[Federal Register Volume 63, Number 197 (Tuesday, October 13, 1998)]
[Proposed Rules]
[Pages 54629-54635]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-27282]
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DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
7 CFR Part 246
RIN 0584-AC64
Special Supplemental Nutrition Program for Women, Infants and
Children (WIC): Food and Nutrition Services and Administration Funding
Formulas Rule
AGENCY: Food and Nutrition Service, USDA.
ACTION: Proposed rule.
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SUMMARY: This rule proposes to revise both the food and the nutrition
services and administration (NSA) funding formulas to improve the
effectiveness of WIC funds distribution now that WIC is in a relatively
stable funding environment. The revised food funding formula would help
to ensure food funds are allocated to State agencies that can utilize
the funds to maintain current participation as well as to direct funds,
as available, to State agencies that are serving a lesser proportion of
their WIC eligible population than other State agencies. The revised
NSA funding formula would simplify the funding formula by deleting
obsolete components and updating existing components to more equitably
distribute funds among State agencies.
DATE: To be assured of consideration, written comments on this rule
must be postmarked by January 11, 1999. No electronically transmitted
correspondence will be accepted.
ADDRESSES: Comments may be mailed to Ron Vogel, Acting Director,
Supplemental Food Programs Division, Food and Nutrition Service, USDA,
3101 Park Center Drive, Room 540, Alexandria, Virginia 22302, (703)
305-2746. All written comments will be available for public inspection
during regular business hours (8:30 a.m.-5:00 p.m. Monday through
Friday) at the above address.
FOR FURTHER INFORMATION CONTACT: Deborah McIntosh, Chief, Program
Analysis and Monitoring Branch, Supplemental Food Programs Division,
Food and Nutrition Service, USDA, 3101 Park Center Drive, Alexandria,
Virginia 22302, (703) 305-2710. An analysis package containing the
formula database, comparisons and mathematical computations is
available upon request at the above address.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This rule has been reviewed by the Office of Management and Budget
under Executive Order 12866 and has been determined to be significant.
An impact analysis statement has been prepared and is available upon
request.
Public Law 104-4
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub.
L. 104-4 (2 U.S.C.), establishes requirements for Federal agencies to
assess the effects of their regulatory actions on State, local, and
tribal governments and the private sector. Under section 202 of the
UMRA, the Food and Nutrition Service (FNS) generally must prepare a
written statement, including a cost-benefit analysis, for proposed and
final rules with ``Federal mandates'' that may result in expenditures
to State, local, or tribal governments, in the aggregate, or to the
private sector, of $100 million or more in any one year. When such a
statement is needed for a rule, section 205 of the UMRA generally
requires FNS to identify and consider a reasonable number of regulatory
alternatives and adopt the least costly, more cost-effective or least
burdensome alternative that achieves the objectives of the rule.
This proposed rule contains no Federal mandates (under the
regulatory provisions of Title II of the UMRA) for State, local, or
tribal governments or the private sector of $100 million or more in any
one year. Thus, this proposed rule is not subject to the requirements
of sections 202 and 205 of the UMRA.
Regulatory Flexibility Act
This proposed rule has been reviewed with regard to the
requirements of the Regulatory Flexibility Act (5 U.S.C. 601-612).
Shirley R. Watkins, Under Secretary, Food, Nutrition and Consumer
Services, has certified that this rule would not have a significant
economic impact on a substantial number of small entities. This
proposed rule would affect how FNS will calculate food and NSA grant
allocations for State agencies. State agencies are not small entities
under the Regulatory Flexibility Act.
Paperwork Reduction Act
This rule does not contain reporting or recordkeeping requirements
subject to approval by the Office of Management and Budget under the
Paperwork Reduction Act of 1995 (44 U.S.C. 3507).
Executive Order 12372
The Special Supplemental Nutrition Program for Women, Infants and
Children (WIC) is listed in the Catalog of Federal Domestic Assistance
Programs under No. 10.557. For the reasons set forth in the final rule
in 7 CFR part 3015, subpart V, and related Notice (48 FR 29114), this
program is included in the scope of Executive Order 12372 which
requires intergovernmental consultation with State and local officials.
Executive Order 12988
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. This rule is intended to have a preemptive effect with
respect to any State or local laws, regulations or policies which
conflict with its provisions or which would otherwise impede its full
implementation. This rule is not intended to have retroactive effect
unless so specified in the ``Effective Dates'' paragraph of this
preamble. Prior to any judicial challenge to the provisions of this
rule or the applications of its provisions, all applicable
administrative procedures must be exhausted.
