[Federal Register Volume 69, Number 145 (Thursday, July 29, 2004)]
[Rules and Regulations]
[Pages 45225-45231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17225]



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  Federal Register / Vol. 69, No. 145 / Thursday, July 29, 2004 / Rules 
and Regulations  

[[Page 45225]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 273

[Amendment No. 396]

RIN 0584-AD13


Food Stamp Program: Vehicle and Maximum Excess Shelter Expense 
Deduction Provisions of Public Law 106-387

AGENCY: Food and Nutrition Service, USDA.

ACTION: Final rule.

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

SUMMARY: This final rule amends Food Stamp Program regulations to 
implement sections 846 and 847 of the Agriculture, Rural Development, 
Food and Drug Administration, and Related Agencies Appropriations Act, 
2001 (Agriculture Appropriations Act of 2001). The rule allows State 
agencies the option to use their Temporary Assistance for Needy 
Families (TANF) Program vehicle allowance rules rather than the vehicle 
rules ordinarily used in the Food Stamp Program where doing so will 
result in a lower attribution of resources to food stamp households. 
The rule also increases the maximum amount of the Food Stamp Program 
excess shelter expense deduction and indexes it each fiscal year to the 
Consumer Price Index (CPI) for all Urban Consumers for the 12 month 
period ending the previous November 30. The rule will increase benefits 
for some participants, make additional households eligible for food 
stamps, and provide greater flexibility for States in determining the 
value of vehicles.

DATES: Effective Date: The rule is effective September 27, 2004.
    Implementation Date: State agencies were required by statute to 
implement the maximum excess shelter expense deduction limits contained 
in section 846 of the Agriculture Appropriations Act of 2001 and 
reflected in Sec.  273.9(d)(6)(ii) of this final rule when certifying 
or recertifying households on or after March 1, 2001. Section 847 of 
the same statute allowed State agencies to begin implementing the 
vehicle provision at Sec.  273.8(f)(4) of this final rule, at State 
option, when certifying or recertifying households on or after July 1, 
2001.

FOR FURTHER INFORMATION CONTACT: John H. Knaus, Chief, Program Design 
Branch, Food and Nutrition Service, USDA, 3101 Park Center Drive, 
Alexandria, Virginia 22302. (703) 305-2098. The e-mail address is 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Procedural Matters

Executive Order 12866

    This final rule has been determined to be economically significant 
and was reviewed by the Office of Management and Budget in conformance 
with Executive Order 12866.

Executive Order 12372

    The Food Stamp Program (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 3015, subpart V and related notice (48 FR 29115), 
the FSP is excluded from the scope of Executive Order 12372, which 
requires intergovernmental consultation with State and local officials.

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. This rule does not regulate the 
activities of small businesses or other small entities; instead it 
regulates the administration of the FSP, which is administered only by 
State or county social service agencies.

Executive Order 12988

    This 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 which 
conflict with its provisions or which would otherwise impede its full 
and timely implementation. Prior to any judicial challenge to the 
provisions of this rule or the application of its provisions, all 
applicable administrative procedures must be exhausted.

Paperwork Reduction Act

    The paperwork burden associated with the food stamp certification 
process is approved under OMB control number 0584-0064. The maximum 
excess shelter expense deduction provisions of this proposed rule would 
result in no change in the burden for either applicants or State 
agencies. For applicants and State agencies, the effect of this 
provision is simply to substitute new maximum deductions for the 
previous ones.
    The vehicle provisions of this rule do not change the paperwork 
burden on applicants. States that elect to substitute their TANF 
vehicle rules for their food stamp vehicle rules will experience minor 
increases or decreases in burden associated with the complexity or 
simplicity of each case. States that elect to retain the food stamp 
vehicle rules will experience no change in burden. The Department has 
concluded that the burden will vary from case to case and State to 
State but not enough to affect the average total processing time data 
upon which all burden estimates for food stamp certification (and re-
certification) are based.

Federalism Summary Impact Statement

    Executive Order 13132 requires Federal agencies to consider the 
impact of their regulatory actions on State and local governments. We 
note that all references to State agencies when used in the context of 
Federalism also refer to local welfare agencies in States in which the 
FSP is administered by local governments. The Department has considered 
the impact of this rule on State agencies while drafting the rule. The 
rule codifies procedures mandated by statute and already implemented 
under the terms of a guidance memorandum issued on January 4, 2001.

