[Federal Register Volume 59, Number 109 (Wednesday, June 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-13891]
[[Page Unknown]]
[Federal Register: June 8, 1994]
VOL. 59, NO. 109
Wednesday, June 8, 1994
DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
7 CFR Part 246
Special Supplemental Food Program for Women, Infants and Children
(WIC); Food Funding Formula Rule
AGENCY: Food and Nutrition Service, USDA.
ACTION: Proposed rule.
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SUMMARY: This rule proposes revisions to funding and funds allocation
procedures for the Special Supplemental Food Program for Women, Infants
and Children (WIC) in order to simplify and update the funding process
in anticipation of a fully funded program. The proposed amendments will
provide a greater share of funds to States receiving comparatively less
than their fair share of funds based on their WIC income eligible
population, simplify and better manage the food funding allocation
process by eliminating obsolete features and provide all State agencies
with stability funding, adjusted for inflation, to the extent funds are
available.
DATES: To be assured of consideration, written comments must be
received on or before August 8, 1994. Since comments may be accepted
simultaneously on several separate rulemakings, commenters on this
proposed rule are asked to label their comments ``Food Funding Formula
Rule''.
ADDRESSES: Comments may be mailed to Stanley C. Garnett, Director,
Supplemental Food Programs Division, Food and Nutrition Service, USDA,
3101 Park Center Drive, room 540, Alexandria, Virginia 22302, (703)
305-2746. All written submissions will be available for public
inspection at this address during regular business hours (8:30 a.m. to
5 p.m.), Monday through Friday.
FOR FURTHER INFORMATION CONTACT: Deborah McIntosh, Chief, Program
Analysis and Monitoring Branch, Supplemental Food Programs Division,
Food and Nutrition Service, USDA, 3101 Park Center Drive, Alexandria,
Virginia 22302, (703) 305-2710.
SUPPLEMENTARY INFORMATION:
Classification
Executive Order 12866
This proposed rule is issued in conformance with Executive Order
12866 and has been classified as significant.
Regulatory Flexibility Act
This rule has been reviewed with regard to the requirements of the
Regulatory Flexibility Act (5 U.S.C. 601-612). Pursuant to that review,
the Administrator of the Food and Nutrition Service (FNS) has certified
that this rule will not have a significant impact on a substantial
number of small entities. The rule affects how the Department will
calculate food grant allocations for WIC State agencies.
Paperwork Reduction Act
No new data collection or recordkeeping requiring Office of
Management and Budget (OMB) approval under the Paper Reduction Act of
1980 (44 U.S.C. 3501 through 3502) are included in this proposed rule.
Executive Order 12372
This program is listed in the Catalog of Federal Domestic
Assistance Programs under 10.557 and is subject to Executive Order
12372, which requires intergovernmental consultation with State and
local officials (7 CFR part 3015, subpart V, and final rule-related
notice published June 24, 1983 (48 FR 29114)).
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 WIC Program, the
administrative procedures are as follows: (1) Local agencies and
vendors--State agency hearing procedures issued pursuant to 7 CFR
246.18; (2) applicants and participants--State agency hearing
procedures issued pursuant to 7 CFR 246.9; (3) sanctions against State
agencies (but not claims for repayment assessed against a State agency)
pursuant to 7 CFR 246.19--administrative appeal in accordance with 7
CFR 246.22; and (4) procurement by State or local agencies--
administrative appeal to the extent required by 7 CFR 3016.36.
Background
Need for Revisions to the Food Funds Allocation Process
The WIC Program has consistently demonstrated its effectiveness in
promoting the health and nutritional well-being of low-income women,
infants and children at nutritional or medical risk, and has
experienced large increases in its appropriation for the last several
years. Due to its success, the WIC Program is likely to soon achieve
``full funding'' whereby it is estimated that all eligible women,
infants and children who apply could obtain program benefits. In moving
toward the full funding objective, the Department finds that its
current food funding formula presents impediments to funding equality
and is so complex it is difficult to execute and predict its results.
Historically, WIC has never had enough funds to serve all who are
in need of, and eligible for, its benefits. Certain State agencies
receive levels of funding that allow them to serve more of their
eligible populations than others. The concept of full funding for WIC
as set forth by the Administration does not guarantee unlimited funds
nor does it establish the WIC Program as a federal entitlement program.
As before, WIC must manage within a finite appropriation level.
However, a fully funded WIC Program implies that the appropriation
level will more adequately provide for all eligible persons who apply
for benefits, and that each State agency should have an equal chance to
serve their eligible population. Currently, many State agencies are
serving lesser proportions of their WIC-eligible population than other
State agencies. Therefore, the formula must support growth among State
agencies which are now funded to serve a lesser proportion of their
eligible population, as well as allocate funds fairly among all State
agencies under a stable, fully funded program.
Therefore, to better prepare the WIC Program for full funding, the
proposed revisions to the food funding formula strive for three major
objectives: (1) To provide a greater share of funds to State agencies
receiving comparatively less than their fair share of funds based on
their WIC income eligible population; (2) to simplify the food funding
formula and delete obsolete components; and (3) to maintain current
services to eligible participants that State agencies are serving to
the extent funds are available.
FNS has recognized for some time that constraints of the current
funds allocation process necessitated revisions to the food funding
formula. Additionally, the National Association of WIC Directors (NAWD)
formed a special Funding Formula Committee (Committee) to provide
recommendations to FNS for revising the formula and improving methods
for allocating WIC food funds. The Committee views are referenced in
this preamble on particular issues.
