[Federal Register: April 12, 1999 (Volume 64, Number 69)]
[Rules and Regulations]
[Page 17719-17768]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12ap99-23]
[[Page 17719]]
_______________________________________________________________________
Part II
Department of Health and Human Services
_______________________________________________________________________
Administration for Children and Families
_______________________________________________________________________
45 CFR Part 260, et al.
Temporary Assistance for Needy Families Program (TANF); Final Rule
[[Page 17720]]
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Administration for Children and Families
45 CFR Parts 260, 261, 262, 263, 264, and 265
RIN 0970-AB77
Temporary Assistance for Needy Families Program (TANF)
AGENCY: Administration for Children and Families, HHS.
ACTION: Final rule.
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SUMMARY: The Administration for Children and Families (ACF) issues
regulations governing key provisions of the new welfare block grant
program enacted in 1996--the Temporary Assistance for Needy Families,
or TANF, program. It replaces the national welfare program known as Aid
to Families with Dependent Children (AFDC) and the related programs
known as the Job Opportunities and Basic Skills Training Program (JOBS)
and the Emergency Assistance (EA) program.
These rules reflect new Federal, State, and Tribal relationships in
the administration of welfare programs; a new focus on moving
recipients into work; and a new emphasis on program information,
measurement, and performance. They also reflect the Administration's
commitment to regulatory reform.
EFFECTIVE DATES: These regulations are effective October 1, 1999.
FOR FURTHER INFORMATION CONTACT: Mack Storrs, Director, Division of
Self-Sufficiency Programs, Office of Family Assistance, Administration
for Children and Families (ACF), at 202-401-9289, or Ann Burek, Family
Assistance Program Specialist, at 202-401-4528.
Deaf and hearing-impaired individuals may call the Federal Dual
Party Relay Service at 1-800-877-8339 between 8 a.m. and 7 p.m. Eastern
time.
SUPPLEMENTARY INFORMATION: On November 20, 1997, the Administration for
Children and Families published a Notice of Proposed Rulemaking that
covered key provisions of the new welfare block grant program, known as
Temporary Assistance for Needy Families, or TANF. We provided an
extended 90-day comment period, which ended on February 18, 1998. We
offered commenters the opportunity to submit comments by mail or
electronically via our Web site. A number of commenters took advantage
of the electronic access, but a significant portion of the comments we
received electronically duplicated comments we received in the mail.
Eight major national organizations (three associations representing
State groups, three advocacy groups, and two labor organizations) and
one Congressman requested the opportunity to present their comments to
us orally. We granted their requests, holding four meetings in
Washington in June, July, and August 1998. The national organizations
focused largely on those issues that they had identified as priority
concerns in their written statements. In a few instances, they modified
their suggestions, endorsed comments that had been offered by other
commenters, or provided clarifying information. The Congressman
expressed his interest in: (1) Providing States more flexibility in
operating their programs; (2) collecting data that would be adequate
for the effective enforcement and oversight of TANF; and (3) placing
sufficient emphasis on ensuring that States met their maintenance-of-
effort (MOE) requirements and did not supplant existing State spending.
The discussions did not introduce any new policy concerns or
proposals. They are part of the public record, and individuals
interested in reviewing notes on these meetings have the same access to
that information as they do to other comments that were submitted in
written form.
Before discussing the comments in more detail, we want to point out
that we changed the part and section references for this TANF rule. One
commenter noted that our use of parts 270 through 275 for the TANF
rules would likely cause confusion because the major Food Stamp rules
used similar section numbers. In response to that comment, we have
shifted all our part and section numbers down by ten; thus, for
example, the provisions that appeared in part 270 of the NPRM appear in
part 260 of this final rule.
To help you make your way through these changes, we include both
NPRM and final-rule section references in this preamble discussion.
Comment Overview
After accounting for the duplications, we received nearly 270
comments on the NPRM. The largest number of comments came from State
welfare agencies and social services departments, followed by advocacy
groups and other State-level organizations. We also heard from a
significant number of Governors, national associations, local
government offices, Federal legislators, community-based organizations,
State legislators, and the general public. We received a lesser number
of comments from other Federal agencies and members of the educational,
business, child care, research, Tribal, and organized labor
communities.
The only policy area that generated a significant number of
``single-issue'' comments was domestic violence. We received about 25
comments from women's, legal, and other groups that focused exclusively
on the domestic violence provisions in the NPRM. We also received a
handful of comments, mostly from the general public, that focused
exclusively on the role of education in promoting self-sufficiency.
A substantial majority of the comments that addressed our
regulatory framework were positive. Commenters generally seemed to
agree that it was helpful for our rules to provide specific guidance on
how we intended to implement the penalty process and make penalty
determinations. In fact, based on the detailed questions and comments
we received, one could conclude that some commenters were looking for
an expansion on the amount of detail contained in the rule.
On the positive side, in addition to support of particular
policies, commenters indicated that the rules provided some helpful
clarifications of the statute, expressed appreciation for our
regulatory development process, noted ``positive steps'' we had taken,
and noted numerous places where our proposed rules appropriately
reflected the statute.
In general, however, many commenters had mixed views on the policy
proposals on the NPRM, supporting some, but opposing others. For
example, with respect to the domestic violence policies, most
commenters supported the general approach and commended our
encouragement of State implementation of the Family Violence Option.
However, most also expressed a number of concerns about specific
provisions in the proposed rules.
Likewise, many of the States, advocates, and national organizations
supported the proposed rule in a number of areas (such as the
flexibility afforded States to define work activities and the reduction
in penalty liability for States that failed only the two-parent
participation rate), but expressed objections to our approach on other
major issues.
The policy issues that generated the most consistent negative
reactions were separate State programs, child-only cases, and
continuation of waivers. Commenters expressed major concerns that: the
proposed rules would stifle
[[Page 17721]]
innovation; they were overly prescriptive and burdensome; they
undermined the partnership between State and Federal governments and
contravened Congressional intent; we presumed State guilt without
evidence; and these policies could ultimately harm recipients.
We also received numerous negative comments from States and State
representatives on the proposed data collection and reporting
requirements. However, these same requirements generated a largely
favorable reaction from other types of commenters.
In the preamble to the proposed rule, we discussed our general
approach on the major cross-cutting issues up front, prior to the
section-by-section analysis. Many of the commenters organized their
comments in the same way, addressing the issues thematically instead of
following the specific structure of the rule. This preamble follows
that same basic format, presenting a separate discussion of our
policies on the major cross-cutting issues (separate State programs,
child-only cases, waiver continuations, and domestic violence) before
proceeding to the section-by-section analysis.
We present most of the discussion of data collection and reporting
issues in two places--the preamble for part 265 and the preamble
discussion entitled the ``Paperwork Reduction Act'' in the ``Regulatory
Impact Analyses'' section of the preamble.
We believe that structuring the preamble this way enables us to
provide a clearer framework for the specific regulatory provisions and
to represent the commenters' concerns most accurately.
For several reasons, we decided not to attempt precise numerical
counts of the comments received. Based on the nature of the comments,
we did not believe that the number of comments was a particularly
meaningful statistic. First, because several of the comments had
multiple signatories and some commenters provided general endorsements
of the comments of other parties, we would have had to create somewhat
arbitrary rules for developing counts. Also, commenters presented their
views of the many overlapping and cross-cutting issues in many
different ways; for example, some spoke generically about the major
provisions of the rule, while others provided very specific suggestions
about individual words and phrases. This diversity in the approach of
commenters also hampered our ability to create meaningful counts.
Nevertheless, we are confident that this preamble accurately conveys
the scope and nature of the comments received.
We appreciate the time and attention that commenters gave to
reviewing the NPRM and preparing their comments. As a result of their
efforts, we have been able to resolve certain technical problems,
incorporate numerous regulatory clarifications, and consider some
alternative regulatory approaches.
Table of Contents
I. Overview: The Personal Responsibility and Work Opportunity
Reconciliation Act
II. Regulatory Framework
A. Pre-NPRM Process
B. Related Regulations under Development
C. Statutory Context
D. Regulatory Reform
E. Scope of This Rulemaking
F. Applicability of the Rules
III. Principles Governing Regulatory Development
A. Restrictions on Our Regulatory Authority
B. State Flexibility
C. Accountability for Meeting Program Requirements and Goals
IV. Discussion of Cross-Cutting Issues
A. Separate State Programs
B. Waivers
C. Child-only Cases
D. Treatment of Domestic Violence Victims
E. Recipient and Workplace Protections
F. Comments Beyond the Scope of the Rulemaking
G. Additional Cross-Cutting Issues
V. Part 260--General Temporary Assistance for Needy Families (TANF)
Provisions
VI. Part 261--Ensuring that Recipients Work
VII. Part 262--Accountability Provisions--General
VIII. Part 263--Expenditures of State and Federal TANF Funds
IX. Part 264--Other Accountability Provisions
X. Part 265--Data Collection and Reporting Requirements
XI. 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
I. Overview: The Personal Responsibility and Work Opportunity
Reconciliation Act
On August 22, 1996, President Clinton signed ``The Personal
Responsibility and Work Opportunity Reconciliation Act of 1996''--or
PRWORA--into law. This bipartisan welfare plan built upon previous
Administration and State efforts to reform welfare. Even before PRWORA
was enacted, many States were well on their way to changing their
welfare programs into jobs programs. By granting Federal waivers, the
Administration allowed 43 States--more than all previous
Administrations combined--to require work, time-limit assistance, make
work pay, improve child support enforcement, and encourage parental
responsibility. The vast majority of States have chosen to continue or
build upon these welfare demonstration projects.
PRWORA is dramatically changing the nation's welfare system into
one that requires work in exchange for time-limited assistance. The law
contains strong work requirements, performance bonuses to reward States
for moving welfare recipients into jobs and reducing out-of-wedlock
births, State maintenance-of-effort requirements, comprehensive child
support enforcement, and supports for moving families from welfare to
work--including increased funding for child care. It provides
opportunities for State and local governments, working in partnership
with communities groups and other agencies, to serve families in new,
more creative, and more effective ways.
With the help of the strong economy, and new Federal and State
policies, the percentage of welfare recipients working has tripled
since 1992 and an estimated 1.5 million people who were on welfare in
1997 were working in 1998. All States met the first overall work
participation rates required under TANF, and welfare caseloads have
fallen to the lowest levels in 30 years.
The first title of this new law (Pub. L. 104-193) created a program
called Temporary Assistance for Needy Families, or TANF, in recognition
of its focus on moving recipients into work and time-limiting
assistance. It repealed the existing welfare program known as Aid to
Families with Dependent Children (AFDC), which provided cash assistance
to needy families on an entitlement basis. It also repealed the related
programs known as the Job Opportunities and Basic Skills Training
program (JOBS) and Emergency Assistance (EA).
The new TANF program went into effect on July 1, 1997, except in
States that elected to submit a complete plan and implement the program
at an earlier date.
The new law reflects widespread, bipartisan agreement on a number
of key principles:
. Welfare reform should help move people from welfare to
work.
. Welfare should be a short-term, transitional experience,
not a way of life.
. Parents should receive the child care and the health care
they need to protect their children as they move from welfare to work.
. Child support programs should become tougher and more
effective in securing support from absent parents.
[[Page 17722]]
. Because many factors contribute to poverty and dependency,
solutions to these problems should not be ``one size fits all.'' The
system should allow States, Indian tribes, and localities to develop
diverse and creative responses to their own problems.
. The Federal government should focus less attention on
eligibility determinations and place more emphasis on program results.
. States should continue to make substantial investments of
State funds in addressing the needs of low-income families.
This landmark welfare reform legislation has dramatically affected
not only needy families, but also intergovernmental relationships. It
challenges Federal, State, Tribal and local agencies to foster positive
changes in the culture of the welfare system and to take more
responsibility for program results and outcomes. It also challenges
them to develop strong interagency collaborations and improve their
partnerships with legislators, advocates, businesses, labor, community
groups, and other parties that share their interest in helping needy
families successfully transition into the mainstream economy.
The new law provides an unparalleled opportunity to achieve true
welfare reform. It also presents very significant challenges for
families and State and Tribal entities in light of the changing program
structure, loss of Federal entitlements, creation of time-limited
assistance, and new penalty and bonus provisions.
Most of the resources in the AFDC program went to support mothers
raising their children alone. In the early years, the expectation was
that these mothers would stay home and care for their children; in
fact, in a number of ways, program rules discouraged work. Over time,
as social and economic conditions changed, and more women entered the
work force, the expectations changed. In 1988, Congress enacted the new
JOBS program to provide education, training and employment that would
help needy families avoid long-term welfare dependence. By 1994, 20
percent of the nonexempt adult AFDC recipients nationwide were
participating in the JOBS program.
In spite of these changes, national sentiment supported more
drastic change. Policy-makers, agency officials, and the public
expressed frustration about the slow progress being made in moving
welfare recipients into work and the continuing decline in family
stability. States lobbied for more flexibility to reform their
programs. While the Clinton Administration had supported individual
reform efforts in almost every State, approving 80 waivers in its first
five years, the waiver process was not an ideal way to achieve systemic
change. It required separate Federal approval of each individual reform
plan, limited the types of reforms that could be implemented, and
enabled reforms to take place only one State at a time. Governors
joined Congress and the President in declaring that the welfare system
was ``broken.''
After more than two years of discussion and negotiation, PRWORA
emerged as a bipartisan vehicle for comprehensive welfare reform. As
President Clinton stated in his remarks as he signed the bill, ``. . .
this legislation provides an historic opportunity to end welfare as we
know it and transform our broken welfare system by promoting the
fundamental values of work, responsibility, and family.''
The law gives States, and federally recognized Indian tribes, the
authority to use Federal welfare funds ``in any manner that is
reasonably calculated to accomplish the purpose'' of the new program.
It provides them broad flexibility to set eligibility rules and decide
what benefits are most appropriate. It also enables States to implement
their new programs without getting the ``approval'' of the Federal
government. In short, it offers States and Tribes an opportunity to try
new, far-reaching changes that can respond more effectively to the
needs of families within their own unique environments.
PRWORA redefines the Federal role in administration of the nation's
welfare system. It limits Federal regulatory and enforcement authority,
but gives the Federal government new responsibilities for tracking
State performance. In a select number of areas, it calls for penalties
when States fail to comply with program requirements, and it provides
bonuses for States that perform well in meeting new program goals.
Under the new statute, program funding and assistance for families
both come with new expectations and responsibilities. Adults receiving
assistance are expected to engage in work activities and develop the
capability to support themselves before their time-limited assistance
runs out. States and Tribes are expected to assist recipients making
the transition to employment. They are also expected to meet work
participation rates and other critical program requirements in order to
maintain their Federal funding and avoid penalties.
Some important indicators of the change in expectations are: time
limits; higher participation rates; the elimination of numerous
exemptions from participation requirements; and the statutory option
for States to require individual responsibility plans. Taken together,
these provisions signal an expectation that we must broaden
participation beyond the ``job-ready.''
In meeting these expectations, States need to examine their
caseloads, identify the causes of long-term underemployment and
dependency, and work with families, communities, businesses, and other
social service agencies in resolving employment barriers. In some
cases, States may need to provide intervention services for families in
crisis or may need to adapt program models to accommodate individuals
with disabilities or other special needs. TANF gives States the
flexibility they need to respond to such individual family needs.
However, in return, it expects States to move towards a strategy that
provides appropriate services for all needy families.
II. Regulatory Framework
A. Pre-NPRM Process
In the spirit of both regulatory reform and PRWORA, we implemented
a broad and far-reaching consultation strategy prior to the drafting of
the Notice of Proposed Rulemaking (NPRM). In Washington, we set up
numerous meetings with outside parties to gain information on the major
issues underlying the work, penalty, and data collection provisions of
the new law. In our ten regional offices, we used a variety of
mechanisms--including meetings, conference calls, and written
solicitations--to garner views from ``beyond the Beltway.''
The purpose of these discussions was to gain a variety of
informational perspectives about the potential benefits and pitfalls of
alternative regulatory approaches. We spoke with a number of different
audiences, including: representatives of State, Tribal, and local
governments; nonprofit and community organizations; business and labor
groups; and experts from the academic, foundation, and advocacy
communities. We solicited both written and oral comments, and we worked
to ensure that information and concerns raised during this process were
shared with both the staff working on individual regulatory issues and
key policy-makers.
These consultations were very useful in helping us identify key
issues and evaluate policy options, and several commenters commended
ACF on this process.
[[Page 17723]]
B. Related Regulations Under Development
This rule addresses the work, accountability, and data collection
and reporting provisions of the new TANF program. We have also issued
NPRM's and program guidance on several related provisions of the new
law including: high performance bonuses (TANF-ACF-PI-98-1 and TANF-ACF-
PI-98-05); illegitimacy reduction bonuses (63 FR 10263, March 2, 1998);
and the Tribal TANF and Native Employment Works (i.e., ``NEW'')
programs (63 FR 39365, July 22, 1998).
With a couple of minor exceptions, this rule does not address the
provisions of the Welfare-to-Work (WtW) program at section 403(a)(5) of
the Act, as created by section 5001(a)(1) of Pub. L. 105-33. The
Secretary of Labor issued interim rules on these provisions and the
provisions at section 5001(c), regarding WtW grants for Tribes, on
November 18, 1997. A copy of the interim rules and other information
about this program are available on the Web at http://wtw.doleta.gov.
The WtW provisions in this rule include the amendments to the TANF
provisions at sections 5001(d) and 5001(g)(1) of Pub. L. 105-33.
Section 5001(d) allows a State to provide WtW assistance to a family
that has received 60 months of federally funded TANF assistance and
specifies that ``noncash'' assistance under the WtW program is not
treated as TANF ``assistance'' for purposes of the TANF time limit.
Section 5001(g)(1) provides a new penalty that takes away WtW funds
when a State fails to meet the basic MOE requirements.
Also, this rule does not include the provision at section
5001(g)(2), which requires repayment of WtW funds to the Secretary of
Labor following a finding by the Secretary of Labor of misuse of funds.
Since the Department of Labor is responsible for administering this
penalty and receives any repaid funds, it would not be appropriate for
us to issue rules on this provision.
Under section 5001(e) of Pub. L. 105-33, we have responsibility for
regulating the WtW data reporting requirements, under section 411(a) of
the Act, as amended. On October 29, 1998, we issued an interim-final
rule that addresses these requirements, following consultation with the
Department of Labor, State agencies, Private Industry Councils, and
other affected parties (63 FR 57919).
As we pointed out in the NPRM preamble, there is an important
relationship between this rulemaking and the rulemaking on Tribal
programs. Under section 412 of the Social Security Act, federally
recognized Tribes may elect to operate their own TANF programs, and
Tribes that operated their own JOBS programs may continue to receive
those funds to operate Tribal work programs. We published the NPRM for
Tribal TANF programs on July 22, 1998 (see 63 FR 39365).
Tribal decisions on whether to elect the TANF option will depend on
a number of factors, including the nature of services and benefits that
will be available to Tribal members under the State program. Thus,
Tribes have a direct interest in the regulations governing State
programs.
Tribes also have an interest in these regulations because some of
the rules we develop for State programs could eventually apply to the
Tribal programs. In particular, we urge Tribes to note the data
collection and reporting requirements at part 265. While the statute
allows Tribes to negotiate certain program requirements, such as work
participation rates and time limits, it subjects Tribal programs to the
same data collection and reporting requirements as States.
We would also like to direct the Tribes to the maintenance-of-
effort (MOE) policies discussed at Sec. 263.1. In that section, we
provide that State contributions to a Tribal program could count toward
a State's MOE. Tribes should be aware of the important implications of
this provision for both the funding of Tribal programs and State-Tribal
relations.
In order for welfare reform to succeed in Indian country, it is
important for State and Tribal governments to work together on a number
of key issues, including data exchange and coordination of services. We
remind States that Tribes have a right under law to operate their own
programs. States should cooperate in providing the information
necessary for Tribes to do so.
Likewise, Tribes should cooperate with States in identifying Tribal
members and tracking receipt of assistance.
On December, 5, 1997, we issued a final rule to repeal the obsolete
regulations for the EA, JOBS, and the IV-A child care programs and a
few provisions covering administrative requirements of the AFDC program
(see 62 FR 64301, December 5, 1997). This action resulted in the
elimination of about 82 pages from the Code of Federal Regulations.
We have yet to issue a more detailed conforming rule that deletes
or replaces obsolete AFDC and title IV-A references throughout chapter
II. This second rulemaking will take additional time because the AFDC
provisions are intertwined with provisions for other programs that are
not repealed. Also, it is not clear that we should repeal all the AFDC
provisions because Medicaid, foster care, and other programs have
linkages to the AFDC rules. Because of these complexities and the
nonurgent nature of the conforming changes, this latter rule is not an
immediate agency priority.
PRWORA also changed other major programs administered by ACF, the
Department, and other Federal agencies that may significantly affect a
State's success in implementing welfare reform. For example, title VI
of PRWORA repealed the child care programs that were previously
authorized under title IV-A of the Social Security Act. In their place,
it provided two new sources of child care funding (which we refer to
collectively as the Child Care Development Fund). These funds go to the
Lead Agency that administers the Child Care and Development Block Grant
program. A major purpose of the increases in child care funding
provided under PRWORA is to assist low-income families in their efforts
to be self-sufficient. We issued final rules covering the Child Care
and Development Fund on July 24, 1998 (see 63 FR 39935).
We encourage you to look in the Federal Register for actions on
these related rules, take the opportunity to comment, and work to
understand the important relationships among these programs in
developing a comprehensive strategy that can provide support to all
families that are working to maintain their family structure and become
self-sufficient.
C. Statutory Context
These proposed rules reflect PRWORA, as enacted, and amended by
Pub. L. 104-327, Pub. L. 105-33, Pub. L. 105-89, Pub. L. 105-178, and
Pub. L. 105-200.
As we indicated in the NPRM preamble, the changes made by Pub. L.
104-327 are fairly limited in scope; we discuss them in the preamble on
Contingency Fund MOE requirements at Secs. 264.71, 264.72, and 264.77.
Pub. L. 105-33 (also known as The Balanced Budget Act of 1997)
created the new Welfare-to Work (WtW) program, made a few substantive
changes to the TANF program, and made numerous technical corrections to
the TANF statute. We attempted to incorporate those amendments that
were in our purview in the NPRM. However, commenters identified a
couple of places where we did not fully
[[Page 17724]]
or correctly incorporate these amendments. We found a few more. We note
these in the preamble discussion that follows and have made appropriate
changes in the regulatory text.
We want to note a couple of additional legislative developments
since the drafting of the NPRM that might affect a State's liability
for penalties and the use of Federal TANF funds. We have made a couple
of conforming changes in the rules to reflect these developments.
Under Pub. L. 105-89, known as the Adoption and Safe Families Act
of 1997, Congress decreased the amount of money available to States
through the ``Contingency Fund'' and increased the amount that States
receiving contingency funds must remit, using a proportionate
reduction. We discuss this provision in more detail in the preamble for
subpart B of part 264, and we have changed the regulatory text to
reflect this change.
Under Pub. L. 105-178, known as The Transportation Equity Act for
the 21st Century, Congress: (1) (Effective in fiscal year 2001) reduced
the cap on the amount that a State could transfer to the Social
Services Block Grant from 10 percent to 4.25 percent; (2) created the
``Job Access'' competitive grant program to help communities develop
transportation services that will help current and former welfare
recipients and other low-income individuals access employment; and (3)
specified that States could use their Federal TANF funds as part of the
nongovernmental cost-sharing required under a Job Access program. None
of these provisions directly affect the TANF rules, but they do change
what would be an allowable use of Federal TANF funds. It is important
that States understand these provisions if they wish to avoid a penalty
for misuse of Federal TANF funds.
Under section 403 of The Child Support Performance and Incentives
Act of 1998, Pub. L. 105-200, Congress amended section 404 of the
Social Security Act to address the use of Federal TANF funds within the
Job Access and Reverse Commute program. It imposed: (1) restrictions on
the use of Federal TANF funds for this purpose, including ``new
spending'' and ``nonsupplantation'' requirements; (2) a requirement
that the preponderance of funds go to TANF recipients, former TANF
recipients, certain noncustodial parents, and low-income individuals at
risk of qualifying for the TANF program; and (3) a requirement that the
services provided support participation in TANF work activities. It
also imposed a cap on the total amount of Federal TANF funds that a
State could use for this purpose, computed as the difference between 30
percent of the State Family Assistance Grant (SFAG) amount and the
amount that a State was transferring that year to the Child Care and
Development Block Grant or the Social Services Block Grant.
Consistent with treatment of the other restrictions on the grant at
section 404, we have not directly incorporated these restrictions into
the TANF rule. However, we note that we would consider expenditures in
violation of these new provisions a misuse of funds.
We also point out that these provisions do not conflict with the
restrictions at section 409(a)(7)(B)(iv) of the Act or Sec. 263.6(a)
and (c) of these rules. The TANF rules deal with the converse
situation--the circumstances under which other State expenditures do
not qualify under TANF's basic maintenance-of-effort provisions. The
new provisions address the circumstances under which Federal TANF funds
may count as nongovernmental expenditures under a separate program.
They do not give States the authority to use Job Access funds for basic
MOE purposes.
Further, the use of Federal TANF funds to support Job Access
activities does not constitute a transfer of Federal TANF funds within
the meaning of section 404(d)(1). Thus, they do not affect the
``adjusted SFAG'' amount that we use in determining the administrative
cost cap and penalty amounts.
The Child Support Performance and Incentives Act also added a
``rule of interpretation'' to section 404(k)(3) of the Social Security
Act, which indicates that the provision of transportation benefits to
an individual who is not otherwise receiving TANF assistance would not
be considered assistance. We have made a conforming change to our
definition of assistance at Sec. 260.31 to reflect this policy.
D. Regulatory Reform
In its latest Document Drafting Handbooks, the Office of the
Federal Register has supported the efforts of the National Partnership
for Reinventing Government and encouraged Federal agencies to produce
more reader-friendly regulations. In drafting the proposed and final
rule, we paid close attention to this guidance and worked to produce a
more readable rule. We also provided electronic access to the document
and gave readers the option to submit their comments electronically. We
received a number of positive comments about how the NPRM was written
and the electronic access.
Based in part on the positive reaction to the proposed rule, and in
the spirit of facilitating understanding, we decided to retain much of
the NPRM preamble discussion. We believe it will be useful for some
readers in providing the overall context for the final regulations.
