Food Stamp Program: Employment and Training Program Provisions of the Farm Security and Rural Investment Act of 2002

DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 272 and 273

RIN 0584-AD32

Food Stamp Program: Employment and Training Program Provisions of

the Farm Security and Rural Investment Act of 2002

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule finalizes the proposed provisions of a rule

published on March 19, 2004 to amend Food Stamp Program regulations to

codify Food Stamp Employment and Training (E&T) Program provisions of

section 4121 of the Farm Security and Rural Investment Act of 2002 (the

Farm Bill). This final rule establishes a reasonable formula for

allocating the 100 percent Federal grant authorized under the Farm Bill

to carry out the E&T Program each fiscal year. This final rule also

codifies the Farm Bill provision that makes available up to $20 million

a year in additional unmatched Federal E&T funds for State agencies

that commit to offer an education/training or workfare opportunity to

every applicant and recipient who is an able-bodied adult without

dependents (ABAWD), limited to 3 months of food stamp eligibility in a

36-month period, who would otherwise be terminated. This final rule

eliminates the current Federal cost-sharing cap of $25 per month on the

amount State agencies may reimburse E&T participants for work expenses

other than dependent care. This final rule codifies Farm Bill

provisions that expand State flexibility in E&T Program spending by

repealing the requirements that State agencies earmark 80 percent of

their annual 100 percent Federal E&T grants to serve ABAWDs; they meet

or exceed their fiscal year 1996 State administrative spending levels

to access funds made available by the Balanced Budget Act of 1997; and

the Secretary be given the authority to establish maximum reimbursement

costs of E&T Program components. Lastly, this final rule rescinds the

balance of unobligated funds carried over from fiscal year 2001.

DATES: This final rule is effective August 8, 2006.

FOR FURTHER INFORMATION CONTACT: Micheal Atwell, Senior Program

Analyst, Program Design Branch, Program Development Division, Food

Stamp Program, Food and Nutrition Service, 3101 Park Center Drive, Room

810, Alexandria, Virginia, 703-305-2449, or via the Internet at

[email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule was determined to be significant and was reviewed

by the Office of Management and Budget (OMB) in conformance with

Executive Order 12866.

Executive Order 12372

The Food Stamp Program (FSP) is listed in the Catalog of Federal

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

final rule in 7 CFR part 3105, subpart V and related Notice (48 FR

29115, June 24, 1983), this Program is excluded from the scope of

Executive Order 12372, which requires intergovernmental consultation

with State and local officials.

Executive Order 12988

This final rule has been reviewed under Executive Order 12988,

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

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

conflict with its provisions or that would otherwise impede its full

implementation. This rule is not intended to have retroactive effect

unless so specified in the DATES paragraph of this final rule. Prior to

any judicial challenge to the provisions of this rule or the

application of its provisions, all applicable administrative procedures

must be exhausted.

Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR

1320) requires that OMB approve all collections of information by a

Federal agency before they can be implemented. Respondents are not

required to respond to any collection of information unless it displays

a current valid OMB control number. The information collections in this

rule were previously approved under OMB control number 0584-0339. The

rules in 7 CFR 273.7(d)(1)(i)(D) provide that, if a State Agency will

not obligate or expend all of the funds allocated to it for a fiscal

year (FY), the Food and Nutrition Service (FNS) will distribute the

unobligated, unexpended funds during the current or subsequent FY on a

first come-first served basis. State Agencies may request more funds,

as needed. Typically, FNS receives nine such requests per year. The

burden associated with OMB control number 0584-0339 has been revised by

adding 9 hours to it to account for the time it takes State Agencies to

prepare the

[[Page 33377]]

requests. The additional 9 hours were approved by OMB on August 22,

2005.

Regulatory Flexibility Act

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

Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Eric M. Bost,

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

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

a substantial number of small entities. This rule does not regulate the

activities of small businesses or other small entities; instead it

regulates the administration of the FSP, which is administered only by

State or county social service agencies.

Unfunded Mandate Analysis

Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Public

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

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

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

Department generally must prepare a written statement, including a cost

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

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

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

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

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

and consider a reasonable number of regulatory alternatives and adopt

the least costly, more cost-effective or least burdensome alternative

that achieves the objectives of the rule.

This rule contains no Federal mandates (under the regulatory

provisions of Title II of UMRA) that impose costs on State, local, or

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

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

section 202 and 205 of UMRA.

Executive Order 13132

Federalism Summary Impact Statement

Executive Order 13132 requires Federal agencies to consider the

impact of their regulatory actions on State and local governments.

Where such actions have ``federalism implications,'' agencies are

directed to provide a statement for inclusion in the preamble to the

regulation describing the agency's considerations in terms of the three

categories called for under section (6)(b)(2)(B) of Executive Order

13132.

Prior Consultation With State Officials

Prior to drafting the rule, we received input from State and local

agencies at various times. Since the FSP is a State administered,

federally funded program, our regional offices have formal and informal

discussions with State and local officials on an ongoing basis

regarding program implementation and policy issues. This arrangement

allows State and local agencies to provide feedback that forms the

basis for many discretionary decisions in this and other FSP rules. In

addition, we presented our ideas and received feedback on program

policy at various State, regional, national, and professional

conferences. Lastly, the comments from State and local officials on the

proposed Farm Bill rule were carefully considered in drafting this

final rule.

Nature of Concerns and the Need To Issue This Rule

State agencies generally want greater flexibility in their

implementation of FSP work requirements and in the operation of the E&T

Program. State agencies have indicated that providing them this

flexibility would greatly enhance their ability to more efficiently

administer the FSP. They also want current rules streamlined to allow

them to conform to the rules of other means tested Federal programs.

Extent to Which FNS Meets Those Concerns

FNS has considered the impact on State and local agencies. This

rule deals with changes required by law, which were effective on May

13, 2002. The overall effect is to lessen the administrative burden by

providing increased State agency flexibility in E&T Program spending.