Background
Need for Revisions to the WIC Funding Formulas
The WIC Program has consistently demonstrated its effectiveness in
promoting the health and nutritional well-being of low-income women,
infants and children at nutritionally related medical or dietary risk.
The WIC Program has grown and changed significantly during the past few
years. However, as growth has plateaued, FNS believes that it is
appropriate to propose changes to both the NSA and food funding
formulas to enhance their effectiveness at distributing funds fairly
and equitably among WIC State agencies
[[Page 54630]]
in an environment where appropriations are relatively stable.
The WIC Program is a fixed grant program, not a Federal entitlement
program, and is not guaranteed unlimited funds. WIC State agencies must
manage within a finite appropriation level; however, State agencies
have considerable latitude to manage program costs to accommodate
variable funding levels.
These revised formulas would better provide State agencies with the
equal opportunity to serve eligible persons who apply for benefits.
Currently, State agency funding levels are not necessarily proportional
to their WIC eligible population. The revised formulas are intended to
allocate funds more fairly among all State agencies under a relatively
stable funding environment.
Stakeholder Input
FNS believes that the rulemaking process is enhanced by public
opinion, and that, to the extent permissible, discussion and input on
the most equitable and fair distribution of WIC funds should occur
prior to publication of the final funding regulation. In fact, section
204(a) of UMRA requires meetings with our cooperators in State, local,
and tribal governments so we may receive their ``meaningful and timely
input in the development of regulatory proposals''. To fulfill this
statutory obligation, FNS and the National Association of WIC Directors
(NAWD) convened a committee to discuss the appropriateness of the
current funding formula components and ways in which the allocation
formula could be improved. This committee was composed of FNS
employees, designated State agency employees, and a designated employee
of a local municipal government agency.
To further the goal of obtaining stakeholder input into the
regulatory process, this proposal actively solicits comments from State
agencies, NAWD, advocacy groups and other interested parties on the
proposed funding formula changes. We are particularly seeking comment
on whether and how some components of the current funding formulas
should be deleted or modified as a way to determine the most
appropriate funding methodology to fairly and equitably distribute WIC
funds.
Nutrition Services and Administration (NSA) Funding Formula
The current WIC NSA funding formula became effective April 1, 1988.
The objectives of the formula were to ensure a reasonable measure of
funding stability while providing funding levels that enabled
equivalent services to participants across State agencies and to
promote incentives for reducing food costs so that more persons may be
served.
The current NSA formula is, however, complicated and a tremendous
amount of data collection is required for the formula--some of which
may no longer be needed or has little impact on the actual allocation
of funds. Further, some data are not available in time to permit
issuance of final grants at the beginning of the fiscal year. As a
result, the current NSA funding formula may no longer be the most
efficient and effective means of distributing NSA funds.
Current NSA Provisions--General
Section 246.16(c)(2) of the WIC regulations sets forth both the NSA
funding requirements as established in section 17(h) of the Child
Nutrition Act of 1966 (42 U.S.C. 1786) and the process by which NSA
funds are allocated to State agencies. The current NSA funding formula
meets the legislative requirements by: (1) establishing a ``target''
NSA funding level, referred to as parity, that each State agency should
receive as its fair share NSA grant; (2) preserving stability by
guaranteeing, to the extent funds are available, the prior year NSA
grant level, and then gradually moving State agencies to their parity
target level; and (3) addressing the varying needs of each State agency
by allocating regional discretionary funds based on regional and
National priorities.
The following outlines the current provisions and proposed changes
to the NSA funding formula:
Section 246.16(c)(2)(ii)(B)--Current NSA Parity Component
The current parity target level is based primarily on the number of
participants projected to be served by State agencies. Using food grant
levels allocated for the current fiscal year, FNS projects the number
of participants each State agency is expected to serve taking into
consideration its State-reported per participant food costs and
inflation. In addition to projected participation, three adjustments
are made to this participation-based formula to recognize factors
believed to affect the cost of Program administration. These include:
(a) Economies of scale--Recognizes the higher per participant costs
associated with smaller participation levels (currently an adjustment
is made at three levels: 5,000 or fewer participants, 5,001-15,000
participants, and more than 15,000 participants);
(b) Salary differentials--Considers the differential salary levels
paid within each State for employees in Public Administration, Health
and Social Services; and
(c) Targeting of benefits to high-risk participants--Considers the
proportion of Priority I participants served by the State agency.
