[Federal Register Volume 65, Number 122 (Friday, June 23, 2000)]
[Rules and Regulations]
[Pages 39234-39250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-15714]



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Part II





Department of Health and Human Services





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Administration for Children and Families



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45 CFR Part 284



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

  Federal Register / Vol. 65, No. 122 / Friday, June 23, 2000 / Rules 
and Regulations  

[[Page 39234]]


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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 or 
Territory's Child Poverty Rate Is the Result of the TANF Program

AGENCY: Administration for Children and Families, HHS.

ACTION: Final rule.

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

EFFECTIVE DATE: This rule is effective August 22, 2000.

FOR FURTHER INFORMATION CONTACT: Sean Hurley at (202) 401-9297 or 
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 8:00 a.m. and 7:00 p.m. 
Eastern time.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Statutory Provisions and Regulatory History
II. Provisions of the NPRM
III. Comment Overview
IV. Discussion of the Final Rule
A. Response to Comments on Cross-cutting Issues and Issues Not Tied 
to the Regulatory Text
1. Intent of the statute and the relationship between the TANF 
program and child poverty
    2. Tribal TANF programs and section 413(i) of the Act
    3. Recommendations to improve the national poverty measure
    B. Summary of the Final Rule
    C. Section-by-Section Discussion of the Regulatory Text
V. Regulatory Impact Analyses
    A. Executive Order 12866
    B. Regulatory Flexibility Analysis
    C. Assessment of the Impact on Family Well-Being
    D. Paperwork Reduction Act
    E. Unfunded Mandates Reform Act of 1995
    F. Congressional Review
    G. Executive Order 13132

I. Statutory Provisions and Regulatory History

    On September 23, 1998, the Administration for Children and Families 
(ACF) published a Notice of Proposed Rulemaking to implement section 
413(i) of the Social Security Act (63 FR 50837). This section of the 
Act is a part of the welfare reform block grant program known as 
Temporary Assistance for Needy Families, or TANF.
    The TANF program was added to the Social Security Act by the 
Personal Responsibility and Work Opportunity Reconciliation Act of 1996 
(PRWORA), signed by President Clinton on August 22, 1996. The first 
title of this new law, ``Block Grants for Temporary Assistance for 
Needy Families'' (sections 101-116, Pub. L. 104-193) established a 
comprehensive welfare reform program designed to change dramatically 
the nation's welfare system into one that promotes work and 
responsibility. The new program is called Temporary Assistance for 
Needy Families 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 
program and Emergency Assistance.
    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 (including Territories), 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. It also challenges them to develop strong interagency 
collaborations and improve their partnerships with legislators, 
advocates, businesses, labor, community, and faith-based groups, and 
other parties that share their interest in helping needy families 
transition into the mainstream economy.
    This legislation also gives States and Tribes the authority to use 
Federal welfare funds ``in any manner that is reasonably calculated to 
accomplish'' one or more of the four purposes 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 innovative ideas so they can respond more 
effectively to the needs of families within their own unique 
environments.
    One of the concerns of Congress in passing PRWORA, however, was the 
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. Congress was also concerned that 
States might take an overly-cautious approach to implementing the new 
law and, for example, not take advantage of the opportunities under the 
TANF program to use new ways to assist families to obtain and retain 
employment and increase economic capability.
    To address these concerns, Congress added section 413(i) (42 USC 
613(i)) to the Social Security Act (the Act)). Specifically:
     Section 413(i)(1) of the Act requires the Chief Executive 
Officer of each State (including the Territories) to submit annually to 
the Secretary a statement of the child poverty rate in the State. The 
first statement, due May 31, 1998, was required to 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 five percent or more 
from the previous year as a result of the TANF program(s) in the State, 
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 will 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

[[Page 39235]]

households; and, to the extent available, the county-by-county 
estimates of children in poverty as determined by the Census Bureau.
    On May 29, 1998, the Administration for Children and Families (ACF) 
issued a Program Instruction to States (and Territories operating a 
TANF program) clarifying that the State and the Territory need not 
submit a statement of its child poverty rate to us by May 31, 1998, as 
specified in the statute. We explained that we planned to send to each 
jurisdiction the Census Bureau estimate of the number of children in 
poverty and that we would be publishing an NPRM in the near future. See 
TANF-ACF-PI-98-4.

II. Provisions of the NPRM

    Prior to development and publication of the Notice of Proposed 
Rulemaking (NPRM), we held two types of consultations. First, we raised 
issues related to this provision in the general TANF consultation 
meetings with representatives of State and local government; nonprofit, 
advocacy, and community organizations; foundations; and others. Second, 
we held consultations focused specifically on this provision with 
national organizations representing State and local elected officials; 
technical, statistical, and policy experts; and representatives of 
research, advocacy, and public interest organizations that focus on 
poverty and child economic well-being. These discussions were helpful 
to us in identifying key issues and evaluating policy options.
    In the NPRM, we discussed issues raised during our consultations, 
including: Measurement of Child Poverty and the Census Bureau Data, Use 
of the County-By-County Estimates of Children in Poverty in the 
Methodology, Use of Food Stamp Data in the Methodology, Use of Free and 
Reduced-Price School Lunch Data in the Methodology, Relative Importance 
of Various Factors in the Proposed Methodology, and Clarification of 
the Term ``Five Percent Increase.''
    In the NPRM, our approach to establishing a methodology for 
determining a State child poverty rate was based on several principles: 
Using the most reliable and objective data on child poverty currently 
available (and thus avoiding a requirement that each State or Territory 
must develop its own child poverty rate); assuring that the child 
poverty rate was assessed in relation to the TANF program in the 
context of all appropriate circumstances in the jurisdiction; and 
limiting administrative burden by requiring that States and Territories 
provide only those data readily available and necessary to implement 
the statute.
    We proposed a sequential methodology consisting of five major 
steps. Not all States or Territories would be required to participate 
in all steps. The proposed methodology for the Territories was similar 
to that for the States but included some necessary modifications.
    We based our methodology on the estimates of child poverty (the 
child poverty rate) developed by the Census Bureau. The Census Bureau's 
child poverty rate is the official United States child poverty rate.

Proposed Step 1

     Annually, we would 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, based on Census Bureau 
data. This estimate would be for the calendar year two years prior to 
the current calendar year, e.g., in 1998, we would provide an estimate 
for calendar year 1996. The Census Bureau estimates would incorporate 
county-level estimates of poverty.
     In 1999, and annually thereafter, we would 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 and provide this information to the State. 
In 1999, we would provide data comparing calendar years 1996 and 1997.

Proposed Step 2

     If the child poverty rate in a State did not increase by 
five percent or more, we would conclude that the State has met the 
requirements of section 413(i) of the Act, and the State would not be 
required to submit further information for that two-year period. (A 
five percent increase would mean that the most recent child poverty 
rate is at least five percent higher (i.e., 1.05 times higher) than the 
previous year's rate. A five percent increase did not mean a five 
percentage point increase.)
     If the child poverty rate in a State increased by five 
percent or more, we proposed to require that the State provide 
supplemental information to adjust, explain, or account for this 
increase. We proposed that the State, within 60 days--
    a. Must provide data on the average monthly number of households 
with children that received food stamp benefits for each of the two 
most recent calendar years for which data are available;
    b. 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
    c. May provide, at State option, other information covering any 
pertinent time period, such as the proportion of students certified for 
free or reduced-price school lunches or estimates of child poverty 
derived from an independent source.
    Alternatively, if a State chose to accept the increase in child 
poverty as indicated by the Census Bureau data, it could skip steps two 
and three and move directly to step four--the assessment of the impact 
of the TANF program on the increase in child poverty.

Proposed Step 3

     We would review the food stamp and other data provided by 
the State. If we determined that these data indicated 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 would indicate that the child poverty rate in the 
State was improving.

Proposed Step 4

     If we determined that the food stamp and other data 
provided by the State did not indicate a subsequent commensurate 
decrease in child poverty, we proposed 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 TANF 
program in the State on the child poverty rate. We proposed to give the 
States and Territories broad latitude in the information they could 
provide.

Proposed Step 5

     We would review the information provided by the State, 
along with other information available such as the State's TANF plan 
and eligibility criteria, data on other supportive services and 
assistance programs, and information on the State's economic 
circumstances. If we determined that the increase in the child poverty 
rate was the result of the State's TANF program, we would notify the 
State that it would be required to submit a corrective action plan 
within 90 days.

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Proposed Methodology for the Territories

     To the extent that data are available and the procedures 
applicable, we proposed that the Territories would be subject to the 
same general methodology as described for the States. Because the 
Census Bureau does not estimate a child poverty rate for the 
Territories, we proposed that ACF would compute an estimated child 
poverty rate for each Territory, based on information submitted by the 
Territory.
     Subsequent procedural steps would be the same as for 
States, i.e., as applicable, we would review supplemental data to 
determine whether the child poverty rate increased by five 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.
    Based on this proposed methodology, we anticipated that a small 
number of States and Territories would need to respond to the 
requirements of each step and an even smaller number would be required 
to submit a corrective action plan.

III. Comment Overview

    We received 14 comment letters on the NPRM from seven State TANF 
agencies, four national organizations, two State and local policy and 
advocacy organizations, and one United States Senator. We reviewed and 
seriously considered all comments. We particularly appreciated the fact 
that several commenters went beyond reacting to the proposed regulatory 
text to include a helpful discussion of the issues raised in the 
preamble and additional supportive and analytic information.
    In general, most commenters had mixed views on our proposed 
approach. They commended our external consultation process prior to the 
development of the rule and our ``reader-friendly'' regulations, given 
the highly complex and technical nature of the subject. Several 
commenters agreed with specific policy provisions, e.g., our use of the 
Census Bureau data, our recognition of the limited usefulness of the 
school nutrition program data, and the flexibility we proposed to allow 
States regarding what information the State could include in its 
assessment of the impact of the TANF program on child poverty or in the 
corrective action plan.
    At the same time, we also received some objections to our proposed 
approach and recommendations for changes. The strongest objections were 
directed at our proposal to allow a State whose child poverty rate had 
increased by five percent or more to provide food stamp participation 
data in order to adjust for deficiencies in the Census Bureau data. Our 
rationale in the NPRM was that food stamp participation data (which 
historically had tracked the poverty rate) could be used to show 
evidence of more recent trends that would explain or ``rebut'' the 
increase in child poverty. Commenters pointed out that the food stamp 
participation rate, indeed, had tracked poverty in the past but that 
recent evidence indicated that it no longer did so. They urged the 
deletion of this provision. Others objected to this provision on the 
grounds of administrative and reporting burden.
    Two commenters objected to what they believed were implicit 
assumptions in the statute, i.e., that child poverty is the result of 
the TANF program or that the TANF program could affect child poverty in 
any meaningful way. Others objected to the additional administrative 
burden of specific provisions and questioned several technical 
provisions, e.g., our use of the 80-percent confidence interval in 
determining the child poverty rate.
    Some commenters called to our attention that we had not addressed 
the role of the Tribal TANF programs in implementing this section of 
the Act. Some recommended that we clarify that States may exclude the 
Tribal TANF population in the calculation of the State's child poverty 
rate.
    In addition, one advocacy organization urged us to focus not only 
on a five percent increase in the child poverty rate but also to 
address the ``poverty gap,'' i.e., the depth of poverty for those 
children below the poverty level. Finally, two national organizations 
recommended a number of steps the Department might take to help improve 
the national child poverty measure and, thus, better implement the 
overall intent of the statute.
    We have organized our response to the comments, first, to address 
the issues that are cross-cutting and are not tied to regulatory text 
and, second, to address other issues in the section-by-section 
discussion of the regulatory text.

