to work has
[[Page 68209]]
resulted in a dramatic decline in the number of families receiving cash
assistance. Many more individuals are now working to support themselves
and their families than ever before. Critical to their continued
success, however, is their ability to feed their families adequately.
Food stamps can help parents working full-time at minimum wage who are
taking advantage of the maximum Earned Income Tax Credit to escape
poverty. In some cases, these individuals may only be able to keep
their jobs and feed their families because food stamps help make ends
meet.
Participation in the Food Stamp Program, however, has decreased
dramatically in recent years. Since March 1996, participation has
fallen by over 7 million people. One group for which participation is
especially low is the working poor; only 39 percent of individuals with
earnings who are eligible for food stamps benefits participate in the
Food Stamp Program, compared to a participation rate of 71 percent
overall.
Food stamps can make the difference between living in poverty and
moving beyond it. It is imperative to the success of welfare reform,
and more fundamentally to the well-being of all Americans, that States
devote attention to making sure that needed supportive services, in
particular food stamps, are available to those families that have left
welfare but remain poor.
The President recently announced a series of actions to help ensure
working families access to food stamps, including: (1) Allowing States
to make it easier for working families to own a car and still be
eligible for food stamps; (2) simplifying food stamp reporting rules to
reduce bureaucracy and encourage work; and (3) launching a nationwide
public education campaign and a toll-free hotline to help working
families know whether they're eligible for food stamps.
As part of this effort, USDA has published ``The Nutrition Safety
Net at Work for Families: A Primer for Enhancing the Nutrition Safety
Net for Workers and Their Children,'' a companion piece to the DHHS
Medicaid guide discussed below. This Food Stamps guide will assist
State, local and community leaders in understanding Food Stamp Program
access requirements. It also includes the following best practices for
serving working families already implemented in some communities.
1. The State agency can take steps to inform low-income households
about the availability, eligibility requirements, application
procedures, and benefits of the Food Stamp Program. For example, States
could:
Submit a Program Information Plan to the Food and
Nutrition Service, as specified at Section 11(e) of the Food Stamp Act
of 1977.
Implement a toll-free telephone number for application and
enrollment information.
Place billboards and posters in places frequented by low-
income families.
Provide flyers or brochures to community organizations
that work with low-income households.
Produce public service announcements for radio and
television.
Develop partnerships with private sector entities such as
retail grocers to display or distribute materials.
2. The State agency can take steps to simplify the Food Stamp
application and recertification process for working families. For
example, States could:
Shorten application forms.
Use joint Food Stamp-TANF-Medicaid applications.
Increase the availability of application sites.
Place Food Stamp workers in the community (hospitals,
health centers, schools or one-stop centers) and in TANF sites for
States where programs are administered separately.
Adopt flexible, family-friendly hours so parents do not
have to miss work for eligibility and redetermination interviews.
Clarify inconsistencies by telephone or mail.
Conduct staff training on the three programs.
Encourage Food Stamp applications even if the TANF
application halts.
3. The State agency can take advantage of the option to extend
categorical eligibility to participants in programs that receive the
majority of their funding from sources other than TANF.
4. The State agency can adopt income reporting waivers to ease the
reporting burdens of working families. States may request to:
Implement a quarterly reporting system for households with
earnings, and allow quarterly reporting of unearned income for such
households.
Allow for 6-month recertifications.
Increase the reporting threshold from $25 to $100.
5. The State agency can take steps to educate families receiving
Food Stamps about possible continuous eligibility, regardless of
discontinued TANF receipt. For example, States could:
Advise families to report earnings instead of simply
calling to have their case closed or not going through the
redetermination process.
Review closed TANF cases in which Food Stamps was not
continued, and inform families with cases closed in error of their
entitlement to restore benefits.
We believe States who use these best practices are likely to
increase enrollment of eligible families, and therefore, to perform
better on the outcome measure below. Along with encouraging and
assisting States in using these best practice innovations to help
ensure working families access to food stamps, USDA is also committed
to vigorous enforcement of the food stamp law and will investigate
complaints about State and local practices and pursue administrative
and legal action as required.
Medicaid/CHIP
Medicaid enrollment dropped by about 1 million from 1996 to 1997.
Though there are many potential reasons for the decline, we do not have
any definitive answers about why it has occurred. Improvements in
earnings and employment resulting from the strong national economy have
probably played an important role in this decline, making it possible
for some low-income Medicaid families to find jobs that offer health
insurance. It is also important to note that, while Medicaid enrollment
has declined, the number of people under the poverty level who are
uninsured has not increased in the last few years. Changes in attitudes
toward public assistance may also be playing a role in falling TANF,
Food Stamp, and Medicaid caseloads.
To help States navigate the opportunities and challenges inherent
in providing Medicaid to all eligible families, DHHS developed and
issued ``Supporting Families in Transition; A Guide to Expanding Health
Coverage in the Post-Welfare Reform World.'' This publication was sent
to all State Medicaid Directors and other interested parties. We have a
follow-up strategy that includes an educational component, aggressive
outreach, and a proactive enforcement process. We are also undertaking
research activities to promote increased participation of eligible
individuals in these programs.
It is in this context that we are proposing performance measures
related to Food Stamps and the Medicaid/CHIP programs that will reward
State efforts to support work, self-sufficiency, and the well-being of
low-income eligible families through rewarding States for year to year
improvements. We believe that basing high performance bonus awards on
these measures will provide another valuable strategy in the
Administrations's efforts to advance the
[[Page 68210]]
goals of welfare reform, focus attention on these critical supports,
assist working families, improve outcomes for children, and encourage
States to take action to increase the likelihood that low-income
families not receiving cash assistance will participate.
We have taken a similar approach in developing these two measures.
Each is designed as an improvement measure; each measure will receive
$20 million in bonus funds. In addition, the food stamp and the
Medicaid/CHIP measures are also similar in that we have proposed
``qualifying conditions'' in each measure. These conditions are ones a
State must meet in order to be eligible to compete for the bonus. For
both Food Stamps and Medicaid/CHIP, these conditions include
requirements of law and regulation that States must meet. For Medicaid/
CHIP, these conditions also include a number of options a State must
take to maximize participation of those eligible for Medicaid and CHIP.
This difference in the design of the food stamp and the Medicaid/
CHIP qualifying conditions reflects the nature of the two programs. The
Medicaid law and regulations provide States considerable flexibility
and makes a broad set of such programmatic options available to States.
In contrast, the Food Stamp Program offers very little State option or
flexibility in these areas because it has national standards of
eligibility with many key service requirements mandated by statute.
However, we invite comments on whether the decision to include
qualifying conditions is appropriate, as well as whether the specific
conditions and distinctions made between the programs are valid.
A. Measure of Participation by Low-Income Working Families in the Food
Stamp Program
In paragraph (c)(1), we identify certain qualifying conditions,
i.e., practices that a State must be in compliance with in order to
compete for a high performance bonus related to food stamp
participation:
(i) The State agency has issued policy instructions or regulations
clearly specifying that, at first contact with the State agency which
administers the Food Stamp Program, individuals must be informed of the
opportunity to apply for food stamps in accordance with 7 CFR
273.2(c)(1).
(ii) The State agency has issued policy instructions or regulations
clearly specifying that food stamp application forms are to be readily
accessible and available upon request, in accordance with 7 CFR
273.2(c)(3).
(iii) As evidenced through policy instructions, regulations, and
administrative reviews, the State agency is complying with application
processing time frames and expedited service rules, as required by 7
CFR 273.2(g).
(iv) As evidenced through policy instructions, regulations, and
administrative reviews, the State agency has taken steps to prevent
inappropriate denials and terminations of eligible food stamp
participants who have lost TANF eligibility, in accordance with 7 CFR
273.12(f). Since food stamp eligibility is not based on TANF
eligibility, States may not deny food stamp eligibility to a family or
family member simply because the family is ineligible for TANF.
These required qualifying conditions reflect food stamp policies
that are required by statute or regulation. We do not believe that a
State which is out of compliance with these requirements should be
eligible for a bonus. The Food and Nutrition Service of the U.S.
Department of Agriculture will determine whether a State is meeting
these conditions through its ongoing oversight of the Food Stamp
Program.
In paragraph (c)(2), we are proposing the outcome measure on which
the bonus will be based. Beginning in FY 2002, we will measure the
improvement in the number of low-income working families (i.e.,
families with children under the age of 18 who have an income of less
than 130 percent of poverty and earnings equal to at least half-time,
full-year employment at minimum wage) receiving food stamps as a
percentage of the number of low-income families working in the State,
using the same definition. For any given year, we will compare a
State's performance on this measure to its performance in the previous
year, beginning with a comparison of CY 2000 to CY 2001, based on
Census Bureau data. We will rank all States and will award bonuses to
the 10 States with the greatest percentage improvement in this measure.
We are proposing this outcome measure in order to reward States
that have identified and implemented successful strategies to provide
food stamps to eligible, low-income working families.
B. Measure of Participation of Low-Income Families in the Medicaid and
CHIP Programs
In paragraph (d)(1), we identify certain qualifying conditions that
a State must meet in order to compete for a high performance bonus
related to the Medicaid and CHIP programs, based on requirements in
Medicaid law and regulation; in paragraph (d)(2), we propose that the
State must document that it has adopted at least two of a list of seven
State options, (i.e., programmatic policies or practices that are
designed to facilitate Medicaid and CHIP enrollment and the retention
of eligible children and families.) In paragraph (d)(3), we propose the
specific outcome measure on which the bonus would be awarded.
We propose the following qualifying conditions in paragraph (d)(1):
(1) The State has issued policy instructions or regulations clearly
specifying that, at first contact with the TANF agency (when the TANF
agency is also the Medicaid agency), an individual must be given the
opportunity to apply for Medicaid in accordance with 42 CFR 435.906;
(2) When eligibility under section 1931 of the Act is lost due to
hours of, or earnings from, employment or loss of time-limited earning
disregards, the State issues to the affected family a written notice
that meets the requirements of section 1925(a)(2)(A) of the Act and a
card or other evidence of the family's entitlement to assistance as
required under section 1925(a)(2)(B) of the Act;
(3) The State has issued policy instructions or regulations clearly
specifying that family members may not be terminated from Medicaid
until it has been determined that they are not eligible under any other
Medicaid group; and
(4) The State has fulfilled all data requirements under the law,
including being up to date on all Medicaid and CHIP data submissions,
and having the MSIS on-line and operating properly.