Government Paperwork Elimination Act

FNS is committed to compliance with the Government Paperwork

Elimination Act (GPEA), which requires Government agencies to provide

the public with the option of submitting information or transacting

business electronically to the maximum extent possible. State agencies

have the option of submitting the Food Stamp Employment and Training

Activity Report (FNS-583) (OMB 0584-0339 electronically via the Food

Program Reporting System. Also, State agencies may submit their

applications for additional Federal operating funds via e-mail.

Civil Rights Impact Analysis

FNS has reviewed this final rule in accordance with the Department

Regulation 4300-4, ``Civil Rights Impact Analysis,'' to identify and

address any major civil rights impacts the rule might have on

minorities, women, and persons with disabilities. After a careful

review of the rule's intent and provisions, and the characteristics of

food stamp households and individual participants, FNS has determined

that there is no way to mitigate its impact on the protected classes.

Other than how to allocate E&T funds among State agencies, FNS had no

discretion in implementing any of these changes, which were effective

upon enactment of the Farm Bill on May 13, 2002. All data available to

FNS indicate that protected individuals have the same opportunity to

participate in the FSP as non-protected individuals. FNS specifically

prohibits the State and local government agencies that administer the

Program from engaging in actions that discriminate based on race,

color, national origin, gender, age, disability, marital or family

status. (FSP nondiscrimination policy can be found at 7 CFR 272.6(a)).

Where State agencies have options, and they choose to implement a

certain provision, they must implement it in such a way that it

complies with the regulations at 7 CFR 272.6.

Regulatory Impact Analysis

Need for Action

This action is needed to implement the provisions of section 4121

of the Farm Bill, which sets forth funding directives for the E&T

program. Because the rules resulting from section 4121 will have

generally applicability, they are best accomplished through regulatory

action. The provisions of this regulation establish a reasonable

formula for allocating the 100 percent Federal grant authorized under

the Farm Bill to carry out the E&T Program each fiscal year; make

available up to $20 million a year in additional unmatched Federal E&T

funds for State agencies that commit to offer an education/training or

workfare opportunity to every ABAWD applicant and recipient who would

otherwise be terminated after 3 months of food stamp eligibility in a

36-month period (3-month time limit); eliminate the current Federal

cost-sharing cap of $25 per month on the amount State agencies may

reimburse E&T participants for work expenses other than dependent care;

repeal the requirement that State agencies earmark 80 percent of their

annual 100 percent Federal E&T grants to serve ABAWDs; and repeal the

requirement that State agencies meet or exceed their FY 1996 State

administrative spending levels to access

[[Page 33378]]

funds made available by the Balanced Budget Act of 1997.

Benefits

State agencies will benefit from the provisions of this rule

because they streamline the annual E&T Program grant allocation

process, expand State agency flexibility in serving at-risk ABAWDs and

other work registrants, and eliminate unnecessary and complex rules on

how State agencies can spend E&T Program funds.

Costs and Participation Impacts

The regulatory impact analysis associated with this rule reports

that the E&T provisions of the Farm Bill are expected to reduce Federal

outlays by $36 million in FY 2005 and by $188 million in the 5 years FY

2005 through FY 2009 (see Table 1). In accordance with OMB circular A-

4, FNS has used a pre-statutory baseline (FY2002) for this analysis.

Because these provisions have already taken effect, it was possible to

compare this pre-legislative baseline to current expectations for

spending on E&T using the President's FY 2006 budget baseline, the most

recent data available at the time of analysis. These assumptions have

also been incorporated in the President's FY 2007 budget. The annual

cost of the provisions was measured as the difference between the two

cost streams. The standard E&T outlay factor of 84 percent was applied

to the difference in expected obligations to estimate the expected

impact on E&T outlays. This methodology assumes that differences

between the pre-legislative baselines and post-reform projections are

entirely due to the impact of provisions in this rule-making. To the

extent that other outside factors have influenced E&T provision and

spending, the impacts of this provision could be over-or understated.

Table 1.--Cost Impact of E&T Provisions of the Farm Bill of 2002 (Federal Outlays)

[In millions of dollars]

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2005 2006 2007 2008 2009 5-year

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100% E&T Grants........................................... -36 -35 -36 -39 -42 -188

50% E&T Grants............................................ 18 19 20 21 21 99

Participant Reimbursements................................ 6 6 6 6 7 31

Participant Benefit Impact................................ -24 -27 -27 -26 -26 -130

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Total Impact.......................................... -36 -37 -37 -38 -40 -188

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The items identified in Table 1 are described in more detail below:

* 100% E&T Grants. The cost to the government of the provisions on

100 percent Federal E&T grants was estimated based on expected 100

percent E&T obligations prior to the legislation ($130 million in FY

2002), indexed by economic projections from the Office of Management

and Budget.

* 50% E&T Grants. The cost to the Government of the provisions on

50 percent Federal E&T grants was based on expected 50 percent E&T

obligations prior to the legislation ($107 million in FY 2002), indexed

by economic projections from the Office of Management and Budget.

* Participant Reimbursements. The cost to the Government of the

provisions on E&T participant reimbursements was based on expected

obligations prior to the legislation ($31 million in FY 2002), indexed

by economic projections from the Office of Management and Budget.

Participant Benefit Impact. With new flexibility and decreased

Federal E&T funding, some States likely reduced the level of E&T

services they provide to ABAWDs, thereby making them ineligible for

food stamps. Based on data from the FNS-583 FNS estimated that 14,000

persons were made ineligible by these provisions in FY 2005. These

impacts are already incorporated in the President's FY 2007 budget

baseline. State agencies have already implemented any applicable

changes and no further impact is expected following publication of this

final rule. The savings in food stamp benefits was calculated based on

the estimated number of ABAWDs made ineligible times the average

monthly benefit per ABAWD, times 12 months. These savings were rounded

to the nearest million dollars. (For example, in FY 2005, 14,000

persons were made ineligible, times an average food stamp benefit of

$141, times 12 months to yield a savings of $24 million.) The standard

food stamp benefit outlay factor of 0.99 was used to estimate the

impact on benefit outlays.

