[Federal Register Volume 68, Number 242 (Wednesday, December 17, 2003)]
[Proposed Rules]
[Pages 70193-70200]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31031]


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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 275

RIN 0584-AD29


Food Stamp Program: High Performance Bonuses

AGENCY: Food and Nutrition Service, USDA.

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: This rulemaking proposes to amend Food Stamp Program (FSP) 
regulations to implement provisions of section 4120 of the Farm 
Security and Rural Investment Act of 2002 (FSRIA). This section 
authorizes the Food and Nutrition Service (FNS) to award bonuses to 
States that demonstrate high or improved performance in administering 
the FSP. This rule proposes performance measures for these bonuses for 
fiscal year (FY) 2005 and beyond. It also proposes the data that will 
be used to measure the identified performance. The performance bonuses 
are meant to act as an incentive for State agencies to improve or 
maintain high performance in administering the FSP.

DATES: Comments must be received on or before February 17, 2004.

ADDRESSES: You may mail comments to the Food Stamp Program, Food and 
Nutrition Service, USDA, 3101 Park Center Drive, Alexandria, Virginia 
22302, Attention: Program Design Branch. You may FAX comments to us at 
703-305-2486, Attention: Program Design Branch. You may also hand-
deliver comments to us on the 8th floor at the above address.

FOR FURTHER INFORMATION CONTACT: Moira Johnston, Senior Program 
Analyst, Program Design Branch, Program Development Division, Food 
Stamp Program, FNS, 3101 Park Center Drive, Room 812, Alexandria, 
Virginia, (703) 305-2515, or via the Internet at 
[email protected].

SUPPLEMENTARY INFORMATION: 

Additional information on Comment Filing/Electronic Access

Electronic Access and Filing Address

    You may view and download an electronic version of this proposed 
rule at http://www.fns.usda.gov/fsp/. You may also comment via the 
Internet at the same address. Please include ``Attention: RIN 0584-
AD29'' and your name and return address in your Internet message. If 
you do not receive a confirmation from the system that we have received 
your message, contact us directly at 703-305-2515.

Written Comments

    Written comments on the proposed rule should be specific, should be 
confined to issues pertinent to the proposed rule, and should explain 
the reason for any change you recommend. Where possible, you should 
reference the specific section or paragraph of the proposed rule you 
are addressing. We

[[Page 70194]]

may not consider or include in the Administrative Record for the final 
rule comments that we receive after the close of the comment period or 
comments delivered to an address other than those listed above.
    We will make all comments, including names, street addresses, and 
other contact information of respondents, available for public 
inspection on the 8th floor, 3101 Park Center Drive, Alexandria, 
Virginia 22302 between 8:30 a.m. and 5 p.m. Eastern time, Monday 
through Friday, excluding Federal holidays. Individual respondents may 
request confidentiality. If you wish to request that we consider 
withholding your name, street address, or other contact information 
from public review or from disclosure under the Freedom of Information 
Act, you must state this prominently at the beginning of your comment. 
We will honor requests for confidentiality on a case-by-case basis to 
the extent allowed by law. We will make available for public inspection 
in their entirety all submissions from organizations or businesses, and 
from individuals identifying themselves as representatives or officials 
of organizations or businesses.

Executive Order 12866

    This proposed rule was determined to be significant and was 
reviewed by the Office of Management and Budget (OMB) in conformance 
with Executive Order 12866.

Executive Order 12372

    The Food Stamp Program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.551. For the reasons set forth in the final 
rule in 7 CFR part 3105, subpart V and related notice (48 FR 29115, 
June 24, 1983), this Program is excluded from the scope of Executive 
Order 12372, which requires intergovernmental consultation with State 
and local officials.

Executive Order 12988

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This rule is intended to have preemptive effect 
with respect to any State or local laws, regulations, or policies that 
conflict with its provisions or that would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
unless so specified in the ``Effective Date'' paragraph of this rule. 
Prior to any judicial challenge to the provisions of this rule or the 
application of its provisions, all applicable administrative procedures 
must be exhausted.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Eric M. Bost, 
Under Secretary for Food, Nutrition, and Consumer Services, has 
certified that this rule will not have a significant economic impact on 
a substantial number of small entities. The changes will affect State 
and local welfare agencies that administer the FSP, to the extent that 
they must implement the provisions described in this action.

Unfunded Mandate Analysis

    Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), Pub. L. 
104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of UMRA, the 
Department generally must prepare a written statement, including a cost 
benefit analysis, for proposed and final rules with ``Federal 
mandates'' that may result in expenditures to State, local, or tribal 
governments, in the aggregate, or to the private sector, of $100 
million or more in any one year. When such a statement is needed for a 
rule, section 205 of UMRA generally requires the Department to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, more cost-effective or least burdensome alternative 
that achieves the objectives of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) that impose costs on State, local, 
or tribal governments or to the private sector of $100 million or more 
in any one year. Thus, this rule is not subject to the requirements of 
section 202 and 205 of UMRA.

Regulatory Impact Analysis

Need for Action

    This NPRM is needed to implement the provisions of Section 4120 of 
the FSRIA that authorized FNS to establish performance measures 
relating to actions taken to correct errors, reduce rates of error, 
improve the eligibility determinations and other indicators of 
effective administration; measure States' performance against these 
performance measures; and award performance bonus payments totaling $48 
million for each fiscal year to State agencies that show high or 
improved performance relating to the performance measures.