IV. Discussion of the Final Rule

A. Response to Comments on Cross-cutting Issues and Issues Not Tied to 
the Regulatory Text

1. The Intent of the Statute and the Relationship Between the TANF 
Program and Child Poverty
    Comments: A number of commenters expressed differing views on the 
purpose of section 413(i) of the Act and the NPRM. One commenter 
assumed that the purpose of the statute and the regulation was to 
decrease child poverty nationally. Other commenters believed that the 
intent of the law was to monitor child well-being and track changes in 
the child poverty rate related to PRWORA. Some commenters objected to 
what they believed were implicit assumptions in section 413(i), i.e., 
that the child poverty rate was the result of the TANF program (a 
``cause and effect relationship'' was assumed to exist), or that the 
TANF program could affect child poverty in any meaningful way. One 
commenter found the statute and the NPRM ``grossly flawed'' based on 
this implicit assumption.
    One commenter stated that, as was true in the Aid to Families With 
Dependent Children (AFDC) program, the TANF program is not explicitly 
designed to elevate families above the poverty level. Rather, its 
purpose, they believed, is to provide a set of financial and service 
supports, coupled with an assumption of personal responsibility, that 
will provide the opportunity for a family to become self-sufficient. 
Except in circumstances where the State's TANF payments exceed the 
poverty rate, this commenter alleged that all children receiving TANF 
will already have incomes beneath the poverty level.
    Therefore, because all the affected persons are already counted as 
living beneath the poverty level, no change to the operation of the 
TANF program, whether it be reducing TANF payments, failing to move 
families to employment, or terminating families' eligibility for TANF, 
would increase the poverty rate.
    They concluded that only positive changes made by the TANF program, 
such as successful employment programs which move recipients to 
relatively high paying jobs, could affect the child poverty rate. 
Significant changes in the poverty rate, they believed, are necessarily 
the result of factors extrinsic to TANF, such as economic and 
demographic shifts. Thus, it appeared to this commenter that neither 
the statute nor the regulations could be implemented in any meaningful 
way.

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    Response: We disagree with the observation that ``all children 
receiving TANF will already have incomes below the poverty line.'' 
Based on AFDC data, we know that, typically, a family may have income 
below the poverty line in a specific month (or months), but family 
income would not necessarily fall below the poverty line on an annual 
basis.
    However, we agree that the intent of the statute reflects 
Congressional concern about PRWORA's effects on the well-being of 
children, including children who no longer receive TANF benefits. 
Section 413(i), as well as other provisions of the law, were added to 
provide a careful look at what is happening to children following 
enactment of this legislation. Clearly, certain TANF program and policy 
decisions could contribute to an increase in poverty. Finally, and more 
importantly, we note that there are positive actions that State and 
Tribal TANF agencies can take to help improve the poverty status and 
well-being of families.
    The child poverty rate in the United States, developed by the 
Census Bureau, is a frequently used indicator of child well-being. (The 
``child poverty rate'' means the percentage of all children in a State 
that live in families with annual incomes below 100 percent of the 
Census Bureau's poverty threshold.)
    The national child poverty rate has declined since 1992 from 22.3 
percent to 18.9 percent, the largest five-year drop in nearly 30 years. 
Still, currently, 13.5 million children live below the poverty line. At 
the same time, a recent Census Bureau report found that, among 
Americans living below the poverty line, a greater share held jobs than 
at any point in the last 20 years. The Census Bureau found that, in 
1998, 12.5 percent of poor adults worked full-time (a 22 percent 
increase over 1997), and another 41 percent worked part-time.
    In the context of the TANF program, employment is central to 
assisting families to escape poverty. States have made huge progress in 
moving families to work; large increases in employment are evident from 
every information source. However, for many families, work by itself 
will not guarantee an escape from poverty unless other critical 
supports are in place. Thus, the challenges are to continue the 
movement of families into work, build supports that can sustain parents 
in work, and help them move to more enduring and higher paying jobs, so 
that families who work will not be poor.
    The TANF program, as opposed to the AFDC program, allows States to 
provide a broad array of supports for working families and to provide 
them independently of the basic cash welfare system. Unlike AFDC, TANF 
can be an effective vehicle for reducing poverty, supporting families, 
and making work pay.
    A number of innovative States are using child poverty as a measure 
of their efforts to assist families, and some States are already using 
the resources and flexibility under TANF to address this issue. Some 
activities that specifically address poverty include:
     Under TANF, utilizing well-known strategies to supplement 
work, such as more generous earning disregards, earnings supplements, 
and wage subsidies;
     Improving child support, such as increasing the amount of 
support collected from non-custodial parents that is passed through to 
children; and
     Enacting State refundable tax credits.
    Recent research findings from studies in Minnesota and Oregon 
support the use of these specific strategies in reducing poverty.
    In addition to these activities directly related to reducing 
poverty, States are undertaking a number of supportive activities which 
indirectly help make work pay, including:
     Taking critical steps to ensure that eligible families, 
including those that do not receive TANF, do receive food stamps and 
Earned Income Tax Credit payments for which they are eligible;
     Increasing the stability of work through investments in 
the wages parents earn or the hours they work, such as employer 
partnerships that focus on the first job, on job advancement after the 
first job, or on combinations of work and training; mentoring and case 
management strategies; strategies that combine work, education, and 
training; and supported work for families with barriers to private 
sector employment;
     Helping families during periods between jobs, such as 
quick re-employment services; and
     Providing employment assistance for other families, such 
as a child-only family where a caretaker relative is not receiving 
assistance.
    We are continuing to monitor what is happening to children and 
families as a result of the enactment of the TANF program. In addition 
to section 413(i), we are looking at State performance and 
accomplishments through the High Performance Bonus and the Out-of-
Wedlock Childbearing Bonus. We are also sponsoring a variety of 
research studies and evaluations to assess the impact of welfare 
reform, e.g., we are measuring the effects of different approaches to 
welfare reform on child well-being, and numerous studies are tracking 
families leaving TANF.
2. Tribal TANF Programs and Section 413(i) of the Act
    Comments: As several commenters pointed out, we did not address the 
issue of child poverty in areas covered by Tribal TANF programs in the 
NPRM. They asked for clarification in the final rule on how Tribes 
operating TANF programs will be considered in the poverty rate 
calculation and recommended that we allow States to exclude the Tribal 
TANF population in the calculation of a State's child poverty rate. 
These commenters also indicated that it was unfair to hold the State 
TANF program accountable for the Statewide child poverty rate when the 
State has no authority over or responsibility for the conduct of the 
TANF program in areas of the State covered by a Tribal TANF program(s).
    Response: Section 413(i) of the Act specifies the responsibilities 
of the Chief Executive Officer of the State in relation to increases in 
the child poverty rate and the TANF program(s) in the State. Section 
413(i)(2) also provides that an assessment of the increase in the 
State's child poverty rate shall be made in relation to ``the 
amendments made by section 103 of PRWORA.'' Because section 103 of 
PRWORA authorizes both State and Tribal TANF programs, the Chief 
Executive Officer must address increases in the State's child poverty 
rate in relation to both State and Tribal TANF programs in the State.
    We do not accept the recommendation that the States may exclude the 
Tribal TANF population in a calculation of a ``State'' child poverty 
rate. We could not implement this recommendation because the statute 
clearly specifies that both State and Tribal TANF programs must be 
considered. In addition, the Census Bureau does not determine a 
separate child poverty rate for Tribal lands or reservation areas.
    In response to comments, however, we have amended three sections of 
the final rule. Specifically, we have:
     Amended Sec. 284.15(b) to provide that the State should 
obtain information from and work with any Tribe(s) (and Tribal 
consortia) operating a Tribal TANF program in the State in preparing 
and submitting the assessment of the impact of TANF programs on the 
increase in child poverty and the corrective action plan;
     Added, in Sec. 284.30(b), examples of Tribal TANF 
information that might appropriately be included in the assessment;

[[Page 39238]]