While this regulatory impact analysis details the expected impacts

on Food Stamp Program costs and the number of participants likely to be

affected by the food stamp employment and training provisions of the

Farm Security and Rural Investment Act of 2002, it does not provide an

estimate of the overall societal costs of the provisions, nor does it

include a monetized estimate of the benefits they bring to society. We

anticipate that the provisions improve program operations by giving

flexibility to States to provide employment and training services that

better meet the needs of their food stamp populations. However, to the

extent that some food stamp recipients are made ineligible, the

provisions have made it more difficult for them to obtain a healthful

diet.

Background

On March 19, 2004, FNS published a rule at 69 FR 12981 in which we

proposed to revise food stamp regulations at 7 CFR 273.7 regarding

funding for the E&T Program. Comments on this proposed revision were

solicited through May 18, 2004. A total of 24 comments were received.

This final rule addresses the commenters' concerns. Readers are

referred to the proposed rule for a more complete description of the

basis for the rule. Following is a discussion of the provisions of the

proposed rule, the comments received, and changes made in the final

rule.

Funding for Food Stamp Employment and Training Programs

Allocation of E&T Grants

FNS proposed to allocate one-half of the annual 100 percent Federal

grant based on our estimate of the numbers of ``at-risk'' ABAWDs in

each State (those who do not reside in an area subject to a waiver of

the time limit or who are not included in each State agency's 15

percent ABAWD exemption allowance) calculated using ABAWD data

collected by Mathematica Policy Research, Incorporated (MPR) for its

September 2001 report, ``Imposing a Time Limit on Food Stamp Receipt:

Implementation of the Provisions and Effects on Food Stamp Program

Participation.'' Based on the MPR study data, FNS established

percentages for the numbers of waived and/or exempted ABAWDs in each

State

[[Page 33379]]

and applied those percentages to Quality Control (QC) survey data to

estimate each State agency's at-risk ABAWD population. FNS believed

this to be the most accurate and reliable data available. FNS proposed

to allocate the balance of the annual 100 percent E&T grant based on

the number of work registrants reported by each State agency on the

FNS-583, E&T Program Activity Report from the most recent complete FY.

FNS received 22 comments regarding our proposed allocation

methodology. Twenty commenters objected to our reliance on at-risk

ABAWDs. They were concerned that this reliance would discourage States

from using the two measures available to protect the eligibility of

ABAWDs who are unable to obtain employment. The first measure is to

request that FNS waive the time limit for a group of ABAWDs in a State

if we determine that the area in which the individuals reside has an

unemployment rate of over 10 percent or does not have a sufficient

number of jobs to provide employment for the individuals. The second

measure is the State option to exempt up to 15 percent of its ABAWD

population that does not reside in waived areas each FY. The commenters

point out that, by utilizing these measures, States will receive

smaller E&T grants than if they had not used them. Several commenters

pointed out that more than a few States have statewide waivers of the

time limit due to high unemployment or a lack of jobs and these States

will lose half of their potential annual E&T grants as a result.

Several State agencies pointed out that the formula ignores the fact

that waived and exempted ABAWDs are work registrants subject to E&T

participation and, although they currently provide E&T services to

exempt ABAWDs and to ABAWDs in waived areas, they will have to curtail

or terminate these services because of reduced grants.

Two commenters argued that FNS has flexibility under the law to

adopt a formula that better serves the ABAWD population. They believe

that the concept of ``at-risk ABAWDs'' should be significantly revised

or dropped and that FNS should adopt a more practical approach to the

requirement that it take into account the numbers of individuals not

exempt from the work requirement under section 6(o) of the Food Stamp

Act. They believe that FNS should consider other factors and apply

necessarily inexact measures of those numbers.

Eight commenters recommended that the ABAWD allocation be based on

the total number of ABAWDs, not just at-risk ones. Three recommended

that the entire grant be based on total ABAWDs. Several recommended

that FNS use the most recent QC household characteristics data (OMB

0584-0299) that reflects each State's share of the nation's food stamp

recipients who are age 18 through 49, not disabled, and who do not live

with children.

One State agency recommended using a funding ratio of 10 to 20

percent based on at-risk ABAWDs, 80 to 90 percent on work registrants.

One State agency recommended using a multi-part formula that

averages the number of ABAWDs determined from the QC sample and the

number of ABAWDs participating in components that meet the ABAWD work

requirement as reported on the FNS-583, E&T Program Activity Report. It

also urged that State agencies be informed of the numbers to be used

and given the opportunity to challenge them if they disagree.

One State agency recommended that all 100 percent Federal E&T funds

be allocated based on a point system that favors at-risk ABAWDs. It

proposes assigning a value of 1.0 to all mandatory work registrants,

excluding ABAWDs, and assigning a value of 1.3 to all ABAWDs.

One State agency recommended using an allocation formula based one-

half on the number of E&T work registrants and one-half on the number

of ABAWD E&T participants.

FNS agrees with those commenters concerned that adhering to the

proposed 50/50 split of the 100 percent Federal grant places too much

emphasis on ABAWDs. The E&T program has two constituencies--ABAWDs

subject to the time limit who need services that qualify them to remain

eligible for benefits until they are able to find employment; and all

other work registrants who also need services to improve their ability

to become self-sufficient. Under the proposed split, a State's ABAWD

population would determine half its grant amount; and, since all ABAWDs

are work registrants, they would be counted again in determining the

other half. For the FY 2005 $90 million grant allocation, FNS allocated

$80 million based on work registrants and $10 million on at-risk

ABAWDs. In addition, to lessen the negative impact on those State

agencies with a large waived and exempted ABAWD population, FNS limited

the cut in grant funding to no more than 20 percent of the FY 2004

grant allocations. Our experience with the FY 2005 E&T grant allocation

convinced us that the appropriate share to be allocated based on

numbers of ABAWDs is 10 percent of the grant, with 90 percent allocated

based on the overall universe of work registrants. We have incorporated

this ratio into the final rule.

