[Federal Register Volume 69, Number 54 (Friday, March 19, 2004)]
[Proposed Rules]
[Pages 12981-12989]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-6184]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 69, No. 54 / Friday, March 19, 2004 / 
Proposed Rules  

[[Page 12981]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 273

RIN 0584-AD32


Food Stamp Program: Employment and Training Program Provisions of 
the Farm Security and Rural Investment Act of 2002

AGENCY: Food and Nutrition Service, USDA.

ACTION: Notice of proposed rulemaking (NPRM).

-----------------------------------------------------------------------

SUMMARY: This rulemaking proposes to amend Food Stamp Program (FSP) 
regulations to implement Food Stamp Employment and Training (E&T) 
Program provisions of section 4121 of the Farm Security and Rural 
Investment Act of 2002 (the Farm Bill). The Department proposes to 
establish a reasonable formula to allocate 100 percent Federal funds 
authorized under the Farm Bill to carry out the E&T Program each fiscal 
year (FY). The Department further proposes to implement the Farm Bill 
provisions that make available up to $20 million a year in additional 
unmatched Federal E&T funds for State agencies that commit to offer an 
education/training or workfare opportunity to every applicant and 
recipient who is an able-bodied adult without dependents (ABAWD) 
limited to 3 months of food stamp eligibility in a 36-month period (3-
month time limit) and who would otherwise be terminated; and to 
eliminate the current Federal cost-sharing cap of $25 per month on the 
amount State agencies may reimburse E&T participants for work expenses 
other than dependent care. This rulemaking also proposes to implement 
Farm Bill provisions that expand State flexibility in E&T Program 
spending by repealing the requirements that State agencies earmark 80 
percent of their annual 100 percent Federal E&T grants to serve ABAWDs; 
they meet or exceed their FY 1996 State administrative spending levels 
to access funds made available by the Balanced Budget Act of 1997 (the 
Balanced Budget Act); and the Secretary be given the authority to 
establish maximum reimbursement costs of E&T Program components.

DATES: Comments must be received on or before May 18, 2004.

ADDRESSES: The Food and Nutrition Service invites interested persons to 
submit comments on this proposed rule. Comments may be submitted by any 
of the following methods:
     Mail: Send comments to Michael Atwell, Senior 
Program Analyst, Program Design Branch, Program Development Division, 
FSP, FNS, 3101 Park Center Drive, Room 810, Alexandria, Virginia, (703) 
305-2449.
     E-Mail: Send comments to [email protected].
     FAX: Submit comments by facsimile transmission 
to (703) 305-2486.
     Disk or CD-Rom: Submit comments on disk or CD-
Rom to Mr. Atwell at the above address.
     Hand Delivery or Courier: Deliver comments to 
Mr. Atwell at the above address.
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.

FOR FURTHER INFORMATION CONTACT: Michael Atwell, Senior Program 
Analyst, Program Design Branch, Program Development Division, FSP, FNS, 
3101 Park Center Drive, Room 810, Alexandria, Virginia, (703) 305-2449, 
or via the Internet at [email protected].

SUPPLEMENTARY INFORMATION:

Additional Information on Comment Filing

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-
AD32'' 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) 305-2449.

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 of paragraph of the proposed rule you 
are addressing. We 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 economically significant 
and was reviewed by the Office of Management and Budget (OMB) in 
conformance with Executive Order 12866.

Executive Order 12372

    The FSP 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.

[[Page 12982]]

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 the final 
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 food 
stamp applicants and recipients who are subject to FSP work 
requirements. The rulemaking also affects 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), Public 
Law 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 action is needed to implement the E&T Program provisions of 
section 4121 of the Farm Bill. These provisions would: (1) Establish a 
reasonable formula for allocating 100 percent Federal funds authorized 
under the Farm Bill to carry out the E&T Program each fiscal year; (2) 
make available up to $20 million a year in additional unmatched Federal 
E&T funds for State agencies that commit to offer an education/training 
or workfare opportunity to every ABAWD applicant and recipient who 
would otherwise be terminated under the 3-month time limit; (3) rescind 
the balance of unobligated funds carried over from FY 2001; (4) 
eliminate the current Federal cost-sharing cap of $25 per month on the 
amount State agencies may reimburse E&T participants for work expenses 
other than dependent care; (5) repeal the requirement that State 
agencies earmark 80 percent of their annual 100 percent Federal E&T 
grants to serve ABAWDs; and (6) repeal the requirement that State 
agencies meet or exceed their FY 1996 State administrative spending 
levels to access funds made available by the Balanced Budget Act.

Benefits

    State agencies will benefit from the provisions of this rule 
because they streamline the annual E&T Program grant allocation 
process, expand State agency flexibility in serving at-risk ABAWDs and 
other work registrants, and they eliminate unnecessary and complex 
rules on how State agencies can spend E&T Program funds.

Costs and Participation Impacts

    The E&T provisions of the Farm Bill reduce the overall level of 100 
percent Federal E&T funding, relieve States from obligations to spend 
matched E&T funding, and allow States to decrease the portion of E&T 
funding targeted to serve ABAWDs. To the extent that some States do not 
replace lost Federal grants with additional State spending, or decrease 
State spending, E&T services will be reduced. Some ABAWDs who are 
subject to the 3-month time limit will be made ineligible when they do 
not receive qualifying services.
    These provisions are expected to save $40 million in FY 2003, the 
first year they are fully implemented. Over the five-year period FY 
2003 through FY 2007, the provisions are expected to produce a savings 
of $227 million. They are expected to result in 12,000 persons becoming 
ineligible for food stamp benefits in FY 2003.

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 program 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 presented our ideas and received feedback on 
program policy at various State, regional, national, and professional 
conferences.

Nature of Concerns and the Need to Issue This Rule

    State agencies generally want greater flexibility in their 
operation of the E&T Program. State agencies have indicated that 
providing them this flexibility would greatly enhance their ability to 
more efficiently administer the FSP.

Extent to Which We Meet Those Concerns

    FNS has considered the impact on State and local agencies. This 
rule deals with changes required by law, which were effective on May 
13, 2002. The overall effect is to lessen the administrative burden by 
providing increased State agency flexibility in E&T Program spending. 
FNS is not aware of any case where any discretionary provisions of the 
rule would preempt State law.

