[Federal Register Volume 59, Number 224 (Tuesday, November 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28830]


[[Page Unknown]]

[Federal Register: November 22, 1994]


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DEPARTMENT OF AGRICULTURE
7 CFR Part 273

RIN 0584-AB59

 

Food Stamp Program; Excess Shelter Expense Limit and Standard 
Utility Allowances

AGENCY: Food and Consumer Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This action proposes several changes in Food Stamp Program 
rules relating to the limit on deductible excess shelter expenses and 
use of standard utility allowances. The major change would implement a 
provision of the Mickey Leland Childhood Hunger Relief Act as set forth 
in the Omnibus Budget Reconciliation Act of 1993. The provision would 
increase Program benefits to households that have no elderly or 
disabled members by gradually increasing and then, in 1997, removing 
the limit on the amount of excess shelter expenses these households can 
deduct from their income to determine eligibility and benefits. The 
changes in provisions for standard utility allowances would allow State 
agencies to use allow use of additional standards and would simplify 
requirements for determining entitlement to a standard.

DATES: Comments must be received on or before January 23, 1995 to be 
assured of consideration.

ADDRESSES: Comments should be submitted to Judith M. Seymour, 
Eligibility and Certification Regulation Section, Certification Policy 
Branch, Program Development Division, Food and Consumer Service, USDA, 
3101 Park Center Drive, Alexandria, Virginia, 22302, (703) 305-2496. 
Comments may also be datafaxed to the attention of Ms. Seymour at (703) 
305-2454. All written comments will be open for public inspection at 
the office of the Food and Consumer Service during regular business 
hours (8:30 a.m. to 5 p.m., Monday through Friday) at 3101 Park Center 
Drive, Alexandria, Virginia, Room 720.

FOR FURTHER INFORMATION CONTACT: Questions regarding the proposed 
rulemaking should be addressed to Ms. Seymour at the above address or 
by telephone at (703) 305-2496.

SUPPLEMENTARY INFORMATION:

Classification

Executive Order 12866

    This proposed rule has been determined to be economically 
significant and was reviewed by the Office of Management and Budget.

Executive Order 13272

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

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Ellen Haas, 
Under Secretary for Food, Nutrition, and Consumer Services, has 
certified that this rule does not have a significant economic impact on 
a substantial number of small entities. The changes will increase 
benefits to food stamp recipients and simplify administration of the 
Program by State and local welfare agencies.

Paperwork Reduction Act

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

Regulatory Impact Analysis

Need for Action
    This action is required by section 13912(b) of Pub. L. 103-66, 
which amended Section 5(e) of the Food Stamp Act to provide for 
incremental increases in the excess shelter expense deduction in July 
1994 and October 1995 and the elimination of the limit on the amount of 
shelter expenses that may be deducted from the net income of a 
household that does not contain an elderly or disabled member, 
effective January 1, 1997.
Benefits
    This action increases benefits to households with high shelter 
expenses and simplifies administration of the Program by State and 
local offices.
Costs
    It is estimated that this action will increase the cost of the Food 
Stamp Program by approximately $40 million in FY 1994, $125 million in 
FY 1995, $190 million in FY 1996, $490 million in FY 1997, and $620 
million in FY 1998.

Executive Order 12778

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

Background

1. Excess Shelter Cap--7 CFR 273.9(d)(5) and 273.9(d)(8)

    Under current rules at 7 CFR 273.9(d)(5), households are entitled 
to a deduction from income for excess shelter expenses, i.e., shelter 
expenses (including rent or mortgage and utilities) that exceed 50 
percent of the household's net income remaining after all other 
deductions. For households with an elderly or disabled member (as 
defined in 7 CFR 271.2), all of the excess shelter expenses are 
deducted. For other households, only excess shelter expenses up to a 
limit are deducted. This limit, usually referred to as the ``shelter 
cap,'' is adjusted annually to reflect changes in the shelter, fuel, 
and utilities components of housing costs in the Consumer Price Index 
(CPI-U) published by the Bureau of Labor Statistics for the 12 months 
ending the preceding June 30. In FY 1994, the cap is $207 for the 
contiguous 48 States and the District of Columbia, $359 in Alaska, $295 
in Hawaii, $251 in Guam, and $152 in the Virgin Islands.
    Section 13912 of the Mickey Leland Childhood Hunger Relief Act 
(Leland Act), Chapter 3, Title XIII of the Omnibus Budget 
Reconciliation Act of 1993, Pub. L. 103-66, enacted August 10, 1993, 
107 Stat. 312), amended section 5(e) of the Food Stamp Act of 1977 (as 
amended), (the Act) 7 U.S.C. 2014(e), to provide for incremental 
increases in the shelter cap and for the elimination of the cap 
according to the following schedule:

    1. Effective July 1, 1994 through September 30, 1995, the excess 
shelter expense deduction shall not exceed $231 a month in the 48 
contiguous States and the District of Columbia, $402 in Alaska, $330 
in Hawaii, $280 in Guam, and $171 in the Virgin Islands.
    2. Effective October 1, 1995 through December 31, 1996, the 
excess shelter expense deduction shall not exceed $247 a month in 
the 48 contiguous States and the District of Columbia, $429 in 
Alaska, $353 in Hawaii, $300 in Guam, and $182 in the Virgin 
Islands.
    3. Effective January 1, 1997, the limit on the excess shelter 
expense deduction is removed.