     Extended, in Sec. 284.21, the period of time the State has 
submit the assessment, from 60 days to 90 days, in part to allow 
further opportunity for State and Tribal coordination; and
     Specified in Sec. 284.45 that any actions to reduce child 
poverty to be taken by the Tribe(s) must be included in the corrective 
action plan.
    In the context of State and Tribal cooperation, we note that there 
are 330 American Indian entities in the contiguous 48 States and 13 
Alaska entities eligible to administer a Tribal TANF program. 
Currently, there are 21 approved Tribal TANF plans in operation. (One 
additional Tribal TANF plan is approved but not yet in operation.) 
Nineteen of these programs involve individual Tribes and three are 
operated by inter-tribal consortia. (One consortium in California is 
composed of 19 Tribes; another consortium is composed of 37 Alaska 
Native villages (Tribes); and the third consortium is made up of 20 
Alaska Native villages (Tribes).) Additional Tribes are exploring the 
option of operating a TANF program.
    Both State and Tribal TANF programs serve Indian families. Based on 
the most recent data available from 1999, Indian tribes expect to serve 
approximately 3,800 families in FY 2000. In FY 1998, approximately 
46,702 American Indian families were served by State programs. In 
several States, American Indians constitute a large percentage of the 
State TANF caseload, i.e., 73 percent of South Dakota's TANF caseload, 
54 percent in North Dakota, about 41 percent in Alaska, and over 46 
percent in Montana.
    Tribes that operate a TANF program have the flexibility to design 
programs and services; define eligibility criteria; establish benefits; 
and design strategies for achieving program goals, including helping 
recipients become self-sufficient.
    Welfare reform also provided Tribes and States with new 
opportunities for communication, coordination, and collaboration to 
help achieve program goals. One of the most important ways States have 
been working with Tribes to address the issue of poverty is by making 
State supplemental contributions to Tribal TANF programs (as a 
maintenance-of-effort (MOE) expenditure) to expand job-related 
activities and strengthen Tribal programs for families and children. In 
addition, a number of States and Tribes are also entering into a range 
of cooperative efforts, including:
     Sharing equipment and resources, such as computers;
     Co-locating service centers and sharing office space;
     Conducting joint staff training;
     Coordinating information, reporting requirements, and 
reporting systems;
     Establishing consolidated intake and eligibility 
determinations, particularly for the food stamp, Medicaid, and State 
Children's Health Insurance Programs; and
     Cooperating in the provision of direct services (e.g., job 
skills training) and supportive services, e.g., transportation.
    The preparation and submittal of an assessment and a corrective 
action plan are additional opportunities for State and Tribal 
coordination, both in meeting the requirements of section 413 of the 
Act and meeting the needs of Indian families. We believe the additional 
time provided to submit the assessment will help support such 
coordination.
3. Recommendations To Improve the National Poverty Measures
    Comment: Two national advocacy organizations recommended that the 
U.S. Department of Health and Human Services (DHHS) should take full 
advantage of the opportunities afforded by PRWORA and section 413(i) of 
the Act to actively explore activities that would expand and improve 
the Census Bureau's existing measure of child poverty. They believed 
that the most important purpose of section 413(i) of the Act is to 
require a careful look at what is happening to the well-being of 
children following enactment and implementation of TANF. The 
measurement of child poverty, therefore, provides a useful means of 
evaluating changes in child well-being at the State level. Improved 
measures will support this effort.
    Generally, these organizations recommended that the Census Bureau's 
child poverty estimates include data from both current and new sources 
and that currently available data from other sources should be used (in 
conjunction with the official poverty measure) to focus increased 
public attention on child poverty. Specifically, they recommended that 
DHHS:
     Support research now underway to implement the 
recommendations of the National Academy of Sciences panel on poverty 
measurement;
     Support funding needed to field the Census Bureau's 
American Community Survey which is designed to provide more timely 
State-level data than the decennial census and more accurate State-
level data than the Current Population Survey;
     Explore ways to use currently available data to improve 
the existing poverty measure and to add new data to the measure as they 
become available, e.g., modify the Census Bureau's Small Area Income 
and Poverty Estimates by adding data on food stamps, housing benefits, 
earned income tax credits, and work expenses;
     Encourage States to better assess the well-being of their 
children and make the data more generally useful by participating in 
the increased costs of expanding the Current Population Survey (CPS) 
sample size at the State level;
     Encourage and fund efforts by States to develop 
administrative databases for measuring child well-being within their 
own jurisdictions;
     Use data already collected by the Census Bureau to show 
the impact of specific programs such as TANF by comparing child poverty 
before and after receipt of means-tested government transfers; and
     Publish measures of the poverty gap among children to 
provide an indication of the depth of poverty, at least at the national 
level.
    Response: While we generally agree that these recommendations would 
help to improve the Census Bureau's measurement of child poverty and 
understand the circumstances of children in poverty, the Department 
already participates in a number of inter-agency and Departmental 
efforts that address these recommendations:
     In May 1995, the Panel of Poverty and Family Assistance 
appointed by the National Research Council published a report in which 
it proposed a new approach for developing an official measure of 
poverty in the U.S. Since that time, personnel from the Census Bureau, 
the Bureau of Labor Statistics, and other Federal agencies (including 
DHHS) have been engaged in research to explore possible implementation 
of the Poverty Panel's recommendations.
     In 1997, the Office of Management and Budget convened a 
Federal Interagency Technical Working Group to Improve the Measurement 
of Income and Poverty that includes representatives from DHHS. In July 
1999, the Census Bureau issued a report on experimental poverty 
measures, reflecting the results of ongoing research. However, none of 
these experimental measures has been selected to replace the current 
official definition because a number of issues remain unresolved. The 
review of alternative poverty measures is expected to carry on for 
several years. We will continue to work with this group and other 
interested public and private organizations to develop improved 
measures of child poverty.

[[Page 39239]]

     Also at an inter-agency level, the National Science and 
Technology Council's ``Children's Initiative Subcommittee'' continues 
to explore the most effective use of Federal resources for research 
focused on child poverty as well as other issues related to the well-
being of America's children.
    In addition, the Department is:
     Transferring funds to the Census Bureau to allow for the 
expansion of State and local estimates of poverty to include children 
ages 0 to 4;
     Financing a research effort to advance State Child 
Indicators Initiatives. The aims of this program are to: (1) Promote 
State efforts to develop and monitor indicators of the health and well-
being of children as welfare reform and other policy changes occur; and 
(2) help to institutionalize the use of indicator data in State and 
local policy formulation; and
     Funding two national poverty research centers: The 
Institute for Research on Poverty located at the University of 
Wisconsin at Madison and The Joint Center for Poverty Research, co-
located at the Northwestern University and the University of Chicago. 
These national nonprofit, non-partisan centers focus their research on 
the causes and consequences of poverty and inequality and on 
interventions to reduce poverty and dependence and help focus on and 
contribute to the knowledge about this important issue.
    In response to the recommendation for publication of information on 
poverty, particularly the poverty gap, these data are available from 
the Census Bureau's Internet site (www.census.gov) along with 
information on how to obtain more detailed data files. ACF also 
publishes poverty gap information in its annual TANF Report to 
Congress.

B. Summary of the Final Rule

    Our principles, first established in the development of the NPRM, 
remain the same for the final rule: Use the most recent, reliable, and 
objective data available; assess the impact of the TANF program(s) in 
the State on any increase in the child poverty rate of five percent or 
more in the context of all appropriate information; and require minimal 
administrative burden on States and Territories in carrying out these 
requirements.
    In the final rule, we retained some policies as proposed in the 
NPRM and made several changes and modifications, based on our 
consideration of public comments. We address these policies and changes 
in the section-by-section discussion. Briefly, however, we:
     Continue to base the State child poverty rate on the 
current Census Bureau estimates, but, if better Census Bureau data 
become available, we will use these data;
     Will provide to States, in 2000, the Census Bureau's 
estimate of the number and percent of children in poverty in each State 
for calendar year 1997 and the change in the percentage of children in 
poverty between 1996 and 1997, at the 90-percent confidence level 
rather than the 80-percent confidence level proposed in the NPRM. (We 
provided the calendar-year 1996 Census Bureau estimates of children in 
poverty in each State to the Chief Executive Officer of the 50 States 
and the District of Columbia on December 21, 1999. We also sent a copy 
of this information to the director of each State's human services 
agency.);
     Allow a State to submit an estimate of the State's child 
poverty rate, derived from an independent source; we will accept the 
State's estimate if it is more reliable than the Census Bureau data;
     Eliminated the step in the NPRM that used food stamp 
participation rate data to ``rebut'' an increase in the child poverty 
rate;
     Continue to allow a State wide latitude in how it conducts 
its assessment of the impact of the TANF program(s) in the State on an 
increase in the State's child poverty rate;
     Allow a State 90 days to submit the assessment, an 
additional 30 days beyond the 60-day period proposed in the NPRM;
     Continue to allow States to develop the content and 
determine the duration of the corrective action plan in accordance with 
the law;
     Clarify that a State should obtain information from and 
work with the Indian tribes (or Tribal consortia) operating a TANF 
program in the State in preparing and submitting the assessment and the 
corrective action plan; and
     Postpone the development of a child poverty rate for the 
Territories (i.e., Guam, Puerto Rico, and the Virgin Islands) until 
reliable data are available. (At the present time, American Samoa has 
not applied to implement the TANF program.)

C. Section-by-Section Discussion of the Regulatory Text

Section 284.10--What Does This Part Cover?

    In the NPRM, this section provided a summary of the scope and 
content of part 284. We received no comments on this section.
    We made two editorial changes in the final rule for clarity. First, 
we added the word ``Territories'' to make explicit that this part 
applies to States and Territories. Second, we substituted the phrase, 
``as a result of the TANF program(s) in the State or Territory'' for 
the phrase ``as a result of TANF.'' This latter change emphasizes that 
an increase in the State's child poverty rate will be assessed in 
relation to all TANF programs(s) in the State, i.e., both State and 
Tribal TANF programs.

Section 284.11--What Definitions Apply to this Part?

    This section of the NPRM proposed the definition of terms we used 
in part 284. We received one comment on this section indirectly related 
to our definition of ``children in poverty.'' We had defined this term 
to mean ``estimates resulting from the Census Bureau methodology of the 
percent of children in a State that live in families with incomes below 
100 percent of the federal poverty level.'' These estimates, developed 
by the Census Bureau, constitute the official U.S. child poverty rate.
    In our external consultations prior to the development of the NPRM, 
we noted that several agencies and organizations recommended that, in 
addition to statutory requirements, we also focus on the percent of 
children in families with income levels at or below 50 percent of 
poverty. We considered regulating beyond the provisions of the statute, 
but found that the current Census Bureau methodology would require 
significant revision and would be much less effective in estimating 
poverty at levels lower than 100 percent. However, we invited public 
comment about the advisability and desirability of pursuing such an 
approach.
    Comment: The advocacy organization which responded to this issue 
pointed out that measuring a five percent increase in the child poverty 
rate, as required by law and as proposed in the definition of children 
in poverty in the NPRM, will not present a complete or accurate picture 
of the effects of TANF on poor children. They were concerned that 
changes brought about by State TANF policies could negatively impact 
the lives of children whose families were already below 100 percent of 
the poverty level before the TANF program began. They provided two 
examples to illustrate this point:
     In States whose pre-TANF cash assistance standards were 
below the federal poverty level, children in TANF families were already 
included in the State's poverty rate. Reductions in the amount of 
assistance caused by TANF-related changes, or even failure of the 
assistance standard to keep pace with

[[Page 39240]]

inflation, would worsen the family's poverty but would not be reflected 
as a change in the poverty rate and, thus, not measure the impact of 
the TANF program on children and families.
     The flexibility offered to States under the TANF program 
means that a State could make major policy changes that might 
negatively affect families. For example, a State might count the 
benefits from other programs (such as Supplemental Security Income 
(SSI)) as available income. Such a policy could make a family 
ineligible for TANF. In this case, a family could go from receiving low 
assistance to no assistance and still not be identified as having been 
affected by TANF-related changes.
    This organization was also concerned about the inequities of the 
proposed five percent increase and our definition. For example, in 
States where the poverty rate is high, a five percent increase means 
more children have fallen into poverty before corrective action is 
taken than in States whose initial poverty rates are low.
    They strongly recommended that we develop measures that would not 
only identify the number of children in families below the poverty 
level, but would also reveal the depth of their poverty, i.e., the size 
of the ``gap'' between family income and 100 percent of the official 
poverty level. They also recommended that the final rule focus on any 
State where the child poverty rate is high, regardless of whether that 
rate increased by five percent or more.
    Response: We carefully considered these comments in developing the 
final rule. We agree with this commenter that child poverty is a 
serious issue and that poverty at the deepest levels is an even more 
serious issue. We are committed to, and concerned with, the well-being 
of children and families, and undertake a wide range of activities to 
improve the lives of children and families, as do a number of other 
public and private agencies and organizations. However, given the 
specific requirements of the statute and our lack of regulatory 
authority to impose requirements not specified in the law, we did not 
accept this recommendation. For the purpose of public information, as 
noted earlier, we publish the poverty gap information in our Annual 
TANF Report to Congress. We also post the Census Bureau's State child 
poverty rate data on our Internet site (www.acf.dhhs.gov).

