[Federal Register Volume 62, Number 108 (Thursday, June 5, 1997)]
[Rules and Regulations]
[Pages 30763-30767]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-14608]


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LEGAL SERVICES CORPORATION

45 CFR Part 1639


Welfare Reform

AGENCY: Legal Services Corporation.

ACTION: Final rule.

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SUMMARY: This final rule implements a provision in the Legal Services 
Corporation's (``Corporation'' or ``LSC'') FY 1996 appropriations act 
which restricts recipients from initiating legal representation or 
challenging or participating in litigation, lobbying or rulemaking 
involving an effort to reform a Federal or State welfare system. The 
rule also clarifies when recipients may engage in representation on 
behalf of an individual client seeking specific relief from a welfare 
agency and under what circumstances recipients may use funds from 
sources other than the Corporation to comment on public rulemaking or 
respond to requests from legislative or administrative officials 
involving a reform of a Federal or State welfare system.

EFFECTIVE DATE: This final rule is effective on July 7, 1997.

FOR FURTHER INFORMATION CONTACT: Office of the General Counsel, (202) 
336-8817.

SUPPLEMENTARY INFORMATION: On May 19, 1996, the Operations and 
Regulations Committee (``Committee'') of the LSC Board of Directors 
(``Board'') requested the LSC staff to prepare an interim rule to 
implement section 504(a)(16) of the Corporation's FY 1996 
appropriations act, Pub. L. 104-134, 110 Stat. 1321 (1996), which 
restricts recipients of LSC funds from initiating legal representation 
or participating in any other way in efforts to reform a Federal or 
State welfare system. The Committee held hearings on July 10 and 19, 
1996, and the Board adopted an interim rule on July 20 which was 
published in the Federal Register on August 29, 1996, with a request 
for comments.
    Subsequent to the adoption of the interim rule by the Board, 
Congress enacted and the President signed the Personal Responsibility 
and Work Opportunity Reconciliation Act of 1996, 110 Stat. 2105 (1996) 
(``Personal Responsibility Act''). After receiving four timely comments 
on the interim rule, the Committee held public hearings on the rule on 
December 13, 1996, but, because of the enactment of the Personal 
Responsibility Act, did not adopt a final rule. The Committee met again 
on March 7, 1997, and adopted proposed revisions to the definitions in 
the interim rule to include most provisions of the Personal 
Responsibility Act and requested that the proposed revisions be 
published for public comment. See 62 FR 14382 (March 26, 1997). The 
Corporation received seventeen timely comments on the proposed rule, 
including a comment from the Center for Law and Social Policy 
(``CLASP''), submitted on behalf of the Project Advisory Group and the 
National Legal Aid and Defender Association; two from bar associations 
(American Bar Association and the Colorado Bar Association), four from 
State or County agencies, and 10 from legal services grantees. The 
Committee held public hearings on the rule on May 9 and the Board 
adopted this final rule on May 10, 1997.
    The Corporation's FY 1997 appropriations act became effective on 
October 1, 1996, see Pub. L. 104-208, 110 Stat. 3009. It incorporated 
by reference the section 504 restriction on welfare reform included in 
the FY 1996 appropriations. Accordingly, the

[[Page 30764]]

preamble and text of this rule continue to refer to the applicable 
section number of the FY 1996 appropriations act.
    This final rule revises the proposed rule's definitions of 
``Federal or State welfare system'' and ``reform'' by merging the two 
definitions into a new definition of ``an effort to reform a Federal or 
State welfare system.'' This rule retains the proposed rule's exception 
for the Child Support Enforcement provisions in the Personal 
Responsibility Act and retains the proposed rule's inclusion of 
regulations in the definition of ``existing law.''
    A section-by-section discussion of this final rule is provided 
below.

Section 1639.1  Purpose

    The purpose of this rule is to ensure that LSC recipients do not 
initiate litigation or participate in litigation, lobbying or 
rulemaking involving an effort to reform a Federal or State welfare 
system. In addition, the rule clarifies when recipients can engage in 
legal representation of a client seeking specific relief from a welfare 
agency and incorporates section 504(e) of 110 Stat. 1321, which permits 
recipients to use non-LSC funds to comment on public rulemaking or 
respond to requests from legislative or administrative officials.