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

[[Page 12983]]

of the rule's intent and provisions, and the characteristics of food 
stamp households and individual participants, FNS has determined that 
there is no way to soften the effect on any of the protected classes. 
Other than how to allocate E&T funds among State agencies, FNS had no 
discretion in implementing any of these changes, which were effective 
upon enactment of the Farm Bill on May 13, 2002. All data available to 
FNS indicate that protected individuals have the same opportunity to 
participate in the FSP as non-protected individuals. FNS specifically 
prohibits the State and local government agencies that administer the 
Program 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

    The Paperwork Reduction Act of 1995 (44 U.S.C. chap. 35; see 5 CFR 
part 1320) requires that the Office of Management and Budget (OMB) 
approve all collections of information by a Federal agency from the 
public before they can be implemented. Respondents are not required to 
respond to any collection of information unless it displays a current 
valid OMB control number. Information collections in this proposed rule 
have been previously approved under OMB 0584-0339.

Background

    The Food Stamp Employment and Training (E&T) Program was 
established by Congress in 1985 to provide able-bodied adult food stamp 
recipients with education and training opportunities designed to lead 
to employment and reduced reliance on food stamps. All 50 States, as 
well as the District of Columbia, Guam, and the Virgin Islands, are 
required to operate an E&T program. The E&T Program, administered 
nationally by the Food and Nutrition Service (FNS), is funded by an 
annual 100 percent Federal E&T allocation. Each State agency receives 
an E&T grant to pay for the administration of its program. In addition, 
Federal funds are available to reimburse State agencies 50 percent of 
State funds they use to administer the E&T Program and to reimburse 50 
percent of participant expenses, such as transportation and dependent 
care.
    Welfare reform legislation enacted in August 1996 established a 3-
month time limit for food stamp participation by ABAWDs. Under the 3-
month time limit, ABAWDs may receive food stamp benefits for no more 
than 3 months in a 36-month period unless they meet the ABAWD work 
requirement--work at least 20 hours a week, participate in a qualifying 
education or training activity for at least 20 hours a week, or 
participate in workfare (working in a public service capacity for the 
number of hours equal to their monthly food stamp benefit divided by 
the higher of the Federal or State minimum wage). The legislation also 
authorized the Secretary to waive the ABAWD work requirement--at the 
request of a State agency--for ABAWDs residing in areas of the State 
that have an unemployment rate of over 10 percent or in areas that do 
not have a sufficient number of jobs to provide employment for the 
ABAWDs.
    The Balanced Budget Act authorized $599 million in 100 percent 
Federal funds--in addition to the regular 100 percent grant--over 5 
years for the E&T Program. All 100 percent Federal funds were to remain 
available until obligated or expended. However, in order to access the 
additional money, the law required States to spend at least as much of 
their own funds as they did in FY 1996 to administer the E&T Program 
and the optional workfare program (if one was available). In addition, 
the law required States to earmark at least 80 percent of all 100 
percent Federal E&T funds to be used to create education, training, and 
workfare opportunities that qualify ABAWDs to maintain their 
eligibility for food stamps. The method for allocating the 100 percent 
Federal E&T grants was formulated to reflect the numbers of at-risk 
ABAWDs in each State, based on estimated ABAWD populations reported in 
FY 1996 Quality Control (QC) survey data, adjusted annually for 
caseload changes. The Balanced Budget Act required the Secretary to 
monitor State agency E&T expenditures, including the cost of individual 
program components. The Secretary was afforded the option of 
establishing maximum component reimbursement rates that reflect the 
reasonable cost of providing qualifying opportunities to ABAWDs subject 
to the 3-month time limit. Lastly the Balanced Budget Act provided 
State agencies the option to exempt up to 15 percent of their ABAWDs 
subject to the ABAWD work requirement.
    State agencies, already dealing with the difficult task of 
administering ABAWD time limit provisions, were faced with a complex 
new set of rules for operating their E&T programs. In addition to the 
use of funds and maintenance of effort requirements, the Department, 
under authority granted by the Balanced Budget Act, established maximum 
component rates for reimbursing State agencies for their expenses in 
creating and maintaining qualifying activities for ABAWDs to remain 
eligible. The Department initiated the rates to ensure that Federal E&T 
funds would be adequate to efficiently and economically serve as many 
at-risk ABAWDs as possible. However, over a period of time it became 
clear that, as more and more ABAWDs left the FSP after exhausting their 
3 months of eligibility, the infusion of Federal funds did not have the 
intended effect. State agencies maintained that ABAWDs are the most 
difficult food stamp population to serve. While many are attached to 
the job market and stay on the program a short time, many others face 
significant barriers, such as homelessness, mental health issues and 
substance abuse. Consequently, according to many State agency 
administrators, ABAWDs are among the most non-compliant food stamp 
recipients in terms of cooperating with State agency efforts to help 
them maintain eligibility. Several State agencies decided not to serve 
ABAWDs beyond the non-qualifying activities already offered. Other 
State agencies reported that they limited service to only the most 
capable and motivated ABAWDs. As a result, the ABAWD caseload steadily 
declined, and the amount of unspent Federal E&T funds grew.
    Many State agencies protested the requirement that they meet a 
maintenance of effort requirement by spending as much State 
administrative funds as they did in FY 1996 before they could access 
the additional 100 percent Federal funding provided under the Balanced 
Budget Act. They pointed out that 18 of 53 State agencies operating the 
E&T Program did not spend State

[[Page 12984]]

administrative funds in FY 1996 and could access their additional 
Federal funding with no maintenance of effort restrictions.
    State agencies also believed that the restrictions on the use of 
Federal E&T funds prevented them from adequately serving members of 
low-income families who do not face the time limit. They maintained 
that 20 percent of their 100 percent Federal funds was not sufficient 
to create meaningful activities for those recipients.
    On May 13, 2002, the President signed into law the Farm Bill, which 
reauthorized the FSP, including the E&T Program, through FY 2007. 
Section 4121 of the Farm Bill made several immediate, significant 
changes to the E&T Program. These changes, along with the Department's 
proposals for amending FSP regulations, are discussed below.