All of these programmatic criteria reflect State policy actions and
processes that are mandated by Medicaid statute or regulation, and we
do not believe that a State that is out of compliance with these
requirements should be eligible for a bonus related to Medicaid and
CHIP participation. We propose that, to be eligible for the bonus,
States must fulfill these required conditions. HCFA will verify States'
compliance through State documentation and the agency's ongoing
oversight of the Medicaid/CHIP programs.
In addition to complying with these qualifying conditions, we
propose that applicant States must meet at least two qualifying State
options. These are programmatic options that are designed to maximize
participation by those eligible for Medicaid and CHIP. We propose that
a State that adopts at least two of the qualifying options below (in
[[Page 68211]]
addition to satisfying the required qualifying conditions described
above) would be eligible to compete for the high performance bonus
related to Medicaid and CHIP, based on the outcome measure in paragraph
(d)(3). We propose that States provide documentation demonstrating that
they have adopted two or more of these optional measures. HCFA will
verify compliance through the agency's ongoing review of the Medicaid/
CHIP programs. We believe States that exercise these options are likely
to increase enrollment of eligible families, and therefore, to perform
better on the outcome measure in paragraph (d)(3) as discussed below.
Programmatic Options:
(1) The State accepts mail-in or phone-in applications for Medicaid
for families and children, which can be completed without a face-to-
face interview;
(2) State Medicaid workers have been outstationed at locations in
addition to the locations required under 42 CFR 435.904 (c)(1) and
(c)(2);
(3) The State has expanded Medicaid eligibility for recipient and
applicant families through the use of less restrictive methodologies,
authorized by section 1931(b)(2) (B) and (C) of the Act;
(4) The State uses a definition of ``unemployed parent'' that
includes parents who are employed more than 100 hours per month, as
authorized under 45 CFR 233.101 and section 1931(d) of the Act;
(5) The State provides continuous Medicaid eligibility for children
for a period of time without regard to changes in circumstances, as
authorized by section 1902(e)(12) of the Act;
(6) The State provides a period of presumptive Medicaid eligibility
for children, as authorized by section 1920A of the Act; or
(7) The State has simplified the enrollment and re-enrollment
processes for children and low-income families by implementing such
improvements as shortened application forms.
Once the States are identified as eligible for consideration, based
on the qualifying conditions and options in paragraphs (d)(1) and
(d)(2), we propose a specific outcome measure for determining which
States would receive a bonus. The outcome measure we are proposing in
paragraph (d)(3) would assess Medicaid and CHIP participation among
persons leaving TANF assistance. The population whose Medicaid/CHIP
participation would be measured is those individuals whose TANF
assistance cases were closed in the calendar year who also were
enrolled in Medicaid or CHIP at the time of case closure. The measure
of State performance would be the percentage of such individuals who
are enrolled in Medicaid or CHIP six months after leaving TANF (and who
are not currently receiving TANF assistance in that month).
We chose this approach because nearly all individuals leaving TANF
are likely to be eligible for a minimum of six months of transitional
Medicaid under section 1925 or to qualify for Medicaid under other
eligibility groups (e.g., section 1931, poverty-related children) or to
be eligible for CHIP. Continued health insurance coverage is a critical
support to families making the transition from welfare to self-
sufficiency, and we expect States to achieve a high rate of Medicaid
and CHIP participation among this population in order to be considered
high performers. We propose that bonuses would be awarded to the ten
States with the largest percentage improvement in their Medicaid/CHIP
participation rates.
The data for this measure will be submitted quarterly by States at
an aggregate level for purposes of this evaluation. States will obtain
these data by matching records of individuals leaving TANF assistance
with Medicaid/CHIP enrollment data.
We also considered an outcome measure that would capture State
performance in enrolling and retaining all eligible families and
children in Medicaid and CHIP, regardless of their former or current
welfare status. This measure would reward States for the Medicaid and
CHIP participation of those families and children leaving TANF
assistance, and also for the participation of eligible families and
children who may not participate in, be diverted from, or may not have
any contact with, the TANF program.
In operational terms, this measure would be based on data from the
Census Bureau, supplemented with data from State MSIS data and HCFA
Form 21-E.
After careful consideration, we proposed an outcome measure limited
to individuals leaving TANF assistance because we believe that it
better captures the mission and responsibility of the TANF agency to
move families toward self-sufficiency. While the broader population
measure would reflect a critical goal of expanding health coverage and
also encourage States to enroll eligible individuals who are diverted
from TANF assistance, the proposed measure is more directly related to
the goals and purposes of TANF. We invite comments on this matter.
Measure of Family Formation and Stability
In paragraph (e), we propose that, beginning in FY 2002, we will
measure the percentage increase in all children below 200 percent of
poverty who reside in married couple families, based on a comparison of
data between CY 2000 and CY 2001 from the Census Bureau. For any given
subsequent year, we will compare a State's performance on this measure
to its performance in the previous year. We will rank all States and
award bonuses to the ten States with the greatest percentage increase
in this measure, if they have filed the information in Sections One and
Three of the SSP-MOE Data Report. Like the Food Stamps and Medicaid/
CHIP measures, a total of $20 million will be awarded for this
improvement measure.
We are proposing this measure of family formation and family
stability for several reasons: the law's emphasis on promoting marriage
and encouraging the formation and maintenance of two-parent families
(section 401(a) of the Act); our concern for the well-being of children
and families, particularly low-income families; and our interest in
stimulating successful State initiatives in this area. The number of
parents living with a child is generally tied to the amount and quality
of human and economic resources available to that child. Children who
live in a household with one parent are five times more likely to have
family incomes below the poverty line than are children who grow up in
a household with two parents.
We also know that children who live with only one parent suffer
more emotional, behavioral, and intellectual problems. They are at
greater risk of dropping out of school, alcohol and drug use,
adolescent pregnancy and childbearing, juvenile delinquency, mental
illness, and suicide.
Using this measure would entail no new data collection
responsibilities on the part of States, assuming the Census Bureau data
are available.
Consideration of Other Measures
During the course of our consultations and internal discussions, we
considered and evaluated a wide range of possible measures and data
sources. We also tried to keep in mind the principles for a high
performance bonus system developed by NGA and APHSA; sought to avoid
additional data collection requirements and costs and to build on
existing systems; tried to focus on positive rather than negative
measures; and attempted to avoid unintended consequences. Specifically,
we
[[Page 68212]]
considered a number of other measures related to the non-work purposes
in the law. These included:
Child support: The average monthly number of TANF families
that have both earned income and child support paid within the same
month.
Diversion: The number of applicants with a financial
payment diverted from the TANF cash assistance program divided by the
number of newly approved cash assistance cases.
Out-of-wedlock births: Measures of such births to TANF
recipients, to all persons in the State as a whole, or in relation to
the same standards and provisions as defined in the bonus to reward
decrease in illegitimacy ratios (section 403(a)(2) of the Act).
Child poverty: The reduction in the State's rate of child
poverty for all families with children under age 18 and the reduction
in the rate of child poverty for working families with children under
age 18, i.e., families with earnings equivalent to half-time full year
employment (parallel to the food stamp measure).
(See the following preamble section entitled ``Discussion of Other
Issues Related to Performance Measurement'' in which we address other
measures and data sources we also considered.)
For several reasons, we did not include a number of potential
measures where there were other mechanisms in the statute for
addressing them. First, we were concerned that inclusion of too many
measures would spread the bonus funds too thinly and thereby weaken
their ability to provide incentives to States to achieve the goals and
purposes of TANF. Second, we believed the measures duplicated other
measures for which performance funding is already in place, e.g., out-
of-wedlock birth reduction and child support enforcement, or where
there are other mechanisms to monitor and correct State performance
(child poverty). Finally, we were particularly aware of the issue of
diversity among States and how that diversity might impact the design
and implementation of the high performance bonus award system. There
was general agreement that the uneven resources and multiple
differences in economic and demographic circumstances and program and
caseload characteristics among States were serious complicating factors
in designing a high performance bonus system. For example, a State with
a stronger economy, a less disadvantaged caseload, or lower grant
levels may be more successful in moving recipients into jobs and off
welfare than the State with a weak economy, a more disadvantaged
caseload, or a higher grant level. Also, a State which began moving
recipients into jobs several years before TANF was enacted and high
performance was measured may have difficulty showing the same level of
accomplishment in current years.
However, we would like to discuss our consideration of a child
poverty measure in greater detail because it relates to two of the
goals/purposes of TANF: promoting work and employment and strengthening
child and family well-being by assisting needy children in their own
homes or in the homes of relatives.
Several innovative States are already using child poverty as a
measure of their efforts, and some States are using the resources and
flexibility under TANF to address this issue. AFDC was limited in its
ability to address child poverty in that the primary flexibility States
had was in setting benefit levels. In contrast, the TANF program offers
States the opportunity to utilize a wide range of investments to help
families escape poverty while strengthening their commitment to work.
These investments include:
Increasing the stability of work through investments in
the wages parents earn or the hours they work, such as employer
partnerships that focus on the first job, on job advancement after the
first job, or on combinations of work and training; mentoring and case
management strategies; strategies that combine work, education, and
training; and supported work for families with barriers to private
sector employment;
Utilizing well-known strategies to supplement work, such
as more generous earning disregards, earnings supplements, and wage
subsidies;
Improving child support, such as increasing the amount of
support collected from non-custodial parents that is passed through to
children;
Helping families during periods between jobs, such as
quick re-employment services; and
Providing employment assistance for other families, such
as a child-only family where a caretaker relative is not receiving
assistance.
In addition, there is empirical evidence from rigorous evaluations
that several of these strategies can be effective in reducing poverty.
For example, interim findings from the Minnesota Family Investment
Program, which implemented generous earning disregards, nearly doubled
the percentage of families above poverty; and a strongly employment-
focused welfare-to-work program in Portland, Oregon, which stressed
getting recipients higher paying jobs along with higher quality,
reliable child care, increased the number of families with above
poverty income by nearly one quarter.
We encourage States to use the available flexibility and resources
to pursue strategies that support working families and help move them
out of poverty. However, after a full consideration of all factors, we
chose not to include a child poverty measure in the proposed rule for
the following reasons:
A child poverty measure was duplicative of the
requirements in section 413(i) of the Act for States to report on their
child poverty rates and take corrective action where any increase in
child poverty of five percent or more is attributable to the TANF
program in the State; and
Improvements in the proportion of families receiving food
stamps and increases in employment and earnings both raise family
income and thereby contribute to poverty reduction.