The Committee recommendations focused on how full funding should
alter the funding formula for the future. The limited funds provided to
the WIC Program in the past were not adequate to fully reach the
eligible population. Consequently, the current funding formula sought
to preserve participation gains that State agencies achieved. If
additional funds were available, funds were allocated to foster program
growth, particularly to the pregnant women and infant population at
highest risk. Service to this highest risk group is now largely
accomplished. A fully funded program must now strive to achieve greater
funding equity among all State agencies.
Assumptions Under Full Funding
Cost Control Efforts. The President's goal of fully funding the WIC
Program strongly assumes that current policies and procedures affecting
cost containment strategies will continue. Cost savings through cost
containment initiatives, including infant formula rebates, have been
highly effective in the WIC Program in recent years, creating savings
that have allowed the program to assist millions of additional
participants. State agencies are required to continue infant formula
rebates, and are encouraged to explore other cost containment
initiatives to manage the WIC Program more efficiently and effectively
and to ensure that the President's goal can be realized.
Due to the intense scrutiny and competition for funds that all
Government programs now face, it is imperative that in a fully funded
program, WIC State agencies continue to monitor and aggressively pursue
cost containment strategies. The Department seeks comments and
suggestions as to how the policies, rules or procedures could be
adjusted to better reward efficient State management and cost
containment efforts without putting upward pressure on program costs or
undue burdens on the program. State agencies may have valuable insights
to share with the Department on cost containment strategies and on
strengthening standards for cost containment to insure that existing
structural incentives for cost efficiency will be maintained.
WIC Food Costs. WIC Program food costs account for approximately 75
percent of the overall WIC budget. Therefore, it is critical that State
agencies use these food dollars wisely so that additional WIC
participants can be served. Since funds are allocated based on the
national average food package cost, State agencies that have food
package costs above the national average will not be able to serve the
number of participants estimated to be served with their allocation.
This will function as an incentive for these State agencies to manage
their food package costs more efficiently in order to serve all
eligibles in their respective jurisdictions.
State agencies currently are required to employ various strategies
to reduce food costs, such as infant formula rebates and effective
vendor management. Additional strategies found effective in controlling
costs include, but are not limited to, food container size and name
brand management practices, and rebates on foods other than infant
formula. Many States are utilizing these additional strategies;
however, other State agencies may need to implement additional cost
containment initiatives to reduce their per person food package cost to
enable them to serve additional participants.
Nutritional Risk Criteria. Another area where State agencies have
some discretion in operating the WIC Program which may affect a State
agency's ability to realize the President's goal of full funding are
the nutritional risk standards used to establish program eligibility.
In addition to meeting income eligibility standards, an applicant for
program benefits must also be certified by a competent professional
authority to be at nutritional risk due to medically-related conditions
or dietary deficiencies that impair or endanger health. Currently State
agencies have considerable flexibility in establishing and implementing
nutritional risk criteria.
The commitment to WIC full funding can only be met if States
continue to utilize risk-related eligibility criteria that are based in
sound medical, nutritional, and preventive health research. Poverty in
and of itself, while strongly associated with many health and
nutrition-related problems, is not a sufficient condition for program
eligibility.
In order to help advance understanding of the current state of
scientific knowledge of nutritional risk as it pertains to the WIC
target population, FNS funded a grant to the National Academy of
Sciences, Institute of Medicine, Food and Nutrition Board (FNB). The
grant will be used for a scientific evaluation of WIC nutrition risk
criteria, including an independent review of all nutrition risk factors
currently in use by the WIC Program, and a review of the related
scientific literature. The FNB will issue a report summarizing its
findings regarding determination of nutritional risk for each
criterion, and will identify gaps in the scientific knowledge
indicating that additional research is needed.
The results of this review will be shared with State agencies to
help them better manage program services and to ensure that full
funding will meet the nutritional and health-related needs in a well
targeted manner.
Funding Formula Objectives
The funding process should assure each State agency a grant that
allows it an equal opportunity to serve its fair share of eligible
persons seeking WIC service by providing a food package suited to the
participant's unique nutritional deficiencies, not to exceed the
maximum food benefit allowed under regulations. This rule proposes a
funding formula to meet this overall goal.
The objective of fair share allocation is to give each State agency
a percentage of total available funds based on its number of WIC-
eligibles as a percent of the total number of WIC-eligibles nationally.
Accordingly, an ``under fair share'' State agency is one whose percent
share of grant funds is less than its percent share of the total
national WIC-eligible population. An ``over fair share'' State agency
is one whose percent share of grant funds is greater than its percent
share of the WIC-eligible population. While there is general agreement
that the fair share concept is important and that it is necessary to
bring ``under fair share'' State agencies closer to their fair share
objective, the best way to implement this concept was a more difficult
decision. The current formula provides a ``stability'' grant which
assures all State agencies of their prior year grant plus some
inflationary increases. While ``stability'' funding was important in
the past to avoid eroding participation gains, fully funding the WIC
Program does not ensure that grant levels to individual State agencies
will be stable, since States' eligible populations may increase or
decrease over time due to changes in the economy or other factors.
The current formula for allocating food funds was published in a
final rule on July 2, 1987 (52 FR 25182). Most recently, it was amended
by a Final Rule published March 11, 1994, at 59 FR 11475. This preamble
is organized first to describe the most significant current provisions,
and to explain the proposed revision or elimination of these
provisions. Second, a summary of how the proposed food funding formula
will work is provided.