Section 1639.2  Definitions

    The proposed rule would have revised the definition of ``Federal or 
State welfare system'' to include all provisions of the Personal 
Responsibility Act, except for the Child Support Enforcement provisions 
in Title III. The earlier interim rule had included only Federal and 
State Aid to Families with Dependent Children (``AFDC'') programs under 
Title IV-A of the Social Security Act, 42 U.S.C. 601 et seq., and State 
General Assistance, or similar State means-tested programs for basic 
subsistence, which operate with State funding or under State mandate.
    Most of the comments opposed the expanded reach of the proposed 
definition. The comments stated that the legislative history of the 
Corporation's welfare reform restriction mentioned only the AFDC and 
General Assistance programs. The comments also asserted that certain 
distinctions among the programs included in the Personal Responsibility 
Act take most of the programs therein outside of what is commonly 
understood to be welfare. For example, the comments stated that the 
Social Security Income (``SSI'') provisions of Title II are not 
welfare, because the program is operated by the Social Security 
Administration, which is not a welfare agency. They also said that the 
Food Stamp Program, amended by Title VIII, is not ``welfare,'' because 
it is ``a safety net program'' administered by the United States 
Department of Agriculture and is intended to ensure that low-income 
households, including the working poor, have adequate nutrition. The 
comments also contended that including most of the provisions in the 
Personal Responsibility Act could adversely affect the ability of 
programs to represent clients in the area of public benefits, because 
they would first need to determine which parts of each welfare program 
have undergone welfare reform and which parts have not been revised.
    Most of the comments agreed with the proposed exclusion of the 
Child Support Enforcement provisions from the definition, agreeing with 
the Corporation that the Child Support Enforcement program is a law 
enforcement program, not a welfare program. The comments pointed out 
that the Child Support Enforcement program establishes and enforces 
legal obligations between parents, and the funds collected and 
distributed are private, not public, funds. Moreover, receipt of 
services is not limited to persons on public assistance, but is 
available to anyone who applies.
    However, with one exception, the comments from State or local 
agencies expressed an opposite view. The comments approved of the 
proposed rule's broader definition, but also urged the Corporation to 
include the Child Support Enforcement provisions, arguing that these 
are a critical component of welfare reform, because they are 
intricately linked with the welfare system and are monitored by the 
United States Department of Health and Human Services (``HHS'').
    The Board decided to include all of the provisions of the Personal 
Responsibility Act, except for the Child Support Enforcement provisions 
in Title III, based on its determination that Congress intended the 
Personal Responsibility Act, in large measure, to constitute an effort 
to reform the Federal and State welfare systems. It is true that the 
legislative history of the Corporation's welfare reform restriction 
used examples based on prior AFDC and General Assistance litigation. 
However, the Board did not consider the examples in the legislative 
history of the LSC welfare reform restriction as dispositive. During 
the same time it was considering the welfare reform restriction, 
Congress was working on, and soon thereafter enacted, the Personal 
Responsibility Act, which was characterized by Congress as a sweeping 
reform of a variety of Federal and State welfare systems. In 
summarizing the agreement that became law, the conference report of the 
Personal Responsibility Act provided that:

    The Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996 puts in place the most fundamental reform of welfare 
since the program's inception. * * * It takes the historic step of 
eliminating a Federal entitlement program--Aid to Families with 
Dependent Children--and replacing it with a block grant that 
restores the states' fundamental role in assisting needy families. 
It makes substantial reforms in the Food Stamp Program, cracking 
down on fraud and abuse and applying tough work standards. It 
reforms the Supplemental Security Income (SSI) disability program to 
strengthen eligibility requirements. * * * It makes sweeping reforms 
relating to noncitizens, strengthening the principle that immigrants 
come to America to work, not to collect welfare benefits.

Conf. Rep. No. 725, 104th Cong., 2d Sess. (1996) (emphasis added).