Since the official poverty measure does not reflect income
sources such as food stamps or EITC, it may not accurately reward State
strategies to support working families.
In developing the NPRM, we also considered additional measures and
various data sources, including the Current Population Survey (CPS),
other Census Bureau surveys, the National Center on Health Statistics,
Unemployment Insurance data, and State administrative data. Except for
the Census Bureau's decennial and annual demographic programs, we
identified problems with each of these measures and with the data
sources considered, e.g., lack of State-reliable and comparable data;
data collection burden; and, in some cases, lack of consistent
definitions for the measure across the States. In other cases, we
believed the measures duplicated other measures for which performance
funding is already in place, e.g., out-of-wedlock birth reduction and
child support enforcement.
For additional discussion of other issues related to performance
measurement, including absolute performance, performance improvement,
and other measures and data sources considered, please see the
following preamble section entitled, ``Discussion of Other Issues
Related to Performance Measurement.''
We are committed to work measures as a major component of the bonus
award. However, we invite comment about whether we should make changes
in these work measures and whether we should consider different
options. We raise the following questions on the
[[Page 68213]]
work and non-work measures for public consideration:
1. Are the work measures proposed in Sec. 270.4 the work measures
we should be using?
2. Are there other measures and data sources we should consider?
3. Does the definition of ``assistance'' included in the final TANF
rule affect the data captured in the work measures?
4. Should we consider other measures that address the first purpose
of the TANF program, i.e., to assist needy families?
5. What data sources should we consider for the non-work measures
if the Census Bureau data are not available for bonus awards in FY
2002?
6. Should we consider measures that would be duplicative or similar
to measures used with other performance awards, e.g, a measure of out-
of-wedlock births?
7. Should we consider State enforcement of the TANF non-
displacement requirements in awarding bonuses and, if so, how?
Section 270.5 What factors will we use to determine a State's score on
the work measures?
In this section, we propose the specific definitions for each of
the work measures and an explanation of how we will calculate the
percentage rate for the work measures, both for the absolute measures
and for the improvement measures, and rank State performance.
In paragraph (a), we propose the specific definitions for each of
the work measures as follows:
The Job Entry Rate means the unduplicated number of adult
recipients who entered not fully subsidized employment for the first
time in the performance year (job entries) as a percent of the total
unduplicated number of adult recipients unemployed at some point in the
performance year. Adult recipients in fully subsidized employment are
not included in the numerator but are included in the denominator.
We are proposing an unduplicated count of adult recipients because
we believe that allowing one individual to be counted more than once in
the numerator would unfairly inflate a State's performance. We are
proposing not to include in the numerator recipients in fully
subsidized employment because that would mitigate against self-
sufficiency. However, we are proposing to include them in the
denominator because we believe they should be considered as part of the
pool of unemployed recipients who potentially could be placed in
unsubsidized employment and, thus, could be an incentive to the State
to help these recipients obtain a job that is not fully subsidized.
The Success in the Work Force Rate measure is composed of two
submeasures defined as follows:
The Job Retention Rate means the performance year sum of
the unduplicated number of employed adult recipients in each quarter
one through four who were also employed in the first and second
subsequent quarters, as a percent of the sum of the unduplicated number
of employed adult recipients in each quarter. (At some point, the adult
might become a former recipient.) Adult recipients in fully subsidized
employment are not included in either the numerator or the denominator;
and
The Earnings Gain Rate means the performance year sum of
the gain in earnings between the initial and second subsequent quarter
in each of quarters one through four for adult recipients employed in
both these quarters as a percent of the sum of their initial earnings
in each of quarters one through four. (At some point, the adult might
become a former recipient.) Earnings gains of adult recipients in fully
subsidized employment are not included in either the numerator or the
denominator.
We believe these two submeasures are the two most important
components for determining success in the workplace. We are proposing
to give job retention a weight of two compared to one for earnings
gain. We believe that earnings gain is dependent on job retention and,
therefore, should be given a lesser weight.
We are proposing that job retention be measured in the initial
quarter and the two consecutive subsequent quarters, because this is
consistent with related measures of job retention in the Job Training
Partnership Act, Welfare-to-Work, and Work Investment Act programs.
We propose to measure earnings gain from the initial quarter to the
second subsequent quarter because we believe it is more reasonable to
expect earnings gain at a later rather than earlier date. We considered
measuring a longer period for success in the workplace and welcome
comments from the public on whether we should measure job retention or
earnings over a longer period of time.
The Increase in the Job Entry Rate means the positive difference
between the performance year job entry rate and the comparison year job
entry rate as a percent of the comparison year job entry rate.
The Increase in Success in the Work Force Rate means the positive
difference between the performance year success in the work force rate
and the comparison year success in the work force rate as a percent of
the comparison year success in the work force rate. It is composed of
two submeasures defined as follows:
The Increase in the Job Retention Rate means the positive
difference between the performance year job retention rate and the
comparison year job retention rate as a percent of the comparison year
job retention rate; and
The Increase in the Earning Gain Rate means the positive
difference between the performance year earnings gain rate and the
comparison year earnings gain rate as a percent of the comparison year
earnings gain rate.
We are proposing that increase in the job entry rate and success in
the work force be measured in the simplest and most straightforward
way, i.e., a percentage increase from the comparison year to the
performance year. However, we welcome comments on alternative ways of
measuring improvement.
We believe these measures are the best measures of self-
sufficiency, are measures based on readily available data, and are
measures that will not create a heavy administrative burden on States.
In addition, these measures are consistent with both past and
current legislation designed to measure performance in the work area.
Section 106(a)(2) of the Job Training Partnership Act (JTPA) stated
that ``the basic return on the investment is to be measured by long-
term economic self-sufficiency, increased employment and earnings,
reductions in welfare dependency, and increased educational attainment
and occupational skills.'' Section 106(b)(3) of JTPA listed several
factors on which to base performance standards including: (A) Placement
in unsubsidized employment; (B) retention for not less than 6 months in
unsubsidized employment; and (C) any increase in earnings, including
hourly wages.
Recent legislation, the Workforce Investment Act of 1998,
authorizes a performance accountability system. Section 136 of this
legislation specifies State performance measures including entry into
unsubsidized employment, retention (in unsubsidized employment) six
months after entry into unsubsidized employment, and earnings received
(in unsubsidized employment) six months after entry into unsubsidized
employment.
Another law enacted by Congress, the Balanced Budget Act of 1997,
authorized Welfare-to-Work Grants to
[[Page 68214]]
States and local communities to provide transitional employment
assistance that moves hard-to-employ welfare recipients and certain
non-custodial parents into unsubsidized employment and economic self-
sufficiency. The legislation authorizes the Department of Labor to
award performance bonuses. Section 5001(a)(5)(E)(iii) of this
legislation specifies that the formula for measuring State performance
be based on certain factors including ``(I) the success of States in
placing individuals in private sector employment or in any kind of
employment * * * (II) the duration of such placements; (III) any
increase in earnings of such individuals * * * and such other factors
as the Secretary of Labor deems appropriate * * *'' The formula may
also take into account general economic conditions on a State by State
basis.
Finally, the work measures we have proposed are similar to those
developed by the Department of Labor for the Welfare-to-Work
performance bonus. See Notice of Welfare-to-Work performance bonus
criteria, published November 23, 1998 (63 FR 64832).
In paragraph (b)(1), we propose to measure performance over the
course of an entire fiscal year as specified in section 403(a)(4)(B) of
the Act. We believe that measuring performance over an entire fiscal
year (or fiscal years, in the case of improvement measures) will help
ensure that a State's performance score is not unfairly deflated or
inflated because of seasonal or other fluctuations in employment
patterns.
In paragraph (b)(2), we explain that we will rank competing States
on the measures for which they indicate they wish to compete and for
which they submit the data specified in Sec. 270.6 within the
timeframes specified in Sec. 270.11.
In paragraph (b)(3), we propose to rank States on their absolute
performance (for the measures in paragraphs (a)(1) and (a)(2) of this
section) and on their performance improvement from the previous fiscal
year (on the measures in paragraphs (a)(3) and (a)(4) of this section).
We believe that awarding bonuses for both absolute and improved
performance provides a way to ensure a more objective and fair
competition, i.e., States starting from a lower baseline would have a
reasonable chance of competing for the bonus awards.
In addition, improvement measures serve as an added incentive to
States to compete and excel. While it is conceivable that a State
scoring high on an improvement measure might score very low on an
absolute measure, we, nevertheless, believe that a State which is a
high performer relative to its past performance should be rewarded
accordingly. The overall benefit to the TANF recipients served and the
contribution to the success of the overall TANF program outweigh any
concerns that absolute and improvement scores might appear inconsistent
to some observers. We have included a discussion of alternate ways to
structure the high performance bonus award system and questions for
public comment on the issue of an objective and fair competition in the
subsequent preamble section.
Paragraph (b)(3) also proposes that the scoring of the two measures
(success in the work force rate and increase in success in the work
force rate) will be a composite weighted score of the rank of the
retention and earnings gain measures with the job retention rank having
a weight of ``2.'' We believe earnings gain is dependent on job
retention, and job retention is the more familiar measure with a more
substantial history.
In paragraph (b)(4), we propose how we will rank the States on the
four work measures. Each State will be ranked from high to low with
``1'' being the rank for the State with the highest score. We will
assign a rank to each State not competing or submitting data for a
measure which is the number following the last rank for States that
properly submitted data for that measure on a timely basis and notified
us of their interest in competing.
In paragraph (b)(5), we propose that, if we identify more than ten
States due to a tie in score for a measure, we will calculate the rate
to as many decimal points as necessary to eliminate the tie. Since we
are proposing that no more than ten States can receive a bonus award
for each measure, we believe that this calculation is the fairest and
least controversial procedure.
For clarity, we propose in paragraph (c) a definition of
Improvement Rate to mean the positive percentage change between the
performance year and the comparison year for each measured rate (job
entry, retention, earnings gain).
We have included additional discussion on absolute performance,
performance improvement, and other issues relating to performance
measurement in the subsequent preamble section.