Current Provisions
Section 246.16(c)(1) Allocation Formula--Use of Participation Data in
the Formula
The proposed food funding formula would no longer use reported
priority participation data or data reflecting State-funded
participation for imputing the figures needed for the targeting
components of the formula described in Sec. 246.16(c)(3)(ii) and
(c)(1)(ii)(A). Accordingly, the Department is proposing to revise
Sec. 246.16(c)(1) to eliminate the use of participation data for these
purposes.
Section 246.16(c)(3)(i) Allocation of Stability Funds
Currently, in allocating funds to State agencies, first priority is
given to maintaining each State's operating level ``stability
funding''. The stability component of a State agency's allocation is
initially based on the amount of food funds received by each State
agency in the prior fiscal year, adjusted to restore 50 percent of any
grant funds voluntarily returned in the prior year. This base level is
then adjusted to account for a portion of the inflation estimated for
the upcoming fiscal year (except that Indian State agencies receive a
full inflation adjustment).
The proposed formula retains this component with some modification.
The principle of stability is maintained to help assure that each State
agency receives enough funds to support its current participation
level. However, the proposed rule tempers this with the principle of
fair share allocation based on each State agency's eligible population.
This rule proposes deleting the provision allowing a State agency
the option to retain 50 percent of funds it returns before July 16 as a
part of its stability grant the next fiscal year. For example,
currently a State agency which voluntarily returns $100 in unspent food
funds would be reduced by only $50 of that $100 in its stability grant
for the next year.
The 50 percent credit was intended as an incentive for a State
agency to return food funds that it could not spend, thereby making
those funds available for reallocation to State agencies that needed
additional funds. Actually, almost all State agencies which have
elected to return funds under this provision have been those which were
in danger of failing to spend at least 95 percent of their allocated
food funds. Failure to achieve this expenditure level results in a
specific decrease in the amount of food funds in the subsequent fiscal
year as specified in Sec. 246.16(e)(2). In these instances, State
agencies simply returned the amount of funds necessary to ensure
expenditures of at least 95 percent of their adjusted food grants. The
Department no longer believes restoration of 50 percent of returned
funds to State agencies in the next year is prudent. The restoration of
these funds makes it possible for a State agency already serving all of
its eligible population to retain funds it does not need.
Section 246.16(c)(3)(i)(A) Inflation Adjustment
The current food funding formula uses a calculation referred to as
the ``targeted inflation factor''. It is designed to provide an
inflation adjustment proportionate to a State agency's service to the
highest priority participants. Under this process, the full inflation
increase is adjusted according to each State agency's percentage of
participants in the top three priority level categories (Priority I-III
women, infants and children at nutritional or medical risk).
Specifically, the formula requires multiplying the percentage of its
participation which is in the top three priorities by the full rate of
inflation. The resultant factor is multiplied by the prior year food
grant to determine the stability grant, as adjusted for targeted
inflation. For instance, if 75 percent of a State agency's
participation was in the Priority I to III participation categories,
and the full inflation rate was 4 percent, that State agency would
receive a targeted inflation rate of 3 percent applied against its
prior year grant to determine its stability grant. An exception is made
for Indian State agencies which receive full inflation.
The intent of the existing provision is twofold. First, it gives a
greater inflation increase to State agencies which are serving high
priority participants. Second, by not providing full inflation to all
State agencies, some funds remain after stability grant allocations.
These funds are distributed under the ``residual funds'' portion of the
formula and provide additional funds to all State agencies. The impact
of targeted inflation, coupled with the residual funds portion of the
formula, has been to provide almost all State agencies with a full
inflation increase anyway. However, the targeted inflation process is
complicated and, since service to the highest risk participants is now
largely achieved, is no longer relevant. This rule proposes the more
straight-forward process of providing all State agencies with a full
inflationary increase as long as funds are adequate to do so.
If, however, the appropriation for any given year is insufficient
to support prior year grant levels plus full inflation, the funding
formula must reduce State agency grants to allow for funds allocation
within available funding. Two options were considered when the
appropriation is inadequate to support stability. The first option, and
the one most favored by the Committee, was an equal pro rata reduction
for all State agencies for that fiscal year. The second option is that
State agencies with under fair share allocations receive first priority
for any available inflationary increases, and those State agencies at
or above their fair share allocation for that fiscal year receive
second priority. The Department believes that when funds are limited,
the concept of a fair share allocation should remain a priority in the
allocation of funds. Therefore, this rule proposes to adopt the second
option. This will assure continued progress in increasing the grants of
States that are under their fair share.
Section 246.16(c)(3)(i)(B) Migrant Set-Aside
Section 17(g)(4) of the Child Nutrition Act of 1966 (42 U.S.C.
1786(g)(4)) provides that not less than \9/10\ of one percent of the
funds appropriated for the WIC Program be available first for services
to migrant women, infants and children. Currently, the regulations
stipulate that the full \9/10\ of one percent set-aside is to be
subtracted from all States' stability grants and then added to
stability grants of States that report serving migrants. Because these
adjustments for the migrant set-aside become part of the base grant of
stability funds for the next fiscal year, FNS found that stability
grants were skewed over time, directly causing some State agencies to
receive more than their fair share of funds while preventing other
States from receiving their fair share. This distorting effect becomes
even larger as overall funding increases.
