[Federal Register Volume 73, Number 213 (Monday, November 3, 2008)]
[Rules and Regulations]
[Pages 65246-65255]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-26099]


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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 248

[FDMS 2007-0008]
RIN 0584-AD74


WIC Farmers' Market Nutrition Program (FMNP): Nondiscretionary 
Provisions of Public Law 108-265, the Child Nutrition and WIC 
Reauthorization Act of 2004

AGENCY: Food and Nutrition Service, USDA.

ACTION: Interim final rule.

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SUMMARY: This interim final rule amends the WIC Farmers' Market 
Nutrition Program (FMNP) regulations to codify three FMNP 
nondiscretionary provisions mandated in the Child Nutrition and WIC 
Reauthorization Act of 2004. The three nondiscretionary provisions 
include the option to authorize roadside stands, a reduction in the 
required amount of State matching funds, and an increase in the maximum 
Federal benefit level. These changes are intended to increase State 
agency flexibility in managing the Program. The first two provisions 
became effective on October 1, 2004, while the increased maximum 
Federal FMNP benefit level was effective as of June 30, 2004.
    The provisions set forth in this rulemaking are nondiscretionary, 
i.e., the Department has not exercised any authority to interpret the 
statutory provisions beyond the language that is specifically provided 
in the legislation. However, the Department believes that at least one 
of the provisions in this rulemaking may generate additional questions 
or comments concerning its implementation. Therefore, the rule is being 
issued as an interim final rule, to afford the public the opportunity 
to comment on the possible implications of the provisions contained 
herein.

DATES: This rule will become effective on December 3, 2008.
    Comment Date: To be considered, comments on this interim rule must 
be postmarked on or before January 2, 2009.

ADDRESSES: The Food and Nutrition Service (FNS) invites interested 
persons to submit comments on this interim final rule. Comments may be 
submitted by any of the following methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Information on using Regulations.gov, including 
instructions for accessing documents, submitting comments, and viewing 
the docket after the close of the comment period, is available through 
the site's ``User Tips'' link under ``How to Use This Site''. Go to 
``More Search Options'' for alternative search methods, including 
searching by agency, viewing documents with an open comment period, or 
searching by document type. To make comments on this interim final 
rule, enter ``WIC Farmers' Market Nutrition Program (FMNP): 
Nondiscretionary Provisions of Public Law 108-265, the Child Nutrition 
and WIC Reauthorization Act of 2004'' or ``FDMS 2007-0008'' under 
``Search documents''; click ``go'' and then use the features available 
on the left side of the results page to narrow your results. Under the 
document listing, click on ``Send a comment or submission.''
     Mail: Send comments to Patricia N. Daniels, Director, 
Supplemental Food Programs Division, Food and Nutrition Service, USDA, 
3101 Park Center Drive, Room 528, Alexandria, Virginia 22302, (703) 
305-2746.
    Comments submitted in response to this interim rule will be 
included in the record and will be made available to the public. Please 
be advised that the substance of the comments and the identities of the 
individuals or entities submitting the comments will be subject to 
public disclosure. FNS will make the comments publicly available on the 
Internet via http://www.regulations.gov. Information regarding the 
interim rule will be available on the FNS Web site at http://www.fns.usda.gov/wic.

FOR FURTHER INFORMATION CONTACT: Debra R. Whitford, Chief, Policy and 
Program Development Branch, Supplemental Food Programs Division, USDA/
FNS 3101 Park Center Drive, Room 529, Alexandria, VA 22302 or at (703) 
305-2746 during regular business hours (8:30 a.m. to 5 p.m.) Monday 
through Friday.

SUPPLEMENTARY INFORMATION:

I. Procedural Matters

A. Executive Order 12866

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

B. Regulatory Impact Analysis

    A Regulatory Impact Analysis (RIA) was developed for this interim 
final rule. It follows this regulation as an Appendix. The conclusions 
of this analysis are summarized below.
    Need for Action. The interim final rule amends the FMNP regulations 
to implement three nondiscretionary provisions mandated in Public Law 
108-265, the Child Nutrition and WIC Reauthorization Act of 2004. The 
three provisions, which give State agencies the option to authorize 
roadside stands, reduce the required amount of State matching funds, 
and increase the maximum Federal benefit level. These provisions became 
effective in fiscal year 2005.
    Benefits. The benefit of this interim final rule is to provide 
State agencies with added flexibility in operating the FMNP.
    Costs. The provisions in this interim final rule are not expected 
to increase significantly the administrative burden to the Department 
or to State agencies, nor will they affect overall program costs since 
the FMNP is funded by an annual appropriation.

C. Regulatory Flexibility Act

    This interim final rule has been reviewed with regard to the 
requirements of the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-
612). Nancy Montanez Johner, Under Secretary, Food, Nutrition, and 
Consumer Services, has certified that this rule will not have a 
significant impact on a substantial number of small entities. In 
addition, this interim final rule provides State and local agencies 
with greater flexibility in operating the

[[Page 65247]]

FMNP and reduces the amount of required State matching funds. 
Recipients and applicants are not expected to be adversely impacted by 
the changes set forth in this rulemaking.

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates 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 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 the private sector, of $100 million 
or more in any one year. When such a statement is needed for a rule, 
section 205 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 objective 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 the private sector of $100 million or more in 
any one year. This rule is therefore not subject to the requirements of 
sections 202 and 205 of the UMRA.

E. Executive Order 12372

    The WIC Farmers' Market Nutrition Program (FMNP) is listed in the 
Catalog of Federal Domestic Assistance Programs under No. 10.572. For 
the reasons set forth in the final rule in 7 CFR Part 3015, Subpart V, 
and related Notice (48 FR 29115, June 24, 1983), this Program is 
included in the scope of Executive Order 12372, which requires 
intergovernmental consultation with State and local officials.

F. 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 regulations 
describing the agency's considerations in terms of the three categories 
called for under section (6)(b)(2)(B) of Executive Order 13121.
1. Prior Consultation With State Officials
    Prior to drafting, State agencies provided input to Congress and 
FNS on recommended changes to the FMNP legislation and regulations. 
Meetings were held to provide State and local agencies with the 
opportunity to make recommendations on changes to the FMNP. The changes 
in the legislation, as reflected in this interim final rule, represent 
input from State and local agencies. Further, because the FMNP is a 
State-administered, Federally funded program, FNS regional offices have 
formal and informal discussions with State and local officials on an 
ongoing basis regarding program and policy issues.
2. Nature of Concerns and the Need To Issue This Rule
    This interim final rule implements nondiscretionary provisions in 
Public Law 108-265 that provide FMNP State and local agencies greater 
flexibility in authorizing roadside stands, increase the maximum 
Federal benefit level and reduce the amount of State matching funds 
that State agencies are required to provide. These changes represent 
recommendations made by FMNP State agencies.
3. Extent to Which We Meet Those Concerns
    This interim final rule provides FMNP State and local agencies with 
greater flexibility in how they operate the program and reduces the 
amount of State matching funds needed to operate the program.