Benefits

    State agencies will benefit from the provisions of this rule 
because they have the potential to be awarded bonuses for high or 
improved performance in administering the FSP.
    Recipients will benefit from the provisions of this rule because, 
as the State agencies seek to improve their performance in determining 
eligibility, issuing benefits, and attracting and retaining 
participants, their actions will positively affect applicants and 
participants.

Costs

    The cost of implementing these provisions is $48 million each 
fiscal year, or $240 million over 5 years.

Executive Order 13132

Federalism Summary Impact Statement

    Executive Order 13132 requires Federal agencies to consider the 
impact of their regulatory actions on State and local governments. 
Where such actions have ``federalism implications,'' agencies are 
directed to provide a statement for inclusion in the preamble to the 
regulation describing the agency's considerations in terms of the three 
categories called for under section (6)(b)(2)(B) of Executive Order 
13132.

Prior Consultation With State Officials

    Prior to drafting the rule, we received input from State and local 
agencies. Since the FSP is a State administered, Federally funded 
program, our national headquarters staff and regional offices have 
formal and informal discussions with State and local officials on an 
ongoing basis regarding FSP implementation and policy issues. This 
arrangement allows State and local agencies to provide feedback that 
forms the basis for any discretionary decisions made in this and other 
FSP rules. In addition, we solicited ideas at various State, regional, 
national, and professional conferences. Finally, we consulted with 
State government representatives and our partners in the anti-hunger 
arena through meetings with such entities as the National Conference of 
State Legislators (NCSL), the National Governors Association (NGA), the 
American Public Human Services Association (APHSA), the Food Research 
and Action Center (FRAC) and the Center on Budget and Policy Priorities 
(CBPP).

Nature of Concerns and the Need To Issue This Rule

    State agencies expressed their preferences that performance 
measures for the high performance bonuses

[[Page 70195]]

should be based on: (1) Activities that FNS and State agencies value 
most; (2) outcomes that State agencies could influence; (3) available 
data, even if imperfect, so as not to impose additional collection and 
reporting requirements on State agencies.

Extent to Which We Met Those Concerns

    FNS took the State agencies' preferences into consideration when 
drafting this NPRM. In addition, FNS will consider comments on the NPRM 
prior to publishing the final rulemaking. This NPRM is required by law 
to implement the high performance bonuses for FY 2005 and beyond.

Civil Rights Impact Analysis

    FNS has reviewed this proposed rule in accordance with the 
Department Regulation 4300-4, ``Civil Rights Impact Analysis,'' to 
identify and address any major civil rights impacts the rule might have 
on minorities, women, and persons with disabilities. After a careful 
review of the rule's intent and provisions, and the characteristics of 
food stamp households and individual participants, FNS has determined 
that there is no adverse effect on any of the protected classes. The 
rulemaking is directed at State agencies and not applicants or 
recipients. If there were a trickle down effect on applicants or 
recipients, it would more than likely be positive and affect all 
applicants and recipients as this rulemaking includes incentives for 
State agencies to improve the eligibility determination and 
certification systems.
    FNS has no discretion in implementing any of these changes, which 
were effective upon enactment of the FSRIA on May 13, 2002. We do have 
discretion regarding the performance measures used to award bonuses. 
However, as discussed above, these performance measures are directed at 
State agencies. To the extent States act on these incentives, customer 
service and payment accuracy may improve. Therefore, FNS anticipates no 
adverse impact on any of the individuals eligible for food stamps and 
no disproportionate impact on any protected class.
    In general, all data available to FNS indicate that protected 
individuals have the same opportunity to participate in the Food Stamp 
Program as non-protected individuals. FNS specifically prohibits the 
State and local government agencies that administer the FSP from 
engaging in actions that discriminate based on race, color, national 
origin, gender, age, disability, marital or family status. Regulations 
at 7 CFR 272.6 specifically state that ``State agencies shall not 
discriminate against any applicant or participant in any aspect of 
program administration, including, but not limited to, the 
certification of households, the issuance of coupons, the conduct of 
fair hearings, or the conduct of any other program service for reasons 
of age, race, color, sex, handicap, religious creed, national origin, 
or political beliefs. Discrimination in any aspect of program 
administration is prohibited by these regulations, the Food Stamp Act 
of 1977 (the Act), the Age Discrimination Act of 1975 (Pub. L. 94-135), 
the Rehabilitation Act of 1973 (Pub. L. 93-112, section 504), and title 
VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d). Enforcement 
action may be brought under any applicable Federal law. Title VI 
complaints shall be processed in accord with 7 CFR part 15.'' Where 
State agencies have options, and they choose to implement a certain 
provision, they must implement it in such a way that it complies with 
the regulations at 7 CFR 272.6.

Paperwork Reduction Act

    There are no revisions to information collections identified in 
this rule. This proposed rule contains information collections that 
have been previously approved by OMB. The burden for the Quality 
Control Negative Case Action Review Schedule (FNS-245) is approved 
under OMB 0584-0034. The Quality Control Review Schedule (FNS-
380-1) is approved under OMB 0584-0299. The Integrated Quality 
Control Review Worksheet (FNS-380) is approved under OMB 0584-
0074. The State Coupon Issuance and Participation Estimates (FNS-388) 
is approved under OMB 0584-0081.
    FNS is committed to compliance with the GPEA, which requires 
Government agencies, in general, to provide the public the option of 
submitting information or transacting business electronically to the 
maximum extent possible.

