Funding Formula for Grants to States

Part II

Department of Labor

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Veterans' Employment and Training Service

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20 CFR Part 1001

Funding Formula for Grants to States; Proposed Rule

Proposed Rules

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DEPARTMENT OF LABOR

Veterans' Employment and Training Service

20 CFR Part 1001

RIN 1293-AA11

Funding Formula for Grants to States

AGENCY: Veterans' Employment and Training Service (VETS), Department of

Labor.

ACTION: Notice of proposed rulemaking; request for comments.

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SUMMARY: The Department of Labor is issuing a Notice of Proposed

Rulemaking (NPRM) with a request for comments to implement section

4(a)(1) of the Jobs for Veterans Act (Act). This proposed rule closely

adheres to the interim final rule (IFR) published June 30, 2003, which

expires September 30, 2004. Like the IFR, this proposed rule

establishes formula criteria for making funds available for veterans'

employment services and the Transition Assistance Program (TAP). Minor

changes to section 1001.151 of title 20 appear in this proposed rule to

clarify funding issues related to TAP. This proposed rule adds a new

subpart F to 20 CFR part 1001. This rule, once it becomes final, will

replace the IFR that expires September 30, 2004.

DATES: To ensure consideration, comments must be received on or before

September 7, 2004.

e Transition Assistance Program (TAP). Minor

changes to section 1001.151 of title 20 appear in this proposed rule to

clarify funding issues related to TAP. This proposed rule adds a new

subpart F to 20 CFR part 1001. This rule, once it becomes final, will

replace the IFR that expires September 30, 2004.

DATES: To ensure consideration, comments must be received on or before

September 7, 2004.

ADDRESSES: You may submit comments, identified by RIN number 1293-AA11,

by any of the following methods: Federal Rulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.

Comments may also be sent to Paul Robertson, Legislative Analysis

Division, VETS. Electronic mail (e-mail) is the preferred method for

submitting comments. Comments must be clearly identified as pertaining

to this Notice of Proposed Rulemaking. E-mail may be sent to

[email protected]. Brief comments, limited to ten pages or fewer

may be transmitted by facsimile (FAX) at (202) 693-4754 (this is not a

toll free number). Individuals with hearing impairments may call (800)

670-7008 (TTY/TDD).

Where necessary, hard copies of comments also may be mailed or

delivered to Paul Robertson, Legislative Analysis Division, VETS, U.S.

Department of Labor, Room S-1325, 200 Constitution Avenue NW.,

Washington, DC 20210. Because of heightened security measures, mail in

Washington, DC is sometimes delayed. We will only consider comments

postmarked on or before the deadline for comments.

Receipt of submissions, whether by e-mail, FAX transmittal, or U.S.

Mail, will not be acknowledged; however, the sender may request

confirmation that a submission has been received, by telephoning VETS

at (202) 693-4714 (individuals with hearing impairments may call (800)

670-7008 (TTY/TDD)), or by making a request for confirmation (separate

from the submission) via the above e-mail.

Comments will be available for public inspection during normal

business hours at the above address

wledged; however, the sender may request

confirmation that a submission has been received, by telephoning VETS

at (202) 693-4714 (individuals with hearing impairments may call (800)

670-7008 (TTY/TDD)), or by making a request for confirmation (separate

from the submission) via the above e-mail.

Comments will be available for public inspection during normal

business hours at the above address. Persons who need assistance to

review the comments will be provided with appropriate aids such as

readers or print magnifiers. Copies of this Notice of Proposed

Rulemaking will be made available in the following formats: large

print, electronic file on computer disk, and audiotape. To schedule an

appointment to review the comments and/or to obtain the Notice of

Proposed Rulemaking in an alternate format, contact VETS at the e-mail

address, telephone number, or mail address listed above.