However, where we are changing our policy in the final rule, or the
context has changed since we issued the NPRM, we have made appropriate
changes to the preamble. We also exercised some editorial discretion to
make the discussion more succinct or clearer in places. Wherever we
made significant changes in policy, the preamble notes and explains
those changes.
In the proposed rule, we decided to incorporate a few statutory
provisions as a frame of reference even though we did not intend to
regulate or enforce State behavior in those areas. We thought the
inclusion of this additional preamble discussion and regulatory text
would help establish the broader context for other parts of the
rulemaking document. These additions were primarily explanatory in
nature or restatements of the statutory requirements. We indicated that
readers could probably identify these additional provisions based on
the language used and the surrounding preamble discussion and noted
that subparts A and G of part 271 (which addressed the work provisions
other than participation rates and penalties) and Sec. 270.20 (which
included the statutory goals of the program) as specific examples.
Commenters identified an additional item that would be helpful to
include as a frame of reference--the nondiscrimination provisions found
at section 408(d) of the Act. We decided to accept the suggestion and
include these provisions in the final rule since commenters had not
generally objected to including such material in the regulatory text of
the NPRM, the inclusion will have informational value, and the change
does not materially alter the scope of the rule. (See the discussion on
``Recipient and Workplace Protections'' for additional information.)
Likewise, based on comments we received on the domestic violence
provisions in the proposed rule, we incorporated the statutory
provisions on the Family Violence Option at a new Sec. 260.52.
In the spirit of providing access to information, we included draft
data collection and reporting forms as appendices to the proposed rules
even though we did not intend to publish the forms as part of the final
rule. We thought that the inclusion of the draft
[[Page 17725]]
forms would expand public access to this information and make it easier
to comment on our data collection and reporting plans.
We believe that we succeeded in accomplishing these goals.
Commenters responded in large numbers and specific detail to both the
Paperwork Reduction Notice and the Proposed Rule. The changes to the
final rule and to the companion appendices reflect our consolidated
response to both sets of comments.
E. Scope of This Rulemaking
The NPRM and final rule reflect our decision to incorporate the
work, data collection, and penalty provisions in a single regulatory
package. While this decision resulted in a large rule, we think it
enabled us to develop a more coherent regulatory framework and provided
readers an opportunity to look at, and comment on, the many
interconnected pieces at one time.
One downside of this decision was that the concentration of all
these accountability provisions in one rule could have contributed to
the perception among some commenters that the tone was punitive and the
rule too penalty-focused. It is important to keep our broader
regulatory and program agenda in mind as you assess the impact and
meaning of this package. The total agenda includes rewards, as well as
penalties, and tracks State performance along a variety of different
measures, including job entries, success in the workplace, reductions
in out-of-wedlock childbearing, and child poverty rates. It also
includes annual reports to Congress on State program characteristics,
recipient characteristics, and performance.
Our agenda also includes extensive research, evaluation, and
technical assistance efforts. Throughout this preamble, you will find
examples of how our efforts in these areas respond, in a nonregulatory
fashion, to commenter concerns. It would be impractical and
inappropriate to use this rulemaking as the vehicle for informing the
public about the full agenda, but the ``Promising Practices National
Conferences'' held in September 1998 and in Fiscal Year 1999 provide a
good example. These meetings, which have the financial support of the
Department of Health and Human Services (including both the
Administration for Children and Families and the Substance Abuse and
Mental Health Services Administration) and the Department of Labor,
will provide State and local staff and other practitioners with
practical ideas on a range of topics, such as preparing for the
difficult task of moving clients with multiple barriers into work,
creating jobs in isolated and high-risk communities, increasing support
from noncustodial parents, promoting collaboration and achieving
seamless delivery of services, changing welfare offices to job centers,
promoting success in the workplace, and maintaining the investments in
needy families.
F. Applicability of the Rules
As we indicated in policy guidance to the States and the NPRM, a
State could operate its program under a reasonable interpretation of
the statute prior to our issuance of final rules. Thus, in determining
whether a State is subject to a penalty, we would not apply regulatory
interpretations retroactively. We retained this basic policy, but
modified it to clarify that the ``reasonable interpretation'' standard
applies until the effective date of these final rules. You can find
additional discussion of this policy at Sec. 260.40 of the preamble.
III. Principles Governing Regulatory Development
A. Restrictions on Our Regulatory Authority
Under the new section 417 of the Act, the Federal government may
not regulate State conduct or enforce any TANF provision except to the
extent expressly provided by law. This limitation on Federal authority
is consistent with the principle of State flexibility and the general
State and congressional interest in shifting more responsibility for
program policy and procedures to the States.
We interpreted this provision to allow us to regulate in two
different kinds of situations: (1) Where Congress has explicitly
directed the Secretary to regulate (for example, under the caseload
reduction provisions, described below); and (2) where Congress has
charged the Department of Health and Human Services (HHS) with
enforcing penalties, even if there is no explicit mention of
regulation. In this latter case, we believe we have an obligation to
States to set out, in regulations, the criteria we will use in carrying
out our express authority to enforce certain TANF provisions by
assessing penalties.
In the preamble to the proposed rule, we indicated that we
endeavored to regulate in a manner that did not impinge on a State's
ability to design an effective and responsive program. A large number
of commenters felt that our regulations would in fact have such a
negative effect. In the subsequent discussion, you will note that we
have revised provisions in key program areas that respond to these
concerns.
At the same time, however, we remain committed to ensuring that
States remain accountable for meeting TANF requirements. Thus, we will
continue to monitor program developments so that we can make
appropriate adjustments if programs fail to remain focused on TANF's
statutory objectives.
B. State Flexibility
In the Conference Report to PRWORA, Congress stated that the best
welfare solutions come from those closest to the problems, not from the
Federal government. Thus, the legislation creates a broad block grant
for each State to reform welfare in ways that work best. It gives
States the flexibility to design their own programs, define who will be
eligible, establish what benefits and services will be available, and
develop their own strategies for achieving program goals, including how
to help recipients move into the work force.
Under the law and the proposed rules, we indicated that States
could implement innovative and creative strategies for supporting the
critical goals of work and responsibility. For example, they could
choose to expend funds on refundable earned income tax credits or
transportation assistance that would help low-wage workers keep their
jobs. They could also extend employment services to noncustodial
parents, by including them within the definition of ``eligible
families.''
To ensure that our rules supported the legislative goals of PRWORA,
we indicated our commitment to gather information on how States were
responding to the new opportunities available to them. We said that we
reserved the right to revisit some issues, either through legislative
or regulatory proposals, if we identified situations where State
actions were not furthering the objectives of the Act.
A large number of commenters felt we had unduly limited State
flexibility to design their programs, particularly with respect to
expending funds in separate State programs, providing assistance to
child-only cases, and continuing waivers, but also in areas like the
definition of administrative costs, restrictions on domestic violence
waivers that affected reasonable cause, and the definition of
assistance.
We included some restrictions on State flexibility in the NPRM to
protect against possible State policies that might undermine TANF goals
or divert the Federal share of child support collections. However, in
response to
[[Page 17726]]
these concerns and in recognition of the positive steps States have
been taking to implement welfare reform, we have decided to remove some
of the direct and perceived restrictions on State flexibility. We have
also provided some important preamble language that helps clarify State
flexibility to define needy families and spend both Federal TANF and
State MOE funds in ways that support a wide range of families in
diverse ways. We provide additional discussion of these changes and
clarifications in subsequent sections of the preamble.
C. Accountability for Meeting Program Requirements and Goals
In the NPRM we recognized that States have enormous flexibility to
design their TANF programs in ways that strengthen families and promote
work, responsibility, and self-sufficiency. At the same time, however,
TANF reflects a bipartisan commitment to ensuring that State programs
support the goals of welfare reform. To this end, the statutory
provisions on data collection, bonuses, and penalties are crucial
because they allow us to track what is happening to needy families and
children under the new law, measure program outcomes, and promote key
program objectives.
Work
As we indicated in the NPRM, we believe the central goal of the new
law is to move welfare recipients into work. The law reflects this
important goal in a number of ways:
. Work receives prominent mention in the statutory goals at
section 401 and the plan provisions in section 402;
. Section 407 establishes specific work participation rates
each State must achieve;
. Section 409 provides significant financial penalties
against any State that fails to achieve the required participation
rates;
. Section 411 provides specific authority for the Secretary
to establish data reporting requirements to capture necessary data on
work participation rates; and
. Section 413 calls for ranking of States based on the
effectiveness of their work programs.
The proposed and final rules reflect a similar, special focus on
promoting the work objectives of the Act and ensuring that States meet
the statutory requirements at sections 407, 409, and 411 of the Act.
You should look at the rules in part 261, and the related preamble
discussion, for specific details.
This Administration has repeatedly shown its commitment to
promoting the work objectives of this new law. Before and since the
legislation was passed, the President and the Administration have
worked very hard to ensure that Congress passed strong work provisions
and provided adequate child care funding and other program supports to
help families making the transition from welfare to work.
These include the new Welfare to Work program (WtW), the Welfare-
to-Work Tax Credit enacted in the Balanced Budget Act, Welfare-to-Work
housing vouchers included in the Fiscal Year 1999 budget for the
Department of Housing and Urban Development, and Job Access
transportation grants.
WtW provides grants to States, localities, Indian Tribes, and
other grantees to help them move long-term welfare recipients and
certain noncustodial parents into lasting, unsubsidized jobs.
The Welfare to Work Tax Credit provides a credit equal to 35
percent of the first $10,000 in wages in the first year of
employment, and 50 percent of the first $10,000 in wages in the
second year, to encourage the hiring and retention of long-term
recipients. (It complements the Work Opportunity Tax Credit, which
provides a credit of up to $2,400 for the first year of wages to
employers who hire long-term welfare recipients.)
Welfare-to-Work Housing vouchers will help current and former
welfare recipients who need housing assistance to get or keep a job.
Most of the housing vouchers (50,000 in FY 1999) will go to
communities on a competitive grant basis.
The Transportation Equity Act for the 21st Century (TEA-21)
authorizes $750 million over five years for competitive grants to
communities to develop innovative transportation activities to help
welfare recipients and other low-income workers (i.e., those with
income up to 150 percent of poverty) get to work. (You can find more
information about the Administration's initiatives at http://
www.whitehouse/gov/wh/welfare.)
The President has also challenged America's businesses, its large
nonprofit sector, and the executive branch of the Federal government to
help welfare recipients go to work and succeed in the workplace.
In May 1997, the President helped to launch a new private-sector
initiative to promote the hiring of welfare recipients by private-
sector employers. The Welfare-to-Work Partnership, which started with
105 participating businesses, now includes over 10,000 businesses that
have hired 410,000 welfare recipients. This partnership has produced a
variety of materials to support businesses in these efforts, including
the ``Blueprint for Business'' hiring manual and ``The Road to
Retention,'' a report of companies that have achieved higher retention
rates for former welfare recipients. You can find information about the
Welfare to Work Partnership at http://www.welfaretowork.org.
The Small Business Administration (SBA) is addressing the unique
and vital role of small businesses, which account for over one-half of
all private-sector employment. It is helping small businesses make
connections to job training organizations and job-ready welfare
recipients. It is also providing training and assistance to welfare
recipients who wish to start their own businesses. Businesses can
receive assistance through SBA's 1-800-U-ASK-SBA and through its
network of centers, shops, and district offices. Information on SBA's
Welfare to Work initiative (W2W) and other activities are available
through the SBA home page at http://www.sba.gov.
In addition, the Vice President has developed a coalition of
national civic, service, and faith-based groups committed to helping
former welfare recipients succeed in the workforce--by providing
mentoring, job training, child care, and other supports.
On March 8, 1997, the President directed all Federal agencies to
submit plans describing the efforts they would make to respond to this
challenge. Under the Vice President's leadership, Federal agencies
committed to hiring at least 10,000 welfare recipients over the next
four years. Agencies have already fulfilled this commitment--nearly two
years ahead of schedule. (You can find additional information on this
effort at http://www.welfaretowork.fed.gov.)
Meeting the Needs of Low-Income Families and Children
In a number of different ways, the new law works to ensure that the
needs of low-income children and families are met. First, it provides a
guaranteed base level of Federal funding for the TANF programs. Then,
in times of special financial need, it makes nearly $2 billion in
additional funding available through a Contingency Fund and up to $1.7
billion available for loans to States. It also authorizes several
studies to monitor changes in the situations of needy children and
families that occur after enactment. For example, it requires us to
report on how certain children are affected by the provisions of the
new law. It also requires us to track whether a State's child poverty
rate increases as the result of the State's TANF program and requires
States to initiate corrective actions when such increases occur.
These regulations work to further the objectives of these statutory
provisions.
[[Page 17727]]
Most importantly, they work to ensure that the use of Federal and State
funds is consistent with the provisions and purposes of TANF, that
States maintain their investments on needy families, that recipients
and other workers have the protections available to them that are
intended under Federal law, and that we collect data from States that
are necessary to assess program performance.
IV. Discussion of Cross-Cutting Issues
Overview of Comments
As we indicated earlier in the preamble, commenters expressed a
number of major concerns with respect to our policies on separate State
programs, child-only cases, and waiver continuations. In particular,
they said: (1) In part because of the uncertainty they created, the
proposed rules would stifle innovation and undermine the States'
ability to meet the needs of their families; (2) the proposed rules
were overly prescriptive and burdensome, too concerned about
accountability and the taking of penalties, and not focused on
outcomes; (3) they undermined the partnership between the State and
Federal governments, fostered an adversarial relationship, violated the
compact between the States and Washington in creating TANF, or
contravened Congressional intent (if not the law) in regulating State
behavior in these areas; (4) we presumed State guilt when there was no
evidence that States were taking advantage of loopholes to evade the
TANF provisions; and (5) our strict penalty policies, promotion of
``work first'' strategies, and inattention to recipient protections
could ultimately harm recipients (e.g., prevent them from attaining
jobs that paid a living wage or accessing appropriate treatment).
We disagree with commenters that claimed that we exceeded our
regulatory and statutory authority in the NPRM. However, because of the
evidence we have seen about States' commitment to develop programs that
are consistent with the goals of TANF, these final rules reflect some
significant changes in our policies on these three issues. You will
find additional details in the following discussion.
A. Separate State Programs
Background
Section 409(a)(7) of the Social Security Act permits States to
assist eligible families by expending maintenance-of-effort funds (MOE)
under ``all State programs.'' Thus, we recognize expenditures under the
State's TANF program and/or separate State program(s). However,
eligible families assisted through a separate State program are not
generally subject to TANF requirements, including work participation
requirements, child support collection requirements, the time limit on
receipt of assistance, and data collection and reporting requirements.
In other words, by definition, States operating separate programs avoid
TANF requirements; they have more flexibility to use the funds
available in these programs to help eligible families.
In the NPRM preamble, in a section entitled ``Maintenance-of-Effort
(MOE),'' we stated that one of the most important provisions in the new
law designed to protect needy families and children is the basic
maintenance-of-effort (basic MOE) requirement in the TANF statute. This
provision requires States to maintain a certain level of spending on
welfare, based on historic (i.e., fiscal year (FY) 1994) expenditure
levels. Because this provision is critical to the successful
implementation of the law, Congress gave us the authority to enforce
State compliance in meeting this requirement, and it received
significant attention in the proposed rule.
We also directed readers to the data collection, work, and penalty
provisions of the proposed rule, at parts 271-275, for provisions
designed to: (1) ensure that States continue to make the required
investments in meeting the needs of low-income children and families;
(2) prevent States from either supplanting funds or using their MOE
funds to meet extraneous program or fiscal needs; (3) give us adequate
information to meet our statutory responsibility to determine what is
happening in State programs; and (4) take a broad view of work effort,
caseload reduction, and program performance.
We recognized that States have more flexibility in spending their
State MOE funds than their Federal TANF funds, especially when they
expend their MOE funds in separate State programs. However, at the same
time, we reiterated concerns that we had first expressed in our policy
guidance of January 1997, TANF-ACF-PA-97-1, that States could design
their programs to avoid the work requirements of the new law or to
avoid returning a share of their child support collections to the
Federal government. Therefore, we proposed four measures to mitigate
these potential negative consequences.
First, if we detected a significant pattern of diversion of
families to a separate State program that achieves the effect of
avoiding either the work participation rates or returning the Federal
share of child support collections, we proposed to deny reasonable
cause for certain penalties. For avoiding the work participation rates,
reasonable cause relief would not be available with respect to
penalties for failure to: meet minimum participation rates, implement
time limits, maintain assistance to a custodial parent who cannot
obtain child care for a child under age 6, and reduce assistance for
recipients refusing without good cause to work. For diverting the
Federal share of child support collections, reasonable cause would not
be available with respect to the penalties for failure to: meet minimum
participation rates, implement time limits, reduce assistance for
recipients refusing without good cause to work, and cooperate with
paternity establishment and child support enforcement requirements.
Second, for the same two diversion situations and penalties that we
just discussed, we proposed that a State would not be eligible for a
penalty reduction on the basis of making substantial progress during
corrective compliance unless it corrected the diversion.
Third, we proposed to deny a State access to two possible
reductions in the penalty for failing to meet work participation rates
unless it ``demonstrates that it has not diverted cases to a separate
State program for the purpose of avoiding the work participation
requirements.''
Finally, we proposed to require that a State collect case-record
data on participants in separate State programs if it wished to receive
a high performance bonus; qualify for work participation caseload
reduction credit; or be considered for a reduction in the penalty for
failing to meet the work participation requirements.
In making these proposals, we noted that the Secretary has
considerable discretion in determining whether to reduce penalties or
grant a good cause exception. We argued that work was the most critical
component in achieving the purposes of TANF and these limits on the
relief on the work penalty were appropriate to prevent circumvention of
this purpose.
We went on to say that implementation of the child support
provisions was the other key component to achieving self-sufficiency.
We spoke about the major Federal role in child support enforcement
(particularly with regard to the operation of the New Hire Directory
and the Federal Parent Locator Service), the continuing Federal
interest in the effectiveness of these programs, and the continued
Federal financial
[[Page 17728]]
commitment, under TANF, for needy families whose children have been
deprived of parental support and care.
We expressed concern not just about the unintended, negative
consequences of diverting cases to separate State programs for the
Federal budget and the Federal government's ability to ensure an
effective child support program, but also about reduced State
accountability for ensuring that needy families take appropriate steps
towards achieving self-sufficiency. We indicated that, in the interest
of protecting the key goals of TANF, it was appropriate for the
Secretary to use the discretion available to her to forgive penalties
and set penalty amounts so as to ensure that States do not divert cases
inappropriately.
We announced plans to monitor States' actions to determine if they
constituted a significant pattern of diversion. For example, if, based
on an examination of statistical or other evidence, we came to the
conclusion that a State was assigning people to a separate State
program in order to divert the Federal share of child support
collections, or in order to evade the work requirements, we would
conclude that this is a significant pattern of diversion and would deny
the State the specified types of penalty relief.
We said a State would have opportunity to prove that this pattern
was actually the result of State policies and objectives that were
entirely unrelated to the goal of diversion, but we would make the
final judgment as to what constitutes a significant pattern of
diversion.
We placed the specific regulatory provisions associated with these
policies in Secs. 271.51(a), 271.52(b), 272.5(c) and (d), and
272.6(i)(2) of the proposed rule.
We also indicated our intent to propose that States seeking to
receive high performance bonuses would be required to report on
families served by separate State programs in the coming NPRM on high
performance bonuses.
Comment Overview
We received dozens of comments on these proposals related to
implementation of separate State programs. The commenters universally
opposed the proposals and presented a variety of objections. Most
wanted the provisions deleted entirely, but some suggested specific
changes that we could make to the regulatory provisions if we did not
delete them.
In summarizing these extensive comments, we first address those
directed at deleting the provisions. Then we address the comments about
possible refinements that we could make.
Commenters objected to both the negative tone of these rules and
their effect in undermining State and local flexibility to serve needy
families, including those with multiple barriers to employment. They
noted that several States have created or were considering separate
State programs to serve their most vulnerable families, such as legal
noncitizens with poor language and literacy skills; single parents
taking care of a disabled child; citizens not disabled enough to
qualify for SSI, but unable to work 20 to 30 hours a week; refugees;
and victims of domestic violence. They expressed fears that the
proposed rules, if not modified, could have a significant chilling
effect on the development of innovative approaches to serve working
families and the most vulnerable populations. That is, States would be
conservative in extending assistance to hard-to-serve or working
families out of fear of incurring more and larger penalties. In fact,
some commenters argued that, since TANF was not an entitlement program,
some States might choose not to give such individuals assistance due to
concerns about the penalty consequences.
Some argued that the proposals were contrary to the statute and
Congressional intent. Their comments encompassed the following general
points: (1) There is no statutory basis for the links between penalty
relief and the operation of separate State programs. In deciding
penalty relief, we should be looking only at the TANF program. (2) The
statute clearly authorizes States to spend their basic MOE funds in
separate State programs that are not subject to TANF requirements. Our
proposals would punish States that elected to use this authority and
preempt State and local authority over their own programs. (3) Our
proposals would deny penalty relief where the statute requires such
relief. (For example, the statute says that the Secretary ``shall''
reduce work participation penalties based on degree of noncompliance;
thus, this reduction is not discretionary. The statute also provides
that the Secretary could impose lesser penalties on a State that fails
to correct a violation fully under corrective compliance.)
Categorically denying penalty relief because of a State's legal and
allowable actions on separate State programs is not appropriate.
In lieu of the proposed policies, many commenters recommended that
we monitor State actions to determine if a State is pursuing legitimate
policy objectives or avoiding TANF-related requirements. They noted the
lack of evidence so far that States were abusing the flexibility
available under the law; their view was that States have been using
separate programs for constructive and appropriate purposes. One noted,
if a few States try to take advantage of the flexibility in the law,
Congress and the Department can work together to figure out an
effective way to stop them.
Commenters also argued that the penalty consequences for operating
separate State programs exceeded the magnitude of the purported
offense. As a case example, a State could be operating a separate State
program that represented only a small percent of its MOE expenditures,
it barely missed its participation rate, and it had suffered a
catastrophic natural disaster during the course of the year. The
argument is that the State should get reasonable cause or penalty
reduction because the State's failure could be attributed entirely to
the natural disaster, the separate State program was an incidental
matter, and, by any objective measure, the State's degree of
noncompliance was minimal. Absolute loss of penalty relief in such a
case would be arbitrary, at a minimum.
A related comment was that we should limit denial of penalty relief
to situations where there is a direct relationship between the penalty
at issue and the conduct of the State. Commenters argued that we should
not deny penalty relief on four penalties when the State actions at
issue were probably only directly connected to one penalty.
One suggestion for making the consequences more proportionate to
the ``offense'' would be to not totally preclude eligibility for
penalty relief, but to consider State policies on separate State
programs as one of several factors affecting how difficult the penalty
standard was for a State to achieve.
Others noted that we had not used clear or consistent language when
articulating how a separate State program might affect the availability
of penalty relief. The lack of clarity would make it difficult for
States to predict the effect of these provisions and could produce
unfair, arbitrary, and inconsistent outcomes. It could also mean that
we unduly deter States from assisting needy families.
Commenters raised the following questions about the meaning of our
proposals: (1) What is meant by ``purpose'' and ``effect''? (2) Are the
terms meant to define different concepts? (3) Does ``purpose'' refer to
``sole purpose'' or ``one of the purposes''? (4) How would we
determine, or a State prove, whether a
[[Page 17729]]
separate State program has the specified ``purpose'' or ``effect''? (5)
What is meant by a ``significant'' pattern of diversion? and (6) What
criteria would we use to judge whether a State adequately demonstrated
that it had not diverted cases to avoid penalties or divert child
support? Relatedly, they objected to the fact that our proposed rules
shifted the burden of proof about intent onto the States and to the
difficulties attendant in proving a negative proposition.
Among the suggestions offered for addressing these concerns were:
(1) Clarify the circumstances when a State will not face loss of
penalty relief (e.g., identify reasonable and legitimate policy bases
for separate State programs, using examples); (2) allow an up-front
assessment of the acceptability of separate State programs that States
could rely upon in deciding what options to pursue under separate State
programs; (3) create clear, objective criteria for determining when a
separate State program would trigger adverse consequences; and (4) err
on the side of flexibility if we cannot make highly accurate
determinations that programs are deliberately designed to avoid Federal
rules.
Overall Response
When we were developing the proposed rules, obviously we were very
concerned that States would use the flexibility available through
separate State programs to avoid work participation requirements,
divert the Federal share of child support collections, and otherwise
undermine the goals or provisions of TANF. Within the authority that we
have to make decisions on State penalties and bonuses, we proposed
specific regulatory policies with respect to penalties, bonuses, and
reporting in response to that concern.
However, as we have seen these programs evolve, our concerns about
possible abuses have diminished. As commenters pointed out, States are
generally using separate State programs to serve a variety of policy
purposes consistent with the goals and provisions of PRWORA. For
example: (1) They are supporting work and self-support--through State
earned income credits, transportation, child care, or other work-
related assistance; (2) they are helping families with special needs
who are unable to engage in work activities for the requisite number of
hours--e.g., families dealing with substance abuse, incapacity (or
caring for a disabled child), literacy or ESL needs; (3) they are
working to increase the economic viability of families--by providing
financial aid for post-secondary education and support for other
education or training activities, including activities for noncustodial
parents; and (4) they are assisting individuals ineligible for the TANF
program (e.g., using State funds to provide ``Food Stamp'' benefits for
legal aliens who lost eligibility for assistance under PRWORA).
In the few cases where separate State programs are serving families
that we would normally expect to see in the TANF program, we often see
the same or similar level of work activity required under TANF; e.g.,
Florida's two-parent program and Maine's Parents-as-Scholars program
are part of separate State programs, but expect parents to participate
at the TANF level of hours, or more.
As commenters pointed out, if we developed policy to force States
to provide services to families within the confines of the TANF
statute, we would not necessarily achieve that end. An equally possible
outcome could be that States would elect not to serve families,
especially those hard-to-serve families that would be the most
difficult to accommodate under the standard TANF rules.
We considered ways to redraft the NPRM policy so that we would not
have the ``chilling'' effect on State innovation that commenters
feared. A variety of options were available to us, ranging from wording
changes, to clarifications of key terms, to setting up a process for
pre-clearance of State proposals, to reducing the potential negative
consequences to States if we found inappropriate diversion.
However, we were concerned that: (1) None of these options totally
eliminated the potential ``chilling'' effects on State innovation; and
(2) existing evidence did not indicate that there was a problem
sufficient to justify such a strong policy response.