FNS also agrees with the commenters who urged us to take a

different approach to how we accomplish the annual allocation. FNS

carefully considered each comment and weighed the suggested funding

strategies against the statutory requirement that we take into account

at-risk ABAWDs. FNS examined several alternatives for using data to

capture the most reliable estimate of the numbers of ABAWDs in each

State. The use of at-risk ABAWD estimates for each State was, of

course, most desirable. However, after careful review FNS determined

that these numbers were difficult to obtain and unreliable, due both to

technical considerations and to continual shifts in the numbers of

waived and exempted ABAWDs in most States. To ensure a reasonably

accurate count of at-risk ABAWDs, State agencies would most likely have

to create new computer programming and reporting requirements for at-

risk ABAWDs. FNS does not believe that such an additional State agency

reporting burden is desirable or necessary. For the FY 2006 $90 million

grant allocation, FNS used food stamp QC data for the most recently

available completed FY (FY 2004) which reflected total ABAWD numbers

instead of at-risk ABAWD estimates. The data, which is state-compiled

and federally reviewed, provide a breakdown of each State's population

of adults age 18 through 49, who are not disabled, and who do not live

with children. These data mirror ABAWD characteristics, are readily and

widely available, are consistent with commenters' requests, and, when

compared to the less current percentages established by the September

2001 MPR study, provide a more reliable estimate of the numbers of all

ABAWDs in each State. Our experience indicates that using total ABAWD

numbers is the most efficient, equitable way to allocate the ABAWD

portion of the annual E&T grant, with currently available data-while

still adhering to the statutory requirement to take into account at-

risk ABAWDs. This approach has the advantage over our earlier proposal

in that it does not reduce funding for States that rely on waivers and

exemptions, thus does not serve as a disincentive to use those tools.

While some commenters questioned the validity of work registrant

data from the FNS-583, E&T Program Activity Report, FNS remains

convinced that it provides the most reliable work registration

information available. State

[[Page 33380]]

agencies have been collecting and reporting work registrant data on the

FNS-583 for many years and they are proficient in accurately counting

their work registrants. Prior to 1996, the annual E&T grants were

allocated based primarily on FNS-583 work registrant data. In addition,

the universal use of computers and the development of sophisticated

software to track program participation and compliance with eligibility

requirements make the accurate calculation of the number of work

registrants a relatively simple procedure. Finally, FNS has been

working closely with states over the last few years to correct

instances of misreporting E&T data.

Thus, in response to comments and based on our experience, FNS is

amending the final rule at 7 CFR 273.7(d)(1)(i)(B) to establish that 10

percent of the annual 100 percent Federal E&T grant will be allocated

among the 53 State agencies based on food stamp QC data for the most

recently available completed FY that reflects each State's share of the

nation's food stamp recipients who are age 18 through 49, not disabled,

and who do not live with children, as a percentage of such individuals

nationwide.

The remaining 90 percent will be allocated based on the numbers of

work registrants in each State as a percentage of work registrants

nationwide. FNS will use work registrant data reported by each State

agency on the FNS-583, Employment and Training Program Activity Report,

from the most recent Federal FY.

Additional Funding for States That Serve ABAWDs

The proposed rule contained the provision of an additional $20

million in 100 percent Federal E&T funds each FY to be allocated among

eligible State agencies to serve all ABAWDs subject to the time limit.

To be eligible for a share of the additional $20 million, the

Department proposed that a State agency must make and comply with a

commitment, or pledge, to offer a qualifying education/training

activity or workfare position to each ABAWD applicant or recipient who

is ``at risk,'' i.e., one who is in the last month of the 3-month time

limit; does not live in an area covered by a waiver of the time limit;

and is not part of a State agency's 15 percent ABAWD exemption

allowance. FNS proposed to allocate among them the $20 million based on

the 2001 MPR study's estimate of the numbers of ABAWDs in each

participating pledge State who do not reside in an area subject to a

waiver granted in accordance with 7 CFR 273.24(f) or who are not

included in each State agency's 15 percent ABAWD exemption allowance

under 7 CFR 273.24(g), as a percentage of such ABAWDs in all the

participating pledge States. Eligible State agencies must use their

shares of the $20 million allocation to defray costs incurred in

serving at-risk ABAWDs.

Three commenters objected to our methodology. Two recommended that

the allocation formula include all ABAWDs. One recommended that the

money be allocated based on actual services provided and not just on

the population eligible for service.

For the reasons cited in the above discussion concerning the

regular Federal E&T allocation, the Department agrees that the

allocation formula should include all ABAWDs. While making it clear

that the first priority of a participating State agency is to guarantee

that all its at-risk ABAWDs are provided the opportunity to remain

eligible while they acquire the skills and experience necessary to

obtain employment, the Department, in the proposed rule, provided the

option of allowing the State agency to use a portion of its additional

funding to provide E&T services to ABAWDs who are not at risk. However,

if a State agency uses waivers and/or its exemption allowance to

protect all of its ABAWDs from the time limit, it is not eligible to

share in the $20 million. Therefore, the formula included in this final

rule bases the allocation of a participating pledge state's share of

the $20 million on the total number of ABAWDs in the State as a

percentage of ABAWDs in all participating States. For the reasons

discussed in the previous section, the number of ABAWDs will be derived

from QC data and not from the MPR study. One commenter urged that FNS

revise this final regulation to properly reflect what it is that a

State must pledge to do in order to be eligible for its share of the

$20 million ABAWD allocation. The cost of serving at-risk ABAWDs is not

an acceptable reason to fail to live up to the pledge. In other words,

a slot must be available and the ABAWD must be served even if the State

exhausts all of its 100 percent E&T funds and must use 50 percent State

matching funds to serve all at-risk ABAWDs. This commenter believes

that the language of the proposed regulation implied that to meet the

pledge States have to pledge only to use their share of the $20 million

to serve these individuals.