Funding for Food Stamp Employment and Training Programs

Allocation of E&T Grants

    Current regulations at 7 CFR 273.7(d)(1)(i) describe the procedures 
for allocating 100 percent Federal E&T funding. Each State agency 
receives a Federal E&T grant consisting of a base amount and an 
additional amount available only to those State agencies that elect to 
meet a maintenance of effort requirement. Both grant amounts are 
allocated to State agencies based on each State's portion of ABAWDs 
subject to the time limit--as a percentage of such ABAWDs nationwide--
who do not reside in an area for which the State has been granted a 
waiver of the ABAWD work requirement, or who do reside in an area of 
the State granted a waiver of the ABAWD work requirement if the State 
agency provides E&T services in the area to ABAWDs. To determine each 
State agency's share of 100 percent Federal E&T funds allocated in a 
fiscal year, FNS estimates the portion of ABAWDs subject to the work 
requirement in each State using 1996 QC survey data, adjusted annually 
to reflect changes in each State's food stamp caseload.
    Additionally, current regulations at 7 CFR 273.7(d)(1)(i) provide 
that no State agency receive less than $50,000 in 100 percent Federal 
E&T funds. To ensure this, FNS is authorized to reduce, if necessary, 
the grant of each State agency allocated more than $50,000 
proportionate to the number of non-waived, non-exempted ABAWDs in the 
State subject to the work requirement, or non-exempted ABAWDs living in 
waived areas in which the State agency provides E&T services, compared 
to the total number of such ABAWDs in all the State agencies receiving 
more than $50,000. FNS distributes the funds from the reduction to 
State agencies initially allocated less than $50,000 so they receive 
the $50,000 minimum.
    Section 4121 of the Farm Bill amended section 16(h)(1)(B) of the 
Act to provide that 100 percent Federal E&T funds be allocated and 
reallocated among State agencies under a reasonable formula that is 
determined and adjusted by the Secretary and takes into account the 
numbers of ABAWDs not exempt from the work requirement.
    The Department proposes to amend 7 CFR 273.7(d)(1)(i) to provide 
that FNS will allocate 100 percent Federal E&T grants from funding 
available each fiscal year using a two-part formula designed to take 
into account non-waived, non-exempted ABAWDs subject to the work 
requirement, and to ensure that each State agency receives an 
appropriate, equitable share of funds.
    To do so, the Department proposes to allocate one-half of the 
annual 100 percent Federal E&T grant based on its estimate of the 
numbers of ABAWDs in each State who do not reside in an area subject to 
a waiver granted in accordance with 7 CFR 273.24(f) or who are not 
included in each State agency's 15 percent ABAWD exemption allowance 
under 7 CFR 273.24(g), as a percentage of such ABAWDs nationwide. FNS 
proposes to determine each State agency's percentage of non-waived, 
non-exempted ABAWDs using ABAWD data collected by Mathematica Policy 
Research, Incorporated (MPR), from its September 2001 report, 
``Imposing a Time Limit on Food Stamp Receipt: Implementation of the 
Provisions and Effects on FSP Participation.'' FNS believes this data 
is the most accurate and reliable available and will continue to be so 
for the foreseeable future. FNS proposes to use the study data to 
derive percentages for the numbers of waived/exempted ABAWDs in each 
State. FNS will apply those percentages to the most recent fiscal year 
for which QC survey ABAWD data is complete to arrive at its estimate of 
each State agency's ABAWD population minus ABAWDs in waived areas and 
exempted ABAWDs. Since FNS had to allocate FY 2003 funds before 
regulations could be issued, we used FY 2001 QC survey figures for FY 
2003; for FY 2004, FY 2002 figures will be used, and so forth.
    The Department proposes to allocate the balance of the annual 100 
percent Federal E&T grant based on the number of work registrants in 
each State as a percentage of work registrants nationwide. FNS will use 
work registrant data reported by each State agency on the FNS-583, 
Employment and Training Program Activity Report from the most recent 
complete Federal fiscal year.
    The Department chose this proposed allocation methodology because 
it takes into account at-risk ABAWDs--as required by law--while 
utilizing valuable work registrant information reported on the FNS-583 
to prevent overemphasis of ABAWD populations to the detriment of other, 
non-ABAWD work registrants who benefit from the E&T Program. FNS 
continues to work with State agencies that have difficulty with the 
consistency and reliability of their FNS-583 information. Additionally, 
FNS revised and simplified the information reporting requirements for 
the FNS-583; this will improve reliability.
    Lastly, the Department proposes to amend 7 CFR 273.7(d)(1)(i) by 
revising the method by which the $50,000 minimum allocations are to be 
calculated. For each State agency scheduled to be allocated more than 
$50,000, FNS proposes to calculate how much it will have its grant 
reduced, if necessary, as follows. First, disregarding all those State 
agencies scheduled to receive less than $50,000, FNS will calculate 
each remaining State agency's percentage share of the fiscal year's E&T 
grant. Next, FNS will multiply the grant--less $50,000 for every State 
agency under the minimum--by the same percentage share for each 
remaining State agency to arrive at the revised amount. The difference 
between the original and the revised amounts will represent each State 
agency's contribution to the $50,000 minimum allocation(s).
    The Department welcomes comments on its proposed method for 
allocating 100 percent Federal E&T funds and encourages alternative 
proposals.

Use of Funds

    Current regulations at 7 CFR 273.7(d)(1)(ii)(A), (d)(1)(ii)(B), 
(d)(1)(ii)(C), and (d)(1)(ii)(D) provide that not less than 80 percent 
of a State agency's 100 percent Federal E&T grant each fiscal year--
both the base and additional Balanced Budget Act allocations--be used 
to serve ABAWDs who are meeting the work requirement. The remaining 20 
percent of a State agency's 100 percent Federal E&T grant may be used 
to provide E&T components for non-ABAWDs or to provide activities that 
do not meet the ABAWD work requirement, such as job search or job 
search training programs for any food stamp recipient. If a State 
agency spends more than 20 percent of

[[Page 12985]]

its E&T grant on non-ABAWDs and/or non-ABAWD activities, FNS will, at 
the normal 50/50 match rate, reimburse the State agency for allowable 
costs in excess of 20 percent.
    Section 4121 of the Farm Bill amended section 16(h)(1)(E) of the 
Act by removing the requirement that State agencies use not less than 
80 percent of their Federal E&T grants to serve ABAWDs.
    The Department proposes to amend 7 CFR 273.7(d)(1)(ii) by removing 
this requirement.