Additionally, for the last few years, the number of reported
migrants receiving WIC services is consistently and substantially less
than the number that could be supported by the full migrant set-aside.
The Department thinks that continued increases in the appropriation
have made the full migrant set-aside excessive and unnecessary. With
full funding and the fair share allocation objective proposed by this
rule, the current method of allocating the migrant set-aside is
irrelevant, since the proposed funding formula is based upon an
estimate of WIC eligibles which already includes the migrant
population.
This rule proposes that for State agencies that serve migrants, a
portion of the grant be designated for service to the migrant
population. The designated amount would be based on prior year migrant
participation reported by each State agency. By designating a target
funding level, the migrant grant does not distort subsequent grant
allocations, yet establishes service to this needy population as a
priority. This is an approach similar to the one employed to target
expenditures for breastfeeding promotion and support. However, as under
current regulations, a State agency would not be penalized for not
fully spending the portion of its grant designated for migrants as this
would be to the detriment of other needy participants waiting for
service. As the migrant population served in a State in a prior year
may change in the following year when migrant workers travel to other
States where work is available, it is unreasonable to hold funds to
serve a population that may not be present that year. In a full funding
environment, migrant populations actually pose a dilemma similar to
unexpected changes in the overall eligible population. At any time, a
demographic change could result in greater or fewer eligibles than
estimated. The Department believes that State agencies must estimate
and accommodate such changes according to the information available
from State and local sources.
Therefore, for planning purposes, expenditure targets will be
established for both food grants and nutrition services and
administration grants to insure that \9/10\ of one percent of the
appropriation is made available for service to migrants. State agencies
would be expected to plan for migrant participants as now required in
their State Plan of Operation and give priority service to migrant
participants that arrive from another State agency seeking WIC
services.
Section 246.16(c)(3)(ii) Allocation of Residual Funds
Under the current rule, any funds remaining after stability grants
are allocated are ``residual funds''. Residual funds are allocated
under two components--''targeting'' and ``growth''. This rule proposes
eliminating the targeting component and modifying the growth component
as discussed below.
Section 246.16(c)(3)(ii)(A) ``Targeting'' Component for Food Funds
The current funding formula requires that 50 percent of residual
funds be distributed to all State agencies for the targeting component.
These targeting funds are allocated to each State agency based
primarily on its number of Priority I participants. The targeting
formula procedure is complex, requiring many computations to calculate
a targeting index by which each State agency's share of targeting funds
is determined.
The targeting component was originally designed to provide an
incentive for targeting benefits to the highest risk participants,
Priority I women and infants. However, State-reported participation
data indicate that nationwide, 90 percent of all fully (categorical,
income and at nutritional risk) eligible infants and pregnant women are
receiving services through the WIC Program. Therefore, the targeting
component is no longer needed to encourage service to Priority I
participants.
The Department is also concerned that the targeting component is a
barrier to achieving funding equity among State agencies. All State
agencies receive targeting funds, regardless of whether their stability
grants already provide a fair share allocation. With targeting, funding
levels for State agencies at or above their fair share level can
continue to increase, while State agencies receiving below their fair
share amount have difficulty catching up. With the elimination of the
targeting component, funding equity can be reached more rapidly. In
short, this rule proposes the elimination of the targeting component to
simplify the formula, and ensure greater funding equity based on each
State agency's eligible population.
Section 246.16(c)(3)(ii)(B) ``Growth'' Component for Food Funds
Under the current formula, after targeting funds are allocated, the
remaining half of residual funds are allocated for ``growth'' within
State agencies that have less opportunity to serve their eligible
population compared to other State agencies. Growth funds are allocated
based primarily on a ``fair share'' concept similar to that discussed
earlier. To determine fair share funding, FNS uses a mathematical
equation to create an estimate of each State's eligible WIC population.
The estimate begins with each State agency's number of income
eligibles, currently extracted from decennial census data. The estimate
is adjusted slightly to account for State agency variations in infant
mortality and low birth weight rates (``health indicators''). Also,
women, infants and children served by the Commodity Supplemental Food
Program (CSFP) are subtracted from this estimate for those States in
which CSFP operates.
Each State agency's estimated ratio of the eligible WIC population
is divided by the national estimated eligible WIC population to
establish each State agency's ``fair share'' percent of total funds. A
State agency receives growth funds if the funds it was allocated
through the stability and targeting components are less than its
calculated fair share. The amount of funds available for growth are
divided among all State agencies receiving less than their fair share
of funds, with State agencies furthest from their fair share of funds
receiving greater allocations. The number of State agencies receiving
growth funds each fiscal year varies.
As explained below, the Department proposes retaining the
``growth'' component of the formula using only the estimate of income
eligibles (with some adjustments) and deleting the use of health
indicators. It is believed that this best defines each State agency's
actual need for program funds and greatly simplifies the ``fair share''
equation. Each component and revision of the eligibles database is
discussed below.
Income Eligibles
Currently, each State agency's estimate of WIC income eligible
persons is based on data from the 1990 Decennial Census, which reflects
population characteristics as of 1989. Although the Census data
provides the most current State-by-State information, the Department
recognizes that data which describe a population at a fixed point in
the past may not accurately reflect recent and future socioeconomic and
demographic trends. Accordingly, the Department is currently exploring
other potential data sources for the state-level income eligibles
estimates. One such potential source is the Current Population Survey
(CPS), which provides state-level population data by income on an
annual basis. CPS is used to estimate the total number of WIC income
eligibles on a national basis. State-level CPS data, used in
conjunction with other state-level economic, demographic and program
participation data, may prove to be a better and more current
alternative source for state-level income eligibles estimates. This
proposed rule does not establish or define the exact source of the
eligibles database in order to allow for the use of the most timely and
reliable data as it becomes available.