Thus, the final rules eliminate the proposed link between a State's
decisions on implementing a separate State program and its eligibility
for penalty relief. In particular, we removed the provisions related to
separate State programs that were in the proposed rules at
Secs. 271.51(a), 271.52(b), 272.5 (c) and (d), and 272.6(i)(2).
However, we remain concerned about the possibility that States
could use separate State programs to avoid the TANF work requirements
(particularly for two-parent families) and to divert the Federal share
of child support collections. Thus, at Secs. 261.41(e) and 265.3(d)(1),
we retained the NPRM provisions (which were at Secs. 271.41(e) and
275.3(d)(1)) that, as a condition for receiving caseload reduction
credits or a high performance bonus, States must report data on
separate State programs and the recipients in them, through the SSP-MOE
Data Report. However, we deleted the language that was in
Sec. 275.3(d)(1)(iii) indicating that States needed to submit the SSP-
MOE Data Report if they wanted to be considered for a reduction in the
penalty for failing to meet the work participation requirements. Also,
as we discuss in the next section of the preamble, by changing the
definition of assistance, we have limited the types of programs covered
by this reporting. We have also reduced the types of data elements that
must be reported.
This data collection is part of a broad strategy to monitor the
scope and nature of separate State programs. This strategy starts with
four data sources: (1) The quarterly TANF Financial Report (Appendix
D); (2) the MOE section of the annual report (at Sec. 265.9(c) and
Appendix I); (3) the quarterly SSP-MOE Data Report; and (4) quarterly
reports on child support collections. We would review data from these
sources to identify States that might be using separate State programs
either for the purpose of avoiding work or diverting the Federal share
of child support collections. We would then make a preliminary
assessment whether these States were operating separate State programs
that were consistent with TANF goals. If we needed additional
information for this assessment, we could supplement the official
information with information gathered in single State audits or special
studies (such as studies conducted by the Department's Office of the
Inspector General).
The data collection on separate State programs will help enable us
to: (1) Monitor the nature of these programs; (2) determine the extent
to which cases are being shifted to separate State programs; (3)
determine whether such shifts are having an adverse effect on the two
work participation rates or the Federal share of child support
collections; (4) develop a sound policy response in the event of
adverse effects; (5) better assess a State's claim for a caseload
reduction credit or high performance bonus; and (6) decide if a State's
policies with respect to separate State programs should affect its
ranking under section 413(d) of the Act.
In the proposed rule, we did not mention that the creation of
separate State programs might affect the annual rankings of States
based on the success of their work efforts. However, we have concluded
that there could be circumstances under which we would
[[Page 17730]]
want to alter a State's ranking on this basis. For example, suppose the
State with the highest percentage of placements in long-term jobs for
its TANF cases achieved its placement rate and ranking by shifting all
of its hard-to-serve cases from TANF to separate State programs.
Obviously, this State would not merit a ranking as one of the five most
successful States. We will consider if a State's separate State program
had the effect of avoiding work requirements as one factor in
determining the annual ranking of successful State programs.
We will incorporate a full analysis of the information that we have
gathered on what has been happening with separate State programs in our
annual report to Congress. For example, we intend to address issues
such as: (1) What is the basic nature of these programs; (2) have there
been changes in their size or scope; (3) who do these programs serve;
(4) how do they differ from TANF recipients; (5) what types of benefits
do they provide; (6) to what extent do work participation rates apply;
(7) what participation rates are being achieved; and (8) is there any
evidence of the diversion of Federal child support collections. By
looking at this range of issues, we will be better able to assess
whether States have diverted individuals from TANF with the apparent
purpose of avoiding TANF program requirements.
In the High Performance Bonus guidance that we issued on March 17,
1998 (TANF-ACF-PI-98-01), we noted that a State's success in meeting
TANF performance goals could be affected by its decision to fund a
separate State program with its maintenance-of-effort (MOE) dollars and
that such actions might advantage one State over another. For example,
if a State had a separate State program similar to TANF in which it put
recipients who were more difficult to employ, its TANF performance
results could be unfairly inflated. In such cases, we would need to
consider including outcomes for the caseload in separate State programs
in the performance measures. We said we would analyze separate State
program data, as well as other information we receive on the
characteristics of the caseload and the nature of benefits provided in
separate State programs, in assessing how and whether to adjust a
State's TANF performance data.
On the issue of child support collections more specifically, while
States have new flexibility in the way that they administer their TANF
programs, they must continue to share a portion of child support
collections with the Federal government. The need to share TANF-related
collections could serve as a possible disincentive for States to pass
through the full amount of child support to families and could create
an incentive for States to serve needy families through separate State
programs. State spending in these separate State programs continues to
count under the basic MOE requirements, but States do not need to share
the child support collected on behalf of families served by these
programs.
At this point, we have no evidence that States are diverting child
support collections. For example, we are not seeing dramatic decreases
in the Federal share of collections or changes in the average
collection per case. In the meantime, the Administration is engaged in
a dialogue with stakeholders on child support program financing issues
to look at ways to address these and other related concerns. We will
work with these stakeholders and with Congress to develop any necessary
legislation.
As a number of commenters suggested, under these final rules, we
have adopted a strategy that includes gathering information, monitoring
developments, and keeping our options open regarding future actions.
Through our data collection, we will obtain substantial information on
the characteristics of separate State programs, the families they
serve, and the benefits they provide. This information will help us
assess their potential impact on the achievement of TANF goals. We will
consider proposing appropriate legislative or regulatory remedies,
consistent with our legal authority, if we find that States are using
the flexibility available under these rules to avoid work requirements,
divert child support collections, or otherwise undermine the goals of
TANF. However, we will not put any significant policy change into
effect without appropriate prior consultation with States, Congress,
and other interested parties.
Separate State Program Reporting
Comment: Commenters also argued that the stringent reporting
requirements and the potential loss of caseload reduction credits,
eligibility for high performance bonuses, and certain penalty relief
for States that failed to comply with the reporting requirements also
discouraged States from implementing innovative separate State
programs.
Response: As we discuss in the preamble for Sec. 260.31, we have
made significant changes to the proposed definition of assistance.
These changes have a significant effect on the scope of the
disaggregated and aggregate reporting for both TANF and separate State
programs. Like the TANF Data Report, the SSP-MOE Data Report only
captures information on families receiving ``assistance.'' Therefore,
States do not have to provide detailed program and family
characteristics data for families receiving other kinds of benefits and
work supports. Thus, the data collection in the final rules responds to
the commenters' concerns about the problems that would be inherent in
requiring detailed reporting of case-record information from programs
that bore little or no relationship, in substance or administration, to
those providing traditional welfare benefits.
However, information on separate State programs is still very
important under the final rule. Thus, we still expect States to submit
SSP-MOE Data Reports containing data on separate State programs that
are similar to the TANF program data as a condition of receiving
caseload reduction credits or high performance bonuses. Also, we have
strengthened the information we will collect on SSP-MOE spending by
expanding reporting under the TANF Financial Report and expanding
information on all MOE programs in the annual report (as discussed in
Sec. 265.9 and presented in Appendix I). Taken in combination, these
data will help us ensure that each State has met its basic MOE
requirement, properly evaluate State reports on caseload reduction
credits, assess overall State performance, and report on program
characteristics to the public, to the Department, and to Congress. We
could also use the information to identify areas in which regulatory or
legislative changes may be necessary.
Under the final rule, we do not require that States submit the SSP-
MOE Data Report in order to qualify for penalty relief because the
information in the report is not germane to the determination of its
penalty amount.
The information in the SSP-MOE Data Report is germane to
determining if States have achieved creditable caseload reductions and
to assessing a State's overall performance under TANF. Thus, as stated
previously, the final rule does require that a State submit an SSP-MOE
Data Report if it wants to receive either a High Performance Bonus or a
caseload reduction credit (though with reduced data elements).
Failure of a State to submit the MOE information required in either
the TANF Financial Report or the annual report could affect a State's
liability for a
[[Page 17731]]
reporting penalty or an MOE penalty, depending upon the nature of the
failure.
You should review the preamble discussion at Sec. 265.9 and
Appendix I for information on annual aggregate reporting for MOE
programs and the regulation at Sec. 265.3(b) and (d) and appendices E,
F, and G for more detailed information on the data collection for
separate State programs in the SSP-MOE Data Report.
Finally, in the policy announcement and proposed rule, we advised
States to think carefully about the risks to the long-term viability of
their TANF programs if they relied too extensively on separate State
programs to meet their MOE requirements. States cannot receive
contingency funds unless their expenditures within the TANF program are
at 100 percent of historic State expenditures. Thus, excessive State
reliance on expenditures outside the TANF program to meet MOE
requirements could make access to contingency funds difficult during
economic downturns.
This restriction on Contingency Fund MOE raised some concerns on
the part of commenters. However, it represents a clear reading of the
statutory language. Thus, we have made no change in this final rule.
B. Waivers
Background
We have no direct interest in regulating section 415 of the Act;
however, the continuation of waivers by a State might affect our
application of certain of the penalty provisions within a State,
specifically those regarding work and time-limit requirements. Thus, in
order to administer the penalty provisions, we are providing notice
concerning the rules that we will use in applying the penalties.
To improve access to, and understanding of, the regulations on
waivers, we have moved all the waiver provisions to a new subpart C of
part 260 of the final regulation and consolidated our preamble
discussion in this section of the preamble. First, we summarize the
NPRM provisions that appeared in various places in the NPRM and provide
an overall summary of the comments. Then we discuss each provision in
the final regulation, section by section, as well as the related
comments.
Summary of NPRM Waiver Provisions
Under section 415, States that received approval for welfare reform
waivers under section 1115 before enactment of PRWORA (August 22, 1996)
have the option to operate their TANF programs under some or all of
these waivers. For States electing this option, provisions of TANF that
are inconsistent with the waivers do not take effect until applicable
waivers expire.
Section 415 also provides for delaying the effect of provisions of
TANF related to waivers approved after enactment, but prior to July 1,
1997. However, we do not address this specific provision in these rules
because we approved no section 1115 waivers after enactment.
The meaning of the term ``waiver'' is important because it governs
the scope of section 415. The NPRM defined waiver as consisting of both
the specific technical provisions in the approved waiver list and the
AFDC and JOBS requirements under prior law that did not need to be
waived, but were integral and necessary to achieve the policy objective
of the waived provision. Thus, the proposed definition of waiver
depended on determining a State's intent.
The meaning of the term ``inconsistent'' is important because it
governs the extent to which a State may delay the implementation of
certain TANF requirements under section 415. The NPRM defined
inconsistent to mean that complying with a TANF requirement would
require a State to change a policy reflected in an approved waiver.
The proposed rule applied these definitions to determine when a
State's waivers were inconsistent with the TANF work and time-limited
assistance requirements under sections 407 and 408(a)(7) of the Act,
respectively. To the extent that we determined inconsistencies existed,
we would have based the work participation rates and time-limit
exceptions on the waiver provisions rather than the requirements of
sections 407 and 408(a)(7).
In particular, the NPRM allowed inconsistencies in two areas
covered by section 407 (i.e., related to work). The first related to
the types of activities that could count as work activities. Under the
proposed definition, in addition to the expanded or revised activities
specifically included in the technical waiver list (such as increased
hours of job search), a waiver would have included the JOBS work
activities that did not require waivers in order to be part of the
State's program. The NPRM recognized that: (1) States had asked for
waivers of the statutorily prescribed JOBS activities in order to
provide what they considered to be the right mix of work activities;
and (2) part of that mix included activities that did not require
waivers under prior law. Thus, we would have considered such activities
to be part of the waiver.
The second work inconsistency recognized in the NPRM related to the
hours of participation necessary for a recipient to be counted as
engaged in work for the purpose of calculating the participation rates.
To the extent that the mandated hours of work in the waiver reflected
the individual circumstances of the participant, either due to criteria
in the waiver itself or under an individual self-sufficiency plan, we
would have recognized an inconsistency with the fixed hours required by
section 407.
The NPRM did not recognize, as inconsistent, waivers that served to
increase the mandated hours of work for classes of recipients. The NPRM
reasoned that there was no inconsistency in this case because TANF
required those classes of recipients to participate for a greater
number of hours than prior law required.
Further, the NPRM did not recognize any inconsistencies for
exemptions that the State had had for work participation under AFDC.
Under the demonstrations, States had obtained waivers to change the
exemptions of individuals from participation in JOBS. We had assumed
that the purpose for changing the exemptions was to require more
individuals to participate. Since we believed the State's purpose was
increasing participation, we reasoned that maintaining the AFDC
statutory exemptions was not necessary or integral to achieving the
waiver's purpose. Therefore, the NPRM did not recognize the AFDC
statutory exemptions as part of the waiver for determining
inconsistency with TANF.
In applying the definitions of ``waiver'' and ``inconsistent'' to
time limits, the proposed rule recognized only those waivers that
provided for terminating cash assistance because of the passage of
time. We said that if a State would have to change its waiver policy on
terminating assistance, due to the TANF time limit at section
408(a)(7), it could apply its waiver time limit instead of the TANF
time limit. In general, individuals subject to a State time limit would
concurrently be subject to the TANF time limit. Those individuals who
were exempt from the State waiver time limit would not be subject to
the TANF time limit until the State's waiver expired. In addition, if
the extensions of the receipt of assistance under the State waiver
limit exceeded the 20-percent limit on extensions allowed under TANF,
the State's extensions would govern.
[[Page 17732]]
The NPRM did not recognize inconsistencies for States with waivers
that: (1) had time limits that triggered work requirements, but did not
result in the termination of assistance; or (2) had implemented
comprehensive welfare reform initiatives under waivers that consciously
chose not to include policies time-limiting assistance. Thus, in either
of these situations, the State would have had to comply with the TANF
time-limit requirements.
The NPRM also recognized one other type of inconsistency. TANF
cases that were part of a research group, whose treatment policies were
being maintained for the purpose of continuing an impact evaluation,
could continue to be fully subject to prior law policies, except as
modified by waivers. Further, the NPRM allowed for exclusion of such
cases from the numerator and denominator of the work participation
rates. Maintaining different requirements for these groups was
necessary to avoid compromising the evaluation. Information on the
research group would be the primary basis for impact and cost-benefit
analyses of the effects of demonstration provisions and would be
essential to all major components of an evaluation.
In the interest of balancing State flexibility with accountability
and preserving the purposes of TANF (particularly those of encouraging
work and focusing TANF on the provision of temporary support to
families as they move to self-sufficiency), the NPRM also proposed
certain other requirements. Specifically it: (1) Required Governors to
certify waiver inconsistencies that a State believed apply in order to
have the waiver rules apply in the penalty determinations; (2) denied
certain forms of penalty relief to States continuing waivers that were
inconsistent with TANF if States failed to meet work participation
rates or time-limit requirements; and (3) proposed that we would
publish information related to a State's success in meeting work
participation rates and time-limit restrictions, as measured against
both TANF and waiver requirements.
Because States operating under alternative waiver requirements
could have an advantage compared to other States, we proposed that
States continuing inconsistent waivers would not be eligible for a
reasonable cause exception from a related work participation or time-
limit penalty. Nor would they be eligible for a work participation rate
penalty reduction based on severity of the failure or under our
discretionary authority, as otherwise allowed in accordance with
Sec. 271.51(b)(3) or (c) of the NPRM. Further, in developing a
corrective compliance plan, the NPRM proposed that a State would have
to consider modifying its alternative waiver requirements as part of
that plan. If a State then continued its waivers and failed to correct
the violation, the NPRM proposed that it would not be eligible for a
reduced penalty for noncompliance regardless of whether the State made
significant progress towards achieving compliance or if the State's
failure to comply was attributable to natural disaster or regional
recession.
Overview of Comments
With few exceptions, the comments from States, organizations
representing States, other organizations, and Congress relating to the
proposed rules governing waiver inconsistencies strongly opposed our
proposals.
Specifically, most commenters argued that our application of the
proposed rule violated the spirit of the law and Congressional intent
to encourage waivers. To support this argument, they cited the language
at section 415(c), which directs the Secretary to encourage States to
continue operating their waivers. They argued that our narrow
interpretation of waiver inconsistencies, along with our decision to
deny penalty relief, would discourage continuation of waivers and
violated the principle of State flexibility in PRWORA. They asserted
that the proposed policies would force States to abandon their waiver
programs.
Finally, a number of commenters indicated that they found the
definitions of ``waiver'' and ``inconsistent'' difficult to understand
and apply to specific factual situations.
Overall Response
In response to the many comments we received, the final rules take
a different approach to the relationship between the continuation of
AFDC waivers and the TANF requirements. While the definition of
``inconsistent'' remains substantially the same, we have modified the
definition of ``waiver'' to eliminate the proposed focus on intent. The
new definition reflects the common use of the term, which refers to the
policies that implement a particular area of reform in the
demonstration. The revised definition allows the waiver to include a
cluster of AFDC provisions with regard to work participation. Thus, it
modifies how we would determine when work waivers are inconsistent.
We also made one change in the application of the term
``inconsistent'' to time limits; after further review, we believe that
the NPRM did not adequately recognize a certain type of inconsistency.
Generally, the revised definition of ``waiver'' continues to
reflect the philosophy that a narrow, technical definition would be
inappropriate. Rather, as reflected in common usage, the term should
recognize that States rarely implemented the technical waivers of the
former section 402 of the Act in isolation. Instead, technical waivers
were generally part of a cluster of policies and requirements related
to administering a component of a State's welfare program. For example,
States implemented components related to time limits, family caps, work
activities and requirements, treatment of teen parents, income and
resource eligibility, and treatment of two-parent families. Although
the substantive policies making up the components and the combination
of components differed from demonstration to demonstration, these
component areas were the core elements of the reform efforts in various
State demonstrations and were commonly referred to as waivers.
In the discussion that follows, the term ``waiver'' could have two
distinct meanings; it could refer to either the technical waiver that
was explicitly approved or the component of the demonstration. To avoid
confusion, when we mean the technical use of the term (i.e., the waiver
of an actual provision of former section 402 as reflected in the waiver
list in the demonstration's terms and conditions), we will use the term
``technical waiver.'' When we simply use the term ``waiver,'' we are
using it (as defined in these regulations at Sec. 260.71) to mean the
cluster of demonstration policies that the State implemented under its
technical waiver. It is this broader definition that we will use to
determine inconsistencies. The requirements and policies making up a
waiver begin with one or more technical waivers, but could also include
one or more related provisions of prior law.
The NPRM recognized this concept of including prior law provisions
as part of its definition of waiver, but it depended on the State's
intent in seeking the technical waiver to determine which AFDC
provisions should be included. Many commenters objected to this
reliance on the State's intent to operationalize a broader waiver
definition. The final rule contains a simpler and more objective
definition based on the demonstration component of which the technical
waiver is a part.
Since our penalty authority that might be affected by waiver
inconsistencies is related to work requirements at section 407 and time
limits at section 408(a)(7),
[[Page 17733]]
we use those two sections to define the waiver components of work and
time limits. We also limit our regulatory consideration of waivers to
whether the waiver components that relate to work requirements and time
limits are inconsistent with the respective provisions of the Act
(i.e., section 407 for the work participation component and sanctions
and section 408(a)(7) for the time-limit component). To the extent that
a State's policies in the component area differ from the TANF policies,
we will follow the waiver policies in making penalty determinations.
You can find further discussion of the application of this definition
in the section-by-section discussion that follows.
Although some commenters objected to our attempt to balance State
flexibility and accountability, accountability to the purposes of TANF
remains important under the final rule. We believe our modified
approach will ensure accountability while allowing waiver policies to
continue. We recognize that States, whether continuing waivers or not,
have generally made serious and concerted efforts to promote the TANF
objectives as they have implemented their programs. Further, as more
and more States reach or approach the end of their waivers, our
concerns about delays in the implementation of the TANF provisions have
diminished. By the effective date of these rules, waiver authority will
have expired for 14 States, and it will expire for the remaining 32
demonstration States within a few years. Moreover, for some of the
remaining demonstration States, the limited scope of their waivers
(e.g., limited to pilot sites or limited classes of recipients) means
that the TANF provisions will be implemented broadly within the State,
in spite of continuing waivers. Also, some of the remaining
demonstration States have chosen to terminate waivers or to adopt
modified policies that are more consistent with TANF than the original
waivers.
Discussion of Specific Comments and Responses, by Section
(a) Section 260.70--What Is the Purpose of This Subpart?
We added this section to the regulation to clarify that the
Department's authority and interest in identifying waiver
inconsistencies is limited to the determination of penalties in three
areas: (1) Failing to meet the work participation requirement; (2)
failing to impose sanctions on nonparticipants; and (3) failing to meet
the time-limit requirement.
Comment: A number of commenters asserted that we had totally
exceeded our authority in regulating in this area. Some cited section
417 and said its provisions prohibited us from defining waiver
inconsistencies at all, leaving authority for reasonable interpretation
to individual States. Also, some commenters believed we should give
States full authority to determine the extent to which waiver
inconsistencies apply.
Response: We added this section to the final rule to clarify our
interest in promulgating regulations on State waiver policies. In
neither the NPRM nor the final rule have we shown any direct interest
in regulating section 415, per se; however, continuation of waivers
might affect the application of certain of the penalty provisions for a
State, specifically those regarding work and time-limit requirements
(under sections 407 and 408(a)(7) of the Act). Thus, we have the
authority and responsibility to regulate in this area. In order to
administer the penalty provisions on work and time limits fairly, we
need to provide notice concerning the rules that we will use in
applying these penalties. We limit our regulatory consideration of
waivers to whether the waiver components relating to sections 407 and
408(a)(7) are inconsistent with the respective provision. To the extent
that a State's policies in the component area are inconsistent with
TANF policies, we will follow the waiver policies in making penalty
determinations.
Comment: A few commenters specifically questioned the legitimacy of
our stated objective for regulating in this area--to try to balance
State flexibility to continue and test innovations begun under welfare
reform waivers with accountability to the purposes of the TANF,
particularly related to work and time-limit requirements. As some
commenters noted, section 415 does not ``ask HHS to balance State
policies against the virtue of the law.''
Response: Section 415 contains ambiguity in using the terms
``waiver'' and ``inconsistent'' without defining them. The Department's
exercise of its work and time-limit penalty authority in a rational
manner requires that we define those terms. As they are ambiguous on
their face, we must look at Congressional intent. In this case, we find
it necessary to try to balance the two potentially conflicting purposes
of accountability and State flexibility to determine the meaning of the
terms.
(b) Section 260.71--What Definitions Apply to This Subpart?
(Sec. 270.30 of the NPRM)
In the final rule, we retain the definition of ``inconsistent''
given in the NPRM. We define inconsistent to mean that complying with
the TANF work participation rates or sanction requirements at section
407 of the Act or the time-limit requirement at section 408(a)(7) of
the Act would necessitate that a State change a policy reflected in an
approved waiver.
However, as previously discussed, we have revised and simplified
the definition of waiver. In the final rule, we define a waiver as
consisting of the work participation or time-limit component of the
State's demonstration project under section 1115 of the Act. The
component includes the revised AFDC requirements indicated in the
State's technical waiver list, as approved by the Secretary under the
authority of section 1115, and the associated AFDC provisions that did
not need to be waived.
Thus, the final rules for determining whether an inconsistency
related to work exists depend on the existence of a technical waiver
corresponding to any of the cluster of provisions included in section
407. These provisions include: allowable work activities; mandated
hours of, and exemptions from, work participation; and applicable
sanctions for noncompliance with work requirements. Under the modified
definition of waiver, if a State has any single technical waiver
enumerated in its list of approved waivers that corresponds to any
provision of section 407, it may incorporate prior AFDC (and the
related JOBS) work participation rules that were part of the cluster of
policies implemented under the waivers. Under the final rule, the
inclusion of prior law as part of the waiver does not depend on the
original purpose or objective of the State in seeking approval of the
waiver.
Finally, we have added definitions for ``control group'' and
``experimental group'' that recognize the definitions included in the
terms and conditions of the State's demonstration. The NPRM had special
rules for research, control, and experimental groups in States that
were continuing evaluations to avoid tainting the evaluations. However,
it did not define any of those terms. The final rule retains the basic
policies that were in the proposed rules, but refers only to
``control'' and ``experimental'' groups. The revisions have the effect
of making the policy clearer and addressing the concern of one
commenter that the original terminology was not consistent
[[Page 17734]]
with its waiver approval and could undermine its ability to continue
its evaluation.
Comment: Commenters generally supported certain inherent concepts
of the proposed definitions for ``waiver'' and ``inconsistent.'' In
particular, they agreed that ``waiver'' should not include only the
technical provisions listed in the documents approving the State's
waivers, but should also encompass related and integral provisions of
prior law. Similarly, they generally agreed that the term
``inconsistent'' should apply where a State would need to change its
waiver policies in order to comply with TANF.
However, many commenters asserted that the proposed rules did not
sufficiently recognize prior law as being integral to specific waivers.
Thus, they argued the NPRM provisions would compel States to abandon
policies they had implemented under waivers.
Many also objected that we presupposed State objectives in
obtaining work and time-limit waivers and thus arbitrarily narrowed the
breadth of applicable inconsistencies. In particular, they disagreed
with our characterizations of the purpose of the waivers that
eliminated exemptions from JOBS participation requirements under AFDC
law and that increased the number of hours of mandatory work
participation for certain classes of recipients, believing they were
too limited. (Under the proposed rules, we would have disallowed
inconsistencies applicable to these types of waivers based on the
rationale that TANF itself eliminated prior law work exemptions and
expanded hours of required work participation for these affected
classes of recipients, and thus TANF requirements were consistent with
the purpose of State waivers.) In effect, the commenters argued that
States increased their work requirements to establish the appropriate
universe of recipients who should be required to work and the
appropriate level of work participation. They noted that these stated
purposes were analogous to the purpose we had already recognized in the
NPRM for accepting AFDC work activities as part of the waiver, i.e., to
find the appropriate mix of participation activities.
A number of commenters further argued that section 415 did not
confer on the Secretary the authority to judge a State's objectives.
Response: The final rules reflect our continued belief that
regulating on how a State's waiver policies would affect the
application of certain penalty provisions is well within our statutory
authority. However, we recognize that the NPRM's reliance on our
ability to judge the State's purpose in seeking a specific technical
waiver was problematic, given the limited documentation available on
the specific purposes of particular waivers. Therefore, we have recast
the definition in terms of an objective demonstration component.