    Except for the arguments made regarding the Child Support 
Enforcement provisions, the Board was unconvinced by most of the 
distinctions set forth in the comments as to why particular titles of 
or programs amended by the Personal Responsibility Act should be exempt 
from the ``welfare reform'' restriction. Neither the text of the 
Personal Responsibility Act nor its legislative history limited 
``welfare reform'' to only Title I. The Board retained the proposed 
rule's exclusion of the Child Support Enforcement provisions in Title 
III because, unlike most of the other programs amended by the Personal 
Responsibility Act, Child Support Enforcement (Title IV-D of the Social 
Security Act) establishes and enforces legal support obligations 
between parents. The support payments collected and distributed are 
private funds, not public funds, and Title IV-D services are available 
to any parent who applies for them, rather than being limited to 
families on public assistance or even those in poverty. Indeed, the 
majority of cases handled and nearly 75 percent of all funds collected 
involve families not on public assistance. Although the Title IV-A 
program contains provisions linking eligibility and benefits for AFDC 
and Food Stamps with cooperation by parents with the Title IV-D agency, 
this connection alone does not transform the Title IV-D program into a 
welfare program.
    Because the Board determined that the Personal Responsibility Act 
constitutes an effort to reform Federal and State welfare systems, the 
Board decided to merge the definitions of ``Federal or State welfare 
system'' and ``reform'' into a new definition of ``an effort to reform 
a Federal or State

[[Page 30765]]

welfare system.'' This more adequately tracks the language in the 
statutory restriction and applies it to current welfare reform 
legislation. The definition still includes State efforts to replace or 
modify key components of their General Assistance programs, because the 
legislative history of the welfare reform restriction identified such 
programs as being within the restriction. The definition also includes 
language which anticipates future reforms. The definition uses the term 
``key components'' of a Federal or State welfare system when referring 
to future efforts to reform a welfare system, because the statute 
references a ``welfare system,'' as distinguished from any particular 
provision of a welfare program. A change to a ``key component'' is 
intended to mean a fundamental restructuring of a welfare program, such 
as the transformation of an entitlement program into a block grant 
program. Finally, several conforming revisions have also been made to 
other provisions of the rule to be consistent with the revised 
definition.
    This rule's final definition of ``existing law'' has been revised 
from the interim rule to clarify three points. ``Existing law'' is used 
in the statutory limitation on the exception to the welfare reform 
restriction. The exception permits recipients to represent individual 
eligible clients to seek specific relief from a welfare agency ``if 
such relief does not involve an effort to amend or otherwise challenge 
existing law in effect on the date of the initiation of the 
representation'' (emphasis added).
    The first clarification made by the definition, which was included 
in the proposed rule, is that ``existing law'' is limited to laws 
enacted to reform a Federal or State welfare system. A broader meaning 
would eviscerate the exception, because the type of law in the 
limitation on the exception would be broader than the type of law in 
the restriction itself. The comments generally approved of this change.
    The second clarification made in the final definition, which was 
also included in the proposed rule, is that ``existing law'' includes 
properly promulgated regulations. Most of the comments disapproved of 
this revision. One comment stated that because ``existing law'' is 
defined to mean law enacted to reform a Federal or State welfare 
system, it should not include regulations, which do not reform existing 
welfare law; rather they implement Federal and State legislative 
efforts that reform welfare law. The comments also gave examples of the 
detrimental effect of including regulations in the definition. For 
example, the comments alleged that including regulations in the 
definition would prevent representation in some cases allowed under the 
exception clause, because the rules of professional responsibility 
preclude an attorney from representing a client if the attorney's other 
obligations are likely to materially restrict avenues of relief that 
would otherwise be available to the client. In essence, the comments 
argued that including regulations in the definition would greatly 
undermine the exception clause, because, when representing clients 
before agencies, legal aid attorneys must often either challenge the 
agency's interpretation of the law or at least lay the foundation for 
such a challenge, should an effort to win benefits for the client under 
the agency's regulations fail.
    The Board decided to retain regulations in the definition of 
``existing law'' largely because the statutory restriction uses the 
term ``existing law'' without qualification. It is beyond cavil that 
properly adopted regulations constitute law. Regulations not only 
implement the express language of statutes, they also fill in the 
statutory gaps and create substantive law. For this reason, Federal and 
State administrative procedure acts require public notice and comment 
before such rules are adopted. The Board also disagreed that the 
inclusion of regulations in the definition eviscerates the exception. 
The exception allows representation to seek relief that is available 
under the existing law, whether statutory or regulatory, but does not 
allow representation that would challenge or amend existing law. The 
comments appear to be opposed not so much to the inclusion of 
regulations as to the limitation clause itself, which prohibits 
representation that would challenge or amend existing law. A point made 
by many comments was that, in order to represent clients properly in 
public benefits cases, an attorney must be able to challenge existing 
law. Although the Corporation is sympathetic to the concerns raised, it 
is not convinced that this definition will lead to the alleged 
consequences. Regardless, the statutory restriction prohibits any 
efforts to reform a Federal or State welfare system or to provide 
representation that would challenge or seek to amend existing ``welfare 
reform'' law and the Corporation believes including regulations within 
the definition is necessary to implement that restriction.
    To clarify that the definition applies to regulations that indeed 
``make law,'' a third revision clarifies that the definition includes 
only regulations ``that have been formally promulgated pursuant to 
public notice and comment procedures.'' This change responds in part to 
the comment from Atlanta Legal Aid, which stated that the legal basis 
of Georgia regulations is unclear, in part because they are not 
formally promulgated. One comment stated that the uncertainty of the 
status of regulations and whether they implement welfare reform 
legislation or un-reformed welfare law would cause an enforcement 
problem. Auditors would not know if certain representation was improper 
unless they are fully versed in a particular jurisdiction's welfare law 
and in the legal status of any applicable regulations. The proposed 
rule used the qualifying clause ``having the force and effect of law,'' 
but because comments found such language ambiguous, the Board replaced 
it with language clarifying that ``existing law'' includes only 
regulations that are promulgated pursuant to public notice and comment 
procedures. This change should preclude any confusion auditors might 
have experienced over the proposed rule's language.
    In summary, the definition of ``existing law'' in this final rule 
does not include regulations that have not been formally promulgated 
under notice and comment procedures or that have not been issued to 
implement reform of a Federal or State welfare system.