Prior Consultation With State Officials

    Prior to drafting this rule, we consulted with State and local 
agencies at various times. Because the FSP is a State-administered, 
Federally-funded

[[Page 45226]]

program, our 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 comments that form the basis for many 
discretionary decisions in this and other FSP rules. We have also had 
numerous written requests for policy guidance on the implications of 
Public Law 106-387 from the State agencies that deliver food stamp 
services. These questions have helped us make the rule responsive to 
concerns presented by State agencies.

Nature of Concerns and the Need To Issue This Rule

    State agencies generally want greater flexibility in their 
implementation of FSP asset policy, especially with regard to vehicle 
ownership. This rule provides much greater flexibility in this area and 
also addresses another major State concern, the need to conform FSP 
rules to the rules of other means-tested Federal programs. Specific 
policy questions submitted by State agencies after enactment of the 
Agriculture Appropriations Act of 2001, but prior to the promulgation 
of regulations, helped us identify issues that needed to be clarified 
in the rule.

Extent to Which We Meet Those Concerns

    The Department has considered the impact of this rule on State and 
local agencies. The rule makes changes that the law required to be 
implemented in 2001. The effects on State agencies are minimal. While 
the vehicle provision of the rule requires eligibility workers to make 
additional computations in some cases, the ability to substitute TANF 
vehicle rules for FSP vehicle rules, when doing so results in a lower 
attribution of resources, allows a growing number of States to exclude 
some or all vehicles from household assets. The maximum excess shelter 
expense deduction provision simply increases the amount of the 
deduction and indexes it to the CPI, resulting in no additional 
requirements for State agencies. In this final rule, we have addressed 
every question submitted during the comment period by State agencies 
regarding both of these provisions.

Unfunded Mandate Reform Act of 1995 (UMRA)

    Title II of UMRA establishes requirements for Federal agencies to 
assess the effects of their regulatory actions on State, local, and 
tribal governments and the private sector. Under Sec.  202 of the 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, 
Sec.  205 of the UMRA generally requires the Department to identify and 
consider a reasonable number of regulatory alternatives and adopt the 
least costly, most 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) for 
State, local, and tribal governments or the private sector of $100 
million or more in any one year. This rule is, therefore, not subject 
to the requirements of section 202 and section 205 of the UMRA.

Civil Rights Impact Analysis

    The Department has reviewed this 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, the Department has 
determined that there is no adverse effect on any of the protected 
classes. The Department has minimal discretion in implementing many of 
these changes. The changes required by law have been implemented. All 
data available to the Department indicate that protected individuals 
have the same opportunity to participate in the FSP as non-protected 
individuals. The Department 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, 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.

Regulatory Impact Analysis

Need for Action
    This action is needed to implement Sec.  846 and Sec.  847 of the 
Agriculture Appropriations Act of 2001, Public Law 106-387. The rule 
increases the amounts of the maximum excess shelter expense deductions, 
and for future years, indexes them to the CPI. It also allows States 
the option of substituting their TANF vehicle rules for their food 
stamp vehicle rules when doing so would result in a lower attribution 
of resources to a household.
Benefits
    Section 846 (maximum excess shelter expense deduction provision): 
this final rule allows a larger income deduction for shelter expenses 
to those low-income families whose shelter expenses exceed 50 percent 
of their monthly income, after all other applicable deductions have 
been made. The Department does not expect raising the excess shelter 
deduction limit to significantly increase FSP participation. Instead, 
we estimate that the change will raise benefits for 8.4 percent of 
current participants. Applying this percentage to the participation 
projections for the President's Fiscal Year (FY) 2005 budget baseline, 
we estimate that 1.98 million persons will each receive an average of 
$6.23 more per month in food stamp benefits in FY 2004, compared to the 
benefits they would have received if the shelter cap had remained 
frozen as legislated prior to this provision. These impacts are already 
incorporated into the President's FY 2005 budget baseline.
    Section 847 (vehicle provision): the rule allows food stamp 
applicants to benefit when State agencies elect to use more expansive 
TANF vehicle policy rules that will allow them to own a reliable 
vehicle and still be eligible for food stamps. The Department estimates 
that this provision will increase average participation in the FSP by 
298,000 persons in FY 2004, compared to what participation would have 
been in its absence. Among those newly eligible, we estimate that their 
average monthly

