[Federal Register Volume 63, Number 184 (Wednesday, September 23, 1998)]
[Proposed Rules]
[Pages 50837-50848]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-25384]



[[Page 50837]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Part 284

RIN 0970-AB65


Methodology for Determining Whether an Increase in a State's 
Child Poverty Rate Is the Result of the TANF Program

AGENCY: Administration for Children and Families, HHS.

ACTION: Proposed rule.

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SUMMARY: The Administration for Children and Families is proposing a 
methodology to determine the child poverty rate in each State. If a 
State experiences an increase in its child poverty rate of 5 percent or 
more as a result of its Temporary Assistance for Needy Families (TANF) 
program, the State must submit and implement a corrective action plan. 
This requirement is a part of the new welfare reform block grant 
program enacted in 1996.

DATES: You must submit comments by November 23, 1998. We will not 
consider comments received after this date in developing the final 
rule.

ADDRESSES: You may mail or hand-deliver comments to the Administration 
for Children and Families, Office of Planning, Research and Evaluation, 
370 L'Enfant Promenade SW, 7th Floor West, Washington, DC 20447. You 
may also transmit comments electronically via the Internet. To transmit 
comments electronically, or download an electronic version of the 
proposed rule, you should access the ACF Welfare Reform Home Page at 
http://www.acf.dhhs.gov/news/welfare and follow the instructions 
provided.

    We will make all comments available for public inspection at the 
Office of Planning, Research and Evaluation, 7th Floor West, 901 D 
Street, SW, Washington, DC 20024, from Monday through Friday between 
the hours of 9 a.m. and 4 p.m. (This is the street address as opposed 
to the mailing address above.)
    We will only accept written comments. In addition, all your 
comments should:
     Be specific;
     Address only issues raised by the proposed rule;
     Where appropriate, propose alternatives;
     Explain reasons for any objections or recommended changes; 
and
     Reference the specific section of the proposed rule that 
you are addressing.
    We will not acknowledge individual comments. However, we will 
review and consider all comments that are germane and received during 
the comment period.

FOR FURTHER INFORMATION, CONTACT: Dennis Poe at 202-401-4053.
    Deaf and hearing-impaired individuals may call the Federal Dual 
Party Relay Service at 1-800-877-8339 between 8 a.m. and 7 p.m. Eastern 
time.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. The Personal Responsibility and Work Opportunity Reconciliation 
Act
II. The Child Poverty Rate Provision
    A. Legislative History
    B. Summary of the Statutory Provisions
III. Regulatory Framework
    A. External Consultation
    B. Related Regulations under Development
    C. Regulatory Reform
IV. Discussion of the NPRM
    A. Issues in the Development of the NPRM
    B. Summary of the Provisions of the Proposed Rule
    C. Section-By-Section Discussion
V. Regulatory Impact Analyses
    A. Executive Order 12866
    B. Regulatory Flexibility Analysis
    C. Paperwork Reduction Act
    D. Unfunded Mandates Reform Act of 1995
    E. Congressional Review

I. The Personal Responsibility and Work Opportunity Reconciliation 
Act

    On August 22, 1996, President Clinton signed ``The Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996''--or 
PRWORA--into law. The first title of this new law, ``Block Grants for 
Temporary Assistance for Needy Families,'' (section 103, Pub. L. 104-
193) established a comprehensive welfare reform program designed to 
change dramatically the nation's welfare system. The new program is 
called Temporary Assistance for Needy Families, or TANF, in recognition 
of its focus on time-limiting assistance and moving recipients into 
work.
    PRWORA repealed the existing welfare program known as Aid to 
Families with Dependent Children (AFDC), which provided cash assistance 
to needy families on an entitlement basis. It also repealed the related 
programs known as the Job Opportunities and Basic Skills Training 
(JOBS) program and Emergency Assistance (EA).
    The new TANF program went into effect on July 1, 1997, except in 
States that elected to submit a complete plan and implement the program 
at an earlier date.
    This landmark welfare reform legislation dramatically affects not 
only needy families, but also intergovernmental relationships. It 
challenges Federal, State, Tribal and local governments to foster 
positive changes in the culture of the welfare system and to take more 
responsibility for program results and outcomes.
    This new legislation also gives States and Tribes the authority to 
use Federal welfare funds ``in any manner that is reasonably calculated 
to accomplish the purpose'' of the new program. It provides them broad 
flexibility to set eligibility rules and decide what benefits are most 
appropriate, and it offers States and Tribes an opportunity to try new, 
far-reaching ideas so they can respond more effectively to the needs of 
families within their own unique environments.

II. The Child Poverty Rate Provision

A. Legislative History

    One of the concerns of Congress in passing PRWORA was potential 
harm to children that might result from the loss of Federal entitlement 
to benefits or the unsuccessful efforts of their caretakers to achieve 
self-sufficiency within the five-year time limit for receipt of 
federally-funded TANF assistance.
    To address this concern, Congress amended the Social Security Act 
to add section 413(i) (42 USC 613(i)). This section requires each State 
to submit an annual statement of the child poverty rate in the State 
and a corrective action plan if the rate exceeds a certain threshold as 
a result of the State's TANF program.
    Section 413(i)(5) directs the Secretary to issue regulations 
establishing a methodology for States to determine the child poverty 
rate and sets out a non-exclusive list of factors the methodology must 
take into account.
    The Balanced Budget Act of 1997 amended section 413(i) to delay the 
due date for the initial report on a State's child poverty rate from 90 
days after enactment to May 31, 1998. It also modified the factors to 
be used in the methodology by making the county-by-county estimates of 
children in poverty, as determined by the Census Bureau, subject to the 
availability of the data.

    (Note: ACF issued a Program Instruction on May 29, 1998, 
clarifying that we, not the State, will send each State the Census 
Bureau estimate of the number of children in poverty and that the 
State need not submit a statement of its child poverty rate to us by 
May 31, 1998, as specified in the statute. We further explained that 
we would be publishing an NPRM to propose a methodology for 
determining whether an increase in the State's child poverty rate is 
the result of the TANF program in the near future. See TANF-ACF-PI-
98-4.)

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B. Summary of the Statutory Provisions

    Section 413(i)(1) of the Social Security Act (the Act) requires the 
chief executive officer of each State to submit annually to the 
Secretary a statement of the child poverty rate in the State. The first 
statement, due May 31, 1998, must report on the child poverty rate at 
the time of enactment of PRWORA, or August 22, 1996.
    Section 413(i)(2) specifies that, in subsequent years, if the child 
poverty rate in a State increases by 5 percent or more from the 
previous year as a result of the State's TANF program, the State shall 
prepare and submit a corrective action plan to the Secretary.
    Section 413(i)(3) provides that the corrective action plan shall 
outline the manner in which the State will reduce the child poverty 
rate in the State and include a description of the actions to be taken 
by the State under the plan.
    Section 413(i)(4) specifies that the State shall implement the 
corrective action plan until the State determines that the child 
poverty rate in the State is less than the lowest child poverty rate on 
the basis of which the State was required to submit the corrective 
action plan.
    Section 413(i)(5) requires the Secretary to establish the 
methodology by which a State would determine the child poverty rate and 
specifies three factors that the Department must take into account in 
developing the methodology: the number of children who receive free or 
reduced-price lunches; the number of Food Stamp households; and, to the 
extent available, the county-by-county estimates of children in poverty 
as determined by the Census Bureau.