The Department agrees. FNS has added language to the final rule to

clarify that a participating pledge State must serve all its at-risk

ABAWDs, and it must be prepared to use its own money to fulfill its

commitment.

Allocation of Carryover Funding

The Department, in the proposed rule, provided for the first come-

first served reallocation of unspent 100 percent Federal E&T grant

funds carried over into the subsequent FY. FNS would notify all State

Agencies of the availability of the funds each year.

One commenter pointed out that State Agencies that may benefit from

an allocation of carryover funds to augment their annual grants will

not be aware of the availability of such funds until after critical

program adjustments must be made.

FNS agrees that State Agencies may find it difficult to rely on

carryover funding because they are notified of its availability well

into the annual budget and spending cycle. However, FNS does not know

how much carryover funding remains until completion of the close-out of

financial accounts for the preceding year, which is not normally

accomplished until the second quarter of the current year. Thus, FNS is

unable to allocate available carryover funding until that time.

FNS urges interested State Agencies to submit their requests for

carryover funding, with accompanying justification, as early as

possible in the FY. FNS will act upon the requests as quickly as

possible.

Participant Reimbursements

The Farm Bill eliminated the $25 per month per participant

limitation on Federal cost sharing for reimbursement for the costs of

transportation and other actual costs other than dependent care.

One commenter believes that the language of the proposed rule

related to the E&T State plan suggests that there is only one

reimbursement rate for participant expenses other than dependent care.

States may desire to have different reimbursement policies for

households that experience different types of expenses, or they may

want to establish different levels of reimbursement for different areas

of the State where, for example, costs of transportation are higher.

The commenter recommends that FNS revise the language to allow for more

than one reimbursement rate for transportation and other expenses.

The Department agrees that the language of the E&T State plan

provision relating to participant reimbursements should be revised to

allow for varying rates of reimbursements. This final rule will include

language in 7 CFR 273.7(c)(6)(xv) to clarify that, if the State

[[Page 33381]]

agency proposes to provide different reimbursement amounts to account

for varying levels of expenses, for instance, for greater or lesser

costs for transportation in different areas of the State, it must

include them here.

One commenter encourages FNS to consider allowing E&T reimbursement

for participants for up to 30 days following placement into

unsubsidized employment. Mandatory participants may not receive their

first paycheck for up to four weeks. This causes hardships for E&T

participants who need to get back and forth to work until they receive

a paycheck. Also, the participant may have a need for employment-

related items such as clothing, work boots, bonding, tools, etc. once a

job is accepted.

FNS believes that expanding the range of possible covered costs

eligible for a Federal match for reimbursement is desirable because

doing so supports the goal of the E&T Program to help food stamp

applicants and recipients obtain employment and achieve self-

sufficiency. In our discussion of expanded reimbursements in the

proposed rule we stated that expenses such as license and bonding fees

required for employment, for which the E&T participant is liable, could

also be considered for reimbursement by State agencies. However, after

reviewing comments on the proposed rule and reconsidering the scope of

the E&T Program, FNS wants to take this opportunity to amend that

statement. While we understand wanting to support employed persons, the

use of Federal funds to provide services associated with starting and

keeping a job is beyond the scope of the E&T Program and must be

disallowed.

Congress established the E&T Program to assist members of

households participating in the FSP in gaining skills, training, work,

or experience that will increase their ability to obtain regular

employment. It defined an E&T program as one that contains one or more

components providing job search; job search training; workfare; actual

work experience or training, or both; educational programs or

activities; self-employment activities; and, as approved by the

Secretary, other employment, education and training programs, projects,

and experiments. Lastly, Congress required that Federal funds provided

to a State agency may be used only for operating an E&T program as

defined. It required that States may be reimbursed 50 percent of their

costs incurred in connection with transportation costs and other

expenses reasonably necessary and directly related to participation in

an E&T program as defined.

Based on this language in the Food Stamp Act and on the legislative

history of the E&T Program, Congress clearly intended to limit the

scope of the Program to preparing for and obtaining employment. Post-

employment services were never part of the Program's mandate.

One reason for this limitation is the relatively small Federal

grant authorized by Congress to fund the Program. With limited

resources, along with the requirement to provide qualifying education

and training opportunities that allow ABAWDs to remain eligible beyond

the 3-month time limit, the Program must focus on relatively

inexpensive components designed to provide basic services.

Further, although some States may desire more flexibility to align

their E&T policies on participant reimbursements with those for

Temporary Assistance for Needy Families (TANF) work supportive

services, the significant differences that exist between the E&T and

TANF work programs preclude FNS from allowing States to cover the

entire array of expenditures considered suitable under TANF guidelines.

These differences involve the nature of the authorizing legislation and

funding mechanisms (block grant with time-limits versus Federal

entitlement with limited education and training funds), the range of

purposes served, the degree to which exemptions are available, and the

sizes of the populations receiving benefits.

Since the E&T Program is defined by its components and all the

components are designed to enable participants to obtain jobs,

reimbursing the costs of goods and services associated with employment

retention are beyond the scope of what can be allowed. Thus, FNS must

limit participation reimbursements to those costs involved in

successful component participation and disallow costs associated with

starting and keeping a job once one has been offered.

Keep in mind, however, that employed individuals may participate in

regular, approved E&T program components and receive participant

reimbursements to cover their expenses. For example, an individual

works less than 30 hours a week, or earns less than the Federal minimum

wage equivalent of 30 hours. The individual--who is otherwise eligible

for food stamps and is subject to all program work requirements,

including E&T--is assigned to and participates in a General Equivalency

Diploma (GED) preparation component. The State agency is authorized to

claim reimbursement for any administrative costs associated with the

individual's participation, as well as half of the costs of participant

expenses, such as transportation, course materials, etc.