We also raise the following questions for public consideration:
1. Should we allow States to select the measures on which they wish
to compete?
2. Should we require all States to compete on certain ``core'' or
``mandatory'' measures as a condition of receiving a bonus?
3. If we require ``core'' measures, should we allow States to
compete on other measures at their option?
4. Should we base some measures on absolute performance and others
on performance improvement as proposed in this part?
5. Should we consider a longer employment period as the retention
rate in future years, e.g., one year, 18 months?
6. Should the definitions and/or specifications for these work
measures be modified, e.g., to include fully subsidized work, minimum
hours of earnings? (See also Sec. 270.6 for a discussion of the data
that must be reported.)
Section 270.6 What Data for the Work Measures Must the State Report to
Us?
We have not included the option to submit sample data under these
proposed rules. Sampling adds a significant level of complexity and
raises data precision questions without significant cost savings.
In paragraph (a), we propose that, if a State wishes to compete on
any or all of the work measures in Sec. 270.5(a), it must report one of
two alternative sets of data, as specified by the Secretary, either:
(1) An unduplicated list of all adult recipients by name, social
security number, and date of birth for each quarter of the semi-annual
reporting period; adult recipients in fully subsidized employment must
be included in the list but identified separately; or
(2) Certain information based on a match between the State's adult
recipient identification data and the Unemployment Insurance (UI)
employment data, also for each quarter of the semi-annual reporting
period. Adult recipients in fully subsidized employment must be
excluded from this data match but must be included in the count of
unemployed recipients.
We are proposing these two different sets of data for several
reasons. First, we wish to obtain public comment on the content and
desirability of each alternative. Second, in relation to the first
alternative, we are exploring the possibility of using the National
Directory of New Hires (NDNH) on an ongoing basis. We would match the
recipient identifying information in paragraph (a)(1), with the data in
the NDNH to determine the State's scores for the work measures.
The NDNH is one of two databases managed by the Federal Parent
Locator Service (FPLS) in the Office of Child
[[Page 68215]]
Support Enforcement, ACF. The FPLS is a computerized network,
established pursuant to section 453 of the Act, through which States
may request and receive information to find noncustodial parents and/or
their employers for purposes of establishing paternity and securing
support. The Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 required the Secretary to develop an
expanded FPLS to improve States' ability to locate child support
obligors, establish and enforce child support orders, and for other
specified purposes in the Act.
The expanded FPLS includes the NDNH, which was implemented on
October 1, 1997, and a Federal Case Registry. The purpose of the NDNH
is to develop a repository of information on newly-hired employees and
on the earnings and unemployment compensation claims data of employees
to enable States to quickly locate information on the address of,
employment of, and unemployment compensation being paid to, parents
with child support obligations who are residing or working in other
States.
This data reporting alternative would be our preference for several
different reasons. We would envision using the State data in paragraph
(a)(1) along with the NDNH data not only for purposes of determining
eligibility for high performance bonus awards, but, more importantly,
for research purposes. We believe these data will provide an
unparalleled source of objective, national, and comparable data on the
TANF program. We would be able to gain insight into such areas as
national trends in job entry, employment retention and earnings, and
the impact of State policy choices on employment outcomes. Additional
research might provide information on the relationships between outcome
levels (low employment, retention, and earnings gain) and economic
conditions; the effects on employment and earnings when individuals
reside in one geographic area and work in another; and the extent to
which welfare recipients enter employment that is not covered by the UI
system, such as Federal government employment.
The NDNH also has the most comprehensive data on both Federal and
State employment. As such, it would allow tracking of employment across
State lines as well as identifying Federal government employment,
something the UI system does not allow. We estimate that the NDNH would
provide us with at least 90 percent of the job entries for TANF and
former TANF recipients. It would also give us a single data source
against which State performance would be measured. Bonus awards would
not be dependent on the States' ability to obtain the information and
would allow us more easily to measure performance and success as well
as reduce the burden on States. Also, having specific recipient
identifying information would permit the use of the data for a variety
of additional research purposes.
Since the availability of the NDNH data has not yet been
determined, we are proposing an alternative data source in paragraph
(a)(2), i.e., a State would submit data based on matches of its adult
recipient data with its Unemployment Insurance (UI) employment data.
This information would be submitted as follows to facilitate the
calculation of the scores for each work measure:
(i) The cumulative number of unduplicated adult recipients who, by
the end of the quarter, were unemployed recipients at some point during
the performance year. (Adult recipients in fully subsidized employment
are considered unemployed and should be included in this count. This
includes employed recipients, who in the same quarter, became
unemployed and then entered new employment for the first time in the
performance year.);
(ii) The total number of unduplicated adult recipients employed at
any time during the quarter;
(iii) The total number of employed adult recipients in paragraph
(a)(2)(ii) of this section who, as a recipient in each quarter, entered
employment for the first time this performance year. (This includes
employed recipients, who in the same quarter, became unemployed and
then entered new employment for the first time in the performance
year.);
(iv) The total number of employed adult recipients in paragraph
(a)(2)(ii) of this section who were also employed in the following
quarter;
(v) The total number of adult recipients in paragraph (a)(2)(ii) of
this section who were also employed in the second following quarter;
(vi) The total amount of earnings in the quarter of all employed
adult recipients in paragraph (a)(2)(v) of this section; and
(vii) The total amount of earnings in the second following quarter
of all employed adult recipients in paragraph (a)(2)(v) of this
section.
We understand that some States might prefer this second alternate
way of reporting data for various reasons, such as having an
established working relationship with the UI agency, or because they do
not want to submit the necessary identifying information on recipients
for a match with the NDNH. However, we note that these data are already
required by the TANF final rule. On the other hand, the State UI
database has the same limitations as the NDNH database, plus it lacks
information on Federal and out-of-State employment. Employment data for
individuals living in one State and working in another are generally
not available unless a special data matching agreement has been
implemented.
Nevertheless, some States may have developed procedures for
overcoming these obstacles. In addition to comments on the use of these
proposed data sources, we also invite comment on any other data sources
for the work measures we might have overlooked or rejected. See the
subsequent preamble section for additional discussion of data sources
we considered but did not propose to use.
You will note that, in paragraph (a)(1), we are proposing that when
States report information on all adult recipients (TANF and SSP-MOE
recipients), they must identify in their report to us those recipients
in fully subsidized employment. Using this information from the State
and the NDNH data, we will be able to calculate the State scores for
the various work measures.
In contrast, in paragraph (a)(2), we are proposing that the State
exclude all adult TANF and SSP-MOE recipients in fully subsidized
employment from their calculation before submitting their data to us.
However, the State must include all recipients in fully subsidized
employment in the count of unemployed recipients.
Workfare programs, in the context of the TANF program, are
generally considered to be work experience and community service
programs; individuals participating in workfare programs are not
considered as employed and are, therefore, used only in the denominator
in the calculation of this bonus.
We propose to clarify in paragraph (b) that the data required in
paragraph (a) must be submitted for both adult TANF recipients and
adult Separate State Program--Maintenance-of-Effort (SSP-MOE)
recipients for whom the State would be required to complete Sections
One and Three of the SSP-MOE Data Report.
In paragraph (c), we cross-reference the requirement in
Sec. 265.3(d) of this chapter (see the TANF final TANF rule published
on April 12, 1999 (64 FR 17720) that, if a State wishes to receive a
high performance bonus, it must file the information in Sections One
and Three of the SSP-MOE Data Report. We
[[Page 68216]]
believe that in order to measure the full impact or success of the TANF
program or the rate of improvement in the program in moving adult
recipients toward self-sufficiency, it is essential that we know what
adults are receiving assistance in the separate State program(s) and
what is happening to them in the areas of job entry, job retention, and
earnings.
As we stated in the preamble to the TANF NPRM, published on
November 20, 1997, and in the final rule, published on April 12, 1999,
information on SSP-MOE programs is needed for several reasons including
to ``help ensure that State decisions to establish such programs do not
undermine the work provisions of the new law.'' Regarding the work
measures, for example, a State could score well on a work measure by
moving certain families, e.g., families with multiple employment
barriers, to a separate State program where they receive no self-
sufficiency services. Because this State would then be able to work
intensively with the easier to serve TANF recipients, it might receive
a high score on a work performance measure(s). In reality, however, it
would not be performing as well as a State which achieved a similar, or
even a lower, score while serving all families in its TANF program.
We will analyze the nature of benefits provided in the separate
State programs as well as the information we receive from the SSP-MOE
Data Report to assess how and whether to adjust a State's TANF
performance data. If a State has been identified as having moved its
hard-to-serve population to a separate State program, for example, we
would adjust the State's high performance bonus score, if appropriate,
or find the State ineligible for a bonus.
We welcome comments on the criteria that should be used to
determine whether such a transfer has occurred and whether any
adjustment to State high performance bonus scores is appropriate. We
also welcome comments on ways in which we might make additional use of
these SSP-MOE data.
In paragraph (d), we propose to require a State to inform us of the
work measures on which it chooses to compete in that bonus year. It is
important that a State provide this information so that we will know in
advance how many States are competing in each of the measures in order
to plan accordingly. We need to know the measures on which a State
chooses to compete so that we can allocate the necessary time and
resources to rank the States within a reasonable time frame that
permits us to award the bonus funds as soon as possible and before the
end of the bonus year.
We raise the following questions for public consideration:
1. Should the bonus awards in FY 2002 and beyond be based only on
measures that use national or standardized data?
2. Should we permit States to file sampled data for bonus awards
and, if so, what would be the rationale and what sampling
specifications should be used?
Section 270.7 What Data Will We Use To Measure Performance on the Non-
Work Measures?
We have proposed to base two of the three non-work measures
entirely on the data from the Census Bureau. We propose to use these
data to measure State performance related to the measure on family
formation and stability and the measure on participation by low-income
working families in the Food Stamp program. The data for the third non-
work measure--participation in the Medicaid/CHIP program--will be
provided by the States, based on a match between TANF data and Medicaid
enrollment data.
The Census Bureau's decennial and annual demographic programs will
provide uniform objective and reliable State-level data. We have
proposed to award bonuses in FY 2002 and beyond based on these data for
CY 2000 and CY 2001. In addition, if a State wishes to receive a high
performance bonus, it must report the data in Sections One and Three of
the SSP-MOE Data Report. We welcome comments on alternate measures and
data sources and on whether States should have the option to compete on
these non-work measures.