G. Executive Order 12988

    This interim final 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 implementation. This rule is not intended to have retroactive 
effect unless so specified in the DATES section of the final rule 
preamble. Prior to any judicial challenge to the provisions of this 
rule or the application of its provisions, all applicable 
administrative procedures must be exhausted. In the WIC Farmers' Market 
Nutrition Program, the administrative procedures are as follows: 
Farmers, farmers' markets, and roadside stands--State agency hearing 
procedures issued pursuant to 7 CFR 248.16.

H. Civil Rights Impact Analysis

    FNS has reviewed this interim final rule in accordance with the 
Departmental 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 of the characteristics 
of WIC Program participants who comprise the target population served 
by the FMNP, FNS has determined that there is no way to soften their 
effect on any of the protected classes. All data available to FNS 
indicate that protected individuals have the same opportunity to 
participate in the FMNP as non-protected individuals. FNS specifically 
prohibits State and local agencies operating the FMNP from 
discrimination based on race, color, national origin, gender, age, and 
disability (see FMNP nondiscrimination policy at 7 CFR 248.7(a)). 
Discrimination in any aspect of program administration is prohibited by 
title VI of the Civil Rights Act of 1964, title IX of the Education 
Amendments of 1972, Section 504 of the Rehabilitation Act of 1973, the 
Age Discrimination Act of 1975 (Pub. L. 94-135), and WIC Program 
regulations and instructions.

I. 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 are implemented. Respondents are not required to 
respond to any collection of information unless it displays a current 
valid OMB control number. This rule does not contain information 
collection requirements subject to approval by OMB under the Paperwork 
Reduction Act of 1995. The regulations for the FMNP at 7 CFR part 248 
contain information collections that have been approved by OMB under 
0584-0447.

J. E-Government Act Compliance

    FNS is committed to complying with the E-Government Act to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes. State Plan amendments regarding 
the implementation of the provisions contained in this rule, as is the 
case with the entire State Plan, may be transmitted electronically by 
the State

[[Page 65248]]

agency to FNS. Also, State agencies may provide FMNP program 
information, as well as their financial reports, to FNS electronically.
Good Cause Determination
    As discussed above, the Child Nutrition and WIC Reauthorization Act 
of 2004, Public Law 108-265, contained provisions related to the FMNP 
that must be implemented exactly as set forth in the legislation, with 
no discretion exercised by the Department regarding such 
implementation. Further, State agencies have already been informed that 
these nondiscretionary provisions must be implemented prior to the 
issuance of amendments to the program regulations. Therefore, Under 
Secretary Nancy Montanez Johner has determined, in accordance with 5 
U.S.C. 553(b), that prior notice and comment would be unnecessary, and 
that good cause exists for making this rule effective without first 
publishing a proposed rule.

II. Background

A. What are the new legislative changes to the FMNP?

    On June 30, 2004, President George W. Bush signed Public Law 108-
265, the Child Nutrition and WIC Reauthorization Act of 2004, 
hereinafter referred to as ``the Act'', which included three 
nondiscretionary provisions regarding the FMNP. The three provisions 
include an option for State agencies to authorize roadside stands, a 
change in the required State matching funds to operate the program, and 
an increase in the maximum Federal benefit level. This interim final 
rule implements these nondiscretionary FMNP provisions verbatim as 
reflected in section 203(h) of the Act. No discretion has been 
exercised by the Department in the implementation of these provisions.
1. Roadside Stands
    Section 203(h)(1)of the Act amended Section 17(m)(1) of the Child 
Nutrition Act of 1966 (CNA) (42 U.S.C. 1786(m)(1)) by providing State 
agencies the option to authorize roadside stands to accept FMNP coupons 
from recipients. This provision of the law was effective October 1, 
2004.
    Previously, State agencies could authorize farmstands or roadside 
stands only in situations where recipient access to farmers' markets 
was an issue and only with prior FNS approval. In fiscal year (FY) 
2003, just over 1,000 roadside stands nationwide were authorized to 
accept FMNP coupons. In FY 2006, more than 2,100 roadside stands were 
authorized to accept FMNP coupons.
    Accordingly, the regulatory definition of ``farmer'' has been 
revised to include farmers with roadside stands. Therefore, if not 
otherwise specified, references in the FMNP regulations to the term 
``farmer'' will also refer to farmers with roadside stands.
    The regulatory definition of ``farmers' market'' has been revised 
to delete the existing reference to FNS approval of farmstands or 
roadside stands when there are participant access issues. With this 
revision, the definition of ``farmers' market'' will be consistent in 
the FMNP and the Senior Farmers' Market Nutrition Program. In addition, 
the definition of ``Farmstand'' in Sec.  248.2 has been removed and the 
definition of ``Roadside stand'' has been added; the definition of 
``Roadside stand'' remains the same as the prior definition of 
``Farmstand.'' Further, throughout 7 CFR part 248 the term 
``Farmstand'' has been changed to ``Roadside stand''. References 
throughout 7 CFR part 248 to farmers and farmers' markets have been 
revised to add the words ``roadside stand,'' such as in Sec.  248.4, 
Sec.  248.10, and Sec.  248.17.
2. State Matching Funds
    Section 203(h)(2) of the Act amended Section 17(m)(3) of the Child 
Nutrition Act of 1966 (42 U.S.C. 1786(m)(3)) by reducing the amount of 
matching funds necessary to operate the FMNP. Previously, State 
agencies were required to match 30 percent of the total cost of the 
program, i.e., both administrative and food costs. The new provision 
requires State agencies to match 30 percent of administrative costs, 
which constitute up to 17 percent of total program costs, or up to 19 
percent of total program costs for State agencies that receive 
additional FMNP administrative funds for market development or 
technical assistance. Indian State agencies are still permitted to 
provide a lower match, but not less than 10 percent matching of the 
administrative cost of the program. This provision of the law was also 
effective October 1, 2004.
    Following is an example of the amount of the State match 
requirement under the new and old requirements. The maximum 
administrative cost rate of 17 percent contained in 7 CFR 248.12 
(a)(1)(i) is used for purposes of this example.