[[Page 45227]]

food stamp benefit will be $80.71. These impacts are already 
incorporated into the President's FY 2005 budget baseline. State 
agencies will benefit from the increased flexibility in program 
administration afforded by the rule and from an anticipated decrease in 
payment errors.
Costs
    Although the provisions have already been implemented by State 
agencies, the Department estimates that the cost to the Government of 
section 846 will be $148 million in FY 2004 and $883 million over the 
five years, FY 2004 through FY 2008, compared to what costs would have 
been in its absence. Likewise, the Department estimates that the cost 
to the Government of section 847 will be $289 million in FY 2004 and 
$1.527 billion over the five years, FY 2004 through FY 2008, compared 
to what costs would have been in its absence. These impacts are already 
incorporated into the President's FY 2005 budget baseline.

II. Background

    On August 29, 2003, we published a rule at 68 FR 51932 in which we 
proposed to amend FSP regulations at 7 CFR 273.8 by adding a new 
paragraph (f)(4), and at 7 CFR 273.9(d)(6)(ii) by inserting new monthly 
shelter expense deduction limits mandated by Congress and by indexing 
future limits to the CPI. We solicited comments on provisions of the 
proposed rule through October 28, 2003, and received a total of 36 
comments of which 28 expressed support for the rule as proposed without 
making specific suggestions for improvements. This final rule addresses 
issues raised by the remaining 8 comments.

Vehicle Provisions--7 CFR 273.8(f)(4)

    The proposed rule added a new paragraph (f)(4) that explains how 
State agencies must administer the provision that allows substitution 
of the vehicle rules from a TANF-funded or TANF Maintenance-of-Effort-
funded assistance program for those of the FSP. We received two 
comments that asked us to use the final rule to eliminate the long-
standing equity test for vehicles at 7 CFR 273.8(f). The purpose of 
this final rule is to implement very specific statutory provisions, not 
to overhaul existing vehicle policy. Therefore, we will not adopt this 
suggestion. A commenter asked us to ensure that the final rule states 
that State agencies must exclude the most valuable vehicle that is not 
excluded under TANF rules if a TANF exclusion exists. While we agree 
with this suggestion, we also believe that the rule, as originally 
proposed, conveys this meaning quite clearly. For this reason, we will 
not add further details to this provision. The same commenter suggested 
that the final rule should state clearly that it applies only to 
vehicles not excluded by food stamp regulations at 7 CFR 273.8(e)(5) 
and (e)(11). We agree and have added language to this effect. The same 
commenter asked us to integrate the rule into the existing vehicle 
rules instead of according it a separate paragraph. The commenter's 
opinion is that by presenting this State option in a separate 
paragraph, we appear to suggest that State agencies must compute 
vehicle valuations twice, once under TANF rules and once under FSP 
rules. We disagree for two reasons: first, the statute presents this 
State option as an ``alternative vehicle allowance,'' which suggests to 
us the intent to offer it to States as a clear option rather than merge 
it with other aspects of the FSP vehicle rules; second, we issued 
guidance on January 4, 2001 that closely mirrors the proposed rule and 
States have long ago worked out their procedures for valuing vehicles 
under that guidance. As of February 2003, only 9 States had not elected 
to substitute TANF rules for FSP rules. We think the high level of 
response to this State option, and the absence of requests for 
clarification or simplification from the States themselves, shows that 
the rule as drafted will reduce rather than increase administrative 
complexities for State agencies.
    Another commenter stated that the final rule should permit a State 
agency to substitute its TANF Fair Market Value (FMV) test for its FSP 
FMV test even if the TANF rules for that State do not include a FMV 
test. The comment argued that the absence of any reference to an FMV 
test is an FMV policy. We disagree. The statute allows the substitution 
of a State's TANF vehicle rules, as written, for the FSP vehicle rules, 
not the substitution of an un-stated provision. Under the final rule, 
this commenter's State may use FSP vehicle rules or the vehicle rules 
of its TANF program. Another commenter asked how to treat the 
resources, including vehicles, of a household member disqualified for 
an intentional program violation. Our view is that a State agency can 
substitute its TANF vehicle rules for all food stamp rules affecting 
treatment of vehicles. Therefore, a State agency can exclude from 
resources vehicles owned by a household member disqualified for an 
intentional program violation if the State's TANF vehicle rules permit 
the exclusion. The same interpretation holds for vehicles owned by 
persons disqualified for drug felony convictions, fleeing felon 
disqualifications, or workfare or work sanctions.