Reduction in Work Effort

In the proposed rule FNS clarified its policy concerning reduction

in work effort. We proposed to amend the regulations to state that an

individual exempt from FSP work requirements because he or she is

working a minimum of 30 hours a week who reduces his or her work hours

to less than 30, but who continues to earn more in weekly wages than

the Federal minimum wage multiplied by 30 hours, remains exempt from

FSP work requirements and is not subject to disqualification.

One commenter supports the clarification of the minimum wage

equivalency as it applies to the reduction in work effort. The

commenter does, however, recommend that the final rule clarify when

States should and should not apply the minimum wage equivalency

analysis. The commenter points out that the work hours of low-skill

workers typically fluctuate considerably from month to month. Many

small reductions in work hours occur either involuntarily or for good

cause. The commenter believes that FNS can reduce administrative

burdens on State agencies and households alike by specifying in the

final rule that reductions of 5 hours or less do not trigger a

sanction.

The Department agrees that such situations sometimes occur,

resulting in a work week less than 30 hours or weekly earnings less

than the minimum wage equivalency. State agencies must take such

situations into account when determining whether a disqualification for

reduction in work effort should apply. However, FNS disagrees that

provision for a 5-hour leeway is appropriate. By initiating such a

policy, FNS would, in effect, alter the federally mandated 30-hour

minimum.

The Department has, in this final rule, included a reminder to

State agencies that minor variations in the number of hours worked or

in the weekly minimum wage equivalent wages are inevitable and must be

taken into consideration when assessing a recipient's compliance with

Program work rules.

State E&T Plans

FNS is taking this opportunity to make a technical correction to

the language at 7 CFR 273.7(c)(7), which requires that State agencies

submit their

[[Page 33382]]

State E&T Plans biennially. FNS is revising this to annual submissions.

While the basics of E&T plans, such as components offered and program

reporting and coordination methodologies, may remain constant, the

requirement for annual participation, budget, and funding estimates,

along with a discussion of program changes, and other pertinent

information demands a yearly submission, which State agencies do. This

correction acknowledges that requirement. Although we did not address

this issue in the preamble to the proposed rule, FNS did inadvertently

include the revised regulatory language. FNS did not receive any

comments concerning the change.

List of Subjects

7 CFR Part 272

Administrative practice and procedures, Food stamps, Grant

programs-social programs.

7 CFR Part 273

Administrative practice and procedures, Food stamps, Grant

programs-social programs, Penalties, Reporting and recordkeeping.

0

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

0

1. The authority citation for parts 272 and 273 continues to read as

follows:

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

PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES

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2. In Sec. 272.1, add paragraph (g)(172) to read as follows:

Sec. 272.1 General terms and conditions.

* * * * *

(g) * * *

(172) Amendment No. 400. The provisions of Amendment No. 400,

regarding the Employment and Training Program Provisions of the Farm

Security and Rural Investment Act of 2002 are effective August 8, 2006.

Sec. 272.2 [Amended]

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3. In Sec. 272.2, paragraph (e)(9) is amended by removing the

reference to ``Sec. 273.7(c)(7)'' and adding in its place a reference

to ``Sec. 273.7(c)(8)''.

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

0

4. In Sec. 273.7:

0

a. paragraph (c)(6)(ii) is amended by removing the period at the end of

sentence three and adding in its place a semi-colon, and by removing

the last sentence

0

b. paragraph (c)(6)(vii) is revised;

0

c. new paragraphs (c)(6)(xv) and (c)(6)(xvi) are added;

0

d. paragraphs (c)(7), (c)(8), (c)(9), (c)(10), (c)(11), (c)(12),

(c)(13), and (c)(14) are redesignated as paragraphs (c)(8), (c)(9),

(c)(10), (c)(11), (c)(12), (c)(13), (c)(14), and (c)(15), respectively,

and new paragraph (c)(7) is added;

0

e. newly redesignated paragraph (c)(8) is amended by removing the word

``biennially'' in the first sentence and adding in its place the word

``annually'';

0

f. newly redesignated paragraphs (c)(9), (c)(10), and (c)(11) are

revised;

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g. paragraph (d)(1)(i) is revised;

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h. paragraph (d)(1)(ii) is amended by removing paragraphs

(d)(1)(ii)(A), (d)(1)(ii)(B), (d)(1)(ii)(C), and (d)(1)(ii)(D), and

redesignating paragraphs (d)(1)(ii)(E), (d)(1)(ii)(F), (d)(1)(ii)(G),

and (d)(1)(ii)(H) as paragraphs (d)(1)(ii)(A), (d)(1)(ii)(B),

(d)(1)(ii)(C), and (d)(1)(ii)(D), respectively;

0

i. paragraphs (d)(1)(iii) and (d)(1)(iv) are removed;

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j. paragraphs (d)(3), (d)(4), (d)(5), and (d)(6) are redesignated as

(d)(4), (d)(5), (d)(6), and (d)(7), respectively, and new paragraph

(d)(3) is added;

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k. newly redesignated paragraph (d)(4) introductory text is amended by

adding a new second sentence after the first sentence of the

introductory text, removing the references ``paragraphs (d)(3)(i) and

(d)(3)(ii)'' in sentences four and seven and adding in their place the

references ``paragraphs (d)(4)(i) and (d)(4)(ii)'', and by removing the

references ``paragraphs (d)(3)(i) and (d)(3)(ii)'' in sentence eight

and adding in its place the reference ``paragraph (d)(4)(i)'';

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l. newly redesignated paragraph (d)(4)(i) is amended by removing the

last sentence;

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m. newly redesignated paragraph (d)(4)(ii) is amended by removing the

last sentence;

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n. newly redesignated paragraph (d)(4)(v) is amended by removing the

reference ``paragraphs (d)(3)(i) and (d)(3)(ii)'' in the second

sentence and adding in its place the reference ``paragraphs (d)(4)(i)

and (d)(4)(ii)'', and removing the reference ``paragraph (d)(3)(i)'' in

the last sentence and adding in its place the ``paragraph (d)(4)(i)'';

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o. paragraph (f)(7)(ii) is amended by removing the reference

``paragraphs (b)(1)(iii) and (b)(1)(v)'' in the second sentence and

adding in its place the reference ``paragraphs (b)(1)(iii) or

(b)(1)(v)'';

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p. paragraph (f)(7)(iv) is amended by removing words ``exemptions

provided in paragraphs (b)(1)(iii) and (b)(1)(v)'' in the first

sentence and adding in their place the words ``exemption in paragraph

(b)(1)(iii)'';

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q. paragraph (j)(3)(iii) is amended by removing the last sentence and

adding two new sentences in its place.

