[Federal Register Volume 59, Number 193 (Thursday, October 6, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24673]
[[Page Unknown]]
[Federal Register: October 6, 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: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule amends regulations governing 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
amendments 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, provide all State agencies with stability
funding, adjusted for inflation, to the extent funds are available, and
simplify the food funding allocation process by eliminating obsolete
features.
EFFECTIVE DATE: This rule is effective on October 1, 1994.
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:
Executive Order 12866
This rule has been determined to be significant and was reviewed by
the Office of Management and Budget under Executive Order 12866.
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 final rule.
Executive Order 12372
The Special Supplemental Food Program for Women, Infants and
Children (WIC) 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 final 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
Sec. 246.18; (2) applicants and participants--State agency hearing
procedures issued pursuant to 7 CFR Sec. 246.9; (3) sanctions against
State agencies (but not claims for repayment assessed against a State
agency) pursuant to 7 CFR Sec. 246.19--administrative appeal in
accordance with 7 CFR Sec. 246.22; and (4) procurement by State or
local agencies--administrative appeal to the extent required by 7 CFR
Sec. 3016.36.
Background
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 equity 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
Department published a proposed rule on June 8, 1994 to revise the food
funding formula in order to meet 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.
The proposed rule provided for a 60-day comment period, which ended
on August 8, 1994. Thirty-six comment letters were received from a
variety of sources, including State and local agencies, advocacy groups
and other public interest groups. The Department has given all comments
careful consideration in the development of this final rule and would
like to thank all commenters who responded to the proposal.
Assumptions Under Full Funding
As explained in the preamble to the proposed rule, full funding is
not intended to replace or discourage efficient and effective program
management. Accordingly, mandatory cost containment efforts recently
undertaken must continue, and additional voluntary cost containment
efforts are encouraged. Funds will continue to be allocated based on a
national average food package cost as an incentive for State agencies
to manage their food package costs more efficiently to serve more
eligibles. Finally the commitment to WIC full funding can only be met
if States continue to utilize risk-related eligibility criteria that
are based on sound medical, nutritional and preventive health research.
Income eligibility alone is not a sufficient condition for program
eligibility.
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 establishes a
funding formula to meet this overall goal. The following is a
discussion of each provision, as proposed, comments received on the
proposal, and an explanation of the provisions set forth in this final
rule.
1. Section 246.16(c)(1) Allocation Formula--Use of participation data
in the formula.
The Department proposed to revise Section 246.16(c)(1) to eliminate
the use of priority participation data or data reflecting State-funded
participation for imputing the figures needed for the targeting
components of the formula described in Section 246.16 (c)(3)(ii) and
(c)(1)(ii)(A).
All commenters on this provision supported it as proposed.
Therefore, the provision remains unchanged from the proposed rule.
2. 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 as ``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 retained this component with some
modification. The principle of stability was maintained to help assure
that each State agency would receive enough funds to support its
current participation level. However, the proposed rule deleted the
provision allowing a State agency the option to retain 50 percent of
funds it returns before July 16 of any given year as a part of its
stability grant the next fiscal year.
The majority of commenters addressing this issue opposed the
provision and stated that the current 50 percent recovery credit should
be maintained. The commenters indicated that eliminating the credit
would be a disincentive for State agencies to return funds, thereby
delaying the reallocation of unspent funds. Several commenters
suggested maintaining the 50 percent credit for one year only. A few
commenters were strongly in support of the provision to delete the 50
percent recovery credit.
The 50 percent credit was originally 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. However, 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. 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 receiving its fair share funding to retain funds it does
not need. In addition, the credit effectively increases stability
grants in the subsequent year by 150 percent of the amount of funds
returned, since the State agencies returning funds receive a 50 percent
credit in the subsequent year's stability grant, while the State
agencies to which the returned funds are reallocated have their
subsequent year's stability grants increased by the full amount of the
reallocation. If there are increases in appropriation levels for the
subsequent year, this additional liability can be funded. However, if
funds in the subsequent year are not adequate to meet all stability
grants, all State agencies share in a grant decrease to accommodate the
50 percent credit. Accordingly, to ensure equity, the 50 percent
recovery credit is deleted in this rule.