    According to the legislative history of the Leland Act 
(Congressional Record, S10725, August 6, 1993), the changes in the 
shelter cap are designed to provide more food stamps to families with 
especially high rent and utility bills. To implement section 13912 of 
Pub. L. 103-66, 7 CFR 273.9(d)(8) will be amended to add the 
statutorily imposed increased shelter cap amounts effective in July 
1994 and October 1995 and to indicate that the shelter cap will be 
eliminated effective January 1, 1997. Those regulatory changes are 
mandated by statute and, in accordance with 5 U.S.C. 553(b)(3)(A), are 
therefore not subject to public comment.
    This action proposes to amend the homeless shelter expense 
provisions of 7 CFR 273.9(d)(5) to eliminate the reference to the 
excess shelter cap. Current regulations provide that State agencies may 
develop their own standard estimate of the shelter expenses of 
households in which all members are homeless and do not receive free 
shelter throughout the month. State agencies that do not want to 
develop their own standards may use the estimate provided by the 
Department. The regulations provide that this homeless shelter estimate 
will be updated annually using the same method as is used to index the 
excess shelter cap. Since the excess shelter cap will be set at the 
amounts established by the Leland Act beginning July 1, 1994 and will 
be removed in January 1997, we are proposing to amend 7 CFR 273.9(d)(5) 
effective July 1, 1994 to provide that the homeless shelter expense 
estimate will be revised each October 1 to reflect changes in the 
shelter, fuel, and utilities components of housing costs in the CPI-U 
for the 12 months ending the preceding June 30. The homeless shelter 
estimate will be adjusted on October 1, 1994 and each October 1 
thereafter. State agencies will be notified of the amount by memorandum 
prior to each change. State agencies will still have the option of 
developing and using their own estimates.