                          New Match Requirement
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Federal Grant...............................................    $500,000
Administrative Rate.........................................       x 17%
                                                             -----------
Total Fed. Admin. Amount....................................     $85,000
Percent of Federal Cost.....................................       / 70%
                                                             -----------
Total Estimate Admin. Cost..................................    $121,429
State Admin. Percent........................................       x 30%
                                                             -----------
State Admin. Match..........................................     $36,429
------------------------------------------------------------------------


                          Old Match Requirement
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Federal Grant...............................................    $500,000
Percent Federal Cost........................................       / 70%
                                                             -----------
Total Estimated Cost........................................    $714,286
State Percent of Cost.......................................       x 30%
                                                             -----------
State Match.................................................    $214,286
------------------------------------------------------------------------

    Under FMNP regulations, there are a variety of sources that State 
agencies can use to meet the State matching requirement. These sources 
continue to include State, local or private funds, program income and 
in-kind contributions.
    The net effect of only requiring a State match on the total 
administrative costs of the program has resulted in a lower burden on 
State agencies to come up with matching funds on the total cost of the 
program. However, State agencies are encouraged to continue to seek 
State, local and/or private financial support to help supplement the 
food funds previously required as part of the match requirement. As 
noted below, this provision in combination with the increase in the 
maximum Federal benefit level could put more demand on potentially 
fewer food funds available to operate the program. Therefore, continued 
financial support in the State becomes increasingly important.
    Accordingly, the definition of ``Matching requirement'' has been 
revised to reflect that State agencies must match 30 percent of the 
administrative cost of the program. In addition, in Sec.  
248.14(a)(1)(i) and (a)(1)(iii) has been revised to reflect this new 
requirement. Further, a newly designated Sec.  248.14(f) has been 
revised to reflect the matching requirement for administrative costs.
3. Federal Benefit Level
    Section 203(h)(3) of the Act amended Section 17(m)(5)(C)(ii) of the 
Child Nutrition Act of 1966 (42 U.S.C. 1786(m)(5)(C)(ii)) to increase 
the maximum Federal FMNP benefit level from $20 to $30 annually. The 
legislative provision to increase the maximum Federal FMNP benefit 
level was effective June 30, 2004. The minimum benefit level of $10 is 
unchanged.

[[Page 65249]]

    State agencies now have the option to increase their FMNP benefit 
levels to $30, but are not required to do so. Therefore, a State agency 
must determine, within its grant level, whether it intends to implement 
this option. Accordingly, Sec.  248.8(b) has been revised to change the 
maximum Federal benefit level to $30.

B. What other changes are made by the final rule?

    The definition of ``Total FMNP costs'' has been removed since it is 
no longer needed. This term was used when State agencies were required 
to provide State matching funds that equaled 30 percent of the total 
cost of the FMNP. In addition, Sec.  248.7, Nondiscrimination, has been 
amended to change the Department's address for the submission of 
discrimination complaints.
    Currently, in Sec.  248.17(c)(1)(i) of the FMNP regulations, each 
State agency must conduct onsite monitoring visits of a minimum of 10 
percent of its authorized farmers and a minimum of 10 percent of its 
authorized farmers' markets, including those authorized farmers and 
outlets identified by the State agency as being at the highest risk for 
program violations and noncompliance. This interim final rule, in 
Sec. Sec.  248.10(e) and 248.17(c)(1)(i), clarifies the Department's 
current policy that State agencies are also required to monitor 
roadside stands, including a minimum of 10 percent of its authorized 
roadside stands annually. In addition, as currently required in FMNP 
regulations for newly authorized farmers and farmers' markets, a newly 
authorized roadside stand's first year of operation in the FMNP is 
considered a high-risk indicator. Other high-risk indicators for 
roadside stands may be defined by the State agency.
    State agencies are encouraged to coordinate and consolidate 
monitoring activities when a State agency administers both the FMNP and 
the Senior Farmers' Market Nutrition Program. A review by one program 
can be counted by the other program toward the monitoring requirement, 
provided that appropriate sanction action is taken for all violations 
found.

List of Subjects in 7 CFR Part 248

    Food assistance programs, Food donations, Grant programs--Social 
programs, Indians, Infants and children, Maternal and child health, 
Nutrition education, Public assistance programs, WIC, Women.

0
For the reasons set forth in the preamble, 7 CFR part 248 is amended as 
follows:

PART 248--WIC FARMERS' MARKET NUTRITION PROGRAM (FMNP)

0
1. The authority citation for part 248 continues to read as follows:


    Authority: 42 U.S.C. 1786.


0
2. In Sec.  248.2:
0
a. Revise the first and last sentences of the definition of ``Farmer'';
0
b. Revise the definition of ``Farmers' market'';
0
c. Remove the definition of ``Farmstand'';
0
d. Revise the first and second sentences of the definition of 
``Matching requirement'';
0
e. Revise the definition of ``Program or FMNP'';
0
f. Add the definition for ``Roadside stand'' in alphabetical order; and
0
g. Remove the definition of ``Total FMNP costs''.
    The revisions and addition read as follows:


Sec.  248.2  Definitions.

* * * * *
    Farmer means an individual authorized to sell produce at 
participating farmers' markets and/or roadside stands. * * * A 
participating State agency has the option to authorize individual 
farmers, farmers' markets and/or roadside stands.
    Farmers' market means an association of local farmers who assemble 
at a defined location for the purpose of selling their produce directly 
to consumers.
* * * * *
    Matching requirement means State, local or private funds, or 
program income, equal to not less than 30 percent of the administrative 
FMNP cost for the fiscal year. The Secretary may negotiate with an 
Indian State agency a lower percentage of matching funds, but not less 
than 10 percent of the administrative cost of the program, if the 
Indian State agency demonstrates to the Secretary financial hardship 
for the affected Indian tribe, band, group, or council. * * *
* * * * *
    Program or FMNP means the WIC Farmers' Market Nutrition Program 
authorized by section 17(m) of the Child Nutrition Act of 1966 (CNA) 
(42 U.S.C. 1786(m)), as amended. The Special Supplemental Nutrition 
Program for Women, Infants and Children (WIC) is authorized by section 
17 of the CNA, as amended. Within section 17, section 17(m) authorizes 
the FMNP.
* * * * *
    Roadside stand means a location at which an individual farmer sells 
his/her produce directly to consumers. This is in contrast to a group 
or association of farmers selling their produce at a farmers' market.
* * * * *

0
3. Amend Part 248 by removing the words ``farmstand'' or ``farmstands'' 
wherever they appear and add in their place the words ``roadside 
stand'' or ``roadside stands''.