3. 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 was 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). 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 proposed rule took a more straight-forward approach by
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 proposed funding formula would reduce State agency
grants to allow for funds allocation within available funding. Those
State agencies with under fair share allocations would receive first
priority for any available inflationary increases, and State agencies
at or above their fair share allocation for that fiscal year would
receive second priority. The proposal sought to assure continued
progress in increasing the grants of States that are under their fair
share.
All of the commenters addressing this issue were opposed to this
provision. The consensus was that if funds were insufficient to provide
full inflationary increases, then all State agencies should take a
prorata reduction for that fiscal year. The commenters were opposed to
the two-tier concept and stated that small reductions in all State
agency grants would be less disruptive to WIC operations than large
cuts to a few State agencies.
The Department is persuaded by the concerns raised by commenters on
this aspect of the proposed rule. Therefore, Section 246.6 (c)(3)(ii)
in this final rule provides that in the event that funds are
insufficient to support prior year grant levels plus full inflation,
all state agencies would take a prorata reduction for that fiscal year.
4. 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. The current regulations
stipulated 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 over-all funding increases.
The rule proposed 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 will not distort subsequent grant
allocations, yet will establish 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.
The Department believes that State agencies must estimate and
accommodate such changes according to the information available from
State and local sources. Therefore, it was proposed that, for planning
purposes, expenditure targets would 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.
Most of the commenters supported this provision. However, two
commenters thought the proposed change was unclear and implied
additional reporting requirements. In addition, it was suggested that
the methodology to be used be clarified.
The Department is not imposing any additional reporting
requirements regarding migrant participants. State agencies will
continue to report migrant participation as in past years. For purposes
of clarity, the Department has deleted the last sentence in section
246.16(c)(3)(iv) of the proposed regulation which erroneously implied
that migrant funds would be deducted from the State agency's stability
allocation. Since this was not the intent of the regulation, this
language was removed for clarification. The remainder of section
246.16(c)(3)(iv), which designates a migrant service expenditure
target, is adopted final as proposed.
5. 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''. The Department
proposed eliminating the targeting component and modifying the growth
component as discussed below.
``Targeting'' Component for Food Funds (Section
246.16(c)(3)(ii)(A))
As explained in detail in the preamble, the targeting component is
no longer needed to encourage service to Priority I participants, and
is a barrier to achieving funding equity among State agencies.
Therefore, the Department proposed the elimination of the targeting
component to simplify the formula, and ensure greater funding equity
based on each State agency's eligible population.
All of the commenters on this provision supported it, and the final
rule retains the provision that would eliminate targeting as a
consideration in funds allocation. However, five commenters stated that
they would oppose the provision unless all States were guaranteed prior
year funding levels plus full inflation if funds are available. In the
event that funds are insufficient, the commenters wanted a prorata
reduction for all States. These concerns were addressed above in the
discussion of the stability allocation (Section 246.16(c)(3)(ii)).
``Growth'' Component for Food Funds (Section 246.16(c)(3)(ii)(B))
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 used a mathematical
equation to create an estimate of each State's eligible WIC population.
The estimate began 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.
As explained below, the Department proposed 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 was 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 for the
fair share allocation provided in Section 246.16(c)(3)(ii) is discussed
below.
Income Eligibles. 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. The proposed rule did 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.
This was supported by the majority of commenters who commented on the
eligibles data.
Under the proposed rule, fair share funding allocations would be
based on estimates of the State agency's eligible population at or
below 185 percent of poverty rather than estimates of the fully-
eligible population (persons income eligible and at nutritional risk).