Components were commonly recognized as parts of the demonstration and
are readily identifiable for penalty determination purpose; one merely
has to associate a technical waiver relating to work requirements or
time limits with the corresponding TANF provision that is subject to
penalty. Thus, while maintaining the concept that ``waiver'' includes
both the technical waiver and some portion of the former AFDC
provisions, we have revised the definition to remove its reliance on
the State's purpose.
You can find a further discussion of the application of the new
definition for work and time-limit policies at Secs. 260.73 and 260.74.
Comment: Some of these commenters offered the perspective that a
waiver should encompass the whole of prior AFDC law as part of the
State's welfare reform strategy, not just specific individual waivers
and limited related extensions of prior law.
Response: We disagree with the commenters that Congress intended
waivers to cover the whole of prior AFDC law. Section 415 allows States
to continue ``one or more waivers to the extent they are
inconsistent.'' The fact that it refers to one or more waivers and does
not use the broader term, demonstration, in describing what is to be
compared for inconsistency, indicates that Congress intended the
determination of inconsistencies to be made on a more specific basis.
Comment: A number of commenters recommended that we modify the
definition of ``inconsistent'' to include any prior law policy in
effect under its demonstration that, if continued, but not recognized
as inconsistent, would give the State reason to believe that it was at
risk of being subject to a TANF penalty.
Response: We addressed this concern to some degree in the final
rule by changing the definition of ``waiver.'' A State may continue
prior law policy that is part of a demonstration component area (e.g.,
work requirements) for which the State has a waiver. Continuation of
prior law policy that is not in a policy area that is subject to
penalties under TANF (i.e., not related to sections 407 or 408(a)(7))
is outside the scope of this final rule and is left to State
discretion.
We declined to change the definition of ``inconsistent'' to mean a
situation in which the State believes that continuing the policy would
put it at risk of a penalty. Congress did not intend to eliminate
penalties for States with waivers. Rather, it intended that we judge
the conduct of such a State based on the requirements in the waiver,
rather than in those in TANF, in determining whether a penalty is
appropriate. If the State has waivers that are inconsistent with TANF,
then the State may be subject to penalties if it fails to submit the
required certification, fails to take the appropriate sanctions, fails
to achieve the required participation rates under its own waiver
policies, or otherwise violates its own waiver policies (e.g., exempts
from time limits individuals subject to the State's demonstration time
limit).
(c) Section 260.72--What Basic Requirements Must State Demonstration
Components Meet for the Purpose of Determining If Inconsistencies Exist
With Respect to Work Requirements or Time Limits? (Sec. 272.8 of the
NPRM)
In the final rules, we have eliminated those NPRM provisions that
would have denied penalty relief to States that continued waivers that
were inconsistent with TANF, but failed to meet work participation
rates or time-limit requirements. Specifically, the NPRM had proposed
that waiver States ought not be eligible for: (1) A reasonable cause
exception from any of four related work participation or time-limit
penalties; or (2) a reduction of work penalty amounts based on severity
of the failure or under our discretionary authority, as otherwise
allowed in accordance with Sec. 271.51(b)(3) or (c). We have also
eliminated proposed rules that would have required a State, in
developing a corrective compliance plan to address work or time-limit
requirement failures, to consider modifying its alternative waiver
requirements as part of its corrective compliance plan. Finally, we
have decided not to deny a State that continues its waivers eligibility
for a reduced penalty based on making significant progress towards
achieving compliance with the work or time-limit requirements (as we
had proposed and described in subparts B and C of part 271 and
Secs. 274.1 and 274.2 of the NPRM).
We had proposed imposing these rules on the basis that States
operating under alternative waiver requirements were at an advantage
compared to other States in being able to meet participation rates and
comply with time-limit requirements. However, a
[[Page 17735]]
large number of commenters questioned whether the advantage that a
waiver State had over other States in complying with specific TANF
requirements was so great as to warrant such absolute restrictions;
some noted the proposed rule was arbitrary in that we did not consider
the degree of any advantage vis-a-vis other legitimate factors and
situations that might result in noncompliance. Based on our assessment
that our proposals might discourage States from continuing successful
demonstration efforts, we have removed these restrictions on penalty
relief.
In the final rules, at Sec. 260.73(d), we retain the regulatory
expectation to publish information about a State's success in meeting
work participation rates, as measured against both TANF and waiver
requirements. We do not expect to publish dual time-limit figures for
States that have waivers of time limits that are inconsistent with the
TANF requirements. Upon further review, for such States, we do not
believe that it will be possible to compute the percentage of cases
with an adult recipient that received more than 60 months of Federal
TANF benefits under the standard TANF rules. Data reported in
accordance with section 411(a) will not be sufficient to allow this
calculation. We do not have the authority under section 411(a) to
require waiver States to report the data that this calculation would
require, and they are not germane to our penalty determinations.
Therefore, we have deleted this specific regulatory expectation.
However, we will be able to calculate dual work rates, and the final
rules indicate our commitment to follow through on that proposal.
The final rules also clarify other necessary conditions that apply
if a State wants us to use its inconsistent waiver policies and
requirements in the penalty determination process.
First, the inconsistencies claimed must be within the scope of the
approved waivers, both in terms of geographical coverage and coverage
of the types of cases specified in the waiver approval package. For
example, a State could not claim a statewide inconsistency if we
approved its waiver policies for an eight-county pilot. Similarly, a
State could not extend waivers to all adults when the approved waivers
applied only to teen parents. Nor could waivers applicable only to two-
parent families apply to other types of cases. However, a State that is
no longer maintaining control group cases for the purpose of completing
an impact evaluation may choose to apply approved waiver policies to
cases formerly assigned to a control group.
Second, the State must have applied its waiver policies on a
continuous basis from the date that it implemented its TANF program.
Section 415(d) allows the State to ``continue'' one or more individual
waivers (which, under the definitions enumerated in these final rules,
means one or more individual demonstration components). Section 415(c)
requires the Secretary to encourage States to ``continue'' their
waivers. Implicit in both these provisions is that continuation of the
waivers is necessary for a finding of inconsistency.
This ``continuation'' requirement does not prevent a State from
modifying policies begun under waivers. TANF clearly provides States
with the authority to modify waiver policies inconsistent with prior
law, but consistent with TANF (e.g., related to eligibility rules such
as income and resource standards). These rules clarify that a State may
modify waiver provisions that are inconsistent with TANF, provided
that, in doing so, it makes its policies more consistent with TANF. For
example, a State could choose to reduce the geographical scope of
waivers, applying waivers approved for statewide implementation in only
certain parts of the State, or a State could choose to eliminate some
exemptions applicable to work participation or time-limited assistance,
retaining other exemptions that are still inconsistent with TANF.
We recognize that the issue of whether a State has continued
waivers since the advent of TANF may be difficult to determine.
Although ACF requested voluntary information on continuation, absent a
final regulation, it never indicated a formal process or requirement
for the States to submit such information about the continuation of the
waiver policies. And, since States need not conduct evaluations as a
condition of operating waivers, some States may have indicated that
they were discontinuing their waivers, when in fact they intended only
to notify us that they were discontinuing evaluations of the
demonstration, not their waiver policies. Further, in the absence of
final rules, some States may not have clearly understood how they
should identify and report inconsistencies under their TANF plans.
Also, although some may have indicated that they were continuing
waivers with policies inconsistent with TANF, they may not have
identified subsequent modifications in their operating policies.
Under these final rules, to determine if a State has continued its
work participation or time-limit waiver component and, therefore, may
claim applicable inconsistencies, we will accept the certification of
the Governor regarding the actual practice of the State. Many of the
former waiver policies (for example, variations in the counting of
income and resources for eligibility purposes) are unrelated to work
and time limits and need not be addressed in the certification. A State
need address only the inconsistencies related to work provisions in
section 407 and time limits in section 408(a)(7), as explained further
below.
However, we wish to note that if a State has abandoned a policy
provision that is inconsistent with TANF, the State has voided its
waiver authority. Thus, it has lost its right to claim an inconsistency
related to that provision. For example, a State that had technical
waivers that allowed it to exempt all adult caretakers from work may
have changed its policy to require participation of adult caretakers
after it implemented TANF. While the State always had the flexibility
subsequently to reinstate a policy exempting adult caretakers, we would
not recognize this policy as an inconsistency in determining the work
participation rates because the State had discontinued the prior
technical waiver.
We treat each technical waiver separately for continuation
purposes. If a State discontinues one technical waiver, we will
continue to recognize other continuing technical waivers related to
work (for example, when a State discontinues an exemption waiver, but
continues unlimited job search as a work activity). However, there is
no authority in section 415 to restore discontinued policies; the
statute allows for consideration only of continued inconsistent
policies.
Similarly, if a State had modified its implementation of the
technical waiver to be more consistent with TANF, we would recognize
only the modified policy as a continuation of the waiver.
Third, the Governor must certify the waiver inconsistencies that
the State is claiming, including an affirmation that the State has not
expanded the scope of its policies and has continued the policies under
section 415 in the interim period since implementing TANF, as discussed
above. This requirement continues a provision of the proposed rules,
but provides new detail about the expected content of the
certification, particularly as it pertains to claiming specific
inconsistencies related to work and time-limit requirements. See
Secs. 260.73 and 260.74
[[Page 17736]]
for a more detailed discussion of work and time-limit inconsistencies.
Finally, these final rules clarify that, despite broadening the
scope of inconsistencies that a State may claim compared to the NPRM,
inconsistencies with sections 407 or 408(a)(7) do not create
inconsistencies with the penalty provisions at section 409. Thus, they
do not have the general effect of delaying the application of the work
participation rate or time-limit penalties at Secs. 261.50, 261.54,
264.1, and 264.2 or the data collection requirements at part 265.
We came to this decision because we never approved any waivers
eliminating compliance with JOBS work participation rates (while they
were operable) or voiding their applicability should they become
operable. Our work component waivers only changed the substance of the
work requirement. As for applicable data requirements, we never
approved waivers that relieved States of data reporting requirements;
thus, we approved no waivers that would be inconsistent with section
411 of the Act. The work and time-limit components affected by sections
407 and 408(a)(7) do not, of themselves, create inconsistencies because
neither encompasses data collection requirements.
Comment: One commenter noted that when the waiver expires for a
State providing extensions of assistance in excess of the 60-month
Federal time limit, a State would need to comply fully with the 20-
percent limit on extensions and that this could cause serious
transition problems. The commenter recommended that we provide that
``reasonable cause'' include a reasonable transition time in the case
of a State that had been implementing an inconsistent policy under an
approved waiver.
Response: The ``waiver terms and conditions'' for demonstration
projects affected by these regulations generally included a requirement
that the State provide, and the Department approve, a plan to phase
down and end the demonstration on the date the waiver approval expires.
We did not authorize any waiver-related activities or costs to extend
beyond the project period. Given that the project period for a waiver
demonstration already includes a phase-down period, States should not
require an additional transition period. In addition, we would remind
States that they may fund cases above the 20-percent cap with State MOE
dollars.
(d) Section 260.73--How Do Existing Welfare Reform Waivers Affect the
Participation Rates and Work Rules? (Sec. 271.60 of the NPRM)
If a State is implementing a work participation component under a
waiver as defined in this subpart, the requirements of section 407 of
the Act will not apply in determining whether a penalty should be
imposed, to the extent that they are inconsistent with the State's
waiver work demonstration component.
To determine that the State's demonstration has a work component,
the waiver list for the demonstration work participation component must
include one or more specific provisions that directly correspond to
provisions enumerated in section 407 (i.e., that cover allowable work
activities, exemptions from participation, required hours of
participation or sanctions for noncompliance with participation). In
other words, the State's waiver list must include at least one
technical waiver that changed the allowable JOBS activities, exemptions
from JOBS participation, hours of required JOBS participation, or
sanctions for noncompliance with JOBS participation.
After the Governor has certified the inconsistencies with section
407, we will calculate the State's work participation rates, if
applicable, by: (1) Excluding cases exempted from participation under
the demonstration and experimental and control group cases and not
otherwise exempted; (2) defining work activities as defined in the
demonstration in calculating the numerators of the rates; (3) including
cases meeting the required number of hours of participation in work
activities in accordance with waiver policy in calculating the
numerators of the rates; and (4) excluding other cases exempt from
participation under the waiver in calculating the denominators of the
rates.
We will also determine whether a State is taking appropriate
sanctions when an individual refuses to work based on the State's
certified waiver policies. These final rules explicitly recognize
waiver inconsistencies related to sanctions for noncompliance with work
requirements; the proposed rules were silent on this matter. They also
recognize exemptions from work and changes to the required hours of
work. Finally, they continue to recognize inconsistencies related to
allowable work activities, as we proposed in the NPRM.
It is important to stress that a State need not have a technical
waiver in a particular part of the work component (e.g., work
activities or exemptions) to claim that the related AFDC provisions for
that part of the component are part of its waiver. Rather, the State
needs one or more technical waivers related to a provision of section
407 to claim applicable prior law in all areas that are part of section
407.
Thus, a State with a waiver work component may delay implementing
TANF requirements for work participation for individuals exempt from
JOBS if such exemptions have been part of the State's continuing
demonstration policies. A State with a demonstration work component,
but without a technical waiver modifying JOBS exemptions, may still
include all prior law exemptions (or a modification of these exemptions
that is more consistent with TANF), if such exemptions have been part
of the State's continuing policies for work participation. For States
with waivers that eliminated some (but not all) JOBS exemptions, the
remaining exemptions would apply, if they have been part of the State's
continuing demonstration policy. However, because all States will need
to conform to all TANF rules once their waivers expire, we urge States
to plan accordingly.
Under these final rules, a State may claim inconsistencies
applicable to hours of work if it has technical waivers related to
section 407 and could, in an audit, provide written evidence (e.g.,
terms and conditions or policy manuals) to document that its waiver
policies, as implemented, expressly provided for alternative rules with
respect to the hours of work required of nonexempt individuals.
The ability to provide such written evidence is necessary because
prior law did not generally have requirements for the number of hours
an individual must work to be considered participating. Rather, prior
law had a calculation methodology that included any JOBS participants
as long as including them did not reduce average hours below 20 hours
per week. If no written policy was in effect, we would hold the State
to the TANF hours-of-work requirements.
Finally, a State may also choose to exempt, from the participation
rate calculation, experimental and/or control group cases that are not
otherwise exempt. It may remove experimental group cases as a class,
control group cases as a class, or both experimental and control group
cases on a class basis. However, it may not exclude such cases on an
individual basis.
Comment: All those commenting on the subject supported counting
towards the work participation rate calculation those work activities
allowed under
[[Page 17737]]
waiver authority without regard to TANF restrictions, as we proposed in
the NPRM. However, many commenters asserted that the rules should not
restrict inconsistencies related to prior law exemptions from work
participation, where those policies were part of a State's welfare
reform program. In support of their position, several organizations and
States argued that, because section 415(a)(2)(B) specifies that waivers
approved after enactment may not affect the applicability of section
407 (concerning compliance with work participation rates), Congress
fully intended the inverse to apply to waivers approved before
enactment. Therefore, we should recognize all continued policies
related to compliance with TANF work requirements as inconsistencies.
Response: Our revised waiver definition would allow the States with
waiver work components to include all prior law exemptions, and other
AFDC (and JOBS) work policies, as part of the waiver, if such policies
were part of the welfare reform demonstration that the State
implemented under its technical waiver(s).
Comment: A number of commenters asserted that hours of mandated
work that were related to waivers and increased the JOBS requirements
for a class of individuals should be claimable as an inconsistency.
Response: These comments addressed a problem with the reference to
a State's intent in our proposed definition of waiver (an issue that we
addressed earlier). Since the final rules rely on the existence of
waiver work components, rather than intent, they recognize increased
hours as part of the waiver. If the amount of the required hours under
the waiver is inconsistent with the required hours under section 407,
the Governor can certify the inconsistency.
Comment: Some commenters asserted that we could not even hold
States operating under waivers to a work participation rate
requirement--i.e., that we should delay the effect of section 407 in
its entirety until State waiver authority expires.
Response: Under section 1115, there were limits on what we approved
as part of a demonstration project. The Secretary only had authority to
waive provisions of the AFDC program that were included in former
section 402. That section contained the provisions regarding the
determination of eligibility, the amount of assistance, and required
procedures for State administration of the plan. The Secretary could,
and did, grant waivers concerning the content of the JOBS program (the
AFDC work program), which was included at section 402(a)(19). However,
the required work participation rate associated with JOBS was at the
former section 403(l). Since the Secretary had no authority to waive
this provision, we never approved any requests from States to waive it.
Thus, no State has a waiver of participation rates that would
conflict with the work participation rate penalty provision at the
former section 409(a)(3). For a State to argue that the work penalty
does not apply, it would have to show a technical waiver that is
inconsistent with any application of the work penalty. However, waivers
that create the content or substance of a State's demonstration work
program are just that--definitions of the content of a work program. As
such, they may be inconsistent with the content of the TANF work
program at section 407 and may allow the State to substitute the
substance of the work program in its demonstration for the program
specified in section 407, to the extent that the State determines there
is an inconsistency. However, there would be no inconsistency in
applying the section 409(a)(3) work participation penalty as long as
participation was determined under the State's demonstration work
program.
Since the final rule bases the penalty under section 409(a)(3) on
what was required participation under the State's demonstration work
program, there is no inconsistency. Delay of the work participation
penalty itself in these circumstances would fall outside any reasonable
definition of waiver or inconsistency.
(e) Section 260.74--How Do Existing Welfare Reform Waivers Affect the
Application of the Federal Time-Limit Provisions? (Sec. 274.1(e) of the
NPRM)
If a State is implementing a time-limit component under a waiver,
until the waiver expires, the provisions of section 408(a)(7) of the
Act will not apply in determining whether to impose a penalty, to the
extent that they are inconsistent with the waiver.
To determine that the State's demonstration has a time-limit
component, the waiver list for a demonstration time-limit component
must include provisions that directly correspond to the time-limit
policies enumerated in section 408(a)(7) (i.e., that address which
individuals or families are subject to, or exempt from, terminations of
assistance based solely on the passage of time, or who qualifies for
extensions to the time limit).
In general, the final rule requires a State with a waiver time-
limit component to count, toward the Federal five-year limit, all
months for which the adult who is subject to the State time limit
receives assistance with Federal TANF funds, just as it would if it did
not have an approved waiver.
The State need not count, toward the Federal five-year limit, any
months for which an adult receives assistance with Federal TANF funds
while the adult is exempt from the State's time limit under the State's
approved waiver. Nor need the State count, toward the Federal five-year
limit, months for which an adult subject to an adult-only State time
limit under the State's waiver receives assistance with Federal TANF
funds.
The State may continue to provide assistance with Federal TANF
funds for more than 60 months, without a numerical limit, to families
provided extensions to the State time limit, under the provisions of
the terms and conditions of the approved waiver.
After the Governor certifies time-limit inconsistencies, we
calculate the State's time-limit exceptions by: (1) Excluding, from the
determination of the number of months of Federal assistance received by
a family, any month in which the adult(s) (or children where a waiver
only terminated assistance to adults) were exempt from State's time
limit under the terms of the State's approved waiver; and (2) applying
the State's waiver policies with respect to the availability of
extensions to the time limit.
The changes that we have made to the framework of how we define
waiver inconsistencies have less effect on inconsistencies related to
time-limiting assistance than to work. The main reason for this
difference is that no prior law policies existed governing time-limited
assistance. All time limits were the result of waivers. Thus, there are
fewer issues about what a time-limit waiver includes. However, there
are significant issues about what is allowable as an inconsistency;
under these rules, the constraining factor is whether a State's
demonstration project has a time-limit component related to the
provisions in section 408(a)(7).
Prior to the passage of PRWORA, a ``time limit'' could take any
number of forms. However, under TANF, the penalty relates to the time
limit in section 408(a)(7), which recognizes only time limits that
terminate assistance with the passage of time (i.e., that terminate
assistance to families with adults who received Federal TANF assistance
for 60 months). Other parts of TANF address time limits in different
contexts, such as those that trigger work requirements. However, these
latter types of provisions are not subject to the penalty provision
under section
[[Page 17738]]
408(a)(7), and we do not address them in this regulation.
Therefore, as we proposed under the NPRM, we are allowing time-
limit inconsistencies only for those States with waiver policies that
terminate assistance solely as the result of the duration of receipt.
Under these rules, if a State has a technical waiver meeting this
requisite, we compare its provisions with those at section 408(a)(7) to
determine whether there are inconsistencies.
As with work participation, States may also choose to exempt
experimental and/or control group cases that are not otherwise exempt
from time limits. However, a State may exclude such experimental and
control group cases only on a group basis, not on an individual basis.
Comment: Commenters generally agreed that inconsistencies should be
recognized that allowed a State to: (1) exempt certain cases from
having months counted toward the 60-month time limit; and (2) provide
extensions to more than 20 percent of the caseload after reaching the
limit.
Response: We have retained these policies in the final rule.
Comment: Some commenters argued that section 415 was designed to
allow States to continue their welfare reform initiatives as a whole.
On this basis, they maintained that any State that consciously chose
not to include time-limited assistance provisions in the comprehensive
welfare reform initiatives that it implemented under waivers should be
able to claim a time-limit inconsistency.
Response: Section 415 was not designed to carry over prior law in
its entirety, nor to delay TANF requirements where waivers did not
exist prior to implementation. Rather, it allows delay in implementing
new TANF provisions ``to the extent such amendments are inconsistent
with the waiver.'' Thus, we find no statutory basis for allowing
inconsistencies to be claimed in this particular situation because no
waiver exists.
Comment: Some commenters argued that we should also allow time-
limit inconsistencies to apply where a State has implemented time
limits that serve to trigger work requirements.
Response: We do not recognize other waiver provisions, such as
those where States used ``time limits'' to trigger work requirements,
as inconsistent with time limits. The purpose of this section of the
regulation is to determine the applicability of the time-limit penalty
at section 409(a)(9). This penalty applies to any failure to meet the
time-limit requirements at section 408(a)(7). Time limits triggering
work requirements are found in sections 402 and 407, not section
408(a)(7). Therefore, such policies do not fit within the definition of
a waiver related to the time-limit component associated with 408(a)(7).
Comment: One commenter recommended that, if we retained the
proposed rules related to time-limit waiver inconsistencies, the
preamble discussion should clarify that ``reduction waivers'' (adult-
only time limits) represent an inconsistency.
Response: We have incorporated this change in the final rule.
States with waivers terminating assistance for adults only may choose
to delay counting months toward the Federal 60-month time limit for as
long as they continue to apply adult-only policies under their State
time limit. While the proposed rules had required that time against the
Federal time clock be counted for any month in which an adult was
subject to the State time limit (i.e., that the Federal and State
clocks would run concurrently), this policy would have had an effect
that was inconsistent with the waiver policy. Because time charged
against an adult would have ultimately resulted in the termination of
benefits to the whole family under TANF, the proposed policy would have
resulted in time being counted against child recipients. While children
are protected from termination of benefits while the waiver is
operable, counting time against adults in the case would have, in
effect, counted time against the family's (and children's) length of
receipt of assistance. This result would have been contrary to the
purpose of the adult-only time-limit waivers, which was to exempt
children from any effect of the time limit. Thus, in submitting a
Governor's certification of continuing waiver inconsistencies, the
State may claim a time-limit inconsistency for its adult-only time
limit.
Comment: Another commenter said that we should allow all cases
subject to a time limit adequate prior notice before a clock begins to
count against them. Thus, States that have applied a reasonable
statutory interpretation of section 415 to exempt cases from the
Federal time limit should not have to count time retroactively against
these cases (i.e., count time accrued prior to the effective date of
the final rules).
Response: As we have previously stated, these rules apply only
prospectively; until they are effective, the State's reasonable
interpretation of the statute applies. An individual who was considered
exempt from the Federal time limit under the State's reasonable
interpretation of its waiver would only have the Federal limit apply
prospectively, beginning October of 1999. This policy will allow States
time to provide the recipient with adequate notice.
(f) Section 260.75--If a State Is Claiming a Waiver Inconsistency for
Work or Time Limits, What Must the Governor Certify? (Sec. 272.8(a) of
the NPRM)
If a State is claiming waiver inconsistencies, the Governor must
certify that the State has continuously maintained applicable policies
in operating its TANF program and that the inconsistencies claimed by
the State do not expand the scope of the approved waivers. Further, the
certification must identify the specific inconsistencies that the State
chooses to continue with respect to work and time limits.
If the waiver inconsistency claim includes work provisions, the
certification must specify the standards that will apply in lieu of the
provisions in section 407. Specifically, it must include, as
applicable: (1) Descriptions of two-parent and other cases that are
exempt from participation, if any, for the purpose of determining the
denominators of the work participation rates; (2) the rules for
determining whether nonexempt two-parent and other cases are ``engaged
in work'' for the purpose of calculating the numerators of the work
participation rates, including descriptions of the countable work
activities and minimum required hours; and (3) the penalty against an
individual or family when an individual refuses to work. Again, the
certification may include a claim of inconsistency with respect to
hours of required participation in work activities only if the State
has written evidence that, when implemented, the waiver policies
established specific requirements related to hours of work for
nonexempt individuals.
If the waiver inconsistency claim includes time-limit provisions,
the Governor's certification must include the standards that will apply
in lieu of the provisions at section 408(a)(7). It must specify the
standards that will apply in determining: (1) Which families are not
counted towards the Federal time limit; and (2) whether a family is
eligible for an extension of its time limit on federally funded
assistance.
If the State is continuing policies for evaluation purposes, the
certification must specify any special work or time-limit standards
that apply to the experimental and control group cases. The State may
choose to exclude cases assigned to the experimental and
[[Page 17739]]
control groups that are not otherwise exempt, for the purpose of
calculating the work participation rates or determining State
compliance related to limiting assistance to families including adults
who have received 60 months of TANF assistance. Thus, the State may
exclude all experimental and control group cases, not otherwise exempt.
However, it may not exclude such cases on an individual, case-by-case
basis.
A State must provide the initial Governor's certification by
October 1, 1999. It would be very helpful to receive the certification
by July 1, 1999, in order to assess how inconsistencies will apply for
data collection and reporting efforts before the effective date of the
new requirements. We would like to resolve any issues about the
treatment of waiver cases before the reporting requirements take
effect, because it is much easier to code information correctly the
first time than to modify the codes retroactively. In light of the
number of States continuing waivers and some of the detailed, case-
specific questions that we anticipate might arise, we want to build in
ample time to resolve all issues by October 1, 1999. It will certainly
be in a State's interest if we can resolve all questions by the
effective date of the new requirements.