III. Regulatory Framework

A. External Consultation

    In the spirit of both regulatory reform and PRWORA, we implemented 
a broad and far-reaching consultation strategy prior to publication of 
the NPRM for the TANF program. This proposed rule was published 
November 20, 1997 (62 FR 62124). We continued our commitment to 
external consultation in developing this NPRM.
    We held two types of external consultations. First, we raised 
issues related to this provision in the general TANF consultation 
meetings with representatives of State and local government; non-
profit, advocacy, and community organizations; foundations; and others. 
Second, we held consultations focused specifically on this provision 
with State groups and technical, statistical, and policy experts. We 
also spoke with representatives from the Federal statistical community, 
including the U.S. Bureau of the Census; the Office of Management and 
Budget; the U.S. Department of Agriculture for the Food Stamp program; 
and numerous representatives from advocacy, public interest, and 
research organizations that focus on child economic well-being.
    The purpose of these discussions was to gain a variety of 
informational perspectives about the potential benefits and pitfalls of 
alternative regulatory approaches. We solicited comments, and we worked 
to ensure that concerns raised during this process were shared with 
both the staff working on individual regulatory issues and key policy 
makers.
    These consultations were very useful in helping us identify key 
issues and evaluate policy options. However, we would like to emphasize 
that we are issuing these regulations as a proposed rule. Thus, all 
interested parties have the opportunity to voice their concerns and to 
react to specific policy proposals. We will review comments we receive 
during the comment period and will take them into consideration before 
issuing a final rule.

B. Related Regulations under Development

    We published the NPRM to address the work, accountability, and data 
collection and reporting provisions of the new State TANF program in 
the Federal Register on November 20, 1997 (62 FR 62124).
    On March 2, 1998, we published in the Federal Register (63 FR 
10264) the NPRM to address the provision in PRWORA entitled Bonus to 
Reward Decrease in Illegitimacy which would reward decreases in out-of-
wedlock childbearing.
    On July 22, 1998, we published an NPRM on the Tribal Work and TANF 
Programs (63 FR 39366). Over the next several months, we expect to 
issue an NPRM on high performance bonus awards and an interim final 
rule on Welfare To Work data collection.

C. Regulatory Reform

    In its latest Document Drafting Handbook the Office of the Federal 
Register supports the efforts of the National Performance Review and 
encourages Federal agencies to produce more reader-friendly 
regulations. In drafting this proposed rule, we have paid close 
attention to this guidance. Individuals who are familiar with prior 
welfare regulations should notice that this package incorporates a 
distinctly different, more readable style.

IV. Discussion of the NPRM

A. Issues in the Development of the NPRM

    The percentage of children in poverty in the United States is a 
frequently used indicator of child well-being and many, both within 
Congress and without, are concerned about the impact of the TANF 
program on children. The child poverty rate in the United States is 
among the highest in the developed world.
    The best source of data on child poverty is the Census Bureau. 
Historically, the Census Bureau has been tracking family and individual 
poverty rates in the United States for approximately three decades. In 
1963-64, Mollie Orshansky of the Social Security Administration 
developed a set of poverty thresholds for families of different sizes 
based on the economy food plan (a minimum-cost diet developed by the 
Department of Agriculture.) Orshansky's thresholds were adopted as a 
quasi-official Federal definition of poverty in 1965 and as the Federal 
Government's official statistical definition of poverty in 1969. (Since 
1969, the thresholds have been updated for price changes, using the 
Consumer Price Index.)
    The most reliable source of data for calculating State level child 
poverty is the Decennial Census. The Bureau of the Census produces an 
annual series of national and State poverty rates during the 
intercensus years based upon data from the March Current Population 
Survey. Unfortunately, the small sample sizes for individual States 
result in significant uncertainty in these estimates, making them 
unsatisfactory for State reporting of child poverty.
    The Census Bureau has a program to develop more reliable 
intercensus estimates of child poverty at the State and local level. 
This effort was given further impetus with the passage of the Improving 
America's Schools Act of 1994, which required the Department of 
Education to work with the National Academy of Sciences and the Bureau 
of the Census to develop State and local estimates of children in 
poverty, ages 5 through 17. With funding from DHHS, this work has been 
expanded to include estimates for children in poverty, ages 0 through 
4.
    Based on our analysis of the statute and information on Census 
Bureau data, Food Stamp data, and school lunch data, we identified 
several general, data, and methodological issues. These issues are 
discussed in greater detail below. Our consultations with external 
groups were particularly helpful in clarifying

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data issues and evaluating alternative approaches and options.
    The general issues we identified included:
     How should we use the three factors identified in the law 
in developing State child poverty rates?
     What additional factors, if any, should we use?
     How should these factors be weighted?
     What flexibility and options should a State have in 
determining the child poverty rate for its State?
    Some of the data and methodological issues included:
     How should we account for limitations in Census Bureau 
data, e.g., until recently, measuring only children ages 5-17 and 
excluding certain sources of income such as taxes and in-kind 
transfers?
     What factors should we propose in order to identify the 
effect of the TANF program on any increases in child poverty?
     Other than Census Bureau data, what are the alternative 
sources of data related to child poverty and how might they be used?
     Given that some of the potential data sources have 
confidence intervals around their estimates, what confidence interval 
would be appropriate for each State's child poverty rate?
    We discuss specific issues as follows
1. Measurement of Child Poverty and the Census Bureau Data
    The Census Bureau develops estimates of child poverty, by State, 
based on the Current Population Survey (CPS) and a sampling size of 
approximately 55,000 households. The Bureau considers these State 
estimates to be moderately reliable and releases three-year averages 
for States, along with standard error rates, to reduce the chances that 
these estimates will be misinterpreted. The most recent data available 
on State child poverty estimates are for calendar year 1996.
    In response to demand for sub-state data, the Census Bureau 
recently launched a program called Small Area Income and Poverty 
Estimates. It is a new program that will provide estimates of income 
and poverty for States and counties between decennial censuses. In 
January, 1998, the Bureau made available county income and poverty 
estimates for 1993. It plans to provide estimates for years 1995 
through 1998, and periodically thereafter. From a program perspective, 
county-level data will be available only every other year, and the 
available data will be at least two years old.
    Many external consultants expressed concern about the limitations 
in the Census Bureau child poverty data and its reliance on the 
official definition of poverty, particularly the exclusion of important 
types of income and the failure to deduct certain types of expenses 
when determining family income. For example, in-kind assistance such as 
housing assistance and Food Stamp benefits are not counted as income 
even though such assistance is clearly available to meet basic needs. 
Similarly, expenses such as work expenses and child support paid are 
not available to meet such needs.
    Initially, some external groups were also concerned about the lack 
of Census Bureau poverty data on children 0 through 4 years, as child 
poverty is more acute for children in this age group. Since DHHS is 
funding the Census Bureau estimates for children in poverty for this 
age group, this information will be incorporated into the child poverty 
estimates we get from the Census Bureau.
    We considered these concerns carefully in our development of this 
NPRM. We believe that Congress, by including in the statute two non-
exclusive factors beyond the Census Bureau poverty measure, intended 
that we develop a methodology that will take into account and adjust 
for some of the limitations in the Census Bureau data.
    However, we approached the drafting of this regulation with a 
desire not to deviate too far from the official Census measure. The 
official measure is the most widely-used measure of poverty, and 
significant deviations from this measure could limit the credibility 
and acceptance of estimates of child poverty rates developed for this 
provision. As data collection capabilities improve, we believe it may 
be possible to amend our proposed methodology to take advantage of such 
improvements. We welcome public comments on these issues.
    Also related to the Census Bureau measure of child poverty was the 
recommendation by some external groups that our methodology focus on 
more extreme poverty. That is, in addition to, or instead of, 
considering the percent of children in families with incomes at or 
below 100 percent of poverty, we should consider the percent of 
children in families with incomes at or below a lower threshold, such 
as 50 percent of poverty. Additional research and model development by 
the Census Bureau would be necessary, however, before we would be able 
to consider such an approach. The current Census Bureau model for 
estimating State level child poverty exploits the strengths of 
additional databases, such as IRS tax data and Food Stamp data, to 
supplement the Current Population data. The value of these additional 
data for estimating extreme poverty is unknown, but experts believe 
that it would be less than the current model of 100 percent of the 
poverty level. We welcome public comment about the desirability and 
feasibility of pursuing this alternative. More information on the 
Census methodology is available on the Internet at the Census Bureau's 
poverty page.
2. Use of County-by-County Estimates of Children in Poverty in the 
Methodology
    The legislation requires us to use, to the extent available, 
county-by-county estimates of children in poverty as determined by the 
Census Bureau. However, section 413(i) requires States to report on 
child poverty at the State level, and State-level estimates are more 
relevant to the purpose of this provision. Furthermore, county-by-
county estimates are only available biennially.
    Most external consultants recommended that we use the State 
estimates of children in poverty as determined by the Census Bureau, 
rather than the specific county-by-county estimates. The State 
estimates represent the first step in calculating the county by county 
estimates and reflect the same data and factors as the county-by-county 
estimates; the data are also compatible because the Census Bureau 
reconciles its county-by-county and State estimates so that the total 
is the same for each State; i.e., the county-by-county estimates are 
adjusted so that the total for all the counties in a State is the same 
as in the State estimates calculated in the first step. We believe this 
approach is consistent with Congressional expectations and represents 
the most prudent use of the Census Bureau county-by-county estimating 
procedure.
3. Use of Food Stamp Data in the Methodology
    The legislation requires us to take into account the number of Food 
Stamp households. Nationally, trends in Food Stamp caseloads generally 
track closely with trends in poverty. Further, Food Stamp data are 
available on a more timely basis than estimates based on the Census 
methodology.
    However, nearly 40 percent of Food Stamp households contain no 
children.
    After considering the focus of the law in relation to child poverty 
and reflecting on the discussion with external consultants, we 
concluded that we should propose the use of data on