The fair share funding allocations are based on estimates of the
State agency's target population at or below 185 percent of poverty
rather than estimates of fully-eligibles (persons income eligible and
at nutritional risk). This is, in part, because consistent state-level
data on income is more readily available than state-level data on
nutritional risk. In addition, the use of income-eligibles data results
in consistent treatment of State agencies regardless of nutritional
risk criteria. That is, State agency allocations are not adjusted for
nutritional risk standards which, compared with other State agencies,
are more or less inclusive.
It should be noted that the state level income-eligible estimates
will be used to determine each state's proportion of the national total
of WIC income-eligibles. Funding allocations are based on this
proportion--not on the absolute number of estimated income eligibles in
each State. Each State agency's fair share allocation thus depends on
both its share of income eligibles and the total amount of funds
available nationally.
Under full funding, the total amount of funds available should
reflect a national estimate of the cost of serving all fully-eligible
persons who wish to participate in the program. Because a national
estimate will assume ``average'' nutritional risk criteria, each State
agency's fair share allocation will also implicitly assume average
nutritional risk certification practices, as well as average food
costs. The allocation formula does not provide additional funds to
States with higher than average food package costs or broader than
average definitions of nutritional risk. This basic approach to
establishing each State agency's fair share funding allocation would
likely be maintained regardless of any foreseeable changes in the data
and methodologies used to estimate income eligibles.
Health Indicators
In the current formula, the calculation of each State's eligible
WIC population, used to compute its fair share allocation, includes an
adjustment for its infant mortality and low birth weight rates. These
health indicators were originally included in the food funding formula
to help direct limited funds to States that were especially needy.
However, as appropriation levels have grown, the WIC Program has been
better able to serve high risk participants (who tend to have the
highest rates of infant mortality and low birth weight babies). Since
this prenatal population is now largely served, these adjustments are
no longer necessary. Moreover, as service to the highest risk
participants has increased, the overall impact of the health indicators
on the amount of food funds received by States has become negligible.
FNS examined the effect of these health indicators on States' Fiscal
Year 1993 food grants and found that, as currently factored in the
growth component, health indicators affected food grants for very few
State agencies and only by a difference of one percent or less.
Furthermore, the inclusion of the health indicators unduly complicates
and reduces understanding of the food funding formula. Therefore, this
rule proposes to eliminate the use of the health indicator adjustments.
Adjustments for Higher Cost Areas
The current growth component also makes an adjustment for the
higher food costs of State agencies located outside of the continental
United States. This adjustment is done to ensure that the share of
funds received by these State agencies is adequate to serve their share
of the eligible population given their higher costs. The current
regulation provides detailed specifications for those States and
territories with higher food costs as recognized by the Food Stamp
Program's Thrifty Food Plan (TFP). These States and territories include
Alaska, Hawaii, Guam, and the Virgin Islands.
The Department proposes to retain this adjustment, but to allow
more flexibility than the current regulation. Therefore, the proposed
rule incorporates more general requirements so that if economic data is
available that can measure and document higher costs in particular
outlying State agencies, the Department may use available data to
construct adjustment factors for such State agencies. Consideration of
such adjustments would be predicated on the condition that State
agencies with higher food costs aggressively pursue cost containment
initiatives, such as stringent vendor management practices,
participation in multi-state agency infant formula rebate contracts and
other cost containment efforts.
Adjustments for Indian Tribal Organizations
The growth allocation for the Indian Tribal Organizations has
traditionally presented problems due to inadequate data regarding
eligibles. Currently, 30 Indian State agencies, each primarily
representing members from one or more Native American tribes, operate
WIC programs. The Department recognizes that the method for determining
eligibles to be served by these Indian State agencies is imprecise,
since census and Vital Statistics data on Native Americans are not
available by tribe. Often these Indian State agencies also serve non-
Native Americans, who are not captured within their estimated eligible
population data. In many cases, the present method of determining
growth allocations indicates that many Indians State agencies are
already receiving adequate funds to fully serve their estimated
eligible populations.
The Department knows of no data source to resolve this problem.
Therefore, the rule proposes to give FNS the authority to organize and
oversee negotiations between the Indian State agency (or agencies) and
the geographic State agency (or agencies) in which the Indian State
agency is located. FNS could, acting independently or at the request of
a State agency, involve affected State agencies in an agreement on the
temporary or permanent transfer of funds. Negotiations could be
conducted to shift funds among these State agencies to better reflect
the actual service being provided by each of the State agencies.
Commodity Supplemental Food Program
The Commodity Supplemental Food Program's (CSFP) service to low-
income women, infants and children contributes to the Administration's
goal of fully funding the WIC Program by the end of Fiscal Year 1996.
The Fiscal Year 1995 budget request and out year targets assume CSFP
women, infants and children participation will equal the authorized
caseload level.