Also, we would point out that, until a State has submitted its
Governor's certification, we will treat the State as a nonwaiver State
in determining its compliance with work participation rate and time-
limit standards. Likewise, if we determine that a Governor's
certification does not comply with the requirements of this subpart, we
will advise the State of the inconsistency and give it an opportunity
to revise the certification. We will accept alternative rules for
determining penalties related to work participation rates and time-
limit exceptions only to the extent that they comply with the
requirements of this part.
If a State modifies its waiver policies, after it provides the
certification, in a way that has a substantive effect on the
calculation of its work participation rates, time-limit exceptions, or
sanctions, it must submit an amended certification by the end of the
fiscal quarter in which the modifications take effect.
Comment: A few commenters questioned whether we had the authority
specifically to require that Governors certify which waivers States
were continuing. Some of these saw this requirement as an added burden
that duplicated information already submitted in their State TANF plans
or documented as part of their waiver approval.
Response: We disagree that we have no authority to require the
certification. As discussed, the Department has had no formal process
for determining a State's decisions on the continuation of waivers. The
information that has been provided has been sporadic and is not
necessarily current or complete. Since we will be relying on the
State's determination that it has continued an inconsistent waiver
component in making penalty determinations, we must have accurate, up-
to-date information on the State's decision to continue its
inconsistent work and time-limit components in order to make those
penalty determinations correctly and on a timely basis. As such
information is necessary to our implementation of the penalty
provisions, we have authority under those provisions to collect it.
(g) Section 260.76--What Special Rules Apply to States That Are
Continuing Evaluations of Their Waiver Demonstrations? (Sec. 271.60(c)
and (d) and Sec. 274.1(e)(4) of the NPRM))
If a State is continuing policies that employ an experimental
design in order to complete an impact evaluation of a waiver
demonstration, the experimental and control groups may be subject to
prior law, except as modified by the waiver.
We have added definitions for experimental and control groups at
Sec. 260.71 (and cross-references at Sec. 260.30). These definitions
reference the terms and conditions in the State's demonstration.
Comment: One commenter suggested that we should allow any State in
which more than half of its families are subject to waiver policies as
part of a research group to apply the same waiver policies to the rest
of the families in the State, as long as the State does not expand the
geographical scope of the waiver authority. The same rule would apply
to a county operating a waiver demonstration in a county-administered
State. Another commenter indicated that States may be less likely to
continue an evaluation if we do not allow a State to apply policies
permitted for the research group to a broader set of families.
Response: While we sympathize with the commenters' desire to reduce
administrative complexity, we do not see why the complexity is any
greater when a majority of the caseload is in the experimental and
control groups than when a minority is. Furthermore, implementing this
policy would introduce complexities of its own in terms of the
measurement required to determine what rules apply in a given
jurisdiction. Since both the number of families in the experimental and
control groups currently on assistance and the total number of families
currently on assistance vary from month to month, rules could vary
month to month. In contrast, the experimental and control groups are
well-defined; a family is either assigned to them or not. Therefore,
under the final rule, determining when and to which families to apply
the pre-TANF policies is relatively simple.
C. Child-Only Cases
Background
The calculations for work participation rate and time-limit
penalties center around the concept of ``family.'' Under the proposed
rules, we indicated that a State could develop its own definition of
``family,'' with the proviso that States could not create definitions
that excluded adults from cases solely for the purpose of avoiding
penalties. To monitor that restriction, we proposed that States report
annually on the number of cases excluded from penalty calculations, and
the reasons for each exclusion. We said we would add families back into
the calculation if we found they were excluded for the purpose of
avoiding penalties. You may find the specific proposals in
Secs. 271.22(b)(2), 271.24(b)(2), and 274.1(a)(3) of the proposed rule.
These provisions reflected our concern that States might convert
cases to child-only cases to avoid the statutory work participation and
time-limit requirements. In part, our concern was a reaction to public
comments that States and advocates made shortly after PRWORA's
enactment suggesting that States might take such actions. It also
reflected our view that such conversions would seriously undermine
critical provisions of welfare reform.
Overview of Comments
Several commenters supported our decision to recognize that States
had the primary authority to define ``family.'' However, a large number
of commenters, from a diversity of groups, opposed or expressed
concerns about our specific proposals in this area. The comments
generally objected to our distrust of States and the pre-emption of
State decisions to define families as they deemed appropriate.
Several commenters challenged the statutory basis for our proposal.
Some did not directly challenge our authority, but questioned the
practicality of our proposed approach. Commenters pointed out
inconsistencies in the language that we had used in different parts of
the regulation and noted that
[[Page 17740]]
the determination of whether States created definitions for the sole
purpose of avoiding penalties would involve subjective determinations
of motive. To minimize these problems, they offered several suggestions
about how we might clarify what types of cases might be subject to
recalculation.
Under one proposal, States would describe their child-only cases in
the State plan or procedures. We could then discuss beforehand with
States the appropriateness of these cases. Other commenters offered a
related suggestion that we set up a process for States to get approval
of reasons for conversions up-front, but did not identify a specific
format for the State submissions.
Another suggestion was that State definitions would automatically
prevail, but that HHS would inform Congress if distortions of
legislative intent seemed to result. In other words, in the absence of
any documented abuses, we would simply gather information on what
States are doing and permit States to use any definition of family that
has a reasonable policy basis. Then, if we discover evidence that
States were trying to subvert the TANF provisions, we could work with
Congress in developing solutions.
Some commenters noted that child-only cases existed under AFDC and
enumerated examples of child-only cases that we should acknowledge as
acceptable, including: cases in which the adults have no legal
liability for the care of the children, cases with recipients of SSI or
other disability payments, cases with adults not receiving assistance
because they exhausted shorter State-imposed time limits, cases with
noncitizen parents or adults ineligible for other reasons (e.g., SSI
receipt or a drug felony conviction), cases that were previously
converted under approved waiver policies, and cases with elderly
caretakers.
We also received suggestions that we should explicitly permit
States to continue to provide assistance to children: (1) once the
parent/relative loses eligibility due to the expiration of the five-
year time limit; (2) whose parent/relative was sanctioned for failure
to participate in work or cooperate with child support enforcement
requirements; and (3) whose parent or caretaker would be better served
by some other State program, such as if she is disabled.
In addition to specific objections or questions, many commenters
expressed the overall concern that our proposal to control for
inappropriate child-only cases may inhibit the State flexibility
essential to TANF. State anxiety about Federal recalculation of penalty
liability could create a ``chilling effect'' that caused States to
limit child-only cases unnecessarily and inappropriately. In the words
of one commenter, ``the uncertainty of knowing whether their policy
basis will be considered legitimate and how work participation rates
and time-limit compliance will be measured by HHS could simply lead
States to avoid serving children as child-only cases even if the result
is not to serve the children at all.''
Commenters did not want to see assistance to valid child-only cases
undermined by our rules. Of particular concern was the effect of our
proposals on State efforts to keep children in the homes of relatives,
in lieu of foster care placements.
Others noted that, up to this point, we do not have evidence that
States are converting cases to child-only cases for the purpose of
avoiding TANF requirements; we have not observed significant changes in
State policy or practice to create new child-only cases. Only if such
changes actually occur should HHS develop corrective procedures.
Overall Response
When we were developing the proposed rules, we were very concerned
that States would use the flexibility available in defining families to
avoid work participation requirements, time limits, and other TANF
requirements. Within the authority that we have to collect
participation rate information and make decisions on State penalties,
we proposed specific regulatory policies with respect to penalties and
reporting in response to that concern. However, as we have seen the
TANF programs evolve, our concerns about possible abuses have
diminished.
While the number of child-only cases has been increasing over time,
commenters correctly observed that the increases began well prior to
TANF and that there is little indication so far that States are
converting cases merely to avoid penalties. In fact, a couple of
internal State analyses (i.e., in Florida and South Carolina) have
found no evidence of conversion of cases to child-only cases from other
statuses.
Also, commenters correctly noted that there were numerous child-
only cases that were considered valid under prior law. Their existence
under TANF therefore does not suggest that States are working to
subvert TANF requirements in this manner. Over the past several years,
there were a number of social and demographic changes underway that
could have contributed to much of the growth in child-only cases. For
example: (1) Because of the ``crack'' epidemic, some infants moved from
the care of their mothers to the care of their grandmothers or other
adult relatives (who may or may not have been needy); (2) in some
places, immigration changes could have caused a growth in the number of
eligible children with ineligible alien parents; and (3) in other
places, States have made an effort to establish eligibility for SSI.
(If parents became SSI-eligible, the children normally received
assistance as child-only cases.)
Recently, we have seen a reduction in the total number of child-
only cases. However, because the number of other types of cases has
been declining faster, the proportion of child-only cases has not gone
down. Thus, State success in moving more families to work may actually
be causing an increase in the proportion of child-only cases.
At the same time, we disagree with the suggestion that it would be
appropriate to provide federally funded assistance to children in
child-only cases when their parents reach the 60-month limit on Federal
assistance. Such a result would be consistent with an adult-only time
limit, but does not seem consistent with the intent of the specific
provision in the law. For example, the provisions on transfers to the
Social Services Block Grant program suggest that children in families
whose adults reached their 60-month limit were not expected to continue
receiving federally funded TANF assistance.
While we disagree with the commenters' suggestion that we did not
have legal authority to regulate in this area, we understand
commenters' concern that the provisions in the proposed rules may do
more harm than good. In the absence of clear evidence that States are
converting cases to avoid the TANF rules, we have decided that the most
appropriate response at this point is to give States leeway to define
families in ways that they think are most appropriate while gathering
better information on how child-only policies might be affecting the
achievement of TANF goals.
However, the possible conversion of cases to child-only status to
avoid TANF requirements remains a major policy concern. For example,
such conversions could effectively eliminate restrictions on the amount
of time that any family could receive federally funded TANF assistance
or could undermine the statutory provisions on the treatment of
sanction cases in the participation rate calculations. We therefore
intend to track it closely. To that end, we have added one data element
to the disaggregated case-record reporting that will identify cases
that have been
[[Page 17741]]
converted to child-only status since the past month. We will use the
quarterly TANF Data Report to monitor trends both in the aggregate
number and type of child-only cases and the number of conversions. By
monitoring these trends, we should be able to identify changes in State
practice or caseload characteristics that would merit further
investigation. If we saw a significant number of conversions to child-
only status in a particular State (i.e., a number that was out of line
with prior State numbers or the numbers for other States), we would
look more closely at that State.
We have a variety of investigative tools available to us, including
detailed analysis of the case-record information reported to us, the
Single State Audit, supplemental reviews, and targeted studies (like
the current ASPE study mentioned below).
We will incorporate a full analysis of the information we have
gathered on what has been happening with child-only cases in our annual
report to Congress.
As a number of commenters suggested, under these final rules, we
have adopted a strategy that includes gathering information, monitoring
developments, and keeping our options open regarding future actions.
Through our data collection, we will obtain substantial information on
the characteristics of child-only cases, trends in their number and
type, and conversions. This information will help us assess the
possible effect of such cases on the achievement of TANF goals. We will
consider proposing appropriate legislative or regulatory remedies if we
find that States are using the flexibility available under these rules
to define families to avoid work requirements or time limits or
otherwise undermine the goals of TANF. However, we will not put any
significant policy change into effect without appropriate prior
consultation with States, Congress, and other interested parties.
Tracking of Child-Only Cases
Comment: A significant number of commenters also objected to our
proposals at Secs. 271.22(b)(2)(i), 271.24(b)(2)(i), 274.1(a)(3)(i),
and 275.9(a)(1) that States annually report to us on their child-only
cases and advise us of the specific nature of each of the cases.
Commenters generally felt it was an unjustified additional burden for
States. Some objected to the specific wording of the requirement
because it suggested that we expected case-by-case reporting of such
cases rather than aggregated reporting.
Response: We have removed the requirement for annual reports on
families excluded from work-rate and time-limit calculations and the
reasons for their exclusion. The proposed language was not consistent
in different parts of the NPRM package and caused some confusion.
Monitoring trends in the number and type of such cases remains an
important issue. However, we decided that a different type of data
would be more helpful in helping us track conversions. Thus, we have
added a new data element to the TANF Data Report that will identify the
specific cases that have become child-only cases. These new data will
supplement other data on child-only cases available through the TANF
and MOE-SSP data reports and give us a solid basis of information for
assessing national and State trends in the number and nature of child-
only cases. From other data elements in those reports, we will get
disaggregated, case-level data on parents and other individuals who are
in the household, but not in the family receiving assistance. We will
get information on whether there are parents who are ineligible for
receipt of Federal benefits, whether the cases are under sanction, and
whether cases have no parent in the home. To provide still further
supplemental information, the Office of the Assistant Secretary for
Planning and Evaluation is undertaking a study in three States to
explore the circumstances of child-only cases in more detail.
Together, these information sources will provide valuable insight
into the nature of child-only cases and the types of services and
assistance States are providing them. We will be able to track any
significant changes in the number and types of such cases and be in a
better position to determine if we need to pursue further action.
Depending on what specifically is happening, an appropriate response
could be information-sharing, consultations, technical assistance, or
regulatory or legislative proposals.
To reflect our other decisions on child-only cases, we deleted the
provisions at Secs. 271.22(b)(2), 271.24(b)(2), and 274.1(a)(3) of the
proposed rule that prohibited conversion of child-only cases for the
purpose of avoiding penalties, indicated that we would add cases back
into the work participation rate and time-limit calculations if we
found that they had, and required separate annual reporting on child-
only cases. We also deleted comparable annual reporting language at
Sec. 275.9(a)(1). We believe that we will have sufficient information
through the TANF Data Report to monitor child-only cases; we determined
that the separate annual reporting requirements were redundant.
D. Treatment of Domestic Violence Victims
Background
The Administration has shown a strong commitment to reducing
domestic violence and helping victims of domestic violence access the
safety and supportive services that they need to make transitions to
self-sufficiency. In the proposed rule, we showed this commitment by
promoting implementation of the Family Violence Option (FVO), a TANF
State plan provision that provides a specific method for addressing the
needs of domestic violence victims receiving welfare.
Under section 402(a)(7) of the Act, States may elect the FVO. This
State plan option provides for identification and screening of domestic
violence victims, referral to services, and waivers of program
requirements for good cause. In the NPRM, we proposed to grant
``reasonable cause'' to States that either failed to meet the work
participation rates or exceeded the limit on exceptions to the five-
year time limit because of program waivers granted under this
provision. To be considered for this purpose, a ``good cause domestic
violence waiver'' would need to incorporate three components: (1)
Individualized responses and service strategies, consistent with the
needs of individual victims; (2) waivers of program requirements that
were temporary in nature (not to exceed 6 months); and (3) in lieu of
program requirements, alternative services for victims, consistent with
individualized safety and service plans.
In addition, to be considered in determining reasonable cause for
exceeding the time-limit exceptions, such waivers had to be in effect
after an individual had received assistance for 60 months, and the
individual needed to be temporarily unable to work.
Our proposed rules attempted to remain true to the statutory
provisions on work and time limits and to ensure that election of the
FVO was an authentic choice for States. In deciding to address these
waiver cases under ``reasonable cause'' rather than through direct
changes in the penalty calculations, we tried to both reflect the
statutory language and maintain the focus on moving families to self-
sufficiency. At the same time, we were giving States some protection
from penalties when their failures to meet the
[[Page 17742]]
standard rates were attributable to the granting of good cause domestic
violence waivers that were based on individual assessments, were
temporary, and included individualized service and safety plans. We
hoped our proposal would alleviate concern among States that attention
to the needs of victims of domestic violence might place them at
special risk of a financial penalty.
We welcomed comments on whether our proposed approach and language
achieved the balance we were seeking.
Also, to ensure that these policies have the desired effect, we
proposed to limit the availability of ``reasonable cause'' to States
that have adopted the FVO. We indicated that we reserved the right to
audit States claiming ``reasonable cause'' to ensure that good cause
domestic violence waivers that States include in their ``reasonable
cause'' documentation met the specified criteria. And we said we
intended to monitor the number of good cause waivers granted by States
and their effect on work and time limits. We wanted to ensure that
States identify victims of domestic violence so that they may be
appropriately served, rather than be exempted and denied services that
could lead to independence. We also wanted to ensure that the provision
of good cause waivers did not affect a State's overall effort in moving
families towards self-sufficiency. Thus, we said we would be looking at
information on program expenditures and participation levels to see if
States granting good cause waivers were making commitments to assist
all families in moving toward work.
If we found that good cause waivers were not having the desired
effects, we said we might propose regulatory or legislative remedies to
address the problems that we identified.
For additional discussion of our proposals, we referred readers to
Secs. 270.30, 271.52 and 274.3 of the preamble and proposed rule.
In the final rule, we have consolidated the provisions in a new
subpart in order to make our policies more coherent. We have also made
some changes to align the regulatory text more closely with the
statutory language. For example, we modified the six-month time limit
placed on good cause domestic violence waivers. Recognizing that the
statute authorizes waivers for ``as long as necessary,'' we have
incorporated similar language in the rule, but called for six-month
redeterminations. We have also incorporated statutory language
describing the Family Violence Option, including its reference to
confidentiality.
Comments and Responses
(a) General Approach
Most commenters generally approved of the way that the proposed
rule attempted to protect victims of domestic violence. A significant
number commended DHHS for recognizing the significance of domestic
violence as a national problem and acknowledging the link between
domestic violence and poverty. Many expressed the view that the
approach we took was reasonable and provided States with the penalty
protection that they needed. However, a few disagreed with the basic
approach we took, and a substantial number of commenters raised
concerns about specific aspects of the proposed rule.
Response: Our rules do not limit a State's authority to grant
``good cause'' waivers under the Family Violence Option, but they do
limit the circumstances under which we will provide special penalty
relief to States granting such waivers. In other words, if a State's
waivers do not comply with the standards in these rules, the State does
not get special consideration in our penalty determinations if it fails
to meet the work participation requirements or exceeds the limit on
Federal time-limit exceptions.
To emphasize this distinction, in the final rules, we created a new
term ``federally recognized good cause domestic violence waivers'' at
Sec. 260.51. A ``good cause domestic violence waiver'' refers to any
waiver granted by a State consistent with the FVO. A ``federally
recognized good cause domestic violence waiver'' refers to a waiver
that also meets the standards that we have established for special
consideration in our penalty determinations.
As we discuss in more detail below, we made some additional changes
to the proposed rule in response to the comments that we received. We
also moved the provisions on domestic violence (including the
definition provisions that were in Sec. 270.30 of the proposed rule) to
a new subpart B of part 260. In addition, we revised the language at
Sec. 264.30(b). The revised language explicitly recognizes that
individuals may receive waivers of child support cooperation
requirements under the FVO and that our rules would treat such waivers
like good cause exceptions granted under the child support statute (at
section 454(29) of the Act).
In summary, the final rule retains the same basic approach as the
proposed rule--i.e., it gives States penalty relief if their failure to
comply with the work participation rate or time-limit standards is
attributable to the granting of good cause domestic violence waivers
that meet certain Federal standards. It retains a requirement for
service and safety plans, but makes important modifications related to
policies on the duration of the waivers that we would recognize,
confidentiality protections, work expectations, information that the
State must provide with respect to its service strategies, and the
standards for time-limit waivers. In addition, the preamble clarifies
the flexibility available to States in delivering services to victims
of domestic violence and the mechanisms in place for protecting victims
from unfair penalties.
Comment: A minority of the commenters argued that we should exclude
individuals granted waivers of work requirements under the FVO from the
calculation that determines a State's overall work participation rates
for each month in the fiscal year.
Response: We chose to address this as a State penalty-relief issue,
in large part because we believe that keeping victims of domestic
violence in the denominator of the work participation rates represents
a better reading of the statute. Section 407 makes no reference to
domestic violence cases or to a State's good cause waiver of work
requirements under the Family Violence Option. In the statutory
provisions on calculating work participation rates (at section 407(b)),
there are only two explicit exemptions from the calculation: one for a
single custodial parent of a child under 12 months old and the other
for a recipient who is being sanctioned. There is no mention of the
victims of domestic violence or cross-reference to the waivers granted
under the FVO.
We believe that victims of domestic violence and the objectives of
the Act will best be served if we maintain the integrity of the work
requirements and promote appropriate services to the victims of
domestic violence. We do not want our rules to create incentives for
States to waive work requirements routinely, especially in cases where
a recipient can work; service providers who work closely with victims
of domestic violence attest that work is often a key factor in helping
victims escape their violent circumstances.
We do realize that, in certain cases, working or taking steps
toward independence may aggravate tensions with a batterer and place
the victim in further danger. Under the final rule, States may provide
temporary waivers of work requirements in such cases. Also, States may
grant waivers to extend time limits to families that were not able to
participate in work activities or to make due progress towards
achieving
[[Page 17743]]
self-sufficiency within 60 months; we would give Federal recognition to
waivers granted to extend time limits under such circumstances. We have
revised the language on service plans to provide that work elements in
a service plan should be consistent with the statutory expectations
about ensuring safety and fairness. We have also modified the language
on waivers to extend time limits (as discussed in a subsequent comment
and response).
We continue to believe that removing victims of domestic violence
from the work participation rate calculation could result in
inappropriate exemptions or deferrals of work requirements for victims
of domestic violence. As an alternative, commenters suggested that we
could protect against this result by requiring States to give waiver
recipients access to appropriate education and training services.
However, we do not believe such a requirement would suffice; States
will have an inherent interest in focusing their resources on
individuals who are part of the participation rate calculations and who
could put them at penalty risk.
Comment: Many commenters expressed general concerns about the
proposed definition of the good cause domestic violence waiver. They
argued that it should be more in line with the statutory language and
less prescriptive.
Response: We added the extra criteria related to Federal
recognition of waivers (at Sec. 260.55) because we wanted to assure
that victims of domestic violence would receive appropriate protections
and services and the goals of TANF would be sustained. At the same
time, as we have discussed, we have made a few modifications to the
provisions that make the rules more consistent with the statute and
responsive to the specific concerns that commenters raised.
To ensure that our rules promote access to appropriate services, we
have added reporting requirements at Secs. 260.54 and 265.9(b)(5)
designed to ensure that States seeking Federal recognition of their
good cause domestic violence waivers implement meaningful alternative
service strategies for victims of domestic violence. The new reporting
will tell us and other interested parties about the strategies and
procedures States have put in place to ensure that these families
receive appropriate supports. It will also give us information on the
aggregate number of good cause domestic violence waivers granted by the
State each year.
Comment: One commenter expressed concerns about the administrative
burden that States would face in filing a claim of reasonable cause.
Response: We have not regulated specific requirements that States
must meet in filing reasonable cause claims. While States must provide
information sufficient to justify their claims, the burden associated
with demonstrating reasonable cause should not be great. In fact, we
would encourage States to present their reasonable cause arguments as
succinctly as possible.
State data reporting systems will contain information on the number
of cases that received federally recognized good cause domestic
violence waivers every month. States will be able to rely on that data
in justifying their reasonable cause claims.
(b) Time Limits on Good Cause Waivers
Comment: A significant number of commenters objected to the six-
month durational limit that we placed on good cause domestic violence
waivers. They said that six months did not provide enough time and that
the length of waivers should be determined on a case-by-case-basis.
They also argued that our proposed rule could create an additional
administrative burden on States for cases where a waiver needed to be
renewed. They noted that the six-month limit is neither required by
statute nor consistent with the statutory language that waivers
continue ``as long as necessary.'' Finally, commenters noted that they
found our policy authorizing extension or renewal of waivers only in
the preamble language; at a minimum, they wanted this policy to be
added to the regulatory text.
Response: In the NPRM we said that we did not intend that all good
cause waivers should last six months. Rather, the length of the waiver
should reflect the State's individualized determination of what length
of time a client needs. This was our way of giving States significant
leeway in how they implemented their Family Violence Option programs.
However, we agree with the commenters that our rules should be more
consistent with the statute and have revised the final rule
accordingly. At the same time, the rule continues to assure that these
cases will receive periodic attention from service workers. More
specifically, like the statute, it allows for the waiver to be granted
for ``as long as necessary.'' However, at Sec. 260.55(b) and (c), it
also requires that a reassessment will take place every 6 months to
determine if the waiver is still necessary and if the service plan is
still appropriate.
(c) Adoption of the Family Violence Option
Comment: A small number of commenters expressed concern that, by
providing special consideration only to States that have opted for the
FVO, we could be penalizing States that did not choose the option.
Response: As we stated in the proposed rule, we consciously tied
penalty relief to State implementation of the FVO because we felt the
FVO provided a constructive framework for identifying, screening, and
serving victims of domestic violence. Also, because the FVO is a State
plan provision, there are some statutory expectations on States that
adopt it, the public will have access to information about it, and
consultation with local governments and private sector organizations
will take place.
Comment: A couple of commenters said that we should mandate that
any State seeking relief from penalties for not meeting work
participation rates or for exceeding the cap on exemptions to the time-
limits must officially adopt and properly implement the FVO within 60
days as part of the corrective plan.
Response: States have the option of submitting corrective plans for
our review, and this final rule provides wide latitude to States in
developing the content of those plans. In that context, we do not
believe it would be appropriate to be very prescriptive about what a
State must include related to adoption of the FVO. Also, we want States
to adopt the FVO based on broad policy and programmatic considerations,
not because such a step would give them a quick way to avoid penalty
liability.
It is important that States understand that, to us, compliance
means more than adoption of the Family Violence Option. In deciding
whether a corrective compliance plan is acceptable, we will consider
the strides that a State has already taken toward developing and
implementing a broad strategy to serve victims of domestic violence and
ensure their safety.
Comment: A small number of commenters expressed concern that the
regulations should require all States to demonstrate that the Family
Violence Option is being implemented statewide.
Response: We reviewed the TANF State plan provisions at section 402
and found no specific requirement that the provisions there be
implemented on a statewide basis. In fact, because the statutory
language at section 402(a)(1)(A)(i) refers to TANF as a ``program,
designed to serve all political subdivisions in the State (not
necessarily in a uniform manner),'' it would be a reasonable
interpretation of the statute to conclude that plan provisions need not
be implemented statewide.
[[Page 17744]]
If we were sure that a statewide requirement would produce the
optimal policy results, we would have the authority to add such a
requirement to our standards for waivers in determining penalty relief.
However, we are not convinced that a statewideness requirement would
result in better protections or more appropriate services for victims
of domestic violence. For example, if a State could not enact statewide
legislation for political reasons or could not implement a program in
remote areas of the State for administrative reasons, a statewideness
requirement might preclude any residents of the State from benefiting
from the FVO.