0
4. In Sec.  248.4:
0
a. Revise paragraph (a)(10)(i);
0
b. Remove paragraph (a)(10)(ii);
0
c. Redesignate paragraphs (a)(10)(iii) through (a)(10)(ix) as 
paragraphs (a)(10)(ii) through (a)(10)(viii);
0
d. Revise newly redesignated paragraphs (a)(10)(iii) and (a)(10)(iv); 
and
0
e. Revise paragraphs (a)(12) and (a)(13), and the first sentence in 
paragraph (a)(14).
    The revisions read as follows:


Sec.  248.4  State Plan.

    (a) * * *
    (10) * * *
    (i) Criteria for authorizing farmers' markets and/or roadside 
stands;
* * * * *
    (iii) Procedures for monitoring farmers, farmers' markets and/or 
roadside stands;
    (iv) Description of system for identifying high risk farmers, 
farmers' markets and/or roadside stands and procedures for sanctioning 
farmers, farmers' markets and/or roadside stands:
* * * * *
    (12) System for ensuring that FMNP coupons are redeemed only by 
authorized farmers, farmers' markets and/or roadside stands and only 
for eligible foods.
    (13) System for identifying FMNP coupons which are redeemed or 
submitted for payment outside valid dates or by unauthorized farmers, 
farmers' markets and/or roadside stands.
    (14) A copy of the written agreement to be used between the State 
agency and authorized farmers, farmers' markets and/or roadside stands. 
* * *
* * * * *

0
5. In Sec.  248.7, revise the first sentence in paragraph (b) to read 
as follows:


Sec.  248.7  Nondiscrimination.

* * * * *
    (b) * * * Persons seeking to file discrimination complaints may 
file them either with the Secretary of Agriculture, or the Director, 
USDA, Office of Adjudication and Compliance, Room 326-W, Whitten 
Building, 14th and Independence Avenue, SW., Washington, DC 20250-9410 
(or call (800) 795-3272 (voice) or (202) 720-

[[Page 65250]]

6382 (TTY)), or with the office established by the State agency to 
handle discrimination grievances or complaints. * * *

0
6. In Sec.  248.8, revise paragraph (b) to read as follows:


Sec.  248.8  Level of benefits and eligible foods.

* * * * *
    (b) The value of the Federal benefits received. The value of the 
Federal FMNP benefit received by each recipient, or by each family 
within a household in those States which elect to issue benefits on a 
household basis under Sec.  248.6(c) may not be less than $10 per year 
nor more than $30 per year.

0
7. In Sec.  248.10:
0
a. Revise the introductory text of paragraph (a);
0
b. Revise paragraphs (a)(1), (a)(2), (a)(3), (a)(6) and (a)(7);
0
c. Revise the second sentence in the introductory text of paragraph 
(b);
0
d. Revise paragraph (b)(1) introductory text, paragraph (b)(1)(xii), 
paragraph (b)(2) introductory text, and paragraphs (b)(3), (b)(4), 
(b)(5), and (b)(6);
0
e. Revise the introductory text of paragraph (e);
0
f. Revise the first and last sentences in paragraph (e)(2);
0
g. Revise the first and second sentences in paragraph (e)(3);
0
h. Revise paragraph (i)(1); and
0
i. Revise the last sentence in paragraph (k).
    The revisions read as follows:


Sec.  248.10  Coupon and market management.

    (a) General. This section sets forth State agency responsibilities 
regarding the authorization of farmers, farmers' markets, and roadside 
stands. The State agency is responsible for the fiscal management of, 
and accountability for, FMNP-related activities for farmers, farmers' 
markets and roadside stands. Each State agency may decide whether to 
authorize farmers individually, farmers' markets, roadside stands, or 
all of the above. All contracts or agreements entered into by the State 
agency for the management or operation of farmers, farmers' markets and 
roadside stands shall conform with the requirements of 7 CFR part 3016, 
Uniform Administrative Requirements for Grants and Cooperative 
Agreements to State and Local Governments.
    (1) Only farmers, farmers' markets and roadside stands authorized 
by the State agency may redeem FMNP coupons. Only farmers authorized by 
the State agency or that have a valid agreement with an authorized 
farmers' market may redeem coupons.
    (2) The State agency shall establish criteria for the authorization 
of individual farmers, farmers' markets and roadside stands. Any 
authorized farmer, farmers' market and roadside stand must agree to 
sell recipients only those foods identified as eligible by the State 
agency, in exchange for FMNP coupons. Individuals who exclusively sell 
produce grown by someone else, such as wholesale distributors, cannot 
be authorized to participate in the FMNP, except individuals employed 
by a farmer otherwise qualified under these regulations, or individuals 
hired by a nonprofit organization to sell produce at farmers' markets 
or roadside stands on behalf of local farmers.
    (3) The State agency shall ensure that an appropriate number of 
farmers, farmers' markets and/or roadside stands are authorized for 
adequate recipient access in the area(s) proposed to be served and for 
effective management of the farmers, farmers' markets and/or roadside 
stands by the State agency. The State agency may establish criteria to 
limit the number of authorized farmers, farmers' markets and/or 
roadside stands.
* * * * *
    (6) Authorized farmers, farmers' markets and roadside stands shall 
comply with the requirements of Title VI of the Civil Rights Act of 
1964, title IX of the Education Amendments of 1972, section 504 of the 
Rehabilitation Act of 1973, the Age Discrimination Act of 1975, 
Department of Agriculture regulations on non-discrimination (7 CFR 
parts 15, 15a and 15b), and FNS Instructions as outlined in Sec.  
248.7.
    (7) The State agency shall ensure that there is no conflict of 
interest between the State or local agency and any participating 
farmer, farmers' market and roadside stand.
    (b) * * * The agreement shall be signed by a representative who has 
legal authority to obligate the farmer, farmers' market and/or roadside 
stand. * * *
    (1) The farmer, farmers' market and roadside stand shall:
* * * * *
    (xii) Notify the State agency if any farmer, farmers' market and/or 
roadside stand ceases operation prior to the end of the authorization 
period.
    (2) The farmer, farmers' market and roadside stand shall not:
* * * * *
    (3) Neither the State agency nor the farmer, farmers' market nor a 
roadside stand has an obligation to renew the agreement. Either the 
State agency or the farmer, farmers' market or a roadside stand may 
terminate the agreement for cause after providing advance written 
notification.
    (4) The State agency may deny payment to the farmer, farmers' 
market or roadside stand for improperly redeemed FMNP coupons and may 
demand refunds for payments already made on improperly redeemed 
coupons.
    (5) The State agency may disqualify a farmer, farmers' market or 
roadside stand for FMNP abuse. The farmer, farmers' market and/or 
roadside stand has the right to appeal a denial of an application to 
participate, a disqualification, or a FMNP sanction by the State 
agency. Expiration of a contract or agreement with a farmer, farmers' 
market or roadside stand, and claims actions under Sec.  248.20, are 
not appealable.
    (6) A farmer, farmers' market or a roadside stand which commits 
fraud or engages in other illegal activity is liable to prosecution 
under applicable Federal, State or local laws.
* * * * *
    (e) Monitoring and review of farmers, farmers' markets, roadside 
stands and local agencies. The State agency shall be responsible for 
the monitoring of farmers, farmers' markets, roadside stands and local 
agencies within its jurisdiction. This shall include developing a 
system for identifying high risk farmers, farmers' markets, and 
roadside stands and ensuring on-site monitoring, conducting further 
investigation, and sanctioning of such farmers, farmers' markets, or 
roadside stands as appropriate.
* * * * *
    (2) Each State agency shall rank participating farmers, farmers' 
markets and roadside stands by risk factors, and shall conduct annual, 
on-site monitoring of at least 10 percent of farmers, 10 percent of 
farmers' markets and 10 percent of roadside stands which shall include 
those farmers, farmers' markets and roadside stands identified as being 
the highest risk. * * * A State agency participating in the FMNP for 
the first time shall, in lieu of applying the high-risk indicators, 
randomly select 10 percent of its participating farmers, 10 percent of 
its participating farmers' markets, and 10 percent of its participating 
roadside stands for monitoring visits.
    (3) The following shall be documented for all on-site farmers, 
farmers' markets, and roadside stands monitoring visits. At a minimum, 
documentation must include the names of the farmer, farmers' market or 
roadside stand and the reviewer; date of review; nature of problem(s) 
detected or the observation that the farmer, farmers' market or 
roadside stand appears to be in compliance with FMNP

