[Federal Register Volume 63, Number 225 (Monday, November 23, 1998)]
[Notices]
[Pages 64832-64833]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-31224]



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Part VIII





Department of Labor





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Employment and Training Administration



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Welfare-to-Work Grants; Performance Bonus Criteria; Notice

  Federal Register / Vol. 63, No. 225 / Monday, November 23, 1998 / 
Notices  

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DEPARTMENT OF LABOR

Employment and Training Administration


Welfare-to-Work Grants; Performance Bonus Criteria

AGENCY: Employment and Training Administration (ETA), DOL.

ACTION: Notice of Welfare-to-Work performance bonus criteria.

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SUMMARY: The Department of Labor (DOL) is responsible for administering 
Welfare-to-Work Grants as authorized by the Balanced Budget Act of 
1997. This includes developing a formula and accompanying guidelines 
for awarding bonuses to successfully performing States. The Act 
stipulates that bonuses are to be awarded in FY 2000 and based on the 
performance of each State that is a Welfare-to-Work State in 1998 and 
1999. DOL has consulted with the U.S. Department of Health and Human 
Services (DHHS), the National Governors' Association (NGA), the 
American Public Human Services Association (APHSA)--formerly American 
Public Welfare Association (APWA), and State and local welfare and 
workforce officials in drafting these guidelines.

FOR FURTHER INFORMATION CONTACT: Karen Greene, Chief, Division of 
Performance Management and Evaluation, Office of Policy and Research, 
United States Department of Labor, Employment and Training 
Administration, (202) 219-8680--not a toll free number.

SUPPLEMENTARY INFORMATION:

I. Background

    The Balanced Budget Act of 1997 amends the Social Security Act to 
authorize the U.S. Department of Labor to provide Welfare-to-Work 
Grants to States and local communities. The purpose of these grants is 
to create additional job opportunities for the hardest-to-serve 
recipients of Temporary Assistance for Needy Families (TANF) funds. 
Section 5001(a)(5)(E) of the Social Security Act enables successfully 
performing States in the Welfare-to-Work program to qualify for a 
bonus. The bonus shall be awarded by a formula which includes the 
following measures: placement in employment, employment retention, 
increase in earnings of such individuals, and such other factors as the 
Secretary deems appropriate. The formula may take into account general 
economic conditions on a State-by-State basis. The Secretary of Labor 
shall prescribe a performance threshold in a manner that ensures that 
the performance bonus grants to states equal the $100,000,000 set aside 
for this purpose.
    As DOL approaches the development of the Welfare-to-Work 
performance bonus formula and guidelines, certain factors make the 
process unique. The Welfare-to-Work program operates within the broader 
TANF and welfare reform effort. A set of ``High Performance Bonus'' 
guidelines for TANF performance in FY 1998 was issued by DHHS in March 
of 1998 with additional clarification issues August 13, 1998. While 
recognizing the unique nature of Welfare-to-Work grants, it is 
important that these two bonus systems are compatible. As currently 
authorized, the Welfare-to-Work performance bonus is a one-time 
process, unlike the TANF high performance bonus that will be ongoing 
over a period of five years. Thus, the Welfare-to-Work bonus criteria 
may differ from the TANF bonus criteria in certain respects and should 
also remain as straightforward as possible.
    DOL has undertaken broad-based consultation with a workgroup of 
DHHS, NGA, and APHSA and State and local welfare and workforce 
officials to develop a bonus formula and guidelines for awarding the 
performance grants. The workgroup has achieved consensus on a set of 
proposed measures, explored the need and potential for economic 
adjustments, identified procedures for determining the amount of bonus 
awards, and examined the potential data sources for scoring States' 
performance in the context of the anticipated reporting burden.

II. Formula and Guidelines

    This section presents the set of performance measures, the 
anticipated data sources, and the manner in which the bonus system will 
be applied and grant amounts determined.