Background

    Section 16(a) of the Food Stamp Act of 1977 (the Act), 7 U.S.C. 
2025(a), establishes the base administrative cost-sharing rate between 
the Federal Government and States at 50 percent. That is, pursuant to 
Section 16(a), the Department will typically reimburse half a State's 
costs incurred in administering the FSP. The Act prior to FSRIA and FSP 
regulations at 7 CFR 277.4(b)(l)(ii) provide that a State agency would 
receive enhanced funding if it has a payment error rate less than or 
equal to 5.9 percent and a negative case error rate less than the 
national weighted mean negative case error rate for the previous year. 
State agencies and advocate groups have expressed concerns that this 
incentive is too narrowly focused on payment accuracy and should be 
modified to also reward States for efficient management of the FSP in 
other areas.
    On May 13, 2002, the enactment of FSRIA (Pub. L. 107-171) re-
designed the quality control (QC) system, doing away with enhanced 
funding and replacing it with bonuses for States with high or improved 
performance administering the FSP, while significantly reducing 
liabilities assessed against States with poor accuracy outcomes.
    This NPRM proposes to implement only those provisions related to 
the high performance bonuses. Elimination of enhanced funding and 
changes in the liability system will be dealt with in a separate 
rulemaking.

What Are the Legislation's Basic Provisions for Performance Bonuses?

    Section 4120 of the FSRIA amended section 16 of the Act to 
authorize FNS to establish performance measures relating to actions 
taken to correct errors, reduce rates of error, improve eligibility 
determinations, and other indicators of effective administration; 
measure States' performance against these performance measures; and 
award performance bonus payments totaling $48 million for each fiscal 
year to State agencies that show high or improved performance relating 
to the performance measures. Section 16(d)(3) prohibits a State from 
being eligible for a performance bonus payment any fiscal year for 
which it has a liability amount established. Section 16(d)(4) provides 
that the amount of the bonus payment and whether or not to award such 
bonus payment is not subject to administrative or judicial review. 
Pursuant to section 16(d)(2)(B)(ii) of the amended Act, FNS is to award 
the bonus payments in the fiscal year following the fiscal year of 
performance.

How Is the Legislation To Be Implemented To Measure and Reward 
Performance for FY 2003 and 2004?

    For FY 2003 and FY 2004, section 16(d)(1)(A) of the Act authorized 
FNS to establish performance measures through guidance. FNS issued 
guidance implementing the performance measures for FY 2003 on September 
30, 2002. The performance measures for FY 2004 had not been established 
at the time FNS drafted this proposed rule.

[[Page 70196]]

How Is the Legislation To Be Implemented To Measure and Reward 
Performance for FY 2005 and Beyond?

    For FY 2005 and beyond, section 16(d)(2) of the Act provides that 
FNS must establish the performance measures through regulation. This 
rule proposes the performance measures for FY 2005 and beyond.

Does the Legislation Require FNS To Consult With Organizations?

    Under Section 16(d)(2)(A)(iii) FNS is required to solicit ideas 
from State agencies and organizations that represent States' interests 
prior to issuing the proposed rule. In June 2002, FNS held two 
meetings, one in Alexandria, Virginia, and one in Dallas, Texas, with 
representatives from all the State agencies to discuss the FSRIA and to 
solicit their ideas for implementation. FNS took the opportunity at 
that time to solicit ideas from State agency representatives 
specifically on the performance measures. On July 2, 2002, FNS met with 
representatives from State agencies, APHSA, NCSL and NGA, and on July 
11, 2002, FNS officials met with representatives from CBPP and FRAC 
specifically to solicit ideas on possible performance measures for the 
high performance bonuses. FNS officials also solicited ideas from State 
agencies through on-going discussions and through the September 30, 
2002 guidance.

Were Methods for Structuring Bonuses Discussed at These Meetings?

    During these discussions, the participants also put forth ideas on 
how to structure the bonuses. For example, some of the issues explored 
included but were not limited to:
    [sbull] How many States should FNS reward? Should FNS reward more 
States with less money or fewer States with more money?
    [sbull] How many measures should FNS propose? Should FNS propose 
several individual measures? Or, should it propose a few measures that 
are made up of several elements that are then indexed or weighted?
    [sbull] Should FNS measure improvements or absolutes? Or, both?
    [sbull] What percentage of the $48 million should go towards 
payment accuracy versus other measures?
    [sbull] How does FNS apportion the money? By size of State? By 
caseload or dollars issued?
    [sbull] Should FNS allow States to choose whether or not to compete 
for the bonuses? Or, should it be mandatory?

What Were Some of the Possible Performance Measures Discussed During 
These Meetings?

    During the meetings, the participants discussed many ideas on 
possible performance measures. The performance measures discussed 
included but were not limited to: per case State administrative costs, 
recipient claims establishment, payment accuracy, general customer 
service, application processing timeliness, increasing family self-
sufficiency, participation levels, participation rates, nutrition 
education, fair hearings, and creativity/innovations.

What Were Some of the Criteria Participants in These Meetings Used To 
Evaluate the Possible Performance Measures?