Unlike the national estimate of eligibles, State agency allocations are
not adjusted for an estimate of fully eligible persons as nutritional
risk standards vary by State agency and application of a ``national''
estimate would serve no useful purpose for funding allocation purposes.
The State level income-eligible estimates were 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 proportion of income
eligibles and the total amount of funds available nationally.
Most commenters stated that they concur with the proposed ``fair
share'' concept, but that more timely updates of eligibles data are
critical. Commenters consistently stated that the current data
seriously under counts the number of WIC eligibles and they strongly
encourage FNS to continue working on obtaining new and better
estimates. However, two commenters stated that FNS should withdraw the
current proposal until better data is obtained. One commenter
maintained that Medicaid participants should be included in the
estimates. One commenter proposed an alternative approach similar to
fair share using a ``full funding'' concept. However, after much
consideration of this particular alternative, the Department believes
that it would impede under fair share State agencies progress in moving
towards full funding. The Department will retain the fair share
principle as proposed, using the best available indicators to determine
each State agency's population of income eligibles. At the same time,
the Department continues its commitment to develop more timely and
accurate estimates of eligibles to be used in the WIC food funding
formula.
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 certain health indicators
(infant mortality and low birth weight rates) in the food funding
formula. As explained in the preamble to the proposed rule, the
population targeted by the health indicators is now largely served.
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. Furthermore, the inclusion of
the health indicators unduly complicates and reduces understanding of
the food funding formula. Therefore, the Department proposed to
eliminate the use of the health indicator adjustments. All commenters
who commented on this provision were supportive of removing the health
indicators from the formula. Therefore, this final rule retains the
provision as proposed.
Adjustments for Higher Cost Areas. The current growth component
also makes an adjustment for the higher food costs of four specific
State agencies located outside of the continental United States (or
Indian State agencies located within their borders). These State
agencies currently are Alaska, Hawaii, Guam, and the Virgin Islands.
The Department proposed to retain this adjustment, but to allow more
flexibility than the current regulation. The majority of commenters
supported the proposed provision. However, some commenters
misinterpreted this provision to mean that State agencies or portions
of State agencies (urban areas, rural areas, Indian Tribal
organizations) within the continental United States (i.e., within the
48 contiguous States and the District of Columbia) that can document
higher food costs should receive an adjustment. Other commenters
specifically stated that Puerto Rico should be considered as an
outlying State agency.
This rule retains the provision as proposed. However, the
Department would like to clarify that the proposed provision was not
intended to expand the adjustment for higher cost in areas to those
State agencies located within the continental United States. At this
time, there is no data to support adjustments for areas within the
continental United States. With regard to Puerto Rico, although it is
potentially eligible for this adjustment under the new provision, it
must still demonstrate that it meets the requisite requirements set
forth in Section 246.16(c)(3)(i)(B). In particular, it must document
that economic conditions result in higher food costs, and that it has
successfully implemented voluntary cost containment measures.
Adjustments for Indian Tribal Organizations (ITOs)
The growth allocation for the Indian Tribal Organizations has
traditionally presented problems due to inadequate data regarding
eligibles. The Department knows of no data source to resolve this
problem. Therefore, it proposed to give FNS the authority to oversee
negotiations between one or more ITOs and the geographic State agency
or agencies in which the ITO 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.
Only a few commenters addressed this provision. The commenters were
generally in favor of the provision but stressed that caution must be
used in shifting funds from one State agency to another, particularly
based on eligibles data that is questionable. In addition, there may be
a misunderstanding that such grant adjustments will occur without input
from all affected State agencies. The Department would like to clarify
that any grant adjustments must be agreed upon by all State agencies
involved, and by FNS. At no time would any affected State agency be
left out of the negotiation process.
Additionally, since the proposed rule was published, it has been
brought to our attention that negotiations may need to also take place
between two or more ITOs not just between ITOs and geographic State
agencies. The final rule has been modified to reflect this. In all
other respects, it remains as proposed.