FOR FURTHER INFORMATION: Contact Paul Robertson, Legislative Analysis

Division, VETS, U.S. Department of Labor, Room S-1325, 200 Constitution

Avenue NW., Washington, DC 20210, or by e-mail at

[email protected] or call 202-693-4714.

SUPPLEMENTARY INFORMATION: The Preamble to this Notice of Proposed

Rulemaking is organized as follows:

I. Background--provides a brief description of the development of

the Notice of Proposed Rulemaking.

II. Authority--cites the statutory provisions for the Notice of

Proposed Rulemaking.

III. Section-by-Section Review of the Rule--summarizes pertinent

aspects of the regulatory text, describes its purposes and

application, and summarizes and responds to comments received on the

Interim Final Rule published June 30, 2003 (68 FR 39000).

IV. Administrative Information--sets forth the applicable

information as required by law.

I. Background

for the Notice of

Proposed Rulemaking.

III. Section-by-Section Review of the Rule--summarizes pertinent

aspects of the regulatory text, describes its purposes and

application, and summarizes and responds to comments received on the

Interim Final Rule published June 30, 2003 (68 FR 39000).

IV. Administrative Information--sets forth the applicable

information as required by law.

I. Background

The President signed the Jobs for Veterans Act (Pub. L. 107-288)

into law on November 7, 2002. The Act amends title 38 of the United

States Code to revise and improve employment, training, and placement

services furnished to veterans. This rule implements the provisions of

38 U.S.C. 4102A(c) as amended by section 4 of the Act that establishes

a new funding formula for making funds available to each State, with an

approved State Plan, to support the Disabled Veterans Outreach Program

(DVOP) and the Local Veterans Employment Representative (LVER)

programs. Additionally, funding will be made available to support TAP

and respond to exigent circumstances.

On June 30, 2003, an Interim Final Rule with a request for comments

during a 60-day comment period was published in the Federal Register,

at 68 FR 39000 through 39003. We thoroughly reviewed every comment

received during the comment period. These comments are summarized and

responded to in section III of this Preamble.

Congress allowed for the phasing in of the new statutory funding

formula ``over the three fiscal-year period'' beginning in fiscal year

2003, which started on October 1, 2002 (38 U.S.C. 4102A(c)(2)(B)(ii)).

Because of the late enactment of the law, funding for year one of the

phase-in had already occurred by the date of enactment. Congress

intended that the formula be phased-in and fully implemented by the

beginning of fiscal year 2006, which is October 1, 2005. The phase-in

provision was not intended to delay the anticipated date of full

implementation of the formula

.S.C. 4102A(c)(2)(B)(ii)).

Because of the late enactment of the law, funding for year one of the

phase-in had already occurred by the date of enactment. Congress

intended that the formula be phased-in and fully implemented by the

beginning of fiscal year 2006, which is October 1, 2005. The phase-in

provision was not intended to delay the anticipated date of full

implementation of the formula. In order to adhere to the implementation

expectations of Congress, the phase-in process began in fiscal year

2004, through publication of an Interim Final Rule for one year. In

order to ensure full public comment and adequate public notice of the

new funding criteria applicable after fiscal year 2004, the Department

issues this Notice of Proposed Rulemaking and requests comments.

II. Authority

The statutory authority for this Notice of Proposed Rulemaking is

38 U.S.C. 4102A(c)(2)(B), as amended by the Jobs for Veterans Act,

enacted November 7, 2002, as Public Law 107-288.

III. Section-by-Section Review of the Rule

A. Funding Formula--Basic Grant

The Act requires the Secretary to make funds available to each

State, upon approval of an ``application'' (i.e., a State Plan), to

support the DVOP and LVER programs designed to provide employment

services to veterans and transitioning servicemembers (38 U.S.C.

4102A(c)(2)(B)). The Act further allows the Secretary to use such

criteria as the Secretary may establish in regulation, including

civilian labor force and unemployment data in determining the funding

levels (38 U.S.C. 4102A(c)(B)(i), as amended by the Act). The statute

requires that the amount of funding

to provide employment

services to veterans and transitioning servicemembers (38 U.S.C.