Section 270.8 How Will We Allocate Bonus Award Funds?
We propose in paragraph (a) of this section a funds allocation
formula for FY 2002 and beyond. We considered a number of ways to
design a high performance bonus award system. We rejected an approach
that would have more strictly limited the number of awards, developed a
formula to calculate a single numerical score for each State, or set
performance or threshold levels, i.e., numerical scores which a State
must exceed in order to receive a bonus.
First, we believe that a major purpose of the bonus award is to
offer an incentive to States to implement programs to meet the goals
and purposes of the TANF program. Therefore, in order to encourage
State participation, we propose to award bonuses to a reasonable number
of States rather than just a few States. We believe that proposing to
award bonuses to the 10 States with the highest scores in each measure
constitutes a reasonable number, i.e., a number which is large enough
to reward several States, but small enough so that the performance will
reflect reasonably high performance and the amount of the bonus will be
a clear incentive. We also believe that awarding bonuses to the ten
States with the highest scores for each measure will help to avoid the
problems associated with reallocation of funds, given the limitation in
the statute on the amount of a State's total bonus award, i.e., five
percent of the State's family assistance grant.
Second, we believe an approach that consists of several measures,
focused on different aspects of program success, and that rewards the
top ten performers in each of these measures, is less complex and
offers States more opportunity to demonstrate program success. Also, we
did not want to set a numerical threshold based on absolute level of
performance given the absence of baseline data.
We solicit the public's view on whether this approach may be more
appropriate in the early days of implementing the TANF program and
whether a different design may be appropriate in later years.
Specifically, in paragraph (a), we propose how we will divide $140
million in FY 2002 and beyond among the four work measures. In general,
we have based this allocation formula on what we believe are the
relative importance and impact of each measure. We are proposing to
give more weight to absolute measures than improvement measures because
scores for absolute measures will generally reflect a higher outcome
than the scores for improvement measures. In addition, we believe that
job entry and increase in job entry should be given more weight than
the other two measures, i.e., success in the work force and increase in
success in the work force. The success in the work force measures
clearly are dependent on job entry, i.e., a recipient must first get a
job before achieving job retention or earnings gain.
In paragraph (b), we propose to allocate $20 million to each of the
three non-work measures, a total of $60 million or 30 percent of the
$200 million to be awarded annually. We believe that the largest
percentage of funds (70 percent or $140 million), however, should be
designated for the work measures, given the importance of
[[Page 68217]]
work in the program. We welcome comments on and supporting rationale
for alternative allocations of funds.
In paragraph (c), we explain that we will distribute the dollars
allocated to each measure based on each State's percentage of the total
SFAG (State family assistance grant) of the ten States that will
receive a bonus. We considered other methods of allocating the bonus
funds, such as allocating the amount of the bonus based on a State's
rank, but we concluded that the bonus award should be in proportion to
the size of the State and perhaps the number of persons potentially
affected. In that context, we also considered allocating funds based on
the number of children in poverty in the State, but we were concerned
that this allocation method might foster unintended consequences.
Therefore, we have proposed an allocation formula based on the size of
the TANF grant.
We believe this to be a proportional and equitable way to allocate
these funds, consistent with and a logical extension of section
403(a)(4)(B)(ii) of the Act. (This section limits the total amount
payable to a State in a bonus year to no more than five percent of the
State's SFAG.) Under this method, both the amount of the State's award
for each measure and the maximum overall amount payable to a State
would be proportional to the SFAG.
In the next section of the preamble, we include additional
discussion related to measurement and allocation of funds. In light of
that discussion and the provisions in this section, we raise the
following questions for consideration:
1. How should the funds be distributed to the high performing
States?
2. What criteria should we use to establish the distribution of
funds among the various measures?
3. Should we use the criterion ``the ten States with the highest
score in each measure'' as a way of distributing funds?
4. Should the percent of funds distributed between the absolute
measures and the improvement measures be changed?
5. If additional measures and data sources are recommended, what
percentage of funds should they receive?
6. How should we handle the situation where more than one State has
the tenth highest score?
7. Should we consider setting a numerical threshold for each
measure that each State would need to exceed in order to be eligible
for a bonus award on that measure?
8. Should we consider other thresholds, such as not awarding a
bonus to a State subject to a work participation penalty or other non-
compliance penalties?
9. Should the amount of the bonus for each State be weighted by the
State's ranking or score, in addition or as an alternative to the size
of its State family assistance grant?
Section 270.9 How Will We Redistribute Funds If That Becomes
Necessary?
In this section, we propose a method to reallocate any
undistributed amount of the annual $200 million high performance bonus
funds. Full distribution might not occur, for example, if the funds
cannot be awarded because of the limitation on the amount payable to a
State for a bonus year to no more than 5 percent of a State's family
assistance grant. This section clarifies what we will do if we cannot
award the full $200 million.
We propose two steps. We would first reallocate the remaining funds
among the measures listed in Sec. 270.4. If any funds still cannot be
distributed within the bonus year, they will remain available for
distribution in the next bonus year.
We raise the following questions for public consideration:
1. How should we redistribute funds when a qualifying State cannot
be awarded the full amount of the bonus because of the limitation of
the bonus to no more that five percent of its TANF grant?
2. How should we redistribute funds that cannot be distributed
within a bonus year?
Section 270.10 How Will We Annually Review the Award Process?
We have proposed in this section an annual review process, as
needed, to address any future circumstances or events that we cannot
predict but that we anticipate may occur and for which we will need to
make modifications, adjustments, or technical changes to the high
performance bonus specifications. We are still learning from State
experience in competing for the first year bonus awards, including the
process of gathering and reporting data in FY 1999 for State
performance in FY 1998. Because the high performance bonus system is
new for both the States and the Federal government, we think that it is
critical to be able to continue to refine our award system based on
what we learn from that award process.
We also know that State TANF programs are changing and that the
field of performance measurement continues to evolve. States and others
are in the forefront of these activities, and we are learning from
their experiences. We believe that taking these changes into account in
making future awards will strengthen the process greatly. In addition,
in anticipation of events occurring over which we have no control, we
believe it is important that States know, to the extent possible before
the measurement year, the measures, data sources, and other provisions
on which we would base the bonus awards.
We propose in Sec. 270.10 to allow for certain changes,
modifications, and technical corrections. We would add new measures or
make changes in the allocation formula only through regulations. We
want to use this NPRM to determine if there is support for retaining
some flexibility in order that we could take advantage of new
developments, such as the emergence of new national data sources, to
adjust to changes in external events such as lack of available data
from the Census Bureau, or changes in the amount of funding available
for bonus awards. We have proposed external consultation with
interested parties as well as the criteria we would use to make these
decisions. We welcome comments on the efficacy of this approach; we
also welcome suggestions for the criteria under which such flexibility
should be exercised.
Section 270.11 When Must the States Report the Adult Recipient Data
and Other Information Related to Work Measures?
In paragraph (a), we propose that each State must collect quarterly
the data specified in Sec. 270.6(a) and (b) and report them semi-
annually (by February 28 and August 31 of the bonus year) for the
performance year (and for the comparison year if the State is competing
on a work improvement measure). We propose that States collect data
quarterly so that any problems that might occur in data reporting can
be addressed by the State early in the bonus year. However, we are
proposing to require reporting only semi-annually to minimize
administrative burden.
We propose in paragraph (b) that each State must collect quarterly
and submit the information in the SSP-MOE Data Report, as specified in
Sec. 270.6(c), either:
At the same time as it submits its quarterly TANF Data
Report; or
At the time it seeks to be considered for a high
performance bonus as long as it submits the required data for the full
period for which this determination will be made.
[[Page 68218]]
These options for filing the SSP-MOE Data Report are the same as
those contained Sec. 265.3(d) of this chapter.
We are proposing in paragraph (c) to require that each State submit
the list of work measures on which it is competing, as specified in
Sec. 270.6(c), by February 28 of the bonus year. This date is the same
as the date proposed in paragraph (b) for the submission of the first
semi-annual data report. We believe that by this date States will have
determined on which measures they wish to compete and consistency of
reporting dates will benefit both States and ACF.
Section 270.12 Must States File the Data Electronically?
In order to compete for a high performance bonus, we are proposing
that each State must submit data electronically on the work measures
and on the Medicaid/CHIP outcome measure to be included in the final
rule. ACF will specify the reporting format and specifications for the
work measures in program guidance after publication of a Paperwork
Reduction Act (PRA) package. HCFA will also specify any specific
reporting requirements.
We are proposing electronic submission for several reasons. For
each collection of information, OMB regulations at 5 CFR 1320.8 require
Federal agencies to evaluate whether the burden on respondents can be
reduced by use of automatic, electronic, mechanical, or other
technological collection techniques. This Department has for many years
encouraged programs and grantees to use such non-paperwork approaches
to meet data collection requirements.
With respect to the work measures, all States currently report the
Emergency TANF Data Report in an electronic format that we have
specified. In external consultation meetings, State representatives
supported electronic submission of data reports. Therefore, we believe
that electronic submission of the high performance bonus data will not
be a burden on States, will reduce paperwork and administrative costs,
be less expensive and time-consuming, and be more efficient for both
States and the Federal Government.
Section 270.13 What do States Need To Know About the Use of Bonus
Funds?
In the context of the flexibility provided to States under the TANF
program, we decline to specify how States must use bonus award funds.
States have the same flexibility in the use of these funds that they
have in the use of TANF block grant funds.
We propose in paragraph (a) that a State must use the bonus award
funds in accordance with two sections of the Act: Section 401 (Purpose)
and section 404 (Use of Grants). We propose in paragraph (b) that the
bonus funds are also subject to the statutory requirements and
limitations in section 404 (Use of Grants) and section 408
(Prohibitions; Requirements) of the Act. In paragraph (c), we propose
that, if the State uses bonus funds to provide assistance as defined in
Sec. 260.31 of this chapter, Sec. 263.11 of this chapter also applies.
Grants made to a State under section 403 of the Act--whether TANF
block grant funds, bonus award funds, or Welfare-to-Work grants--are
subject to these limitations and requirements. For example, if a State
uses bonus funds to provide assistance (as defined in Sec. 260.31 of
this chapter), the prohibitions against providing assistance to certain
individuals in section 408 will apply. If the State does not use bonus
funds to provide such assistance, these prohibitions are not
applicable.