The revisions and additions read as follows:

Sec. 273.7 Work provisions.

* * * * *

(c) * * *

(6) * * *

(vii) The method the State agency uses to count all work

registrants as of the first day of the new fiscal year;

* * * * *

(xv) The combined (Federal/State) State agency reimbursement rate

for transportation costs and other expenses reasonably necessary and

directly related to participation incurred by E&T participants. If the

State agency proposes to provide different reimbursement amounts to

account for varying levels of expenses, for instance for greater or

lesser costs of transportation in different areas of the State, it must

include them here.

(xvi) Information about expenses the State agency proposes to

reimburse. FNS must be afforded the opportunity to review and comment

on the proposed reimbursements before they are implemented.

(7) A State agency interested in receiving additional funding for

serving able-bodied adults without dependents (ABAWDs) subject to the

3-month time limit, in accordance with paragraph (d)(3) of this

section, must include in its annual E&T plan:

(i) Its pledge to offer a qualifying activity to all at-risk ABAWD

applicants and recipients;

(ii) Estimated costs of fulfilling its pledge;

(iii) A description of management controls in place to meet pledge

requirements;

(iv) A discussion of its capacity and ability to serve at-risk

ABAWDs;

(v) Information about the size and special needs of its ABAWD

population; and

(vi) Information about the education, training, and workfare

components it will offer to meet the ABAWD work requirement.

* * * * *

(9) The State agency will submit an E&T Program Activity Report to

FNS no later than 45 days after the end of each Federal fiscal quarter.

The report will contain monthly figures for:

(i) Participants newly work registered;

(ii) Number of ABAWD applicants and recipients participating in

qualifying components;

[[Page 33383]]

(iii) Number of all other applicants and recipients (including

ABAWDs involved in non-qualifying activities) participating in

components; and

(iv) ABAWDs subject to the 3-month time limit imposed in accordance

with Sec. 273.24(b) who are exempt under the State agency's 15 percent

exemption allowance under Sec. 273.24(g).

(10) The State agency will submit annually, on its first quarterly

report, the number of work registrants in the State on October 1 of the

new fiscal year.

(11) The State agency will submit annually, on its final quarterly

report:

(i) A list of E&T components it offered during the fiscal year and

the number of ABAWDs and non-ABAWDs who participated in each; and

(ii) The number of ABAWDs and non-ABAWDs who participated in the

E&T Program during the fiscal year. Each individual must be counted

only once.

* * * * *

(d) * * *

(1) * * *

(i) Allocation of grants. Each State agency will receive a 100

percent Federal grant each fiscal year to operate an E&T program in

accordance with paragraph (e) of this section. The grant requires no

State matching.

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

grant, FNS will apply the percentage determined in accordance with

paragraph (d)(1)(i)(B) of this section to the total amount of 100

percent Federal funds authorized under section 16(h)(1)(A) of the Act

for each fiscal year.

(B) FNS will allocate the funding available each fiscal year for

E&T grants using a formula designed to ensure that each State agency

receives its appropriate share.

(1) Ninety percent of the annual 100 percent Federal E&T grant will

be allocated based on the number of work registrants in each State as a

percentage of work registrants nationwide. FNS will use work registrant

data reported by each State agency on the FNS-583, Employment and

Training Program Activity Report, from the most recent Federal fiscal

year.

(2) Ten percent of the annual 100 percent Federal E&T grant will be

allocated based on the number of ABAWDs in each State, as determined by

food stamp QC data for the most recently available completed fiscal

year, which provide a breakdown of each State's population of adults

age 18 through 49 who are not disabled and who do not live with

children.

(C) No State agency will receive less than $50,000 in Federal E&T

funds. To ensure this, FNS will, if necessary, reduce the grant of each

State agency allocated more than $50,000. In order to guarantee an

equitable reduction, FNS will calculate grants as follows. First,

disregarding those State agencies scheduled to receive less than

$50,000, FNS will calculate each remaining State agency's percentage

share of the fiscal year's E&T grant. Next, FNS will multiply the

grant--less $50,000 for every State agency under the minimum--by each

remaining State agency's same percentage share to arrive at the revised

amount. The difference between the original and the revised amounts

will represent each State agency's contribution. FNS will distribute

the funds from the reduction to State agencies initially allocated less

than $50,000.

(D) If a State agency will not obligate or expend all of the funds

allocated to it for a fiscal year under paragraph (d)(1)(i)(B) of this

section, FNS will reallocate the unobligated, unexpended funds to other

State agencies during the fiscal year or the subsequent fiscal year on

a first come-first served basis. Each year FNS will notify all State

agencies of the availability of carryover funding. Interested State

agencies must submit their requests for carryover funding to FNS. If

the requests are determined reasonable and necessary, FNS will allocate

carryover funding to meet some or all of the State agencies' requests,

as it considers appropriate and equitable. The factors that FNS will

consider when reviewing a State agency's request will include the size

of the request relative to the level of the State agency's E&T spending

in prior years, the specificity of the State agency's plan for spending

carryover funds, and the quality of program and scope of impact for the

State's E&T program and proposed use of carryover funds.