4102A(c)(2)(B)). The Act further allows the Secretary to use such

criteria as the Secretary may establish in regulation, including

civilian labor force and unemployment data in determining the funding

levels (38 U.S.C. 4102A(c)(B)(i), as amended by the Act). The statute

requires that the amount of funding

available to each State reflect the ratio of: (1) The total number of

veterans residing in the State who are seeking employment; to (2) the

total number of veterans seeking employment in all States (38 U.S.C.

4102A(c)(B)(i)(I) and (II)). Additionally, the Act permits the

Secretary to establish minimum funding levels and hold harmless

criteria, in order to mitigate the impact upon States whose funding

levels may be significantly affected by the implementation of the new

formula (38 U.S.C. 4102A(c)(B)(iii)).

The Act states that the use of this formula will be phased-in over

the three fiscal-year period beginning October 1, 2002. Since the

statute was not enacted until November 7, 2002, after the beginning of

fiscal year 2003, we interpret this to mean that the first phase-in

year for the funding formula will be fiscal year 2004, which began on

October 1, 2003. This will only allow a two-year phase-in period,

fiscal years 2004 and 2005, instead of the three years as contemplated

by the statute. To give the States the maximum phase-in period

possible, an Interim Final Rule was published on July 30, 2003, which

expires September 30, 2004. Once this regulation becomes a Final Rule,

it will replace the Interim Final Rule.

1. Basic Grant Funding Formula and Data and Methodology

We propose to use the same data sources as those used in the FY

2004 formula established by the IFR

he statute. To give the States the maximum phase-in period

possible, an Interim Final Rule was published on July 30, 2003, which

expires September 30, 2004. Once this regulation becomes a Final Rule,

it will replace the Interim Final Rule.

1. Basic Grant Funding Formula and Data and Methodology

We propose to use the same data sources as those used in the FY

2004 formula established by the IFR. The ratio of the number of

veterans seeking employment in each State to the number of veterans

seeking employment in all States is best determined using data

collected through the Current Population Survey (CPS) and the Local

Area Unemployment Statistics (LAUS), both of which are administered by

the Bureau of Labor Statistics (BLS). We are using LAUS data to

determine the number of unemployed persons in the civilian labor force

because LAUS data are considered to be the most reliable data on the

levels of general unemployment at the State level; and the Office of

Management and Budget (OMB) requires Agencies allocating federal funds

that include unemployment as a factor to use LAUS as the indicator of

unemployment, unless the authorizing statute specifies otherwise (OMB

Statistical Policy Directive 11). We are using the CPS data to

determine the number of veterans in the civilian labor force because

the CPS is considered to be the most reliable source of data on the

levels of veteran participation in the civilian labor force at the

State level. A subset of the CPS data on veterans in the civilian labor

force does provide State level estimates of the number of unemployed

veterans. However, because the sample size of veterans at the State

level is so small, these estimates are subject to large sampling

errors. Therefore, the funding levels would be subject to undue

variability/volatility if that subset of the CPS data were used alone

to determine the number of unemployed veterans at the State level

does provide State level estimates of the number of unemployed

veterans. However, because the sample size of veterans at the State

level is so small, these estimates are subject to large sampling

errors. Therefore, the funding levels would be subject to undue

variability/volatility if that subset of the CPS data were used alone

to determine the number of unemployed veterans at the State level.

Because LAUS data are based on the total unemployment level for a

State, we concluded that LAUS data are the best available measure of

persons who are seeking work. Accordingly, we concluded the number of

unemployed veterans in each State can be best determined by using a

ratio of the general unemployment level in each State compared to the

general unemployment level in all States (LAUS for the individual

States/LAUS for all States) and the number of veterans in the civilian

labor force in each State compared to the number of veterans in the

civilian labor force in all States (CPS for the individual States/CPS

for all States). The result of these two ratios will be averaged and

converted to a single ratio of the number of veterans seeking

employment in each State compared to the number of veterans seeking

employment in all States. Three-year averages of the CPS and LAUS data

are used in calculating the funding formula to stabilize the effect of

annual fluctuations in the data in order to avoid undue fluctuations in

the annual amounts allocated to States.