    In examining the possible measures, participants used several 
criteria to determine which ones to pursue and which ones to set aside. 
Participants felt very strongly that the measures should be ones that 
the States could influence. For example, the number of individuals 
participating in the FSP relates more to the size of the State and 
condition of the economy than to State agency actions. However, the 
percentage of eligible citizens actually participating in the Program 
can be influenced by State agency practices such as outreach, 
accessibility of offices, the length of the application form, and the 
speed of application processing. In addition, two key considerations 
were the value of the performance reflected by the measure, and the 
availability of objective data for a given measure. In some areas, FNS 
has considerable data but participants did not believe that these data 
measured core areas of FSP performance. For example, FNS has data on 
recipient claims. Participants expressed concern, however, about 
rewarding States with high error rates and that have a much larger pool 
of claims to establish and collect. In addition, participants 
emphasized that State agencies were already financially rewarded in 
that they retain a certain percentage of all the claims they collect.
    FNS has data on the amount of States' administrative costs. 
Participants expressed concern, however, about rewarding States with 
low administrative costs that may have less effective programs. In 
other instances, an activity may advance a key part of the FSP mission 
but data is not available or not sufficient to gauge success. For 
example, nutrition education promotes the basic purpose of the FSP, 
which is to improve the nutrient intake of low-income persons. While 
food intake data is relevant to measure nutrient intake, it is not 
sufficient because it is not collected annually and the sample sizes 
are not sufficient to develop statistically adequate estimates of 
nutritional intake at the State level. The measures that FNS decided to 
propose following the conclusion of the meetings, while not perfect, 
met the basic criteria mentioned above.

Were There Overall Themes That Emerged During the Discussions?

    During the discussions mentioned above, as well as subsequent in-
house discussions, the following overall themes emerged concerning the 
performance measures:
    [sbull] Performance measures should be based on: (1) Activities 
that FNS and State agencies value most; (2) outcomes that State 
agencies could influence; (3) available data, even if imperfect, so as 
not to impose additional collection and reporting requirements on State 
agencies.
    [sbull] The bonuses should be structured as simply as possible; 
several individual performance measures are preferable over composite 
measures that would include several categories that would be 
``weighted.''
    [sbull] FNS should award more States with smaller bonuses, since 
recognition may be as important as money.
    [sbull] FNS should make awards proportional to State's caseloads to 
give all States sufficient incentive to compete for these bonuses.
    [sbull] FNS should emphasize rewarding excellence, but also award 
improvement. This will give all States an opportunity to receive an 
award and motivate more States to try.
    [sbull] Awards should reflect a balancing of the goals of program 
integrity and program access. Integrity continues to be one of FNS' 
highest priorities.
    [sbull] FNS should measure all States in all areas, as opposed to 
having them choose which bonuses to compete for, because the data are 
available, are public information, and will motivate States to improve.

What Performance Measures and Bonus Structure Has FNS Decided To 
Propose for FY 2005 and Beyond?

    While there are many measures, many ways to divide the money, and 
many ways to structure the bonuses, FNS believes the following proposed 
scheme reflects the values of the FSP, strikes a good balance between 
payment accuracy and access, and recognizes both improvements and 
excellence.

[[Page 70197]]

How Many Proposed Categories Are There?

    There are 7 proposed categories that would provide bonuses for up 
to 30 States.

What Are the Proposed Categories?

    The 7 categories include the lowest and most improved combined 
payment error rates, the lowest and most improved negative error rates, 
the highest and most improved participant access rates, and the best 
application processing timeliness rate. Following is a detailed 
discussion of each proposed measure and the proposed data that would be 
used for each measure.
    As mentioned above, FNS and representatives of partnering agencies 
and organizations considered many categories. One of these categories 
was for innovation. Generally, FNS believes that a determination of 
``most innovative'' would require a subjective determination, unlike 
the other measures discussed and eventually proposed in this rulemaking 
that are based on objective and quantifiable data. Therefore, FNS 
decided at the time of this proposed rulemaking to reserve such a 
category for the annual non-monetary awards that FNS gives out at the 
American Association of Food Stamp Directors Conference. FNS is 
interested in the idea of rewarding innovation, and would like to 
solicit comments on whether or not to include as a high performance 
bonus a category for innovation. Specifically, what criteria could be 
used to rank innovative projects?

Payment Accuracy

    FNS proposes to divide $24 million (50 percent of the total amount) 
among the 7 States with the lowest and the 3 States with the most 
improved combined payment error rate (the error rate). FNS believes 
allocating 50 percent of the total amount towards payment accuracy 
sends a strong signal that payment accuracy is still one of the 
Agency's highest priorities. In addition, it is an established index 
that measures outcomes that are influenced by many aspects of FSP 
management, such as policies, training and customer service. In general 
terms, the error rate consists of the rate of over issuances and under 
issuances to participating households. More specifically, the 
regulations at 7 CFR part 275 define the error rate, prescribe how this 
data is collected and manipulated, and describe how the error rate is 
determined. These data are the most readily available data of all the 
proposed performance measures. They are selected from random sampling 
of approximately 54,000 cases that are reviewed by the States and 
validated by FNS. Determination of error rates is a long established 
practice, one that the State agencies and others are familiar with. 
Therefore, for the sake of brevity, this proposed rule will not detail 
the QC data collection process.