Maintenance of Effort

    Current regulations at 7 CFR 273.7(d)(1)(iii) provide that, in 
order to be eligible for funds allocated under the Balanced Budget Act, 
a State agency must expend at least as much State funds for 
administration of E&T and optional workfare programs (if applicable) as 
it did in FY 1996.
    Section 4121 of the Farm Bill amended section 16(h)(1)(F) of the 
Act by removing the requirement that State agencies maintain the 
expenditures of the State agency for E&T and workfare programs for each 
fiscal year at a level not less than its level of expenditures for E&T 
and workfare programs in FY 1996.
    The Department proposes to amend 7 CFR 273.7(d)(1) by removing the 
maintenance of effort requirement.

Component Costs

    Prior to enactment of the Farm Bill, section 16(h)(1)(G) of the Act 
required the Secretary to monitor State agencies' expenditures of 
Federal E&T funds, including the costs of individual components of 
State agencies' programs. It authorized the Secretary to determine the 
reimbursable costs of E&T components to ensure they reflect the 
reasonable cost of efficiently and economically providing components 
appropriate to recipient E&T needs.
    On September 3, 1999, the Department published an interim rule (64 
FR 48246) that amended food stamp regulations to add new requirements 
regarding E&T components costs at 7 CFR 273.7(d)(1)(iv). The Department 
determined that setting reimbursement rates for E&T activities was 
necessary to promote the intent of the increased E&T funding, which was 
to create a sufficient number of work opportunities so that as many 
ABAWDs who wished to work could be given the opportunity to do so 
before losing eligibility for the program. The Department believed the 
reimbursement rates would help ensure that the maximum number of 
opportunities was created with the available funds, thus potentially 
keeping as many ABAWDs as possible eligible for the program.
    However, after observing the reimbursement rates in effect and 
having the opportunity for further consideration of the issue, the 
Department determined that the reimbursement rate structure constrained 
State agencies' ability to serve ABAWDs effectively in State E&T 
programs. Further, the Department determined that its elimination would 
allow State agencies to fully utilize the funds available to them to 
create opportunities for ABAWDs that not only maintain their food stamp 
eligibility but also help them become and stay employed.
    In a final rule (67 FR 41589) published on June 19, 2002, the 
Department eliminated the reimbursement rate structure, while 
maintaining its authority, under 7 CFR 273.7(d)(1)(iv), to monitor 
State agency E&T expenditures to ensure that planned and actual 
spending reflects the reasonable cost of providing E&T services.
    Section 4121 of the Farm Bill amended section 16(h)(1)(G) of the 
Act by removing the requirement to monitor State agency E&T 
expenditures. However, the Secretary retains the authority to ensure 
that State agencies efficiently and effectively administer the FSP, 
including the E&T Program, by complying with the provisions of the Act, 
the regulations issued pursuant to the Act, and the FNS-approved State 
E&T Plan of Operation.
    Therefore, the Department proposes to remove the component cost 
provision at 7 CFR 273.7(d)(1)(iv).

Additional Funding for States that Serve ABAWDS

    Prior to elimination of component reimbursement rates, the 
Department offered State agencies greater flexibility to meet the 
intent of the increased funding provided under the Balanced Budget Act. 
State agencies that committed, or ``pledged'' to offer a qualifying 
education, training, or workfare position to all non-waived, non-
exempted ABAWDs subject to the time limit were exempted from adhering 
to the maximum reimbursement rates in effect. The Farm Bill continues 
to provide some of that same flexibility for State agencies committed 
to serving their ABAWD population. Section 4121(a)(3)(E) of the Farm 
Bill amended the Act by authorizing an additional $20 million in 100 
percent Federal E&T funds each fiscal year to be allocated among those 
State agencies that offer a qualifying education, training, or workfare 
position to all ABAWDs subject to the time limit.
    To be eligible for a share of the additional $20 million, a State 
agency must make and comply with a commitment to offer a qualifying 
education, training, or workfare position to each ABAWD applicant or 
recipient who is in the last month of the 3-month time limit; who does 
not live in an area subject to a waiver of the time limit; and who is 
not exempt from the time limit as part of the State agency's 15 percent 
ABAWD exemption allowance. Eligible State agencies must use their share 
of the $20 million allocation--along with their regular Federal E&T 
grants, if necessary--to defray costs incurred in serving these ``at-
risk'' ABAWDs. While a participating pledge State agency may use a 
portion of the additional funding to provide E&T services to ABAWDs who 
are not at risk, its first priority is to guarantee that its at-risk 
ABAWDs are provided the opportunity to remain eligible.
    Unlike regular Federal E&T grants, this $20 million allocation does 
not remain available until obligated or expended. At the end of each 
fiscal year, unobligated, unspent portions of the $20 million must be 
returned to the U.S. Treasury.
    Therefore, the Department proposes to add a new paragraph at 7 CFR 
273.7(d)(3), titled ``Additional allocations,'' that provides for an 
additional allocation of $20 million in 100 percent Federal funds each 
fiscal year to State agencies that commit to ensuring the availability 
of education, training and workfare opportunities that permit ABAWDs to 
remain eligible for food stamps beyond the 3-month time limit. To be 
eligible, a State agency must make and comply with a commitment, or 
``pledge,'' to offer a qualifying education/training activity or 
workfare position to each ABAWD applicant or recipient who is ``at 
risk,'' i.e., one who: (1) Is in the last month of the 3-month time 
limit; (2) does not live in an area covered by a waiver of the time 
limit; and (3) is not part of a State agency's 15 percent ABAWD 
exemption allowance.
    The Department proposes that interested State agencies will have 
one opportunity to make the pledge for the upcoming fiscal year, and no 
pledges will be accepted after the beginning of the new fiscal year on 
October 1. An interested State agency should include in its annual 
State E&T Plan or State Plan update--due no later than August 15 each 
year--its request to be considered as a pledge State. The Department 
proposes to require an interested State agency to include in its 
request estimated costs of fulfilling its