Other Changes Made in Sec. 284.11 of the Final Rule

    We made several changes in this section to provide further clarity 
and explanation of terms. We:
     Revised the definition of ``Census Bureau methodology'' 
by: (1) Adding an explanation to clarify that the term may include a 
range of mechanisms to estimate poverty, including estimates based on 
the Current Population Survey; the Small Area Income and Poverty 
Estimates; annual demographic programs, including the American 
Community Survey; or any other methods used by the Census Bureau; (2) 
adding a definition of the term ``children in poverty'' as used in the 
definition of ``Census Bureau methodology'' and deleting the definition 
of ``children in poverty'' as a separate definition; and (3) deleting 
the sentence explaining how we proposed to compute the child poverty 
rate for the Territories;
     Revised the definition of ``Child poverty rate'' to 
incorporate language from the NPRM's definition of ``children in 
poverty'' and to comport with the current Census Bureau description;
     Added a definition of Tribal TANF program; and
     Added definitions for, or explanations of, acronyms used 
in the final rule, i.e., the Small Area Income and Poverty Estimates 
(SAIPE), Separate State Program-Maintenance of Effort (SSP-MOE), and 
Maintenance of Effort (MOE).

Section 284.15--Who Must Submit Information to ACF To Carry Out the 
Requirements of this Part?

    As specified in section 413(i) of the Act, we proposed in the NPRM 
that the Chief Executive Officer of the State or Territory, or his or 
her designee, is responsible for carrying out the requirements of this 
part.
    We received no comments on this section of the NPRM but have made 
one addition in this section of the final rule. In new paragraph (b), 
we specify that the State should obtain information from and work with 
any Indian tribe (and Tribal consortia) operating a TANF program in the 
State in preparing and submitting the assessment (as specified in 
Sec. 284.30) and the corrective action plan (as specified in 
Sec. 284.45). As discussed above under the topic ``Tribal TANF programs 
and Section 413(i) of the Act,'' this change clarifies that the statute 
requires the State to consider both State and Tribal TANF programs in 
carrying out the requirements of this part. If the requested Tribal 
TANF information is not made available to the State, any submission to 
us should clearly indicate that fact.

Section 284.20--What Information Will We Use To Determine the Child 
Poverty Rate in the State?

(Sec. 284.20 of the NPRM--What information will we provide to each 
State to estimate the number of children in poverty?)
    In the NPRM, we proposed, in paragraph (a), that we would send to 
the States each year the Census Bureau's estimate of the number of 
children in poverty. The first estimate in 1998 would be for calendar 
year 1996. In paragraph (b) of the NPRM, we proposed that, beginning in 
1999, we would compute the change in the percentage of children in 
poverty, at the 80-percent confidence level, and provide this 
information to the State. We proposed that the first percentage change 
would be sent to States in 1999 and would cover the change between 
calendar years 1996 and 1997. We also proposed that the annual Census 
Bureau estimates would be based on the Current Population Survey (CPS) 
data and would incorporate data from the Small Area Income and Poverty 
Estimates (SAIPE), e.g., State and county level data.
    We have continued this general approach in Sec. 284.20 of the final 
rule, with two modifications. The first modification, in response to 
comments, is a change in the level of statistical confidence we will 
use to determine the percentage change in a State's child poverty rate, 
i.e., from 80 percent to 90 percent. We have also clarified the use of 
a statistical test to ascertain a change in a State's child poverty 
rate. The second modification expands on a provision in the NPRM to 
allow a State to submit child poverty data derived from an independent 
source.
    Briefly, we will continue to send annual estimates of the number 
and percentage of children in poverty to each State, based on data from 
the Census Bureau. Paragraph (b) of the final rule specifies that, in 
2000, we will determine the first percentage change in the State's 
child poverty rate, between calendar years 1996 and 1997, at the 90-
percent confidence level. Paragraph (c) allows a State to submit child 
poverty data derived from an independent source as an alternative to 
the Census Bureau data and specifies the conditions for submitting 
these data. Paragraph (d) specifies that if we determine that the 
State's independent child poverty data are more reliable than the 
Census Bureau data, we will accept them. These changes are discussed 
more fully below.
    We also received a number of technical comments which we have 
organized into and will respond to

[[Page 39241]]

under four subject areas: Use of the Census Bureau Estimates of 
Poverty; Use of the 80-percent Confidence Level; Interpretation of the 
Term ``five percent increase;'' and Dissemination of the Census Bureau 
Data.
    Comment: One national organization recommended that, because the 
Census Bureau data is considered moderately reliable and we proposed an 
80-percent confidence level, the final rule should allow States to 
challenge the Census Bureau estimates by providing alternative 
statistical evidence.
    Response: In the NPRM, we proposed in Sec. 284.25(c) to allow a 
State to submit an independent estimate of child poverty as part of the 
``rebuttal'' process, along with food stamp and school nutrition data. 
However, we agree with the thrust of this commenter's recommendation 
and have added new paragraphs (c) and (d) to Sec. 284.20 of the final 
rule to allow States to provide child poverty data derived from an 
independent source.
    New paragraph (c) specifies that if the State submits an 
independent estimate of child poverty, it must do so within 45 days of 
the date the State receives the Census Bureau estimates from us; 
include the child poverty rate for each of the two years covered by the 
Census Bureau estimates; include a computation of the change in the 
child poverty rate over the two-year period at the 90-percent 
confidence level; and provide a description of the methodology used by 
the independent source to develop its child poverty estimate.
    New paragraph (d) provides that we will accept the State's 
independent estimate of the child poverty rate if the data are more 
reliable than the Census Bureau data. Otherwise, we will determine the 
State's child poverty rate based on the Census Bureau estimates.
    In the NPRM, we recognized that a growing number of States and 
other organizations are conducting studies of child poverty. One of our 
aims in implementing section 413(i) of the Act is to use the best child 
poverty data available. We believe that those States currently 
conducting or funding such studies of child poverty will be in the best 
position to provide an independent estimate, if they so choose.
    We have specified that the State may provide an alternative 
estimate of the State's child poverty rate, but only if the estimate is 
derived from an independent source. (An ``independent source'' is a 
source of data or information not under the direct supervision or 
control of the State TANF agency such as a university, research or 
advocacy organization, or an independent evaluation or analysis office 
associated with a State executive branch agency or State legislature.)
    We have specified that the independent estimate must be provided 
within 45 days of the State's receipt of the Census Bureau estimates 
because we want to utilize independent estimates that have already been 
conducted for the applicable years. Our intent is to not delay the 
process of review and assessment of poverty estimates in relation to 
the TANF program(s) in the State.
    We will need certain information from the State in order to 
evaluate the reliability of the State's independent estimate. 
Accordingly, in paragraph (c)(2)(iv), we specify that the State must 
describe the methodology used to develop the independent estimate, the 
source of the data, the data collection methodology, any known problems 
associated with making estimates of this type, the estimate of the 
standard error, and the power of the sample to detect a five percent 
change in the child poverty rate. The State must also use the official 
definition of poverty used by the Census Bureau.
    We believe that the State's data must be ``more reliable'' than the 
Census Bureau data. Otherwise, we will use the Census Bureau data in 
implementing this part. For the purposes of paragraph (d), the term 
``more reliable'' means data that are based on and meet accepted 
statistical methods and standards, e.g., the data are derived from a 
representative sample of households, determined at precision levels 
higher than the Census Bureau data, and based on income and other 
variables comparable to the Census Bureau methodology.

A. Use of the Census Bureau Estimates of Poverty

    Comments: A national organization supported our use of the Census 
Bureau estimates on the grounds that ``the Census Bureau estimates, 
including the SAIPE data, are the best current available measures of 
the percentage of children living at or below the Federal poverty 
threshold.'' A State TANF agency expressed appreciation for our 
proposal to send the child poverty data to the States, thus reducing 
State reporting burden.
    However, another State TANF agency recommended that we use only the 
Current Population Survey (CPS) data because the CPS sample sizes are 
large enough to reduce the risk of error, higher confidence levels are 
possible, and the lag time would be reduced from two years to one.
    Response: We reviewed our decision to use the Census Bureau 
estimates of poverty, and we believe, at the present time, they are the 
best national data available. This decision is reflected in paragraph 
(b) of this section of the final rule. If more reliable Census Bureau 
data sources become available in the future, we plan to use them.
    In response to the recommendation that we use CPS data as the basis 
of our national estimates of poverty, we agree with the commenter that 
the lag time would be reduced. However, we believe that the SAIPE data 
are not only required by section 413(i)(5) (i.e., use of ``county-by-
county estimates of children in poverty as determined by the Census 
Bureau''), but that the SAIPE data, when used with the Census Bureau 
State estimates, provide greater accuracy and less variation than are 
present in the CPS data.
    In addition, we are not relying on point estimates, but are using 
statistical tests that address variation. Finally, we believe, and the 
Census Bureau confirms, that the CPS estimates are large enough to 
provide reliable direct estimates for only 10 States and a few large 
counties. The CPS data might serve the large population States but 
would not serve as a reliable national data source for all States.
    Comment: One commenter noted the increasing disconnect between the 
use of food stamps and the poverty rate and was concerned about how 
this would affect the SAIPE data.
    Response: The Census Bureau is satisfied that current estimates are 
reasonable and appropriate. They will be closely monitoring the 
relationship between food stamp program participation and poverty and 
will consider changes in their modeling process, as needed. In addition 
to the Census Bureau's expert review, a national panel of independent 
experts, established by Congress under the auspices of the National 
Academy of Sciences' Committee on National Statistics, has been formed 
to also review and determine the reliability of these estimates. The 
results of this independent review are available from the Academy on 
its website.
    Comment: A State TANF agency requested information concerning how 
the Census Bureau determines the child poverty rate, the formula, 
weighting of variables, and the definition of child poverty used. They 
believed this information would be useful in order to monitor and 
modify their TANF program to avoid negative impacts.
    Response: We refer this commenter to the Census Bureau website. On 
its Internet site, the Census Bureau provides a wide range of 
information on families and children in poverty. It also

[[Page 39242]]

provides an explanation of its methods, discusses the limitations of 
and problems encountered in its use of current methods, and describes 
steps being taken to improve future data collection.