In those States where both CSFP and WIC operate, the current rule
requires the subtraction from the WIC income eligible database of those
participants (based on actual, average CSFP participation in the prior
fiscal year) who are eligible for the WIC Program, but elect to receive
benefits under CSFP. As CSFP is currently authorized to serve, in
addition to WIC eligibles, 5 year old children and postpartum women
from 6 months to 1 year postpartum, not all CSFP participants are
categorically eligible for the WIC Program. Therefore, FNS currently
assumes that one-fourth of the children and one-half of the postpartum
women participating in CSFP are not eligible for the WIC Program. The
balance of CSFP participants are subtracted from the WIC eligibles
estimate.
The Department is proposing to revise Sec. 246.16(c)(3)(i) to make
three changes to this deduction from the WIC eligibles baseline data.
First, the proposed rule modifies the method for determining the number
of CSFP women, infants and children to subtract from the WIC eligibles
baseline. The deduction will now be based upon the authorized CSFP
women, infants and children caseload, rather than actual participation
figures. Second, the deduction will be based on the CSFP caseload
authorized at the beginning of the caseload cycle of the prior fiscal
year (generally announced on December 1). This is a change from the
current practice of using actual, average participation for the prior
fiscal year. Finally, the adjustment described above for those CSFP
participants who are not also categorically eligible for WIC
(postpartum women from 6 months to 1 year postpartum and 5 year old
children) will no longer be made. Utilizing the total CSFP caseload
level for women, infants and children, rather than performance, more
equitably accounts for the resources provided to a State agency to
serve the WIC target population using CSFP. These changes will ensure
that States that do not have access to CSFP will not be disadvantaged
in their access to WIC funds when compared with States that operate
both programs.
Summary of the Proposed Food Funding Formula
The foregoing has described the components of the current formula
that are proposed for deletion, retention or modification. To ensure
that the proposed formula is fully understood, the following describes
the proposed allocation process and provides simplified examples of the
proposed process.
Fair Share Allocation Objective
In the proposed Sec. 246.16(c)(3), the funding objective would be
to give each State agency its fair share allocation of funds to the
extent funds are available. Funds available would include funds
appropriated for the fiscal year as well as unspent funds carried over
from the prior fiscal year that State agencies have not retained under
spendforward authority as provided in Sec. 246.16(b)(3)(ii). An example
of a simplified fair share allocation is shown below. This example
assumes that available funds total $5000, and the total number of
income eligibles is 1000 persons.
------------------------------------------------------------------------
Eligibles Fair share Fair share
Stateagency No. percentage allocation
------------------------------------------------------------------------
A.................................... 200 20 $1,000
B.................................... 500 50 2,500
C.................................... 300 30 1,500
----------------------------------
Total.......................... 1,000 100 5,000
------------------------------------------------------------------------
Stability Allocation
Recognizing that State agencies may already have participants on
the program supported with the grant funds each State agency received
in the prior year, the formula would strive to protect this service
depending on total funds available. Section 246.16 (c)(ii) proposes a
Stability Allocation which protects prior year grant levels contingent
on availability of funds.
It is proposed that if funds are not adequate to fully fund prior
year grants, all State agencies will receive a pro-rata reduction from
their prior year grant level commensurate with the shortfall of
available funds. If funds are available, each State agency would
receive a stability allocation equal to its final authorized grant
level as of September 30 of the prior fiscal year. If funds are still
available, State agencies will receive an inflation adjustment in the
following two-step sequence.
(1) Each State agency with a prior year final authorized grant
level which is less than its fair share allocation shall receive its
prior year final authorized grant level, increased by an inflation
factor which reflects the anticipated rate of food cost increases as
determined by the Department, not to exceed its fair share allocation.
Should funds be inadequate to fully meet this adjustment, each under
fair share State agency will receive an equal percent increase as
permitted by the amount of funds available.
(2) If funds remain after completing step 1, each State agency with
a prior year final authorized grant level that is at or greater than
its fair share allocation shall receive its prior year final authorized
grant level, increased by an inflation factor which reflects the
anticipated rate of food cost increases as determined by the
Department. Should funds be inadequate to fully meet this adjustment,
each State agency will receive an equal percent increase as permitted
by the amount of the funds available.
Growth Allocation
If funds remain after step 1 and 2 above, then funds are provided
for a ``growth allocation''. The growth allocation gives additional
funds to each State agency which has an inflation-adjusted stability
allocation which is less than its fair share allocation. The formula
subtracts each State agency's current year stability allocation from
its fair share allocation to determine the dollar shortfall. Each State
agency's shortfall, as a percent of all State agency's shortfalls,
yields its percent share of the funds available for the growth
allocation.
Example of Formula Allocation Process
The example below describes allocation steps for stability and
growth. First, all State agencies have received at least their prior
year final grant, which totaled $4,500. As $5,000 is available to
allocate in this case, funds are sufficient to do both stability and
growth allocations.
1. Stability Allocation--Under Fair Share
First, under fair share State agencies get an inflationary
increase, based on full inflation, to the extent permitted by available
funding. In this example, available funding permits the entire
inflationary increase:
------------------------------------------------------------------------
Prior
Fair year Inflation New
State agency share final 3 percent grant
grant
------------------------------------------------------------------------
A.............................. $1,000 $1,100 NA $1,100
B.............................. 2,500 2,000 $60 2,060
C.............................. 1,500 1,400 42 1,442
----------------------------------------
Total.................... 5,000 4,500 102 4,602
Funds remaining = $398
------------------------------------------------------------------------
2. Stability Allocation--Over Fair Share
Next, over fair share State agencies get an inflationary increase,
based on full inflation, to the extent permitted by available funding.