We received seven comments on the use of these data sources in

response to the issuance of the Interim Final Rule. One commenter

expressed the concern that stakeholders were asked to comment on the

rule without being given the data for analysis.

Response: CPS and LAUS data are in the public domain and can be

obtained through information requests to the Bureau of Labor

Statistics, Division of Local Area Unemployment Statistics, 2

Massachusetts Avenue, NE., Room 4675, Washington, DC 20212 or by e-mail

request [email protected]

ed the concern that stakeholders were asked to comment on the

rule without being given the data for analysis.

Response: CPS and LAUS data are in the public domain and can be

obtained through information requests to the Bureau of Labor

Statistics, Division of Local Area Unemployment Statistics, 2

Massachusetts Avenue, NE., Room 4675, Washington, DC 20212 or by e-mail

request [email protected].

We have determined that our choice of data sources provides the

most meaningful and reliable data on veterans seeking employment, given

the factors that are required by statute.

Three commenters objected to the use of LAUS data based on a

concern that too many veterans who use employment services are excluded

from the LAUS computation such as veterans who are either ineligible

for or have exhausted their unemployment benefits. Additionally, three

commenters requested the use of DOL's Employment and Training

Administration data from the ETA 9002 report rather than LAUS.

Response: The Jobs for Veterans Act mandates the use of State

civilian labor force and unemployment data. See 38 U.S.C.

4102A(c)(2)(B)(i). The Office of Management and Budget requires

Agencies allocating federal funds that include unemployment as a factor

to use LAUS as the indicator of unemployment, unless the authorizing

statute specifies otherwise (OMB Statistical Policy Directive 11). In

addition, LAUS unemployment data includes all individuals who had no

employment and had looked for work, whether or not they draw

unemployment benefits.

We are not using data from the ETA 9002 report on labor exchange

services provided to job seekers instead of LAUS data. The ETA 9002

would not provide a reliable measure of the unemployed in each State

because many of those registering for those labor exchange services are

employed. Our proposed analysis considers both unemployment statistics

and civilian labor force data. The LAUS data are considered the most

reliable source available for area unemployment statistics

vided to job seekers instead of LAUS data. The ETA 9002

would not provide a reliable measure of the unemployed in each State

because many of those registering for those labor exchange services are

employed. Our proposed analysis considers both unemployment statistics

and civilian labor force data. The LAUS data are considered the most

reliable source available for area unemployment statistics. For

civilian labor force data, the CPS household survey is the official

measure of the labor force for the nation. Annual average labor force

data for all States and the District of Columbia are currently derived

directly from the CPS. BLS has published detailed descriptions of the

concepts and methodology used on their website at www.bls.gov. Based on

the foregoing, we propose to make no change from the Interim Final Rule

on this issue.

Two commenters expressed the concern that the new funding formula

does not take into account States with large landmass. It was suggested

that we include a provision providing extra funding for those States or

that we identify such a situation as a per se exigent circumstance

warranting additional funds from the monies set aside for exigent

circumstances.

Response: The Jobs for Veterans Act mandates that the proportion of

funding reflect the ratio between the total number of veterans residing

in the State who are seeking employment to the total number of veterans

seeking employment in all States (38 U.S.C. Sec. 4102A(c)(2)(B)(i)).

The authorization for setting criteria for the funding formula relates

to how we determine the number of veterans seeking employment, not how

or where they are served. Although we are sympathetic that coverage in

a large geographical area can present unique challenges to States, we

have not included this

number of veterans

seeking employment in all States (38 U.S.C. Sec. 4102A(c)(2)(B)(i)).