Maximum Excess Shelter Expense Deduction Provision--7 CFR 
273.9(d)(6)(ii)

    The proposed rule deleted the existing maximum excess shelter 
expense deductions and inserted the new ones contained in the statute. 
It also proposed in the preamble to index the maximum deductions for 
future years to the Shelter Component and Fuels and Utilities Component 
of the Consumer Price Index for all Urban Consumers (CPI-U). One 
commenter asked us to modify the regulatory language to include details 
on how these two components would be used in making future annual 
adjustments and recommended that the Department give them the same 
weights they receive within the overall CPI-U. When the Department made 
the adjustments for FY 2003 and FY 2004, we weighted the two components 
exactly as the commenter suggests, and will probably weight them the 
same way in future calculations. However, because the computation of 
the CPI-U and the weighting of components within it are not under the 
control of the Department, we have decided not to adopt the commenter's 
recommendation. We are concerned that future changes in the CPI-U, and 
unpredictable factors in the economy, may make the commenter's 
recommended methodology less favorable to food stamp participants than 
alternative methodologies at some point in the future. In addition, the 
rule, as drafted, is consistent with the Department's treatment of 
annual adjustments of the maximum excess shelter expense deduction in 
previous regulations.

III. Implementation

    The proposed rule, published August 29, 2003, closely mirrored the 
January 4, 2001 guidance memorandum sent to States by the Food and 
Nutrition Service (FNS). The proposed rule, however, specified no 
implementation dates for this final rule's two provisions: the vehicle 
provision is a State option that can be implemented at any time after 
July 1, 2001; the statute required State agencies to implement the new 
maximum excess shelter expense deduction limits beginning March 1, 
2001.

List of Subjects in 7 CFR Part 273

    Administrative practice and procedure, Food stamps, Fraud, Grant

[[Page 45228]]

programs, Social programs, Resources, Vehicles.


0
Accordingly, 7 CFR part 273 is amended as follows:

PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS

0
1. The authority citation for part 273 continues to read as follows:

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


0
2. In Sec.  273.8, add new paragraph (f)(4) to read as follows:


Sec.  273.8  Resource eligibility standards.

* * * * *
    (f) * * *
    (4) A State agency may substitute for the vehicle evaluation 
provisions in paragraphs (f)(1) through (f)(3) of this section the 
vehicle evaluation provisions of a program in that State that uses TANF 
or State or local funds to meet TANF maintenance of effort requirements 
and provides benefits that meet the definition of ``assistance'' 
according to TANF regulations at 45 CFR 260.31, where doing so results 
in a lower attribution of resources to the household. States electing 
this option must:
    (i) Apply the substituted TANF vehicle rules to all food stamp 
households in the State, whether or not they receive or are eligible to 
receive TANF assistance of any kind;
    (ii) Exclude from household resources any vehicles excluded by 
either the substituted TANF vehicle rules or the food stamp vehicle 
rules at paragraphs (e)(3), (e)(5), (e)(11) and (f) of this section;
    (iii) Apply either the substituted TANF rules or the food stamp 
vehicle rules to each of a household's vehicles in turn, using 
whichever set of rules produces the lower attribution of resources to 
the household;
    (iv) Apply any vehicle exclusions allowed by their TANF vehicle 
rules to the vehicles with the highest values; and
    (v) Exclude any vehicle owned by any household in the State if it 
selects TANF vehicle rules that exclude all vehicles completely or 
contain no resource provisions at all.
* * * * *

0
3. In Sec.  273.9, add two sentences after the second sentence of 
paragraph (d)(6)(ii) to read as follows:


Sec.  273.9  Income and deductions.

* * * * *
    (d) * * *
    (6) * * *
    (ii) * * * For fiscal year 2001, effective March 1, 2001, the 
maximum monthly excess shelter expense deduction limits are $340 for 
the 48 contiguous States and the District of Columbia, $543 for Alaska, 
$458 for Hawaii, $399 for Guam, and $268 for the Virgin Islands. FNS 
will set the maximum monthly excess shelter expense deduction limits 
for fiscal year 2002 and future years by adjusting the previous year's 
limits to reflect changes in the shelter component and the fuels and 
utilities component of the Consumer Price Index for All Urban Consumers 
for the 12 month period ending the previous November 30. * * *
* * * * *

    Dated: July 21, 2004.
Eric M. Bost,
Under Secretary, Food, Nutrition, and Consumer Services.