[[Page 12986]]

pledge; a description of management controls in place to meet pledge 
requirements; a discussion of its capacity and ability to serve at-risk 
ABAWDs; information about the size and special needs of its ABAWD 
population; and information about the education, training, and workfare 
components it will offer to meet the ABAWD work requirement. The 
Department proposes that FNS will review each request based on the 
information provided. If the information clearly indicates that the 
State agency will be unable to fulfill its commitment, FNS may require 
the State agency to address its deficiencies before it is allowed to 
participate as a pledge State. If the State agency does not address its 
deficiencies by October 1 it will not be allowed to participate as a 
pledge State.
    The Department also proposes that, once it determines how many 
State agencies will participate each fiscal year, it will, as early as 
possible in the fiscal year, allocate among them the $20 million based 
on its estimate of the numbers of ABAWDs in each participating pledge 
State who do not reside in an area subject to a waiver granted in 
accordance with 7 CFR 273.24(f) or who are not included in each State 
agency's 15 percent ABAWD exemption allowance under 7 CFR 273.24(g), as 
a percentage of such ABAWDs in all the participating pledge States. FNS 
proposes to use the same percentages of non-waived, non-exempted ABAWDs 
as it uses to allocate the annual 100 percent Federal E&T grant to 
arrive at its estimate of each pledge State's at-risk ABAWD population. 
This method ensures that each pledge State will receive a share of the 
$20 million based entirely on those ABAWDs facing the time limit, as 
Congress intended. It also guarantees that those States in which all 
ABAWDs reside in waived areas and/or are exempted do not share in the 
funding. If a pledge State will not expend its entire share of the 
additional $20 million during the fiscal year, FNS proposes to 
reallocate the unobligated, unexpended funds to other pledge States on 
a first come-first served basis. FNS will notify other pledge States of 
the availability of additional funding. To qualify, a pledge State must 
have already obligated its entire annual 100 percent Federal E&T grant, 
excluding an amount that is proportionate to the number of months 
remaining in the fiscal year, and it must guarantee in writing that it 
intends to obligate its entire grant by the end of the fiscal year. A 
State's annual 100 percent Federal E&T grant is its share of the 
regular 100 percent Federal E&T allocation plus its share of the 
additional $20 million (if applicable).

    For example: State A is allocated a regular E&T grant of 
$1,000,000, plus a $200,000 share of the $20 million additional 
allocation for pledge States--a total annual 100 percent Federal E&T 
grant of $1,200,000. In March, State A is informed of the 
availability of unobligated, unexpended pledge State funding. To 
qualify for a part of the funds, it must have already obligated one-
half ($600,000) of its total annual grant ($1,200,000 divided by 12 
equals $100,000. $100,000 times 6 months--October through March--
equals $600,000). Additionally, it must guarantee in writing that it 
intends to obligate the remaining $600,000 by September 30.

    Interested pledge States must submit their requests for additional 
funding to FNS. FNS will review the requests and, if they are 
determined reasonable and necessary, will reallocate some or all of the 
unobligated, unspent ABAWD funds, as it considers appropriate and 
equitable. Although a pledge State may use a portion of the additional 
funding to serve ABAWDs not at risk, it must honor its commitment to 
serve at-risk ABAWDs before doing so.
    Further, the Department proposes to specify that, unlike regular 
100 percent Federal E&T funds, unobligated funds from this additional 
allocation are not permitted under the Act be carried over into the 
subsequent fiscal year. Rather, they must be returned to the U.S. 
Treasury at the end of each fiscal year.
    Lastly, The Department proposes to specify that a pledge State that 
fails to meet its commitment may be disqualified from participating in 
subsequent fiscal years.

Rescission of Carryover Funds

    The Farm Bill maintains the provisions established by the Balanced 
Budget Act that regular 100 percent Federal E&T funds remain available 
until expended. It also continues to authorize the Secretary to 
reallocate unexpended funds to other States during the fiscal year for 
which they were appropriated or the subsequent fiscal year 
appropriately and equitably. However, section 4121(b) of the Farm Bill 
provided that all carryover funds from any fiscal year before FY 2002 
were rescinded on the date of enactment, unless obligated by a State 
agency before that date. Thus, as of May 13, 2002 all unobligated 100 
percent Federal E&T funds appropriated for any fiscal year prior to FY 
2002 were no longer available.
    E&T 100 percent funding appropriated for FY 2002 and subsequent 
fiscal years are likewise unaffected by the rescission, and, excluding 
the additional funding authorized for States that serve ABAWDs, will be 
available for carryover and reallocation on a first come--first served 
basis. Each year FNS will notify State agencies of the availability of 
carryover funding. Interested State agencies must submit their requests 
for carryover funding to FNS. If the requests are determined reasonable 
and necessary, FNS will allocate carryover funding to meet some or all 
of the State agencies' requests, as it considers appropriate and 
equitable. The factors FNS will consider when reviewing a State 
agency's request will include the size of the request relative to the 
level of the State agency's E&T spending in prior years, the 
specificity of the State agency's plan for spending carryover funds, 
and the quality of program and scope of impact for the State agency's 
E&T program and proposed use of carryover funds.

Participant Reimbursement

    Current regulations at 7 CFR 273.7(d)(3)(ii) require a State agency 
to reimburse the actual costs of transportation and other costs, except 
dependent care costs, it determines to be necessary and directly 
related to participation in E&T. Only costs up to $25 per participant 
per month are subject to Federal cost share assistance.
    In 1982 Congress passed legislation establishing the optional 
workfare program under which eligible recipients work in public service 
jobs in exchange for their food stamps. The workfare legislation 
established $25 a month per participant as the maximum reimbursable 
amount, at the 50 percent match rate, for costs, such as 
transportation, reasonably necessary and directly related to 
participation in the program.
    When Congress established the E&T Program in 1985, it continued the 
requirement that State agencies reimburse participant expenses up to 
$25 per month per participant. State agencies were allowed to reimburse 
expenses in excess of $25 using their own funds, but the maximum 
Federal contribution remained $12.50.
    While subsequent E&T-related legislation retained the $25 maximum, 
State agencies argued that they should be allowed to set the 
participant reimbursement maximum at a level that reflects the true 
costs of transportation. They contended that transportation is a major 
barrier to E&T participation, especially in rural areas, that $25 was 
not enough to cover the expense of getting to and from E&T activities, 
and that it certainly was insufficient to cover