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 budget 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 estimated as 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 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 proposed to make three changes to this deduction
from the WIC eligibles database. First, it proposed to modify the
method for determining the number of CSFP women, infants and children
to subtract from the WIC eligibles database. It proposed to base the
deduction upon the authorized caseload for CSFP women, infants and
children, rather than actual participation. Second, it proposed to base
the deduction on the CSFP caseload authorized at the beginning of the
caseload cycle of the prior fiscal year (generally announced on
December 1). Finally, it proposed that 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) would no longer be made. The Department believed that
utilizing the total CSFP caseload level for women, infants and
children, rather than actual participation, more equitably accounts for
the resources provided to a State agency to serve the WIC target
population under CSFP. These changes were intended to ensure that
States that do not have access to CSFP were not disadvantaged in their
access to WIC funds when compared with States that operate both
programs.
Uniformly, commenters were strongly opposed to reducing the WIC
eligibles data by the CSFP caseload, particularly with no reduction for
non-WIC eligibles participating in CSFP. Commenters felt that deducting
CSFP caseload from the WIC eligibles would improperly reduce estimates
of income eligibles. They also stated that it was inequitable to no
longer adjust the deduction to account for non-WIC eligible CSFP
recipients. Most commenters suggested retaining the method used in the
current formula. However, several commenters suggested perhaps there
are States that could report WIC eligibles actually served by CSFP and
then that data could be used to determine income eligibles.
In view of the concerns raised by commenters, the Department has
decided not to adopt the proposed rule. Instead, the method used in the
current regulations for deducting the CSFP participants eligible for
WIC from the WIC income eligible data base will be retained.
Performance Standard
The Department also proposed to revise the 95 percent performance
standard which reduces the current year grant for any State agency that
does not spend at least 95 percent of its food grant. The Department is
concerned that expenditure of only 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 in meeting
the 95 percent expenditure level, State agencies with relatively stable
funding and participation do not face the same difficulties. For State
agencies at or exceeding their fair share level, expending less than
the 95 percent of allocated food funds is likely to indicate they have
funds they cannot use. The Department proposed to retain the 95 percent
standard for State agencies receiving less than their fair share
allocation, and to increase the performance standard to 98 percent for
those at or over their fair share level.
The majority of commenters were adamantly opposed to two different
performance standards for over and under fair share State agencies.
Additionally, most commenters felt the 98 percent performance standard
was much too stringent and unrealistic due to food cost fluctuations,
infant formula rebates, variations in participation and other factors
not directly controlled by the WIC State agency. In view of these
comments, the final rule deletes the proposed two-tier performance
standard for over and under fair share State agencies. However, the
Department continues to be concerned that unspent funds be directed to
States with documented need, especially as State demographic and
socioeconomic situations fluctuate from year to year. This is
particularly critical in a full funding environment. Therefore, the
Department has decided to retain a uniform performance standard, and to
gradually increase it over time. Accordingly, paragraph 246.16
(e)(2)(i) in the final rule establishes a 96 percent performance
spending standard in fiscal years 1995 and 1996, and a 97 percent
standard for fiscal year 1997 and beyond for all WIC State agencies.
Additionally, prior to applying the performance standard, the
current regulations in section 246.16(e)(3)(i) allow for exclusion from
the grant of food funds that are spent forward into a succeeding fiscal
year as authorized by section 246.16(b)(3)(ii), and (iv) and (v). Since
spentforward funds are merely unspent funds that the State agency can
retain, the Department proposed that they should no longer be excluded
when assessing spending performance. A few commenters opposed this
provision, but the Department continues to believe that spendforward
funds should not be deducted when calculating the performance standard.
This deduction has led to the current situation in which there are
significant amounts of unspent money moving from one fiscal year to
another. If not rectified, this will compound the extreme pressure that
will be placed on all Departmental discretionary spending in order to
meet the commitment to WIC full funding. Therefore, the final rule
retains this provision as proposed. Any food funds backspent under
section 246.16(b)(3)(i) or converted to nutritional services and
administration (NSA) funds under section 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.