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Food Stamp households with children rather than the total number of 
Food Stamp households.
4. Use of Free and Reduced-Price School Lunch Data in the Methodology
    The third factor specified in the Act is ``the number of children 
receiving free or reduced-price lunches.'' Over the past several years 
both the proportion of lunches served free or at a reduced price and 
the proportion of student enrollment approved for free or reduced-price 
meals have risen steadily. During the same time period, poverty rates 
have fallen. There are several likely reasons that free and reduced-
price school lunch trends have not tracked poverty rates. Free and 
reduced-price lunch benefits are available to children in families with 
incomes up to 185 percent of the poverty level. Income trends in this 
eligible population will not necessarily mirror trends in the poverty 
population. In addition, changes in policy and procedures in the school 
lunch program during the past several years have likely influenced the 
rates at which children are certified for and/or participate in the 
program.
    Given the lack of correspondence between school lunch data and 
poverty trends in recent years, these data received the least weight in 
our methodology. We have not required that States submit it, but we 
propose that States may provide it, at their option.
    We are proposing that, if a State chooses to provide school lunch 
data, it must report the proportion of students certified for free and 
reduced-price meals. The Department of Agriculture indicates that 
changes in certification data primarily reflect changes in eligibility 
rates and in the propensity to apply for the program. Meal counts also 
reflect these two factors but are further affected by changes in the 
propensity to actually obtain a school meal on a given day such as 
school attendance rates or the number of serving days in a school year. 
Therefore, we believe that data on the proportion of students certified 
for free or reduced-price school lunches represent more useful data 
than the number of meals served.
5. Relative Importance of Various Factors in the Methodology
    We did not give equal consideration to the three statutory factors. 
Rather, we give the greatest consideration to the Census Bureau 
methodology because it provides the most objective estimates of child 
poverty rates by States. However, given the limitations in the Census 
Bureau data, we propose that States provide supplemental information, 
in certain circumstances, that may adjust for these limitations, i.e., 
if the estimate of the State's child poverty rate increased five 
percent or more over the two year period.
6. Clarification of the Term ``Five Percent Increase''
    The statute speaks to an increase in the child poverty rate of 5 
percent. We want to clarify that a 5 percent increase does not mean a 5 
percentage point increase in poverty. Rather, it means that the most 
recent child poverty rate is at least 5 percent higher than (i.e., 1.05 
times) the previous year's rate. For example, an increase of 5 percent 
would mean an increase in the poverty rate of 20 percent to 21 percent.
    We are taking this interpretation because it is the clearest 
reading of the statute and the one interpretation that will give the 
statute meaning; that is, it would be very unlikely that we would ever 
see an increase of 5 percentage points in a State's child poverty rate 
from one year to the next. In addition, we believe Congress would want 
to know about and have States take corrective action long before that 
occurred.

B. Summary of the Provisions of the Proposed Rule

    Section 413(i) of the Act requires the Secretary to establish a 
methodology by which each State would determine the child poverty rate 
in the State. It specifies three factors that we must take into account 
in developing the methodology: The number of Food Stamp households; the 
number of children who receive free or reduced-price lunches; and, to 
the extent available, county-by-county estimates of children in poverty 
as determined by the Census Bureau.
    Section 413(i) also specifies a deadline which requires the chief 
executive officer of each State to submit to DHHS by May 31, 1998, and 
annually thereafter, a statement of the State's child poverty rate. As 
noted earlier, we issued a Program Instruction to States explaining 
that we would provide to each State the Census Bureau's estimate of 
child poverty in each State as a first step in a proposed methodology 
and that no action by the State was required in relation to this 
deadline. (See TANF-ACF-PI-98-4.)
    We are proposing a sequential methodology to implement the statute. 
There are five major steps in the proposed methodology. Not all States 
or Territories will need to participate in all steps. The methodology 
for the Territories is similar but includes some necessary 
modifications.
Step 1
     Annually, when we receive the data from the Census Bureau, 
we will provide each State with an estimate of the number and 
percentage of children living at or below 100 percent of the Federal 
poverty threshold within the State. This estimate will be for the 
calendar year that is two years prior to the current calendar year, 
e.g., in 1998, we will provide an estimate for calendar year 1996. The 
estimates we provide will be the Census Bureau estimates incorporating 
county level estimates of poverty.
     In 1999, and annually thereafter, we will determine for 
each State, at the 80 percent confidence level, the change in the 
percent of children in poverty for the most recent two year period for 
which the data are available, e.g., in 1999, we will provide data 
comparing calendar years 1996 and 1997; and provide this information to 
the State.
Step 2
     If the child poverty rate in a State did not increase by 
five percent or more, we will conclude that the State has met the 
requirements of section 413(i) of the Act, and the State will not be 
required to submit supplemental information.
     If the child poverty rate in a State increased by 5 
percent or more, we propose to require that the State provide 
supplemental information to adjust, explain, or account for this 
increase. We propose that the State, within 60 days--
    1--Must provide data on the average monthly number of households 
with children that receive Food Stamp benefits for each of the two most 
recent calendar years for which data are available. (We expect that the 
data submitted in 1999 will cover calendar years 1997 and 1998.);
    2--Must provide data on any changes in legislation, policy, or 
program procedures that have had a substantial impact on the number of 
households with children receiving Food Stamp benefits during the same 
two year period, including data on sub-populations affected; and
    3--May provide, at State option, other information such as the 
proportion of students certified for free or reduced-price school 
lunches or estimates of child poverty derived from an independent 
source. These data may cover any pertinent time period, e.g., the two-
year period for which the child poverty rate was determined or the most 
recent two year period for which data are available. An independent 
source may include studies by research or advocacy organizations, 
universities, or independent evaluation and analysis

[[Page 50841]]

offices associated with State executive branch agencies or State 
legislatures.
     If the Food Stamp data are based on population counts, 
States may simply report the average monthly number for each of the two 
calendar years and the simple difference between them. If the Food 
Stamp data are based on monthly samples, States must include the 
calculated standard errors of each annual estimate.