The authorization for setting criteria for the funding formula relates

to how we determine the number of veterans seeking employment, not how

or where they are served. Although we are sympathetic that coverage in

a large geographical area can present unique challenges to States, we

have not included this

criterion in the new Proposed Rule because we believe that, as written,

the Proposed Rule complies with the law while maintaining much needed

flexibility within the formula. Furthermore, we have not proposed to

create a per se category for geographically large States in order to

maintain flexibility and maximize the most effective use of limited

resources. Exigent circumstances can vary from State to State and year

to year; therefore we believe the best course is to review each

situation on a case-by-case basis. Funds will be distributed based on

need as supported by an approved State Plan or a modification to the

State Plan.

Four commenters also articulated the concern that the formula would

not include ``underemployed'' veterans, e.g., a veteran who is employed

by necessity in a job that pays less than the veteran should receive

based on his/her education, skills, and/or experience. Additionally,

one commenter was concerned that neither survey asks the question ``are

you looking for work?'' in the context of a veteran who is currently

employed but seeking alternative employment.

Response: With respect to the question, ``Are you looking for

work?'' not being asked of those who are employed, the commenter is

correct that this question is not asked of those CPS survey respondents

who are employed

ter was concerned that neither survey asks the question ``are

you looking for work?'' in the context of a veteran who is currently

employed but seeking alternative employment.

Response: With respect to the question, ``Are you looking for

work?'' not being asked of those who are employed, the commenter is

correct that this question is not asked of those CPS survey respondents

who are employed. The question, ``Are you looking for work?'' is only

included in a series of questions asked of those respondents identified

as ``not employed'' to determine those who are ``unemployed.''

Furthermore, the comment applies to the LAUS data because the CPS

survey is an important foundation of the LAUS data, which are derived

by supplementing the CPS survey data with data from a variety of other

sources.

While there is no direct measure of the underemployed, veterans or

other workers, in the CPS or LAUS data, underemployed veterans are

taken into account in the funding formula. Those veterans who are

considered to be underemployed because they seek alternative employment

while currently employed are counted among the employed veterans in the

civilian labor force. Thus, they are included in the data used to

determine the funding allocations.

2. Minimum Funding Levels and Hold Harmless Criteria

The Act authorizes the Secretary to establish hold harmless

criteria and minimum funding levels (38 U.S.C. 4102A(c)(2)(B)(iii)).

This Notice of Proposed Rulemaking establishes a hold harmless rate of

eighty percent for the second phase-in year (fiscal year 2005) to

mitigate the impact of the most significant reductions to States' prior

funding levels. This is the same rate as that set forth in the Interim

Final Rule. With the eighty percent hold harmless during fiscal year

2005 each State will be provided no less than eighty percent of its

previous year's allocation. The eighty percent hold harmless rate will

allow the reduction of funding, to those States impacted, to be

implemented incrementally

ld harmless provision were applied to

the larger amount, States would receive more than their fair share of

funding since the allocation would no longer be based on the service

population. Furthermore, such a scheme may result in penalizing a State

that was unable to expend its full allocation due to unforeseen

circumstances. No changes have been made on this basis.

B. Other Funding Criteria

In addition to requiring the Secretary to use civilian labor force

and unemployment data in establishing States' funding levels, the Act

states that the Secretary ``shall make available to each State * * * an

amount of funding * * * using such criteria as the Secretary may

establish in regulation * * *'' (38 U.S.C. 4102A(c)(2)(B)(i)).

Accordingly, the proposed rule provides that in addition to the amount

awarded based on the basic grant funding formula, described in section

IV.A.1 of this document, the Secretary may distribute up to four

percent of the total amount available for allocation based on TAP

workload and exigent circumstances (38 U.S.C. 4102, 4102A(b), and 10

U.S.C. 1141). These other funding criteria are discussed more fully

below.

