[Federal Register Volume 68, Number 125 (Monday, June 30, 2003)]
[Rules and Regulations]
[Pages 39000-39003]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-16481]



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Part V





Department of Labor





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Veterans' Employment and Training Service



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20 CFR Part 1001



Funding Formula for Grants to States; Interim Final Rule

  Federal Register / Vol. 68, No. 125 / Monday, June 30, 2003 / Rules 
and Regulations  

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DEPARTMENT OF LABOR

Veterans' Employment and Training Service

20 CFR Part 1001

RIN 1293-AA10


Funding Formula for Grants to States

AGENCY: Veterans' Employment and Training Service (VETS), Department of 
Labor.

ACTION: Interim final rule; request for comments.

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SUMMARY: The Department of Labor is issuing an interim final rule 
implementing the Jobs for Veterans Act (Act). This rule establishes 
formula criteria for making funds available to each State. This rule 
will add a new Subpart F to 20 CFR part 1001.

DATES: This interim final rule is effective on July 30, 2003. The 
Department is requesting comments to be considered on this interim 
final rule. Comments will be considered and a final rule published as 
quickly as possible. To ensure consideration, comments must be received 
on or before August 29, 2003. This interim final rule expires September 
30, 2004. A notice of proposed rulemaking will be published and the 
final rule will be issued before September 30, 2004, which addresses 
funding beyond fiscal year 2004.

ADDRESSES: Comments shall be sent to Paul Robertson, Legislative 
Analysis Division, VETS. Electronic mail is the preferred method for 
submitting comments. Comments must be clearly identified as pertaining 
to the interim final rule and sent to [email protected]. Brief 
comments, limited to ten pages or fewer may be transmitted by facsimile 
(FAX) at (202) 693-4754. Individuals with hearing impairments may call 
(800) 670-7008 (TTY/TDD).
    Where necessary, hard copies of comments also may be delivered to 
Paul Robertson, Legislative Analysis Division, VETS, U.S. Department of 
Labor, Room S-1325, 200 Constitution Avenue NW., Washington, DC 20210. 
Because of heightened security measures, mail in Washington, DC is 
sometimes delayed. For this reason we will only consider comments, 
postmarked on or before the deadline for comments.
    Receipt of submissions, whether by e-mail, FAX transmittal, or U.S. 
Mail, will not be acknowledged; however, the sender may request 
confirmation that a submission has been received, by telephoning VETS 
at (202) 693-4714, or by making a request for confirmation (separate 
from the submission) via the above e-mail.
    Comments will be available for public inspection during normal 
business hours at the above address. Persons who need assistance to 
review the comments will be provided with appropriate aids such as 
readers or print magnifiers. Copies of this interim final rule will be 
made available in the following formats: large print, electronic file 
on computer disk, and audiotape. To schedule an appointment to review 
the comments and/or to obtain the interim final rule in an alternate 
format, contact VETS at the e-mail address, telephone number, or mail 
address listed above.

FOR FURTHER INFORMATION: Contact Paul Robertson, Legislative Analysis 
Division, VETS, U.S. Department of Labor, Room S-1325, 200 Constitution 
Avenue NW., Washington, DC 20210, or by e-mail at [email protected].

SUPPLEMENTARY INFORMATION: The preamble to this interim final rule is 
organized as follows:

I. Background--provides a brief description of the development of 
the interim final rule.
II. Authority--cites the statutory provisions and rationale 
supporting the interim final rule.
III. Section-by-Section Review of the Rule--summarizes pertinent 
aspects of the regulatory text and describes its purposes and 
application.
IV. Regulatory Flexibility and Regulatory Impact Analysis--sets 
forth the applicable regulatory requirements.

I. Background

    The President signed the Jobs for Veterans Act (Pub. L. 107-288) 
into law on November 7, 2002. The statute amends title 38 of the United 
States Code to revise and improve employment, training, and placement 
services furnished to veterans. This rule implements the provisions of 
38 U.S.C. 4102A(c) as amended by section 4 of the Act that establishes 
a new funding formula for making funds available to each State, with an 
approved State plan, to support the Disabled Veterans Outreach Program 
(DVOP) and the Local Veterans Employment Representative (LVER) program.