    Note: Alternatively, if a State chooses to accept the increase 
in child poverty as indicated by the Census data, it may skip steps 
two and three and move directly to step four--the assessment of the 
impact of the State's TANF program on child poverty.
Step 3
     We will review the Food Stamp and other data provided by 
the State, including data on substantive legislative, policy, and 
program changes affecting the number of households with children 
receiving Food Stamp benefits. If we determine that these data indicate 
a subsequent improvement, commensurate with the poverty increase in the 
Census data, it would not be necessary for the State to proceed to Step 
4 because the more recent data indicate child poverty is already 
improving.
Step 4
     If we determine that the Food Stamp and other data 
provided by the State do not indicate a subsequent commensurate 
decrease in child poverty as addressed in Step 3, we propose to notify 
the State that it must, within 60 days, provide an assessment (and the 
information and evidence on which the assessment was based) of the 
impact of the State's TANF program on the child poverty rate. In this 
instance, we propose to give the States and Territories broad latitude 
in the information they provide.
Step 5
     We will review the information provided by the State, 
along with other data available such as the State's TANF plan and 
eligibility criteria, other supportive services and assistance 
programs, and the State's economic circumstances. If we determine that 
the increase in the child poverty rate is the result of the State's 
TANF program, we will notify the State that it is required to submit a 
corrective action plan within 90 days.
     To the extent that data are available and the procedures 
applicable, the Territories are subject to the same methodology as 
described for the States. One modification, however, is necessary. 
Since the Census Bureau does not estimate a child poverty rate for the 
Territories, ACF will compute an estimate of the percentage of children 
in poverty and the estimated child poverty rate for the Territory, 
based on information submitted by the Territory. Subsequent procedural 
steps are the same as for States, i.e., as applicable, we will review 
supplemental data to determine whether the child poverty rate increased 
by 5 percent or more; review the Territory's assessment of whether the 
increase in the child poverty rate was a result of the TANF program; 
and require the development of a corrective action plan, as necessary.

    Note: We call to the Territories' attention that this NPRM 
proposes to require the retention and availability of 1996 calendar 
year data on households with children that received Food Stamp 
benefits.
    We believe this approach will begin with and use the most 
reliable, objective data on child poverty available for all States 
and Territories; help assure that the child poverty rate for each 
jurisdiction accurately reflects its economic and other 
circumstances; and require that States and Territories provide only 
those data necessary, readily available, and most appropriately 
provided by them. States have more timely access to Food Stamp and 
other data to supplement the Census Bureau estimates, and both 
States and Territories are in a better position to explain any 
relationship to the TANF program. We anticipate, however, that only 
a small number of States and Territories will need to provide these 
data and an even smaller number will be required to submit a 
corrective action plan.

C. Section-By-Section Discussion

What Does This Part Cover? (Sec. 284.10)
    This section of the proposed rule provides a summary of 45 CFR part 
284. Part 284 proposes a methodology for determining State child 
poverty rates, including a determination of whether the child poverty 
rate increased as a result of the TANF program. It also covers the 
content and duration of the corrective action plan.
    In Sec. 284.10(b), we indicate that any Territory that has never 
operated a TANF program would not be subject to these rules. We 
included this provision to address American Samoa's situation. American 
Samoa did not operate an AFDC program, and it has not yet elected to 
operate a TANF program. Unless its status changes, we would exempt 
American Samoa from the requirements of this part.
What Definitions Apply to This Part? (Sec. 284.11)
    This section proposes definitions of the terms used in part 284. It 
includes key technical terms used in the methodology for clarity.
    The statute requires States to submit a ``statement of the child 
poverty rate'' using various factors, including ``county-by-county 
estimates of children in poverty as determined by the Census Bureau.'' 
These two references to the term ``poverty'' need further 
clarification. We refer to estimates provided by the Census Bureau of 
the percentage of children in a State in families with incomes below 
100% of the poverty threshold as ``children in poverty.'' The term 
``Census methodology'' means the methods developed by the Census Bureau 
for estimating the number and percentage of children in poverty in each 
State.
    We use the term ``child poverty rate'' when referring to the 
sequential methodology proposed in this part for determining whether a 
State will be required to submit a corrective action plan.
    We propose to define ``date of enactment'' to mean calendar year 
1996. Although the statute requires the State to provide to DHHS a 
statement of the child poverty rate in the State as of the date of 
enactment of PRWORA (August 22 1996), these data are available only on 
a calendar year basis. We believe that using the available calendar 
year data is the most feasible way to determine child poverty rates and 
consider the impact of the TANF program on these rates.
    Although section 419(5) of the Act, as amended, defines ``State'' 
as the 50 States of the United States, the District of Columbia, the 
Commonwealth of Puerto Rico, the United States Virgin Islands, Guam and 
American Samoa, we have proposed, for this part, to define 
``Territory'' in a separate definition to mean the Commonwealth of 
Puerto Rico, the United States Virgin Islands, Guam, and American 
Samoa.
    We have done this for clarity as some data limitations and some 
procedural steps in the proposed methodology do not apply to the 
Territories. We have outlined the steps for determining the child 
poverty rate for States in Secs. 284.20 through 284.30 and specified 
how the process differs for Territories in Sec. 284.35.
    You will note that we use the term ``we'' throughout the regulation 
and preamble. We have defined ``We (and any other first person plural 
pronouns)'' to mean the Secretary of the Department of Health and Human 
Services or any of the following individuals or organizations acting in 
an official capacity on the Secretary's behalf: the Assistant Secretary 
for Children and Families, the Regional Administrators for Children and 
Families, the Department of Health and Human

[[Page 50842]]

Services, and the Administration for Children and Families.
Who Must Submit Information to ACF to Carry out the Requirements of 
this Part? (Sec. 285.15)
    Section 413(i)(1) of the Act specifies that the chief executive 
officer of the State (or Territory) shall submit to the Secretary the 
annual statement of the State's (Territory's) child poverty rate. Other 
subsections require action by the ``State.''
    Given the widespread concern for the needs and circumstances of 
children, we believe it is appropriate that the chief executive officer 
of a State (Territory) carry out these responsibilities. We have 
proposed in Sec. 284.15 that the chief executive officer, or his or her 
designee, submit the information required by this part. For editorial 
simplicity, however, we have used the term ``State'' or ``Territory'' 
throughout part 284 rather than the more cumbersome term ``chief 
executive officer of the State.''
What information will we provide to each State to estimate the number 
of children in poverty? (Sec. 284.20)
    Annually, we propose to provide each State with an estimate of the 
number and percentage of children in poverty within the State. The 
estimates we provide will be those determined by the Census Bureau and 
will incorporate calculations by the Census Bureau using the 
methodology it has developed for small-area (e.g., county-level) 
estimates of poverty.
    The first annual estimate will be an estimate of the number and 
percentage of children in poverty for calendar year 1996. Subsequent 
year estimates will also be for the calendar year two years preceding, 
e.g., the second annual estimate will be for calendar year 1997. The 
two-year time differential reflects the amount of time it takes for the 
Census Bureau to collect and analyze the data sources used in its 
model.
    Although the law states that ``the chief executive officer of each 
State shall submit to the Secretary a statement of the child poverty 
rate in the State* * *,'' we are proposing to provide this information 
to the States in order to reduce burden on States and others. Because 
the Census Bureau data are collected at the Federal level, we are in a 
position to obtain and distribute these data more efficiently to 
States. (It did not seem reasonable to require each State to contact 
the Census Bureau for child poverty information and forward it back to 
us.)
    We have not referenced or incorporated the May 31st date specified 
in the statute in this NPRM. We will, however, send to the States the 
annual child poverty estimates as soon as they are available from the 
Census Bureau.
    In Sec. 284.20(b), we propose that annually we will determine for 
each State, at the 80 percent confidence level, the change in the 
percentage of children in poverty for the applicable two year period 
and provide each State with its percentage of change. (The 1999 
percentage change will cover the change between calendar years 1996 and 
1997.)
    We are proposing the use of the 80 percent confidence level 
because, while the Census methodology will provide us a point estimate 
of the poverty rate, there is a high probability that the actual 
poverty rate will not be exactly the same as the point estimate. 
Rather, the actual poverty rate likely will lie somewhere near the 
estimate. Statistical procedures will allow us to determine the range 
around which the actual estimate lies, with varying degrees of 
confidence.
    This range is important because year-to-year changes in State-level 
child poverty rates may simply reflect points within the confidence 
interval. The estimate may indicate that the child poverty rate has 
changed when in fact it has not.
    We will require a particular level of statistical certainty in 
determining a State's poverty rate in order to avoid erroneously 
concluding that a State's poverty rate has increased by 5 percent or 
more.
    We propose to require States to submit additional data only when we 
conclude, with 80 percent confidence, that the rate has increased by 5 
percent or more. While an 80 percent confidence level is not considered 
to be a high level of confidence in a scientific context of hypothesis 
testing, a four-fifths likelihood is certainly high enough in a 
practical context to justify concern that the child poverty rate may 
have in fact increased sufficiently to warrant attention.
    More importantly, we believe the 80 percent confidence level offers 
greater protection to children. We have proposed the 80 percent 
confidence level (instead of the commonly used 95 percent confidence 
level) in order to ascertain more sensitively any percentage change in 
the child poverty rate. The choice of a particular confidence level 
affects the quality of statistical information.
    For example, the risk of choosing a narrower confidence band is 
that it may provide a false indication of change in the poverty rate 
when no significant change has occurred. However, the consequences of 
choosing a higher percent confidence level are far more serious, in a 
programmatic sense, as they may lead us to conclude that the child 
poverty rate has not changed significantly when, in fact, it has.
    In determining the 80 percent confidence interval, we will use a 
one-tailed (rather than two-tailed) statistical test because we want to 
ensure that we have determined the point estimate of any increase in 
the child poverty rate with 80 percent certainty. We would use a two-
tailed statistical test only if we wanted to determine the point 
estimates of both increases and decreases in the child poverty rate 
with 80 percent probability. Therefore, the one-tailed test is the 
appropriate test to use to ensure that the real increase is at least 5 
percent. (A test is one-tailed when the alternative hypothesis states a 
direction such as the mean (average) increase in the child poverty rate 
for a given year is GREATER THAN zero.)
    The Census Bureau may update the assumptions and features of its 
methodology occasionally. Further, estimates may need to be refined 
after initial publication. Should the Census Bureau alter its 
methodology or subsequently update previously published estimates, we 
will base the estimates of change in poverty on the most updated 
methods and estimates. If, for example, the Census Bureau changes a 
model assumption from one reporting period to the next, we will re-
estimate the number of children in poverty for that year. This re-
estimate will be solely for the purpose of calculating the change; it 
will help ensure that any estimated changes do not result from changes 
in the methodology.
What Information Must the State Provide if the Estimate of a State's 
Child Poverty Rate Has Increased Five Percent or More Over the Two Year 
Period? (Sec. 284.25)
    If we have determined, with 80 percent confidence, that the child 
poverty rate in a State did increase by 5 percent or more, we propose 
in paragraph (b) to require that the State must submit data within 60 
days on Food Stamp participation. The State may also submit other 
information.
    We propose, in paragraph (c), to require that the State provide 
data on the average monthly number of households with children 
receiving Food Stamp benefits for each of the two most recent calendar 
years for which data are available. For example, we expect that the 
Food Stamp data submitted in 1999 will cover calendar years 1997 and 
1998.
    We also propose that the State, at its option, may submit other 
information in