B. Use of the 80-Percent Confidence Level

Background
    The measurement of child poverty involves a process which employs 
samples taken from the general population to generate estimates. In 
this case, we use sample estimates produced by the Census Bureau to 
determine if an increase in the child poverty rate has occurred over a 
two-year period. This process of using samples results in some 
statistical uncertainty in each year's estimate of the child poverty 
rate. It is because of this statistical uncertainty that we cannot 
simply look at the difference in the observed poverty rate from one 
year to the next and determine that an increase of at least five 
percent occurred or did not occur. To overcome this statistical 
uncertainty, statisticians employ tests that incorporate a measure of 
error to better estimate a characteristic of a population.
    In the NPRM, we proposed to use a statistical test at the 80-
percent confidence level. We proposed the 80-percent confidence level 
for several reasons. First, we were attempting to strike a balance 
between falsely identifying a State as having a five percent increase 
in its child poverty rate when it did not and missing a five percent 
increase that truly did occur.
    Second, we proposed that if a five percent or greater increase in 
the poverty rate had occurred, based on the Census Bureau's data and 
the statistical test, we asked that the State submit more recent Food 
Stamp administrative data to determine if there was a commensurate 
increase in the number of households with children participating in the 
Food Stamp Program. Finally, we reasoned that the direct consequence to 
a State of the identification of a five percent increase when in fact 
such an increase did not occur would be the preparation of an 
assessment of the impact of the TANF program on the increase and, 
possibly, a corrective action plan.
    In the NPRM, we proposed a one-tailed statistical test because we 
were interested in determining if an increase in the child poverty rate 
occurred from one year to the next. There are three possible outcomes 
from comparing the child poverty rate from one year to the next: (a) 
There was an increase; (b) there was no change; and (c) there was a 
decrease. However, only an increase is relevant for purposes of this 
section of the Act. We, therefore, proposed using a one-tailed 
statistical test which only examines increases or decreases, but not 
both.
    Comments: One national advocacy organization supported our use of 
the 80-percent confidence level, concurring with our statement in the 
NPRM that it would help protect children by decreasing the possibility 
that we would miss a significant change in a State's child poverty 
rate. They also supported the 80-percent confidence level as a useful 
tool in carrying out what they believed was the primary intent of 
section 413(i), i.e., the protection of children.
    Four State TANF agencies, however, disagreed with our proposed use 
of the 80-percent confidence level. Their general concern was that the 
lower confidence level would lead to a large number of States 
incorrectly identified as having experienced a five percent increase in 
child poverty. One State agency noted that, using an 80 percent 
confidence level, we could expect that, purely by chance, 10 (or 20 
percent) of the States would show an increase in poverty when in fact 
they do not. At the 90-percent level, five States could be mistakenly 
identified as having an increase in poverty.
    Another State agency observed that any State whose child poverty 
rate increased by five percent or more could maintain that the larger 
confidence level obscured any real fluctuation. In other words, an 
alleged increase could be the result of random fluctuation.
    Still another State agency commented that the use of a one-tailed 
confidence interval test does not appear to take into account the error 
in both the previous year and the current year estimate.
    Recommendations by these State agencies included:
     Increase the confidence level to 90 or 95 percent because 
these levels are used in much policy research, including the national 
welfare reform demonstrations sponsored by DHHS.
     Use, and clearly explain in the final rule, a statistical 
test that appropriately provides for the error in the previous and the 
current year estimates, e.g., a difference of means or proportions test 
or a confidence interval around the difference in proportions.
     Make explicit in the final rule the possibility, 
magnitude, and the benefits of an incorrect identification of an 
increase in the child poverty rate.
     Explicitly state in the final rule the tradeoffs in 
choosing a particular confidence level, including the use of a ``payoff 
matrix, computable by a statistician, using the standard errors from 
the model that will be used.''
    Response: After consideration of all comments on both the policy 
and technical issues, we have concluded that the intent of the statute 
and this section of the law will be served if we increased the level of 
statistical confidence from 80 to 90 percent while maintaining the use 
of a one-tailed Z-test for the difference of proportions. We believe 
that this choice will serve the needs of children while balancing the 
burden on the States.
    First, we concur with the national advocacy organization that the 
use of the 80-percent confidence level is a useful way to assess the 
change in the child poverty rate for the purpose of the Act. At the 
same time, the State TANF agencies are correct in noting that, at the 
lower confidence level (80 percent as opposed to 90 or 95 percent), we 
can expect a larger number of findings of change that may be due to 
statistical variability and not true increases. Increasing the 
confidence level to 90 percent would reduce the likelihood that a State 
would be identified as having an increase in its child poverty rate 
when in fact the rate had not increased. We are aware, however, that 
this change leads to the possibility that we may miss a State where an 
increase actually did occur. However, on balance, we believe this 
change will provide more reliable data while protecting the well-being 
of the nation's children.
    Second, we want to make explicit the statistical test we will 
employ to determine if a five percent or greater increase in a State's 
child poverty rates occurred. We use a Z-test for difference between 
proportions. This test uses the information for each year under 
consideration, including the point estimate of the child poverty rate 
for each year as well as the variance of the point estimate for each 
year. In addition, since the samples for the two years are not 
completely independent, the statistical test utilizes the variance of 
the difference between the point estimates for the two years.
    Given that we have eliminated the step that proposed to rely on 
Food Stamp participation rate data to ``rebut'' an increase in the 
child poverty rate, a State found to have an increase of five percent 
in its child poverty rate would either accept the finding and provide 
an explanation of the role of TANF in the increase, or provide child 
poverty data from an independent source as an alternate to the Census 
Bureau's estimates.

[[Page 39243]]

C. Interpretation of the Term ``Five Percent Increase''

    In the NPRM, we proposed that the term ``five percent increase,'' 
as specified in the statute, did not mean a five percentage point 
increase in child poverty. Rather, it meant that the most recent child 
poverty rate is at least five percent higher than the previous year's 
rate.
    Comment: One State TANF agency, in commenting on the statistical 
concerns they had with our approach and the consequent burden on States 
of this approach, noted that there were ``high risks'' involved in 
trying to detect a small percentage change in the face of large errors 
in the estimation procedures. They asserted that Congress would not 
have wanted to impose a significant corrective action burden on States 
based on erroneous data. They believed Congress must have meant an 
increase of five percentage points.
    Response: Based on our analysis, we believe that there is enough 
reliability in the poverty estimates that, using statistical 
techniques, we can make reasonable estimates of changes. We also 
believe that this is the clearest reading of the statute and is the 
interpretation intended by Congress, given the sources of data 
specified in the statute.

D. Dissemination of the Census Bureau Data

    Comment: A commenter recommended that the final rule indicate when 
the child poverty rate will be sent to each State, on the assumption 
that the Census Bureau could reasonably specify a date by which the 
child poverty estimates would be available.
    Response: The Census Bureau does not have a firm date for issuance 
of the child poverty estimates. Our plan is to make these data 
available to the States as soon as they are available from the Census 
Bureau.
    Comment: One commenter made a recommendation for improved 
communication of the State child poverty rate data. In the NPRM, we 
proposed to distribute the child poverty rate to the Chief Executive 
Officer of each State. The commenter recommended that this information 
also be posted on the DHHS and Census Bureau websites, sent to ``Kids 
Count'' organizations in each State, and shared with research and 
advocacy organizations.
    Response: We accept this recommendation in part. The Census 
Bureau's child poverty data are posted on the Census Bureau's website, 
and we will post this information on the ACF website. Because this 
information will thus be readily available, we do not plan to send it 
to other agencies and organizations.

Section 284.21--What Will We Do if the State's Child Poverty Rate 
Increased Five Percent or More Over the Two-Year Period?

    This new section of the final rule is added for clarity. The 
content of this new section is derived from Sec. 284.25(d) and (e) and 
Sec. 284.30(a) of the NPRM and specifies the next steps in the process 
we will follow if the State's child poverty rate increased five percent 
or more over the applicable two-year period.
    In this section, we provide that, if we determine that the State's 
child poverty rate increased by five percent or more over the two-year 
period (based either on the Census Bureau estimates or, if we accept 
them, the State's independent estimates), we will notify the State that 
it has 90 days from its receipt of our notification to submit an 
assessment of the impact of the TANF program(s) in the State on that 
increase. To provide flexibility, we have added an additional 30 days 
beyond the 60-day period proposed in the NPRM for States to submit the 
assessment.
    We will also notify those States in which the child poverty rate 
did not increase five percent or more over the two-year period that no 
further information or action is required for the applicable two-year 
period.

Proposed Sec. 284.25--What Information Must the State Provide if the 
Estimate of the State's Child Poverty Rate Has Increased Five Percent 
or More Over the Two Year Period? (DELETED IN THE FINAL RULE)

    We deleted this section in the final rule.
    In the NPRM, we proposed that, if a State's child poverty rate 
increased by five percent or more, the State could provide information 
to explain, indicate a subsequent improvement in, or ``rebut'' this 
increase. We proposed that the State must submit information on the 
number of households with children receiving food stamps. The State 
could also submit school nutrition information and/or an estimate of 
the State's child poverty rate derived from an independent source. 
Alternatively, the State could accept the Census Bureau estimate and 
move to the next step in the process, i.e., to prepare an assessment of 
the relationship of the TANF program to the increase in child poverty.
    We based this proposed step in Sec. 284.25 on our assumption that, 
despite recent changes, the relationship between the child poverty rate 
and the food stamp participation rate continued to be a reasonably 
reliable one. We also proposed this step because we recognized the time 
lag in receipt of the child poverty estimates. We believed that a State 
whose child poverty rate increased during the period 1996-1997 should 
not necessarily be required to assess the relationship to the TANF 
program and develop a corrective action plan if, in 1998 or 1999, 
verifiable circumstances indicated that the rate or level of child 
poverty in the State had improved.
    Comments: A majority of commenters strongly objected to this 
proposal in Sec. 284.25, and almost all urged its deletion. They stated 
that there is no longer a direct relationship between the numbers of 
children in poverty and the numbers of children receiving food stamps. 
Some commenters also pointed out that recent declines in food stamp 
participation appear to reflect a decline in participation among those 
eligible for the program as well as a reduction in poverty. Other 
commenters found that the changes in the food stamp participation rate 
were related to the implementation of the TANF program, e.g., that 
State practices, whether intended or unintended, had, indeed, affected 
the food stamp participation rate.
    In addition, commenters expressed concern that using food stamp 
data to ``rebut'' increases in the child poverty rate could give States 
more incentive to ignore administrative problems that could lead to 
reduced food stamp participation among eligible families with children. 
Our proposed approach, they believed, could enable, if not encourage, 
States to avoid taking corrective action to address such administrative 
problems.
    Several commenters also referred to recent national studies that 
found food stamp declines unexplained by unemployment or other factors 
and provided specific State data illustrating the lack of relationship 
in these two data sets over recent years.
    A national organization also objected to this provision on the 
grounds that it presented difficult administrative and reporting 
burdens for States. This organization and a State TANF agency also 
objected to the proposed requirement to report on any changes in food 
stamp policy and procedures, including changes made at the national 
level, that have affected the food stamp participation rate. 
(Sec. 284.25(c)(3) of the NPRM.) They believed that this

[[Page 39244]]

provision was extremely broad and amorphous and would be both 
burdensome and costly to States.
    Response: After further research and analysis, we agree with these 
general comments on Sec. 284.25 and have deleted this section from the 
final rule.
    Comment: One national organization recommended that, instead of 
using food stamp data to explain or ``rebut'' an increase in child 
poverty, the final rule should require that States provide data on: (1) 
The number of families receiving TANF cash payments; (2) the total 
amount of State spending on TANF cash payments; and (3) the numbers of 
families and families with children participating in the food stamp 
program.
    Response: We agree that the recommended information may potentially 
be valuable in assessing the relationship of the TANF program(s) in the 
State to any increase in child poverty. Rather than using these 
recommended data as part of a ``rebuttal'' process, however, we have 
added the three recommended items to Sec. 284.30(b) as information a 
State may wish to submit as part of its assessment of the impact of the 
TANF program on the increase in child poverty.
    Comment: Another national organization recommended that the final 
rule require States to submit data on the employer-reported earnings 
levels of TANF leavers, e.g., Unemployment Insurance wage record data. 
(These data are similar to the data provided by States competing for 
the high performance bonus.) This commenter believed these data would 
be highly relevant to evaluating the poverty rate in the State. They 
also recommended that the final rule inform States that submitting 
multi-year Unemployment Insurance wage record data would be an 
appropriate and meaningful way to show that an increase in child 
poverty is not the result of the TANF program.
    Response: We agree that the Unemployment Insurance wage record data 
may be valuable in assessing the possible impact of TANF on State child 
poverty, and we have added this information in Sec. 284.30(b).
    Comment: Two commenters agreed with our recognition of the limited 
usefulness of the school nutrition information (in assessing the 
relationship between child poverty and the TANF program(s)) and 
supported our proposal in the NPRM to make this information optional.
    Response: We have continued to make the school nutrition 
information optional as a part of the State's assessment in 
Sec. 284.30.