Thus, under the statute and this rule, there can be variations in
the implementation of the FVO across a State. However, we hope that all
States will work toward statewide implementation because we believe
that recipients would generally be better served under a statewide
program. Also, we point out that States can expect broader protection
against penalties if they implement statewide.
We would like to take this opportunity to clarify the meaning of
the phrase ``optional certification'' in section 402(a)(7). Under this
provision, election of the Family Violence Option is optional, i.e.,
States may use their own discretion in deciding if they will elect the
option. However, for States that have adopted the option, the State
plan certification is not optional. States adopting the option must
submit the certification with their State plan or submit a State plan
amendment and notify the Secretary of DHHS within 30 days.
(d) Scope of Penalty Relief Available
Comment: A couple of commenters pointed out that our ``reasonable
cause'' proposal gave States very limited penalty relief with respect
to FVO waivers. If a State did not fully meet the work participation
rates or time-limit cap when we removed waiver cases from the
calculations, it could get no other consideration. For example, our
proposed rules did not consider such waivers in deciding whether a
State qualified for penalty reductions under Sec. 271.51 or in deciding
the potential size of reductions under that provision.
Response: In the revised language at Sec. 260.58(b), we indicate
that we will consider good cause domestic violence waivers in deciding
eligibility for, and the amount of, penalty reduction under
Sec. 261.51. In Secs. 260.58(c) and 260.59(b), we indicate that we may
take waivers into consideration in deciding if a State qualifies for
penalty relief as the result of its performance under a corrective
compliance plan.
Also, while Secs. 260.58 and 260.59 set specific criteria for
automatic reasonable cause determinations based on domestic violence
waivers, under the revised language at Sec. 262.5(a), the Secretary has
some discretion to grant reasonable cause in cases where a State could
not attribute its failure entirely to one of the established
``reasonable cause'' criteria. Thus, a State could request that we
grant ``reasonable cause'' in cases where federally recognized good
cause domestic violence waivers did not justify ``reasonable cause'' in
and of themselves, but were one of several factors contributing to its
failure.
Taking waivers into consideration in deciding penalty reduction
under Sec. 261.51 seemed to be a logical extension of our proposed
``reasonable cause'' provision. Under the statute and rules, the
penalty reduction under Sec. 261.51 is available based on the degree of
noncompliance. If two States had the same participation rate, but one
could attribute its failure in part to the granting of federally
recognized good cause domestic violence waivers and the other could
not, we think that the State granting waivers is complying to a greater
degree and deserves a smaller penalty. The revised rules at
Sec. 260.58(b) reflect this philosophy.
The revised rules do not provide for automatic penalty relief for
waivers granted during a corrective compliance period. As we have
indicated in the response to another comment, we do not want States to
look to the FVO as a quick fix for their penalty problems. Under these
rules, at Secs. 260.58(c) and 260.59(b), we reserve discretion whether
to give an individual State credit for good cause domestic violence
waivers in determining whether it has achieved compliance during the
corrective compliance period. In making this decision, we would expect
to look at evidence provided by the State that it had adopted the FVO
and had implemented a broad, thoughtful, and long-term strategy for
identifying and serving victims of domestic violence.
(e) Service Plans and Work Requirements
Comment: We received a number of comments on the requirement in the
proposed rule that waivers be accompanied by service plans that ``lead
to work.'' They argued that this language diverted the focus of the FVO
away from the safety considerations emphasized in the statute and that
the reference to work had no statutory basis.
Response: As we indicated in the proposed rule, we believe that
work is an important part of service plans because many victims of
domestic violence need to make progress on that front in order to
escape their abusive situations. In Sec. 270.30 of the proposed rule,
we indicated that good cause domestic violence waivers must be designed
to lead to work. However, we recognize that, in the short-term, safety
issues and other demands on the family may preclude specific steps
toward work. Thus, we have added new regulatory text at Sec. 260.55(c)
to clarify that States have the ability to postpone work activities
when safety or fairness issues would so indicate. For example, if a
victim of domestic violence needs time to recover from injuries, secure
safe and stable housing, and get her children resettled, or needs to
stay at home or in a shelter to avoid danger, there may be a need to
postpone work activities.
We encourage States to incorporate work activities as a key
component of the service plan for victims of domestic violence, to the
extent possible. Also, we note that, with our removal of the 6-month
limit on the duration of waivers, these final rules may make it more
feasible to do so.
Comment: Several commenters expressed concerns that the service
plan requirements in the proposed rules would make victims of domestic
violence more vulnerable to sanctions (i.e., penalty reductions) for
not meeting welfare agency expectations. TANF caseworkers are trained
to sanction participants who do not adhere to the caseworkers'
instructions or who do not comply with eligibility conditions.
Additionally, they stated that, in certain circumstances, an
appropriate service plan for a victim may be to do nothing. Forcing
victims to take specific steps within a fixed time frame may make their
situation more precarious. They also argued that services provided by
domestic violence counselors would be better for victims since these
workers understand that developing a plan for the family's safety can
be emotionally painful and may involve continuous reassessments.
Response: The FVO provides for waiver of program requirements
``where compliance with such requirements would make it more difficult
for individuals receiving assistance * * * to escape domestic violence
or unfairly penalize such individuals. * * *'' Thus, it would be
inconsistent with the FVO for domestic violence victims to be more at
risk of program sanctions than other individuals receiving assistance.
In other words, States should be giving victims of domestic violence
the same, or greater, access to ``good cause'' for failing to comply or
cooperate with
[[Page 17745]]
work, personal responsibility, and child support requirements. They
also should consider the needs of victims of domestic violence in
deciding eligibility for State time-limit exemptions and exceptions.
In general, we view service plans not as additional requirements
for victims of domestic violence, but as alternatives to normal program
requirements. In developing these plans, and determining if an
individual has good cause for not complying with a plan, States should
take the other demands on the family and the family's ability to
respond into account. States should also recognize that a battered
woman often does not have control over her own actions and respect a
victim's judgment of whether she can safely take certain action steps
(e.g., move out of her home).
Comment: A significant number of commenters asked that we delete
the requirement for a service plan because they felt it placed an
additional burden on TANF caseworkers who may not be equipped to engage
in this type of work and raised potential privacy issues. Commenters
also wanted to see a requirement that States provide referrals to
supportive services, as specified in the statute.
Response: Implicit in these comments seems to be an assumption that
TANF caseworkers would have full responsibility for developing and
enforcing service plans. This is not our assumption, and it is not
consistent with the evolving nature of the TANF program. The TANF
statute does not have the same statutory or regulatory requirements for
``single State agency'' administration that the AFDC program did. Thus,
under TANF, other public and private agencies can make discretionary
decisions on behalf of the TANF agency.
In the context of the FVO, States have a lot of flexibility in
deciding the appropriate roles for TANF staff and domestic violence
service providers in administering these provisions. The statutory
language in section 402 provides for State referral of domestic
violence victims to counseling and supportive services. It makes no
distinction as to who will provide these services. Thus, services may
be provided within the TANF agency, with referrals to specially trained
agency staff, or by referrals to an outside agency. There is also no
specification as to when these referrals can occur; for example, they
could occur before or after the service plan is in place.
If there are concerns about the ability of TANF staff within a
State to perform certain roles, e.g., because of resource constraints
or expertise, the TANF agency can and should work with third parties on
the development of service plans and the delivery of supportive
services.
Also, readers should note that we modified the regulatory text in
Sec. 260.55 to include an expectation that assessments and service
plans be developed by persons trained in domestic violence. This
regulatory text does not prescribe any specific training curriculum,
any specific staff credentials, or any specific administrative
structure for delivering services. However, it does require that staff
performing these functions have some training in domestic violence. The
regulatory change reflects our view and the view of commenters about
the critical importance of these activities. Staff need some level of
special knowledge and expertise in order to make appropriate decisions
in these highly sensitive case situations.
At the Federal level we have been investing resources to improve
the capacity of TANF staff to screen, identify, and serve victims of
domestic violence. We supported a project in Anne Arundel County,
Maryland, to pilot test such an effort. In 1997, ACF awarded a grant to
train all of Anne Arundel County's Department of Social Services staff
on domestic violence. This training has now been incorporated into the
regular training for all new employees. This project is one of the
first in the nation and has become a model for other States considering
adopting a State domestic violence curriculum. In addition, we are
developing resource materials that agencies can use as part of our
Welfare and Domestic Violence Technical Assistance Initiative,
under the National Resource Center on Domestic Violence. The first two
``practice papers'' issued under this initiative address the subjects
of ``Building Opportunities for Battered Women's Safety and Self-
Sufficiency'' and ``Family Violence Protocol Development.'' You may
contact the National Resource Center at its toll-free number, 1-800-
537-2238.
Comment: A couple of commenters felt that our rules should specify
that service plans should also provide for referrals to appropriate
alternative support, such as SSI and child support.
Response: One of the expectations for all TANF recipients is to
cooperate in establishing paternity and obtaining child support. Under
both the Family Violence Option and the rules of the Child Support
Enforcement program, the State may waive these requirements if the
individual has ``good cause'' for not cooperating. Thus, we would
expect child support referrals except in cases where it creates a risk
to the family or is otherwise inappropriate.
Our rules generally expect that service plans will help enable
victims to attain the skills necessary to ``lead to work'' and to
become self-sufficient because economic self-sufficiency is a major
goal of the TANF program. However, our rules also envision that the
plans will reflect individualized assessments of the needs and
circumstances of victims and their families. The rules recognize that
work requirements are not necessarily appropriate in some cases and
that some women will need extra time on assistance because of their
current or past circumstances.
We would not prescribe the specific content of a State's
assessments or the specific nature of its referrals. However, we would
point out that, for a State's TANF program to achieve long-term
success, families will need to receive appropriate supports and
referrals. Also, based on State practice in recent years, it seems
fairly clear to us that States understand the value of making
appropriate referrals to SSI.
(f) Waivers of Time Limits
Comment: Some commenters felt that our regulatory interpretation on
time-limit waivers appeared to be contrary to the purpose of the
welfare reform statute. A majority recommended that the final
regulations should allow States to ``stop the clock'' for families and
give them good cause domestic violence waivers at the time they are at
risk of violence, not just at the time that they approach the 60-month
time limit. A number of commenters had similar concerns about the
proposed language that only recognized time-limit waivers for cases
that were ``unable to work.''
They felt that the proposed definition of good cause domestic
violence waiver would not necessarily be consistent with an
individual's circumstances. They argued that some domestic violence
victims might need an extended period of time to set up a new
household, help their children adjust to new surroundings, and receive
counseling. If the trauma of the abusive relationship is substantial, a
woman might not be psychologically ready to develop the employment
skills that are required under TANF. In these types of cases, the clock
should be stopped until the victim is healthy and feels safe enough to
engage in work activities. Similarly, the clock should be stopped if
States determine that abused women are not able to comply with the
Federal work requirements. They also expressed concerns that our
proposed policies
[[Page 17746]]
would treat victims inequitably, based on the particular timing of
their domestic abuse situations.
Response: Although we have not adopted the specific suggestion of
commenters to recognize waivers that ``stop the clock'' and
automatically exempt families from the time limit, we have revised the
final rules to give Federal recognition to a much broader array of
waivers to extend the time limits. Under the final rules, we will
recognize such waivers, based on need, due to current or past domestic
violence or the risk of further domestic violence. Thus, States will be
able to provide victims with specific assurances that: (1) They can
receive assistance for as long as necessary to overcome the effects of
abuse; and (2) extensions will be available in the future based on
their current inability to move forward. For example, States could look
at whether victims were unable to pursue work or child support for any
period of time while they were on assistance or whether a current or
prior unstable housing situation creates a need for extended
assistance. As a result, States could advise a victim that the family
will receive an extension for as long as necessary if the family
accrues 60 months of assistance.
We encourage States to give victims the assurance they need that:
(1) They will not be cut off assistance when they reach the Federal
time-limit if they still need assistance; and (2) they will be able to
return for assistance if the need recurs. Such assurances are important
because they will alleviate pressure on victims to take steps that
might jeopardize their personal or their family's safety. We intend to
defer to State judgments on the need for such waivers and the length of
time such waivers are needed. For example, if a State granted a waiver
that extended a family's eligibility for assistance based on the length
of time that the victim was unable to participate in work activities,
we would recognize a State waiver that extended assistance for that
period of time.
The disaggregated data reporting will indicate those cases whose
time limit has been extended based on a federally recognized domestic
violence waiver, as reported by the State. (We will also get
information on the aggregate number of waivers granted under the annual
report.)
As we have stated previously, we remain concerned that individuals
granted waivers receive appropriate attention from TANF staff, access
to services, and appropriate consideration of their safety issues.
Therefore, we have added new annual reporting requirements at
Sec. 265.9(b)(5) that should give us insight into actual State practice
in these waiver cases and tell us how frequently such waivers are being
granted. In addition, at Secs. 260.54, 260.58, and 260.59, we have
specified that a State may receive special penalty consideration under
these regulatory provisions if it submits this information. The primary
purpose for creating criteria for Federal recognition of a State's good
cause domestic violence waivers was to set in place a structure for
ensuring that victims receive appropriate alternative services. In
addition, the reporting will provide a public description of the basic
strategies that the State has put in place.
Comment: A few commenters expressed concern about the proposed
language in Sec. 274.3 that appeared to require that the victim of
domestic violence receive both a hardship exemption from the 60-month
time limit and a separate good cause domestic violence waiver based on
inability to work. The language in the NPRM stated that, in order to
qualify for exclusion from the calculation of work participation rates,
families must have good cause domestic violence waivers that were in
effect after the family received a hardship exemption from the limit on
receiving assistance for 60 or more months. They expressed concern that
the effect of this requirement would be that a State wishing to use the
FVO must include domestic violence as part of the hardship extension
criteria. Commenters stated that this is not supported by law and could
result in some States not being able to benefit from the penalty relief
that we were trying to provide.
Response: The language in the NPRM apparently did require that both
a hardship exemption and a good cause domestic violence waiver be in
effect. We agree with the commenters that waivers should not have to
meet both requirements, and we have deleted the problematic language
from the final rule.
(g) Confidentiality
Comment: A large number of commenters expressed concerns about the
lack of attention paid to confidentiality. Commenters argued that
individual case files should not be kept. Such files could have a
negative effect on victims, potentially discouraging them from seeking
services and even endangering them, if special attention is not paid
toward protecting the files. They asked us to clarify in both the
preamble and final regulation that we would neither require nor expect
States to include sensitive information in their files that could
jeopardize a woman's safety or security. They recommended that States
retain and report information in an aggregated form to protect the
anonymity of victims and their children.
Response: We have revised the regulation to incorporate the
statutory language on confidentiality found in the FVO (see
Sec. 260.52). We also encourage States to consider the special needs of
victims of domestic violence and to consult with providers of domestic
violence services as they develop procedures to ``restrict the use and
disclosure of information'' on recipients, pursuant to section
402(1)(A)(iv). The experience of domestic violence service providers
should help shed light on questions such as what information is
sensitive, what particular cautions should be taken with victims of
domestic violence, and what practices work best in ensuring
confidentiality.
We recognize the importance of this issue. However, in order to
administer these provisions and have effective and accountable
programs, it will be necessary for States to maintain records that
identify victims and recipients of good cause domestic violence
waivers. Since it is vital to keep this information, States should
consider whether their standard confidentiality safeguards are
sufficient to protect victims or whether they should institute
additional safeguards. For example, these could include establishing
special safeguards for both computer and paper files, training TANF
staff about the importance of confidentiality for domestic violence
victims and specific procedures to be used in their workplace, using
extreme caution when determining whether to release the whereabouts of
victims to anyone, and handling disclosures of abuse with extreme
sensitivity.
(h) Notice Requirements
Comment: A small number of commenters asked to see language in both
the preamble and the text of the regulation requiring that States
provide TANF applicants written notice when a request for a good cause
domestic violence waiver is denied.
Response: Under section 402(a)(1)(B)(iii), in their TANF plans,
States must set forth objective criteria for fair and equitable
treatment and explain how they will provide opportunities for hearings
for recipients who have been adversely affected. Although we are not
regulating this provision, in light of the restrictions on our
regulatory authority at section 417, we encourage States to send
notices in these cases as a matter of fairness and
[[Page 17747]]
equity and to treat these waiver denials as adverse actions.
E. Recipient and Workplace Protections
Background
A number of commenters expressed concerns that the NPRM focused too
much on penalties and was unacceptably silent on protections for needy
individuals and families, including the protections available through
Federal nondiscrimination and employment laws.
One concern of commenters was that the stringency of the proposed
rules on issues like penalty relief, waivers, child-only cases, and
separate State programs would make it less likely that hard-to-serve
families would receive appropriate services and treatment. Throughout
the final rule you will find responses to this latter concern.
However, commenters also had some specific suggestions as to how we
could incorporate specific protections available in the TANF law and
other Federal laws into these rules. It is this latter set of comments
that we address in this section.
You will find discussion of some related comments and our response
in the sections of the rules dealing with nondisplacement (at subpart G
of part 261) and individual sanctions (at subpart A of part 261).
Comments and Responses
(a) Applicability of Other Federal Laws
Comment: Several commenters noted that there was no reference in
the TANF regulations to the applicability of Federal employment laws to
TANF-funded positions, such as the Fair Labor Standards Act (FLSA), the
Occupational Safety and Health Act (OSHA) and title VII of the Civil
Rights Act. They noted that welfare recipients are not exempted from
such laws; rather they are entitled to a safe, healthy employment
environment, per OSHA, and to equal protection under all other statutes
that apply to the workplace.
We received a number of related comments about the lack of
reference to Federal nondiscrimination laws, including the Americans
with Disabilities Act, Equal Pay Act, and Age Discrimination in
Employment Act.
In both cases, commenters argued that we needed to take a more
active role in the enforcement of these laws. There were a variety of
suggestions about how we should do that.
At one end of the spectrum, commenters want us to speak to the
applicability of such statutes under the TANF program, reference
guidance put out by the Department of Labor and EEOC, inform welfare
systems about existing laws and enforcement procedures, and acknowledge
the role of EEOC in addressing individual complaints.
At the other end were comments saying that we should actively
engage in litigation or promote actions through other agencies with
enforcement authority upon evidence of systemic violations or a pattern
of substantiated complaints. One commenter explicitly indicated that we
could defer to agencies of proper jurisdiction for enforcement.
Response: In the NPRM preamble, we had noted that our proposed
rules did not cover the nondiscrimination provisions at section 408(d)
of the Act. These provisions specify that any program or activity
receiving Federal TANF funds is subject to: (1) the Age Discrimination
Act of 1975; (2) section 504 of the Rehabilitation Act of 1973; (3) the
Americans with Disabilities Act of 1990; and (4) title VI of the Civil
Rights Act of 1964. We had decided not to include the provisions in the
NPRM because ACF was not responsible for administering these provisions
of law, and they were not TANF provisions.
We suggested that individuals with questions about the requirements
of the nondiscrimination laws, or concerns about compliance of
individual TANF programs with them, should address their comments or
concerns to the Director, Office of Civil Rights, Department of Health
and Human Services, 200 Independence Ave, SW, Room 522A, Washington, DC
20201.
We recognize that this language and approach did not adequately
represent this Administration's commitment to the enforcement of civil
rights and labor laws. In that context, we have decided that we should
focus more attention on these protections in the final rule. We can do
that without violating section 417 (in letter or spirit) or interfering
with the jurisdiction of other Federal agencies. In light of the
concerns raised in these comments, we believed it would be helpful to
include the nondiscrimination provisions referenced at section 404(d)
of the Act in the regulation. They appear at Sec. 260.35(a).
In Sec. 260.35(b), you will find new regulatory language designed
to further clarify the protections applicable to TANF programs and
activities. In this new clarifying language, we make the point that
section 417 of the Act does not limit the effect of other Federal laws,
including those that provide workplace and nondiscrimination
protections. We also indicate that Federal employment laws and
nondiscrimination laws apply to TANF beneficiaries in the same manner
as they apply to other workers.
Based on comments we received in this subject area and on some of
the fiscal issues being raised, we were concerned that some States were
reading the limitations in section 417 more broadly, in effect to free
States from all provisions of Federal law, except those in the new
title IV-A. In fact, section 417 only limits regulation and enforcement
of the TANF provisions. It does not affect the applicability of other
Federal laws or the authority of other Federal agencies to enforce laws
over which they have jurisdiction.
In addition to adding this new regulatory text at Sec. 260.35, we
added a new reporting requirement at Sec. 265.9(b)(7). Under this
provision each State must include a description of the grievance
procedures that are in place in the State to resolve complaints that it
receives about displacement.
Each State must create nondisplacement procedures under section
407(f) of the Act. This provision and the related provision at section
403(a)(5)(J) of the Act (which applies to the WtW program) reflects
long-standing concern among unions, labor groups, and others about the
possibility that placement of welfare recipients at work sites could
displace other workers from their jobs.
States also are concerned about displacement because of its
potential negative effect on their labor force and the long-term
success of their TANF programs. At the same time, States are facing
economic and programmatic pressures to move applicants and recipients
into the workforce. For example, they want to avoid work participation
rate and time-limit penalties, and they want to increase their job
placements in order to qualify for a High Performance Bonus. In light
of these countervailing pressures, we believe that it is important that
we monitor State activity in this area. Thus, we are asking for
information on the procedures available in the States to protect
against displacement. We will incorporate a summary of this information
on nondisplacement procedures as part of the characteristics of State
programs that we feature in the annual report to Congress (pursuant to
section 411(b)(3)). We can also make the descriptions publicly
available to interested parties within the State.
To the extent that a State includes such a description in its State
TANF plan, it could merely cross-reference the plan material in the
annual report. It
[[Page 17748]]
would not need to resubmit the information.
In addition to these specific regulatory changes, we encourage
States to exercise due care as they promote work and implement new job
development, placement, and referral activities. They should not use
TANF programs in any way that would cause displacement or compel people
to endure discriminatory work places, unsafe work environments, or
unfair work conditions in order to obtain assistance.
There is a potential that States without adequate nondisplacement
procedures may have an unfair advantage in obtaining job placements.
Therefore, as we work on developing proposed rules for the High
Performance Bonus, we will consider State grievance procedures or the
record of a State with respect to displacement complaints as potential
factors in determining eligibility for, or the size of, a High
Performance Bonus. We look forward to receiving public comments on this
issue and other issues when we publish the High Performance Bonus NPRM
shortly.
Finally, we wanted to use this opportunity to provide additional
information to State agencies, employers, and the public about the
workplace and nondiscrimination protections that do apply in TANF. We
will not attempt to provide detailed information on how various other
Federal laws would apply to the TANF program or to TANF recipients.
Rather, our goal is to give enough background information so that
readers will understand the basic context and know where to go for
further information.
As commenters pointed out, the four Federal laws that are cited in
section 408(d) of the Act are not the only Federal nondiscrimination
and employment laws that are applicable to, and relevant for, the TANF
program. Other laws that may come into play include the Fair Labor
Standards Act (which covers issues like minimum wage and hours of
work), the Family and Medical Leave Act, the Occupational Safety and
Health Act, title IX of the Education Amendments of 1972, title VII of
the Civil Rights Act of 1964 (title VII), and the Equal Pay Act. A
variety of Federal agencies are responsible for enforcing these laws,
and the enforcement tools available differ by program.
The Department is developing guidance that will provide an overview
of the applicable civil rights laws and the enforcement mechanisms for
each. We advise you to consult this guidance for information on which
Federal agencies have jurisdiction over which types of complaints; for
example, as one commenter pointed out, the Department's Office of Civil
Rights may be the appropriate reference for certain issues, but the
EEOC generally handles individual complaints of employment
discrimination. We will provide access to the guidance through the Web,
when it is available.
The U.S. Department of Labor (DOL), and the Equal Employment
Opportunity Commission (EEOC) have also issued guidance on the
applicability of Federal discrimination and employment laws to welfare
recipients. In part, this guidance indicates that welfare recipients
participating in certain types of activities may be ``employees'' and
thus covered by the FLSA, OSHA, and title VII. You may access these two
documents through links on our Web site. The DOL guidance is entitled
``How Workplace Laws Apply to Welfare Recipients (May 1997),'' and the
EEOC guidance is entitled ``Enforcement Guidance: Application of EEOC
Laws to Contingent Workers Placed by Temporary Employment Agencies and
Other Staffing Firms (Dec. 3, 1997).''
Likewise, the Internal Revenue Service (IRS) has issued guidance on
the ``Treatment of Certain Payments Received as Temporary Assistance
for Needy Families (TANF).'' IRS Notice 99-3, dated December 17, 1998,
addresses the treatment of TANF payments under certain income and
employment tax provisions. For example, it notes that, under the
Internal Revenue Code, earned income for Earned Income Credit (EIC)
purposes does not include amounts received for service in community
service and work experience activities, to the extent that TANF
subsidizes those amounts. It also specifies the conditions under which
TANF payments would not be includible in an individual's gross wages,
would not be earned income for EIC purposes, and would not be wages for
employment tax purposes.
(b) Effect on Recipient Sanctions and State Penalties
Comment: We received a couple of comments saying that our
regulations should provide that a person whose failure to comply with
work participation requirements is caused by a violation of employment
standards (e.g., a woman who leaves her job due to unremedied sexual
harassment) may not suffer reduction or elimination of assistance,
under section 407(e). Likewise, a few commenters suggested that we
provide that State definitions of good cause (e.g., for failure to
participate in work or meet responsibilities under an Individual
Responsibility Plan) include workplace rights and/or discrimination
situations.
Response: We have not directly required States to provide a good
cause exception from the sanction provisions, as some of these comments
suggest, because it is not clear that we have the authority to do so.
Section 417 generally limits our regulatory authority, and the language
at the end of section 407(e) indicates that State sanction decisions
are ``subject to such good cause and other exceptions as the State may
establish.'' Thus, we believe that we should defer to State decisions
on the specific definition of ``good cause.''
At the same time, we do not want to see TANF programs fostering
work or participation that is in violation of Federal law. If we learn
that violations are occurring, we will pursue additional enforcement,
administrative, regulatory, or legislative remedies, as appropriate.
Comment: A commenter also suggested that we deny reasonable cause
and penalty relief if a State does not have an adequate process in
place for recipients to raise good cause.