2. Standard Utility Allowances--7 CFR 273.9(d)(6)

    The legislative history of the Leland Act (Congressional Record, 
S10725, August 6, 1993 and House Report 103-213, p. 924, August 4, 
1993) indicates Congressional intent that the excess shelter expense 
deduction be simple to administer and that the standard utility 
allowance facilitate, rather than hinder, program simplification. We 
have reviewed the regulations governing shelter expenses and utility 
standards to determine how they might be improved. As a result, we are 
proposing to revise 7 CFR 273.9(d)(6) in its entirety.
    In section 5(e) of the Food Stamp Act (7 U.S.C. 2014(e)), Congress 
authorized use of a standard utility allowance (standard) in computing 
a household's excess shelter deduction to reduce the burden on State 
agencies and households of having to report, verify, and calculate 
actual utility costs. However, subsequent legislation and numerous 
regulatory revisions have resulted in increasingly complicated 
requirements for use of the standards. State agencies have complained 
that current regulations are confusing and, by their very complexity, 
defeat the purpose of using standards.
    Rules published October 17, 1978 (43 FR 47846, 47865-66) required 
State agencies to establish a standard utility allowance which 
households could include in claiming their shelter costs. Households 
that incurred costs for electricity and fuel for heating, cooling, or 
cooking were allowed to use the State agency's single utility standard 
which included these costs. Alternatively, States were allowed to 
develop separate standards for each utility. A household incurring a 
cost for any of these utilities was allowed the option of claiming 
actual costs or the standard in the calculation of benefits.
    To give State agencies more flexibility in operating the Program, 
the Omnibus Budget Reconciliation Act of 1982, Pub. L. 97-253, 
(September 8, 1982, 96 Stat. 775-6), made use of a standard utility 
allowance a State agency option. In doing so, the use of the standard 
became more complex. Use of a single standard that included heating or 
cooling costs was restricted to those households that incurred heating 
or cooling costs separately from their rent or mortgage. However, 
households in public housing who were billed only for excess usage were 
prohibited from using this standard. These households were required to 
use actual expenses. The law also required State agencies to prorate 
the standard among separate households who lived together and shared 
heating or cooling expenses.
    Interim regulations implementing the provisions of Pub. L. 97-253 
were issued on November 16, 1982 (47 FR 51551) and made final on June 
21, 1983 (48 FR 28190). (Readers may refer to the preambles of these 
regulations for a full explanation of the changes.) The rules 
implemented the prohibition against use of a heating or cooling 
standard by households in public housing. In addition, the rules 
provided that renters in private housing could receive the heating or 
cooling standard only if the amount of heating or cooling usage was 
established through a separate meter. Households not entitled to the 
heating or cooling standard could claim actual costs.
    Legislation governing the Low-Income Home Energy Assistance (LIHEA) 
program also has had an effect on use of the heating or cooling 
standard by households receiving LIHEA and further complicated this 
policy. The Low-Income Home Energy Assistance Act of 1981, Title XXVI, 
Pub. L. 97-35, enacted August 13, 1981, (42 U.S.C. 8621, et seq.) 
required State agencies to exclude LIHEA payments from income in 
assistance programs, including the Food Stamp Program. Under the food 
stamp rules, households that received direct LIHEA payments and still 
incurred a heating or cooling expense in excess of the LIHEA payments 
were allowed use of the heating or cooling standard. However, 
households that received LIHEA assistance in the form of vendor 
payments made to the energy provider were not entitled to the heating 
or cooling standard. Section 273.10(d)(1)(i) provided that any expense 
covered by an excluded reimbursement or vendor payment was not 
deductible. As early as 1981, lawsuits were filed challenging the 
Department's position on this issue. (See Schmeige v. USDA, 693 F.2d 55 
(8th Cir. 1982), Idaho v. Block, 784 F.2d 895 (9th Cir. 1986); and 
Seban v. Block, 626 F. Supp. 545 (S.D. Ind. 1985)).
    The Food Security Act of 1985, Pub. L. 99-198 (December 23, 1985) 
amended the Food Stamp Act to provide that households which incurred 
out-of-pocket heating or cooling expenses over and above their LIHEA or 
similar energy assistance payments were entitled to receive a standard 
allowance for heating or cooling costs. In the context of entitlement 
to a heating or cooling standard, out-of-pocket expenses are those that 
exceed any energy assistance payments made to or on behalf of the 
household. The law allowed State agencies to develop two standard 
allowances including heating or cooling expenses: One standard for 
households that did not receive indirect energy assistance payments and 
a second standard for households that received indirect payments and 
incurred out-of-pocket heating or cooling expenses. (The preamble to 
regulations published May 21, 1986, 51 FR 18744, 18746, contains a 
complete explanation of the provisions.)
    The amendments to the Food Stamp Act made by the Food Security Act 
of 1985 were nullified by the Human Services Reauthorization Act of 
1986, Pub. L. 99-425 (September 30, 1986), which included a provision 
affecting the treatment of LIHEA payments in calculating an excess 
shelter expense deduction. Section 504(e) of that law provided that 
LIHEA payments must be treated consistently regardless of how the 
payments are distributed to the household and that the full amount of 
the payments was to be deemed expended by the household for heating or 
cooling expenses.
    A final rule published February 23, 1987 (52 FR 5434) amended 7 CFR 
273.9(d)(6) and 7 CFR 273.10(d)(1)(i) to require State agencies to 
consider energy expenses covered by LIHEA payments made to the energy 
supplier on behalf of the household (indirect payments) as deductible 
shelter expenses. State agencies were required to consider all 
households receiving LIHEA as eligible to claim the heating or cooling 
standard whether or not the household had any out-of-pocket expense. 
The rule eliminated a State agency's option to use a separate heating 
or cooling standard allowance for those households which received 
indirect LIHEA payments.
    State agencies have indicated that the legislative conflict between 
the desire to avoid reducing a household's food stamp allotment when it 
receives energy assistance and the principle that the heating or 
cooling standard should be allowed only when a household actually 
incurs an out-of-pocket heating or cooling expense has resulted in 
regulations that are error-prone and difficult to administer. Numerous 
policy memoranda and clarifications have been issued to assist State 
agencies in determining the circumstances under which a household is 
entitled to a heating or cooling standard. However, State agencies 
continue to raise questions concerning use of the standard.
    Within the constraints of the Food Stamp Act and legislation 
governing the LIHEA program, we are proposing to revise 7 CFR 
273.9(d)(6) to assist State agencies in using a heating or cooling 