In this example, available funding permits the entire inflationary
increase:
------------------------------------------------------------------------
Prior
Fair year Inflation New
State agency share final 3 percent grant
grant
------------------------------------------------------------------------
A.............................. $1,000 $1,100 $33 $1,133
B.............................. 2,500 2,000 60 2,060
C.............................. 1,500 1,400 42 1,442
----------------------------------------
Total.................... 5,000 4,500 135 4,635
Funds remaining = $365
------------------------------------------------------------------------
3. Growth Allocation
Under fair share State agencies get a proportion of remaining funds
based on the shortfall between their fair share allocation and
stability grant. In the example below, the $365 available for growth
funding is shared by States B and C according to their respective
shortfalls from their fair share allocations.
----------------------------------------------------------------------------------------------------------------
Shortfall
State agency Fair share Stability -------------------------- Fundsreceived Final grant
grant Dollar's Percent
----------------------------------------------------------------------------------------------------------------
A............................... $1,000 $1,133 NA NA NA $1,133
B............................... 2,500 2,060 $440 88 $322 2,382
C............................... 1,500 1,442 58 12 43 1,485
-------------------------------------------------------------------------------
Total..................... 5,000 4,635 498 100 365 5,000
Funds remaining = $0.
----------------------------------------------------------------------------------------------------------------
If any funds allocated in the three steps above cannot be used and
are declined by one or more State agencies, then these funds will be
allocated, using the method in Step 3, to the under fair share State
agencies which have the ability to use more funds. If all funds are
still not distributed, then these remaining funds would be allocated to
State agencies which have a stability allocation which is at or greater
than its fair share allocation. Each of these State agencies which can
document the need for additional funds will be eligible to receive
additional funds based on the difference between its stability
allocation level and fair share allocation. State agencies closest to
their fair share allocation shall receive first consideration.
For instance, in the example above, State A would be able to
receive funds declined by State B or C. In this way, the precedence for
funding will be to increase funding to under fair share State agencies
to the extent possible, while still allowing State agencies that are
over their fair share level to receive additional funds when a
documented need for additional funds exists. All grants awarded through
this process would become the basis of the following year's stability
allocation.
Performance Standard
The 95 percent performance standard in current regulations was
reevaluated. This standard reduces the current year grant for any State
agency that did not spend at least 95 percent of its food grant. The
Department is concerned that this current standard of 95 percent of the
grant is too generous in the context of a fully funded program. While
the Department is sympathetic to the difficulties of rapidly growing
States of meeting the 95 percent expenditure level, State agencies with
relatively stable funding and participation do not face the same
difficulties. For stable State agencies, expending less than the 95
percent of allocated food funds is likely to indicate they have funds
they cannot use. Therefore, the Department has proposed in
Sec. 246.16(e)(2)(i) a 95 percent standard for State agencies receiving
less than their fair share allocation, and 98 percent for those at or
over their fair share level. Additionally, prior to applying the
performance standard, the current provision in Sec. 246.16(e)(3)(i)
allows for exclusion from the grant of food funds that are spent
forward into a succeeding fiscal year as authorized by
Sec. 246.16(b)(3)(ii), and (iv) and (v). Since spentforward funds are
merely unspent funds that the State agency can retain, the Department
no longer believes that they should be excluded when assessing spending
performance. Accordingly, the proposed rule deletes this provision. Any
food funds backspent under Sec. 246.16(b)(3)(i) or converted to
Nutritional Services and Administration (NSA) funds under
Sec. 246.16(g) will continue to be excluded from the food grant for
purposes of applying the performance standard. These two reductions are
appropriate in that they reflect food funds actually expended in the
current year, and not merely reserved for future use.
List of Subjects in 7 CFR Part 246
Food assistance programs, Food donations, Grant programs--Social
programs, Infants and children, Maternal and child health, Nutrition
education, Public assistance programs, WIC, Women.
Accordingly, 7 CFR part 246 is proposed to be amended as follows:
PART 246--SPECIAL SUPPLEMENTAL FOOD PROGRAM FOR WOMEN, INFANTS AND
CHILDREN
1. The authority citation for part 246 continues to read as
follows:
Authority: 42 U.S.C. 1786.
2. In Sec. 246.16
a. Paragraph (c)(1) is revised.
b. Paragraph (c)(3) is revised.
c. Paragraph (e)(2)(i) is revised.
The revisions read as follows:
Sec. 246.16 Distribution of Funds.
* * * * *
(c) Allocation formula. * * *
(1) Use of participation data in the formulas. Wherever the formula
set forth in paragraphs (c)(2) and (c)(3) of this section require the
use of participation data, the Department shall use participation data
reported by State agencies according to Sec. 246.25(b).
* * * * *
(3) Allocation of food benefit funds. In any fiscal year, any
amounts remaining from amounts appropriated for such fiscal year and
amounts appropriated from the preceding fiscal year after making
allocations under paragraph (a)(6) of this section and allocations for
nutrition services and administration (NSA) as required by paragraph
(c)(2) of this section shall be made available for food costs.