1. Transition Assistance Program (TAP) Workload

The Act requires the Secretary to implement programs to ease the

transition of servicemembers to civilian careers (38 U.S.C. 4102. See

also 10 U.S.C. 1141). TAP workshops provide such employment services

for transitioning servicemembers. Because active military personnel are

not included in the CPS civilian labor force data, or in the LAUS

unemployment data, the level of need for TAP workshops is not reflected

in the funding formula for the basic grant. Therefore, supplemental

funding is needed in order to ensure adequate funding is available to

provide TAP workshops. In the proposed rule, the allocation to the

States will be proportional to each State's TAP workload as identified

in its State Plan

r force data, or in the LAUS

unemployment data, the level of need for TAP workshops is not reflected

in the funding formula for the basic grant. Therefore, supplemental

funding is needed in order to ensure adequate funding is available to

provide TAP workshops. In the proposed rule, the allocation to the

States will be proportional to each State's TAP workload as identified

in its State Plan. Policy guidance will be provided to States to assist

them in determining the amounts needed for this additional workload,

which will be calculated on a per workshop basis as identified in the

State Plan.

We received two comments supporting the proposed funding formula,

particularly the method for allocating TAP workshop funds. One comment

requested clarification of whether overseas TAP workshops would be

covered by the four percent set aside proposed.

Response: The set aside fund will be available to help support TAP

workshops, including TAP workshops overseas. The Act requires the

Secretary to implement programs to ease the transition of

servicemembers to civilian careers. (38 U.S.C. 4102. See also 10 U.S.C.

1141). There are approximately 20,000 servicemembers and their spouses

who are eligible to participate in TAP workshops at overseas locations

annually. In order to clarify that the four percent funds may be

available for TAP, we have changed the proposed language contained in

Sec. 1001.151 by deleting ``to the States'' from subsection (a). That

section, as currently proposed in this Notice of Proposed Rulemaking,

now reads ``[f]our percent of the total amount available at the

national level will be available based on Transition Assistance Program

(TAP) workload and other exigencies.'' For similar reasons we propose

to modify section (b) as follows:

e contained in

Sec. 1001.151 by deleting ``to the States'' from subsection (a). That

section, as currently proposed in this Notice of Proposed Rulemaking,

now reads ``[f]our percent of the total amount available at the

national level will be available based on Transition Assistance Program

(TAP) workload and other exigencies.'' For similar reasons we propose

to modify section (b) as follows:

``[f]unding for TAP workshops will be allocated on a per workshop

basis. Funding to the States will be provided based on the workload

shown in the approved State Plan''.

2. Exigent Circumstances

Supplemental funding will be made available for exigencies,

including but not limited to, needs based on sharp or unanticipated

fluctuations in State unemployment levels and services to transitioning

servicemembers (as required by the Act). Economic and unemployment

conditions projected at the time of the grant application may not

reflect actual conditions. In such cases, program needs may warrant

additional funding. These funds will be made available based on need.