A. Performance Measures

    The performance measures reflect the three specified in the statute 
and the measures included in the TANF high performance bonus. They will 
include two job entry measures (basic rate and 30+ hour rate) and two 
post-placement measures (job retention and earnings gain).
    1. Job Entry Rate: (a) Basic Rate = the number of participants 
entering employment for the first time divided by the total number of 
participants (i.e. the number of participants entering employment for 
the first time + the number of participants who are not employed + the 
number of participants entering employment not for the first time).
    (b) 30+ Hour Rate = the number of participants entering employment 
of at least 30 hours per week, or increasing hours of subsidized and 
unsubsidized employment to 30 hours per week or greater for the first 
time, divided by the total number of participants (i.e. the number of 
participants entering or increasing to at least 30 hours of employment 
per week + the number who are not employed or who work fewer than 30 
hours per week).
    Explanation: Job entry is a fundamental feature of the Welfare-to-
Work program. Providing two measures recognizes the importance of 
moving the hard-to-employ Welfare-to-Work participants into employment. 
At the same time, additional credit also should be given for promoting 
self-sufficiency by helping participants secure full-time employment, 
or jobs of at least 30 hours per week.
    The time period for the measurement of both job entry measures will 
be from October 1, 1998 through September 30, 1999. This allows for the 
bonus criteria to apply when most States have reached a fully 
operational stage.
    Credit for basic job entry will include both subsidized and 
unsubsidized employment and only the initial job entry for each 
participant in light of the importance of securing an initial 
attachment to the workforce. Basic job entry only counts for those jobs 
obtained while receiving services from a Welfare-to-Work entity. Credit 
for 30+ hour job entry will also include entry into both subsidized and 
unsubsidized employment, but includes an initial placement into a 30+ 
hour job and an increase in hours of weekly employment from less than 
30 to 30 or more hours per week. Credit for 30 + hour job entry will 
include employment under 30 hours not obtained while receiving services 
from a Welfare-to-Work entity if the employment is increased to 30 or 
more hours while receiving services from the Welfare-to-Work entity. 
Unsubsidized employment will be defined as any type of employment that 
does not include a wage subsidy (e.g. a TANF wage subsidy or OJT). 
Subsidized employment counts as long as it is not fully subsidized 
employment or workfare, i.e. the amount paid to the individual exceeds 
the amount of the subsidy.
    2. Job Retention rate = the number of participants employed in 
unsubsidized employment in the base quarter (Quarter 3: April 1 through 
June 30, 1999) who are retained in unsubsidized employment in the 
second subsequent quarter (Quarter 5: October 1 through December 31, 
1999), divided by the number of participants employed in

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unsubsidized employment in the base quarter (Q3).
    3. Earnings Gain rate = the sum of the earnings of participants 
retained in unsubsidized employment in the second subsequent quarter 
(Q5) minus the sum of the earnings of that same group in the base 
quarter (Q3), divided by the sum of the earnings of that same group in 
the base quarter (Q3).
    Explanation: The measures are based on a six-month time frame 
between the base quarter and the measurement quarter because at least 
six months are needed to see any significant earnings gains. The Act 
also suggests that job retention of at least 6 months is an appropriate 
outcome measure to use in evaluating the Welfare-to-Work program. Both 
retention and earnings are based solely on employment in unsubsidized 
jobs in light of the long-term goal of moving participants into 
unsubsidized employment. The third quarter was selected as the base 
period because it allows sufficient time for States to reach a steady 
state of program operations and have substantial numbers of 
participants in an employment retention phase. Measurement is limited 
to a single quarter because of the overall time limits on applying the 
bonus (measuring the FY 99 performance of FY 98 and 99 grantees for 
bonuses to be awarded in FY 2000).

