[Federal Register Volume 59, Number 12 (Wednesday, January 19, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-1261]


[[Page Unknown]]

[Federal Register: January 19, 1994]


                                                    VOL. 59, NO. 12

                                        Wednesday, January 19, 1994
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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 273

[Amendment No. 351]

 

Food Stamp Program--Distribution of Employment and Training 
Performance-Based Funds

AGENCY: Food and Nutrition Service, USDA.

ACTION: Proposed rule.

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SUMMARY: State agencies that are responsible for administering the Food 
Stamp Program are required to operate the Food Stamp Employment and 
Training (E&T) program. To assist in the operation of their E&T 
programs, the State agencies receive a Federal E&T grant, a portion of 
which is distributed on the basis of each State agency's performance in 
serving the target population. This rule proposes to freeze the 
performance-based grants at the level the State agencies received in 
Fiscal Year 1993, for two years from promulgation of this rule in final 
form. The Department is proposing this action because of statutory 
amendments to the Food Stamp Act of 1977, as amended, made by the Food, 
Agriculture, Conservation and Trade Act Amendments of 1991 (December 
13, 1991).

DATES: Comments must be received by March 21, 1994 to be assured of 
consideration.

ADDRESSES: Comments should be addressed to Ellen Henigan, Supervisor, 
Work Programs Section, Program Development Division, Food Stamp 
Program, Food and Nutrition Service, USDA, 3101 Park Center Drive, 
Alexandria, VA 22302. Comments may also be sent via fax to the 
attention of Ms. Henigan at (703) 305-2454. All written comments will 
be open for public inspection during regular business hours (8:30 a.m. 
to 5 p.m., Monday through Friday) at 3101 Park Center Drive, 
Alexandria, VA, Room 718.

FOR FURTHER INFORMATION CONTACT: Questions regarding this rulemaking 
should be addressed to Ms. Henigan at the above address or by telephone 
at (703) 305-2762.

SUPPLEMENTARY INFORMATION:

Classification

Executive Order 12866

    This proposed rule is issued in conformance with E.O. 12866.

Executive Order 12372

    The Food Stamp Program is listed in the Catalog of Federal Domestic 
Assistance Programs under No. 10.551. For reasons set forth in the 
final rule related Notice(s) of 7 CFR part 3015, subpart V (48 FR 
29115), this Program is excluded from the scope of Executive Order 
12372 which requires intergovernmental consultation with State and 
local officials.

Executive Order 12778

    This proposed rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. This rule is intended to have preemptive effect 
with respect to any State or local laws, regulations or policies which 
conflict with its provisions or which would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
unless so specified in the ``Effective Date'' paragraph of this 
preamble. Prior to any judicial challenge to the provisions of this 
rule or the application of its provisions, all applicable 
administrative procedures must be exhausted. In the Food Stamp Program 
the administrative procedures are as follows: (1) For program benefit 
recipients--State administrative procedures issued pursuant to 7 U.S.C. 
2020(e)(10) and 7 CFR 273.15; (2) for State agencies--administrative 
procedures issued pursuant to 7 U.S.C. 2023 set out at 7 CFR 276.7 (for 
rules related to non-quality control (QC) liabilities) or part 284 (for 
rules related to QC liabilities); (3) for program retailers and 
wholesalers--administrative procedures issued pursuant to 7 U.S.C. 2023 
set out at 7 CFR 278.8.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act (5 U.S.C. 601 through 612). Christopher J. 
Martin, Acting Administrator of the Food and Nutrition Service (FNS), 
has certified that this action does not have a significant economic 
impact on a substantial number of small entities. State and local 
welfare agencies will be the most affected because they administer the 
Program and the rule will affect the performance-based funding levels 
for each State agency.

Paperwork Reduction Act

    This proposed rule does not contain reporting or recordkeeping 
requirements subject to approval by the Office of Management and Budget 
(OMB) under the Paperwork Reduction Act of 1980 (44 U.S.C. 3507).