Allocations to State agencies for food costs will be determined
according to the following procedure:
(i) Fair share allocation. (A) For each State agency, establish a
fair share allocation which shall be an amount of funds proportionate
to the State agency's share of the national aggregate population of
persons who are income eligible to participate in the Program based on
the nationally uniform 185 percent of poverty criterion. The Department
will determine each State agency's population of income eligible
persons through the best available indicators as determined by the
Department. If the CSFP also operates in the area served by the WIC
State agency, the CSFP women, infants and children caseload level at
the beginning of the caseload cycle of the prior fiscal year shall be
deducted from the WIC State agency's population of income eligible
persons.
(B) The Department may adjust the respective amounts of food funds
that would be allocated to a State agency which is outside the 48
contiguous states and the District of Columbia when the State agency
can document that economic conditions result in higher food costs for
the State agency. Prior to any such adjustment, the State agency must
demonstrate that it has successfully implemented voluntary cost
containment measures, such as improved vendor management practices,
participation in multi-state agency infant formula rebate contracts or
other cost containment efforts. The Department may use the Thrifty Food
Plan amounts used in the Food Stamp Program, or other available data,
to formulate adjustment factors for such State agencies.
(ii) Stability allocation. If funds are available, each State
agency shall receive a stability allocation equal to its final
authorized grant level as of September 30 of the prior fiscal year. If
funds are not available to provide all State agencies with their prior
year final authorized grant level, all State agencies shall receive a
pro-rata reduction from their prior year grant level as required by the
short fall of available funds. If additional funds are available after
each State agency receives a stability allocation, the balance of funds
shall be allocated first to meet the requirement in
paragraph(c)(3)(ii)(A) of this section, then paragraph (c)(3)(ii)(B) of
this section.
(A) Each State agency with a prior year final authorized grant
level which is less than its current fair share allocation shall
receive its prior year final authorized grant level, increased by an
inflation factor which reflects the anticipated rate of food cost
increases as determined by the Department; not to exceed its fair share
allocation. Should funds be inadequate to fully meet this requirement,
each State agency will receive an equal percent increase as permitted
by the funds available.
(B) Each State agency with a prior year final authorized grant
level that is at or greater than its fair share allocation shall
receive its prior year final authorized grant level, increased by an
inflation factor which reflects the anticipated rate of food cost
increases as determined by the Department. Should funds be inadequate
to fully meet this requirement, each State agency will receive an equal
percent increase as permitted by the funds available.
(iii) Growth allocation. (A) If additional funds remain available
after the allocation of funds under paragraph (c)(3)(ii) of this
section, each State agency which has a stability allocation, as
calculated in paragraph (c)(3)(ii)(A) of this section, which is less
than its fair share allocation shall receive additional funds based on
the difference between its stability allocation and fair share
allocation. Each State agency's difference shall be divided by the
total of the differences for all such State agencies, to determine the
percent share of the available growth funds each State agency shall
receive. In the event a State agency declines any of its allocation in
paragraph (c)(3)(ii) of this section or this paragraph, the funds
declined shall be allocated to the remaining State agencies which are
still under their fair share.
(B) In the event funds still remain after completing the
distribution in paragraph (c)(3)(iii)(A) of this section, these funds
shall be allocated to all State agencies including those with a
stability allocation at, or greater than, their fair share allocation.
Each State agency which can document the need for additional funds
shall receive additional funds based on the difference between its
prior year grant level and its fair share allocation. State agencies
closest to their fair share allocation shall receive first
consideration.
(iv) Migrant services. At least \9/10\ of one percent of
appropriated funds for each fiscal year shall be available first to
assure service to eligible members of migrant populations. For those
State agencies serving migrants, a portion of the grant shall be
designated to each State agency for service to members of migrant
populations based on that State agency's prior year reported migrant
participation. The national aggregate amount made available first for
this purpose shall equal \9/10\ of one percent of all funds
appropriated each year for the Program. Funds designated or used for
migrant services shall not be included in a State agency's stability
allocation, under paragraph (c)(3)(ii) of this section.
(v) Special provisions for indian state agencies. The Department
may choose to adjust the allocations and/or eligibles data among Indian
State agencies and the geographic State agencies in which they are
located when eligibles data for the State agencies' population is
determined to not fairly represent the population to be served. Such
allocations may be redistributed from one State agency to another,
based on negotiated agreements among the affected State agencies
approved by FNS.
* * * * *
(e) Recovery and reallocation of funds.
* * * * *
(2) * * *
(i) The amount allocated to any State agency for food benefits in
any fiscal year shall be reduced if such State agency's food
expenditures for the preceding fiscal year were less than the
established performance standard. For State agencies which received
less than their fair share allocation as defined in paragraph (c)(3)(i)
of this section, the performance standard shall be the expenditure of
funds at no less than 95 percent of the food grant. For State agencies
over their fair share allocation, the performance standard shall be the
expenditure of funds at no less than 98 percent of the food grant. Such
reduction shall equal the difference between the State agency's
preceding year food expenditures and applicable percent performance
standard applied to the amount allocated to the State agency for such
benefits. For purposes of determining the amount of such reduction, the
amount allocated to the State agency for food benefits for the
preceding fiscal year shall not include food funds expended for food
costs incurred under the spendback provision in paragraph (b)(3)(i) of
this section or conversion authority in paragraph (g) of this section.
Temporary waivers of the performance standard may be granted at the
discretion of the Department.
* * * * *
Dated: June 2, 1994.
Ellen Haas,
Assistant Secretary for Food and Consumer Services.
[FR Doc. 94-13891 Filed 6-7-94; 8:45 am]
BILLING CODE 3410-30-U