Response: We have not made any changes to our regulation in
response to this comment. Section 402(a)(1)(B)(iii) requires that the
State plan must explain how the State ``will provide opportunities for
recipients who have been adversely affected to be heard in a State
administrative or appeal process.'' Also, as we previously mentioned,
section 407(e) indicates that States have discretion in establishing
rules on good cause exceptions to sanctions. In light of these
provisions, section 417, our lack of plan approval authority, and the
general expectation under the TANF statute and rules that States will
have discretion in deciding how services are delivered, we do not think
it be appropriate to regulate a State's good cause process in this
manner.
Comment: A couple of commenters said that we should not penalize
States for failing to meet work requirements when their failure could
be attributed to compliance with certain laws, such as employment
discrimination. A related set of comments was that we should consider
State efforts to comply with employment laws in determining whether a
State gets reasonable cause or penalty reduction. For example, one said
we should require States to develop ``an effective enforcement plan for
the employment rights of recipients in work programs'' that include
monitoring of laws as a prerequisite for getting a reduced penalty
under Sec. 261.51(a). One commenter said we should deny reasonable
cause and penalty reductions if the State has no system in place for
[[Page 17749]]
monitoring and enforcing of compliance.
Response: We have not included any changes in our regulation in
response to these comments. First, it was not clear to us that we
should reward States for complying with other Federal laws. We thought
it would be better to start with the presumptions that: (1) All States
would comply with applicable Federal laws; and (2) we should rely on
the procedures available under those other laws as the appropriate
mechanisms for promoting compliance. We also had concerns about how we
could incorporate such factors into our penalty determination
decisions. We would not want to be making independent judgments about
the level of State compliance with laws for which other agencies had
jurisdiction. Further, it would be difficult for us to get timely,
complete, and definitive compliance information from other agencies.
Looking beyond Federal law to State and local laws would exacerbate
these difficulties. Furthermore, we would have little assurance that
official actions on official complaints accurately represented the
overall level of compliance within the State, and we would have
difficulty developing objective standards that would help convert
evidence on violations--or State efforts to comply or enforce
compliance--into objective, quantifiable standards.
(c) Procedural Requirements
Comment: A few commenters suggested that we require States to
inform recipients of their rights and/or procedures for addressing
violations. One commenter said we should require that staff be informed
as well. One commenter also said we should require posting of
appropriate nondiscrimination notices following the model under title
VII of the Civil Rights Act.
Response: We recognize the value of providing full information to
recipients, staff, and employees on these matters. However, we do not
believe that imposing these requirements would be consistent with
section 417 of the Act or the basic principle of State flexibility of
the TANF legislation. Through the efforts by our Office of Civil Rights
and other Federal agencies, we are making information on protections
more widely available to the public, but in a framework more consistent
with the TANF legislation.
You can find additional discussion about workplace protections in
the preamble for part 261.
F. Comments Beyond the Scope of the Rulemaking
General
A few comments we received were outside the scope of this
rulemaking. However, we wanted to take the opportunity to speak briefly
to them in this preamble because they raise important TANF issues that
merit discussion.
Special Issues
(a) Work Standards
Comment: We received some comments expressing concerns about the
statutory provisions--most notably about the work participation rate
requirements. Readers noted two specific concerns--their failure to
recognize certain kinds of educational activities as participation and
the inordinately high standards applicable to two-parent families.
Response: While certain policy decisions in this regulation respond
to these concerns, to the extent that they represent statutory, and not
regulatory, issues, they are beyond the scope of this rule. You may
find additional discussion of this issue and our response in the
preamble and rules for part 261.
(b) Drug Testing
Comment: One organization expressed its opposition to urine drug
testing, provided a number of suggestions about guidelines we could
issue to protect clients against unfair sanctions, asked that we
promulgate guidance to States on how to conduct testing in a way that
ensures the due process rights of clients, and suggested that treatment
for addiction would be a more cost-effective approach than sanctions,
in the long run, for States. It also asked that we remind States that
the law allows sanctions only against the person who tests positive,
not other family members.
Response: We are working with the Substance Abuse and Mental Health
Services Administration (SAMHSA) on developing guidance and technical
assistance materials that will help States deal effectively and
appropriately with needy families that have substance abuse problems.
In fact, we have developed an action plan of activities that we could
undertake jointly with SAMHSA. Under that plan, we are co-sponsoring
some sessions on substance abuse and welfare reform as part of our FY
1999 ``Promising Practices'' Conferences.
Regarding the commenter's last point, we assume the commenter is
referring to section 902 of PRWORA, which says that the Federal
government would not prohibit States from sanctioning welfare
recipients who test positive for use of controlled substances. Clearly,
this language envisions that sanctions in such cases would not extend
beyond the individual to other family members.
Technically, we could claim the authority to regulate this
provision because the limits to our regulatory authority at section 417
cover only those provisions in part IV-A of the Act. (Part IV-A of the
Act incorporates section 103(a) of PRWORA, but not section 902 or the
other sections.) However, requiring States to continue TANF benefits to
other family members would contravene the intent of section 401(b) of
the Act, which eliminates the entitlement to assistance under TANF, and
the spirit of the TANF statute, in giving States discretion in deciding
which families should receive benefits. Thus, while we might advise
against sanctioning other family members, we decided not to regulate
State decisions in this area.
(c) State Plan Requirements
Comment: One commenter asked that our regulations include specific
requirements about State plan descriptions, due process, and
notifications to recipients.
Response: In general, these are areas where we do not have clear,
direct regulatory authority. However, there are places in the final
rule where we have made changes that address this concern. One is in
the section dealing with MOE expenditures. Because MOE expenditures
must be made on behalf of ``eligible families,'' in order for us to
determine if State MOE expenditures are ``qualified expenditures,''
State plans must contain information on how the State defines ``needy
families.'' The revised rule at Sec. 263.2(b) contains a reference to
this State plan requirement. Also, in the sections of the rule and
preamble that deal with appropriate implementation of the work sanction
provisions (Secs. 261.54 through 261.57), we draw a connection between
the adequacy of a State's notification and hearings processes and its
eligibility for penalty relief. We believe these provisions are clearly
within our regulatory authority, because of their connection to penalty
enforcement, even though we do not have general regulatory or
enforcement authority in these areas.
However, we would point out to States that the absence of
regulation does not eliminate the requirements as the statute does
address State responsibilities in these areas. Under section
402(a)(1)(B), the State plan must
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set forth objective criteria for the delivery of benefits and the
determination of eligibility and for fair and objective treatment. It
must also explain how the State will provide opportunities for
recipients who have been adversely affected to be heard in a State
administrative or appeal process. Section 402(b) requires that States
must notify the Secretary of plan amendments within 30 days, and
section 402(c) requires that States make summaries of the plan and plan
amendments available. Section 407(e) provides that State penalties
against individuals (i.e., sanctions) are subject to such good cause
and other exceptions as the State establishes, and it prohibits
penalties against single custodial parents with children under age 6
who refuse to work and have a demonstrated inability to obtain needed
child care.
(d) Tribal Issues
Comment: We also received a couple of comments concerned about the
Tribal regulations and the consultation process used in that
rulemaking.
Response: We have referred those comments to the Division of Tribal
Services in the Office of Community Services for further consideration.
At the same time, we would like to address a couple of concerns raised
by the comments.
Comment: One commenter asked that we require States to coordinate
with Tribes as part of the planning process. Another noted that the
proposed rule did not provide specific mechanisms for building State-
Tribal relationships. The commenter indicated that history of State-
Tribal relationships over the past 200 years was primarily negative and
suggested we add specific financial penalties or sanctions to foster
cooperation.
Response: We believe it would be contrary to the spirit of this
legislation and the restrictions placed on our regulatory authority by
section 417 to require States or Tribes to take specific actions in
this area. However, as indicated by our subsequent comments on State-
Tribal coordination, for welfare reform to succeed in Indian country,
States and Tribes need to work together in addressing administrative,
economic, and service delivery issues. Thus, we have spent some time
trying to identify ways to make coordination between States and Tribes
easier and more beneficial, and we have included a few provisions in
this rule designed to foster better coordination. More specifically,
this rule: (1) allows State contributions to Tribal TANF programs to
count towards the State MOE; (2) exempts individuals covered by Tribal
TANF reporting from the State case-record reporting sample; and (3)
gives States an option whether to include individuals in Tribal
programs in the State work participation rate calculations. Also, we
continue to look for opportunities outside of this rule--such as in our
technical assistance and outreach initiatives--to enhance coordination
of State and Tribal programs.
Comment: One commenter spoke about the concerns of Tribes and
Tribal organizations in meeting the proposed TANF data collection and
reporting requirements, in light of the limited resources available to
Tribes. The commenter said that these requirements might prevent Tribes
from implementing their own TANF programs and place those who do
participate at risk of sanction. Because Tribes lack the same
infrastructure as States, we should provide them administrative
resources.
Response: Because the statute imposes the same reporting
requirements on Tribes as States and specifies many of the data
elements that must be reported, we have limited ability to reduce the
reporting burden for Tribes. However, we have made a few adjustments,
as we discuss in part 265. Also, we would point out that: (1) there are
some reports that Tribes do not have to submit, including the MOE-SSP
data report, which is inapplicable to Tribal programs; (2) Tribes are
not subject to a penalty if they fail to submit complete, accurate, and
timely reports; (3) in these rules, we try to facilitate State support
of Tribal programs in the form of MOE expenditures, systems support,
and infrastructure; and (4) we will be providing technical assistance
to Tribal programs to help address their infrastructure needs.
G. Additional Cross-Cutting Issues
Pregnancy Prevention
Comment: One commenter asked that we address pregnancy prevention
in the rules.
Response: This issue did not get much direct attention in the NPRM
because of the scope of the regulatory package and our limited
regulatory authority. However, it is clear from the statement of
findings in section 101 of PRWORA, the stated TANF goals at
Sec. 260.20, the preamble discussions on allowable uses of Federal and
MOE funds, and activities underway outside the scope of these rules
that: (1) the TANF legislation recognizes out-of-wedlock pregnancy
prevention as a critical component of welfare reform; and (2) subject
to some general restrictions, States may spend Federal TANF and State
MOE funds on pregnancy prevention efforts.
Because of the significance of this issue, in the final rule, we
have added a limited amount of new reporting to capture information on
State activities related to out-of-wedlock pregnancies. First, at
Sec. 265.9(b)(8), as part of their annual report, we are asking States
to include a description of the out-of-wedlock pregnancy prevention
activities they provide under their TANF program. Second, in the TANF
Financial Report, we are asking States annually to provide a break-out
of their expenditures on these activities--to the extent that such
expenditures are not reflected in other reporting categories. (We have
added similar requirements for reporting on activities related to the
formation and maintenance of two-parent families.)
The TANF bonus provisions, which are the subject of separate
rulemakings, also address this concern. First, there is a bonus under
section 403(a)(2) for States that achieve the greatest reductions in
their rates of out-of-wedlock childbearing (without increasing their
abortion rates). We will also be considering inclusion of pregnancy
prevention measures as we develop proposed rules for the High
Performance Bonus, awarded under section 403(a)(4).
We would also point out that, under section 413(e) of the Act, we
must rank States based on their rates of out-of-wedlock births for
families receiving TANF assistance and conduct annual reviews of those
States with the highest and lowest rankings. The TANF Data Report
contains data collection related to this provision.
Program Coordination
Comment: One commenter complained that the lack of coordination
between the U.S. Department of Agriculture and the Department of Health
and Human Services shackled State efforts to meet Federal agency goals.
Response: We have worked diligently over many years to deal with
some of the program inconsistency issues that have created
administrative problems for States. We will continue our interagency
efforts to coordinate program policies and minimize inconsistencies
through active dialogue with the Department of Agriculture.
Rural and Transportation Issues
Comment: One commenter offered several suggestions in response to
concerns about the effects of TANF in rural areas, including: (1) a
rural set-aside of TANF evaluation funds to
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determine whether there were inequities for rural areas; and (2) the
use of existing rural networks to provide information on the effects of
welfare reform in rural areas and lessons learned.
The commenter also suggested that we set guidelines for State
implementation in rural areas.
The commenter's final suggestion was that we come up with a method
to encourage innovative programs in rural areas as an alternative to
State waivers or exemptions of rural residents.
Response: We referred the first two comments to the Director of the
Office of Planning, Research and Evaluation for further consideration.
At the same time, we would point out that a critical part of our
overall research strategy is to ensure that our studies cover a broad
diversity of geographic and demographic situations so that we can get a
fuller understanding of the effects of our programs. In that context,
in July of 1998, we announced that we would be awarding grants to State
agencies to stimulate research of emerging approaches for welfare
reform programs and policies in rural America. In the first phase of
this project, we have awarded planning grants to increase knowledge
about current rural strategies, develop new strategies that can be
tested, and design evaluations for assessing these strategies.
Contingent upon the availability of funds, we would then enter a second
phase to fund implementation and evaluation activities.
With regard to rural implementation, we believe that setting
guidelines would violate the principle of State flexibility in TANF and
the restrictions on our regulatory authority at section 417. However,
we will give consideration to rural concerns as we continue to develop
our research and evaluation, technical assistance, and outreach
agendas.
One of our goals in developing our technical assistance and
outreach strategies is to foster efforts that help programs reach all
families, including those in isolated communities. An area where we
have made significant early progress is in the area of connecting needy
individuals to work through more innovative uses of transportation
resources and networks. We have been working with the Departments of
Labor and Transportation to identify how new and existing resources can
be used to address the transportation needs of low-income families and
to highlight innovative approaches that have been developed at the
community level. We expect these activities to develop further in
response to the new Job Access program authorized under the
Transportation Equity Act. You can find additional information on these
transportation initiatives, including guidance on how TANF and other
funds can support these activities and descriptions of program models,
through the ACF Web site.
Comment: We received a related comment from a national public
transportation group, which urged that TANF plans be developed at the
local level with local public transit systems and metropolitan
transportation planning organizations.
Response: We recognize the value of these local collaborations and
are working on a variety of fronts to foster them. However, we have not
included anything in our rule to require them because such a
requirement would be beyond the scope of this rule and inconsistent
with the limits of our regulatory authority at section 417.
Introduction to Section-by-Section Discussion
Following is a discussion of the regulatory provisions we have
included in this package. The discussion follows the order of the
regulatory text, addressing each part and section in turn.
V. Part 260--General Temporary Assistance for Needy Families (TANF)
Provisions (Part 270 of the NPRM)
Subpart A--What Provisions Generally Apply to the TANF Program?
This subpart of the rules helps set the framework for the rest of
the rule. For the convenience of the reader, it reiterates the goals
stated in the new section 401. It also includes a set of definitions
that are applicable to this part.
We received no comments on this section and have made no changes in
the final rule.
Section 260.10--What Does This Part Cover? (Sec. 270.10 of the NPRM)
This section of the rules indicates that part 260 includes
provisions that are applicable across all the TANF regulations in this
rulemaking.
We received no comments on this section and have made no changes in
the final rule.
Section 260.20--What Is the Purpose of the TANF Program? (Sec. 270.20
of the NPRM)
This section of the rules repeats the statutory goals of the TANF
program. In brief, they include reducing dependency and out-of-wedlock
pregnancies; developing employment opportunities and more effective
work programs; and promoting family stability.
While we did not elaborate on the statutory language in the
proposed rule, in the preamble we pointed out that, in a number of
ways, the new law speaks to the need to protect needy and vulnerable
children. We advised States to keep this implicit goal in mind as they
implement their new programs.
Comment: A couple of commenters argued that we should do more in
our rules to promote job preparation and/or marriage. One expressed
explicit concern about the negative effect of the two-parent work
participation rate on State support for two-parent families.
Response: This section of the regulation directly incorporates the
statutory language and reflects the premise that States need and merit
flexibility in deciding how to meet these goals. However, we have
incorporated policies in other sections of the regulation to support
State efforts in these areas. For example, our policy to let States
define work activities will enable States to better support job
preparation. Likewise, we have limited disincentives for States to
serve two-parent families in TANF under our policy to limit the
potential penalty States face when they fail only the two-parent
participation rate (i.e., by basing the penalty on the proportion of
the total caseload that two-parent cases represent). Also, we revised
the calculation of caseload reduction credits in a couple of ways that
address the commenters' latter concern. First, we allow the State an
option of applying a credit based either on the two-parent caseload or
on the overall caseload. Secondly, we provide for offsets in cases
where the State has made eligibility changes that have the effect of
increasing the caseload.
We have also made changes to help focus more attention on State
efforts to promote the formation and maintenance of two-parent
families. In recognition of the significance of this issue, we have
added a limited amount of new reporting to capture information on State
activities in this area. First, at Sec. 265.9(b)(8), as part of their
annual report, we are asking States to include a description of their
activities to promote two-parent families. Second, in the TANF
Financial Report, we are asking States annually to provide a break-out
of their expenditures on these activities--to the extent that such
expenditures are not reflected in other reporting categories. (We have
added similar requirements for reporting on activities related to the
prevention of out-of-wedlock pregnancies.)
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In a related effort, the formula that we created to award high
performances, under separate guidance, encourages State efforts to
prepare recipients for work, by setting aside a substantial share of
the monies for States whose recipients succeed in the workplace (i.e.,
retain jobs and show earnings gains).
Section 260.30--What Definitions Apply Under the TANF Regulations?
(Sec. 270.30 of the NPRM)
General Explanation
(a) Scope
This section of the rule includes definitions of the terms used in
parts 260 through 265. It also includes references to definitions that
pertain only to individual parts or provisions. You can find the
definition of terms that are specific only to individual parts or
provisions in the appropriate individual parts of the final rules.
In drafting this section, we defined only a limited number of terms
used in the statute and regulations. We understood that excessive
definition of terms could unduly and unintentionally limit State
flexibility in designing programs that best serve their needs.
Commenters were generally supportive of this approach, but had specific
concerns about specific terms, that we address below.
(b) General Terms to Note
In the proposed rule, we pointed out our use of the term ``we''
throughout the regulatory text and preamble--to mean the Secretary of
the Department of Health and Human Services or any of the following
individuals or agencies acting on her behalf: the Assistant Secretary
for Children and Families, the Regional Administrators for Children and
Families, the Department of Health and Human Services, and the
Administration for Children and Families.
We also cited the terms ``family'' and ``head-of-household'' as
examples of terms that we did not define. We said that States were thus
free to define what types of families would be eligible for TANF
assistance. (However, we also advised readers to look at several
sections of the proposed rule because, while not defining the term
``family,'' they addressed key requirements on the State that related
to the State's definition. These sections included: work participation
rates (Secs. 271.22 and 271.24 of the NPRM), MOE requirements (subpart
A of part 273), time limits (Sec. 274.1), and data collection
definitions (Sec. 275.2). We received a number of comments on the
proposed policies in these related areas, including the proposed
provisions on child-only cases. Thus, you will find related discussion
in those other sections of the preamble.)
In the final rule, we have added a definition of noncustodial
parent. It clarifies that, under TANF, this term is not used in the
narrow legal context to refer to parents lacking legal custody, but to
parents who do not live in the same household as the minor child. It
also does not refer to parents who live outside the State and are
beyond the reach of the State's TANF program. We felt it was necessary
to include a basic definition because we received so many questions
about how the TANF rules on expenditures, data collection, work
requirements, and time limits applied to this group of individuals. You
will find additional discussion of noncustodial parent issues
throughout the preamble that follows.
We decided not to define the individual work activities that count
for the purpose of calculating a State's participation rates. We
directed readers to the preamble discussion for Sec. 273.13 and subpart
C of part 271 in the NPRM, respectively, for additional discussion.
While commenters generally supported our decision not to define work
activities, we received a few comments in this area. We discuss these
comments in the preamble to subpart C of part 261. (NOTE:
The reference to Sec. 273.13 in the NPRM preamble was incorrect,
and we deleted it.)
For reference purposes, we noted the use of the term ``Act'' to
refer to the Social Security Act, as amended by the new welfare law,
and ``PRWORA'' for the new law itself. Any section reference is a
reference to a Social Security Act section, unless otherwise specified.
This part incorporates the major definitions from the PRWORA
statute, including: ``adult,'' ``minor child,'' ``eligible State,''
``Indian, Indian Tribe and Tribal organization,'' ``State,'' and
``Territories.'' (Readers should note that the term ``State'' includes
the ``Territories,'' unless specifically noted.) We include these
definitions largely for the readers' convenience.
This part also incorporates some clarifying definitions, commonly
used acronyms (such as ACF, AFDC, EA, IEVS, JOBS, MOE, PRWORA, TANF,
and WtW), and commonly used terms and phrases (such as the Act and the
Secretary). While the meaning of many of these terms is generally
understood, we included them to ensure a common understanding and
enable some reductions in regulatory text.
(c) Significant Fiscal Terms
This part also incorporates a number of definitions that have
substantial policy significance, which we included for clarification
purposes. For example, it incorporates terms that distinguish among
several types of expenditures. These distinctions are critical because
the applicability of the TANF requirements vary depending on the source
of funds for the expenditures. In particular, it distinguishes between
expenditures from the Federal TANF grant and from the State funds
expended to meet MOE requirements (either within the TANF program or in
separate State programs), as follows:
Federal expenditures. This is short-hand for the State expenditure
of Federal TANF funds.
Qualified State Expenditures. This term refers to expenditures that
count for basic MOE purposes (at section 409(a)(7)). (By regulation,
many, but not all, of the requirements that apply for countable basic
MOE expenditures also apply for Contingency Fund MOE purposes.)
Basic MOE. This term refers to the expenditure of State funds that
a State must make in order to meet the basic MOE requirement for the
TANF program and avoid the penalty specified at section 409(a)(7). (In
the NPRM, we used the term ``TANF MOE,'' but we changed the term in
response to comments and concerns about confusing readers.)
Contingency Fund MOE. This term refers to expenditures of State
funds that a State must make in order to meet the Contingency Fund MOE
requirements under sections 403(b) and 409(a)(10). States must meet
this MOE level in order to retain contingency funds made available to
them for the fiscal year. Note that this term is more limited in scope
than the term ``basic MOE.'' See discussion at subpart B of part 264
for additional details.
State MOE expenditures. This term refers generically to any
expenditures of State funds that may count for basic MOE or Contingency
Fund purposes. It includes both State TANF expenditures and
expenditures under separate State programs, where allowable.
State TANF expenditures. This term encompasses the expenditure of
State funds within the State's TANF program. It identifies the only
expenditures that can be counted toward the Contingency Fund MOE. It
includes both commingled and segregated State TANF expenditures.
Commingled State TANF expenditures. This term identifies the
expenditure of State funds, within the
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TANF program, that are commingled with Federal TANF funds. Such
expenditures may count toward both the State's basic MOE and
Contingency Fund MOE. To the extent that expended State funds are
commingled with Federal TANF funds, they are subject to the Federal
rules.
Segregated State TANF expenditures. This term identifies State
funds expended within the TANF program that are not commingled with
Federal TANF funds. Such expenditures count for both basic MOE and
Contingency Fund MOE purposes. They are not subject to many of the TANF
requirements that apply only to Federal TANF funds (including time
limits).
Separate State program (SSP). This term identifies programs
operated outside of TANF in which the expenditure of State funds counts
toward the basic MOE requirement, but not for Contingency Fund MOE.
Expenditure of State funds must be made within the TANF program in
order to count as MOE for Contingency Fund purposes.
It also incorporates terms to distinguish among different
categories and amounts of TANF grant funds. These distinctions are
important because they affect the size of grant adjustments and total
funding available to the State. In some cases, different spending rules
apply to different categories of funds.
State Family Assistance Grant (or SFAG). This term refers to the
annual allocation of Federal TANF funds to a State under the formula at
section 403(a)(1).
Adjusted State Family Assistance Grant, or ``Adjusted SFAG.'' In
the NPRM, we indicated this term refers to the grant awarded to a State
through the formula and annual allocation at section 403(a)(1), minus
any reductions due to the implementation of a Tribal TANF program to
serve Indians residing in the State. In the final rule, we modified the
definition to also exclude any funds transferred from TANF pursuant to
section 404(d) of the Act. We explain this change in the Comment/
Response section below. The distinction between ``Adjusted SFAG'' and
``SFAG'' is significant in determining spending limitations and the
amount of penalties that might be assessed against a State under parts
261-265.
Federal TANF funds. This term includes not just amounts made
available to a State through the SFAG, but also other amounts available
under section 403, including bonuses, supplemental grants, and
contingency funds. In expending Federal TANF funds, States are subject
to more restrictions than they are in expending State MOE monies, as
discussed under subpart B of part 263. (The NPRM used this term and the
terms ``Federal funds'' and ``TANF funds'' interchangeably.)
(d) Cross-References
In Sec. 260.30, you will find cross-references for the definitions
of ``assistance'' and ``WtW cash assistance.'' In the NPRM, the
definition of ``assistance'' appeared at Sec. 270.30. In the final
rule, we decided to move it to its own separate section. You will find
it in Sec. 260.31. The discussion of the comments on our proposed
definition appears in the corresponding preamble section. ``WtW cash
assistance'' was not defined in the NPRM; in the final rule, it appears
in Sec. 260.32.
In the NPRM, we included definitions for the terms ``Family
Violence Option (FVO),'' ``good cause domestic violence waiver,'' and
``victim of domestic violence'' in section Sec. 270.30 and explained
them in this section of the preamble.
In the final rule, Sec. 260.30 only contains cross-references for
the definitions of the domestic violence terms. As we discussed earlier
in the final rule, we have moved the domestic violence provisions to a
new subpart B of part 260. The definitions appear at Sec. 260.51. For
the discussion of these provisions, you should go to the earlier
preamble section entitled ``Treatment of Domestic Violence Victims.''
Likewise, in the final rule, we have moved the waiver definitions
(including the definitions of ``waiver'' and ``inconsistent'') to a new
subpart C of part 260. For the discussion of the waiver definitions and
waiver policies, you should go to the earlier preamble section entitled
``Waivers.''
We received a few comments on the definition of child care terms
that are relevant to the issue of whether single parents with children
under age 6 may be sanctioned for failing to meet work requirements.
For a discussion of those comments, you should go to Secs. 261.56 and
261.57.
Finally, we would like you to note that we added a reference to
Sec. 263.0(b), which contains a definition of ``administrative costs.''
We decided not to define ``information technology and computerization
costs needed for tracking or monitoring required by or under title IV-A
of the Act.'' However, we do provide some regulatory language to
explain the scope of the exclusion at Secs. 263.2(a)(5) and 263.13(b).
You will find a discussion of this language in the preamble for
Sec. 263.0. (These terms are important because States are subject to
15-percent caps on the amount of Federal TANF and State MOE funds that
they may spend on administrative activities, exclusive of such
computer-related costs.)