Background

    Under section 6(d)(4) of the Food Stamp Act of 1977, as amended (7 
U.S.C. 2015(d)(4)), State agencies are required to operate the Food 
Stamp Employment and Training (E&T) program. The purpose of the E&T 
program is to place able-bodied food stamp recipients in educational or 
work-related activities that will increase their chances of obtaining 
regular employment, and thus, reduce their need for public assistance.
    Food stamp recipients who are required to register for work as 
specified under section 6(d)(4) of the Food Stamp Act are expected, if 
assigned, to participate in an E&T component as a condition of 
eligibility for receiving food stamps. Work registrants who refuse or 
fail to comply with an assigned E&T activity or component are 
ineligible to receive benefits for two months or until they comply with 
the assigned activity, whichever comes first.
    The Food Stamp Act provides State agencies flexibility in operating 
their E&T programs. To meet the needs of their work registrant 
populations, the State agencies have discretion in determining which 
components will be offered to E&T participants and in targeting 
services toward certain work registrants. However, to avoid fiscal 
sanction, State agencies must meet performance standards specified 
under 7 CFR 273.7(o). In Fiscal Years (FYs) 1990 and 1991, the State 
agencies were required to place at least 50 percent of their mandatory 
E&T participants into E&T components. In FY 1992 performance standards 
were lowered to 10 percent in response to section 907(b) of Public Law 
102-237. For the purpose of determining each State agency's performance 
level, a person is considered ``placed'' in a component each time they 
begin a component or fail to comply with an assigned activity and are 
sent a Notice of Adverse Action (NOAA). The performance formula also 
includes participants who are exempt from work registration but elect 
to participate in the E&T program (i.e., volunteers). State agencies 
may, but are not required to, serve volunteers.