II. Authority

    The statutory authority for this interim final rule is 38 U.S.C. 
4102A(c)(2)(B), as amended by the Jobs for Veterans Act, enacted 
November 7, 2002, as Public Law 107-288. Congress allowed for the 
phasing in of this requirement ``over the three fiscal-year period'' 
beginning in fiscal year 2003, which started on October 1, 2002 (38 
U.S.C. 4102A(c)(2)(B)(ii), as amended by the Act). Because of the late 
enactment of the law, one year of the phase-in had already lapsed on 
the date of enactment. There are only two years, therefore, to phase-in 
the funding formula. Congress intended that the formula will be phased-
in and be fully implemented by the beginning of fiscal year 2006, which 
is October 1, 2005. The phase-in provision was not intended to delay 
the anticipated date of full implementation of the formula. The only 
practical way to adhere to the implementation expectations of Congress 
is to begin the phase-in process in FY 2004. The Secretary of Labor 
(Secretary) is publishing an interim final rule for the first phase-in 
year, to be followed by a notice of proposed rulemaking, because full 
notice and comment to begin implementation of the statutory phase-in 
period would result in impracticable delay and would be contrary to the 
public interest. Full notice and comment would be impracticable because 
the statutory duty to execute the law in a timely manner cannot be 
accomplished by strictly adhering to such requirements.
    Solely using full notice and comment would be contrary to the 
public interest because enacting a requirement in one year that, by 
statutory design, was to take effect over a three-year period would 
unduly impact States. The effective date of the law caused a reduction 
of the phase-in to two years. If there are further delays brought about 
through a full notice and comment period, then the second year of the 
three-year phase-in period would be lost and the States would lose even 
more of the benefit intended by the phase-in provision. Because the new 
funding formula required by the Act will result in significant changes 
to States' funding allocations, the Secretary has determined it is in 
the public interest to act expediently to ensure States receive as much 
of the benefit of the phase-in period as possible. This will enable 
those States whose funding will be reduced more time to adjust to the 
reduced funding and will avoid disruptions in service to the greatest 
extent possible. It will also permit States, which gain funding to more 
sensibly plan how to administer their programs.
    These concerns provide a sufficient good cause basis to forgo full 
notice and comment requirements for the first year in which the new 
formula will be phased-in. To accommodate a full notice and comment 
period and implement the formula beyond the first phase-in year, a 
notice of proposed rulemaking will be published. The upcoming notice of 
proposed

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rulemaking will address the funding formula for FY 2005 (the last year 
of the phase-in period) and subsequent years.

III. Section-by-Section Review of the Rule

A. Funding Formula--Basic Grant

    The Act requires the Secretary to make funds available to each 
State, upon approval of an ``application'' (i.e., a State plan), to 
support the DVOP and LVER programs designed to provide employment 
services to veterans and transitioning servicemembers (38 U.S.C. 
4102A(c)(2)(B), as amended by the Act). The Act further allows the 
Secretary to use such criteria as the Secretary may establish in 
regulation, including civilian labor force and unemployment data in 
determining the funding levels (38 U.S.C. 4102A(c)(B)(i), as amended by 
the Act). The statute requires that the amount of funding available to 
each State reflect the ratio of: (1) The total number of veterans 
residing in the State that are seeking employment; to (2) the total 
number of veterans seeking employment in all States (38 U.S.C. 
4102A(c)(B)(i)(I) and (II), as amended by the Act). Additionally, the 
Act permits the Secretary to establish minimum funding levels and hold 
harmless criteria, in order to mitigate the impact upon states whose 
funding levels may be significantly affected by the implementation of 
the new formula (38 U.S.C. 4102A(c)(B)(i)(iii), as amended by the Act).
    The Act states that the use of this formula be phased-in over the 
three fiscal-year period beginning October 1, 2002. Since the statute 
was not enacted until November 7, 2002, after the beginning of fiscal 
year 2003, we interpret this to mean that the first phase-in year for 
the funding formula will be fiscal year 2004, which begins on October 
1, 2003. This will only allow a 2-year phase-in period, fiscal years 
2004 and 2005, instead of the 3 years as contemplated by the statute.
1. Basic Grant Funding Formula and Data and Methodology
    It has been determined that the ratio of the number of veterans 
seeking employment in each State to the number of veterans seeking 
employment in all States can be best determined using data collected 
through the Current Population Survey (CPS) and the Local Area 
Unemployment Statistics (LAUS), both of which are administered by the 
Bureau of Labor Statistics (BLS). The CPS is the most reliable source 
of current State level data on the number of veterans in the civilian 
labor force. However, because the sample size of veterans at the State 
level is so small, the use of CPS to determine veterans' unemployment 
rates at the State level is subject to large relative sampling errors. 
LAUS data are considered as the most highly reliable data on the 
general rate of unemployment at the State level and do not contain the 
large sampling error found in the CPS. Therefore, we determined to use 
LAUS data to measure the State unemployment rate. Furthermore, the 
Office of Management and Budget (OMB) requires Agencies allocating 
federal funds that include unemployment as a factor, to use LAUS as the 
indicator of unemployment, unless the authorizing statute specifies 
otherwise (OMB Statistical Policy Directive 11). Since LAUS data is 
based on total unemployment for a State, we concluded that LAUS data is 
the best available measure of veterans who are seeking work. 
Accordingly, we concluded the number of unemployed veterans in each 
State can be best determined by using a ratio of the general 
unemployment level in each State to the unemployment level in all 
States (from LAUS for the individual States / LAUS for all States) and 
the number of veterans in the civilian labor force in each State 
compared to the total number of veterans in the civilian labor force 
across all States (from CPS for the individual States / CPS for all 
States). The result of these two ratios will be averaged and converted 
to a percentage of veterans seeking employment in the State compared to 
the percentage of veterans seeking employment in all States. Three-year 
averages of the CPS and LAUS data are used in calculating the funding 
formula to stabilize the effect of annual fluctuations in the data in 
order to avoid undue fluctuations in the annual amounts allocated to 
States.
2. Minimum Funding Levels and Hold Harmless Criteria
    The Act authorizes the Secretary to establish hold harmless 
criteria and minimum funding levels (38 U.S.C. 4102A(c)(2)(B)(iii), as 
amended by the Act). This interim final rule establishes a hold 
harmless rate of eighty percent for the phase-in period for fiscal year 
2004 to mitigate the impact of the most significant reductions to 
States' prior funding levels. With the eighty percent hold harmless 
during fiscal year 2004 each State will be provided no less than eighty 
percent of its previous year's allocation. The eighty percent hold 
harmless will allow the reduction of funding, to those States impacted, 
to be implemented incrementally. To give States the maximum available 
period to adjust to changes in funding, the Department is implementing 
the first year's hold harmless rate through this interim final rule and 
will propose a second year hold harmless rate in the notice of proposed 
rulemaking to be published later. Finally, a minimum funding level of 
0.28 percent of the prior year's total funding level will be applied, 
meaning that no State may receive less than that amount, which is the 
same percentage applied in section 6 of the Wagner-Peyser Act (29 
U.S.C. 49e(b)(3)).
3. Other Funding Criteria
    In addition to requiring the Secretary to use civilian labor force 
and unemployment data in establishing States' funding levels, the Act 
states that the Secretary ``shall make available to each State * * * an 
amount of funding * * * using such criteria as the Secretary may 
establish in regulation * * *'' (38 U.S.C. 4102A(c)(2)(B)(i), as 
amended by the Act). In addition to the amount awarded based on the 
basic grant funding formula, described in section 1 of this document, 
the Secretary will distribute four percent of the total amount made 
available for allocation to the States based on Transition Assistance 
Program (TAP) workload and exigent circumstances (38 U.S.C. 4102, 
4102A(b), and 4107(c)(1), and 10 U.S.C. 1141). These other funding 
criteria are discussed more fully below.