standard and to provide greater flexibility in developing other 
standards. Under this proposal, provisions relating to standard utility 
allowances would be organized into the following areas: (a) Developing 
and updating standard utility allowances, (b) entitlement to a heating 
or cooling standard, (c) household option, and (d) sharing utility 
costs. We are also proposing to add the last sentence of current 7 CFR 
273.9(d)(6)(i) regarding allowable cooling costs to the list of 
allowable utility costs in 7 CFR 273.9(d)(5)(ii)(C) so that all 
allowable utility costs are listed in one paragraph. The proposed 
changes are discussed below.
    a. Developing and updating standard utility allowances. Current 
regulations at 7 CFR 273.9(d)(6)(i), (iii), (iv), (v), and (vi) set 
forth the requirements for developing standard utility allowances. They 
allow State agencies to use seasonal standards; annual standards that 
do not have to be adjusted seasonally; separate standards for each 
utility expense; or single utility standards that include the cost of 
heating or cooking fuel, cooling, electricity, water, sewerage, garbage 
or trash collection, and the basic service fee for one telephone.
    In an effort to ease confusion and clarify the rules regarding the 
establishment of utility standards, we are proposing to consolidate the 
current rules into a single, revised paragraph, 7 CFR 273.9(d)(6)(i). 
At the same time, we are proposing several changes in existing policy. 
The changes in policy are described below.
    Several State agencies have requested and have been granted waivers 
to use a combined standard for all nonheating or noncooling expenses. 
As justification for their waiver requests, State agencies cite 
difficulty in obtaining verification for utility expenses and, 
consequently, increased errors relating to shelter costs when 
certifying households. To provide greater State agency flexibility 
without the need for waivers and to reduce the error-prone use of 
actual utility expenses, we are proposing in 7 CFR 273.9(d)(6)(i) to 
allow State agencies to develop standard utility allowances for 
individual utilities and a combination of utilities. As provided in 
current regulations, the allowances may be seasonal or annualized to 
include costs for all seasons and may be varied by household size or 
geographic location. Although the proposal for a combined standard is 
not as broad as some standards currently in use, we believe it would 
provide some additional flexibility to State agencies and would reduce 
the number of cases in which workers must verify actual expenses 
without greatly increasing Program costs.
    As provided in current 7 CFR 273.9(d)(6)(i) and under our proposal, 
State agencies would not be permitted to develop a separate standard or 
decrease the heating or cooling standard for households that receive 
LIHEA payments. However, a State agency would be able to develop and 
use a separate heating/cooling standard for households that receive 
energy assistance other than energy assistance provided under the Low-
Income Home Energy Assistance Act of 1981. In developing other standard 
utility allowances, State agencies would be required to include only 
the allowable costs identified in 7 CFR 273.9(d)(5)(ii)(C). No 
additional costs could be added.
    Therefore, under the proposed revision of 7 CFR 273.9(d)(6)(i), 
State agencies would be allowed to develop the following standards: (a) 
A separate standard for each type of utility expense; (b) a standard 
that includes heating or cooling costs; (c) a telephone standard; and 
(d) a combined standard that includes electricity, water, sewerage, and 
garbage or trash collection and is available only to households that 
incur the cost of electricity and either water or sewerage. State 
agencies would be allowed to add the telephone standard to a separate 
standard for electricity, for example, for households that incur both 
expenses. The telephone standard could also be added to the combined 
standard to allow use of a standard for households that incur costs for 
electricity, sewerage or water, and telephone.
    State agencies could use the heating or cooling standard for 
households that incur a heating or cooling cost and an individual 
standard for households that incur an expense for only one utility, 
such as electricity. Because State agencies may develop a variety of 
standards, the proposed rule specifies that no household shall receive 
more than one standard for the same utility expense. For example, if 
the State agency's combined standard includes the expense of a basic 
telephone, a household that receives the combined standard would not 
also be entitled to a separate telephone standard. Households whose 
only utility expense is for a telephone would be entitled to the 
telephone standard only.
    The proposal would require State agencies that develop new standard 
utility allowances to use FCS-approved methodologies. The State agency 
would be required to review the standards annually and submit revised 
amounts to FCS for approval. State agencies would be required to submit 
methodologies used in developing and updating standards to FCS every 3 
years. They would also be required to submit the methodologies when 
they are revised or upon a request from FCS. We are requiring State 
agencies to submit methodologies every 3 years so that we will be able 
to monitor State agency development and use of standards.
    b. Entitlement to a heating or cooling standard. Another complex 
and confusing area of policy involving standard utility allowances is 
determining who is entitled to a standard that includes heating or 
cooling costs. We are proposing in revised Sec. 273.9(d)(6)(ii) to 
clarify and simplify these rules. In doing so, we are attempting to 
eliminate inequities that exist in the application of current policy.
    Current regulations at 7 CFR 273.9(d)(6)(ii) provide that a heating 
or cooling standard shall be made available only to households that 
incur out-of-pocket heating and cooling costs separately from their 
rent or mortgage and to households that receive LIHEA. Renters must be 
billed on a monthly basis by their landlords for actual usage as 
determined through individual metering to be entitled to use the 
standard. Recipients of indirect energy assistance payments other than 
LIHEA must incur expenses in excess of the payments during the 
certification period to qualify for the heating or cooling standard. 
Households in public or private housing with a central meter who are 
billed only for excess usage are not permitted to use the standard. A 
household not entitled to the standard can claim actual expenses.
    As indicated above, provisions of interim regulations published 
November 16, 1982 (47 FR 51551) and finalized June 21, 1988 (48 FR 
28190) limited use of the heating or cooling standard by households in 
public or private housing to those households whose costs could be 
verified by separate metering. Previously, households in public or 
private housing who could verify that they incurred heating or cooling 
costs separately from their rent were entitled to use the heating or 
cooling standard. Although these households were no longer entitled to 
a heating or cooling standard under food stamp rules, they were 
entitled to the heating or cooling standard if they received LIHEA. 
Therefore, State agencies had to determine which households would or 
would not receive LIHEA before food stamp eligibility and benefits 