Federal Funding for E&T Programs

    Section 16(h), 7 U.S.C. 2025(h) of the Food Stamp Act authorizes 
the Secretary to distribute $75 million each year in unmatched Federal 
funds to State agencies to operate their E&T programs. The State 
agencies may also receive Federal matching funds for administrative 
costs above the initial Federal E&T grant. The Federal and State 
governments equally share the costs for transportation or dependent 
care reimbursements that are provided to E&T participants. Currently, 
participants must receive monthly reimbursements of up to $25 for 
transportation and other expenses related E&T to E&T participation. 
Public Law 103-66 removes the monthly cap on dependent care expenses 
effective September 1, 1994. Participants may be reimbursed for actual 
expenses incurred, not to exceed the applicable local market rate for 
the services.
    As specified under section 16(h)(1)(C) of the Food Stamp Act, $60 
million of the Federal E&T grant--the nonperformance based portion--is 
distributed on the basis of each State agency's work registrant 
population as a percent of the total work registrant population 
nationwide. Pursuant to Section 16(h)(1)(B), the remaining $15 million 
of the Federal E&T grant must be distributed on the basis of State 
agency performance. The Food Stamp Act does not address the methodology 
for distributing performance-based funds.
    The Department published final rules on June 9, 1989 (54 FR 24664) 
that specify how these funds are distributed. Under 7 CFR 
273.7(d)(1)(i)(B), performance-based E&T funds are distributed on the 
basis of the number of people placed into E&T components. A person is 
considered placed for the purpose of distributing performance-based 
funds if the person is required to work register and (1) begins an E&T 
component; or (2) fails to comply with the E&T requirement and is sent 
a Notice of Adverse Action (NOAA) by the State agency. Volunteers are 
not included in the calculations for distributing performance-based 
funds. To be eligible to receive performance-based funds, the State 
agency must meet the performance standard as set forth under 7 CFR 
273.7(o).
    The current method for distributing the $15 million performance-
based funds encourages State agencies to serve large numbers of work 
registrants (i.e., broad-based) with low cost components such as job 
search and job search training. When implementing the E&T program in FY 
1987, the Department encouraged broad-based programs because existing 
research indicated that they had a positive impact on a participant's 
future chances of obtaining employment or ending his or her dependence 
on public assistance. Given these results, the Department believed the 
possible benefits participants should be shared by as many participants 
as possible.
    Since implementation of the E&T program in 1987, several things 
have shifted the focus of the program away from the broad-based 
perspective. One was the implementation of the Job Opportunities and 
Basic Skills Training (JOBS) program for non-exempt recipients of Aid 
to Families with Dependent Children (AFDC). With a combination of 
matching Federal funds of up to $1 billion annually, State agencies 
must offer a number of mandatory and voluntary components that are 
generally more intensive than those offered by the Food Stamp E&T 
program. By October 1992 JOBS had to be implemented statewide 
throughout the country. Several State agencies have sought to make the 
two programs more similar. A number have started directing their E&T 
funds toward a more targeted population.
    Results of studies assessing the effectiveness of broad-based work 
programs have been published in recent years, including the 
Department's evaluation of the E&T program (See ``Evaluation of the 
Food Stamp Employment and Training Program, Final Report,'' Abt 
Associates, June 1990). This study concluded that the broad-based E&T 
program in operation in FY 1988 did not have a significant effect on a 
participant's ability to find work or increase work hours or earnings. 
Without a positive effect on employment and earnings, the study further 
concluded that participation in the E&T program did not significantly 
reduce a person's need for food stamp benefits.
    In light of these circumstances, Congress made certain amendments 
to the E&T provisions of the Food Stamp Act that allow, or even 
encourage, the State agencies to provide more intensive services 
towards a targeted population.
    One amendment in the Hunger Prevention Act of 1988, (Pub. L. 100-
435, 102 Stat. 1645, September 19, 1988), mandated that the Department 
implement outcome-based standards in place of the current process-based 
(i.e., placements) system. As specified under Public Law 100-435, 
outcome-based standards would measure job placement rates, wage rates, 
job retention rates, households ceasing to need food stamp benefits, 
improved education levels and the extent to which persons volunteer for 
E&T services. Public Law 100-435 also required that the outcome-based 
standards encourage State agencies to serve participants with barriers 
to employment (e.g., illiteracy or long-term food stamp dependency). 
Therefore, the E&T provisions under Public Law 100-435 reflect 
Congress' concern that, to be successful, Federal work programs must 
apply resources towards disadvantaged populations with barriers to 
employment and that performance must be measured in terms of successful 
outcomes rather than placements.
    The Department was required under Public Law 100-435 to implement 
outcome-based performance standards by April 1, 1991. The 
implementation date was later amended to October 1, 1991 through the 
Mickey Leland Memorial Domestic Hunger Relief Act (Pub. L. 101-624, 104 
Stat. 3359, November 28, 1990). This date was changed again by the 
Food, Agriculture, Conservation and Trade Act Amendments of 1991 (Pub. 
L. 102-237, 105 Stat. 1818, December 13, 1991). Under section 907(a) of 
Public Law 102-237, outcome-based performance standards must be 
implemented no later than one year after the DHHS publishes final 
outcome-based performance standards for its JOBS program. This delay 
will allow the Department of Agriculture and the DHHS to coordinate 
outcome-based performance standards for the two programs.
    In the interim period before outcome-based performance standards 
are implemented, section 907(b) of Public Law 102-237 reduced the 
annual performance standard for States from 50 percent to no more than 
10 percent in FYs 1992 and 1993. The provisions show clear 
Congressional intent that the State agencies no longer be held to a 
standard requiring service to a large number of participants. Rather, 
under Public Law 102-237, the State agencies must be provided the 
flexibility to target a smaller population with more intensive 
components. State agencies are not required to implement a more 
intensive E&T program and may continue to operate broad-based programs.
    Section 907(b) of Public Law 102-237 was effective on September 30, 
1991. On February 12, 1992, the Department notified State agencies in 
writing of the reduction in performance standards for FY 1992. The 