[[Page 50843]]

relation to the child poverty rate for the same most recent two year 
period. This information could include changes in the proportion of 
students certified for free or reduced-price school lunches or 
estimates of child poverty derived from an independent source. As noted 
earlier, studies of child poverty are being conducted by a variety of 
entities including, research and advocacy organizations, universities, 
and evaluation and analysis offices associated with State executive 
branch agencies or State legislatures.
    We propose, in paragraphs (c)(1) and (c)(2) that States submitting 
the average monthly number of Food Stamp households with children under 
age 18 may elect to calculate such number based upon either:
     Population counts (e.g., from its administrative data 
system); or
     Monthly samples of Food Stamp recipient households based 
on generally accepted scientific sampling methods, i.e., each recipient 
household has a known, non-zero probability of being drawn into the 
sample.
    A State submitting the average monthly number of Food Stamp 
recipient households with children under 18 based upon population data 
for each month would then calculate the simple difference between 
yearly averages.
    If a State chooses to use monthly samples of its Food Stamp 
recipient caseload for each of the twelve months to develop an estimate 
of the average monthly number of Food Stamp households with children 
under 18, such State would be required to submit:
     The estimated average monthly number of households; and
     Estimated sampling errors (standard errors).
    We expect that a State using the sampling method will have its 
sampling plan available for review and submission as needed. A State 
using its Food Stamp Quality Control sampling plan will not be asked to 
submit its plan.
    In paragraph (c)(3), we propose that the State must submit 
information on any changes in legislation, policy, or program 
procedures that have had, during the same period for which Food Stamp 
data are provided, a substantial impact on the number of households 
with children receiving Food Stamp benefits. Specifically, the State 
must submit data relative to determining how such changes affected the 
Food Stamp population as a whole or any sub-population.
    We will review the Food Stamp information provided by the State 
under paragraph (c). The purpose of our review will be to determine 
whether the average monthly number of households with children 
receiving Food Stamps indicates a subsequent improvement commensurate 
with the poverty increase in the Census data, taking into account any 
additional information provided by the State.
    If we determine that the number of households with children 
receiving Food Stamp benefits did not indicate an improvement 
commensurate with the poverty increase in the Census data, we will 
review any additional data the State has provided. Unless we determine 
that this additional data provides sufficient documentation that either 
child poverty did not go up in the State or that there was a subsequent 
improvement, commensurate with the poverty increase in the Census data, 
we will notify the State that information on the impact of TANF on the 
child poverty rate must be submitted.
How Will We Determine the Impact of TANF on the Increase in the State 
Child Poverty Rate? (Sec. 284.30)
    Section 413(i) of the Act requires States to submit corrective 
action plans only if the State's child poverty rate has increased by 5 
percent or more as a result of TANF.
    In Sec. 284.30, we propose that those States identified, based on 
the determination made in Sec. 284.25, must make an assessment of the 
impact of the TANF program on its child poverty rate. The State's 
assessment, and the information on which the assessment was based, must 
be provided to us within 60 days.
    The State's assessment of the impact of the TANF program will be 
based on the same two-year time period used to determine State's child 
poverty rate. For example, the poverty rate for 1996-1997 will be 
compared to the TANF (or prior program) in effect for the same years.
    Paragraph (a) of this section includes examples of information or 
evidence that a State may submit as a part of its assessment. States 
may identify and provide other pertinent information as well.
    In assessing the impact of the TANF program, the State, for 
example, might review its TANF program and policies, the percentage of 
eligible persons receiving TANF, the TANF application disapproval 
rates, and numbers of cases sanctioned or closed; and the economic and 
other circumstances in the State, e.g., factory and base closings, rise 
in unemployment rates; and participation rates of other assistance 
programs. A State should review the evidence to form a broad picture of 
contributing circumstances and not consider factors in isolation. An 
increase in State unemployment, for example, cannot by itself be put 
forward to account for the increase in the child poverty rate if 
restrictive TANF eligibility policies are also in place.
    During the consultation process, some experts expressed doubt that 
a single methodology could be used by all States to statistically 
attribute changes in child poverty rates. Many factors contribute to 
such changes in ways that may vary from State to State and from year to 
year.
    It is the Department's responsibility to determine whether a State 
or Territory's child poverty rate has increased as a result of the TANF 
program in the State or Territory, and this is a responsibility we take 
seriously. We will thoroughly examine the assessment provided by the 
State as well as a range of other available information. At the same 
time, however, we propose to give States flexibility in reviewing their 
programs, policies, and economic and other circumstances; assessing the 
effect of the TANF program on child poverty rates; and providing 
evidence of alternative factors they believe may have contributed to 
the increase.
    We expect that a State or Territory will also take this 
responsibility seriously and will provide an assessment in sufficient 
detail to enable us to make our determination. However, if a State 
submits only a conclusory statement--with no information, evidence, or 
assessment--we will conclude that a corrective action plan is required.
    Paragraph (b) of this section proposes that we will review the 
information provided by the State, in addition to other available 
information (such as the State's TANF plan and eligibility criteria, 
other supportive service or assistance plans, and a State's economic 
circumstances); make a determination; and notify the State if a 
corrective action plan is required.
How Will the Methodology for the Territories Differ? (Sec. 284.35)
    Not all of the steps proposed for States in the previous sections 
are applicable to Territories. For example, ``estimates of children in 
poverty as determined by the Census Bureau'' are calculated only for 
the 50 States and the District of Columbia, but not for the 
Territories. Further, the Food Stamp Program does not operate in the 
Commonwealth of Puerto Rico and American Samoa.
    Therefore, we are proposing a modified but similar process for the 
Territories. In Sec. 284.35, we propose that, in the absence of Census 
Bureau

