[Federal Register Volume 69, Number 216 (Tuesday, November 9, 2004)]
[Proposed Rules]
[Pages 64881-64884]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-24944]



[[Page 64881]]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Part 98

[RIN 0970-AC18]


Child Care and Development Fund State Match Provisions

AGENCY: Administration for Children and Families (ACF), HHS.

ACTION: Notice of proposed rulemaking.

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

SUMMARY: This proposed rule revises the Child Care and Development Fund 
(CCDF) regulations to permit States to designate multiple public and/or 
private entities as eligible to receive private donations that may be 
certified as child care expenditures for purposes of receiving Federal 
CCDF matching funds. This proposed rule also allows States to use 
public pre-kindergarten expenditures for up to 30 percent of the State 
match expenditures required to claim their full allotment of Federal 
CCDF matching funds.

DATES: Comment Period: You may submit comments through January 10, 
2005. We will not consider comments received after this date.

ADDRESSES: You may mail comments to the Administration for Children and 
Families, Child Care Bureau, 330 C Street, SW., Room 2046, Washington, 
DC 20447. Attention: Shannon Christian, Associate Commissioner.
    Commenters may also provide comments on the ACF website. To 
transmit comments electronically, or to download an electronic version 
of the proposed rule, please go to http://regulations.acf.hhs.gov. We 
will have comments available for public inspection Monday through 
Friday, 8:30 a.m. to 5 p.m. at the above address.

FOR FURTHER INFORMATION CONTACT: Karen Tvedt, Policy Director, Child 
Care Bureau, at (202) 401-5130.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
    A. Child Care and Development Fund
    B. Summary of the Statutory Provisions Related to the State 
Match Requirement
    C. State Match Requirement Regulations
    D. Statutory Authority
II. Provisions of Proposed Rule
    A. Certifying Private Donations as State Expenditures
    1. Summary of the Regulations Regarding Certifying Private 
Donations as State Expenditures in the Current Regulations
    2. Consultation with States and Other Organizations
    3. Changes Made in this Proposed Rule
    B. Public Pre-Kindergarten Expenditures
    1. Summary of the Regulations Regarding Public Pre-Kindergarten 
Expenditures in the Current Regulations
    2. Consultation with States and Other Organizations
    3. Changes Made in this Proposed Rule
III. Regulatory Impact Analyses
    A. Executive Order 12866
    B. Regulatory Flexibility Analysis
    C. Assessment of the Impact on Family Well-Being
    D. Paperwork Reduction Act
    E. Unfunded Mandates Reform Act of 1995
    F. Congressional Review
    G. Executive Order 13132

I. Background

A. Child Care and Development Fund

    Administered by the Child Care Bureau, CCDF assists low-income 
families, including families receiving or transitioning from Temporary 
Assistance for Needy Families (TANF), in the purchase of child care 
services, thereby allowing parents to work or attend training or 
education. States must spend a portion of their CCDF allotment on 
expenditures to improve the quality and availability of child care.

B. Summary of the Statutory Provisions Related to the State Match 
Requirement

    CCDF is comprised of three funding streams, discretionary funds 
subject to annual appropriation by Congress as authorized under Section 
658B of the CCDBG Act, 42 U.S.C. 9858, and mandatory and matching funds 
appropriated under Section 418 of the Social Security Act (``SSA''), 42 
U.S.C. 618. Pursuant to Section 418(a)(2) of the SSA, the Federal CCDF 
matching funds are the funds remaining after the mandatory funds have 
been distributed to the States. Matching funds are allocated to the 
States on the basis of the number of children under age 13 in the State 
compared with the number of children under age 13 in the Nation. These 
funds must be matched by States at the State's Federal medical 
assistance percentage (FMAP) rate.

C. State Match Requirement Regulations

    The current CCDF regulations (the ``current regulations'') are 
codified at 45 CFR part 98. The relevant matching fund requirements of 
the current regulations provide that donated funds from private sources 
may be qualified as State expenditures for purposes of receiving 
Federal CCDF matching funds, provided that such funds are transferred 
to or under the control of the State CCDF Lead Agency or given to the 
single entity designated by the State to receive donated funds. 45 CFR 
98.53(e) and (f). The relevant matching fund requirements also provide 
that States may use public pre-kindergarten expenditures for up to 20 
percent of the expenditures serving as maintenance-of-effort and up to 
20 percent of the expenditures meeting CCDF matching requirements. 45 
CFR 98.53(h). States seeking to use pre-kindergarten expenditures for 
between 10 and 20 percent of the expenditures serving as maintenance-
of-effort or meeting CCDF matching requirements must provide a 
description of the efforts they will undertake to ensure that pre-
kindergarten programs meet the needs of working families. They must 
also demonstrate how they will coordinate their pre-kindergarten and 
child care services to expand the availability of child care. 45 CFR 
98.53(h)(4).
    We propose to revise current regulations to implement a provision 
of the President's Good Start, Grow Smart Initiative and give States 
more flexibility in making the necessary State expenditures on child 
care to earn their full allotment of Federal CCDF matching funds. 
Specifically, the President's Good Start, Grow Smart Initiative 
provides that the amount of State pre-kindergarten expenditures that 
may be used for Federal match will be increased to give States more 
flexibility in funding quality activities in support of early learning. 
Further, in FY 2001 and FY 2002, five States failed to earn their full 
allotment of Federal CCDF matching funds. In recent months, ACF Regions 
and the Child Care Bureau have received requests from additional states 
for increased flexibility in the use of donated funds and public pre-
kindergarten expenditures to meet CCDF matching requirements.