Department will publish a rule implementing the revised performance 
standards in the near future.
    The amendments made under Public Law 102-237 support efforts to 
target the E&T program towards fewer, harder to employ participants or 
to offer more intensive components to a smaller segment of the food 
stamp population. Given these amendments, the Department believes it 
must suspend the current method for distributing the $15 million 
performance-based funds and, in its place, implement a method which 
will not penalize State agencies that place fewer participants and/or 
operate more intensive components. If the current method for 
distributing performance funds is left unchanged, State agencies that 
elect to target fewer participants will lose performance-based funding. 
Thus, the current method for distributing funds is a barrier to the 
State agencies' implementation of amendments made by Public Law 102-
237.
    The Department considered numerous options for revising the 
methodology for distributing performance-based funds. All options were 
viewed with two purposes in mind--to remove barriers for those State 
agencies that wish to target their E&T programs and to reward State 
agencies equitably for their performance. After careful consideration 
of these options, the Department is proposing in this rule to freeze 
performance-based funds at the levels the State agencies received in FY 
1993. This rule proposes that the freeze of performance-based funding 
remain in effect for two years from the date of promulgation of this 
rule in final form.
    On February 12, 1992, the Department notified State agencies in 
writing of the freeze of performance-based funding to the FY 1993 
level. FY 1994 performance-based funds were distributed based on this 
methodology.
    The Department believes there are several advantages for freezing 
performance-based funds. First, the proposed freeze does not prohibit 
State agencies from either modifying their E&T program to target 
smaller populations or retaining the current broad-based program. 
Therefore, this proposal would provide the State agencies with the 
flexibility to move their E&T programs in the direction they believe is 
most appropriate for their work registrant population. However, no 
State agency would be penalized for meeting the lower standard. Second, 
the State agencies would know the amount of their performance-based 
funding levels for the foreseeable future.
    In reaching its decision to propose a freeze on performance-based 
funds, the Department considered numerous other options. These 
included: (1) Distributing the funds on the basis that is currently 
used for distributing the $60 million nonperformance-based funds (i.e., 
work registrant population); (2) rewarding performance on the basis of 
how many participants complete a component or leave a component to take 
a job; (3) modifying the current definition of a ``placement'' (e.g., 
include volunteers and/or exclude NOAA's); and (4) providing extra 
credit to State agencies that target hard-to-employ populations (e.g., 
allow credit only for service to certain hard-to-employ groups such as 
long-term recipients of food stamp benefits or individuals who have not 
completed high school).
    Even though each of these options has merit, the Department 
rejected the options in favor of a freeze. The option for distributing 
the $75 million Federal E&T grant on the basis of each State agency's 
work registrant population was rejected because it would not distribute 
the $15 million E&T funds on the basis of performance, as required by 
law.
    The second option, rewarding performance for completed E&T 
components or job entries was rejected because it would base 
performance on outcomes. Because section 907(a) of Public Law 102-237 
specifically delays outcome-based performance standards until 
coordination with the JOBS program can be achieved, the Department 
believes the option would not be consistent with the law. The 
Department is also reluctant to implement changes to program areas 
which will, in all likelihood, be changed again when the outcome-based 
performance standards are implemented.
    Under the third option, the Department would have redefined 
``placements'' in calculating the success of a State agency's 
performance. None of the possible redefinitions examined, however, 
would have resulted in moving away from rewarding States with high 
numbers of placements over those with low numbers. Thus, all of the 
possible changes would have penalized States that reduce the number of 
people served--contrary to the Congressional intent underlying the 
amendment.
    The last option, providing extra credit to State agencies targeting 
populations with the greatest barriers to employment, was rejected 
because of its administrative burdens. The option would have resulted 
in better targeting of hard-to-employ populations, and thus, taken 
State agencies in the direction the program is heading. However, the 
Department is reluctant to implement a major increase in reporting 
requirements for a relatively short period of time before outcome-based 
performance standards are implemented. The Department further believes 
that the definition of hard-to-employ populations should be coordinated 
with the JOBS program during development of outcome-based performance 
standards.
    Accordingly, the Department is proposing to amend 
Sec. 273.7(d)(1)(i)(B) in this rulemaking to specify that the $15 
million E&T funds will be frozen at the levels the State agencies 
received in FY 1993. In accordance with current rules, performance-
based funds will be allocated by the ratio of the number of E&T 
mandatories placed in an E&T program in an eligible State to the number 
of E&T mandatories placed in all eligible States in Calendar Year 1991.
    The rule proposes that the FY 1993 levels be used for the two 
Fiscal Years following the year in which this rule is published in 
final form. The Department is anxious to receive suggestions for ways 
the performance-based funds could be distributed beyond that, until 
outcome-based performance standards are implemented.
    The State agencies must continue to meet established performance 
standards (i.e., 10 percent in FY 1994) to be eligible for their share 
of these funds as is required under 7 CFR 273.7(d)(1)(i)(B). Should a 
State agency fail to meet the 10 percent performance standard in a 
given fiscal year, it would be ineligible to receive its share of 
performance-based funding in the second following fiscal year. For 
instance, if a State agency fails to meet the 10 percent performance 
standard in FY 1992, it would be ineligible to receive performance-
based funding in FY 1994. Should this occur, the Department is 
proposing in this rule to recalculate the performance-based funds to 
the State agencies on the basis of Calendar Year 1991 data, but 
excluding the States which did not place at least 10 percent of their 
eligible population.
    As required under current rules, State agencies may not submit 
corrected FNS 583 reports any later than March 1 if they are to be used 
in determining whether a State agency is eligible for performance-based 
funding.