[[Page 50844]]

estimates, ACF will compute the estimated percentage of children in 
poverty for each Territory. We will base our computations on the 
information submitted by the Territory as specified in paragraph (b) or 
(c) of this section. This information must include Food Stamp data, if 
available. If the Territory does not have a Food Stamp program, it must 
provide other information such as the proportion of students certified 
for free or reduced-price school lunches or other estimates of child 
poverty derived from independent sources.
    For example, in 1998, we will compute the estimated percentage of 
children in poverty for each Territory for calendar year 1996. In 1999, 
we will compute the estimated percentage of children in poverty for 
calendar year 1997. We will also determine, at the 80 percent 
confidence level (if the data are sample data), the percentage change 
between calendar years 1996 and 1997. We will perform these 
computations annually for the applicable two year period, based on the 
annual information submitted by the Territory.
    If the child poverty rate in the Territory did not increase between 
one year and the next, we will conclude that the Territory has met the 
requirements of section 413(i) and notify it that no further 
information from or action by the Territory is required for that two 
year period.
    If the estimate of the child poverty rate increased by 5 percent or 
more from one year to the next, we propose in paragraph (g) to require 
that the Territory submit data for calendar year 1998. This data would 
be the Food Stamp data, if available, as specified in paragraph (b) or 
other data as specified in paragraph (c).
    This proposed action parallels the proposed action required from 
States in Sec. 284.25(c). We believe that these more recent data will 
help illustrate, for both States and Territories, any positive trends 
and show the current effect of a State or Territory's program and 
policies.
    Based on the data submitted in paragraph (g), we will determine 
whether the child poverty rate has increased 5 percent or more. If it 
has, we will notify the Territory that it must submit an assessment 
(and the information and evidence on which the assessment was based) of 
whether the child poverty rate increased as a result of the Territory's 
TANF program. We reference the examples of information and evidence 
described in Sec. 284.30(a).
    We will review the assessment submitted by the Territory, along 
with other available information; make a determination whether the 
increase in the child poverty rate is a result of the Territory's TANF 
program; and notify the Territory whether it is or is not required to 
submit a corrective action plan as specified in Secs. 284.40 and 
284.45.
When is a Corrective Action Plan Required? (Sec. 284.40)
    This section proposes that only those States and Territories for 
which we have concluded that the child poverty rate has increased by 5 
percent or more as a result of TANF are required to submit corrective 
action plans. The State and the Territory must submit the plan within 
90 days of the date we notify it of our determination under 
Secs. 284.30 or 284.35.
What is the Content and Duration of the Corrective Action Plan? 
(Sec. 284.45)
    The Act does not provide express authority for us to prescribe 
regulations regarding the content and duration of corrective action 
plans. Therefore, this section restates the statutory provisions.
    However, we want to provide additional explanation of the statutory 
language on the duration of the corrective action plan. Paragraph (b) 
of this section re-states section 413(i)(4) of the Act. This section 
requires that the State implement the corrective action plan ``until 
the State determines that the child poverty rate in the State is less 
than the lowest child poverty rate on the basis of which the State was 
required to submit the corrective action plan.''
    The ``lowest child poverty rate'' means the five percent threshold 
above the first year in the two year comparison period. For example, a 
State with a 20 percent child poverty rate in the first year of the two 
year comparison period would have a five percent threshold of 21 
percent and would be required to implement its corrective action plan 
until its child poverty rate dropped below 21 percent.

V . Regulatory Impact Analyses

A. Executive Order 12866

    Executive Order 12866 requires that regulations be drafted to 
ensure that they are consistent with the priorities and principles set 
forth in the Executive Order. The Department has determined that this 
proposed rule is consistent with these priorities and principles. This 
proposed rulemaking implements statutory authority based on broad 
consultation and coordination.
    The Executive Order encourages agencies, as appropriate, to provide 
the public with meaningful participation in the regulatory process. As 
described elsewhere in the preamble, ACF consulted with State and local 
officials, their representative organizations, and a broad range of 
technical and interest group representatives.
    We discuss the input received during the consultation process in 
previous sections of the preamble. To a considerable degree, this NPRM 
reflects the information provided by, and the recommendations of, the 
groups with whom we consulted.

B. Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (5 U.S.C. 603, 605) requires the 
Federal government to anticipate and reduce the impact of rules and 
paperwork requirements on small businesses and other small entities. 
Small entities are defined in the Regulatory Flexibility Act to include 
small businesses, small non-profit organizations, and small 
governmental agencies. This rule will affect only States, the District 
of Columbia, and certain Territories. Therefore, the Secretary 
certifies that this rule will not have a significant impact on small 
entities.

C. Paperwork Reduction Act

    In developing this proposed rule, we had very little discretion 
with respect to the kinds of data States and Territories must report to 
the Secretary. Thus, the burden of reporting data on the Food Stamp 
program is mandated by the statute. We have estimated the burden in 
this section and do not view it as significant. We have exercised 
discretion by developing an approach that will help States and 
Territories meet the statutory requirements with the least burden.
    We will send to the States the Census Bureau data on the number and 
percentage of children reported to have fallen below the poverty level 
and will compute for the Territories the percentage of children in 
poverty based on the information provided by the Territory. Only those 
States and Territories whose child poverty rate increased 5 percent or 
more will be required to submit further information. This approach is 
designed to lessen the burden on these jurisdictions. However, we 
invite comments on this approach and the possible impact it may have on 
States and Territories.
    To the extent possible, this proposed rule relies on existing data 
sources. The Census methodology is based on available data from the 
Bureau of the Census, the U.S. Department of Agriculture, and the U.S. 
Department of the Treasury. Sample or universe data on the number of 
households with children that receive Food Stamp benefits are reported 
by the States to the

[[Page 50845]]

U.S. Department of Agriculture (USDA) and are available from the States 
or the USDA. Also, States report to USDA data on the number of students 
certified to receive free and reduced-price school lunches.
    However, this proposed rule does contain information collection 
activities that are subject to review and approval by the Office of 
Management and Budget (OMB) under the Paperwork Reduction Act of 1995 
(the PRA). Under the PRA, no persons are required to respond to a 
collection of information unless it displays a valid OMB control 
number. As required by the PRA, we have submitted the proposed data 
collection requirements to OMB for review and approval. We are using 
this NPRM as a vehicle for seeking comment from the public on these 
information collection activities.
    There are four circumstances in the proposed rule that will create 
a reporting burden:
     A Territory provides data to us on which we will base our 
computation of an estimate of the percentage of children in poverty and 
the change in the percentage (Sec. 284.35);
     A State or Territory provides evidence that the estimated 
increase in poverty was less than 5 percent (Sec. 284.25(c) and 
Sec. 284.35(g));
     A State or Territory provides evidence that the increase 
in the child poverty rate was not the result of the TANF program 
(Sec. 284.30 and Sec. 284.35(h)); and
     A State or Territory submits a corrective action plan 
(Sec. 284.40 and Sec. 284.45).
    The annual burden estimates include any time involved compiling and 
abstracting information, assembling any other material necessary to 
provide the requested information, and transmitting the information.
    Prior to the development of this estimate, we researched the burden 
estimates for similar OMB-approved data collections in our inventory, 
and those pending OMB approval, and consulted with knowledgeable 
Federal officials.
    All 50 States, the District of Columbia, and the Territories of 
Guam, Puerto Rico, and the United States Virgin Islands are potential 
respondents to all of the proposed data collections. The annual burden 
estimates for these data collections are:

----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average burden
            Instrument or requirement                Number of     responses per     hours per     Total burden
                                                    respondents     respondent       response          hours
----------------------------------------------------------------------------------------------------------------
Submission of Data by Territory for Computation
 of an Estimate of the Percentage of Children in
 Poverty and the Change in the Percentage (Sec.
 284.35)........................................               3               1              40             120
Submission of Food Stamp Data and/or Alternative
 Evidence That Child Poverty Level Did Not
 Increase by 5% or More (Sec.  284.25(c) and
 Sec.  284.35(g))...............................              54               1              40           2,160
Documentation for Relationship of TANF to the
 Increase in Child Poverty Level (Sec.  284.30
 and Sec.  284.35(h))...........................              54               1              80           4,320
Corrective Action Plan (Sec.  284.40 and Sec.
 284.45)........................................              54               1             160           8,640
----------------------------------------------------------------------------------------------------------------

    Estimated Total Annual Burden Hours: 15,240.
    We have over-estimated the burden hours for part 284 for ease of 
discussion and public review of the burden. We expect that only a few 
States will experience an increase of 5 percent or more in their child 
poverty rate and will need to provide Food Stamp or additional data; 
even fewer will need to submit information in relation to the TANF 
program; and a very few will be required to submit a corrective action 
plan.
    We encourage States, organizations, individuals, and other parties 
to submit comments regarding the information collection requirements to 
ACF (at the address above) and to the Office of Information and 
Regulatory Affairs, OMB, Room 3208, New Executive Office Building, 725 
17th Street, Washington, DC 20503, ATTN: Desk Officer for ACF.
    To ensure that public comments have maximum effect in developing 
the final regulations and the data collection requirements, we urge 
that each comment clearly identify the specific section or sections of 
the proposed rule that the comment addresses and follow the same order 
as the regulations.
    We will consider comments by the public on these proposed 
collections of information in:
     Evaluating whether the proposed collections are necessary 
for the proper performance of our functions, including whether the 
information will have practical utility;
     Evaluating the accuracy of our estimate of the burden of 
the proposed collections of information, including the validity of the 
methodology and assumptions used, and the frequency of collection;
     Enhancing the quality, usefulness, and clarity of the 
information to be collected; and
     minimizing the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technology, e.g., the 
electronic submission of responses.
    OMB is required to make a decision concerning the collections of 
information contained in these proposed rules between 30 and 60 days 
after publication of this document in the Federal Register. Therefore, 
a comment is assured of having its full effect if OMB receives it 
within 30 days of publication. This OMB review schedule does not affect 
the deadline for the public to comment to ACF on the proposed rules.

D. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 requires 
that a covered agency prepare a budgetary impact statement before 
promulgating a rule that includes any Federal mandate that may result 
in the expenditure by State, local, and Tribal governments, in the 
aggregate, or by the private sector, of $100 million or more in any one 
year.
    If a covered agency must prepare a budgetary impact statement, 
section 205 further requires that it select the most cost-effective and 
least burdensome alternative that achieves the objectives of the rule 
and is consistent with the statutory requirements. In addition, section 
205 requires a plan for informing and advising any small government 
that may be significantly or uniquely impacted by the proposed rule.
    We have determined that this proposed rule would not impose a 
mandate that will result in the

[[Page 50846]]

expenditure by State, local, and Tribal governments, in the aggregate, 
or by the private sector, of more than $100 million in any one year. 
Accordingly, we have not prepared a budgetary impact statement, 
specifically addressed the regulatory alternatives considered, or 
prepared a plan for informing and advising any significantly or 
uniquely impacted small government.

E. Congressional Review

    This proposed rule is not a ``major'' rule as defined in 5 U.S.C., 
Chapter 8.

List of Subjects in 45 CFR Part 284

    Grant programs--Social programs, Public Assistance programs; 
Reporting and recordkeeping requirements; Poverty.

(Catalogue of Federal Domestic Assistance Programs: 93.558 TANF 
programs--State Family Assistance Grants, Assistance grants to 
Territories, Matching grants to Territories, Supplemental Grants for 
Population Increases and Contingency Fund; 93.595 Welfare Reform 
Research, Evaluations and National Studies.)

    Dated: May 13, 1998.
Olivia A. Golden,
Assistant Secretary for Children and Families.

    Approved: June 9, 1998.
Donna E. Shalala,
Secretary, Department of Health and Human Services.
    For the reasons set forth in the preamble, we propose to amend 45 
CFR Ch. II by adding part 284 to read as follows:

PART 284--CHILD POVERTY RATES

Sec.
284.10 What does this part cover?
284.11 What definitions apply to this part?
284.15 Who must submit information to ACF to carry out the 
requirements of this part?
284.20 What information will we provide to each State to estimate 
the number of children in poverty?
284.25 What information must the State provide if the estimate of a 
State's child poverty rate has increased by five percent or more 
over the two year period?
284.30 What information must the State provide to explain the impact 
of TANF on the increase in child poverty?
284.35 How will the methodology for the Territories differ?
284.40 When is a corrective action plan due?
284.45 What is the content and duration of a corrective action plan?

    Authority: 42 U.S.C. 613(i)


Sec. 284.10  What does this part cover?

    (a) This part describes the methodology to be used to determine 
State child poverty rates, as required by section 413(i) of the Social 
Security Act, including determining whether the child poverty rate 
increased by 5 percent or more as a result of TANF. It also describes 
the content and duration of the corrective action plan.
    (b) The requirements of this part do not apply to any Territory 
that has never operated a TANF program.


Sec. 284.11  What definitions apply to this part?

    The definitions that apply to this part are:
    ACF means the Administration for Children and Families.
    Act means the Social Security Act, unless otherwise specified.
    Census methodology means the methods developed by the Census Bureau 
for estimating the number and percentage of children in poverty in each 
State.
    Child poverty rate means the result of the methodology described in 
this part to determine the percentage of children in poverty in each 
State and Territory. The State child poverty rate will be based on the 
Census methodology and may also include the number of households with 
children receiving Food Stamp benefits and additional data submitted by 
a State. The child poverty rate for a Territory will be computed by ACF 
based on data submitted by the Territory.
    Children in poverty means estimates resulting from the Census 
methodology of the percentage of children in a State that live in 
families with income below 100 percent of the federal poverty level.
    Date of enactment means calendar year 1996.
    State means each of the 50 States of the United States and the 
District of Columbia.
    TANF means the Temporary Assistance for Needy Families program, as 
enacted by section 103 of Pub. L. 104-193 (42 U.S.C. 601-619).
    Territories means American Samoa, Guam, the Commonwealth of Puerto 
Rico, and the United States Virgin Islands.
    We (and any other first person plural pronouns) means the Secretary 
of Health and Human Services or any of the following individuals and 
organizations acting in an official capacity on the Secretary's behalf: 
The Assistant Secretary for Children and Families, the Regional 
Administrators for Children and Families, the Department of Health and 
Human Services, and the Administration for Children and Families.


Sec. 284.15  Who must submit information to ACF to carry out the 
requirements of this part?

    The chief executive officer of the State or Territory, or his or 
her designee, is responsible for submitting the information required by 
this part to us.


Sec. 284.20  What information will we provide to each State to estimate 
the number of children in poverty?

    (a) Annually, we will provide each State with an estimate of the 
number and percentage of children in poverty within the State, as 
determined by the Census Bureau using the Census methodology. The 
annual estimate will be for the calendar year two years previous. (The 
first annual estimate in 1998 will be an estimate of children in 
poverty for calendar year 1996.)
    (b) In 1999, and annually thereafter, we will determine for each 
State, at the 80 percent confidence level, the change in the percentage 
of children in poverty for the applicable two calendar year period 
based on the Census Bureau data, and provide each State with its 
percentage of change. (The first determination of percentage change 
will cover the change between calendar years 1996 and 1997.)


Sec. 284.25  What information must the State provide if the estimate of 
a State's child poverty rate has increased five percent or more over 
the two year period?