could be determined. This presented a problem for State agencies, 
particularly when there was no easy method for exchanging information 
with the LIHEA agency. Although this policy has been in effect for some 
time now, State agencies still experience difficulty in anticipating 
entitlement to a heating or cooling standard when a household is 
entitled solely because of receipt of LIHEA payments.
    Our first proposed change to the rules governing the use of a 
heating or cooling standard is to provide direct entitlement to a 
standard by households in private housing who have heating or cooling 
costs apart from or in addition to their rent. Under the proposal, 
these households would be entitled to use the heating or cooling 
standard even if their actual utility usage is not determined by 
separate metering.
    The amount of the expense could be determined and verified by means 
other than separate metering, such as a statement from the landlord. 
If, in addition to rent, the landlord charges a flat amount for 
utilities each month which includes the cost of heating or cooling, the 
household would be entitled to the heating or cooling standard. 
Regulations at 7 CFR 273.2(f)(1)(iii) do not require State agencies to 
verify entitlement to a standard allowance. However, entitlement to a 
standard may be verified if it is questionable, as provided in 7 CFR 
273.2(f)(2)(i) or under 7 CFR 273.2(f)(3) as a State agency option. The 
proposed rule retains the statutory prohibition against use of the 
heating or cooling standard by households in public housing.
    This proposed change would extend use of the standard to households 
that live separately but share a utility meter. Under current policy, 
if two households live separately but have one meter, the households 
are prohibited from sharing the standard, and the State agency cannot 
grant the standard to both households even though both incur heating or 
cooling costs. Under the proposed change, the State agency would be 
required to grant the full heating or cooling standard to both 
households if both incur or anticipate incurring out-of-pocket heating 
or cooling expenses separately from their rent or receive or anticipate 
receiving LIHEA.
    A second proposed change in the standard utility allowance rules 
stems from numerous policy questions that have been raised regarding 
when and how often a household has to incur an expense in order to be 
eligible for an annualized heating or cooling standard. As indicated 
above, State agencies currently may choose between seasonal heating or 
cooling standards and an annualized standard that includes year-round 
heating and cooling costs. State agencies have complained that 
regulations and policy regarding use of an annualized standard are 
confusing and difficult to administer. We are proposing in this rule to 
simplify the regulations for determining when a household is entitled 
to an annualized standard utility allowance that includes heating or 
cooling costs.
    Annualized standards represent the average monthly heating and 
cooling costs for the entire year. This means that in some months 
during the year, and perhaps during the certification period, the 
household may not have any heating or cooling costs. For example, a 
household that previously had no heating or cooling costs applies in 
June and does not anticipate incurring any heating or cooling costs 
during the summer months. However, the household will incur heating 
costs in the fall. Regulations at 7 CFR 273.10(d)(4) provide that the 
State agency shall calculate a household's expenses based on the 
expenses the household expects to be billed for during the 
certification period. Therefore, if the household above is certified 
for three summer months and incurs no heating or cooling costs, the 
household is not entitled to an annualized standard that includes 
heating costs. If the household is certified for six months and 
anticipates incurring heating costs in the fall, however, it is 
entitled to the heating standard. State agencies have complained that 
this policy is difficult to administer and can result in inequities.
    To reduce the problems associated with determining when a household 
is entitled to an annualized heating or cooling standard, we are 
proposing in this rule that a household that currently incurs or 
expects to incur out-of-pocket heating or cooling costs during the next 
heating or cooling season (except a household in public housing with a 
central meter where the household is billed only for excess usage) is 
entitled to an annualized heating or cooling standard regardless of 
when the certification period begins or ends.
    This rule further proposes that the household shall continue to be 
entitled to the standard until it no longer expects to incur heating or 
cooling costs during the next heating or cooling season. The State 
agency would be required to reexamine a household's entitlement to the 
heating or cooling standard at recertification, when the household 
moves, or when the household voluntarily reports a change affecting 
entitlement to the standard.
    Under this proposal, a household with no heating or cooling costs 
which is certified for three summer months and which expects to be 
billed for heating costs in the fall would be entitled to a heating or 
cooling standard at the time of certification. Also, a household that 
incurred no heating or cooling expenses in the past which moves to a 
living arrangement where it will incur heating costs in the next 
heating season would be allowed the annualized standard from the time 
of the move. If a State agency uses seasonal standards, households 
would be entitled to the appropriate seasonal standard if they incur or 
expect to incur a qualifying expense (or receive or expect to receive a 
LIHEA payment) during the season covered by the standard.
    We believe this proposal is more equitable and easier to administer 
than current policy. We would appreciate specific comments supporting 
the proposal or pointing out any problems with the proposed change.
    Although food stamp households are categorically eligible for 
LIHEA, not all food stamp households receive the assistance, either 
because they do not apply for it or because LIHEA funds run out before 
all eligible households can be served. This makes it extremely 
difficult for State agencies to know in advance whether or not a 
household will receive LIHEA and be entitled to the standard. To grant 
the standard beginning with the month the household reports receipt of 
LIHEA would not meet the intent of the LIHEA legislation. Therefore, we 
are also proposing in revised Sec. 273.9(d)(6)(ii) that the State 
agency shall allow a heating or cooling standard to households that 
receive or anticipate receiving LIHEA in the next heating or cooling 
season. These households shall continue to be entitled to the standard 
until they no longer receive or anticipate receiving LIHEA in the next 
heating or cooling season. The State agency would consult with the 
household concerning the household's intention to apply for LIHEA, 
determine whether or not the household received LIHEA for the previous 
season at the same address, and contact the LIHEA agency if necessary 
to determine the availability of funds and the likelihood that the 
household will receive energy assistance. The case worker would 
document the case file to support the decision to allow or deny use of 