[[Page 12987]]

other acceptable participation related expenses as well.
    Section 4121(d) of the Farm Bill amended the Act by eliminating the 
$25 maximum participant reimbursement for the costs of transportation 
and other actual costs other than dependent care. This provides State 
agencies the opportunity to establish reimbursement levels that reflect 
the actual transportation situations in their jurisdictions. In 
addition, elimination of the $25 maximum allows State agencies to 
expand the types of participant expenses they are able to reimburse. In 
the past, transportation expenses usually accounted for the entire $25 
reimbursement. Now, State agencies may be able to reimburse E&T 
participants for such acceptable work, training, or education related 
expenses as uniforms, personal safety items or other necessary 
equipment, and books or training manuals, with the Federal government 
defraying half the costs.
    In addition, it is possible that State agencies will earmark more 
State funds--matched by Federal funds--to reimburse expenses related to 
E&T participation but aimed at enhancing a participant's chances of 
finding employment. For example, a State agency may choose to provide a 
clothing allowance to permit participants to purchase appropriate 
clothing for job search and for job interviews. Such an allowance would 
help E&T participants successfully compete for jobs. Other expenses, 
such as license and bonding fees required for employment, for which an 
E&T participant is liable, could also be considered for reimbursement 
by State agencies.
    We believe that this expanded use of participant reimbursements is 
allowable under the Act and would be beneficial in achieving self-
sufficiency for many E&T participants.
    Therefore, the Department proposes to redesignate 7 CFR 273.7(d)(3) 
as 7 CFR 273.7(d)(4) and to amend the newly redesignated 7 CFR 
273.7(d)(4)(ii) by removing the $25 per month per participant 
limitation on Federal cost sharing for participant expenses.
    We also propose to include language requiring State agencies to 
provide, in their annual State E&T Plans, information about which 
expenses they plan to reimburse. FNS will review this information as 
part of the overall plan approval process.

Non-Financial Program Reporting Requirements

    Each State agency is responsible for maintaining information about 
its E&T program and for reporting it quarterly to FNS. Form FNS-583, 
E&T Program Activity Report, was designed to capture the information 
and to provide a standard, consistent means of accumulating and 
analyzing national E&T Program data. The form has undergone several 
permutations, the latest coming as a result of Balanced Budget Act, 
which modified the E&T Program to focus State agency efforts on a 
particular segment of the food stamp population--ABAWDs--and contained 
provisions governing the use of Federal E&T funds. Form FNS-583 was 
extensively revised to capture information that permitted FNS to 
monitor State agency ABAWD spending to ensure compliance with the 
maximum reimbursement rates that were in effect and to ensure that 
State agencies met the use of funds requirement. In addition, form FNS-
583 was used to capture the numbers of ABAWDs exempted under each State 
agency's 15 percent ABAWD exemption allowance.
    With the elimination of Balanced Budget Act funding provisions, it 
became necessary to once again revise form FNS-583, to streamline and 
simplify the data required of each State agency to provide national 
oversight of E&T Program operations. Current regulations at 7 CFR 
273.7(c)(8), (c)(9), and (c)(10) contain the requirements for 
completing the FNS-583.
    The Department proposes to amend regulations to describe the new 
requirements for completing the FNS-583, based on its recent revision 
to reflect Farm Bill provisions.

Reduction in Work Effort

    One statutory exemption from FSP work requirements is employment of 
30 or more hours weekly or weekly earnings at least equivalent to the 
Federal minimum wage multiplied by 30 hours. The 1996 welfare reform 
legislation added a new work requirement that made ineligible those 
individuals who reduce work effort to less than 30 hours per week. The 
reduction in work effort provision was included in the June 19, 2002, 
final rule (67 FR 41589). The current regulation at 7 CFR 
273.7(j)(3)(iii) provides that the minimum wage equivalency does not 
apply when determining a reduction in work effort. However, subsequent 
policy clarifications made clear that the minimum wage equivalency must 
apply when making these determinations. Section 6(d)(2)(E) of the Act 
establishes one criterion for exemption from FSP work requirements as 
working a minimum of 30 hours a week or earning the minimum wage 
equivalent of at least 30 hours a week. Thus, in accordance with the 
Act, an individual exempt from FSP work requirements because he or she 
is working a minimum of 30 hours a week who reduces his or her work 
hours to less than 30, but who continues to earn more in weekly wages 
than the Federal minimum wage multiplied by 30 hours, remains exempt 
from FSP work requirements, and is not subject to disqualification.
    The Department is taking this opportunity to clarify its policy 
concerning reduction in work effort.

List of Subjects in 7 CFR Part 273

    Administrative practice and procedures, Food stamps, Grant 
programs--social programs, Penalties, Reporting and recordkeeping.

    Accordingly, 7 CFR part 273 is proposed to be amended as follows:
    1. The authority citation for part 273 continues to read as 
follows:

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

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

    2. In Sec.  273.7:
    a. Paragraph (c)(6)(ii) is amended by removing the period at the 
end of sentence three and adding in its place a semi-colon, and by 
removing the last sentence;
    b. paragraph (c)(6)(vii) is revised;
    c. new paragraphs (c)(6)(xv) and (c)(6)(xvi) are added;
    d. paragraphs (c)(7), (c)(8), (c)(9), (c)(10), (c)(11), (c)(12), 
(c)(13), and (c)(14) are redesignated as paragraphs (c)(8), (c)(9), 
(c)(10), (c)(11), (c)(12), (c)(13), (c)(14), and (c)(15), respectively, 
and new paragraph (c)(7) is added;
    e. newly redesignated paragraph (c)(8) is amended by removing the 
word ``biennially'' in the first sentence and adding in its place the 
word ``annually'';
    f. newly redesignated paragraphs (c)(9), (c)(10), and (c)(11) are 
revised;
    g. paragraph (d)(1)(i) is revised;
    h. paragraph (d)(1)(ii) is amended by removing paragraphs 
(d)(1)(ii)(A), (d)(1)(ii)(B), (d)(1)(ii)(C), and (d)(1)(ii)(D), and 
redesignating paragraphs (d)(1)(ii)(E), (d)(1)(ii)(F), (d)(1)(ii)(G), 
and (d)(1)(ii)(H) as paragraphs (d)(1)(ii)(A), (d)(1)(ii)(B), 
(d)(1)(ii)(C), and (d)(1)(ii)(D), respectively;
    i. paragraphs (d)(1)(iii) and (d)(1)(iv) are removed;
    j. paragraphs (d)(3), (d)(4), (d)(5), and (d)(6) are redesignated 
as (d)(4), (d)(5), (d)(6), and (d)(7), respectively, and new paragraph 
(d)(3) is added;
    k. newly redesignated paragraph (d)(4) is amended by adding a new 
sentence after the first sentence of the introductory text, removing 
the regulatory references ``paragraphs

[[Page 12988]]