[[Page 65251]]

requirements; a record of interviews with recipients, market managers 
and/or farmers; and the signature of the reviewer. * * *
* * * * *
    (i) * * *
    (1) A list of names and addresses of authorized farmers, farmers' 
markets and roadside stands at which FMNP coupons may be redeemed.
* * * * *
    (k) * * * State agency policies shall ensure that a farmer that is 
disqualified from the FMNP at one market or roadside stand shall not 
participate in the FMNP at any other farmers' market or roadside stand 
in the State's jurisdiction during the disqualification period.

0
8. In Sec.  248.14, revise paragraphs (a)(1)(i) and (a)(1)(iii) to read 
as follows:


Sec.  248.14  Distribution of funds.

    (a) * * *
    (1) * * *
    (i) Match amount. As a prerequisite to the receipt of Federal 
funds, a State agency must agree to contribute State, local or private 
funds, or program income, equal to not less than 30 percent of the 
total administrative FMNP cost. The Secretary may negotiate a lower 
percentage of matching funds, but not lower than 10 percent of the 
administrative cost of the program, in the case of an Indian State 
agency that demonstrates to the Secretary financial hardship for the 
affected Indian tribe, band, group, or council. The State agency may 
contribute more than the minimum amount. State, local or private funds 
for similar programs as defined in Sec.  248.2 may satisfy the State 
matching requirement.
* * * * *
    (iii) Failure to match. A State agency's failure to meet the State 
matching requirement will result in the establishment of a claim for 
the amount of Federal grant funds not matched. The matching requirement 
will be considered satisfied if State or other non-Federal matching 
contributions reported on the final closeout report (required by Sec.  
248.15(a)) amount to at least 30 percent of the administrative costs. 
This match amount may be lower for those Indian State agencies that 
have demonstrated to the Secretary financial hardship as set forth in 
paragraph (a)(1)(i) of this section.
* * * * *

0
9. In Sec.  248.17:
0
a. Revise the third sentence in the introductory text of paragraph (b);
0
b. Revise paragraph (b)(2)(iv); and
0
c. Revise the first sentence of paragraph (c)(1)(i).
    The revisions read as follows:


Sec.  248.17  Management evaluations and reviews.

* * * * *
    (b) * * * These evaluations shall also include reviews of selected 
local agencies, and on-site reviews of selected farmers, farmers' 
markets and roadside stands. * * *
* * * * *
    (2) * * *
    (iv) Upon notification from the State agency that corrective action 
has been taken, FNS will assess such action, and if necessary, perform 
a follow-up review to determine if the noted deficiencies have been 
corrected. FNS will then advise the State agency of whether the actions 
taken are in compliance with the corrective action plan, and whether 
the deficiency is resolved or further corrective action is needed. 
Compliance buys can be required if, during FNS management evaluations 
by regional offices, a State agency is found to be out of compliance 
with its responsibility to monitor and review farmers, farmers' markets 
and roadside stands.
* * * * *
    (c) * * *
    (1) * * *
    (i) Annual monitoring reviews of participating farmers, farmers' 
markets and roadside stands, including on-site reviews of a minimum of 
10 percent of farmers, 10 percent of farmers' markets, and 10 percent 
of roadside stands, which includes those farmers, farmers' markets, and 
roadside stands identified as being the highest risk. * * *
* * * * *

0
10. In Sec.  248.25, revise paragraphs (c) and (g) to read as follows:


Sec.  248.25  FMNP information.

* * * * *
    (c) Alabama, Florida, Georgia, Kentucky, Mississippi, North 
Carolina, South Carolina, Tennessee: U.S. Department of Agriculture, 
FNS, Southeast Region, 61 Forsyth Street, SW., Room 8T36, Atlanta, 
Georgia 30303.
* * * * *
    (g) Alaska, American Samoa, Arizona, California, Guam, Hawaii, 
Idaho, Nevada, Oregon, Trust Territory of the Pacific Islands, the 
Northern Mariana Islands, Washington: U.S. Department of Agriculture, 
FNS, Western Region, 90 Seventh Street, Suite 10-100, San 
Francisco, California 94103.

    Dated: October 17, 2008.
Kate Houston,
Acting Under Secretary, Food, Nutrition, and Consumer Services.

    Note: This appendix will not be published in the Code of Federal 
Regulations.

Appendix: Regulatory Impact Analysis

Title

    7 CFR 248: WIC Farmers' Market Nutrition Program: Nondiscretionary 
Provisions of Public Law 108-265, the Child Nutrition and WIC 
Reauthorization Act of 2004 Rule

Action

    a. Nature: Interim Final Rule
    b. Need and purpose: The interim final rule amends the WIC Farmers' 
Market Nutrition Program (FMNP) regulations to implement three 
nondiscretionary provisions mandated in Public Law 108-265, the Child 
Nutrition and Reauthorization Act of 2004. The three provisions, which 
(1) give State agencies the option to authorize roadside stands, (2) 
reduce the required amount of State matching funds, and (3) increase 
the maximum Federal benefit level, are intended to increase State 
agency flexibility in managing the Program.
    c. Affected parties: The parties affected by these regulations are 
the U.S. Department of Agriculture, WIC FMNP State and local agencies, 
WIC FMNP recipients, and authorized farmers participating in the WIC 
FMNP.