the standard.
    Current regulations at 7 CFR 273.9(d)(6)(ii)(C) require that 
households incur recurring costs for heating or cooling in order to 
qualify for a heating or cooling standard. The regulations are 
confusing in that they specify that the household must be billed 
regularly, but, if the household is not billed regularly, it may use 
the standard between billing periods if it is otherwise eligible to use 
the standard. Under this proposed revision, the regulatory provisions 
for billing would not be needed. Entitlement to the heating or cooling 
standard would be based on anticipated expenses. Most households that 
are responsible for paying heating or cooling expenses have these 
expenses on a recurring basis. Therefore, we are proposing to remove 
the provisions regarding recurring costs from the regulations. We are 
also proposing to remove the provisions in 7 CFR 273.9(d)(6)(ii)(C) and 
7 CFR 273.10(d)(6) regarding households that incur out-of-pocket 
expenses for heating or cooling in excess of non-LIHEA energy 
assistance. These provisions would also be unnecessary under the 
proposed revision of the regulations. Any household that receives LIHEA 
or incurs an out-of-pocket expense for heating or cooling (except a 
household in public housing billed only for excess usage) would be 
entitled to an annualized heating or cooling standard.
    We are also proposing a conforming amendment to 7 CFR 273.10(d)(3) 
to provide that standard utility allowances shall be allowed in 
accordance with 7 CFR 273.9(d)(6). This change is necessary because the 
provisions allowing the averaging of fluctuating expenses and the 
determination of entitlement to an annualized heating or cooling 
standard based upon anticipated heating or cooling costs are exceptions 
to the provisions regarding billed expenses in 7 CFR 273.10(d)(2) and 
anticipating expenses in 7 CFR 273.10(d)(4).
    c. Household option. Current regulations at 7 CFR 273.9(d)(6)(vii) 
require State agencies to advise households at the time of 
certification that, except for the telephone allowance, they may deduct 
their actual verified utility costs or the standard allowance 
throughout the certification period. The State agency is also required 
to advise households that they may switch between the use of actual 
utility costs and the standard at the time of recertification and one 
additional time during each twelve-month period.
    State agencies have pointed out that households may move from one 
residence to another more frequently than once a year. Current policy 
is that the household's eligibility for the heating or cooling standard 
must be redetermined at the time of the move. We have granted waivers 
to several State agencies to allow households to choose between actual 
expenses or the standard when the household moves without having the 
choice count as a ``switch.''
    This rule proposes to include the provisions of current 7 CFR 
273.9(d)(6)(vii) regarding the household option to use a standard or 
actual costs in revised Sec. 273.9(d)(6)(iii). The proposed rule also 
adds a provision requiring State agencies to give households that move 
the option of actual expenses or a standard utility allowance based on 
circumstances at the new address. When a household reports a move, it 
would be the State agency's responsibility to redetermine the 
household's entitlement to a standard and give the household the 
opportunity to choose between actual costs and the standard, if the 
household is entitled to the standard. Households that report a move 
would be granted the standard on the same basis as applicants. If the 
household anticipates that it will receive LIHEA or incur out-of-pocket 
heating or cooling expenses during the next heating or cooling season 
at the new address, it would be allowed use of the standard. The 
household's choice of a standard or actual costs when it moves would 
not be considered a switch.
    Current regulations at 7 CFR 273.9(d)(6)(iii)(C) provide that the 
State agency may mandate use of the telephone allowance even if actual 
telephone costs are higher. This provision was included in the 
regulations because of the concern of State agencies that use of actual 
telephone costs would be extremely error-prone. We believe that use of 
an adequate telephone standard increases the administrative efficiency 
of determining a household's excess shelter expense without any 
significant adverse effect on households. Therefore, we are proposing 
to retain the provision of current 7 CFR 273.9(d)(6)(v)(C) concerning 
the telephone allowance and incorporate it in revised 
Sec. 273.9(d)(6)(iii).
    d. Prorating standard utility allowances. Under section 5(e) of the 
Food Stamp Act, State agencies are required to prorate a heating or 
cooling standard among households that live together and share the 
heating or cooling expense. Current regulations at 7 CFR 
273.9(d)(6)(viii) require State agencies to prorate a standard 
allowance among households that live together and share utility 
expenses. It is not clear in the regulations whether proration is 
limited to the heating or cooling standard or whether other standards, 
such as a telephone standard, must also be prorated among the 
households contributing to the payment of the utility cost. Questions 
have arisen concerning proration of a heating or cooling standard when 
one household pays for heat, for example, and another household pays 
for the water. We believe it is equitable to prorate any standard among 
the households sharing the expense included in the standard.
    The current provision indicates that if the State agency is unable 
to accurately determine the pro rata share of utility costs paid by the 
parties, the State agency may use the actual utility costs paid by each 
household. The regulations provide that under no circumstances shall 
the total amount of utility costs used to determine the amount of the 
deduction exceed the total amount of actual utility costs for the 
residence.
    Under this proposed rule, households would be able to share a 
standard or claim actual verified costs. They would not be allowed to 
use a combination of these methods in claiming a deduction for utility 
expenses. That is, State agencies could not allow one household to 
claim a share of the utility standard and allow another household 
sharing the expense to claim actual costs. We believe that allowing a 
combination of actual expenses and a share of the standard is 
burdensome on State agencies.
    Under this proposal, the total allowable deduction for the 
residence would not exceed actual costs or one standard allowance. If 
one household pays all the utility expenses, that household would be 
entitled to the applicable standard or could claim actual costs. The 
household that did not pay any utility costs would not be able to claim 
any actual utility costs or any part of a standard. If one household 
pays for heat and the other household pays another expense, such as 
water, a standard that includes the costs of heating and water would be 
prorated between the households according to a method established by 
the State agency.
    We propose to provide in revised Sec. 273.9(d)(6)(iv) of this rule 
that the State agency shall prorate any utility standard among all 
parties incurring an expense covered by the standard or allow actual 
costs incurred by each party. The State agency would be able to 
determine the proration method if a standard is prorated.