Eighty percent of funds available for allocation through the parity
component are allocated in accordance with projected participation,
adjusted by the economy of scale factor. This is done on the basis of
administrative grant per participant (AGP) rates that are adjusted for
the higher per participant costs associated with smaller participation
levels (15,000 or fewer participants per month). Twenty percent of
funds available for the parity grant component are allocated on the
basis of differential salary levels and service to Priority I
participants.
Proposed ``Fair Share'' Component
Renaming the Parity Component
The term ``parity'' is used to describe the basic concept of
gradually moving State agencies to a funding level that represents
their respective ``fair share'' of available funds. FNS believes that
the term ``fair share'' better describes the purpose and intent of this
component and, therefore, proposes that the current ``parity''
component be renamed the ``NSA fair share'' component. This change
would also provide continuity with terminology used in the food funding
formula.
Food Cost Data Used in Calculating Projected Participation
The NSA funding formula projects the number of participants to be
served by each State agency by dividing the current year food grant
level by the State-reported per participant food cost, adjusted for
inflation. The data currently used represents the closed-out per
participant food cost data for the 12-month period beginning in July
and ending in June prior to the fiscal year for which the grants are
being calculated. This closed-out food cost data is usually available
150 days after the report month. Therefore, closed-out food cost data
for June is available to FNS in late November. This data is then used
in the calculation of final WIC grants, which are usually released by
January 1.
To allow for the calculation of final WIC grants at the beginning
of the fiscal year, FNS proposes that April through March closed-out
food cost data be used. As is currently done, an inflation adjustment
would be applied to the food cost data to more accurately project
[[Page 54631]]
actual food costs and to adjust for inflationary increases that may
occur during the remainder of the fiscal year. While other timeframes
were considered for use, it was felt that a 12-month base of food cost
data was necessary to take into consideration seasonal fluctuations of
food prices. While the current regulations do not address the specific
months of food cost data used in the calculations, FNS did want to
inform interested parties of the change in the timeframes that will be
used when final regulations are issued.
Economy of Scale/Bands
As noted above, NSA costs are affected by economy of scale. There
are certain fixed administrative costs in the delivery of program
benefits incurred by a State agency that do not vary regardless of the
size of the caseload. Therefore, State agencies with larger
participation levels are able to realize reductions in costs per
participant as these fixed costs are spread among more participants.
Smaller State agencies, particularly Indian Tribal Organizations
(ITOs), have comparatively higher costs per participant. Although the
current NSA funding formula includes a size-adjusted cost factor, other
alternatives and adjustment factors were examined to determine if the
current adjustments adequately recognize the various range of
administrative expenditures for State agencies of differing sizes.
The current adjustment factors were based on administrative
expenditures per participant (AEP) calculated over 10 years ago. The
expenditures per participant were evaluated and compared to the size of
the State agency, creating ``bands'' or groupings. The size of the
bands were determined using regression techniques that analyzed the
relationship between the administrative cost per participant and total
participation levels. By analyzing the positive correlation between
these two factors, the band sizes were determined based on the grouping
of State agencies of various sizes. For each State agency, an
adjustment factor is used to establish a funding level applied to each
band of participation. The first 5,000 participants are adjusted at a
level that is no more than 68 percent higher than the per participant
funding provided for average participation levels exceeding 15,000
monthly. The next 10,000 participants, or average monthly participation
levels between 5,001 and 15,000 participants, are funded at a level
that is no more than 2.4 percent higher than the per participant
funding for participation levels exceeding 15,000 monthly. These
percentages (68 percent and 2.4 percent) equal the percent differences
between the weighted average AEP for the State agencies with
participation levels up to 5,000 and in the range of 5,001 to 15,000,
respectively, and the weighted average AEP for State agencies with
participation levels over 15,000. The weighted average AEP for
participation up to 5,000 was calculated by dividing the FY 1986 total
Federal NSA expenditures for State agencies in that size group by their
FY 1986 total cumulative participation. The weighted average AEPs for
State agencies with participation levels between 5,001 and 15,000 and
over 15,000 were calculated in a similar way using FY 1986 data and
allowing for higher AEPs for the first 15,000 participants.
After lengthy consideration, FNS determined that the current bands
should be retained because the updated NSA cost information needed to
determine new band sizes is unavailable. It was felt that the data upon
which the AEP bands are currently based remains the best available.