Finally, some of the general requirements in sections 404 and 408
of the Act will apply regardless of how the States choose to use these
funds. For example, the 15 percent limitation on the use of TANF grant
funds for administrative purposes (section 404(b) of the Act) means
that any bonus award funds will be added to the State's total amount of
TANF funds and the administrative cost percentage will be computed
based on the total.
We propose in paragraph (d) to add, for clarity, the statutory
provision that, for Puerto Rico, Guam, the Virgin Islands, and American
Samoa, the bonus award funds are not subject to the mandatory ceilings
on funding established in section 1108(c)(4) of the Act.
VI. Discussion of Other Issues Related to Performance Measurement
In this section of the preamble, we discuss and raise questions
concerning issues relating to absolute performance, performance
improvement, threshold levels, and alternative ways to ensure an
objective and fair competition. We also include a list of measures and
data sources that we believe do not merit further consideration at this
time, although we welcome comment on this conclusion.
A. Consideration of Issues Relating to Absolute Performance,
Performance Improvement, and Threshold Levels
It is easy to understand absolute performance; whoever receives the
highest or best score is the winner. However, such measures can reward
high performers without additional effort on their part, and it can
also discourage low performers who would need to make extraordinary
progress in order to compete.
Measuring improvement, on the other hand, allows a wider range of
States to compete successfully and encourages low performers to invest
in greater efforts. It also recognizes that States work in different
environments and that success needs to be measured in more than one
way. However, use of such measures could allow a low performer to
register a significant improvement while still remaining a low
performer. It might also be difficult for a high performing State to
compete successfully over time because it would need to continue to
sustain high levels of improvement or even to maintain the same level
of performance year to year.
Because these bonuses are intended for ``high performing'' States,
we decided it would be appropriate to set some levels of performance.
We had several options available in establishing these levels. We have
proposed the threshold level as the ``top ten States'' competing in
each measure. Another option would be to establish a numerical score
which could be absolute, e.g., 75 percent or another score which a
State would need to meet or exceed in order to be eligible to receive a
bonus in a certain category, or a score tied to self-sufficiency such
as one related to above poverty-level wages. A third option was to
establish individually negotiated targets with each State. This last
option provides the greatest flexibility to States in setting
performance outcomes and competing for bonuses. However, it could be
perceived as inconsistent with statutory intent and with the public's
understanding of high performance. It would also entail a greater
workload for States and the Department. A final option would be to
raise the score each year, e.g., a 75 percent score must be achieved in
FY 2002, an 80 percent score in FY 2003.
B. Consideration of Alternate Ways To Structure the High Performance
Bonus To Ensure an Objective and Fair Competition: The Impact of
External Factors
We believe that competition for the high performance bonus should
primarily reflect a State's welfare and work strategies and should be a
competition among States that is objective and fair. We can achieve
this goal, to some extent, in our use of common measures and uniform,
reliable
[[Page 68219]]
data sources, allowing for measures of both absolute and improved
performance. However, there are factors over which the State has little
control, such as the health of the State's economy, the demographics of
its TANF caseload and its resident population, and State population
growth. As a result, many individuals would like us to incorporate some
adjustments for these external factors. However, the inclusion of
multiple adjustment factors in some type of weighting scheme poses
serious methodological problems. Such a scheme might create a more
equitable starting point, but it could also lead to misunderstandings,
challenges, and contentious debates.
In light of this discussion, we raise the following questions:
1. Should we attempt to develop adjustment factors in order to
ensure an objective and fair competition?
2. If so, what adjustment factors should we consider and how should
they be used?
3. Should we consider the use of the State's employment rate or
changes in State caseloads as adjustment factors?
C. Other Measures and Data Sources Considered
We considered and evaluated a wide range of possible measures and
data sources in developing this NPRM. As noted earlier in our
discussion of Sec. 270.4, one of the factors we were particularly aware
of was the issue of diversity among States and how that diversity might
impact the design and implementation of the high performance bonus
award system. For example, under AFDC, each State defined its standard
of need for assistance, set its own benefit levels, and established
(within Federal limitations) income and resource limits. As a result,
there were sizeable differences from State to State in the definitions
used in these programs, in the level of assistance families received,
and in the types of families served. Waivers from Federal requirements
used by some States to test the effect of changes in certain rules
increased these differences. The table below illustrates the range in
State AFDC caseload sizes, case characteristics, benefit levels,
employment levels, and program costs for fiscal year 1996.
------------------------------------------------------------------------
Range
Category -------------------------------
Lowest Highest
------------------------------------------------------------------------
Number of families...................... 4,700 896,000
Number of adults........................ 3,700 821,000
Number of Children...................... 9,100 1,805,000
Percent of families headed by one adult. 57.0 83.8
Percent of families headed by two (or 0.4 18.5
more) adults...........................
Percent of families headed by no adult 7.6 38.5
recipient**............................
Average monthly benefit per family...... $118 $731
Average monthly benefit per recipient... $44 $247
Percent of recipient adults (male and 1.1% 27.3%
female) with employment (full or part-
time)..................................
Average monthly earnings of families $127 $505
with earnings..........................
Average monthly administrative expenses $13 $128
per family.............................
Average monthly administrative expenses $5 $49
per recipient..........................
------------------------------------------------------------------------
** ``No adult recipient'' means that the children are living with
parents or adult caretakers who are not receiving AFDC due to a wide
variety of reasons.
Since States now have even greater flexibility in designing their
TANF programs, we believe this diversity across States will continue to
grow. We noted some examples of these differences in a review of State
TANF plans:
(1) Although assistance under the TANF statute is limited to 5
years, only 25 States have a five year limit;
(2) About half the States plan not to provide extra payments to
families that have an additional child while on welfare (sometimes
called a ``family cap''); and
(3) Thirty States operate or allow counties to operate ``up-front''
diversion programs. These generally involve a one-time cash payment to
meet immediate needs.
Because of these differences, as we evaluated performance measures
related to work, we chose not to include measures that were based
solely on receipt of cash benefits or type of benefits. We believe such
measures could have serious unintended effects. Instead, we focused on
work measures which would gauge work and self-sufficiency performance.
We discussed our rationale for this choice earlier in the preamble.
We also considered using a number of national data sources,
including:
1. The Current Population Survey (CPS).--The CPS contains detailed
questions related to labor force participation (e.g., employment/
unemployment status; hours and weeks worked throughout the past year;
and reasons for non-participation, joblessness, and part-year/part-time
employment) as well as questions on whether an individual/family/
household received public assistance. We seriously considered using
this database. However, the CPS has a limited data set and most
importantly, a small sample size. Because of the sample size, State
figures may vary widely which would restrict its usefulness for
awarding the high performance bonus.
2. In addition to the CPS, the data sources listed below were also
found to have various limitations including inconsistent definitions,
non-comparability across States, tangential relevance, and different
sample populations. These databases included:
Food Stamp Quality Control Data
Internal Revenue Service Data
(PSID) Panel Study of Income Dynamics
(SIPP) The Survey of Income and Program Participation
(NLSY) National Longitudinal Survey of Youth
(NSFG) National Survey of Family Growth
(YRBSS) Youth Risk Behavior Surveillance System
(NCHS) National Center on Health Statistics
(UI) Unemployment Insurance
State administrative data
Below is a summary list of the major performance measures and data
sources we considered but did not propose at this time for various
reasons, including a lack of uniform national data availability,
variation in definitions among States, and measures beyond the scope of
the bonus.
Other Measures and Data Sources Considered:
[[Page 68220]]
------------------------------------------------------------------------
Variable Source
------------------------------------------------------------------------
Percent of caseload entering employment CPS.
without a high school diploma.
Percent of long-term caseload entering State administrative data.
employment.
Work participation rate................ State administrative data.
Percent of cases that reach time limit State administrative data.
without job.
Percent of TANF teens attending school State administrative data.
or working.
Percent of TANF teens not attending State administrative data.
school and not working.
Number of out-of-wedlock births........ State administrative data;
NCHS.
Recidivism rate........................ No data source identified.
Average length of stay on assistance... State administrative data.
Cases with transitional benefits....... State administrative data.
Receipt of TANF benefit................ State administrative data
Number of applicants diverted from the No data source identified.
TANF cash assistance program.
Reduction in dependence................ State administrative data.
Increase in number of persons in Department of Labor data.
training/non-traditional employment
under Welfare-to-Work program.
Percent of children living in CPS.
households with no adult male ages 21
and over.
Educational attainment................. CPS.
Improvement in immunization............ No data source identified.
Proportion of recipients who receive No data source identified.
domestic violence services.
Percent of current/former recipients State administrative data.
receiving subsidized child care.
Quality child care..................... No data source identified.
Percent of caseload with paternity State administrative data.
established.
Number of TANF families that have both State administrative data.
earned income and child support paid.
Percent of caseload married............ State administrative data.
Percent of caseload leaving welfare for State administrative data.
marriage.
Administrative cost per work placement. State administrative data.
Marriage/Divorce rates statewide....... Vital statistics.
Number of children entering foster care Adoption and Foster Care
Analysis and Reporting System
(AFCARS).
Percent of children in poverty......... Census Bureau data.
Services to the harder to serve No data source identified.
population.
------------------------------------------------------------------------
We welcome comments on any of the measures or data sources we
considered but rejected.
VII. Regulatory Impact Analyses
A. Executive Order 12866
Executive Order 12866 requires that regulations be drafted to
ensure that they are consistent with the priorities and principles set
forth in the Executive Order. The Department has determined that this
proposed rule is consistent with these priorities and principles. This
proposed rulemaking implements statutory authority based on broad
consultation and coordination.
The Executive Order encourages agencies, as appropriate, to provide
the public with meaningful participation in the regulatory process.
Section 403(a)(4) of the Act also requires the Department to consult
with the National Governors' Association and the American Public Human
Services Association in the development of a system for awarding high
performance bonuses. As described elsewhere in the preamble, ACF
consulted extensively with State and local officials and their
representative organizations as well as a broad range of advocacy
groups, researchers, and others to obtain their views. These proposed
rules reflect the discussions with and the concerns of the groups with
whom we consulted.
This rule is a significant regulatory action that will have an
annual effect on the economy of $100 million or more, according to
section 3(F)(1) of the Executive Order. This rule will determine how
$200 million will be awarded to high performing States to be used to
benefit the recipients of State TANF programs and will have the
additional effect of improving States' efforts in implementing welfare
reform. High performing States could see their State family assistance
grants increase by as much as five percent. We believe the cost of
competing for a high performance bonus award should be minimal since
competition for these awards will be based, to the extent possible, on
existing data sources.