(d)(3)(i) and (d)(3)(ii)'' in sentences four and seven and adding in 
their place the regulatory references ``paragraphs (d)(4)(i) and 
(d)(4)(ii)'', and by removing the regulatory references ``paragraph 
(d)(3)(i) and (d)(3)(ii)'' in sentence eight and adding in its place 
the regulatory reference ``paragraph (d)(4)(i)'';
    l. newly redesignated paragraph (d)(4)(i) is amended by removing 
the last sentence;
    m. newly redesignated paragraph (d)(4)(ii) is amended by removing 
the last sentence;
    n. newly redesignated paragraph (d)(4)(v) is amended by removing 
the regulatory reference ``paragraphs (d)(3)(i) and (d)(3)(ii)'' in the 
second sentence and adding in its place the regulatory reference 
``paragraphs (d)(4)(i) and (d)(4)(ii)'', and removing the regulatory 
reference ``paragraph (d)(3)(i)'' in the last sentence and adding in 
its place the regulatory reference ``paragraph (d)(4)(i)'';
    o. paragraph (f)(7)(ii) is amended by removing the regulatory 
reference ``paragraphs (b)(1)(iii) and (b)(1)(v)'' in the second 
sentence and adding in its place the regulatory reference ``paragraphs 
(b)(1)(iii) or (b)(1)(v)'';
    p. paragraph (f)(7)(iv) is amended by removing words ``exemptions 
provided in paragraphs (b)(1)(iii) and (b)(1)(v)'' in the first 
sentence and adding in their place the words ``exemption in paragraph 
(b)(1)(iii)'';
    q. paragraph (j)(3)(iii) is amended by revising the last sentence.
    The revisions and additions read as follows:


Sec.  273.7  Work provisions.

* * * * *
    (c) * * *
    (6) * * *
    (vii) The method the State agency uses to count all work 
registrants as of the first day of the new fiscal year;
* * * * *
    (xv) The combined (Federal/State) State agency reimbursement rate 
for transportation costs and other expenses reasonably necessary and 
directly related to participation incurred by E&T participants.
    (xvi) Information about expenses the State agency proposes to 
reimburse. FNS must be afforded the opportunity to review and comment 
on the proposed reimbursements before they are implemented.
    (7) A State agency interested in receiving additional funding for 
serving able-bodied adults without dependents (ABAWDs) subject to the 
3-month time limit, in accordance with paragraph (d)(3) of this 
section, must include in its annual E&T plan:
    (i) Its pledge to offer a qualifying activity to all at-risk ABAWD 
applicants and recipients;
    (ii) Estimated costs of fulfilling its pledge;
    (iii) A description of management controls in place to meet pledge 
requirements;
    (iv) A discussion of its capacity and ability to serve at-risk 
ABAWDs;
    (v) Information about the size and special needs of its ABAWD 
population; and
    (vi) Information about the education, training, and workfare 
components it will offer to meet the ABAWD work requirement.
* * * * *
    (9) The State agency will submit an E&T Program Activity Report to 
FNS no later than 45 days after the end of each Federal fiscal quarter. 
The report will contain monthly figures for:
    (i) Participants newly work registered;
    (ii) Number of ABAWD applicants and recipients participating in 
qualifying components;
    (iii) Number of all other applicants and recipients (including 
ABAWDs involved in non-qualifying activities) participating in 
components; and
    (iv) ABAWDs subject to the 3-month time limit imposed in accordance 
with Sec.  273.24(b) who are exempt under the State agency's 15 percent 
exemption allowance under Sec.  273.24(g).
    (10) The State agency will submit annually, on its first quarterly 
report, the number of work registrants in the State on October 1 of the 
new fiscal year.
    (11) The State agency will submit annually, on its final quarterly 
report, a list of E&T components it offered during the fiscal year and 
the number of ABAWDs and non-ABAWDs who participated in each.
* * * * *
    (d) * * *
    (1) * * *
    (i) Allocation of grants. Each State agency will receive a Federal 
E&T program grant each fiscal year to operate an E&T program in 
accordance with paragraph (e) of this section. The grant requires no 
State matching.
    (A) In determining each State agency's 100 percent Federal E&T 
grant, FNS will apply the percentage determined in accordance with 
paragraph (d)(1)(i)(B) of this section to the total amount of 100 
percent Federal funds authorized under section 16(h)(1)(A) of the Act 
for each fiscal year.
    (B) FNS will allocate the funding available each fiscal year for 
E&T grants using a formula designed to ensure that each State agency 
receives its appropriate share.
    (1) One-half of the annual 100 percent Federal E&T grant will be 
calculated based on the number of ABAWDs in each State who do not 
reside in an area subject to a waiver granted in accordance with Sec.  
273.24(f) or who are not included in each State agency's 15 percent 
ABAWD exemption allowance under Sec.  273.24(g), as a percentage of 
such ABAWDs nationwide. FNS will consider all waivers granted in 
accordance with Sec.  273.24(f) within a reasonable time before the E&T 
allocations are determined. FNS will utilize the best data available 
for the waiver and exemption adjustments. FNS will determine each State 
agency's percentage of ABAWDs using the most recent Quality Control 
(QC) survey data adjusted for changes in its caseload.
    (2) One-half of the grant will be allocated based on the number of 
work registrants in each State as a percentage of work registrants 
nationwide. FNS will use work registrant data reported by each State 
agency on the FNS-583, Employment and Training Program Activity Report, 
from the most recent Federal fiscal year.
    (C) No State agency will receive less than $50,000 in Federal E&T 
funds. To ensure this, FNS will, if necessary, reduce the grant of each 
State agency allocated more than $50,000. In order to guarantee an 
equitable reduction, FNS will calculate grants as follows. First, 
disregarding those State agencies scheduled to receive less than 
$50,000, FNS will calculate each remaining State agency's percentage 
share of the fiscal year's E&T grant. Next, FNS will multiply the 
grant--less $50,000 for every State agency under the minimum--by each 
remaining State agency's same percentage share to arrive at the revised 
amount. The difference between the original and the revised amounts 
will represent each State agency's contribution. FNS will distribute 
the funds from the reduction to State agencies initially allocated less 
than $50,000.
    (D) If a State agency will not obligate or expend all of the funds 
allocated to it for a fiscal year under paragraph (d)(1)(i)(B) of this 
section, FNS will reallocate the unobligated, unexpended funds to other 
State agencies during the fiscal year or the subsequent fiscal year on 
a first come-first served basis. Each year FNS will notify State 
agencies of the availability of carryover funding. Interested State 
agencies must submit their requests for carryover funding to FNS. If 
the requests are determined reasonable and necessary, FNS will allocate 
carryover funding to meet some or all of the State agencies' requests, 
as it considers appropriate and equitable.