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Appendix: Regulatory Impact Analysis

    Title: Vehicle and maximum excess shelter expense deduction 
provisions of the Agriculture, Rural Development, Food and Drug 
Administration, and Related Agencies Appropriations Act of 2001, 
Public Law 106-387.
    Action:
    (a) Nature: Final Rule.
    (b) Need: This action is required as a result of the 
Agriculture, Rural Development, Food and Drug Administration, and 
Related Agencies Appropriations Act of 2001, Public Law 106-387.
    (c) Background: On October 28, 2000, the President signed the 
Agriculture, Rural Development, Food and Drug Administration, and 
Related Agencies Appropriations Act of 2001 (Agriculture 
Appropriations Act of 2001). This rule implements sections 846 and 
847 of the Agriculture Appropriations Act of 2001. Section 846 
increases the maximum amount of the food stamp excess shelter 
expense deduction for fiscal year 2001 and indexes it for future 
years to the Consumer Price Index for all Urban Consumers for the 12 
month period ending the previous November 30. Section 847 allows 
State agencies the option to use their Temporary Assistance for 
Needy Families (TANF) Program vehicle allowance rules rather than 
the vehicle rules used in the Food Stamp Program (FSP) where doing 
so will result in a lower attribution of resources to food stamp 
households.
    1. Justification of Alternatives: These provisions are 
statutorily mandated and have already been implemented. In the case 
of the vehicle provision, FNS could have interpreted the statute to 
offer a more restrictive definition of TANF-funded programs, which 
would have limited the number of households gaining eligibility due 
to the provision. Instead, we proposed and are adopting a 
comprehensive definition of TANF-funded programs, which maximizes 
the benefits of the provision and is consistent with both our 
understanding of Congressional intent and prior policy guidance 
issued by the Food and Nutrition Service to States.
    2. Effects: (a) Effects on food stamp recipients, and (b) 
Program costs: Although these provisions have already been 
implemented, they are expected to increase Food Stamp Program costs 
by $437 million in FY 2004 and $2.41 billion over the five years FY 
2004 to FY 2008, compared to what program costs would have been in 
their absence. Likewise, these provisions are expected to add 
298,000 new participants and increase benefits among 1.98 million 
current participants in FY 2004. These impacts are already 
incorporated into the President's FY 2005 budget baseline.

Section 846: Increase the Excess Shelter Deduction Limits

    Discussion: Recognizing that shelter expenses reduce the amount 
of income available to purchase food, the Food Stamp Act of 1977 
(FSA) provides a deduction from income for households whose shelter 
expenses exceed 50 percent of their income, after other applicable 
deductions are made. Because households with larger shelter expenses 
relative to their income generally receive a larger excess shelter 
deduction for food stamp benefit determination, the deduction is a 
means of targeting benefits to those most in need.
    The FSA also sets limits on how large the excess shelter 
deduction can be, often referred to as the ``excess shelter 
deduction cap''. Since households with elderly or disabled members 
are not subject to the shelter deduction cap, most households 
affected by the cap are households with children. Legislation 
enacted since 1977 has adjusted the caps to the Consumer Price Index 
(Omnibus Budget Reconciliation Act of 1981); required that 
calculations of excess shelter deductions be rounded down to the 
next lower dollar (Omnibus Budget Reconciliation Act of 1982); 
removed the caps altogether (Omnibus Budget Reconciliation Act of 
1993, Mickey Leland Childhood Hunger Relief Act); and most recently, 
reset caps and froze them at current levels for households without 
elderly or disabled members (Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996). The excess shelter 
deduction caps in effect for FY 2001 were: $300, $521, $429, $364, 
and $221 respectively, for the 48 contiguous States and the District 
of Columbia, Alaska, Hawaii, Guam, and the United States Virgin 
Islands. Households with elderly or disabled members are not subject 
to the excess shelter caps.
    Since the caps were frozen by the 1996 legislation, many FSP 
participants, State agencies, and advocacy organizations have sought 
legislation that would bring the maximum excess shelter expense 
deduction more closely in line with current housing costs and index 
it to the cost of living. Section 846 of the Agriculture 
Appropriations Act of 2001 accomplishes those objectives by: (a) 
setting the fiscal year 2001 maximum excess shelter expense 
deductions at $340, $543, $458, $399, and $268 per month for, 
respectively, the contiguous 48 States and the District of