B. Regulatory Flexibility Analysis
The Regulatory Flexibility Act (5 U.S.C. Ch. 6) requires the
Federal government to anticipate and reduce the impact of rules and
paperwork requirements on small businesses and other small entities.
Small entities are defined in the Act to include small businesses,
small non-profit organizations, and small governmental entities. This
rule will affect only the 50 States, the District of Columbia, and
certain territories. Therefore, the Secretary certifies that this rule
will not have a significant impact on small entities.
C. Assessment of the Impact on Family Well-Being
We certify that we have made an assessment of this rule's impact on
the well-being of families, as required under section 654 of the
Treasury and General Appropriations Act of 1999. The high performance
bonus awards proposed in this NPRM are a component part of the TANF
program and are designed to reward State efforts in strengthening the
economic and social stability of families and carrying out other
purposes in the statute. The NPRM does not limit State flexibility to
design programs to serve these purposes.
D. Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 (PRA), no persons are
required to respond to a collection of information unless it displays a
valid OMB control number. As required by this Act, we have submitted
the proposed data collection requirements to OMB for review and
approval. We are concurrently using this NPRM as a vehicle for seeking
comment from the public on these and any additional
[[Page 68221]]
information collection activities that they believe should be added as
a part of the bonus award process.
This NPRM proposes to award bonuses, in FY 2002 and beyond, based
on four work measures and three non-work measures. No reporting burden
would fall on the States for two of the non-work measures for which we
will use Census Bureau decennial and annual demographic program data as
the data source, i.e., food stamp participation measure and measure on
family formation and stability. To measure Medicaid/CHIP participation,
States must match TANF data with Medicaid/CHIP enrollment data, using
the information from HCFA's MSIS system and the HCFA Form 21-E.
We have computed the burden based only on the work measures and the
measure of Medicaid/CHIP participation specified in Sec. 270.4. If
additional measures are added or additional reporting is required in
the final rule, we will solicit comments on the increased burden of
reporting through a Paperwork Reduction Act Notice.
Burden Estimate for the Work Measures
The NPRM proposes two alternative reporting mechanisms for the work
measures, i.e., either the information specified in Sec. 270.(6)(a)(1)
or the data specified in Sec. 270.6(a)(2). After a consideration of
public comments, the Secretary's decision will be reflected in the
final rule. Under both alternatives, the State must collect information
quarterly and report it semi-annually for both the adult TANF
recipients and the adult SSP-MOE recipients for whom the State reports
data in the SSP-MOE Data Report.
If the State wishes to receive a high performance bonus, it must
report the data in Sections One and Three of the SSP-MOE Data Report as
required in Sec. 265.3(d) of this chapter. (The burden for this
reporting requirement was previously estimated in the TANF final rule,
published April 12, 1999 (64 FR 17720).) We will specify the reporting
format for these proposed requirements.
We estimate the burden for the first reporting alternative in
Sec. 270.6(a)(1) as 1,728 hours, based on the requirement that States
report the name, birth date, and social security number of all adult
TANF and SSP-MOE recipients and identify those in fully subsidized
employment. Our estimate of the burden is as follows: 16 hours per
response, times 54 respondents, times two (semi-annual reporting).
Because the four work measures proposed in this NPRM are
substantially the same as the work measures on which we will award
bonuses in FY 1999 and FY 2000, we estimate the burden for the second
reporting alternative in Sec. 270.6(a)(2) to be the same as the current
number in the OMB PRA Inventory of 8,640 hours. This current number
represents the annual burden estimate of collecting data from 54
respondents, responding quarterly, at 40 hours per response. (See ACF-
Form 200, OMB No. 0970-0180.) The actual burden may be less since we
are proposing to require that States submit quarterly data twice a
year. On the other hand, the burden may be the same because the primary
burden is the quarterly collection of the data rather than the semi-
annual reporting of the data.
We estimate the total burden of the two reporting alternatives is
10,368 hours (1,728 plus 8,640). We realize that this number is an
over-estimate, reflecting the total burden of two proposed alternatives
in the NPRM, only one of which will be included in the final rule.
We believe the burden of reporting the information on work measures
will be minimal, particularly if we are able to use the NDNH. In
addition, States already have experience in extracting case/individual
identifying information from their electronic data bases for matching
purposes, including the Income and Eligibility Verification System
(IEVS) matches required by statute.
Burden Estimate for the Measures on Medicaid/CHIP Participation
The Medicaid/CHIP performance measure at Sec. 270.4(d) consists of
qualifying conditions and an outcome measure. The qualifying conditions
will be evaluated by HCFA based on State documentation and HCFA
oversight of the Medicaid/CHIP programs. There is no new burden
associated with these process measures.
The outcome measure in Sec. 270.4(d)(4) is based on quarterly
reporting of the data from a match of TANF data and Medicaid enrollment
data. Because this activity is similar to State activity in matching
TANF data and UI data (see Sec. 270.6(a)(2)), we estimate that the
burden will be approximately the same, i.e., 8,640 hours, excluding
start-up costs. We understand that some States may not have social
security numbers for CHIP recipients. In that instance, there may be an
additional burden.
The total annual burden estimate includes the development of a one-
time extraction program (based on our specifications), computer run-
time to execute the program, the creation of an extract data file, and
transmitting the information.
We estimate that the 50 States, the District of Columbia, Guam,
Puerto Rico, and the United States Virgin Islands will be respondents.
(Currently, American Samoa has not applied to implement the TANF
program.)
The annual burden estimate for this data collection is:
----------------------------------------------------------------------------------------------------------------
Number of Average
Number of responses burden Total
Instrument or requirement respondents per hours per burden
respondent response hours
----------------------------------------------------------------------------------------------------------------
High Performance Bonus Report: WORK MEASURES (total of two 54 2 96 10,368
alternative................................................
measures)...................................................
High Performance Bonus Report: MEDICAID/CHIP MEASURE........ 54 4 40 8,640
------------
Estimated Total Annual Burden Hours..................... 19,008
----------------------------------------------------------------------------------------------------------------
We encourage States, organizations, individuals, and other parties
to submit comments regarding the information collection requirements to
the Administration for Children and Families, Office of Information
Services, Office of Information Resource Management Services, 370
L'Enfant Promenade SW., Washington, DC 20447, Attention: Reports
Clearance Officer.
To ensure that public comments have maximum effect in developing
the final regulations and the data collection instrument, we urge that
each comment clearly identify the specific section or sections of the
proposed rule or Appendices.
We will consider comments by the public on these proposed
collections of information in:
[[Page 68222]]
Evaluating whether the proposed collections are necessary
for the proper performance of our functions, including whether the
information will have practical utility;
Evaluating the accuracy of our estimate of the burden of
the proposed collections of information, including the validity of the
methodology and assumptions used, and the frequency of collection;
Enhancing the quality, usefulness, and clarity of the
information to be collected; and
Minimizing the burden of the collection of information on
those who are to respond, including through the use of appropriate
automated, electronic, mechanical, or other technology, e.g., the
electronic submission of responses.
OMB is required to make a decision concerning the collection of
information contained in these proposed rules between 30 and 60 days
after publication of this document in the Federal Register. Therefore,
a comment is assured of having its full effect if OMB receives it
within 30 days of publication. This OMB review schedule does not affect
the deadline for the public to comment to ACF on the proposed rules.
Written comments to OMB for the proposed information collection should
be sent directly to the following: Office of Management and Budget,
Office of Information and Regulatory Affairs, Room 3208 New Executive
Office Building, 725 17th Street, NW, Washington, DC 20503, Attention:
Desk Officer for ACF.
E. Unfunded Mandates Reform Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded
Mandates Act) requires that a covered agency prepare a budgetary impact
statement before promulgating a rule that includes any Federal mandate
that may result in the expenditure by State, local, and Tribal
governments, in the aggregate, or by the private sector, of $100
million or more in any one year.
If a covered agency must prepare a budgetary impact statement,
section 205 further requires that it select the most cost-effective and
least burdensome alternative that achieves the objectives of the rule
and is consistent with the statutory requirements. In addition, section
203 requires a plan for informing and advising any small government
that may be significantly or uniquely impacted by the proposed rule.
We have determined that the proposed rules will not result in the
expenditure by State, local, and Tribal governments, in the aggregate,
or by the private sector, of more than $100 million in any one year.
Accordingly, we have not prepared a budgetary impact statement,
specifically addressed the regulatory alternatives considered, or
prepared a plan for informing and advising any significantly or
uniquely impacted small government.
F. Congressional Review
This proposed rule is a major rule as defined in 5 U.S.C., Chapter
8.
List of Subjects in 45 CFR Part 270
Grant Programs (Social Programs); Public Assistance Programs
(Welfare Programs); Recordkeeping and Reporting Requirements.
(Catalogue of Federal Domestic Assistance Programs: No. 93.558
Temporary Assistance for Needy Families (TANF) Program; State Family
Assistance Grants; Tribal Family Assistance Grants; Assistance
Grants to Territories; Matching Grants to Territories; Supplemental
Grants for Population Increases; Contingency Fund; High Performance
Bonus; Decrease in Illegitimacy Bonus)
Dated: November 17, 1999.
Olivia A. Golden,
Assistant Secretary for Children and Families.
Approved: November 19, 1999.
Donna E. Shalala,
Secretary, Department of Health and Human Services.
For the reasons set forth in the preamble, we propose to amend 45
CFR chapter II by adding part 270 to read as follows:
PART 270--HIGH PERFORMANCE BONUS AWARDS
Sec.
270.1 What does this part cover?
270.2 What definitions apply to this part?
270.3 What is the annual maximum amount we will award and the
maximum amount that a State can receive each year?
270.4 On what measures will we base the bonus awards?
270.5 What factors will we use to determine a State's score on the
work measures?
270.6 What data for the work measures must a State report to us?
270.7 What data will we use to measure performance on the non-work
measures?
270.8 How will we allocate the bonus award funds?
270.9 How will we redistribute funds if that becomes necessary?
270.10 How will we annually review the award process?
270.11 When must the States report the adult recipient data and
other information related to the work measures?