Section 284.30--What Information Must the State Include in Its 
Assessment of the Impact of the TANF Program(s) in the State on the 
Increase in Child Poverty?

    If a State's child poverty rate increased by five percent or more, 
we proposed in the NPRM that the State must make an assessment of the 
impact of the TANF program on the increase in the child poverty rate, 
covering the same two-year period for which an increase in child 
poverty was identified. We proposed that the State must submit the 
assessment, and the information on which the assessment was based, 
within 60 days. We also listed examples of suggested information and 
evidence the State might want to include in its assessment.
    Comments: Most commenters agreed with our proposal to allow States 
the flexibility to base their assessment on a wide range of 
information, including data from other assistance programs, State 
economic conditions, etc.
    Response: We have continued the same general approach in this 
section as we proposed in the NPRM, but we have made the following 
changes for additional clarity, specificity, flexibility and in 
response to comments:
     Retained the requirements that the assessment must cover 
the same two-calendar-year period as the Census Bureau estimates 
provided to the State and include the information on which the 
assessment was based;
     Added, in paragraph (a), that the assessment must directly 
address the issue of whether the State's child poverty rate increased 
as a result of the TANF program(s) in the State and include the State's 
analysis, explanation, and conclusions in relation to this issue to 
help assure a high quality, focused assessment;
     Provided an expanded list of examples of data and 
information the State may include in its assessment, including examples 
of information from Tribal TANF programs; and
     Allowed States 90 days (an additional 30 days beyond the 
60 days proposed in the NPRM) to submit the assessment.
    Comment: One commenter read the statute as requiring only actions 
initiated by the State, i.e., the State must specify whether the 
State's child poverty rate increased by five percent or more and, if 
so, it must develop a corrective action plan. This commenter objected 
to the proposed assessment process as beyond the scope of the law.
    Response: We believe that section 413(i)(2) of the Act requires the 
assessment of, and some conclusion regarding, the impact of the TANF 
program(s) in the State on the child poverty rate before a State moves 
to develop a corrective action plan. We do not read the statute to 
require that all States that experience a five percent increase or more 
in child poverty must develop such a plan--only those where the 
increase was a result of the TANF program(s) in the State.
    However, if a State objects to the assessment process and wishes to 
conclude that the increase in the child poverty rate is due to, or is 
the result of, the TANF program(s) in the State, without any analysis 
or assessment, the State may skip the assessment process and prepare a 
corrective action plan.
    Comment: One commenter objected to our flexible approach to the 
assessment process on the assumption that asking a State to report on 
whether its TANF policies contributed to an increase in child poverty 
put the State in an untenable, conflict-of-interest position. They 
doubted that any State would self-report any actions that would 
jeopardize its current practices or policies, particularly those 
policies related to caseload reduction. They also believed that it 
would be easy for a State to point to other factors (e.g., economic 
circumstances) as the primary reason for increases in child poverty.
    Response: We recognize the commenter's concern, but we decline to 
be more prescriptive in our requirements. As we said in the preamble to 
the NPRM, it is the Department's responsibility to determine whether a 
State's child poverty rate increased as a result of the TANF program(s) 
in the State. This is a responsibility we take seriously. Thus, we 
proposed, in the NPRM, that we would consider not only the information 
the State submitted in its assessment, but also other information that 
is readily available, such as State TANF plan provisions, eligibility 
requirements, benefit levels, TANF expenditures, and other factors.
    We also expect that States will take this responsibility seriously. 
We know States are concerned with the well-being of their citizens, and 
some are actively addressing issues of poverty, frequently in 
cooperation with other public and private agencies. We also know that 
there is much public concern and attention focused on the issue of 
child poverty by the media, researchers, advocacy organizations, and 
Congress. We expect that the States will respond to this provision by 
providing a thorough and reasoned analysis and assessment.

[[Page 39245]]

Section 284.35--What Action Will We Take in Response to a State's 
Assessment and Other Information?

    In the NPRM, Sec. 284.35 was titled, ``How will the methodology for 
the Territories differ?''. The section in the final rule regarding the 
Territories is now numbered Sec. 284.50. We have created a new 
Sec. 284.35 in the final rule. The content of this new section is taken 
from paragraphs (b) and (c) of Sec. 284.30 of the NPRM. In the NPRM, 
these paragraphs proposed that we would review the State's assessment, 
along with other available information; make a determination whether 
the child poverty rate increased at least five percent as a result of 
the TANF program(s) in the State; and notify the State whether a 
corrective action plan was required.
    Comment: One commenter asked that we specify in the final rule how 
a State (or DHHS) should (or will) attribute any increase in child 
poverty to the TANF program. They asked that we specify what formula 
for computation we would use, what criteria we would use, and how 
States should weight the numerous variables (both TANF and non-TANF 
related) in the formula that might contribute to such an increase.
    Response: We have not specified a computation formula, established 
criteria, or identified variables for the State assessment process 
because we do not believe we could, in advance, specify exactly how 
DHHS will review and evaluate a State's assessment. We believe that a 
process that relies on analysis, evaluation, and judgment will be more 
likely to reflect reality rather than a computation formula or 
weighting of variables. This analysis and judgment will be particularly 
important when a variety of factors, including the TANF program, may 
have resulted in the increase in child poverty. Our plan is to work 
cooperatively with States in reviewing the assessment information and 
making a final determination on whether a corrective action plan is 
required. It is not our intention to require a corrective action plan 
when the TANF program is only a minimal cause of the increase in the 
State's child poverty rate.
    We have made no substantive changes, but we have modified the 
language in this section for clarity.

Section 284.40--When Is a Corrective Action Plan Due?

    In the NPRM, we proposed that a corrective action plan is required 
only for those States and Territories whose child poverty rate 
increased by five percent or more as a result of TANF. We also proposed 
that the State and Territory must submit the plan within 90 days of the 
date we notify it of our determination that such a relationship exists 
between the TANF program and the child poverty rate.
    Comment: One commenter supported a 90-day timeframe for submitting 
the corrective action plan.
    Response: We have made no changes to this section of the final 
rule.

Section 284.45--What Are the Contents and Duration of a Corrective 
Action Plan?

    In the NPRM, we proposed in paragraph (a) that the corrective 
action plan must outline the manner in which the State or the Territory 
will reduce child poverty in the State and included a description of 
the actions to be taken by the State or Territory under such a plan.
    We proposed in paragraph (b) that the State or Territory must 
implement the corrective action plan until it 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.
    Comment: One commenter supported our proposal to allow States the 
flexibility to design the content of their corrective action plans as 
States are best able to determine which methods will work best for 
reducing child poverty within their boundaries. Another commenter 
recommended that this section be revised to require corrective action 
plan content specific to affected States, based on Federal site visits 
and monitoring of States. They believed that, as proposed, this section 
was weak and ineffective. Also, if a State were allowed to develop its 
own corrective action plan, it would merely be a ``paper exercise.''
    Response: The Act does not provide express authority for us to 
prescribe regulations regarding the content of the corrective action 
plan. We believe, however, that States will take the requirement to 
develop a corrective action plan seriously, not only because of concern 
for the issues affecting the well-being of families and children but 
also, in part, because of the attention being given to this issue by 
the media and a wide range of external organizations. We have made no 
change in this section of the final rule in response to this comment.
    Comment: One commenter was concerned that there was no penalty 
currently assigned to this section of the regulations. The commenter 
believed that it would be extremely awkward for a State to agree to a 
corrective action plan only to have a penalty assigned at a later date.
    Response: There was no penalty proposed in the NPRM because there 
was no penalty included in section 413(i) of the Act. Given the limited 
Federal regulatory and enforcement authority under the TANF program, we 
have not included a penalty provision. However, we will monitor the 
State's actions and timelines under the plan. We also expect that 
interested national, State, and local organizations will monitor State 
progress in this matter as well.
    We want to clarify that the corrective action plan is not intended 
to be based on or cover the two-year period in which an increase in the 
child poverty rate was identified. Rather, we anticipate that the 
State's corrective action plan would include both past efforts and 
current activities aimed at reducing child poverty.
    We have made several changes in this section of the final rule. In 
Sec. 284.45(a), we added language regarding the inclusion in the 
corrective action plan of any action steps that will be taken by the 
Tribes (or consortia of Tribes) under the plan. We also added a 
requirement in paragraph (b) that the State notify us when it 
determines that it is no longer required to implement the corrective 
action plan. Finally, for clarification, we added a definition of the 
term ``lowest child poverty rate'' in paragraph (b) and specified that 
the State must use the methodology in Sec. 284.20 in determining when a 
corrective action plan is no longer required to be implemented.
    We took the definition of the term ``lowest child poverty rate'' 
and the following explanatory language from the preamble to the NPRM 
regarding the duration of the corrective action plan (see 63 FR 50844).

    Section 413(i)(4) of the Act 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.

    By specifying that the State must use the methodology in 
Sec. 284.20 in determining the duration of the corrective action plan, 
we intend to clarify that the State may use either the

[[Page 39246]]

Census Bureau data or an independent estimate of the child poverty 
rate.