However, more research and analysis is needed to understand how
economies of scale actually affect WIC NSA costs, what specific costs
are most influenced, the participation level(s) at which economies of
scale vary and how much allowance should be made at each of those
levels. Therefore, FNS will conduct further analysis in this area to
examine how funding for different size State agencies might be
acknowledged in the NSA funding formula. Until FNS's further analysis
is completed and appropriate baseline data is available, it is proposed
that the current bands of 5,000 or fewer; 5,001 to 15,000; and over
15,000 and the corresponding percent adjustment between bands be
retained. Comments on this aspect of the funding formula are welcome as
are suggestions as to how economies of scale can be objectively and
fairly determined for future consideration.
Salary and Priority I Participant Targeting Component
The combined salary and targeting component determines 20 percent
of a State agency's NSA fair share target level. In an effort to
simplify the funding formula and to delete obsolete components, both
the salary and targeting components were analyzed to determine whether
they continue to have a significant and appropriate impact on the final
NSA grant allocations.
Salary Component. Salary data were incorporated into the current
funding formula in recognition that salary costs represent by far the
most significant contributor to WIC NSA costs. Additionally, due to
regional variations in labor costs, similar levels of service have
different salary costs. The salary data used to compute differential
salary levels for State agencies includes average annual salaries for
State and local government workers provided by the Bureau of Labor
Statistics (BLS) for the 50 States, the District of Columbia, Puerto
Rico, and the Virgin Islands. BLS does not gather this information for
American Samoa, Guam or the ITOs. Therefore, the salary level for a GS-
9, step 1 in the Federal Government's General Schedule pay scale is
used for American Samoa, Guam and ITOs acting as State agencies. FNS
determined that a GS-9, step 1 salary is a reasonable approximation of
the salary costs incurred on an individual employee basis by State
agencies in American Samoa, Guam and the ITOs. The most current data
available from BLS reflects average salary levels paid 2 years prior to
the applicable fiscal year for which funds are allocated. The GS-9
salary level used for American Samoa, Guam and ITO State agencies
reflects the salary level for the same year as the available BLS data.
Overall, most State agencies are affected only slightly by the
salary component, primarily because the salary component makes up only
10 percent of the total parity component (called the fair share target
funding level in this proposed rule). An analysis of the final grants
with and without the salary component reveals that for approximately 90
percent of WIC State agencies, the difference in final NSA grants
without the salary component is within 3 percent (+/-) of a State's
grant inclusive of the salary adjustment.
FNS recognizes that the salary component is a controversial area
and that there are strong opinions and arguments supporting both the
inclusion and deletion of the salary component in the NSA funding
formula. Therefore, FNS proposes to retain the current salary
component, which would continue to equal 10 percent of the NSA fair
share component of the NSA funding formula. However, comments on
whether the current salary factor contributes to an appropriate and
fair allocation of NSA funds are welcomed.
Targeting Component. The targeting component was originally
designed to provide an incentive for targeting benefits to the highest
risk participants, Priority I women and infants, as defined in current
Program regulations at Sec. 246.7(e)(4)(i). At the time it was
incorporated into the NSA funding formula in 1988, the food funding
formula also included a targeting component. In a time when WIC was
[[Page 54632]]
not able to meet the need for Program benefits, targeting funds to
those State agencies that were serving a greater proportion of high
risk individuals was a necessary objective. Now, however, based on
estimates derived from State-reported participation data, nationwide,
virtually all fully eligible infants are receiving services through the
WIC Program and most fully eligible women are participating at some
point during their pregnancies. Therefore, FNS believes the targeting
component is no longer needed to encourage and support service to
Priority I participants.
The targeting component is based on a complex process, dependent on
State reported data, requiring many computations to calculate a
targeting index by which each State agency's share of targeting funds
is determined. Its effect on the final NSA funding allocation today is
negligible. Therefore, FNS proposes to delete this component. Targeting
was deleted from the food funding formula in a final food funding rule
published in the Federal Register October 6, 1994. Elimination of this
feature from the NSA formula would result in formula consistency. By
deleting the targeting component, 100 percent of the NSA ``fair share''
funds would be allocated based on projected participation levels,
adjusted for State agency size (90 percent) and salary differentials
(10 percent).
Section 246.16(c)(2)(i) NSA Stability Funds
Throughout the deliberations on the possible revisions to the NSA
funding formula, it was recognized that a critical aspect of NSA
funding is the stability component. The stability grant helps to
guarantee, to the extent funds are available, some measure of funding
continuity that acknowledges that State agencies have fixed NSA costs
that are relatively stable from year to year and are necessary for
continued Program operations. In the event that available funding is
insufficient to fund State agencies at their prior year funding level,
each State agency experiences a pro-rata reduction to its grant, as is
done with the food funding formula.