Corrections

    We are taking this opportunity to correct the reference in the 
first sentence of 7 CFR 273.12(a)(1)(i) to the joint processing 
regulations. The correct citation is 7 CFR 273.2(j)(3).

Implementation

    In accordance with the requirements of section 13971(b)(6) of Pub. 
L. 103-66, this rule provides that the increase in the excess shelter 
expense deduction to $231 in the 48 contiguous States and the District 
of Columbia ($402 in Alaska, $330 in Hawaii, $280 in Guam, and $171 in 
the Virgin Islands) will be effective and must be implemented on July 
1, 1994; that the increase to $247 in the 48 contiguous States and the 
District of Columbia ($249 in Alaska, $353 in Hawaii, $300 in Guam, and 
$182 in the Virgin Islands) will be effective and must be implemented 
on October 1, 1995; and that removal of the excess shelter deduction 
limit will be effective and must be implemented on January 1, 1997. The 
changes in provisions for the homeless shelter estimate in 7 CFR 
273.9(d)(5)(i) will be effective July 1, 1994. State agencies are 
required to adjust all cases on January 1, 1997 to reflect the 
deduction for all allowable excess shelter expenses. Restored benefits 
must be provided to all households whose cases are not adjusted on the 
required implementation date. Variances resulting from implementation 
of the final rule would be excluded from quality control consideration 
for 120 days from the required implementation date in accordance with 
section 13951 of Pub. L. 103-66.
    We are proposing that the changes in requirements for standard 
utility allowances made by this rule be effective and implemented 120 
days after publication of the final rule. The affected regulatory 
sections are: 7 CFR 273.9(d)(5)(ii)(C), 273.9(d)(6), 273.10(d)(3), 
273.10(d)(6), and 273.12(a)(1)(i). State agencies would be required to 
adjust the cases of ongoing households at the next recertification, at 
household request, or when the case is next reviewed, whichever comes 
first. Variances resulting from implementation of the provisions of the 
final rule shall be excluded from error analysis for 120 days from the 
required implementation date.

List of Subjects in 7 CFR Part 273

    Administrative practice and procedure, Aliens, Claims, Food stamps, 
Fraud, Grant programs-social programs, Penalties, Records, Reporting 
and recordkeeping requirements, Social security, Students.
    Accordingly, 7 CFR Part 273 is proposed to be amended as follows:

    1. The authority citation for Part 273 continues to read as 
follows:

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

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

    2. In Sec. 273.9:
    a. the sixth and seventh sentences of paragraph (d)(5)(i) are 
removed, and one new sentence is added in its place;
    b. paragraph (d)(5)(ii)(C) and paragraph (d)(6) are revised; and
    c. the fourth sentence of paragraph (d)(8)(i) is amended by 
removing the word ``thereafter,'' and adding the words ``thereafter 
through October 1, 1993,'' in its place and by adding three sentences 
at the end of the paragraph.
    The additions and revision read as follows:


Sec. 273.9  Income and deductions.