Section 284.50--What Information Will We Use To Determine the Child 
Poverty Rate in Each Territory? (Sec. 284.35 of the NPRM)

    The Census Bureau produces annual estimates of the child poverty 
rate in each of the 50 States and the District of Columbia. However, 
the Census Bureau does not develop poverty estimates for the 
Territories. Therefore, in Sec. 284.35 of the NPRM, we proposed that 
each Territory must, annually, beginning in 1998 (for calendar year 
1996), submit to ACF certain food stamp or other data on which we would 
calculate a child poverty rate. We also proposed a process similar to 
the proposed State process for determining whether the child poverty 
rate increased by five percent or more between the applicable years. 
Finally, we specified the actions and information we would require if 
the child poverty rate increased by five percent or more as a result of 
the TANF program.
    ``Territories'' are defined, for the purposes of this part, as 
American Samoa, Guam, Puerto Rico, and the United States Virgin 
Islands. At the present time, this part applies to all of these 
jurisdictions except American Samoa, which has not applied to operate a 
TANF program. When it does so, the provisions of this part will apply 
to it as well.
    We received no comments on Sec. 284.35 of the NPRM or how we 
proposed to determine a child poverty rate for the Territories. We did, 
however, receive comments critical of our proposed use of State food 
stamp data in rebutting the increase in child poverty (in Sec. 284.25). 
These comments caused us to re-evaluate our use of food stamp data as 
the basis for calculating a child poverty rate for the Territories.
    During the development of the final rule, we had numerous 
discussions with the Census Bureau and others in an attempt to identify 
reliable child poverty data for the Territories, but we were 
unsuccessful. Therefore, we have revised Sec. 284.50 to postpone, 
temporarily, the determination of a child poverty rate for these 
jurisdictions. However, we are committed to applying the provisions of 
section 413(i) to both States and Territories. We specify, in paragraph 
(a) that our intent is to apply the same requirements and procedures to 
the Territories as to the States. We specify in Sec. 284.50(b) that we 
will estimate the number of children in poverty in these jurisdictions 
when reliable data are available.

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 rule is consistent with 
these priorities and principles. This rulemaking implements statutory 
authority based on broad consultation and coordination. It also 
reflects our response to comments received on the NPRM issued on 
September 23, 1998.
    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, researchers, a broad 
range of technical and interest group representatives, and others to 
obtain their views prior to the publication of the NPRM.
    To a considerable degree, the NPRM reflected the information 
provided by, and the recommendations of, the groups with whom we 
consulted. We also carefully considered and have accepted and/or 
responded to the comments received in response to the NPRM.
    This final rule also reflects the intent of the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 to 
achieve a balance between granting States the flexibility they need to 
develop and operate effective and responsive programs and ensuring that 
they meet the objectives of the statute. The limited scope of this 
regulation is also consistent with the provisions of the statute and 
Administration policy as articulated in Executive Order 12866 and its 
Regulatory Reinvention Initiatives.
    The Department has determined that this rule is significant under 
the Executive Order. The Office of Management and Budget has reviewed 
this rule. This rule is not a major rule under the Small Business 
Regulatory Enforcement Fairness Act of 1996.
    We have estimated the maximum annualized Paperwork Reduction Act 
costs to be approximately $454,118. This is clearly an upper limit on 
what the costs would be if all States were required to respond to all 
requirements. Thus, as discussed in section D below, this figure is an 
over-estimate of the expected costs.
    In assessing the potential costs and benefits--both quantitative 
and qualitative--of these final regulations, the Secretary has 
determined that the benefits of these regulations justify the costs. 
The Secretary has also determined that this regulatory action does not 
unduly interfere with State, local, and Tribal governments in the 
exercise of their governmental functions.

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 immediately affect the 50 States 
and the District of Columbia. It will affect the Territories in the 
future, when reliable Census Bureau data on child poverty in the 
Territories are available. Therefore, the Secretary certifies that this 
rule will not have a significant impact on small entities.

C. Assessment of the Impact on Family Well-Being

    We certify that we have made an assessment of this rule's impact on 
the well-being of families, as required under section 654 of The 
Treasury and General Government Appropriations Act of 1999. The overall 
aim of the TANF program is to strengthen the economic and social 
stability of families. The purpose of this rule is to monitor annual 
estimates of child poverty in the States (and, in the future, the 
Territories); assess the impact of the TANF program(s) on an increase 
in child poverty of five percent or more; and require the development 
of a corrective action plan, if indicated. We believe that the well-
being of families will be enhanced by this rule.

D. Paperwork Reduction Act

    This rule contains three information collection requirements. These 
requirements were reviewed and approved by the Office of Management and 
Budget (OMB) at the NPRM stage on December 2, 1998, under the Paperwork 
Reduction Act of 1995 (OMB control number 0970-0186). This data 
collection approval expires on November 30, 2001. An agency may not 
conduct or sponsor, and a person is not required to respond to, a 
collection of information unless it displays a currently valid OMB 
control number.
    To the extent possible, this rule relies on existing data sources. 
We will obtain data on child poverty from the Census Bureau for the 50 
States and the District of Columbia. We have postponed implementing the 
provisions of this final rule for the Territories until

[[Page 39247]]

reliable Census Bureau data on child poverty in the Territories are 
available.
    The three information collection activities in the final rule are: 
(1) As an optional provision, a State or Territory may provide an 
alternative estimate of the child poverty rate (Sec. 284.20(c)); (2) a 
State or Territory may be required to conduct and submit an assessment 
of the impact of the TANF program(s) in the State or Territory on the 
increase in the child poverty rate (Sec. 284.30 and Sec. 284.50); and 
(3) a State or Territory may be required to submit a corrective action 
plan (Sec. 284.40, Sec. 284.45 and Sec. 284.50). These information 
collection requirements were approved at the NPRM level. We received no 
comments on the burden as proposed in the NPRM.
    The annual burden estimates include any time involved compiling and 
abstracting information, analyzing and evaluating information, 
assembling materials necessary to provide the requested information, 
obtaining clearance, 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.
    The 50 States and the District of Columbia are the immediate 
potential respondents to the information collection requirements in 
this rule. These jurisdictions may, at their option, submit an estimate 
of child poverty from an independent source. They may also be required 
to submit an assessment and a corrective action plan. We will not 
implement these information collection activities for the Territories 
until we have reliable child poverty data for these jurisdictions, but 
we have included Puerto Rico, Guam, and the Virgin Islands in the 
burden calculation as they will be respondents in the future.
    We have increased the estimated total annual burden from 15,240 
hours in the NPRM to 15,552 hours in the final rule. This change 
reflects the elimination of the requirement that the Territories 
provide data for us to compute an estimate of their child poverty rate 
(Sec. 284.35 of the NPRM); the elimination of the requirement that 
States provide food stamp data and other data to explain or rebut an 
increase in the State's child poverty rate (Sec. 284.25 of the NPRM); 
the addition of 8 hours per respondent for the optional submission of 
data on a State's child poverty rate from an independent source 
(Sec. 284.20(c) of the final rule); and an increase in the estimated 
burden hours for a State to develop and submit an assessment of the 
impact of TANF on the child poverty rate from 80 hours per respondent 
in the NPRM to 120 hours in the final rule (Sec. 284.30 of the final 
rule).
    The annual burden estimates for each of the three data collections 
are:

----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
            Instrument or requirement                Number of     responses per   burden hours    Total burden
                                                    respondents     respondent     per response        hours
----------------------------------------------------------------------------------------------------------------
Optional Submission of Data on Child Poverty                  54               1               8             432
 from an Independent Source (Sec.  284.20(c))...
Assessment of the Impact of TANF on the Increase              54               1             120           6,480
 in Child Poverty (Sec.  284.30 and Sec.
 284.50)........................................
Corrective Action Plan (Sec.  284.40, Sec.                    54               1             160           8,640
 284.45, and 284.50)............................
                                                                                                 ---------------
    Estimated Total Annual Burden Hours.........  ..............  ..............  ..............          15,552
----------------------------------------------------------------------------------------------------------------

    We have estimated the burden hours for each information collection 
activity in part 284 as though they applied to all jurisdictions for 
ease of discussion and public review. This is clearly an over-estimate. 
We do not expect that all States (or Territories) will opt to provide 
an alternate estimate of child poverty derived from an independent 
source. We expect that no more than a few States (or Territories) will 
experience an increase of five percent or more in their child poverty 
rates and will need to submit an assessment in relation to the TANF 
program; and only a few States (or Territories) will be required to 
submit a corrective action plan.
    We estimate the annualized cost of the hour burden to be $454,118. 
Again, this is an over-estimate. It is based on an estimated average 
hourly wage of $29.20 (including fringe benefits, overhead, and general 
and administrative costs) for the State staff performing the work 
multiplied by the estimated 15,552 burden hours.
    We expect that no capital/start-up costs and operation/maintenance 
costs will be required as a result of a State or Territory's 
implementation of this part. No systems modifications should be 
required and much of the information that States may submit as a part 
of their assessment is pre-existing information or available from other 
State executive branch agencies or research sources. Therefore, we do 
not anticipate any significant costs beyond the annualized cost of the 
hour burden noted above.
    We considered all comments by the public in:
     Evaluating whether the 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 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.

E. 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 
203 requires a plan for informing and advising any small government 
that may be significantly or uniquely impacted by the rule.
    We have determined that this rule will not result in the 
expenditure, in the

[[Page 39248]]

aggregate, by State, Territorial, local, and Tribal governments, 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.

F. Congressional Review

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

G. Executive Order 13132

    On August 4, 1999, the President issued Executive Order 13132, 
``Federalism.'' The purposes of the Order are: ``to guarantee the 
division of governmental responsibilities between the national 
government and the States that was intended by the Framers of the 
Constitution, to ensure that the principles of federalism established 
by the Framers guide the executive departments and agencies in the 
formulation and implementation of policies, and to further the policies 
of the Unfunded Mandates Reform Act * * *.''
    We certify that this final rule does not have a substantial direct 
effect on States, on the relationship between the Federal government 
and the States, or on the distribution of power and responsibilities 
among the various levels of government. The final rule does not pre-
empt State law and does not impose unfunded mandates.
    This rule does not contain regulatory policies with federalism 
implications which would require specific consultations with State and 
local elected officials. However, during the development of the NPRM, 
we held two types of consultations. First, we raised issues related to 
this provision in the general TANF consultation meetings with 
representatives of State and local governments; nonprofit, advocacy, 
and community organizations; foundations; and others. Second, we held 
consultations focussed specifically on this provision on May 30, 1997, 
and September 4, 1997, with national organizations representing State 
and local elected officials; technical, statistical, and policy 
experts; and research, advocacy, and public interest organizations that 
focus on poverty and child well-being.
    We sent invitations to the May 30 meeting (along with a list of 
policy issues proposed for discussion) to, among others: The National 
Governors' Association (NGA), the National Conference of State 
Legislatures (NCSL), the National Association of Counties, the National 
League of Cities, and the United States Conference of Mayors. In 
addition to these groups, invitations to the September 4 meeting were 
also sent to the National Black Caucus of State Legislators and the 
National Organization of Black County Officials. Based on our records, 
representatives of NGA and NCSL attended both meetings.

List of Subjects in 45 CFR Part 284

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

(Catalogue of Federal Domestic Assistance Programs: 93.558 Temporary 
Assistance for Needy Families; 93.559 Federal Loans for State 
Welfare Programs; 93.594 Tribal Work Grants; and 93.595 Welfare 
Reform Research, Evaluations and National Studies.)

    Dated: February 11, 2000.
Olivia A. Golden,
Assistant Secretary for Children and Families.