How Will the Most Improved Error Rate Be Determined--by Percent 
Decrease (Relative) or by Percentage Point Decrease (Absolute)?

    FNS proposes that the most improved error rate be determined by 
measuring the percentage points decreased (absolute improvement). For 
example, if State A has an error rate of 10 percent in FY 2003 and an 
error rate of 6 percent in 2004, its improvement is 4 percentage 
points, or a 40 percent improvement. If State B has an error rate of 6 
percent in 2003 and an error rate of 3 percent in FY 2004, its 
improvement is 3 percentage points, or a 50 percent improvement. FNS 
proposes to rank State A higher than State B because its absolute 
improvement (4 percentage points) is greater.
    FNS believes absolute improvement has more of an impact on the 
national FSP than relative improvement. For example, if States A and B 
both issued $100 million in benefits, State A would have reduced its 
payment error by $4 million while State B would have reduced its 
payment error by only $3 million.

Negative Error Rate

    FNS proposes to divide $6 million among the 4 States with the 
lowest and the 2 States with the most improved negative error rate. The 
negative error rate measures the correctness of the State agency's 
action to deny an application, or suspend or terminate the benefits of 
a participating household. It also measures whether a State correctly 
determined a household's eligibility in terms of the State's compliance 
with Federal procedural requirements. For example, a case may be 
reported as an invalid denial because the State denied the application 
prior to the 30th day, even though the household is not eligible. The 
negative error rate is the best measure FNS has of how many people walk 
in the door and do not get the services and benefits as provided by 
statute. As with the error rate, the determination of the negative 
error rate is spelled out in 7 CFR part 275. Again, it is long standing 
practice and, therefore, this proposed rule will not detail how FNS 
determines the negative error rate.

How Will the Most Improved Negative Error Rate Be Determined--by 
Percent Decrease (Relative) or by Percentage Point Decrease (Absolute)?

    FNS proposes to determine the most improved negative error rate by 
measuring the percentage points improved. For example, if two States 
have the same caseload: State A starts with a 6 percent negative error 
rate and State B starts with a 3 percent negative error rate. State A 
reduces its error rate to 4.5 percent, a reduction of 1.5 percentage 
points (absolute) and a 25 percent (relative) reduction. State B 
reduces its error rate to 2 percent, a reduction of 1 percentage point 
(absolute) and a 33 percent (relative) reduction.
    Our proposal is to acknowledge State A because it has had a larger 
effect on its State caseload than State B (1.5 percentage points versus 
1 percentage point).
    If both States start with the same caseload, it is clear that State 
A has affected more cases in its improvement. When the caseloads are 
different, State A still has had a bigger impact in proportion to its 
caseload than has State B.
    FNS would like to solicit comments on whether States must attain a 
certain threshold to be rewarded for improvement. For example, if a 
State improves its negative error rate from 20 percent to 15 percent 
should it be rewarded, even though its negative error rate is still 
very high?

Participant Access Rate

    FNS proposes to divide $12 million among the 4 States with the 
highest and the 4 States with the most improved participant access 
rate. This measure is central to the purpose of the FSP in that it 
reflects the degree to which those in need of nutritional assistance 
are accessing the benefits to which they are eligible. FNS and others 
discussed measuring States' performance based on the participation rate 
that FNS publishes every year. The participation rate measures the rate 
at which eligible individuals are participating in the FSP. In 
determining this measure, FNS makes adjustments for things that would 
make a household or individual otherwise ineligible for the FSP such as 
resources, alien status, household composition and whether or not an 
individual has reached the time limits for able-bodied adults without 
dependents. It also makes adjustments for things that would make a 
household otherwise eligible for the FSP such as annual income versus 
monthly income. For example, a household could have an annual income

[[Page 70198]]

above 130 percent of the poverty line, and at first glance would be 
ineligible for the FSP. But, because the sole breadwinner was laid off 
halfway through the year, the household was ``poor'' for many months 
within that year, and thus income eligible for the FSP for those 
months. The participation rate is based in part on data from the Census 
Bureau's March Supplement to the Current Population Survey. FNS then 
makes the adjustments discussed above. As this process takes time, the 
participation rate is not available until a year after the bonuses are 
to be awarded.
    FNS is proposing that States be measured against a participant 
access rate (PAR). The PAR differs from the participation rate, in that 
it measures the ratio of participants in the FSP to the number of 
persons in poverty in the State. In calculating the PAR, FNS does not 
make adjustments for things that would make individuals otherwise 
ineligible for the FSP such as resources or alien status, or otherwise 
eligible, such as monthly income versus annual income. Therefore, it is 
available within the timeframe needed in order to award the bonuses 
within the statutory time frame.

What Data Will FNS Use To Calculate the Participant Access Rate?