Summary of the Final Food Funding Formula
The foregoing has described the decisions reached on the proposed
provisions. To ensure that the new formula in this final rule is fully
understood, the following describes the allocation process and provides
simplified examples of the funding process.
Fair Share Allocation Objective
The funding objective is to give each State agency its fair share
allocation of funds to the extent funds are available. Funds available
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 section 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.
------------------------------------------------------------------------
Fair share
State agency Eligibles percentage Fair share
No. 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 strives to protect this service
depending on total funds available. A stability allocation is provided
to protect prior year grant levels contingent on availability of funds.
If funds are not adequate to fully fund prior year grants, all
State agencies will receive a prorata 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, all State
agencies will receive an inflation adjustment.
This inflation adjustment will reflect 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 inflation increase as permitted by the amount
of funds available.
Growth Allocation
If funds remain after the stability allocation, then these 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. All State agencies receive 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 year Inflation Stability
State agency Fair share final grant 3% 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
------------------------------------------------------------------------
2. 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.
----------------------------------------------------------------------------------------------------------------
$$
State agency Fair share Stability Shortfall ------------- Funds rec'd Final grant
grant Pct.
----------------------------------------------------------------------------------------------------------------
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 two steps above cannot be used and
are declined by one or more State agencies, then these funds are
allocated, using the method in Step 2, 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. The
Department recognizes that being at or over fair share is a statistical
definition that may or may not accurately indicate the actual need for
funding to serve all eligibles within that State. Therefore, over fair
share States must have the opportunity to receive additional funds,
should the funding be available.
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. Additionally, over fair
share States must demonstrate effective efforts to control food package
costs. All grants awarded through this process would become the basis
of the following year's stability allocation.
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 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. Paragraphs (c)(1), (c)(3) and (e)(2)(i) are revised; and
b. Paragraph (r) is redesignated as paragraph (p) and all internal
references to the redesignated paragraph are revised. The revisions
read as follows:
Sec. 246.16 Distribution of funds.
* * * * *
(c) Allocation formula. * * *
(1) Use of participation data in the formula. 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 185 percent of poverty criterion. The Department will determine
each State agency's population of persons categorically eligible for
WIC which are at or below 185% of poverty, through the best available,
nationally uniform, indicators as determined by the Department. If the
Commodity Supplemental Food Program (CSFP) also operates in the area
served by the WIC State agency, the number of participants in such area
participating in the CSFP but otherwise eligible to participate in the
WIC Program, as determined by FNS, 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 plus
a full inflation increase. The inflation factor shall reflect the
anticipated rate of food cost increases as determined by the
Department. If funds are not available to provide all State agencies
with their full stability allocation, all State agencies shall receive
a prorata reduction from their full stability allocation as required by
the short fall of available funds.
(iii) Growth allocation. (A) If additional funds remain available
after the allocation of funds under (c)(3)(ii) of this section, each
State agency which has a stability allocation, as calculated in
paragraph (c)(3)(ii) 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.
(v) Special provisions for Indian State agencies. The Department
may choose to adjust the allocations and/or eligibles data among Indian
State agencies, or 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) Performance standards. * * *
(i) The amount allocated to any State agency for food benefits in
the current fiscal year shall be reduced if such State agency's food
expenditures for the preceding fiscal year do not equal or exceed 96
percent of the amount allocated to the State agency for such costs for
fiscal year 1995 and fiscal year 1996 and 97 percent for fiscal year
1997 and beyond. Such reduction shall equal the difference between the
State agency's preceding year food expenditures and the performance
expenditure standard amount. 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: September 30, 1994.
Ellen Haas,
Assistant Secretary for Food and Consumer Services.
[FR Doc. 94-24673 Filed 10-4-94; 11:08 am]
BILLING CODE 3410-30-U