* * * * *

(3) Additional allocations. In addition to the E&T program grants

discussed in paragraph (d)(1) of this section, FNS will allocate $20

million in Federal funds each fiscal year to State agencies that ensure

availability of education, training, or workfare opportunities that

permit ABAWDs to remain eligible beyond the 3-month time limit.

(i) To be eligible, a State agency must make and comply with a

commitment, or ``pledge,'' to use these additional funds to defray the

cost of offering a position in an education, training, or workfare

component that fulfills the ABAWD work requirement, as defined in Sec.

273.24(a), to each applicant and recipient who is:

(A) In the last month of the 3-month time limit described in Sec.

273.24(b);

(B) Not eligible for an exception to the 3-month time limit under

Sec. 273.24(c);

(C) Not a resident of an area of the State granted a waiver of the

3-month time limit under Sec. 273.24(f); and

(D) Not included in each State agency's 15 percent ABAWD exemption

allotment under Sec. 273.24(g).

(ii) While a participating pledge State may use a portion of the

additional funding to provide E&T services to ABAWDs who do not meet

the criteria discussed in paragraph (d)(3)(i) of this section, it must

guarantee that the ABAWDs who do meet the criteria are provided the

opportunity to remain eligible.

(iii) State agencies will have one opportunity each fiscal year to

take the pledge described in paragraph (d)(3)(i) of this section. An

interested State agency, in its E&T Plan for the upcoming fiscal year,

must include the following:

(A) A request to be considered as a pledge State, along with its

commitment to comply with the requirements of paragraph (d)(3)(i) of

this section;

(B) The estimated costs of complying with its pledge;

(C) A description of management controls it has established to meet

the requirements of the pledge;

(D) A discussion of its capacity and ability to serve vulnerable

ABAWDs;

(E) Information about the size and special needs of the State's

ABAWD population; and

(F) Information about the education, training, and workfare

components that it will offer to allow ABAWDs to remain eligible.

(iv) If the information provided in accordance with paragraph

(d)(3)(iii) of this section clearly indicates that the State agency

will be unable to fulfill its commitment, FNS may require the State

agency to address its deficiencies before it is allowed to participate

as a pledge State.

(v) If the State agency does not address its deficiencies by the

beginning of the new fiscal year on October 1, it will not be allowed

to participate as a pledge State.

(vi) No pledges will be accepted after the beginning of the fiscal

year.

(vii)(A) Once FNS determines how many State agencies will

participate as pledge States in the upcoming fiscal year, it will, as

early in the fiscal year as possible, allocate among them the $20

million based on the number of ABAWDs in each participating State, as a

percentage of ABAWDs in all the participating States. FNS will

determine the number of ABAWDs in each

[[Page 33384]]

participating State using food stamp QC data for the most recently

available completed fiscal year, which provide a breakdown of each

State's population of adults age 18 through 49 who are not disabled and

who do not live with children.

(B) Each participating State agency's share of the $20 million will

be disbursed in accordance with paragraph (d)(6) of this section.

(C) Each participating State agency must meet the fiscal

recordkeeping and reporting requirements of paragraph (d)(7) of this

section.

(viii) If a participating State agency notifies FNS that it will

not obligate or expend its entire share of the additional funding

allocated to it for a fiscal year, FNS will reallocate the unobligated,

unexpended funds to other participating State agencies during the

fiscal year, as it considers appropriate and equitable, on a first

come-first served basis. FNS will notify other pledge States of the

availability of additional funding. To qualify, a pledge State must

have already obligated its entire annual 100 percent Federal E&T grant,

excluding an amount that is proportionate to the number of months

remaining in the fiscal year, and it must guarantee in writing that it

intends to obligate its entire grant by the end of the fiscal year. A

State's annual 100 percent Federal E&T grant is its share of the

regular 100 percent Federal E&T allocation plus its share of the

additional $20 million (if applicable). Interested pledge States must

submit their requests for additional funding to FNS. FNS will review

the requests and, if they are determined reasonable and necessary, will

reallocate some or all of the unobligated, unspent ABAWD funds.

(ix) Unlike the funds allocated in accordance with paragraph (d)(1)

of this section, the additional pledge funding will not remain

available until obligated or expended. Unobligated funds from this

grant must be returned to the U.S. Treasury at the end of each fiscal

year.

(x) The cost of serving at-risk ABAWDs is not an acceptable reason

to fail to live up to the pledge. A slot must be made available and the

ABAWD must be served even if the State agency exhausts all of its 100

percent Federal E&T funds and must use State funds to guarantee an

opportunity for all at-risk ABAWDs to remain eligible beyond the 3-

month time limit. State funds expended in accordance with the approved

State E&T Plan are eligible for 50 percent Federal match. If a

participating State agency fails, without good cause, to meet its

commitment, it may be disqualified from participating in the subsequent

fiscal year or years.

(4) * * * The Federal government will fund 50 percent of State

agency payments for allowable expenses, except that Federal matching

for dependent care expenses is limited to the maximum amount specified

in paragraph (d)(4)(i) of this section. * * *

* * * * *

(j) * * *

(3) * * *

(iii) * * * If the individual reduces his or her work hours to less

than 30 a week, but continues to earn weekly wages that exceed the

Federal minimum wage multiplied by 30 hours, the individual remains

exempt from Program work requirements, in accordance with paragraph

(b)(1)(vii) of this section, and the reduction in work effort provision

does not apply. Minor variations in the number of hours worked or in

the weekly minimum wage equivalent wages are inevitable and must be

taken into consideration when assessing a recipient's compliance with

Program work rules.

* * * * *

Sec. 273.24 [Amended]

0

5. In Sec. 273.24, paragraph (a)(4)(i) is amended by removing the

reference ``Sec. 273.22'' and adding in its place the reference

``Sec. 273.7(m)''.

Dated: June 1, 2006.

Kate Coler,

Deputy Under Secretary, Food, Nutrition and Consumer Services.

FR Doc. E6-9001 Filed 6-8-06; 8:45 am]

BILLING CODE 3410-30-P