    FNS proposes to use a variety of data sources to calculate the 
participant access rate. FNS proposes that the denominator be composed 
of data from the Census Bureau's March Supplement to the Current 
Population Survey. FNS would use the annual State counts of persons 
below 125 percent of poverty from the Census Bureau shortly after it is 
released, usually in late September. These counts are based on income 
received in the previous calendar year. For the numerator, or the 
number of food stamp participants, FNS proposes to use administrative 
counts of participants by State over the same calendar year for the 
Census Bureau's persons below 125 percent of poverty, averaging 12 
months of data.
    The threshold of 125 percent of poverty differs from what FNS used 
for fiscal years 2003 and 2004 (100 percent of poverty). However, our 
analysis shows that using 125 percent of poverty better correlates to 
our official Food Stamp Program participation rates. We are examining 
whether 130 percent of poverty is an even better match. However, at 
this time, this data is not readily available from the Census Bureau 
and would require time to obtain. If we are guaranteed to receive this 
data from the Census Bureau within a reasonable timeframe and the data 
better correlates to our official statistics, in the final rule making 
we will use numbers of people below 130 percent rather than 100 percent 
of poverty.
    FNS is also considering using data from the American Community 
Survey (ACS) instead of the Current Population Survey because ACS has a 
larger sample and is released earlier than the official poverty 
statistics. Currently, the only ACS data available is for 2002. We will 
examine how well the ACS poverty counts correlate to the official Food 
Stamp Program participation rate, when the 2002 rates are available 
this coming summer. If the ACS data provides a better proxy for the 
official program participation rate, in final rule making we will use 
the ACS rather than the CPS.

Would FNS Make Adjustments for Special State Specific Situations That 
Might Affect the Number of People Receiving Food Stamps?

    FNS proposes to make adjustments for two special situations. First, 
because persons receiving Supplemental Security Income (SSI) are 
ineligible for food stamps in California, FNS proposes to reduce the 
number of persons below 125 percent of poverty in California by the 
percentage of such persons who received SSI in the previous year. 
Second, because some individuals residing on reservations may choose to 
receive food assistance from either the FSP or the Food Distribution 
Program on Indian Reservations (FDPIR) but not both simultaneously, FNS 
proposes to add to the number of food stamp participants the number of 
FDPIR participants using administrative data averaged over a calendar 
year.
    FNS proposes to not make adjustments for State option programs that 
offer State benefits through the FSP to immigrants because they are not 
Federal food assistance programs.

Application Processing Timeliness

    FNS proposes to divide $6 million among the 6 States with the 
highest percentage of timely processed applications. FNS believes 
application-processing timeliness is an important aspect of customer 
service, not only because it measures whether households get the food 
stamps as provided by statute in a timely fashion, but also because it 
is a well established standard that is mandated by section 11(e)(3) of 
the Act (7 U.S.C. 2025(e)(3)). Many State agencies and advocates agree. 
However, FNS also recognizes that reliable data for measuring 
application-processing timeliness are not readily available and/or 
reliable. Currently, FNS collects some of this information on the 
Program Activity Statement (Form FNS-366) such as data on 
certification, fair hearings and fraud control. However, in many 
instances these data are reported inconsistently or inaccurately. For 
example, States have different reporting systems (manual or automatic) 
or eligibility workers may understate the number of late decisions for 
fear of being reprimanded. In addition, FNS does not validate the data 
that the State agencies report. A review of the data from the current 
Form FNS-366B indicates a wide range of performance. Rewarding States 
that report stellar performance may reflect reporting differences 
rather than exceptional timeliness. Finally, if we were to use the Form 
FNS-366B to collect this data, we would have to mandate consistent 
systems and reporting processes that would result in an additional 
burden on States. In light of these concerns, FNS is proposing to use 
other data for this measure.

What Data Does FNS Propose Using To Measure Application-Processing 
Timeliness?

    FNS proposes collecting data on application-processing timeliness 
through the QC system. FNS has initiated collection of data as part of 
the QC reviews beginning with FY 2003 cases for use in determining the 
measure and evaluating its use in measuring these data (FNS-380). 
Instructions for collecting this information, which can be found in the 
FNS Handbook 310: The Food Stamp Program Quality Control Review 
Handbook, have already been shared with the Regional offices and State 
agencies. FNS is seeking particular comment on this data collection 
instrument and its ability to collect the sought after information.

What Application-Processing Standard Does FNS Propose To Use To Measure 
Timeliness?

    FNS proposes to use the application-processing standard of 30 days 
(or 7 days for expedited service). An applicant must be given the 
``opportunity to participate'' (as defined in 7 CFR 274.2) within 
thirty days (or 7 days for expedited service). New applications that 
are processed outside this standard would be considered untimely for 
this measure, with one exception as discussed below.

Will FNS Count Client Caused Delays as Untimely?

    Yes. Any application processed outside of the 30-day processing 
standard will be considered untimely for this measure including client 
caused

[[Page 70199]]

delays, with one exception. FNS is proposing not to include in the 
measure applications that are properly pended because the applicant 
failed to provide requested verification. Properly pended means the 
State agency has taken the actions described in 7 CFR 273.2(h)(1)(i)(C) 
and it has pended the application in accordance with 273.2(h)(2)(i).
    FNS recognizes that the regulations at 7 CFR 273.2(h)(2)(i) provide 
procedures for State agencies that, for one reason or another, are 
unable to meet the 30-day standard. For example, if the delay is the 
fault of the State agency, the State agency may not deny the 
application, but must hold it pending while taking immediate corrective 
action. If the delay is the fault of the applicant (for example, the 
household failed to complete the application), the State agency may 
either deny the application or hold it pending for 30 days from the 
date of the initial request for verification. Some may argue that FNS 
should measure States' compliance with these regulations rather than 
States' performance under a 30-day standard mandated in section 
11(e)(3) of the Act. Why then does this rulemaking propose to measure 
State agencies' performance against the statutory 30-day limit as 
opposed to compliance with the regulations? First, FNS believes that 
the incidence of client caused delays does not vary that much by State, 
and therefore, with this methodology States are on an even playing 
field. Second, FNS would not want to reward a State that is relatively 
weak in meeting the 30-day standard but good at getting benefits out 
within 60 days. Furthermore, FNS believes it would be difficult, based 
upon certification records, to consistently distinguish between delays 
that are client versus agency caused, except in the situation described 
above. However, given the considerable discussion around this measure, 
FNS is soliciting comments on whether to exclude all client-caused 
delays from this measure and, if so, how to work that into the existing 
reporting and QC framework.