    Approved: March 27, 2000.
Donna E. Shalala,
Secretary, Department of Health and Human Services.

    For the reasons set forth in the preamble, we are amending 45 CFR 
Chapter II by adding part 284 to read as follows:

PART 284--METHODOLOGY FOR DETERMINING WHETHER AN INCREASE IN A 
STATE OR TERRITORY'S CHILD POVERTY RATE IS THE RESULT OF THE TANF 
PROGRAM

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 use to determine the child poverty 
rate in each State?
284.21   What will we do if the State's child poverty rate increased 
five percent or more over the two-year period?
284.30   What information must the State include in its assessment 
of the impact of the TANF program(s) in the State on the increase in 
child poverty?
284.35   What action will we take in response to the State's 
assessment and other information?
284.40   When is a corrective action plan due?
284.45   What are the contents and duration of a corrective action 
plan?
284.50   What information will we use to determine the child poverty 
rate in each Territory?

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


Sec. 284.10  What does this part cover?

    (a) This part describes the methodology for determining the child 
poverty rates in the States and the Territories, as required by section 
413(i) of the Social Security Act, including determining whether the 
child poverty rate increased by five percent or more as a result of the 
TANF program(s) in the State or Territory. 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 following definitions apply to this part:
    ACF means the Administration for Children and Families.
    Act means the Social Security Act, unless otherwise specified.
    Census Bureau methodology means the various methods developed by 
the Census Bureau for estimating the number and percentage of children 
in poverty in each State. These methods may include national estimates 
based on the Current Population Survey; the Small Area Income and 
Poverty Estimates; the annual demographic programs, including the 
American Community Survey; or any other programs or methods used by the 
Census Bureau to estimate poverty. ``Children in poverty'' means 
children that live in families with incomes below 100 percent of the 
Census Bureau's poverty threshold.
    Child poverty rate means the percentage of all children in a State 
or Territory which live in families with incomes below 100 percent of 
the Census Bureau's poverty threshold.
    Date of enactment means calendar year 1996.
    MOE means maintenance-of-effort. This is a provision in section 
409(a)(7) of the Social Security Act that requires States to maintain a 
certain level of spending based on historical (i.e., FY 1994) 
expenditure levels.
    SAIPE means the Small Area Income and Poverty Estimates, a 
methodology developed by the Census Bureau to obtain more accurate 
estimates of poverty and income (including the number and percentage of 
children in poverty) at the State and county level between decennial 
censuses.
    SSP-MOE means a separate State program operated outside of the TANF 
program for which the expenditure of State funds may count for MOE 
purposes.
    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

[[Page 39249]]

under sections 401 through 419 of the Social Security Act, as enacted 
by the Personal Responsibility and Work Opportunity Reconciliation Act 
of 1996, sections 101-116 of Pub. L. 104-193 (42 U.S.C. 601-619).
    Territories means American Samoa, the Commonwealth of Puerto Rico, 
Guam, and the United States Virgin Islands.
    Tribal TANF program means a TANF program developed by an eligible 
Tribe, Tribal organization, or consortium of Tribes, and approved by us 
under section 412 of the Act.
    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?

    (a) The Chief Executive Officer of the State, or his or her 
designee, is responsible for submitting to ACF the information required 
by this part.
    (b) The State should obtain information from and work with the 
Indian tribe(s) (and Tribal consortia) operating a Tribal TANF program 
in the State in preparing and submitting the assessment, as specified 
in Sec. 284.30, and the corrective action plan, as specified in 
Sec. 284.45.


Sec. 284.20  What information will we use to determine the child 
poverty rate in each State?

    (a) General
    We will determine the child poverty rate in each State based on 
estimates from either the Census Bureau or the State, as described in 
this section. Each year we will use these data to determine the change 
in the State's child poverty rate over a two-year period, beginning 
with calendar years 1996 and 1997.
    (b) Estimates from the Census Bureau
    (1) Annually, we will obtain from the Census Bureau and provide to 
each State the estimate of the number and percentage of children in 
poverty in each State. The estimate will be based on the Census Bureau 
methodology.
    (2) In 2000, and annually thereafter, we will determine for each 
State, at the 90-percent confidence level, the percentage change in the 
child poverty rate and provide this information to the State. The 
determination of percentage change in 2000 will cover the change 
between calendar years 1996 and 1997.
    (c) Estimates from the State
    (1) As an alternative to the Census Bureau estimates provided to 
the State under paragraph (b) of this section, the State may provide to 
us data on child poverty in the State derived from an independent 
source.
    (2) If the State provides data on child poverty as described in 
paragraph (c)(1) of this section, it must:
    (i) Provide an estimate of the child poverty rate for the same two 
calendar years as the Census Bureau estimates provided to the State 
under paragraph (b)(2) of this section;
    (ii) Provide the change in the child poverty rate for the 
applicable two-calendar-year period at the 90-percent confidence level;
    (iii) Use the official definition of poverty as used by the Census 
Bureau; and
    (iv) Describe the methodology used to develop its independent 
estimates, the sources of data and methodology for collecting the data, 
any known problems associated with making estimates of this type, the 
estimate of the standard error, and the power of the sample to detect a 
five percent change in the child poverty rate.
    (3) The State must submit its independent estimates and supporting 
information within 45 days of the date the State receives the Census 
Bureau estimates as described in paragraph (b) of this section.
    (d) Determination of the State's child poverty rate
    (1) If we determine that the State's independent estimates of the 
child poverty rate are more reliable than the Census Bureau estimates, 
we will accept these estimates.
    (2) For all other States, we will determine the State's child 
poverty rate based on the Census Bureau's estimates.


Sec. 284.21  What will we do if the State's child poverty rate 
increased five percent or more over the two-year period?

    (a) If we determine, based on Sec. 284.20, that the State's child 
poverty rate did not increase by five percent or more over the 
applicable two-year period at the 90-percent confidence interval, we 
will:
    (1) Conclude that the State has satisfied the statutory 
requirements of section 413(i) of the Act; and
    (2) Notify the State that no further information from or action by 
the State is required for the applicable two-calendar-year period.
    (b) If we determine, based on Sec. 284.20, that the State's child 
poverty rate increased by five percent or more over the applicable two-
year period at the 90-percent confidence level, we will notify the 
State that it has 90 days from the date of its receipt of our 
notification to submit an assessment of the impact of the TANF 
program(s) in the State, as specified in Sec. 284.30.


Sec. 284.30  What information must the State include in its assessment 
of the impact of the TANF program(s) in the State on the increase in 
child poverty?

    (a) The State's assessment must:
    (1) Cover the same two-calendar-year period as the Census Bureau 
estimates provided to the State in Sec. 284.20(b)(2);
    (2) Directly address the issue of whether the State's child poverty 
rate increased as a result of the TANF program(s) in the State and 
include the State's analysis, explanation, and conclusions in relation 
to this issue; and (3) Include the information on which the assessment 
was based.
    (b) The State's assessment may be supported by any materials the 
State believes to be pertinent to its analysis, explanation, and 
conclusions. The following are examples of such materials:
    (1) The number of families receiving TANF cash assistance payments 
under the State TANF program and, if applicable, the Tribal TANF 
program(s);
    (2) The total amount of State and Tribal spending on TANF cash 
assistance payments;
    (3) The number and/or percentage of eligible families with children 
in the State who are participating in the Food Stamp Program or other 
State supportive and assistance programs;
    (4) The proportion of students certified for free or reduced-price 
school lunches;
    (5) TANF income eligibility rules that show that client 
participation was not limited or cash benefits did not decrease;
    (6) Examples of efforts that the State and the Indian tribe(s), as 
appropriate, have taken using TANF and other funds to support families 
entering the work force;
    (7) The percentage of eligible individuals in the State receiving 
TANF assistance;
    (8) Information on TANF program participation such as the number of 
applications disapproved or denied, or cases sanctioned;
    (9) The number of TANF cases closed as a result of time-limit 
restrictions or non-compliance with work requirements;
    (10) The amount of total cash assistance expenditures that can be 
claimed for SSP-MOE purposes;
    (11) Information based on Unemployment Insurance wage record

[[Page 39250]]

data showing, for example, increases in the number of TANF participants 
entering jobs, retaining jobs, and increasing their earnings;
    (12) The number of families receiving work subsidies, i.e., 
payments to employers or third parties to help cover the costs of 
employee wages, benefits, supervision, and training;
    (13) Information that a State met the definition of ``needy State'' 
under section 403(b)(6) of the Act for an extended period of time 
within the applicable two-calendar-year period;
    (14) Examples of past efforts that the State and the Indian 
tribe(s), as appropriate, have taken to mitigate or address child 
poverty;
    (15) Any other data on the TANF program(s) in the State that would 
support the State's conclusions; and
    (16) Information on other circumstances in the State that may have 
contributed to the increase in child poverty such as changes in 
economic or social conditions, e.g., an increase in the State's 
unemployment rate.


Sec. 284.35  What action will we take in response to the State's 
assessment and other information?

    (a) We will review the State's assessment along with other 
available information. If we determine that the increase in the child 
poverty rate of five percent or more is not the result of the TANF 
program(s) in the State, we will notify the State that no further 
information from, or action by, the State is required for the 
applicable two-calendar-year period.
    (b) Based on our review of the State's assessment and other 
information, if we determine that the increase in the State's child 
poverty rate of five percent or more is the result of the TANF 
program(s) in the State, we will notify the State that it must submit a 
corrective action plan as specified in Secs. 284.40 and 284.45.


Sec. 284.40  When is a corrective action plan due?

    Each State must submit a corrective action plan to ACF within 90 
days of the date the State receives notice of our determination that, 
as a result of the TANF program(s) in the State, its child poverty rate 
increased by five percent or more for the applicable two-calendar-year 
period.


Sec. 284.45  What are the contents and duration of the corrective 
action plan?

    (a) The State must include in the corrective action plan:
    (1) An outline of the manner in which the State or Territory will 
reduce its child poverty rate;
    (2) A description of the actions it will take under the plan; and
    (3) Any actions to be taken under the plan by the Indian tribe(s) 
(or Tribal consortia) operating a TANF program in the State.
    (b) The State must implement the corrective action plan until it 
determines and notifies us that its child poverty rate, as determined 
in Sec. 284.20, 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.


284.50  What information will we use to determine the child poverty 
rate in each Territory?

    (a) Our intent is that, to the extent that reliable data are 
available and the procedures are appropriate, the Territories must meet 
the requirements in Secs. 284.11 through 284.45 as specified for the 50 
States and the District of Columbia.
    (b) When reliable Census Bureau data are available for the 
Territories, we will:
    (1) Notify the Territories through guidance of our intent to use 
these data in the implementation of this part; and
    (2) Begin the process by providing to each Territory the number and 
percent of children in poverty in each jurisdiction, as specified in 
Sec. 284.20(b).

[FR Doc. 00-15714 Filed 6-22-00; 8:45 am]
BILLING CODE 4184-01-U