D. Statutory Authority

    This proposed regulation is being issued under the authority 
granted to the Secretary of Health and Human Services (HHS) by Section 
658E of the CCDBG Act, 42 U.S.C. 9858c.

II. Provisions of Proposed Rule

A. Certifying Private Donations as State Expenditures

1. Summary of the Regulations Regarding Certifying Private Donations as 
State Expenditures in the Current Regulations
    In order to certify funds donated from private sources that are not 
transferred to or under State control as expenditures for the purpose 
of receiving Federal CCDF matching funds, the current regulations 
provide that States must designate a single entity to receive such 
privately donated funds and all such privately donated funds must be 
transferred to this single

[[Page 64882]]

designated entity. The specific provisions setting forth this 
requirement appear at Sec.  98.53(f) of the current regulations and 
provide that funds donated from private sources ``may be given to the 
entity designated by the State to receive donated funds'' in the State 
Plan.
2. Consultation with States and Other Organizations
    Requests have been made by State officials at the Child Care 
Bureau's annual meeting of State Administrators and through numerous 
written, e-mail, and telephonic correspondence for increased 
flexibility in meeting the States' CCDF matching requirements. The 
Child Care Bureau has also heard that States find the current 
regulations too restrictive when States seek to encourage coordination 
among early childhood education programs or to implement the 
President's Good Start, Grow Smart Initiative.
3. Changes Made in This Proposed Rule
    In order to grant States greater flexibility in meeting the 
matching requirements for Federal CCDF matching funds, this proposed 
rule provides that States shall be allowed to designate multiple public 
and/or private entities to receive privately donated funds that may be 
certified as State expenditures for purposes of receiving Federal CCDF 
matching funds. We propose to revise Section 98.53(f) to provide that 
privately donated funds ``may be given to the public or private 
entities designated by the State to implement the child care program in 
accordance with Sec. 98.11 provided that such entities are identified 
and designated in the State Plan to receive donated funds pursuant to 
Sec. 98.16(c)(2).'' Additionally, conforming changes are proposed to 
Sections 98.16(c)(2) and 98.53(e)(2)(iv) to reflect the fact that 
privately donated funds may be given to ``public or private entities.''

B. Public Pre-Kindergarten Expenditures

1. Summary of the Regulations Regarding Public Pre-Kindergarten 
Expenditures in the Current Regulations
    The current regulations provide that, once States have met their 
maintenance-of-effort requirement, they may use public pre-kindergarten 
expenditures for up to 20 percent of their child care expenditures 
designated toward meeting CCDF matching requirements. States seeking to 
use the full 20 percent of pre-kindergarten expenditures to meet the 
matching requirements must provide a description of the efforts they 
will undertake to ensure that pre-kindergarten programs meet the needs 
of working families. They must also demonstrate how they will 
coordinate their pre-kindergarten and child care services to expand the 
availability of child care. The specific provisions setting forth this 
requirement appear at Section 98.53(h)(3) of the current regulations 
and provide that ``[i]n any fiscal year, a State may use other public 
pre-K funds for up to 20% of the expenditures serving as the State's 
matching funds under this subsection.''
2. Consultation With States and Other Organizations
    Requests have been made by State officials at the Child Care 
Bureau's annual meeting of State Administrators and through numerous 
written, e-mail, and telephonic correspondence for increased 
flexibility in meeting the States' CCDF matching requirements. The 
Child Care Bureau has also been informed that States are finding the 
current regulations to be too restrictive when States seek to encourage 
coordination among early childhood education programs or to implement 
the President's Good Start, Grow Smart Initiative.
3. Changes Made in This Proposed Rule
    In order to grant States greater flexibility in meeting the 
matching requirements for Federal CCDF matching funds, this proposed 
rule provides that once States have met their maintenance-of-effort 
requirement, they may designate a portion of their public pre-
kindergarten expenditures as their expenditures toward Federal CCDF 
matching funds; provided that the portion of public pre-kindergarten 
expenditures designated as State matching funds may not exceed 30 
percent of the amount of expenditures required by States to earn their 
full allotment of Federal CCDF matching funds. We propose to revise 
Section 98.53(h)(3) to provide that, ``[i]n any fiscal year, a State 
may use other public pre-K funds as expenditures serving as State 
matching funds under this subsection; such public pre-K funds used as 
State expenditures may not exceed 30% of the amount of a State's 
expenditures required to earn the State's full allotment of Federal 
matching funds available under this subsection.'' Additionally, 
conforming changes would be made to Sections 98.53(h)(4) to provide 
that the CCDF Plan ``shall reflect the State's intent to use public 
pre-K funds in excess of 10%, but not for more than 20% of its 
maintenance-of-effort or 30% of its State matching funds in a fiscal 
year.''