Will Both Approvals and Denials Be Included in the Determination of 
Timeliness?

    FNS proposes that only approvals be included in the determination 
of timeliness since this measure is focused on meeting the 30-day 
standard for providing eligible households the opportunity to 
participate.

Will Every Case Identified for QC Review in the Performance Year Be 
Evaluated for Timeliness?

    FNS proposes that QC reviewers evaluate for timeliness only new 
applications in the State QC active sample that were filed on or after 
the beginning of the fiscal year because they were filed within the 
performance measurement year for which the bonuses are awarded.
    FNS realizes that this approach reduces the sample size. For 
example, if a QC reviewer pulls a case for review in November, chances 
are it was originally certified in the previous fiscal year. Therefore, 
that case will not be included in the sample for the application-
processing-timeliness measure. It may be several months into the fiscal 
year before the QC reviewers sample cases that are certified within the 
performance measurement year. FNS will monitor the sample size and, 
depending upon the confidence it has in the data and comments it 
receives on the approach, reevaluate this method of measuring 
timeliness. However, we believe this sample size will give us enough 
data to make a determination of State rankings.

Will This Information Be Validated?

    Federal reviewers will examine the data during the Federal re-
review process and possibly at the end of the review period.

General Questions

Can a State Agency Win More Than One Bonus in the Same General 
Category, i.e., the Best and the Most Improved Payment Error Rate?

    FNS proposes that a State cannot be awarded two bonuses in the same 
category, i.e., the best and most improved participant access rate. FNS 
proposes that if a State were among the most improved in a category, it 
would not be counted among the best. This allows the ``next best'' 
State to receive an award as being among the best States. A State may 
be awarded bonuses for different general categories, such as most 
improved negative error rate and highest participant access rate.

How Will FNS Ascertain the Winners of Each Category When There Is a 
Tie?

    Where there is a tie to the fourth decimal point, FNS proposes to 
add the additional State(s) into the category. For example, if 7 awards 
should be made for the lowest error rate, but there are 3 States that 
are tied for the 7th spot, 9 States would receive the award.

Can a State Agency That Has a Liability Amount Established Receive a 
Bonus?

    No. Section 4120 of the SFIRA provided in section 16(d)(3) of the 
Act that a State may not be eligible for a performance bonus payment in 
any fiscal year for which it has a liability amount. To have a 
liability amount established, a State's combined payment error rate 
must exceed 105 percent of the national performance measure for payment 
errors for two consecutive fiscal years. Therefore, since FY 2003 was 
the first year for which a State could have poor performance as 
discussed above, it would not have a liability amount established 
unless it has poor performance in FY 2004 as well. However, note that 
no State will have a liability established in accordance with section 
16(d)(3) of the Act in FY 2003 and, therefore, all States are eligible 
for a high performance bonus for that year.

How Will the Money Be Apportioned?

    FNS proposes that the money be divided among States in proportion 
to the size of their caseloads (average number of households per month 
for the fiscal year for which performance is measured). For example, if 
6 states are to split $6 million and State A accounts for 40 percent of 
all food stamp participants in these 6 states, State A will receive 40 
percent of $6 million, or $2.4 million. FNS believes that this is the 
most equitable way to apportion the money. This method recognizes that 
more effort is needed to influence a large State's performance versus a 
small State's performance. At the same time, though, it provides a per-
case award so that each case is in effect weighted equally.

When Will the Bonuses for FY 2005 and Subsequent Fiscal Years' 
Performance Be Awarded?

    The bonuses for performance in FY 2005 will be awarded in FY 2006, 
as required by section 16(d)(2)(B)(ii) of the Act. For each subsequent 
fiscal year, FNS will award bonuses in the fiscal year following the 
performance measurement year.

Is FNS's Decision To Award a Performance Bonus Payment Subject to 
Administrative or Judicial Review?

    No. Section 16(d)(4) of the Act specifically states that the 
determination by the Secretary whether, and in what amount, to award a 
performance bonus payment under this subsection shall not be subject to 
administrative or judicial review.

[[Page 70200]]

Where Does FNS Propose Revising the Regulations To Include the High 
Performance Bonuses?

    FNS proposes to codify these provisions in a new section at 7 CFR 
275.24.

List of Subjects in 7 CFR Part 275

    Administration, Management evaluation reviews, Quality control 
reviews, Data analysis and evaluation, Corrective action, 
Responsibilities for reporting on program performance, Program 
performance.