The stability component would be continued in this proposed rule,
with modifications. It is recognized that the funding formula, if
properly designed, should calculate an NSA grant commensurate with a
State agency's NSA funding needs. In the past, discretionary funding
decisions made by FNS may have, over time, unnecessarily inflated the
grant allocations provided to particular States due to additional
funding allocated for large capital expenditures. These discretionary
funds then become a permanent part of a State agency's stability grant
the following year. Therefore, FNS proposes changes to the stability,
or base, grant calculation to eliminate consideration of discretionary
funding (or, as described below, ``operational adjustment funding'')
allocations made in the prior fiscal year.
FNS proposes to revise Sec. 246.16 (c)(2)(i) to provide each State
agency a stability grant equal to its NSA grant from the previous year,
less any discretionary fund adjustments for that year. As is currently
the case, each State agency's stability grant would be reduced by a
pro-rata share if insufficient funds were available.
Section 246.16(c)(2)(ii) NSA Residual Funds
Currently, after NSA stability grants are determined, any remaining
funds available for allocation are referred to as residual funds and
are distributed according to Sec. 246.16(c)(2)(ii) of current Program
regulations. Residual funds represent funding that either: (1) Helps to
cover NSA costs associated with increases in projected participation,
or (2) moves State agencies closer to their ``fair share'' target
funding level. The fair share for NSA funds is an administrative grant
per person (AGP) for each projected participant, adjusted for factors
that affect NSA costs.
FNS proposes that priority for residual funds should be given only
to State agencies below their NSA fair share target funding level. The
fair share principle, which is participant-based, represents the amount
of NSA funds needed by a State agency to support current participation
projections based on the food grant the State agency will receive. The
part of the current regulatory provision which provides funds on the
basis of increased participation countervails the fair share objective
by allocating funds to State agencies which are already over their fair
share funding level.
Therefore, the proposed NSA formula grant for each State agency
would be calculated based on each State agency's fair share target
funding level, which considers the difference between the estimated
cost of projected participation (as adjusted for economy of scale and
salary differential) and the prior year NSA formula grant. If a State
agency's NSA fair share target funding level is greater than its
stability grant, the State agency would be eligible to receive
additional NSA funds proportionate to their respective shortfall from
the fair share target funding level.
Section 246.16 (c)(2)(iii) Discretionary Funds
The success of the WIC Program is due in large part to the
flexibility of the program to accommodate individual State needs and
initiatives. As the WIC Program continues to change and mature, the
responsiveness of the Program to meet State agencies' varying needs and
provide for program innovation becomes more critical.
Section 246.16 (c)(2)(iii) currently requires that ten percent of
each State agency's total NSA grant level be subtracted and aggregated
by region to form the FNS regional discretionary funding pools. In FY
1998, these pools amounted to over $100 million nationally. Each FNS
regional office then allocates the discretionary funds back to State
agencies within the region on the basis of the varying needs of State
agencies and national guidelines. Through the regional allocation of
discretionary administrative funds, the funding process can satisfy
many of the administrative and structural needs not accounted for in
the NSA funding formula (e.g., one-time acquisition costs for
management information systems).
FNS considered the discretionary funding allocation process and the
actual use of these funds. As a result of these considerations, it was
determined that the term ``discretionary'' does not fully represent or
accurately describe the use of these funds, and that many State
agencies must use these funds for operational costs. Therefore, FNS
proposes to change the name ``discretionary funds'' to ``operational
adjustment funds'' (OAF). This change will help clarify that the use of
the funds are for both capital investments as well as operational
activities, and that, in many cases, the funds are a critical part of a
State agency's WIC grant and are needed to support ongoing operations.
The degree to which FNS regions have been inconsistent in the
methodology used to award discretionary fund allocations and the
adherence to national guidelines was also considered. While some
regions have used a competitive process to award the majority of
available discretionary funds, other regions simply returned a large
portion of the available discretionary funds to the State agencies in
their region according to the distribution allocated through the
funding formula. This inconsistency has caused concern as funding for
projects becomes more competitive and funding levels for the program
are being scrutinized. Further, FNS regions including large State
agencies
[[Page 54633]]
contributing to the regional fund have more flexibility than regions
with smaller State agencies. FNS recognizes that regions have various
funding resources and needs and, for most regions, the process employed
for discretionary fund allocations is a mutually acceptable one in
which the State agencies and the regions are satisfied with the
process. After much consideration of this issue, it was decided to
allow up to 10 percent of the total regional NSA funds to be used for
OAF (formerly discretionary fund) allocations. However, regions would
be given the authority to withhold less than 10 percent of the total
regional NSA funds available if deemed appropriate for that region's
needs.