[[Page 12989]]

The factors that FNS will consider when reviewing a State agency's 
request will include the size of the request relative to the level of 
the State agency's E&T spending in prior years, the specificity of the 
State agency's plan for spending carryover funds, and the quality of 
program and scope of impact for the State's E&T program and proposed 
use of carryover funds.
* * * * *
    (3) Additional allocations. In addition to the E&T program grants 
discussed in paragraph (d)(1) of this section, FNS will allocate $20 
million in Federal funds each fiscal year to State agencies that ensure 
availability of education, training, or workfare opportunities that 
permit ABAWDs to remain eligible beyond the 3-month time limit.
    (i) To be eligible, a State agency must make and comply with a 
commitment, or ``pledge,'' to use these additional funds to defray the 
cost of offering a position in an education, training, or workfare 
component that fulfills the ABAWD work requirement, as defined in Sec.  
273.24(a), to each applicant and recipient who is:
    (A) In the last month of the 3-month time limit described in Sec.  
273.24(b);
    (B) Not eligible for an exception to the 3-month time limit under 
Sec.  273.24(c);
    (C) Not a resident of an area of the State granted a waiver of the 
3-month time limit under Sec.  273.24(f); and
    (D) Not included in each State agency's 15 percent ABAWD exemption 
allotment under Sec.  273.24(g).
    (ii) While a participating pledge State may use a portion of the 
additional funding to provide E&T services to ABAWDs who do not meet 
the criteria discussed in paragraph (d)(3)(i) of this section, it must 
guarantee that the ABAWDs who do meet the criteria are provided the 
opportunity to remain eligible.
    (iii) State agencies will have one opportunity each fiscal year to 
take the pledge described in paragraph (d)(3)(i) of this section. An 
interested State agency, in its E&T Plan for the upcoming fiscal year, 
must include the following:
    (A) A request to be considered as a pledge State, along with its 
commitment to comply with the requirements of paragraph (d)(3)(i) of 
this section;
    (B) The estimated costs of complying with its pledge;
    (C) A description of management controls it has established to meet 
the requirements of the pledge;
    (D) A discussion of its capacity and ability to serve vulnerable 
ABAWDs;
    (E) Information about the size and special needs of the State's 
ABAWD population; and
    (F) Information about the education, training, and workfare 
components that it will offer to allow ABAWDs to remain eligible.
    (iv) If the information provided in accordance with paragraph 
(d)(3)(iii) of this section clearly indicates that the State agency 
will be unable to fulfill its commitment, FNS may require the State 
agency to address its deficiencies before it is allowed to participate 
as a pledge State.
    (v) If the State agency does not address its deficiencies by 
October 1 it will not be allowed to participate as a pledge State.
    (vi) No pledges will be accepted after the beginning of the new 
fiscal year on October 1.
    (vii) (A) Once FNS determines how many State agencies will 
participate as pledge States in the upcoming fiscal year, it will, as 
early in the fiscal year as possible, allocate among them the $20 
million based on the number of ABAWDs in each participating State who 
do not reside in an area subject to a waiver granted in accordance with 
Sec.  273.24(f) or who are not included in each State agency's 15 
percent ABAWD exemption allowance under Sec.  273.24(g), as a 
percentage of such ABAWDs in the participating States. FNS will 
determine each participating State agency's percentage of ABAWDs using 
the most recent Quality Control (QC) survey data adjusted for changes 
in its caseload.
    (B) Each participating State agency's share of the $20 million will 
be disbursed in accordance with paragraph (d)(6) of this section.
    (C) Each participating State agency must meet the fiscal 
recordkeeping and reporting requirements of paragraph (d)(7) of this 
section.
    (viii) If a participating State agency notifies FNS that it will 
not obligate or expend its entire share of the additional funding 
allocated to it for a fiscal year, FNS will reallocate the unobligated, 
unexpended funds to other participating State agencies during the 
fiscal year, as it considers appropriate and equitable, on a first 
come-first served basis. FNS will notify other pledge States of the 
availability of additional funding. To qualify, a pledge State must 
have already obligated its entire annual 100 percent Federal E&T grant, 
excluding an amount that is proportionate to the number of months 
remaining in the fiscal year, and it must guarantee in writing that it 
intends to obligate its entire grant by the end of the fiscal year. A 
State's annual 100 percent Federal E&T grant is its share of the 
regular 100 percent Federal E&T allocation plus its share of the 
additional $20 million (if applicable). Interested pledge States must 
submit their requests for additional funding to FNS. FNS will review 
the requests and, if they are determined reasonable and necessary, will 
reallocate some or all of the unobligated, unspent ABAWD funds.
    (ix) Unlike the funds allocated in accordance with paragraph (d)(1) 
of this section, the additional pledge funding will not remain 
available until obligated or expended. Unobligated funds from this 
grant must be returned to the U.S. Treasury at the end of each fiscal 
year.
    (x) If a participating State agency fails, without good cause, to 
meet its commitment to make available education, training, and workfare 
opportunities that permit all its at-risk ABAWDs to remain eligible 
beyond the 3-month time limit it may be disqualified from participating 
in the subsequent fiscal year or years.
    (4) * * * The Federal government will fund 50 percent of State 
agency payments for allowable expenses, except that Federal matching 
for dependent care expenses is limited to the maximum amount specified 
in paragraph (d)(4)(i) of this section. * * *
* * * * *
    (j) * * *
    (3) * * *
    (iii) * * * If the individual reduces his or her work hours to less 
than 30 a week, but continues to earn weekly wages that exceed the 
Federal minimum wage multiplied by 30 hours, the individual remains 
exempt from Program work requirements, in accordance with paragraph 
(b)(1)(vii) of this section, and the reduction in work effort provision 
does not apply.
* * * * *

    Dated: March 12, 2004.
Eric M. Bost,
Under Secretary, Food, Nutrition and Consumer Services.
[FR Doc. 04-6184 Filed 3-18-04; 8:45 am]
BILLING CODE 3410-30-P