    (a) If the estimate of a State's child poverty rate did not 
increase by 5 percent or more, at an 80 percent confidence interval, 
from one year to the next, we will conclude that a State has satisfied 
the statutory requirements of section 413(i) of the Act, and notify the 
State that no further information from or action by the State is 
required for the applicable two calendar year period.
    (b) If the estimate of a State's child poverty rate increased by 5 
percent or more from one year to the next, we will notify the State 
that it has 60 days to submit the data required in paragraph (c) of 
this section.
    (c) If required under paragraph (b) of this section, the State must 
submit data on the average monthly number of households with children 
that received Food Stamp benefits for each of the two most recent years 
for which data are available. (We expect that the data submitted in 
1999 will cover calendar years 1997 and 1998.) The State may also 
submit other evidence covering any pertinent time-period, including the 
proportion of students certified for free or reduced-price school 
lunches or estimates of child poverty that were derived from an 
independent source.
    (1) If a State reports Food Stamp data based on population counts, 
it must

[[Page 50847]]

report the average monthly number for each of the two calendar years 
and the difference between them.
    (2) If a State reports Food Stamp data based on monthly samples, it 
must include the calculated standard errors of each annual estimate.
    (3) If there has been a change in legislation, policy, or program 
procedures that have had a substantial impact on the number of 
households with children receiving Food Stamps during the period for 
which we are requesting Food Stamp data, the State must submit data 
relevant to determining how that change(s) affected the number of Food 
Stamp households with children, including data on sub-populations 
affected by the change.
    (d) Based on the information submitted by the State under paragraph 
(c) of this section, if the average monthly number of households with 
children receiving Food Stamp benefits within the State indicates a 
subsequent improvement, commensurate with the poverty increase in the 
Census data, we will conclude that the State has satisfied the 
statutory requirements of section 413(i) of the Act, and that no 
further information from or action by the State is required.
    (e) If the average monthly number of households with children 
receiving Food Stamp benefits within the State did not indicate a 
subsequent decrease in child poverty commensurate with the increase 
shown by the Census data, we will review any additional data the State 
has provided. Unless this additional data provides sufficient 
documentation that either child poverty did not go up in the State or 
there was a subsequent commensurate decline, we will notify the State 
that it must provide the information described in Sec. 284.30.


Sec. 284.30  What information must the State provide to explain the 
impact of TANF on the increase in child poverty?

    (a) If we have determined under Sec. 284.25, that the State must 
submit its assessment (and the information and evidence on which the 
assessment is based) of whether the child poverty rate has increased as 
a result of the State's TANF program, the State's assessment, and the 
information on which the assessment is based, must cover the two year 
period for which the child poverty rate is determined, and must be 
submitted to us within 60 days. Examples of such information may 
include--
    (1) Evidence that TANF program rules did not economically 
disadvantage children from one calendar year to the next to the extent 
that such policies could account for a 5 percent or more increase in 
the child poverty rate. For example, if TANF income eligibility rules 
did not limit program participation and program cash benefits did not 
decrease substantially, a State could assert that increases in the 
child poverty rate occurred independently of TANF. A State could also 
provide other TANF program evidence, such as the percentage of eligible 
individuals receiving TANF, the number of applicants disapproved, 
sanction rates, numbers of cases terminated as a result of time limits, 
and numbers of cases terminated as a result of failing to meet work 
requirements;
    (2) Evidence that other factors account for the increase in the 
child poverty rate, such as changes in economic or social conditions, 
e.g., an increase in the State's unemployment rate. For example, a 
State that met the definition of a ``needy State'' under section 
403(b)(6) of the Act for an extended period of time within the 
applicable two year period could assert that increases in the child 
poverty rate resulted from non-TANF factors; or
    (3) An alternate justification that demonstrates that changes in 
the child poverty rate within the State did not result from TANF. For 
example, a State could submit data from other assistance programs that 
provide evidence that increases in the child poverty rate did not 
result from TANF.
    (b) We will review the State's assessment, along with other 
available information such as the State's TANF plan and eligibility 
criteria, other supportive services and assistance programs, and the 
State's economic circumstances; make a determination whether the child 
poverty rate has or has not increased by 5 percent or more as a result 
of the State's TANF program; and notify the State whether it must 
submit a corrective action plan as described in Secs. 284.40 and 
284.45.
    (c) If we determine that the child poverty rate has not increased 
by 5 percent or more as a result of the State's TANF program, we will 
conclude that the State has met the requirements of section 413(i) and 
notify the State that no further information from or action by the 
State is required for the applicable two calendar year period.


Sec. 284.35  How will the methodology for the Territories differ?

    (a) To the extent that data are available and the procedures 
applicable, the Territories are subject to the same methodology used to 
determine the child poverty rate in the 50 States and the District of 
Columbia.
    (b) Since the Census Bureau methodology does not estimate a child 
poverty rate for the Territories, each Territory must, beginning in 
1998, and annually thereafter, submit to ACF the Food Stamp data 
described in Sec. 284.25(c).
    (c) If the Food Stamp data are not available for a Territory 
because it did not operate a Food Stamp program for the applicable 
year, it must, beginning in 1998, and annually thereafter, submit other 
information on which the child poverty rate may be determined, such as 
the proportion of students certified for free or reduced-price school 
lunches or estimates of child poverty derived from independent sources. 
(In 1998, the Territory must submit data for calendar year 1996; in 
1999, the Territory must submit data for calendar year 1997.)
    (d) Based on the data specified in paragraph (b) or (c) of this 
section submitted for calendar year 1996, we will compute an estimate 
of the percentage of children in poverty for the Territory for calendar 
1996.
    (e) Based on the data specified in paragraph (b) or (c) submitted 
for calendar year 1997, we will compute an estimate of the percentage 
of children in poverty for calendar year 1997. We will also determine, 
at the 80 percent confidence level (if the data are sample data), the 
change in the percentage of children in poverty between calendar years 
1996 and 1997. We will do this annually thereafter for the applicable 
two year period.
    (f) If the estimate of the child poverty rate in the Territory did 
not increase by 5 percent of more, at an 80 percent confidence level, 
we will conclude that the Territory has satisfied the requirements of 
section 413(i) of the Act. We will notify the Territory that no further 
information from or action by the Territory is required for the 
applicable two year period.
    (g) If the estimate of the child poverty rate in the Territory 
increased by 5 percent or more from one year to the next, the Territory 
must submit the information in paragraph (b) or (c) of this section for 
the subsequent calendar year. For example, if the child poverty rate 
increased between calendar years 1996 and 1997, the Territory must 
submit data for calendar year 1998. We will review these data and 
determine whether the child poverty rate has or has not increased by 5 
percent or more.
    (h) If we determine that the child poverty rate has increased 5 
percent or more, we will notify the Territory that it must submit an 
assessment (and the information and evidence on which the assessment 
was based) of whether the child poverty rate increased as a result of 
the TANF program in the Territory.

[[Page 50848]]

Examples of such information and evidence are found in Sec. 284.30(a).
    (i) We will review the assessment provided by the Territory, along 
with other available data on the Territory's TANF plan and eligibility 
criteria, other supportive services and assistance plans, and economic 
circumstances; make a determination whether the increase in the child 
poverty rate is due to the Territory's TANF program; and notify the 
Territory whether a corrective action plan is required as specified in 
Sec. 284.40 and Sec. 284.45.


Sec. 284.40  When is a corrective action plan due?

    Each State and Territory must submit a corrective action plan to 
ACF within 90 days of the date we notify it that, as a result of TANF, 
its child poverty rate increased by 5 percent or more for the 
applicable two calendar year period.


Sec. 284.45  What is the content and duration of the corrective action 
plan?

    (a) The corrective action plan must outline the manner in which the 
State or Territory will reduce the child poverty rate in the State and 
include a description of the actions to be taken by the State or the 
Territory under such a plan.
    (b) A State or Territory shall implement the corrective action plan 
until the State or Territory determines that the child poverty rate in 
the State is less than the lowest child poverty rate on the basis of 
which the State was required to submit the corrective action plan.

[FR Doc. 98-25384 Filed 9-22-98; 8:45 am]
BILLING CODE 4184-01-P