III. Regulatory Impact Analyses

A. Executive Order 12866

    Executive Order 12866 requires that regulations be drafted to 
ensure that they are consistent with the priorities and principles set 
forth in Executive Order 12866. The Department has determined that this 
proposed rule is consistent with these priorities and principles.
    Executive Order 12866 encourages agencies, as appropriate, to 
provide the public with meaningful participation in the regulatory 
process. As described earlier, the Child Care Bureau and ACF regional 
offices have been contacted by numerous States expressing their desire 
for greater flexibility in meeting their matching requirement for 
Federal CCDF matching funds. This rule addresses these concerns. In 
addition, we are providing a 60-day public comment period.
    This rule is considered a ``significant regulatory action'' under 
Executive Order 12866 and therefore has been reviewed by the Office of 
Management and Budget.

B. Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (5 U.S.C. Ch. 6) (RFA) requires the 
Federal government to anticipate and reduce the impact of rules and 
paperwork requirements on small businesses and other small entities. 
Small entities are defined in the RFA to include small businesses, 
small non-profit organizations, and small governmental entities. This 
rule will affect only the 50 States and the District of Columbia. 
Therefore, the Secretary certifies that this rule will not have a 
significant impact on small entities.

C. Assessment of the Impact on Family Well-Being

    We certify that we have made an assessment of this proposed rule's 
impact on the well-being of families, as required under Section 654 of 
the Treasury and General Appropriations Act of 1999. This proposed rule 
will make it easier for States to receive their full allotment of 
Federal matching funds through CCDF. These funds are to be used by 
States to assist low-income families in purchasing child care services, 
to provide comprehensive consumer education to parents and the public, 
and to improve the quality and availability of child care.

D. Paperwork Reduction Act

    In order for States to use the increased flexibility provided by 
the proposed rule, Lead Agencies must amend their Lead Agency Plans, 
the information

[[Page 64883]]

requirements of which are set forth in Section 98.16 of the current 
regulations. As required by the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507 (d)), the Administration for Children and Families has 
submitted a copy of this section, together with a copy of this notice 
of proposed rulemaking to the Office of Management and Budget (OMB) for 
its review.
    Title: Amendment to State/Territorial Plan Pre-Print (ACF-118) for 
the Child Care and Development Fund (Child Care and Development Block 
Grant).
    Description: The legislatively-mandated plans serve as the 
agreement between the Lead Agency and the Federal Government as to how 
CCDF programs will be administered in conformance with legislative 
requirements, pertinent Federal regulations, and other applicable 
instructions and guidelines issued by ACF. This information is used for 
Federal oversight of the Child Care and Development Fund. Because the 
State Plans must accurately reflect the manner in which a State meets 
the matching requirements for Federal CCDF matching funds, in order for 
a State to use the increased flexibility provided by this proposed 
rule, it must submit an amendment to its plan reflecting the change in 
the manner in which it meets the matching requirement for Federal CCDF 
matching funds. Because the information required to take advantage of 
the provisions of this proposed regulation are already collected in the 
ACF-118, a new information collection document will not be necessary. 
ACF expects to publish proposed revisions to the ACF-118 in the Federal 
Register in October. These proposed changes should reach OMB in January 
2005.
    Respondents: State and territorial governments.
    Burden Estimates:
    Estimated Number of Likely Respondents: 22*.
    Number of Responses Per Respondent: 1.
    Average Burden Hours Per Response: 2.
    Estimated Total Burden Hours: 44.
    *Estimate based upon the total number of States using private 
donations and/or their public pre-kindergarten expenditures as their 
expenditures toward Federal CCDF matching funds in FY2002, plus an 
additional number of States that are expected to take advantage of the 
increased flexibility in using private donations and/or public pre-
kindergarten expenditures to meet their State CCDF matching 
requirement.
    The Administration for Children and Families will consider comments 
by the public on this proposed collection of information in the 
following areas:
    (1) Evaluating whether the proposed collection is necessary for the 
proper performance of the functions of ACF, including whether the 
information will have practical utility;
    (2) Evaluating the accuracy of the ACF's estimate of the burden of 
the proposed collection of information, including the validity of the 
methodology and assumptions used;
    (3) Enhancing the quality, usefulness, and clarity of the 
information to be collected; and
    (4) Minimizing the burden of the collection of information on those 
who are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technology, e.g., permitting 
electronic submission of responses.
    OMB is required to make a decision concerning the collection of 
information contained in these proposed regulations between 30 and 60 
days after publication of this document in the Federal Register. 
Therefore, a comment is best assured of having its full effect if OMB 
receives it within 30 days of publication. This does not affect the 
deadline for the public to comment to the Department on the proposed 
regulations. Written comments to OMB for the proposed information 
collection should be sent directly to the following: Office of 
Management and Budget, Paperwork Reduction Project, Washington DC, 
[email protected].

E. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that a covered agency prepare a budgetary impact statement 
before promulgating a rule that includes any Federal mandate that may 
result in the expenditure by State, local, and Tribal governments, in 
the aggregate, or by the private sector, of $100 million or more in any 
one year.
    This proposed rule will not result in the expenditure by State, 
local, and Tribal governments, in the aggregate, or by the private 
sector, of $100 million or more in any one year. Expenditures made to 
meet the requirements for Federal CCDF matching funds are made entirely 
at the option of the State or Tribal government seeking the Federal 
CCDF matching funds.

F. Congressional Review

    This proposed rule is not a major rule as defined in 5 U.S.C. 804.

G. Executive Order 13132

    Executive Order 13132 guarantees ``the division of governmental 
responsibilities between the national government and the States that 
was intended by the Framers of the Constitution, to ensure that the 
principles of federalism established by the Framers guide the executive 
departments and agencies in the formulation and implementation of 
policies, and to further the policies of the Unfunded Mandates Reform 
Act.''
    The Secretary certifies that this proposed rule does not have a 
substantial direct effect on States, on the relationship between the 
Federal government and the States, or on the distribution of power and 
responsibilities among the various levels of government. This proposed 
rule does not preempt State law and does not impose unfunded mandates.
    This proposed rule does not contain regulatory policies with 
federalism implications that would require specific consultations with 
State or local elected officials.

List of Subjects in 45 CFR Part 98

    Child Care, Grant programs--social programs.

(Catalogue of Federal Domestic Assistance Programs: 93.575, Child 
Care and Development Block Grant; 93.596, Child Care Mandatory and 
Matching Funds)

    Dated: March 16, 2004.
Wade F. Horn,
Assistant Secretary for Children and Families.

    Approved: July 21, 2004.
Tommy G. Thompson,
Secretary, Department of Health and Human Services.

    For the reasons set forth in the preamble, the Administration for 
Children and Families proposes to amend part 98 of title 45 of the Code 
of Federal Regulations as follows:

PART 98--CHILD CARE AND DEVELOPMENT FUND

    1. The authority for part 98 continues to read:

    Authority: 42 U.S.C. 618, 9858.

    2. Amend Sec.  98.16 by revising paragraph (c)(2) as follows:


Sec.  98.16  Plan provisions.

* * * * *
    (c) * * *
    (2) Identification of the public or private entities designated to 
receive private donated funds and the purposes for which such funds 
will be expended, pursuant to Sec. 98.53(f);
* * * * *

[[Page 64884]]

    3. Amend Sec. 98.53 by revising paragraphs (f), (h)(3), and (h)(4) 
to read as follows:


Sec.  98.53  Matching fund requirements.

* * * * *
    (f) Donated funds need not be transferred to or under the 
administrative control of the Lead Agency in order to qualify as an 
expenditure eligible to receive Federal match under this subsection. 
They may be given to the public or private entities designated by the 
State to implement the child care program in accordance with Sec.  
98.11 provided that such entities are identified and designated in the 
State Plan to receive donated funds pursuant to Sec.  98.16(c)(2).
* * * * *
    (h) * * *
    (3) In any fiscal year, a State may use public pre-K funds for up 
to 20% of the funds serving as maintenance-of-effort under this 
subsection. In addition, in any fiscal year, a State may use other 
public pre-K funds as expenditures serving as State matching funds 
under this subsection; such public pre-K funds used as State 
expenditures may not exceed 30% of the amount of a State's expenditures 
required to earn the State's full allotment of Federal matching funds 
available under this subsection.
    (4) If applicable, the CCDF Plan shall reflect the State's intent 
to use public pre-K funds in excess of 10%, but not for more than 20% 
of its maintenance-of-effort or 30% of its State matching funds in a 
fiscal year. Also, the Plan shall describe how the State will 
coordinate its pre-K and child care services to expand the availability 
of child care.
* * * * *
[FR Doc. 04-24944 Filed 11-8-04; 8:45 am]
BILLING CODE 4184-01-P