Section 1639.3  Prohibition

    This section generally prohibits litigation, lobbying and 
rulemaking activities involving an effort to reform a Federal or State 
welfare system. The prohibition includes litigation challenging laws or 
regulations enacted as part of a reform of a Federal or State welfare 
system; participating in rulemaking involving proposals that are being 
considered as part of a reform of a Federal or State welfare system; 
and lobbying before legislative or administrative bodies involving 
pending or proposed legislation that is part of a reform of a Federal 
or State welfare system.

Section 1639.4  Permissible Representation of Eligible Clients

    This section implements the statutory exception in section 
504(a)(16) which permits a recipient to represent ``an individual 
eligible client who is seeking specific relief from a welfare agency, 
if such relief does not involve an effort to amend or otherwise 
challenge existing law in effect on the date of the initiation of the 
representation.'' Pursuant to this provision, an action to enforce 
existing

[[Page 30766]]

law would not be proscribed. Thus, for example, when representing an 
eligible client seeking individual relief from the actions of an agency 
taken under a welfare reform law or regulation, a recipient may 
challenge an agency policy on the basis that it violates an agency 
regulation or State or Federal law or challenge the application of an 
agency's regulation, or the law on which it is based, to the individual 
seeking relief.

Section 1639.5  Exceptions for Public Rulemaking and Responding to 
Requests With Non-LSC Funds

    The 1996 appropriations act includes a provision, section 504(e) of 
110 Stat. 1321, which provides that nothing in section 504

shall be construed to prohibit a recipient from using funds derived 
from a source other than the Legal Services Corporation to comment 
on public rulemaking or to respond to a written request for 
information or testimony from a Federal, State or local agency, 
legislative body or committee, or a member of such an agency, body 
or committee, so long as the response is made only to the parties 
that make the request and the recipient does not arrange for the 
request to be made.

This exception applies to the prohibition on welfare reform lobbying 
and rulemaking in section 504(a)(16). Therefore, recipients may use 
non-LSC funds to make oral or written comments in a public rulemaking 
proceeding involving an effort to reform a Federal or State welfare 
system. Recipients may also use non-LSC funds to respond to a written 
request from a government agency or official thereof, elected official, 
legislative body, committee or member thereof, made to the employee or 
to a recipient to testify or provide information regarding an effort to 
reform a State or Federal welfare system, provided that the response by 
the recipient is made only to the party making the request and the 
recipient does not arrange for the request to be made.

Section 1639.6  Recipient Policies and Procedures

    In order to ensure that the recipient's staff is fully aware of the 
restriction on welfare reform activity and to ensure that staff receive 
appropriate guidance, this section requires that recipients adopt 
written policies and procedures to guide its staff in complying with 
this part.