Background

Overview
    The WIC FMNP was established by Congress in 1992 to provide fresh, 
unprepared, locally grown fruits and vegetables to participants in the 
Special Supplemental Nutrition Program for Women, Infants, and Children 
(WIC). Women, infants (over 4 months old) and children that have been 
certified to receive WIC program benefits or who are on a waiting list 
for WIC certification are eligible to participate in the program. State 
agencies may serve some or all of the recipient categories. The WIC 
FMNP also assists farmers by expanding the awareness of, use of, and 
sales at farmers' markets.
    Lists of the fresh fruits, vegetables, and herbs that can be 
purchased with WIC FMNP coupons are developed by State agencies. 
Recipients receive coupons to purchase produce from authorized farmers 
at any authorized farmer's market or roadside stand. Currently, 37 
State agencies, 5 Indian Tribal Organizations (ITOs), the District

[[Page 65252]]

of Columbia, Guam, and Puerto Rico operate the FMNP.
    Between fiscal years (FY) 1998 and 2006, the total number of WIC 
FMNP recipients increased by 86 percent. Breastfeeding and postpartum 
women accounted for the largest average annual growth among all WIC 
FMNP recipients over the eight year period. However, children continued 
to make up the largest number of recipients comprising over 50 percent 
of all recipients in 2006.

                                                         Table 1--WIC FMNP Recipients, 1998-2006
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Breastfeeding
              Fiscal year                 Pregnant women         women         Postpartum women       Infants            Children       Total recipients
--------------------------------------------------------------------------------------------------------------------------------------------------------
1998..................................            258,281             76,022             81,993            109,813            819,611          1,345,720
1999..................................            309,647             87,005            124,669            128,628            882,850          1,532,799
2000..................................            339,659            147,721            134,409            144,745          1,134,604          1,901,138
2001..................................            343,849            156,108            179,599            164,266          1,308,135          2,151,957
2002..................................            361,914            149,382            164,181            182,640          1,304,265          2,162,382
2003..................................            393,283            176,497            202,003            212,183          1,388,290          2,372,256
2004..................................            418,803            194,261            212,395            207,395          1,483,870          2,516,724
2005..................................            449,118            220,196            231,477            244,143          1,541,276          2,686,210
2006..................................            433,632            186,724            207,329            386,194          1,283,283          2,497,162
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: FNS administrative data.

    Among State agencies, grant levels can differ widely. In FY 2006, 
over $23 million in WIC FMNP grants were issued. Six percent of the 
State agencies received grants between $1,000,000 and $4,000,000 and 
almost 48 percent received grants less than $500,000. The minimum grant 
was in the amount of $6,337 and the maximum grant was $3,769,708.

        Table 2--Summary of 2006 WIC FMNP State Grant Funding ($)
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Mean grant amount..........................................      529,109
Median grant amount........................................      310,342
Minimum grant amount.......................................        6,337
Maximum grant amount.......................................    3,769,708
                                                            ------------
Total grant amount.........................................   23,809,901
------------------------------------------------------------------------
Source: FNS administrative data.

WIC FMNP Benefits
    The WIC FMNP provides benefits to women, infants, and children who 
have been certified to participate in WIC or who are on a WIC waiting 
list. WIC FMNP benefits are in the form of coupons, which recipients 
redeem for fresh produce and nutrition education. Prior to the Child 
Nutrition and Reauthorization Act of 2004, State agencies could issue 
coupons to recipients with a maximum Federal benefit level of $20 per 
year. Typically, all recipients within a State receive the same benefit 
level. As shown in Table 3 below, over the past ten years, both the 
aggregate value of issued WIC FMNP coupons and the aggregate value of 
the redeemed coupons have increased by approximately 238 percent from 
$11,330,202 to $38,244,123 and from $7,007,902 to $22,493,077, 
respectively. During the same period of time, the rate of redemptions 
remained relatively constant averaging 60 percent. However, despite 
redemption rates averaging around 60 percent, most State agencies spend 
over 80 percent of the Federal food dollars received for the WIC FMNP 
by taking redemption rates into account when issuing coupons to 
eligible participants.

                                  Table 3--WIC FMNP Redemption Rates, 1994-2006
----------------------------------------------------------------------------------------------------------------
                                                                                                    WIC FMNP
                      Fiscal year                        WIC FMNP  coupons  WIC FMNP  coupons     redemptions/
                                                             issued ($)        redeemed ($)      issuances (%)
----------------------------------------------------------------------------------------------------------------
1994...................................................         11,330,202          7,007,902                 62
1995...................................................         14,483,209          8,963,640                 62
1996...................................................         14,712,669          9,086,455                 62
1997...................................................         14,088,940          8,434,526                 60
1998...................................................         21,021,239         12,440,730                 59
1999...................................................         24,439,166         13,931,410                 57
2000...................................................         30,826,175         17,572,939                 57
2001...................................................         36,593,280         20,613,402                 56
2002...................................................         36,193,585         20,809,843                 57
2003...................................................         39,009,229         24,271,575                 62
2004...................................................         43,760,565         26,946,970                 62
2005...................................................         40,295,432         23,444,438                 58
2006...................................................         38,244,123         22,493,077                 59
Average (1994-2006)....................................         28,076,755        16,616,6855                 59
----------------------------------------------------------------------------------------------------------------
Source: FNS administrative data.