Food Funding Formula
Current Food Funding Provisions--General
The current food funding formula, finalized on October 6, 1994, was
developed for use during a time of participation growth and annual
increases in WIC appropriations. The primary objectives were to: (1)
Provide a greater share of funds to State agencies receiving
comparatively less than their fair share of funds; (2) simplify the
food funding formula and delete obsolete components; and (3) provide
for a level of stability for State agencies. While the current food
funding formula has met those objectives, WIC has now entered a time in
which, at least for the foreseeable future, increases in appropriations
are not likely and emphasis must be placed on shifting available funds
among State agencies to reflect demographic changes in the eligible
population and to reach the maximum number of participants possible
within available Program resources.
The following outlines the current provisions and proposed changes
to the food funding formula:
Section 246.16 (c)(3)(ii) Current Food Stability Component
The stability component of the current food funding formula
provides that each State agency receive its prior year food grant,
adjusted for full inflation, contingent on available resources. If
funding is inadequate to fund all State agencies at this level, each
State agency would receive a reduced stability grant based on a pro-
rata reduction of funds.
The current stability component, in a stable funding environment,
results in little if any additional funding to assist State agencies
that, for historical reasons or due to demographic shifts, do not have
a share of WIC funding proportionate to their share of their eligible
WIC population. These State agencies are considered to be ``under fair
share''. Therefore, FNS proposes that the stability component of the
food funding formula be modified to allow some funds to be available to
allocate to under fair share State agencies to further the objective of
funding equity among State agencies. In a relatively stable funding
environment, mechanisms must be in place to allow for some movement of
funds to correspond to shifts in eligible populations, and the ability
of State agencies to fully utilize available funding to maximize
participation.
Proposed Stability Component
Long consideration was given to stability food funding and whether
full inflation should be guaranteed. Concerns were raised that if State
agencies were not funded with full inflation, prior year end
participation levels may not be sustained, thereby forcing some State
agencies to cut caseload. This concern, however, was countered by the
objective of making available, to the extent possible, additional
funding to under fair share State agencies so that they have the
opportunity to add participants to bring them closer to the level of
service provided by State agencies that have received allocations above
their fair share.
After exploring options available, FNS proposes to modify
Sec. 246.16 (c)(3)(ii) to redefine stability as the prior year food
grant level, without any initial adjustments for inflation. Any funds
remaining after guaranteeing prior year end grant levels would be
split. Fifty percent of the remaining funding would be provided for an
inflation allowance based on the fair share funding level allocated
with the new year appropriation instead of the prior year grant levels
currently used in the formula. The remaining 50 percent would be
allocated to under fair share State agencies to bring them closer to
their fair share level. The funds subject to the 50/50 split would
include current year appropriated funds and unspent recoverable funds
from the prior fiscal year.
These changes to the stability component would ensure that even in
a funding environment in which the Program receives only a modest
increase above prior year grant levels, State agencies with less than
their fair share of funds would continue to receive a greater increase
in funding relative to over fair share State agencies.
We recognize that the 50/50 split of the remaining funds after
prior year grant levels are funded and the inflation calculation are
different than what was discussed with the NAWD Committee. However, we
were persuaded during the review process that a more aggressive
approach was necessary to shift available funds to under fair share
State agencies. Therefore, we are particularly interested in comments
concerning the split of funds and the method used to calculate
inflation adjustments.
To determine the amount of funds allocated to each State agency,
State agencies would initially receive their prior year end food grant
as their stability grant. As is currently done, if funds are
insufficient to fund all State agencies at the prior year end grant
level, each State agency would receive a pro-rata reduction to its
grant. If funds are available in excess of prior year-end grant levels,
50 percent of such funds would be made available to each State agency
for inflation. An inflation allowance will be calculated based on the
difference between each State agency's inflated appropriated fair share
grant level and their appropriated fair share grant level. The
remaining 50 percent of available funds would be allocated to under
fair share State agencies proportionate to their shortfall from their
fair share target funding level. Once all State agencies have received
their target food inflation level, 100 percent of all available funds
would be allocated to under fair share State agencies. If sufficient
funding is available to fund inflation and all under fair share State
agencies up to their fair share target levels of funding, additional
funds would be allocated according to Sec. 246.16 (c)(3)(iii)(B) to any
State agency requesting additional food funds.