[[Page 45229]]

Columbia, Alaska, Hawaii, Guam, and the Virgin Islands, effective 
March 1, 2001; and (b) setting the maximum excess shelter expense 
deductions for fiscal year 2002 and beyond by adjusting the previous 
year's maximums to changes in the Consumer Price Index for All Urban 
Consumers for each 12-month period ending the preceding November 30.
    Effect on Low-Income Families: This provision will affect low-
income households without an elderly or disabled member, who certify 
or re-certify for food stamp benefits on or after March 1, 2001, who 
have shelter expenses that are high enough relative to their net 
income to be eligible for the excess shelter deduction, are subject 
to the current shelter cap, and are not already receiving the 
maximum benefit for their household size. Most households affected 
by the provision are households with children. It will allow 
affected households to claim a larger income deduction for shelter 
expenses and to obtain higher food stamp benefits.
    Cost Impact: Although this provision has already been fully 
implemented, we estimate that the cost to the Government of this 
provision will be $148 million in FY 2004, and $883 million over the 
five years, FY 2004 through FY 2008, compared to what costs would 
have been in its absence. These impacts are already incorporated 
into the President's FY 2005 budget baseline.
    Cost estimates were based on food stamp cost projections from 
the President's FY 2005 budget baseline of December 2003. While we 
recognize that the President's FY 2005 budget baseline is an 
imperfect baseline for this analysis because it already incorporates 
the impacts of this provision and subsequent legislation, it is 
preferable to the alternatives because it reflects the most recent 
economic and participation trends. The new values of the shelter cap 
for FY 2002 and beyond were calculated by inflating the FY 2001 
values, using actual and projected values of the Consumer Price 
Index for All Urban Consumers from the Office of Management and 
Budget's economic assumptions for the President's FY 2005 budget. 
The benefit and participation impacts of raising the shelter 
deduction cap to the new values were modeled using data from the 
2002 food stamp quality control sample regarding household 
characteristics, income and expenses. Using these data, we were able 
to measure expected changes in household benefits resulting from the 
changes in the shelter cap. The program suggested that raising the 
cap would increase program benefits by less than one percent 
nationally. The estimated percentage increase was multiplied by the 
baseline cost projections to estimate the expected cost increase for 
each fiscal year. Because this provision became effective on March 
1, 2001 for households who are newly certified or re-certified, the 
provision was considered fully implemented in FY 2004. Cost 
estimates were rounded to the nearest million dollars.
    Participation Impacts: We estimate that raising the shelter 
deduction cap will raise benefits among those households currently 
participating and subject to the shelter deduction cap. We do not 
expect any significant impacts on participation due to nature of the 
rule change and the small benefit increase per recipient. FY 2002 
quality control data indicate that 8.4 percent of food stamp 
participants will receive higher benefits due to this provision. 
(These are persons in households that claim the maximum shelter 
deduction but receive less than the maximum food stamp benefit. 
Households that already receive the maximum food stamp allotment 
cannot have their benefits raised as a result of this provision.) 
Applying this percentage to the participation projections for the 
President's FY 2005 budget baseline, we estimate that 1.98 million 
persons will each receive an average of $6.23 more per month in food 
stamp benefits in FY 2004, when compared to the benefits they would 
have received if the cap had remained frozen as legislated prior to 
this provision.
    Uncertainty: Because these estimates are based on detailed food 
stamp household data from the food stamp quality control system, 
they are associated with a fairly high degree of certainty. To the 
extent that actual shelter expenses in future years change more or 
less than forecasted in the President's FY 2005 baseline economic 
assumptions, future shelter deduction cap values could differ, and 
actual costs of this provision could be larger or smaller than 
estimated.