IV. Administrative Information

Regulatory Flexibility and Regulatory Impact Analysis

The Regulatory Flexibility Act of 1980, as amended in 1996 (5

U.S.C. chapter 6), requires the Federal government to anticipate and

minimize the impact of rules and paperwork requirements on small

entities. ``Small entities'' are defined as small businesses (those

with fewer than 500 employees, except where otherwise provided), small

non-profit organizations (those with fewer than 500 employees, except

where otherwise provided), and small governmental entities (those in

areas with fewer than 50,000 residents). We have assessed the potential

impact of this rule on small entities. This proposed rule implements

reforms to the funding of the State operated veterans' employment and

training services and transitional assistance programs for separating

servicemembers

er than 500 employees, except

where otherwise provided), and small governmental entities (those in

areas with fewer than 50,000 residents). We have assessed the potential

impact of this rule on small entities. This proposed rule implements

reforms to the funding of the State operated veterans' employment and

training services and transitional assistance programs for separating

servicemembers. Because the rule affects only the distribution of

appropriated funds among the States, we have determined that the rule

will not have a significant impact on a substantial number of small

governments or other small entities. We are transmitting a copy of our

certification to the Chief Counsel for Advocacy for the Small Business

Administration. In addition, while these rules govern the distribution

and administration of funds appropriated by Congress, the rules

themselves do not result in an annual effect on the economy of

$100,000,000 or more; a major increase in costs or prices for

consumers, individual industries, Federal, State, or local government

agencies, or geographic regions; or significant adverse effects on

competition, employment, investment, productivity, innovation, or on

the ability of United States-based enterprises. Accordingly, under the

Small Business Regulatory Enforcement Fairness Act (SBREFA) (5 U.S.C.

Chapter 8), the Department has determined that these are not ``major

rules,'' as defined in 5 U.S.C. 804(2).

Paperwork Reduction Act

This proposed rule does not require any information to be

collected, therefore is not subject to review by the Office of

Management and Budget (OMB) under the Paperwork Reduction Act of 1995.

Executive Order 12866, Regulatory Planning and Review

FA) (5 U.S.C.

Chapter 8), the Department has determined that these are not ``major

rules,'' as defined in 5 U.S.C. 804(2).

Paperwork Reduction Act

This proposed rule does not require any information to be

collected, therefore is not subject to review by the Office of

Management and Budget (OMB) under the Paperwork Reduction Act of 1995.

Executive Order 12866, Regulatory Planning and Review

The Department of Labor has determined that this proposed rule is a

``significant regulatory action''. However, it is not an economically

significant rule, therefore does not fall under Executive Order 12866.

While this rule affects the distribution among States of funds

appropriated by Congress, the rule itself will not materially alter the

rights and obligations of the State recipients, particularly in light

of the hold harmless provisions included in the rule. Furthermore, the

rule itself will not: Materially alter the budgetary impact of

entitlements, grants, user fees, or loan programs; have an annual

effect on the economy of $100 million or more, or adversely affect in a

material way the economy, a sector of the economy, productivity,

competition, jobs, the environment, public health or safety, or State,

local, or tribal governments or communities; create a serious

inconsistency, or otherwise interfere with an action taken or planned

by another agency; or raise novel legal or policy issues arising out of

legal mandates, the President's priorities, or the principles set forth

in Executive Order 12866.

Unfunded Mandates

Executive Order 12875--This proposed rule does not create an

unfunded Federal Mandate upon any State, local, or tribal government.

Unfunded Mandate Reform Act of 1995--This proposed rule will not

include any Federal mandate that may result in increased expenditures

by State, local and tribal governments in the aggregate of $100 million

or more, or increased expenditures by the private sector of $100

million or more.

Executive Order 13132, Federalism

unfunded Federal Mandate upon any State, local, or tribal government.

Unfunded Mandate Reform Act of 1995--This proposed rule will not

include any Federal mandate that may result in increased expenditures

by State, local and tribal governments in the aggregate of $100 million

or more, or increased expenditures by the private sector of $100

million or more.

Executive Order 13132, Federalism

We have assessed this proposed rule under Executive Order 13132 and

found that it will not have substantial direct effects on the States or

the relationship between the national government and the States, or on

the distribution of power and responsibilities among the various levels

of government, within the meaning of the Executive Order.

Executive Order 12988

This proposed rule has been drafted and reviewed in accordance with

Executive Order 12988, Civil Justice Reform, and will not unduly burden

the Federal court system. The rule has been written so as to minimize

litigation and provide a clear legal standard for affected conduct, and

has been reviewed carefully to eliminate drafting errors and

ambiguities.

List of Subjects in 20 CFR Part 1001

Employment, Grant programs, Labor, Reporting and recordkeeping

requirements, Veterans.