270.12 Must States file the data electronically?
270.13 What do States need to know about the use of bonus funds?
Authority: 42 U.S.C. 603(a)(4)
Sec. 270.1 What does this part cover?
This part covers the regulatory provisions relating to the bonus to
reward high performing States in the TANF program, as authorized in
section 403(a)(4) of the Social Security Act.
Sec. 270.2 What definitions apply to this part?
The following definitions apply under this part:
Act means the Social Security Act, as amended.
Bonus year means each of the fiscal years 2002 and 2003 in which
TANF bonus funds are awarded, and any subsequent fiscal year for which
Congress authorizes and appropriates bonus funds.
CHIP is the Children's Health Insurance Program as described in
title XXI of the Social Security Act.
Comparison year means the fiscal year preceding the performance
year.
Fiscal year means the 12-month period beginning on October 1 of the
preceding calendar year and ending on September 30.
Food Stamp Program means the program administered by the United
States Department of Agriculture pursuant to the Food Stamp Act of
1977, U.S.C. 2011 et.seq.
HCFA is the Health Care Financing Administration.
Medicaid is a State program of medical assistance operated in
accordance with a State plan under title XIX of the Act.
MSIS is the Medicaid Statistical Information System.
Performance year means the fiscal year in which a State's
performance is measured, i.e., the fiscal year immediately preceding
the bonus year.
Separate State program (SSP) means a program operated outside of
TANF in which the expenditure of State funds may count for TANF
maintenance-of-effort (MOE) purposes.
SSP-MOE Data Report is the report containing disaggregated and
aggregated data required to be filed on SSP-MOE recipients in separate
State programs as specified in Sec. 265.3(d).
State means each of the 50 States of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, the United
States Virgin Islands, Guam, and American Samoa.
TANF means The Temporary Assistance for Needy Families Program.
We (and any other first person plural pronouns) means the Secretary
of Health and Human Services or any of the following individuals or
organizations acting in an official capacity on the Secretary's behalf:
The
[[Page 68223]]
Assistant Secretary for Children and Families, the Department of Health
and Human Services, and the Administration for Children and Families.
Sec. 270.3 What is the annual maximum amount we will award and the
maximum amount that a State can receive each year?
(a) Except as provided in Sec. 270.9, we will award $200 million in
bonus funds annually, subject to Congressional authorization and the
availability of the appropriation.
(b) The amount payable to a State in a bonus year may not exceed
five percent of a State's family assistance grant.
Sec. 270.4 On what measures will we base the bonus awards?
(a) Performance measures: General. We will base the high
performance bonus awards on four work measures; one measure of family
formation and family stability; and two measures that support work and
self-sufficiency, i.e., participation by low-income working families in
the Food Stamp Program and participation in the Medicaid and CHIP
programs.
(b) Work Measures.
(1) Beginning in FY 2002, we will measure State performance on the
following work measures:
(i) Job entry rate;
(ii) Success in the work force rate;
(iii) Increase in the job entry rate; and
(iv) Increase in success in the work force rate.
(2) For any given year, we will score and rank competing States and
award bonuses to the ten States with the highest scores in each work
measure.
(3) Each State has the option to compete on one, any number of, or
none of the work measures specified in this paragraph.
(c) Measure of participation by low-income working families in the
Food Stamp Program--(1) Qualifying conditions. In order to compete on
the Food Stamp outcome measure in paragraph (c)(2) of this section,
States must meet all the following qualifying conditions. The Food and
Nutrition Service of the U.S. Department of Agriculture will determine
whether a State is meeting these conditions through its ongoing
oversight of the Food Stamp Program.
(i) The State agency has issued policy instructions or regulations
clearly specifying that, at first contact with the State agency which
administers the Food Stamp Program, individuals must be informed of the
opportunity to apply for food stamps in accordance with 7 CFR
273.2(c)(1).
(ii) The State agency has issued policy instructions or regulations
clearly specifying that application forms are to be readily accessible
and available upon request, in accordance with 7 CFR 273.2(c)(3).
(iii) As evidenced through policy instructions, regulations, and
administrative reviews, the State agency is complying with application
processing time frames and expedited service rules, as required by 7
CFR 273.2(g).
(iv) As evidenced through policy instructions, regulations, and
administrative reviews, the State agency has taken steps to prevent
inappropriate denials and terminations of eligible food stamp
participants who have lost TANF eligibility. Since food stamp
eligibility is not based on TANF eligibility, States may not deny food
stamp eligibility to a family or a family member simply because the
family is ineligible for TANF.
(2) Outcome measure. (i) Beginning in FY 2002, we will measure the
improvement in the number of low-income working families (i.e.,
families with children under age 18 who have an income less than 130
percent of poverty and earnings equal to at least half-time, full-year
minimum wage) receiving food stamps as a percentage of the number of
low-income working families (as defined in this subparagraph) in the
State.
(ii) For any given year, we will compare a State's performance on
this measure to its performance in the previous year, beginning with a
comparison of CY 2000 to CY 2001, based on Census Bureau decennial and
annual demographic program data.
(iii) We will rank all States that meet the conditions in paragraph
(c)(1) of this section and will award bonuses to the 10 States with the
greatest percentage improvement in this measure.
(d) Measure of participation by low-income families in the
Medicaid/CHIP Programs--(1) Qualifying conditions. In order to compete
on the Medicaid/Children's Health Insurance Program (CHIP) outcome
measure in paragraph (d)(3) of this section, a State must meet all of
the following qualifying conditions:
(i) The State has issued policy instructions or regulations clearly
specifying that, at first contact with the TANF agency, an individual
must be given the opportunity to apply for Medicaid in accordance with
42 CFR 435.906;
(ii) When eligibility under section 1931 of the Act is lost due to
hours of, or earnings from, employment or loss of the time-limited
earning disregards, the State issues to the affected family a written
notice that meets the requirements of section 1925(a)(2)(A) of the Act,
and a card or other evidence of the family's entitlement to assistance,
as required under section 1925(a)(2)(B) of the Act;
(iii) The State has issued policy instructions or regulations
clearly specifying that family members may not be terminated from
Medicaid until it has been determined that they are not eligible under
any other Medicaid group; and
(iv) The State has fulfilled all data requirements under the law,
including being up to date on all Medicaid and CHIP data submissions
and having the MSIS system on-line and operating properly.
(2) Qualifying options. In addition, in order to compete on the
outcome measure in paragraph (d)(3) of this section, the State must
have implemented at least two of the following qualifying State
options:
(i) The State accepts mail-in or phone-in applications for Medicaid
for families and children which can be completed without a face-to-face
interview;
(ii) State Medicaid workers have been outstationed at locations in
addition to the locations required under 42 CFR 435.904 (c)(1) and
(c)(2);
(iii) The State has expanded Medicaid eligibility for recipient and
applicant families through the use of less restrictive methodologies,
authorized by section 1931(b)(2) (B) and (C) of the Act;
(iv) The State uses a definition of ``unemployed parent'' that
includes parents who are employed more than 100 hours per month, as
authorized under 45 CFR 233.101 and section 1931(d) of the Act;
(v) The State provides continuous Medicaid eligibility for children
for a period of time without regard to changes in circumstances, as
authorized by section 1902(e)(12) of the Act;
(vi) The State provides a period of presumptive Medicaid
eligibility for children, as authorized by section 1920A of the Act; or
(vii) The State has simplified the enrollment and reenrollment
processes for children and low-income families by implementing such
improvements as shortened application forms.
(3) Outcome Measure. (i) Beginning in FY 2002, we will measure the
improvement in the percentage of individuals receiving TANF benefits
who are also enrolled in Medicaid or CHIP, who leave TANF in a calendar
year and are enrolled in Medicaid or CHIP in the sixth month after
leaving TANF assistance (and are not receiving TANF assistance in the
sixth month).
[[Page 68224]]
(ii) For any given year, we will compare a State's performance on
this measure to its performance in the previous year, beginning with a
comparison of CY 2000 to CY 2001, based on a quarterly submission by
the State of the above percentage as determined by matching individuals
(adults and children) who have left TANF assistance and are not
receiving it in the sixth month with Medicaid/CHIP enrollment data.
(iii) We will rank the performance on this measure of all States
that meet the conditions in paragraphs (d)(1) and (d)(2) of this
section and will award bonuses to the 10 States with the greatest
percentage improvement in this measure.
(e) Measure of family formation and stability. (1) Beginning in FY
2002, we will measure the increase in the percent of children below 200
percent of poverty in each State who reside in married couple families,
beginning with a comparison of data between CY 2000 and CY 2001, based
on Census Bureau decennial and annual demographic program data. For any
given subsequent year, we will compare a State's performance on this
measure to its performance in the previous year.
(2) We will rank all States and will award bonuses to the ten
States with the greatest percentage improvement in this measure.
Sec. 270.5 What factors will we use to determine a State's score on
the work measures?
(a) Definitions. The work measures are defined as follows:
(1) The Job Entry Rate means the unduplicated number of adult
recipients who entered not fully subsidized employment for the first
time in the performance year (job entries) as a percent of the total
unduplicated number of adult recipients unemployed at some point in the
performance year. Adult recipients in fully subsidized employment are
not included in the numerator but are included in the denominator.
(2) The Success in the Work Force Rate is composed of two
submeasures defined as follows:
(i) The Job Retention Rate means the performance year sum of the
unduplicated number of employed adult recipients in each quarter one
through four who were also employed in the first and second subsequent
quarters, as a percent of the sum of the unduplicated number of
employed adult recipients in each quarter. (At some point, the adult
might become a former recipient.) Adult recipients in fully subsidized
employment are not included in either the numerator or the denominator;
and
(ii) The Earnings Gain Rate means the performance year sum of the
gain in earnings between the initial and second subsequent quarter in
each of quarters one through four for adult recipients employed in both
these quarters as a percent of the sum of their initial earnings in
each of quarters one through four. (At some point, the adult might
become a former recipient.) Earnings gains of adult recipients in fully
subsidized employment are not included in either the numerator or the
denominator.
(3) The Increase in the Job Entry Rate means the positive
difference between the performance year job entry rate and the
comparison year job entry rate as a percentage of the comparison year
job entry rate; and
(4) The Increase in Success in the Work Force Rate means the
positive difference between the performance year success in the work
force rate and the comparison year success in the work force rate as a
percent of the comparison year success in the work force rate. It is
composed of t
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