a. Transition Assistance Program Workload

    The Act requires the Secretary to implement programs to ease the 
transition of servicemembers to civilian careers (38 U.S.C. 4102. See 
also 10 U.S.C. 1141). Transition Assistance Program workshops provide 
such employment services for transitioning servicemembers. Since active 
military personnel are not included in the CPS civilian labor force 
data, or in the LAUS unemployment data, the level of need for 
Transition Assistance Program workshops are not reflected in the 
funding formula for the basic grant. Therefore, in order to ensure that 
each State has adequate funding to provide Transition Assistance 
Program workshops, supplemental funding is warranted. This funding will 
be proportional to each State's Transition Assistance Program workload 
as identified in its State plan. Policy guidance will be provided to 
States to assist them in determining the amounts needed for this 
additional workload, which will be calculated on a per workshop basis 
as identified in the State plan.

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b. Exigent Circumstances

    Funding will be made available for exigencies, including but not 
limited to, needs based on sharp or unanticipated fluctuations in State 
unemployment levels and services to transitioning servicemembers as 
required by the Act. Economic and unemployment conditions at the time 
of the grant application may not reflect actual conditions. In such 
cases, program needs may warrant additional funding. These funds will 
be made available to States based on need and as supported by an 
approved modified plan.

Regulatory Flexibility and Regulatory Impact Analysis

    The Regulatory Flexibility Act of 1980, as amended in 1996 (5 
U.S.C. chapter 6), requires the Federal government to anticipate and 
minimize the impact of rules and paperwork requirements on small 
entities. ``Small entities'' are defined as small businesses (those 
with fewer than 500 employees, except where otherwise provided), small 
non-profit organizations (those with fewer than 500 employees, except 
where otherwise provided), and small governmental entities (those in 
areas with fewer than 50,000 residents). We have assessed the potential 
impact of this interim final rule by consulting with a wide range of 
small entities, in order to identify and address any areas of concern. 
Based on that assessment, we certify that the interim final rule, as 
promulgated, will not have a significant impact on a substantial number 
of small entities. We are transmitting a copy of our certification to 
the Chief Counsel for Advocacy of the Small Business Administration.
    This interim final rule implements reforms to the nation's job 
training system. The Act will provide resources to States to assist 
veterans in preparing for, obtaining and retaining employment. This 
rule sets forth the conditions under which State governments receive 
funding. This rule does not directly impact small governmental 
entities.