For the reasons set forth in the preamble, 20 CFR chapter IX is

amended as set forth below.

PART 1001--SERVICES FOR VETERANS

1. The authority citation for part 1001 is revised to read as

follows:

Authority: 29 U.S.C. 49k; 38 U.S.C. chapters 41 and 42. Subpart

F is also issued under the authority of Sec. 4(a), Pub. L. 107-288,

38 U.S.C. 4102A.

2. Part 1001 is amended by adding subpart F to read as follows:

Subpart F--Formula for the Allocation of Grant Funds to State Agencies

Sec.

1001.150 Method of calculating State base grant awards.

1001.151 Other funding criteria.

1001.152 Hold harmless criteria and minimum funding level.

Subpart F--Formula for the Allocation of Grant Funds to State

Agencies

Sec. 1001.150 Method of calculating State base grant awards.

by adding subpart F to read as follows:

Subpart F--Formula for the Allocation of Grant Funds to State Agencies

Sec.

1001.150 Method of calculating State base grant awards.

1001.151 Other funding criteria.

1001.152 Hold harmless criteria and minimum funding level.

Subpart F--Formula for the Allocation of Grant Funds to State

Agencies

Sec. 1001.150 Method of calculating State base grant awards.

(a) In determining the amount of funds available to each State, the

ratio of the number of veterans seeking employment in the State to the

number of veterans seeking employment in all States will be used.

(b) The number of veterans seeking employment will be determined

based on the number of veterans in the civilian labor force and the

number of unemployed persons. The civilian labor force data will be

obtained from the Current Population Survey (CPS) and the unemployment

data will be obtained from the Local Area Unemployment Statistics

(LAUS), both of which are compiled by the Department of Labor's Bureau

of Labor Statistics.

(c) Each State's allocation will be determined by dividing the

number of unemployed persons in each State by the number of unemployed

persons across all States (LAUS for the individual States/LAUS for all

States) and by dividing the number of veterans in the civilian labor

force in each State by the number of veterans in the civilian labor

force across all States (CPS for the individual States/CPS for all

States). The result of these two ratios will be averaged and converted

to a percentage of veterans seeking employment in the State compared to

the percentage of veterans seeking employment in all States. Three-year

averages of the CPS and LAUS data will be used in calculating the

funding formula to stabilize the effect of annual fluctuations in the

data in order to avoid undue fluctuations in the annual amounts

allocated to States.

Sec. 1001.151 Other funding criteria.

centage of veterans seeking employment in the State compared to

the percentage of veterans seeking employment in all States. Three-year

averages of the CPS and LAUS data will be used in calculating the

funding formula to stabilize the effect of annual fluctuations in the

data in order to avoid undue fluctuations in the annual amounts

allocated to States.

Sec. 1001.151 Other funding criteria.

(a) Four percent of the total amount at the national level will be

available based on Transition Assistance Program (TAP) workload and

other exigencies.

(b) Funding for TAP workshops will be allocated on a per workshop

basis. Funding to the States will be provided pursuant to the approved

State Plan.

(c) Funds for exigent circumstances, such as unusually high levels

of unemployment, surges in the demand for transitioning services,

including the need for TAP workshops, will be allocated based on need.

Sec. 1001.152 Hold harmless criteria and minimum funding level.

(a) A hold harmless rate of 90 percent of the prior year's funding

level will be applied after the funding formula phase-in period is

completed (beginning fiscal year 2006 and subsequent years).

(b) A hold harmless rate of 80 percent of the prior year's funding

level will be applied for fiscal year 2005.

(c) A minimum funding level is established to ensure that in any

year, no State will receive less than 0.28 percent (.0028) of the

previous year's total funding for all States.

Signed at Washington, DC, this 29th day of June, 2004.

Frederico Juarbe Jr.,

Assistant Secretary for Veterans' Employment and Training.

[FR Doc. 04-15078 Filed 7-2-04; 8:45 am]

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