Section 847: State Option To Use TANF Vehicle Rules

    Discussion: Since 1964, food stamp legislation has limited the 
value of resources households may own while remaining eligible for 
food stamps. The FSA specifically addresses the valuation of 
vehicles as resources that count toward the resource limit of $2,000 
per household, or $3,000 for households with one or more members who 
are disabled, or aged 60 years or over. The fair market value (FMV) 
of vehicles in excess of $4,500 was designated as a countable 
resource in the 1977 FSA. Subsequent laws have raised the FMV limit 
to $4,650, excluded the value of vehicles used for various purposes 
from household resources, and designated vehicles whose sale would 
net no more than $1,500, after payment of liens, as inaccessible 
resources. After excluding all vehicles exempted by the FSA, food 
stamp vehicle rules prior to the provision in this rule (referred to 
hereafter as the ``basic'' food stamp vehicle rules) apply the 
excess FMV test to one licensed vehicle per adult household member 
and any other licensed vehicle a teenager drives to work, school, 
job training, or job hunting. Additional non-exempt licensed 
vehicles are valued at the higher of excess FMV or equity value 
(fair market value minus any outstanding loan balance). Unlicensed 
vehicles are counted at their equity value.
    Section 847 of the Agriculture Appropriations Act of 2001 amends 
section 5(g)(2) of the Food Stamp Act of 1977 to allow States to 
substitute their TANF vehicle rules for the food stamp vehicle rules 
when doing so would result in a lower attribution of food stamp 
resources to households. In lieu of the basic food stamp vehicle 
rules at 7 CFR 273.8(f), the Department proposes that States may 
substitute the vehicle rules from any program that receives TANF or 
TANF maintenance of effort funds and meets the definition of 
``assistance'' according to TANF regulations at 45 CFR 260.31. 
Implementation of section 847 will streamline the process of 
determining eligibility, make many more households eligible for food 
stamps, reduce errors, and facilitate processing of TANF and food 
stamp joint applications. The effect of section 847 will vary from 
State to State, according to the TANF vehicle rules developed by 
each State and whether or not they implement this optional treatment 
of vehicles.
    Effect on Low-Income Families: This provision will allow States 
to adopt more generous vehicle rules from their TANF-funded programs 
for use in determining food stamp eligibility. By adopting more 
generous TANF vehicle rules, some income-eligible food stamp 
households who were previously ineligible because of the basic food 
stamp vehicle rules valuation of their vehicle(s), are made eligible 
to participate. Persons will be affected by the provision to the 
extent that States adopt this provision and to the extent that 
States have less restrictive vehicle rules in their relevant TANF-
funded programs.
    Cost Impact: Although section 847 is already fully implemented, 
we estimate that the cost to the Government of this provision will 
be $289 million in FY 2004 and $1.527 billion over the five years FY 
2004 to FY 2008, compared to what costs would have been in its 
absence. These impacts are already incorporated into the President's 
FY 2005 budget baseline.
    In FY 2004, 31 States reported adopting their more generous 
TANF-cash vehicle rules for the purpose of determining food stamp 
eligibility. Ten other States reported adopting vehicle rules from 
their TANF-funded child care and foster care programs for the 
purpose of determining food stamp eligibility. For the impact 
analysis, it is assumed that States interested in adopting vehicle 
rules from any of their TANF-funded programs have done so and that 
no additional States will switch to TANF vehicle rules in the 
future.
    In order to estimate the impact of this provision on food stamp 
participation and benefit costs, we used data from the 1999 Survey 
of Income and Program Participation (SIPP), which contains 
information about household characteristics, income and assets--
including vehicle ownership data. Using this dataset, we created the 
1999 MATH SIPP simulation program, which models food stamp 
eligibility, participation and benefits under FSP vehicle rules and 
allows us to compare them to participation and benefits under 
alternative vehicle rules. Ideally, we would use a model based on 
the basic food stamp vehicle rules and we would measure the impact 
of this provision by simulating the change to allow States to adopt 
TANF vehicle rules. Because the model was created after 
implementation of the Agricultural Appropriations Act of 2001, 
however, it already includes the State adoption of TANF vehicles 
rules as of January 2004. For each State that chose to adopt TANF 
vehicle rules for determining food stamp eligibility, the model uses 
their specific TANF vehicle rules based on the policy choices they 
made for FY 2004. We then backed out the cost and participation

[[Page 45230]]

impacts of this provision by simulating the restriction of States to 
the basic food stamp vehicle rules, and took the absolute value of 
that impact.