Section 246.16 (c)(3)(i)(B) Adjustments for Higher Cost Areas
In calculating the fair share target food level for State agencies,
the regulations permit an adjustment for the higher cost of food for
State agencies located outside of the 48 contiguous States and the
District of Columbia. This adjustment is done to ensure that the share
of funds received by these State agencies is adequate to serve their
share of the eligible population given their higher costs. Currently,
five State agencies receive this adjustment. Current regulations allow
for these adjustments after a State agency demonstrates that it has
successfully implemented voluntary cost containment measures, such as
improved vendor management practices, participation in multi-state
agency infant formula rebate contracts or other cost containment
efforts. FNS believes that the current adjustments
[[Page 54634]]
and conditions under which adjustments may be applied are consistent
with Program objectives and consistent with high cost adjustments
available to States in the National School Lunch Program and the School
Breakfast Program and, therefore, no changes to this component of the
food funding formula are proposed.
Section 246.16 (e) (2) (i) Food Spending Performance Standard
The current food spending performance standard was implemented in
fiscal year 1995. Failure to meet this standard results in an
adjustment of the current year grant. The current standard requires
each State agency to expend at least 97 percent of its food grant.
Typically, State agencies cannot spend 100 percent of their WIC grants
due to factors that are inherent to the Program. For example, because
the federal grant is the only source of funds for WIC in most states,
State agencies must exercise caution to ensure that they do not spend
more than their federal grant. In addition, because State agencies must
estimate the value of vouchers and checks to distribute food benefits,
they cannot determine the Program's actual food costs until the
vouchers and checks have been redeemed and processed. While FNS
recognizes that the structure of the Program may cause some State
agencies to have difficulty meeting this expenditure standard, the
majority of State agencies should be able to expend at least 97 percent
of its food funds in a stable funding environment. Therefore, the 97
percent food spending performance standard would be retained and the
obsolete references to the performance standards for fiscal years 1995-
1997 would be deleted.
Eligibility Data
Data on the number of individuals estimated to be income eligible
for Program benefits is produced annually at the national level. State-
level estimates of income-eligible infants and children are produced
using similar data. These estimates, in turn, are used to estimate the
fair share funding levels for WIC food grants. Much consideration was
given as to the reliability and accuracy of the income eligible data.
Current regulations stipulate at Sec. 246.16(c)(3)(i) that the income
eligible data be calculated by FNS using the best available, nationally
uniform, indicators. FNS continues to believe that the current
methodology is the best available data and proposes no changes at this
time. However, FNS will reevaluate the method for estimating the
potential eligible population if new data sources or methods become
available that could improve the current estimation process.
List of Subjects in 7 CFR Part 246
Food assistance programs, Food donations, Grant programs--Social
programs, Indians, Infants and children, Maternal and child health,
Nutrition education, Public assistance programs, WIC, Women.
For reasons set forth in the preamble, 7 CFR part 246 is proposed
to be amended as follows:
PART 246--SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS
AND CHILDREN
1. The authority citation for part 246 continues to read as
follows:
Authority: 42 U.S. C. 1786.
1. In Sec. 246.16:
a. Paragraph (c)(2)(i) is revised.
b. Paragraph (c)(2)(ii) is revised.
c. Paragraphs (c)(2)(iii) and (c)(2)(iv) are redesignated as
paragraphs (c)(2)(iv) and (c)(2)(v), respectively, and a new paragraph
(c)(2)(iii) is added.
d. Newly redesignated paragraph (c)(2)(iv) is revised.
e. Newly redesignated paragraph (c)(2)(v) is amended by removing
the word ``discretionary funds'' and adding, in its place, the word
``operational adjustment funds''.
f. The heading of paragraph (c)(3)(i) and the first sentence of
paragraph (c)(3)(i)(A) are revised.
g. Paragraph (c)(3)(ii) is revised.
h. The heading of paragraph (c)(3)(iii)and the first sentence of
paragraph (c)(3)(iii)(A) are revised.
i. The first sentence of paragraph (e)(2)(i) is revised.
The revisions and an addition read as follows:
Sec. 246.16 Distribution of funds.