Paperwork Reduction Act

    This rule does not contain information collection that is subject 
to review by the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995.

Executive Order 12866, Regulatory Planning and Review

    The Department of Labor has determined that this rule is not a 
``significant regulatory action'' under Executive Order 12866 because 
this action will not: (1) Have an annual effect on the economy of $100 
million or more, or adversely affect in a material way the economy, a 
sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or tribal 
governments or communities; (2) create a serious inconsistency, or 
otherwise interfere, with an action taken or planned by another agency; 
(3) materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs, or the rights and obligations of recipients 
thereof; (4) raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
Executive Order 12866. Therefore, no regulatory impact analysis is 
required.

Unfunded Mandates

    Executive Order 12875--This rule will not create an unfunded 
Federal Mandate upon any State, local, or tribal government.
    Unfunded Mandate Reform Act of 1995--This rule will not include any 
Federal mandate that may result in increased expenditures by State, 
local and tribal governments in the aggregate of $100 million or more, 
or increased expenditures by the private sector of $100 million or 
more.

Executive Order 13132, Federalism

    This rule will not have substantial direct effects on the states, 
on the relationship between the national government and the states, or 
on the distribution of power and responsibilities among the various 
levels of government. Therefore, the requirements of section 6 of 
Executive Order 13132 do not apply to this rule.

Executive Order 12988

    This rule has been drafted and reviewed in accordance with 
Executive Order 12988, Civil Justice Reform, and will not unduly burden 
the Federal court system. The rule has been written so as to minimize 
litigation and provide a clear legal standard for affected conduct, and 
has been reviewed carefully to eliminate drafting errors and 
ambiguities.

0
For the reasons set forth in the preamble, 20 CFR chapter IX is amended 
as set forth below.

PART 1001--SERVICES FOR VETERANS

0
1. The authority citation continues to read as follows:

    Authority: Sec. 4(a), Pub. L. 107-288; 38 U.S.C. 4102A.

0
2. Part 1001 is amended by adding a new Subpart F to read as follows:

Subpart F--Formula for the Allocation of Grant Funds to State 
Agencies

Sec.
1001.150 Method of calculating State base grant awards.
1001.151 Other funding criteria.
1001.152 Hold harmless criteria and minimum funding level.

Subpart F--Formula for the Allocation of Grant Funds to State 
Agencies


Sec.  1001.150  Method of calculating State base grant awards.

    (a) In determining the amount of funds available to each state, the 
ratio of the number of veterans seeking employment in the state to the 
number of veterans seeking employment in all states will be used.
    (b) The number of veterans seeking employment will be determined 
based on the number of veterans in the civilian labor force and the 
unemployment rate. The civilian labor force data will be obtained from 
the Current Population Survey (CPS) and the unemployment rate will be 
obtained from the Local Area Unemployment Statistics (LAUS).
    (c) Each state's allocation will be determined by dividing the sum 
of the corresponding figures across all states for the number of 
unemployed veterans in each state (LAUS for the individual states / 
LAUS for all sStates) and the number of veterans in the civilian labor 
force in each state compared to the total number of veterans in the 
civilian labor force across all states (CPS for the individual states / 
CPS for all states). The result of these two ratios will be averaged 
and converted to a percentage of veterans seeking employment in the 
state compared to the percentage of veterans seeking employment in all 
states. Three-year averages of the CPS and LAUS data will be used in 
calculating the funding formula to stabilize the effect of annual 
fluctuations in the data in order to avoid undue fluctuations in the 
annual amounts allocated to states.


Sec.  1001.151  Other funding criteria.

    (a) Four percent of the total amount available at the national 
level for allocation to the states will be distributed to the states 
based on Transition Assistance Program (TAP) workload and other 
exigencies.
    (b) Funding for TAP workshops will be provided on a per workshop 
basis as described in the approved state plan submitted by the state.
    (c) Funds for exigent circumstances, such as unusually high levels 
of unemployment, surges in the demand for transitioning services, 
including the

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need for TAP workshops, will be allocated based on need as supported by 
an approved or modified state plan.


Sec.  1001.152  Hold harmless criteria and minimum funding level.

    (a) A hold harmless rate of 80 percent of the prior year's funding 
level will be applied for fiscal year 2004.
    (b) A minimum funding level is established to ensure that in any 
year, no state will receive less than 0.28 percent of the previous 
year's total funding for all states.

    Signed at Washington, DC this 25th day of June, 2003.
Frederico Juarbe Jr.,
Assistant Secretary of Labor for Veterans' Employment and Training.
[FR Doc. 03-16481 Filed 6-27-03; 8:45 am]
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