Transition Guidance

    Recipients must take immediate steps to withdraw from pending cases 
that were permitted by the interim regulation but which are now 
prohibited by the final regulation. Such steps should be documented by 
written notice to the client and written pleadings to the courts or 
administrative agencies involved. However, where a court or agency will 
not permit withdrawal in spite of a recipient's best efforts, the 
Corporation will determine on a case-by-case basis whether continued 
representation violates the regulation. During the period in which the 
recipient is seeking alternative counsel or other proper ways to 
conclude its involvement in such representation, it may file such 
motions as are necessary to preserve its client's rights in the matter 
on which representation is being provided.

List of Subjects in 45 CFR Part 1639

    Grant programs, Legal services, Welfare reform.

    For reasons set forth in the preamble, 45 CFR part 1639 is revised 
to read as follows:

PART 1639--WELFARE REFORM

Sec.
1639.1  Purpose.
1639.2  Definitions.
1639.3  Prohibition.
1639.4  Permissible representation of eligible clients.
1639.5  Exceptions for public rulemaking and responding to requests 
with non-LSC funds.
1639.6  Recipient policies and procedures.

    Authority: 42 U.S.C. 2996g(e); Pub. L. 104-208, 110 Stat. 3009; 
Pub. L. 104-134, 110 Stat. 1321.


Sec. 1639.1  Purpose.

    The purpose of this rule is to ensure that LSC recipients do not 
initiate litigation involving, or challenge or participate in, efforts 
to reform a Federal or State welfare system. The rule also clarifies 
when recipients may engage in representation on behalf of an individual 
client seeking specific relief from a welfare agency and under what 
circumstances recipients may use funds from sources other than the 
Corporation to comment on public rulemaking or respond to requests from 
legislative or administrative officials involving a reform of a Federal 
or State welfare system.


Sec. 1639.2  Definitions.

    (a) An effort to reform a Federal or State welfare system includes 
all of the provisions, except for the Child Support Enforcement 
provisions of Title III, of the Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996 (Personal Responsibility Act), 
110 Stat. 2105 (1996), and subsequent legislation enacted by Congress 
or the States to implement, replace or modify key components of the 
provisions of the Personal Responsibility Act or by States to replace 
or modify key components of their General Assistance or similar means-
tested programs conducted by States or by counties with State funding 
or under State mandates.
    (b) Existing law as used in this part means Federal, State or local 
statutory laws or ordinances which are enacted as an effort to reform a 
Federal or State welfare system and regulations issued pursuant thereto 
that have been formally promulgated pursuant to public notice and 
comment procedures.


Sec. 1639.3  Prohibition.

    Except as provided in Secs. 1639.4 and 1639.5, recipients may not 
initiate legal representation, or participate in any other way in 
litigation, lobbying or rulemaking, involving an effort to reform a 
Federal or State welfare system. Prohibited activities include 
participation in:
    (a) Litigation challenging laws or regulations enacted as part of 
an effort to reform a Federal or State welfare system.
    (b) Rulemaking involving proposals that are being considered to 
implement an effort to reform a Federal or State welfare system.
    (c) Lobbying before legislative or administrative bodies undertaken 
directly or through grassroots efforts involving pending or proposed 
legislation that is part of an effort to reform a Federal or State 
welfare system.


Sec. 1639.4  Permissible representation of eligible clients.

    Recipients may represent an individual eligible client who is 
seeking specific relief from a welfare agency, if such relief does not 
involve an effort to amend or otherwise challenge existing law in 
effect on the date of the initiation of the representation.


Sec. 1639.5  Exceptions for public rulemaking and responding to 
requests with non-LSC funds.

    Consistent with the provisions of 45 CFR 1612.6 (a) through (e), 
recipients may use non-LSC funds to comment in a public rulemaking 
proceeding or respond to a written request for information or testimony 
from a Federal, State or local agency, legislative body, or committee, 
or a member thereof, regarding an effort to reform a Federal or State 
welfare system.

[[Page 30767]]

Sec. 1639.6  Recipient policies and procedures.

    Each recipient shall adopt written policies and procedures to guide 
its staff in complying with this part.

    Dated: May 30, 1997.
Victor M. Fortuno,
General Counsel.
[FR Doc. 97-14608 Filed 6-4-97; 8:45 am]
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