    Nutrition education is provided to FMNP recipients by the State 
agency, often through an arrangement with the local WIC agency. Other 
educators and program partners may provide nutrition education and/or 
educational information to FMNP recipients. For example, Cooperative 
Extension Programs, local chefs, farmers or farmers' markets 
associations, and various other non-profit or for-profit organizations 
may provide nutrition

[[Page 65253]]

education to FMNP recipients. These educational arrangements help to 
encourage FMNP recipients to improve and expand their diets by adding 
fresh fruits and vegetables, as well as educate them on how to select, 
store and prepare the fresh fruits and vegetables they buy with their 
FMNP coupons.
    WIC FMNP regulations do not specify the number of nutrition 
education ``contacts'' each recipient must receive. Nutrition education 
requirements in the Program may be satisfied through coordination with 
other agencies within the State. Nutrition education is typically 
provided to WIC FMNP recipients through an arrangement with the local 
WIC agency. State agencies can enter into agreements with the WIC 
program to provide FMNP nutrition education in conjunction with WIC 
nutrition education. The WIC FMNP State/local agency or other educators 
and program partners may also provide nutrition education and/or 
educational information to Program recipients. These educational 
arrangements help to encourage recipients to improve and expand their 
diets by adding fresh fruits and vegetables, as well as educate them on 
how to select, store, and prepare the fresh fruits and vegetables they 
buy with their WIC FMNP coupons. State agencies use administrative 
funds to support nutrition education.
    Eligible WIC participants are issued FMNP coupons in addition to 
their regular WIC food instruments. These coupons can be used to buy 
fresh, unprepared fruits, vegetables and herbs from farmers, farmers' 
markets or roadside stands that have been approved by the State agency 
to accept FMNP coupons. The farmers, farmers' markets or roadside 
stands then submit the coupons to the bank or State agency for 
reimbursement. The Federal food benefit level for FMNP recipients may 
not be less than $10 and no more than $30 per year, per recipient. 
However, State agencies may supplement the benefit level.
    In addition to providing benefits to low-income women, infants, and 
children, the WIC FMNP provides small farmers who participate in the 
Program with additional income through the sale of their produce to 
FMNP recipients. In FY 2006, 14,259 farmers were authorized to sell 
their produce at 2,896 authorized farmer's markets and 2,136 authorized 
roadside stands (see Table 4). These farmers received over $22 million 
from redemption of WIC FMNP coupons.

                  Table 4--Number of Authorized Farmers, Farmer's Markets, and Roadside Stands
----------------------------------------------------------------------------------------------------------------
                                                                  WIC FMNP  number of
             Fiscal year                 WIC FMNP  number of      authorized farmer's      Number of authorized
                                          authorized farmers            markets            farm/roadside stands
----------------------------------------------------------------------------------------------------------------
1998.................................                    9,589                    1,253                      276
1999.................................                   11,439                    1,591                      236
2000.................................                   12,897                    1,622                      471
2001.................................                   13,741                    1,824                      708
2002.................................                   13,176                    1,911                      913
2003.................................                   16,226                    2,345                    1,078
2004.................................                   14,050                    2,548                    1,583
2005.................................                   14,323                    2,715                    1,999
2006.................................                   14,259                    2,896                    2,136
----------------------------------------------------------------------------------------------------------------
Source: FNS administrative data.

Cost/Benefit Assessment of Economic and Other Effects

Summary
    The interim final rule will amend the WIC FMNP regulations to 
reflect changes mandated by Public Law 108-265. These changes include 
allowing WIC FMNP State agencies to authorize roadside stands, 
increasing the maximum Federal benefit level, and changing the State 
matching requirement.
    The interim final rule is not expected to significantly increase 
administrative burden upon the Department or State agencies and is 
intended to provide State agencies with added flexibility in operating 
the WIC FMNP. The potential costs and benefits that may result from the 
provisions of the interim final rule will depend on the financial 
environment in which State agencies operate the WIC FMNP as well as 
what objectives States will seek to accomplish in their respective 
programs. For example, if a State agency with a financially constrained 
WIC FMNP is seeking to preserve its existing number of participants, 
there will likely be little increase in Federal benefit levels. 
However, if a State agency chooses to increase its Federal benefit 
level, the number of participants able to be served may decrease.
Option To Authorize Roadside Stands
    Under Public Law 108-265, State agencies now have the option to 
authorize roadside stands without prior FNS approval and without the 
requirement that access be an issue for recipients. Based on the 
results of an informal survey conducted by FNS regional staff, it 
appears that this provision has not had a significant effect on the 
number of roadside stands that have been authorized since this 
provision went into effect on October 1, 2004. In State agencies where 
the number of authorized stands did increase, this increase appeared to 
be a result of normal growth rather than of changes in the 
authorization process. However, for at least one State agency (Oregon), 
the number of roadside stands in the WIC FMNP did increase as a result 
of the provision. This State agency indicated that additional roadside 
stands were authorized so that the same stands that were already 
authorized under the Senior Farmer's Market Nutrition Program (SFMNP) 
would also be authorized under the WIC FMNP. In such an instance, there 
would likely be little burden imposed on State agencies since they 
already incur the administrative costs of monitoring those stands. FNS 
realizes that the effects of this provision may not be fully realized 
in such a short period of time and have therefore considered various 
other effects which may occur as a result of the provision to allow 
State agencies to authorize roadside stands.
    Under the interim final rule, in areas where there is a relatively 
large population of WIC FMNP recipients and where access to farmer's 
markets and/or roadside stands is not an issue, farmers operating 
roadside stands will now have an incentive to seek authorization to 
participate in the WIC FMNP. If State agencies authorize more roadside 
stands in areas where there is already sufficient access, the interim 
final rule might result in a higher concentration of

[[Page 65254]]

roadside stands and farmer's markets within commuting areas. In this 
case, the increase in the number of farmers from which to buy fresh 
produce may allow recipients to stretch the value of their coupons by 
being able to comparison-shop and find the best prices. It is, however, 
not expected that a higher concentration of farmers will lead to a 
significant decrease in the price of fresh fruits, vegetables, and 
herbs among all WIC FMNP market outlets given the relatively small 
number of FMNP recipients within States.
    If the quantity of roadside stands increases in areas where access 
is limited, WIC FMNP recipients will have better access to fresh, 
locally grown fruits, vegetables, and herbs and may be more likely to 
redeem their coupons. It is possible that increases in the number of 
authorized stands above normal growth levels may result in an increase 
in redemptions if WIC FMNP recipients who previously were not redeeming 
their coupons begin to do so as a result of the increased access and/or 
convenience that additional roadside stands might provide. However, 
because roadside stands could already be authorized in areas where 
access was limited, with FNS approval, it is not expected that the 
interim final rule will significantly increase the number of authorized 
roadside stands in isolated areas. Due to limited available information 
and various possible scenarios, there is some uncertainty regarding the 
long term effects of this provision.
Change in State Matching Requirements
    Prior to Public Law 108-265, State agencies have been required to 
match 30 percent of the total cost of the WIC FMNP program. Because of 
fiscal conditions, some State agencies have had difficulty meeting the 
30 percent program match. The match has been characterized as an 
``obstacle to program growth'' in participating WIC FMNP State agencies 
and limited ``expansion to new states''.\1\ Public Law 108-265 changed 
the basis for the amount of matching funds necessary to operate the WIC 
FMNP so that State agencies would only be required to match 30 percent 
of the total administrative cost of the program, which by stature 
continues to be limited to 17 percent of program costs. Indian Tribal 
Organizations are still permitted to provide a lower match, but not 
less than a 10 percent match of the total administrative cost.
---------------------------------------------------------------------------