    Accordingly, 7 CFR part 275 is proposed to be amended as follows:

PART 275--PERFORMANCE REPORTING SYSTEM

    1. The authority citation for Part 275 continues to read as 
follows:

    Authority: 7 U.S.C. 2011-2036.

    2. A new Sec.  275.24 is added to read as follows.


Sec.  275.24  High performance bonuses.

    (a) General rule. (1) FNS will award bonuses totaling $48 million 
for each fiscal year to State agencies that show high or improved 
performance in accordance with the performance measures under paragraph 
(b) of this section.
    (2) FNS will award the bonuses no later than September 30th of the 
fiscal year following the performance measurement year.
    (3) A State agency is not eligible for a bonus payment in any 
fiscal year for which it has a liability amount established.
    (4) The determination whether, and in what amount, to award a 
performance bonus payment is not subject to administrative or judicial 
review.
    (5) FNS will divide the award money among the States in each 
category (see paragraph (b) of this section) in proportion to the size 
of their caseloads (the average number of households per month for the 
fiscal year for which performance is measured).
    (6) A State cannot be awarded two bonuses in the same category; the 
relevant categories are payment accuracy (which is outlined in 
paragraph (b)(1) of this section), negative error rate (which is 
outlined in paragraph (b)(2) of this section), or participant access 
rate (which is outlined in paragraph (b)(3) of this section). If a 
State is determined to be the best and the most improved in a category, 
it would be awarded a bonus only for being the most improved. This 
allows the ``next best'' State to receive an award as being among the 
best States.
    (7) Where there is a tie to the fourth decimal point for the 
categories outlined in paragraphs (b)(1) through (b)(4) of this 
section, FNS will add the additional State(s) into the category and the 
money will be divided among all the States in accordance with paragraph 
(a)(5) of this section.
    (b) Performance measures. FNS will measure performance by and base 
awards on the following categories of performance measures:
    (1) Payment accuracy. FNS will divide $24 million among the 10 
States with the lowest and the most improved combined payment error 
rates as specified in paragraphs (b)(1)(i) and (b)(1)(ii) of this 
section.
    (i) Excellence in payment accuracy. FNS will provide bonuses to the 
7 States with the lowest combined payment error rates based on the 
validated quality control payment error rates for the performance 
measurement year as determined in accordance with this part.
    (ii) Most improved in payment accuracy. FNS will provide bonuses to 
the 3 States with the largest percentage point decrease in their 
combined payment error rates based on the comparison of the validated 
quality control payment error rates for the performance measurement 
year and the previous fiscal year as determined in accordance with this 
part.
    (2) Negative error rate. FNS will divide $6 million among the 6 
States with the lowest and the most improved negative error rates as 
specified in paragraphs (b)(2)(i) and (b)(2)(ii) of this section.
    (i) Lowest negative error rate. FNS will provide bonuses to the 4 
States with the lowest negative error rate based on the validated 
quality control negative error rate for the performance year as 
determined in accordance with this part.
    (ii) Most improved negative error rate. FNS will provide bonuses to 
the 2 States with the largest percentage point decrease in their 
negative error rates based on the comparison of the performance 
measurement year's validated quality control negative error rates with 
those of the previous fiscal year as determined in accordance with this 
part.
    (3) Participant access rate (PAR). FNS will divide $12 million 
among the 8 States with the highest and the most improved level of 
participation as specified in paragraphs (b)(3)(i) through (b)(3)(iii).
    (i) High Participant Access Rate. FNS will provide bonuses to the 4 
States with the highest PAR as determined in accordance with paragraph 
(b)(3)(iii) of this section.
    (ii) Most improved participant access rate. FNS will provide 
bonuses to the 4 States with the most improved PAR as determined in 
accordance with paragraph (b)(3)(iii) of this section.
    (iii) Data. For the number of participants (numerator), FNS will 
use the administrative counts of participants by State for the calendar 
year, increased by the administrative counts of participants in the 
Food Distribution Program on Indian Reservations (FDPIR) as reported by 
the States that operated FDPIR. For the number of people below 125 
percent of poverty (denominator), FNS will use the Census Bureau's 
count of people below 125 percent of poverty for the same calendar 
year, reducing California's count by the number of people below 125 
percent of poverty in California who received Supplemental Security 
Income in the previous year.
    (4) Application processing timeliness. FNS will divide $6 million 
among the 6 States with the highest percentage of timely processed 
applications.
    (i) Data. FNS will use quality control data for application 
processing timeliness.
    (ii) Timely processed applications. A timely processed application 
is one that provides an eligible applicant the ``opportunity to 
participate'' as defined in 7 CFR 274.2, within thirty days for normal 
processing or 7 days for expedited processing. New applications that 
are processed outside of this standard are untimely for this measure, 
except for applications that are properly pended in accordance with 
Sec.  273. 2(h)(2) of this chapter because verification is incomplete 
and the State agency has taken all the actions described in Sec.  
273.2(h)(1)(i)(C) of this chapter. Such applications will not be 
included in this measure.
    (iii) Evaluation of applications. Only applications that were filed 
on or after the beginning of the performance measurement (fiscal) year 
will be evaluated under this measure.

    Dated: December 9, 2003.
Eric M. Bost,
Under Secretary, Food, Nutrition and Consumer Services.
[FR Doc. 03-31031 Filed 12-16-03; 8:45 am]
BILLING CODE 3410-30-P