B. Data Sources

    The primary source of data to measure performance for bonus 
purposes will be the participant summary information included on the 
Welfare-to-Work Cumulative Quarterly Financial Status Report. States 
will automatically be considered for the Welfare-to-Work performance 
bonus by submitting the proper information on the Quarterly Financial 
Status Report. The primary source of data for filling out the 
participant information on these quarterly reports is anticipated to be 
Unemployment Insurance (UI) wage records. The recommended and 
preferable data source for earnings and retention measurement is UI 
wage records, with the measures and general approach having been set 
anticipating their use. DOL understands that there will be States that 
cannot or choose not to use UI wage records. States using other data 
sources for retention and earnings gain must justify the sufficiency of 
the other data collection methods to be used.

C. Bonus Allocation

    Weighting the measures. The importance and influence of each of the 
measures can be reflected through the weighting of the measure. During 
the consultation on designing the bonus system, various views were 
expressed and considered. DOL has developed a weighting scheme as 
follows:

Job Entry Rate  60%
    (a) Basic Rate  40%
    (b) 30+ Hour Rate  20%
Retention and Earnings Rate  40%
    (a) Retention Rate  25%
    (b) Earnings Gain Rate  15%

    Applying the formula. Statistical methods based on the distribution 
of States' performance levels for each performance measure will be 
used, both to determine which States can receive a bonus and to 
calculate the bonus amounts.
    Determining eligibility. Each State's eligibility for receiving a 
bonus will be determined by a point system based on the extent to which 
the State performs above or below the national average for each 
measure. Assuming a normal distribution, a State will receive zero 
points for each measure on which it performs average or below average; 
one point for each measure on which it performs above average; and two 
points for each measure on which it performs significantly above 
average. If a State scores significantly below average on a specific 
measure, it will receive a score of negative one on that measure. In 
order to qualify for the bonus, a State must receive at least one point 
on one of the two job entry measures, plus at least one point on either 
the job retention or earnings gain measure. The extent of the standard 
deviation from the mean for each measure will be the basis for what 
determines above average (mean to one standard deviation above the 
mean), significantly above average (one or more standard deviations 
above the mean), and significantly below average (one or more standard 
deviations below the mean) performance.
    Determining bonus amounts. Each State that qualifies for a bonus 
will be assigned a score according to the formula:

(W1)(X1) + (W2)(X2) + (W3)(X3) + (W4)(X4) = total score

(Where W represents the weight of the measure and X represents the 
score for each measure)

For example, if a State scores a 1 on basic job entry, 0 on 30+ hour 
job entry, a 2 on retention and
a 1 on earnings gain, their score would be: (40)(1) + (20)(0) + (25)(2) 
+ (15)(1) = 105

    States will then be grouped according to their scores. Top 
performers (135-200 points) will receive a set percentage of their 
original Welfare-to-Work grant amount. Second-level performers (100-134 
points) and third-level performers (35-99 points) will receive 
proportionately lower percentages. Applying the percentages to the 
State's formula grant amount will scale the award to the size of the 
State. Percentages will be set based on final performance data in a 
manner that provides for the full distribution of the $100,000,000 set 
aside for the bonus as required by the Act.
    In order to avoid a single State receiving a disproportionately 
large bonus grant, caps are set at no more than 25% of a State's 
formula allotment, and no state may receive more than $20,000,000 (20% 
of the bonus money available).
    Equity adjustments. DOL, based on the consultation process and past 
experience with providing adjustment approaches for performance 
standards, acknowledges the need to take into account the different 
economic circumstances in States and localities. The two most important 
factors expected to influence performance are the unemployment rate 
statewide and the unemployment rate in areas of the State with a high 
concentration of Welfare-to-Work participants. There is no comparable 
program able to provide a database that would allow the development of 
a statistical model to confirm that assumption. Once performance data 
are received, they will be analyzed to determine the extent to which 
these or other economic factors influence program performance, and 
appropriate adjustments will be taken under consideration in the 
assessment of a State's performance. A supplemental notice outlining 
more specific unemployment adjustment procedures will be published as 
soon as it is available.

    Signed at Washington, DC this 18th day of November 1998.
Dennis Lieberman,
Director, Office of Welfare to Work.
[FR Doc. 98-31224 Filed 11-20-98; 8:45 am]
BILLING CODE 4510-30-P