    \1\ Wambles, Don. National Association of Farmers' Market 
Nutrition Programs. Statement Presented to U.S. Senate Agriculture, 
Nutrition, and Forestry Committee. April 3, 2003.
---------------------------------------------------------------------------

    This provision reduces the financial requirement States must make 
in order to operate the WIC FMNP. However, if State agencies do not 
continue to use State or local funds, private funds, or in-kind 
contributions to match the food as well as the administrative portion 
of the Federal grant, their total funds available to operate the FMNP 
will decrease. For example, in FY 2004, the total Federal grant for the 
State of Minnesota was $396,667, which was about the median FY 2004 
grant. Under the requirement for a 30 percent match of total program 
costs, the total WIC FMNP funds available in FY 2004 were $566,667. 
Under the new matching requirement, the Federal grant amount would not 
change. However, the State of Minnesota would only be required to match 
30 percent of the total administrative cost of the program. As shown 
below, the total WIC FMNP funds available would be $425,567. This is 
$141,100 less than under the old matching requirement. The amount of 
the shortfall is equal to the State food match under the old matching 
requirement.

                          Table 5--Difference Between Old and New Matching Requirements
----------------------------------------------------------------------------------------------------------------
                                            Old matching requirements             New matching requirements
      Federal grant = $396,667       ---------------------------------------------------------------------------
                                        Administration          Food          Administration          Food
----------------------------------------------------------------------------------------------------------------
Percentage Split....................                17%                83%                17%                83%
Federal Contribution................            $67,433           $329,234            $67,433           $329,234
Federal Percent Contribution........                70%                70%                70%               100%
Estimated Available Funds...........            $96,333           $470,334            $96,333           $329,234
State Percent Contribution..........                30%                30%                30%                 0%
State Match.........................            $28,900           $141,100            $28,900                 $0
                                     ---------------------------------------------------------------------------
    Total Program Funds Available...                $566,667
                                                    $425,567
----------------------------------------------------------------------------------------------------------------

    A decrease in food funds may result in State agencies having to 
either decrease recipient benefit levels and/or serve fewer recipients. 
However, some State agencies may choose to decrease the share of funds 
allocated towards administration so as to increase the share of funds 
allocated for food. To compensate for reduced administration and 
nutrition education funding, WIC FMNP State agencies may enter into 
agreements with local WIC programs to provide relevant WIC nutrition 
education sessions that can be used to meet the nutrition education 
requirement of the WIC FMNP. Based on guidance issued in OMB Circular 
A-87 and the Department's WIC Policy Memo 2002-5, allowable 
FMNP nutrition education costs may be charged to WIC funds since under 
the new matching requirement State agencies may choose to spend the 
matching funds on food, administration, or both.
    Farmers participating in the WIC FMNP will lose income earned from 
the redemption of WIC FMSP coupons resulting from a decrease in food 
funds. However, by lowering the financial commitment that State 
agencies must make in order to receive WIC FMNP funds, current State 
agencies will be more likely to take expansion funds, if offered, and 
new State agencies will have an easier time joining the Program.
Change in Maximum Federal Benefit
    Since the inception of the FMNP, the maximum Federal benefit, which 
unlike some other nutrition programs whose benefits are annually 
adjusted for inflation, has not changed. The maximum Federal benefit of 
$20 per year was established in 1992 and would be equivalent to $33 in 
2005 dollars.\2\ The proposed rule amends current regulations to 
implement the provision in Public Law 108-265, which increases the 
annual maximum Federal WIC FMNP benefit level from $20 to $30

[[Page 65255]]

with the $10 minimum benefit level remaining the same. State agencies 
have the option of increasing their WIC FMNP benefit level up to the 
new maximum, but are not required to do so.
---------------------------------------------------------------------------

    \2\ Inflation rate obtained from the Bureau of Labor Statistics, 
Consumer Price Index for fresh fruits and vegetables. (http://www.bls.gov/cpi/home.htm).
---------------------------------------------------------------------------

    Because of the changes made to the matching requirement, which may 
lower the amount of program funds available, it is expected that many 
State agencies will not be able to increase the benefit level. If State 
agencies do raise benefits, it is possible that not as many people will 
be able to be served by the Program. For example, given the number of 
WIC FMNP recipients and the benefit level in Minnesota in FY 2004, with 
a redemption rate of 60 percent, the total value of redeemed coupons 
would have been $584,664.\3\ If funds available for the WIC FMNP remain 
constant at approximately $585,000 as the benefit level increased, the 
number of recipients able to be served would decrease from 48,722 
recipients receiving a $20 coupon to 32,500 receiving a $30 coupon.
---------------------------------------------------------------------------

    \3\ This calculation only takes into account the Federal food 
benefits and does not make any assumptions regarding the level of 
State food benefits.

                                               Example: Minnesota
----------------------------------------------------------------------------------------------------------------
                                                           Number of WIC         Average         Total cost of
     Benefit level per recipient       Value of coupon    FMNP recipients,    percentage of      redeemed FMNP
                                             ($)              FY 2004        redeemed coupons     coupons ($)
----------------------------------------------------------------------------------------------------------------
Previous Benefit Level..............              20.00             48,722                60%            584,664
FY2005 Maximum Benefit Level........              30.00             32,500                60%            585,000
----------------------------------------------------------------------------------------------------------------
The state of Minnesota did not increase the value of WIC FMNP coupons in 2005. The calculation was done for the
  purpose of an example only. The average percent of redeemed coupons is based on the average national rate of
  redemption for FY 2000-FY 2004.

    If State agencies choose to increase benefit levels, WIC FMNP 
recipients will benefit from the ability to purchase and consume more 
fresh fruits, vegetables, and herbs. Additionally, it is possible that 
redemption rates will increase as some participants, who previously did 
not utilize their coupons, may be enticed to start utilizing them given 
the higher value.
    FNS regional offices have indicated that in FY 2005, less than 10 
State agencies increased the Federal benefit level and not all of those 
State agencies increased it to the $30 annual maximum. Of the State 
agencies that did increase benefits, the number of WIC FMNP recipients 
served did not decrease. Some State agencies indicated that they would 
have increased their benefit level, but were unable to do so because of 
their Federal 2005 grant levels. This implies that if provided with 
sufficient Federal funding to maintain current caseloads, many of the 
State agencies would increase their Federal benefit level, but would 
choose not to increase it if it meant serving fewer recipients.

[FR Doc. E8-26099 Filed 10-31-08; 8:45 am]
BILLING CODE 3410-30-P