* * * * *
    (d) Income deductions. * * *
    (5) Shelter costs.
    (i) Homeless households. * * * The Department will revise the 
homeless shelter expense estimate each October 1 to reflect changes in 
the shelter, fuel, and utilities components of housing costs in the 
CPI-U for the 12 months ending the preceding June 30 and will notify 
State agencies of the adjusted amount. * * *
    (ii) Household shelter deduction. P* * *
    (C) The cost of heating and cooking fuel, cooling (verifiable 
expenses relating to the operation of air conditioning systems or room 
air conditioners), electricity, water, sewerage, garbage and trash 
collection, the basic service fee for one telephone (including tax on 
the basic fee), and fees charged by the utility provider for initial 
installation of the utility. One-time deposits shall not be included as 
shelter costs.
* * * * *
    (6) Standard utility allowances--(i) Developing and updating 
standard utility allowances. A State agency may develop the following 
standard utility allowances (standards) to be used in place of actual 
costs in determining a household's excess shelter deduction: a separate 
standard for each type of utility expense; a single standard for all 
utilities that includes heating or cooling costs; a telephone standard; 
and a combined standard that includes electricity, water, sewerage, and 
garbage or trash collection that is available only to households that 
incur the costs of electricity and either water or sewerage. The State 
agency shall submit proposed standards to FCS for approval. The State 
agency shall update the standards annually and submit revised amounts 
to FCS for approval. State agencies shall submit methodologies used in 
developing and updating standards to FCS for review every 3 years, when 
there is a change in the methodology, and upon a request from FCS. 
State agencies may use a heating or cooling standard, a combined 
standard, and individual standards. However, they shall not allow 
households the use of two standards that include the same expense. The 
State agency may elect to use seasonal standards that include heating 
or cooling costs or an annual standard that does not have to be 
adjusted seasonally. The State agency may vary the allowance by factors 
such as household size or geographical area. Only utility costs 
identified in paragraph (d)(5)(ii) of this section shall be used in 
developing standards. The State agency shall not use a reduced standard 
for households that receive assistance under the Low-Income Home Energy 
Assistance Act (LIHEAA) of 1981. Households shall be allowed to use 
standards that include heating or cooling costs in accordance with 
paragraphs (d)(6)(ii), (d)(6)(iii) and (d)(6)(iv) of this section. 
Households whose only utility expense is for a telephone are entitled 
to only the separate telephone standard if one has been developed by 
the State agency.
    (ii) Entitlement to a heating or cooling standard. A standard with 
a heating or cooling component shall be made available to households 
that incur heating or cooling expenses separately from their rent or 
mortgage or expect to incur such expenses in the next heating or 
cooling season, except households in public housing units which have 
central utility meters and charge households only for excess utility 
costs. Households that receive assistance under the LIHEAA but do not 
incur out-of-pocket heating or cooling expenses are also entitled to a 
standard that includes a heating or cooling component on the same basis 
as households that incur such costs. Households that receive other 
indirect energy assistance are entitled to a standard that includes 
heating or cooling only if they incur out-of-pocket expenses for 
heating or cooling costs. Entitlement to an annualized heating or 
cooling standard shall continue until the household no longer incurs or 
expects to incur a heating or cooling expense or no longer receives or 
expects to receive a LIHEAA payment during the next heating or cooling 
season. If the State agency elects to use seasonal standards, the State 
agency shall ensure that a standard is provided only to households that 
incur or expect to incur an expense that would entitle the household to 
the standard or receive or expect to receive a LIHEAA payment during 
the season covered by the standard.
    (iii) Household option. The State agency shall advise a household 
at the time of certification and whenever it reports a move that it may 
deduct verified actual utility costs (for any allowable expense 
identified in paragraph (d)(5)(ii)(C) of this section) it incurs rather 
than the standard (except for the telephone standard) throughout the 
certification period if actual expenses are more than the standard or 
the household is not eligible for the standard. The State agency may 
require use of the telephone standard for the cost of basic telephone 
service even if actual costs are higher. The State agency shall also 
inform the household that it may switch between use of actual utility 
costs and the standard at recertification and one additional time 
during each twelve-month period.
    (iv) Sharing utility expenses. If a household lives with and shares 
utility expenses with another individual, another household, or both, 
the State agency shall prorate a standard among the household and the 
other individual, household, or both, or allow the actual costs of each 
household. The State agency shall determine the proration method if a 
standard is used.
* * * * *
    (8) Adjustment of shelter deduction. (i) * * * Effective July 1, 
1994 through September 30, 1995, the excess shelter expense deduction 
shall not exceed $231 a month in the 48 contiguous States and the 
District of Columbia, $402 in Alaska, $330 in Hawaii, $280 in Guam, and 
$171 in the Virgin Islands. Effective October 1, 1995 through December 
31, 1996, the excess shelter expense deduction shall not exceed $247 a 
month in the 48 contiguous States and the District of Columbia, $429 in 
Alaska, $353 in Hawaii, $300 in Guam, and $182 in the Virgin Islands. 
Effective January 1, 1997, the limit on the excess shelter expense 
deduction is removed.
* * * * *
    3. In Sec. 273.10:
    a. paragraph (d)(3) is amended by adding a new sentence after the 
first sentence.
    b. paragraph (d)(6) is removed, and paragraph (d)(7) is 
redesignated as paragraph (d)(6).
    The addition reads as follows:


Sec. 273.10  Determining household eligibility and benefit levels.

* * * * *
    (d) Determining deductions. * * *
    (3) Averaging expenses. * * * Households shall be allowed to use 
annualized standard utility allowances in accordance with 
Sec. 273.9(d)(6). * * *
* * * * *


Sec. 273.12  [Amended]

    4. In 273.12, the first sentence of paragraph (a)(1)(i) is amended 
by removing the citation ``Sec. 273.2(j)(2)'' and adding in its place 
the citation ``Sec. 273.2(j)(3)''.

    Dated: November 15, 1994.
Ellen Haas,
Under Secretary for Food, Nutrition, and Consumer Services.
[FR Doc. 94-28830 Filed 11-21-94; 8:45 am]
BILLING CODE 3410-30-P