* * * * *
(c) * * *
(2) * * *
(i) Fair share target funding level determination. For each State
agency, FNS will establish, using all available NSA funds, an NSA fair
share target funding level which is based on each State agency's
average monthly participation level for the fiscal year for which
grants are being calculated, as projected by FNS. Each State agency's
projected participation level shall be adjusted to account for the
higher per participant costs associated with small participation levels
and differential salary levels relative to a national average salary
level. The formula shall be adjusted to account for these cost factors
in the following manner: 90 percent of available funds shall provide
compensation based on rates which are proportionately higher for the
first 15,000 or fewer participants, as projected by FNS, and 10 percent
of available funds shall provide compensation based on differential
salary levels, as determined by FNS.
(ii) Stability allocation funding level. To the extent funds are
available and subject to the provisions of paragraph (c)(2)(iv) of this
section, each State agency shall receive an amount equal to 100 percent
of the final formula-calculated NSA grant of the preceding fiscal year,
prior to any operational adjustment funding allocations made under
paragraph (c)(2)(iv) of this section. If funds are not available to
provide all State agencies with their stability allocation funding
level, all State agencies shall have their stability allocation funding
level reduced by a pro-rata share as required by the short fall of
available funds.
(iii) Fair share allocation. Any funds remaining available for
allocation for NSA after the stability allocation required by paragraph
(c)(2)(ii) of this section has been completed and subject to the
provisions of paragraph (c)(2)(iv) of this section shall be allocated
to bring each State agency closer to its NSA fair share target funding
level. FNS shall make fair share allocation funds available to each
State agency based on the difference between the NSA fair share target
funding level and the stability allocation funding level, which are
determined in accordance with paragraphs (c)(2)(i) and (c)(2)(ii) of
this section, respectively. Each State agency's difference shall be
divided by the sum of the differences for all State agencies, to
determine the percent share of the available fair share allocation
funds each State agency shall receive.
(iv) Operational adjustment funds. Each State agency's final NSA
grant shall be reduced by up to 10 percent, and these funds shall be
aggregated for all State agencies within each FNS region to form an
operational adjustment fund. The Regions shall allocate these funds to
State agencies according to national guidelines and shall consider the
varying needs of State agencies within the region.
* * * * *
(3) * * *
(i) Fair share target funding level determination. (A) For each
State agency, establish a fair share target funding level which shall
be an amount of funds proportionate to the State agency's share of the
national aggregate population of persons who are income eligible to
participate in the Program
[[Page 54635]]
based on the 185 percent of poverty criterion.
* * * * *
(ii) Stability allocation. To the extent funds are available, each
State agency shall receive a stability allocation equal to its final
authorized grant level as of September 30 of the prior fiscal year. If
funds are not available to provide all State agencies with their full
stability allocation, all State agencies shall have their full
stability allocation reduced by a pro-rata share as required by the
short fall of available funds.
(iii) Inflation/fair share allocation. (A) If funds remain
available after the allocation of funds under paragraph (c)(3)(ii) of
this section, the funds shall be allocated as provided in this
paragraph. First, FNS will calculate a target inflation allowance based
on the fair share funding level determined for current year
appropriated funds. This fair share funding level is then adjusted by
the anticipated rate of food cost inflation as determined by the
Department. Second, FNS will allocate 50 percent of the available funds
to the State agencies in proportionate shares to meet the target
inflation level. Third, FNS will allocate 50 percent of the available
funds to each State agency which has a stability allocation, as
determined in paragraph (c)(3)(ii) of this section and adjusted for
inflation as determined in this paragraph, which is still less than its
fair share target funding level. The amount of funds allocated to each
State agency shall be based on the difference between its stability
allocation plus target inflation funds and the fair share funding
target level. Each State agency's difference shall be divided by the
sum of the differences for all such State agencies, to determine the
percentage share of the 50 percent of available funds each State agency
shall receive. In the event a State agency declines any of its
allocation under either this paragraph or paragraph (c)(3)(ii) of this
section, the declined funds shall be reallocated in the percentages and
manner described in this paragraph. Once all State agencies receive
allocations equal to their full target inflation levels, any remaining
funds shall be allocated or reallocated, in the manner described in
this paragraph, to those State agencies still under their fair share
target funding level.
* * * * *
(e) * * *
(2) * * *
(i) The amount allocated to any State agency for food benefits in
the current fiscal year shall be reduced if such State agency's food
expenditures for the preceding fiscal year do not equal or exceed 97
percent of the amount allocated to the State agency for such costs. * *
*
* * * * *
Dated: October 1, 1998.
Shirley R. Watkins,
Under Secretary, Food, Nutrition and Consumer Services.
[FR Doc. 98-27282 Filed 10-9-98; 8:45 am]
BILLING CODE 3410-30-P