Implementation

    The proposed provisions in this rule are effective retroactively to 
October 1, 1993. The State agencies are not required to take any action 
to implement these provisions.

List of Subjects in 7 CFR Part 273

    Administrative practice and procedure, Aliens, Claims, Food stamps, 
Fraud, Grant programs--social programs, Penalties, Reporting and 
recordkeeping requirements, Social security, Students.

    Accordingly, 7 CFR part 273 is proposed to be amended as follows:
    1. The authority citation for part 273 continues to read as 
follows:

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

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

    2. In Sec. 273.7, paragraph (d)(1)(i)(B) is revised to read as 
follows:


Sec. 273.7  Work requirements.

* * * * *
    (d) Federal financial participation.
    (1) Employment and training grants.
    (i) * * *
    (B) In Fiscal Year 1993, the Secretary shall allocate $15 million 
of the Federal funds available for unmatched employment and training 
grants based on the ratio of the number of E&T mandatory participants 
placed (as defined under paragraph (o) in this section) in a food stamp 
E&T program in an eligible State to the number of E&T mandatory 
participants placed in all eligible States in Calendar Year 1991. 
Beginning in Fiscal Year 1994, and each subsequent fiscal year until 
two years after the promulgation of this rule in final, the Secretary 
shall allocate $15 million of Federal funds on the basis of the amount 
of performance-based funding each State agency received in Fiscal Year 
1993, provided the State agency has met the performance standard as 
specified under paragraph (o) of this section for the second preceding 
fiscal year. For example, to receive performance-based funding in 
Fiscal Year 1994, the State agency must have met its performance 
standard in Fiscal Year 1992. Corrections to reports required to be 
submitted in accordance with paragraph (c) of this section must be 
received by FNS, and State agency good cause appeals must be resolved 
no later than March 1, to be used in determining whether a State agency 
is eligible for performance-based funding for the fiscal year beginning 
the following October. In Fiscal Year 1994 and each subsequent fiscal 
year until two years after the promulgation of this rule in final form, 
if the data on the reports show that a State agency did not meet its 
performance standard or a good cause determination was not made by FNS 
by March 1, the State agency shall not be eligible for performance-
based funding. In this instance, the Secretary shall redistribute the 
$15 million Federal funds to eligible State agencies on the basis of 
Calendar Year 1991 data as prescribed under this paragraph, excluding 
the noncompliant States.
* * * * *
    Dated: January 10, 1994.
Ellen Haas,
Assistant Secretary for Food and Consumer Services.
[FR Doc. 94-1261 Filed 1-18-94; 8:45 am]
BILLING CODE 3410-30-U