                    State Vehicle Rules for Determining FSP Eligibility (as of January 2004)
----------------------------------------------------------------------------------------------------------------
                                                                 TANF child care or        Other: states with
   FSP vehicle rules (6 states)     TANF-cash vehicle rules      foster care vehicle      expanded  categorical
                                          (31 states)             rules (10 states)      eligibility (6 states)
----------------------------------------------------------------------------------------------------------------
GA, ID, IA, TN, VI, WA...........  AL, AK, AZ, AR, CT, DC,    CA, CO, IN, MA, MO, NE,   DE, MI, ND, OR, SC, TX.
                                    FL, GU, HI, IL, KS, KY,    NM, NY, WV, WI.
                                    LA, ME, MD, MN, MS, MT,
                                    NV, NH, NJ, NC, OH, OK,
                                    PA, RI, SD, UT, VT, VA,
                                    WY.
----------------------------------------------------------------------------------------------------------------

    The impact of States moving from FSP vehicle rules to TANF-based 
vehicle rules was estimated as a 2.38 percent increase in national 
benefits. This impact was multiplied by expected benefits for each 
fiscal year, based on the President's FY 2005 budget baseline of 
December 2003. While we recognize that the President's FY 2005 
budget baseline is an imperfect baseline for this analysis because 
it already incorporates the impacts of this provision and subsequent 
legislation, it is preferable to the alternatives because it 
reflects the most recent economic and participation trends.
    An additional adjustment was made to account for other policy 
choices available to States regarding their treatment of assets. The 
simulation impact assumes that, in the absence of this provision, 
States would use basic FSP vehicle rules in determining household 
assets. We believe, however, that some of these States would have 
chosen to adopt more expansive categorical eligibility policies as 
well. (The FSA permits some households to be categorically eligible 
for benefits. Those households do not need to meet the resource 
test, so the value of their vehicles is irrelevant to their 
eligibility determination. States have some choice in how to define 
categorical eligibility.) By expanding categorical eligibility, 
States would lower the number of households subject to the FSP 
vehicle asset rules. To account for this alternative policy 
available to States, estimates were reduced by half in all years. 
Given that section 847 was effective on July 1, 2001, we considered 
it to be fully implemented in FY 2004 and no further adjustments 
were made. Cost estimates were rounded to the nearest million 
dollars.
    Participation Impacts: Although already implemented, we estimate 
that this provision will increase average participation in the Food 
Stamp Program by 298,000 persons in FY 2004, compared to what 
participation would have been in its absence. Among those made 
eligible by this provision, we estimate that their average monthly 
food stamp benefit will be $80.71. These impacts are already 
incorporated into the President's FY 2005 budget baseline.
    Participation impacts were estimated using the same method as 
the cost impacts. The participation impact was estimated as a 2.52 
percent expected increase in participation. This impact was 
multiplied by expected participation for each fiscal year, based on 
the President's FY 2005 budget baseline of December 2003. As with 
the cost estimate, participation estimates were reduced by half to 
reflect alternative policy choices available to States regarding the 
treatment of assets. Participation estimates were rounded to the 
nearest thousand persons.
    Uncertainty: There is a great deal of uncertainty associated 
with this estimate. The 1999 MATH SIPP model produces fairly 
accurate impact estimates based on a national dataset, details about 
State specific TANF vehicle policies, and known State policy 
choices. It is uncertain, however, how many States would have chosen 
to expand FSP categorical eligibility in the absence of this 
provision. The 50 percent reduction is our best estimate, based on 
the demonstrated desire of many States to liberalize their asset 
rules through the adoption of their TANF vehicle rules. To the 
extent that a greater or fewer number of States would have adopted 
expanded categorical eligibility, the cost of this provision to the 
Government would differ.
    Societal Costs: While this regulatory impact analysis details 
the expected impacts on Food Stamp Program costs and the number of 
participants likely to be affected by the food stamp provisions of 
the Agricultural Appropriation Act of 2001, it does not provide an 
estimate of the overall social costs of the provisions, nor does it 
include a monetized estimate of the benefits they bring to society. 
We anticipate that the provisions will improve program operations by 
providing States with the ability to coordinate food stamp and TANF 
vehicle rules. In addition, by increasing food stamp benefits to 
low-income families, we believe that these statutory changes will 
increase food expenditures, which may strengthen food security.
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[GRAPHIC] [TIFF OMITTED] TR29JY04.039

[FR Doc. 04-17225 Filed 7-28-04; 8:45 am]
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