Additional Definitional Issues in Sec. 260.30
(a) Fiscal Terms
Comment: A few commenters pointed out that the proposed rule had an
apparent inconsistency in that the base for determining the
administrative cost cap and the base for determining penalty amounts
were different in States that chose to transfer funds to CCDBG (the
Discretionary Fund of the CCDF).
Response: Not all commenters presented this as a definition
comment, but we think the appropriate place to address it is by
revising the definition of the ``adjusted SFAG.'' The revised
definition excludes amounts transferred to SSBG and the Discretionary
Fund of the CCDF. This change has the effect of removing the
transferred amounts from the base for both the administrative cost cap
and the penalty calculations. We believe the exclusion is most
consistent with the statutory provision at 404(d), which provides that
transferred amounts are subject of the rules of the program to which
they are transferred. You can find additional discussion of this issue
in the preamble for Sec. 263.0.
Comment: One commenter indicated that we had too many financial and
program terms in the list of definitions and asked that we delete some.
Of particular concern were: (1) the distinction between SFAG and TANF
funds; and (2) State MOE expenditures versus State TANF expenditures,
TANF funds and TANF MOE. The commenter recommended that a different
term be used for either TANF MOE or State MOE expenditure.
Response: First, while ``SFAG'' and ``TANF funds'' are similar
terms, they are not identical. It is important to make and understand
the distinction. ``SFAG'' refers only to the basic Federal TANF block
grant, the amount given to the State based on prior AFDC, JOBS, and EA
payments. ``Federal TANF funds'' refers to Federal funds awarded to the
State under section 403 of the Act, except for WtW funds. It thus
includes any supplemental grants, bonuses, contingency funds. The
``SFAG'' amount (adjusted) is the base amount for determining any
penalties assessed on the State. Most of the provisions on use of funds
apply to all ``Federal TANF funds,'' and thus extend to the funding
provided under section 403, not just the basic TANF block grant amount.
We have modified the definition of Federal TANF funds slightly to
clarify
[[Page 17754]]
that the term does not include WtW funds provided under section
403(a)(5). By statute (section 403(a)(5)(C)(v)), the restrictions on
the use of TANF funds do not generally apply to WtW funds and the
Secretary of Labor is responsible for administering the WtW grants. The
exceptions are the TANF provisions on use of funds for administrative
costs, Individual Development Accounts, and Employment Placement
Programs. The Department of Labor has addressed the restriction on
administrative costs for WtW funds separately in its WtW rules, we have
made a conforming change to our IDA rules (at Sec. 263.21), and we have
not addressed use of WtW funds for Employment Placement Programs
because the TANF rules do not directly address this issue. While the
proposed rule contained three definitions related to maintenance-of-
effort--Contingency Fund MOE, MOE, and TANF MOE, we believe it is best
to keep three terms. Since the statute applies some different rules for
the basic MOE requirement and Contingency Fund MOE, the rules need to
include at least two terms. We included the third term--MOE--because
there are many places where the same rules apply to both types of State
expenditures, and it is more efficient to use the one short acronym
than two longer terms.
As we noted earlier, we did decide to change the term ``TANF MOE''
to ``basic MOE.'' We recognized that the term ``TANF MOE'' could cause
confusion because States could expend funds outside the TANF program in
meeting the basic MOE requirement; the term ``TANF MOE'' suggested that
we were looking only at MOE expenditures under the TANF program.
The proposed rule also contained three terms for Federal TANF
funds--TANF funds, Federal funds, and Federal TANF funds. In this case,
the three terms were duplicative. We chose to eliminate the first two
from the list of terms at Sec. 260.30 and keep the definition for
Federal TANF funds. We have made changes throughout the preamble and
regulatory text to reflect this decision.
Comment: One commenter noted that our definition for ``Contingency
Fund MOE'' contained an incorrect reference to child care expenditures.
Response: The commenter correctly noted that our proposed
definition did not conform to the amendments in the Balanced Budget
Act. We have revised the definition in the rules to remove the
reference to child care expenditures. We also made conforming changes
to the preamble discussion.
(b) Miscellaneous Issues
Comment: One commenter indicated that we needed a definition of
Governor and that we should include the Mayor of the District of
Columbia in that definition.
Response: We have added a standard definition that includes the
Mayor of the District of Columbia and the chief executive officer of
the eligible Territories as well.
Comment: One commenter wanted us to establish a Federal definition
for ``violating a condition of their parole or probation,'' like the
one used in New York State. The commenter's suggestion would have the
effect of limiting the scope of the ``fugitive felon'' provision at
section 408(a)(9) by providing for uniform standards that exclude
certain ``technical violations.''
Response: For several reasons (including the limits to our
regulatory authority under section 417 and existing variations in State
law), we believe that this definition is an appropriate area to leave
to State discretion. Therefore, we have not included a Federal
definition.
Miscellaneous Technical Changes To Note
Finally, we made a few minor changes based on our own internal
reviews. First, we noted that the proposed definition of ``eligible
State'' did not reflect the amendment made by the Balanced Budget Act.
Under PRWORA, as enacted, an ``eligible State'' was one that had
submitted a complete plan in the two-year period immediately preceding
the fiscal year. Under the change, ``an eligible State'' is one that
submitted a complete plan in the ``27-month period ending with the
close of the first quarter of the fiscal year.'' The final rule
incorporates this revised language.
According to the Committee Report (H.R. Rep. No. 78, Part 1, 105th
Cong., 1st sess., p. 38), the purpose of the amendment was to give
States an additional quarter to submit their plans. However, the
meaning of the new statutory language is a little more complicated. If
you would like additional information, you may refer to guidance that
we sent out on May 15, 1998 (OFA-TANF-PA-98-3). A copy of this document
is available through the OFA Web page (at /ofa).
Secondly, we have added some cross-references to terms defined in
other parts of the TANF rules, including ``Individual Development
Accounts'' and ``administrative costs.''
Thirdly, as we have previously discussed, we created a new subpart
A in part 260 for the definitions and other general provisions that
were in part 270 of the NPRM, and we moved the definition of terms
related to domestic violence and welfare reform waivers to new subparts
of part 260. We believe this new structure will make our policies in
these latter areas clearer and more coherent.
Finally, we added definitions for ``Social Services Block Grant,''
``SSBG,'' ``State agency,'' ``CCDBG,'' and the ``Discretionary Fund of
the Child Care and Development Fund'' because these terms were helpful
in describing other provisions of these rules. These definitions are
straightforward references, based on existing statutory and regulatory
language.
Sec. 260.31 What Does the Term Assistance Mean? (New Section)
This is a new section in the final rule. The proposed rule
contained the definition of assistance in Sec. 270.30, with the other
TANF definitions. However, because of the length and significance of
this term, we decided to give it its own section.
(a) Background
In the NPRM we advised readers to note the definition of
``assistance'' proposed in this section. We indicated that PRWORA uses
the terms ``assistance'' and ``families receiving assistance'' in many
critical places, including: (1) most of the prohibitions and
requirements at section 408, which limit the provision of assistance;
(2) the numerator and denominator of the work participation rates in
section 407(b); and (3) the data collection requirements of section
411(a). Largely through reference, the term also affects the scope of
the penalty provisions in section 409. Thus, the definition of
``assistance'' is very important. At the same time, because TANF
replaces AFDC, EA and JOBS, and provides much greater flexibility than
these programs, what constitutes assistance is less clear than it was
in the past.
Because TANF is a block grant, and it incorporates three different
programs, a State may provide some forms of support under TANF that
would not commonly be considered public assistance. Some of this
support might resemble the types of short-term, crisis-oriented support
that was previously provided under the EA program. Other forms might be
more directly related to the work objectives of the Act and not have a
direct monetary value to the family. We proposed to exclude some of
these forms of support from the definition of assistance.
[[Page 17755]]
The general legislative history for this title indicated that
Congress meant for this term to encompass more than cash assistance,
but did not provide much specific guidance (H.R. Rep. No. 725, 104th
Cong., 2d sess.). Likewise, our pre-NPRM consultations did not provide
clear guidance or direction.
In our January 1997 guidance (TANF-ACF-PA-97-1), we expressed the
view that the definition of assistance should encompass most forms of
support. However, we recognized two basic forms of support that would
not be considered welfare and proposed to exclude them from the
definition of assistance. In brief, the two exclusions were: (1)
services that had no direct monetary value and did not involve explicit
or implicit income support; and (2) one-time, short-term assistance.
In the proposed rule, we clarified that child care, work subsidies,
and allowances that cover living expenses for individuals in education
or training were included within the definition of assistance. For this
purpose, child care included payments or vouchers for direct child care
services, as well as the value of direct child care services provided
under contract or a similar arrangement. It did not include child care
services such as information and referral or counseling, or child care
provided on a short-term, ad hoc basis. Work subsidies included
payments to employers to help cover the costs of employment.
We also proposed to define one-time, short-term assistance as
assistance that is paid no more than once in any twelve-month period,
is paid within a 30-day period, and covers needs that do not extend
beyond a 90-day period. In response to the policy announcement, we had
received a number of questions about what the term ``one-time, short-
term'' meant. Based on our experience with the EA program, we realized
that a wide range of interpretations was possible, and we were
concerned that States might try to define as ``short-term'' or ``one-
time'' many situations where assistance was of a significant and
ongoing nature. Thus, we proposed to limit what was excluded as one-
time, short-term assistance to items that were paid no more than one
time a year over no more than a 30-day period for needs that did not
extend beyond 90 days. We expressed the hope that our proposal would
give States the flexibility to meet short-term and emergency needs
(such as an automobile repair), without invoking too many
administrative requirements and undermining the objectives of the Act.
We welcomed comments on whether the proposed policy achieved this end.
In drafting the NPRM, we had considered allowing States to include
additional kinds of benefits and services as assistance, at their
option. However, we were concerned that varying State definitions would
create additional comparability problems with respect to data
collection and penalty determinations. Also, we were concerned that an
expanded definition might have undesirable program effects (e.g., in
extending child support assignment to cases where it would not be
appropriate). Thus, we did not give States the option to expand the
definition.
For those concerned about the inclusion of child care in the
definition of assistance, we pointed out that the child care
expenditures made under the Child Care and Development Fund (CCDF) are
not subject to TANF requirements, and States have the authority to
transfer up to 30 percent of their TANF grant to the Discretionary Fund
of the CCDF program.
We also proposed to collect data on how much of the program
expenditures were being spent on different kinds of ``assistance'' and
``nonassistance.'' We referred readers to the discussion of the TANF
Financial Report at part 275 of the NPRM for additional details.
We said that, if the data show that large portions of the program
resources are being spent on aid that fell outside the definition of
assistance, we would have concerns that the flexibility in our
definition of assistance is undermining the goals of the legislation.
We would then look more closely at the aid being provided outside the
definition and try to assess whether work requirements, time limits,
case-record data and child support assignment would be appropriate for
those cases. If necessary, we would consider a change to the definition
of assistance or other remedies.
Since we issued the NPRM, Congress enacted the Child Support
Performance and Incentives Act of 1998. As we discussed earlier in the
preamble, section 403 of that legislation included several provisions
on the use of Federal TANF funds to help pay for transportation
benefits for welfare recipients under the Job Access program. In a new
section 404(k)(3) of the Social Security Act, there is a ``rule of
interpretation'' indicating that the provision of transportation
benefits to an individual who is not otherwise receiving TANF
assistance, pursuant to these provisions, would not be considered
assistance. We have added a new exclusion to the definition of
assistance to reflect this provision. (Also, as we discuss later, the
final rule incorporates other changes that exclude transportation
benefits for employed families from the definition of assistance.)
(b) Overview of Comments
We received a number of comments supportive of the definition in
our January 1997 guidance and the definition in the NPRM (which was
derived from this guidance).
At the same time, a wide range of commenters--including States,
advocates, and union groups--wanted to see changes to one or both of
our proposed exclusions. A significant number of commenters indicated
that this was one of the most important issues in the NPRM for them.
All these commenters wanted to narrow the scope of benefits that would
be considered within the definition of assistance; many expressed a
particular concern about the treatment of supports for working families
under the definition. Some wanted modest changes to the proposed
definition, while a significant number sought significant additional
exclusions, such as: (1) child care, transportation, and other work
supports; and (2) work-based assistance, such as wage subsidies.
Moreover, subsequent discussions and materials that we have
received suggest increasing concern about the proposed definition over
time, as individuals have had more time to ponder its implications,
States have further explored supports needed by families as they
transition from welfare to work, and commenters have shared their
concerns with other parties.
As the result of these comments, we have made some significant
modifications to the definition of assistance. The modifications
address the concerns of commenters both about the treatment of work
supports and the exclusion for one-time, short-term assistance. We
found substantial merit in the arguments made by commenters in both
areas. Also, as States proceed with their implementation of TANF, they
continue to explore and develop new, innovative ways to support low-
income working families and to address the goals of the TANF program.
As a result, their programs are beginning to look less like traditional
welfare. TANF program requirements were created with a particular
program model in mind. Applying the TANF requirements much more broadly
makes limited policy sense.
Under the narrower definition of assistance in the final rule,
States will have more flexibility in how they serve families--
particularly working families--with their Federal TANF and
[[Page 17756]]
State MOE funds. They will also experience a significant reduction in
the administrative burden associated with serving working families,
providing refundable earned income tax credits, and administering
Individual Development Accounts (because they will not have to provide
disaggregated data in such circumstances).
With the change in the definition of assistance under the final
rule, we will not be collecting disaggregated data on work supports and
other types of benefits and services that are not assistance. To
compensate for this loss, we have significantly revised the TANF
Financial Report by adding a number of new reporting categories. We
have also provided for new information on diversion programs to be
included in the annual report.
At the same time, we remain concerned about the potential impact of
this definition on the achievement of TANF goals. While we believe the
revised definition in the final rule is sound, it is difficult to
envision all of the consequences. Thus, we will monitor State programs
and expenditures and periodically assess whether our definition
continues to support the goals of the program. If aspects of the
definition become problematic, we will pursue appropriate changes.
A detailed discussion of the comments and our policy decisions
follows.
(c) The Appropriateness of a Federal Definition
Comment: A couple of commenters said we should let States create
their own definitions of assistance.
Response: We do not believe this is a viable option. The definition
is too central to all the accountability provisions in the statute. If
we did not define this term, States might define assistance so narrowly
as to undermine the key TANF provisions on child support, work
requirements, and time limits. Also, wide variations in State
definitions would exacerbate issues about the consistency of data
collection, program information, work participation rates, time limits,
and other penalty provisions.
Readers should understand that the definition of assistance does
not substantially impede the flexibility each State has to set
eligibility rules or to expend funds on a broad range of benefits,
services, and supports for needy families in the State. The major
effect of the definition is to determine the applicability of key TANF
requirements to the benefits that a State does elect to provide. It
does not circumscribe the types of allowable benefits; these may be
inside or outside the definition of assistance.
We had indicated in the proposed rule that the definition did not
apply to the MOE provisions at subpart A of part 273. We have included
similar language in the final rule at Sec. 260.31(c)(1). (We also made
a conforming change in that paragraph that references Contingency Fund
MOE as part of this exception). In addition, at Sec. 260.31(c)(2), we
have added language clarifying that the definition of assistance does
not limit the types of benefits and services that States provide to
individuals and families under the first statutory goal of TANF. This
first statutory goal authorizes the provision of assistance, but does
not mention other forms of benefits or services. However, in other
places, the statute specifically authorizes expenditures of State and
Federal funds that are ``in any manner reasonably calculated to
accomplish the purpose'' of the program. Thus, the statute indicates
that the word ``assistance'' needs to be interpreted more broadly in
the context of this first TANF goal. (The new regulatory text refers
only to the first goal of TANF; the other TANF goals do not use the
term ``assistance'' and thus did not require clarification.)
Comment: Although one commenter said the proposed rule
``effectively incorporates'' the policy from the guidance (with
clarification and elaboration), a number of respondents commented that
the proposed definition represented a retreat from the definition
provided in the guidance.
Response: We agree that the changes we proposed in the NPRM related
to the exclusion for ``one-time, short-term assistance'' had the effect
of narrowing what could have been excluded under our policy
announcement. As discussed in the next comment, we have decided to ease
the proposed restrictions on one-time, short-term assistance.
We do not believe that our proposed definition otherwise deviated
from the definition in the guidance. It is our view that benefits such
as child care and transportation subsidies, while not directly
mentioned, were part of the definition of assistance in the January
1997 policy announcement (TANF-ACF-PA-97-1), as they involved subsidies
or other forms of income support. Our intent in inserting the
references to child care and transportation in the NPRM was to provide
a clearer and more complete definition, not to make a substantive
change.
(Nevertheless, as we discuss in the next section, on ``Work Supports,''
the final rule excludes such supports for working families from the
definition of assistance.)
Comment: Several commenters suggested that we should exclude
assistance that was not cash assistance or financial assistance from
our definition.
Response: As we discuss in the following comments, the legislative
history does not support this approach. Rather, for both TANF and WtW,
it suggests that Congress envisioned inclusion of at least some noncash
benefits as assistance. Otherwise, it would have been superfluous to
specifically exclude noncash WtW assistance from the time-limit
requirement. In addition, wholesale exclusion of noncash benefits from
the definition would create some peculiar incentives for States and
could substantially distort their decisions about how to provide
benefits.
(d) Work Supports
Comment: A significant number of commenters called for additional
exclusions from the definition of assistance. While there was a fair
amount of diversity in the specific suggestions, a significant number
of commenters sought exclusions of: (1) assistance that is not like
traditional welfare, but directed at achieving the work objectives of
the Act (e.g., child care, transportation, and other work supports);
and/or (2) work-based assistance, provided as either work subsidies to
employers (especially payments to employers to cover the costs of
supervision and training) or as compensation for work. Many commenters
expressed specific concerns about the appropriateness of child support
assignment and time limits in these cases. A number objected to our
standard of ``direct monetary value.''
Some commenters spoke broadly about excluding work subsidies,
assistance directed at achieving the work objectives of the Act, or
work supports. Others focused on specific items such as child care,
transportation, and earned income tax credits. A few commenters
suggested that we borrow language from the caseload reduction
provisions of the proposed rule and exclude ``cases receiving only
State earned income tax credits, transportation subsidies or benefits
for working families that are not directed at their basic needs.''
We received more comments in support of excluding child care than
for other types of supportive services. Commenters expressed strong
objections to the inclusion of child care, in large part due to
concerns about the time-
[[Page 17757]]
limit implications. They also expressed disagreement with our
proposition that States could transfer funds to the Child Care and
Development Block Grant in order to avoid time limits for child care
benefits; they argued that there were legislative and administrative
barriers associated with these transfers. Some commenters argued that
child care and transportation are not like cash. Since they are not
fungible (i.e., available to meet a family's basic needs), they should
be excluded from the definition of assistance on that basis. Other
commenters said that it was unclear that Congress intended to extend
child support assignment to additional forms of aid, such as child care
and JOBS-related benefits; at a minimum, they requested that we clarify
that States can take an assignment of less than the amount of
assistance.
In addition to some of the prior arguments, the principal arguments
that commenters presented for the exclusion of work subsidies (or
payments to employers to cover the costs of employment and training)
were: (1) such benefits primarily benefit employers, not recipients,
and thus do not have direct monetary value to the family; (2) they
should be viewed as the equivalent of tax credits or like other
expenditures on training; (3) employees may use up their time limit by
going through a series of subsidized jobs from which employers benefit,
but that give employees no prospect of long-term employment; and (4)
their inclusion will create administrative problems and make it
difficult to jointly fund work subsidy programs.
Commenters also presented arguments for excluding assistance for
which recipients worked. They argued that this assistance represented
compensation for work, rather than assistance. Since recipients
``earned'' this assistance, commenters felt that it was inappropriate
for the months to accrue against the time limit on assistance and for
child support assignment to apply.
Response: We agree that there are good arguments for narrowing the
definition of assistance to exclude work supports such as child care
and transportation. While neither the statute nor the legislative
history directly suggests that a significant subset of benefits should
be excluded from the definition, there is also little direct evidence
that Congress intended for time limits and data collection to apply to
an array of new benefits (such as IDAs and new work supports) or to
working families that have not traditionally been part of the welfare
system. Rather, in reforming the welfare program, it seems Congress was
trying to end dependence on welfare as a way of life for families and
to facilitate the ability of families to work and become self-
sufficient. Two of the main effects of defining a TANF benefit as
assistance are to require that a family work so that it can become
self-sufficient and to time limit that assistance. However, a work
requirement is unnecessary if the adult is already working and the
benefit that the family receives is a work support. Further, the need
to time-limit work supports is mitigated since the family is already
moving toward self-sufficiency; working families should eventually
become independent.
One statutory provision that raised questions about Congressional
intent was section 404(k)(3). This provision, which was part of the
Child Support Performance and Incentives Act of 1998, provided a ``rule
of interpretation'' that specified that transportation benefits
provided under Job Access to an individual who was not otherwise
receiving assistance under TANF would not be considered assistance. It
suggests that Congress envisioned transportation to otherwise be
included within the TANF definition of assistance. However, another,
equally viable, interpretation of this Congressional action exists. The
child support legislation was enacted while our interim guidance was in
effect. Thus, Congress could have been providing a clarification of
what was excluded from assistance in that context. In fact, the
legislative history did not express any opinions about the interim
definition in the policy guidance that we had issued (TANF-ACF-PA-97-
1).
You will note that we have incorporated an exclusion that reflects
this specific statutory provision. We recognize that it is largely
duplicative of the general exclusion for work-related supportive
services, including transportation, in Sec. 260.31(b)(3). However, it
is possible that some Job Access transportation benefits are not
covered by the general provisions, and we wanted to ensure that the
statutory exclusion received full weight. Under Sec. 260.31(b)(7),
therefore, we provide a categorical exclusion for transportation
benefits received under Job Access by individuals who are not otherwise
receiving TANF assistance.
The definition in these rules is generally consistent with
commenter suggestions, but more specific in some areas. It provides
that supports for working families (such as child care and
transportation) would be excluded. This exclusion covers supportive
services needed to cover employment-related needs and time spent by an
employed individual in education and training needed for job retention
and career advancement. (As discussed below, the education and training
is also excluded.)
Except as provided in paragraphs (b), the exclusion does not cover
supportive services related to participation in education, training,
job search and related employment activities for nonworking families.
Supportive services provided in this situation look more like
traditional welfare than work supports. Also, the same rationale for
excluding these individuals from the TANF program requirements,
including work participation and time limits, does not exist for these
families as exists for families that are already working.
The education and training activities themselves are generally
excluded under paragraph (b)(6). The one exception would be if
education or training benefits included allowances or stipends designed
to provide income support; these particular types of education and
training benefits would be considered assistance. Also, we would remind
readers that under sections 401 and 407 of the Act education and
training services should be directed at preparing individuals for work
and moving them to self-sufficiency; they should not be of a general
nature.
Our definition also specifies the types of items that would be
considered as part of basic needs. The listed items (food, clothing,
shelter, utilities, household goods, personal care items, and general
incidental expenses) reflect those items that were represented in the
majority of the State needs standards under prior law. The term
``incidental expenses'' covers items States included as part of basic
needs such as telephones; small allowances for child care or
transportation needs associated with keeping appointments, going to the
store, or fulfilling other basic responsibilities; basic supplies for
the medical cabinet; insurance premiums; and miscellaneous fees and
expenses, to the extent consistent with State practice.
The definition excludes contributions to, and distributions from
Individual Development Accounts (IDAs). Although the TANF statute
includes IDA provisions, commenters did not specifically raise
questions about the treatment of IDA benefits under the definition of
assistance. However, interest has grown since the passage of the Assets
for Independence Act (under title IV of Pub. L. 105-285). Since then,
we have received numerous questions from interested parties, including
State agencies and potential grantees, about how IDA benefits would be
treated
[[Page 17758]]
under the TANF rules. We have several reasons for the specific
exclusion in the final rule. First, many of the assets in IDA accounts
represent deposits from the earnings of low-income families and the
interest on those deposits. Thus, many of the assets do not represent
assistance from TANF or any other governmental source. Second, when
contributions are made into an IDA account from the TANF agency or
other third parties, they only represent potential assistance at that
point. The individuals whose funds are in the account are potential
beneficiaries, but have very limited access to the funds in that
account. The funds are not available to meet their basic needs.
Furthermore, distributions from IDA accounts would normally be excluded
under other provisions of our definition (e.g., as emergency benefits,
for education, and as nonrecurrent, short-term benefits). Because the
residual cases might be insignificant in terms of the amount of
assistance involved and the tracking of such amounts might create very
significant administrative burdens, we believed it would be appropriate
to provide an umbrella exclusion for IDA benefits.
While we were convinced by the arguments for excluding supportive
services for working families from the definition of assistance, we
have noted a few consequences of this narrower definition of assistance
that were of some concern. For example, many of the funding
restrictions in section 408 are restrictions on which families may
receive ``assistance,'' section 404(e) of the Act only authorizes
States to use the ``rainy day'' funds that they reserve for future
years ``for providing assistance,'' many working families will not be
included in the TANF work participation rate calculations, and we will
receive data on fewer families and types of benefits from the
aggregated and disaggregated reporting.
In order to compensate for the loss of reporting, we have added
some additional detail to the expenditure information required in the
TANF Financial Report (see Appendix D). (See the preamble for
Sec. 263.11 and the Instructions for Completion of ACF-196 (the TANF
Financial Report) in Appendix D for additional information on the use
and reporting of reserved funds.)
Comment: One commenter asked whether expenditures on ``work
activities'' were the same as expenditures on ``employment services.''
Response: We assume this commenter wanted to know if all
expenditures on work activities, as specified in section 407(d) of the
Act, would be excluded from the definition of assistance. The
exclusions we provide in the final rules would generally cover the
specified work activities, including on-the-job training, subsidized
employment, and most education and training activities (i.e, since most
do not represent income support). They would also cover payments to
employers and third parties for supervision and training and payments
under performance-based contracts for success in achieving job
placements and job retention. As discussed above, there may be types of
education and training benefits (e.g., stipends or allowances) that
fall within the definition. Also, the definition does not generally
exclude payments to individuals participating in work experience or
community service (or any other work activity). Nor does it exclude
needs-based payments to individuals in any work activity whose purpose
is to supplement the money they receive for participating in the
activity.
The distinction we make between work subsidies paid to employers
and payments to participants in work experience and community service
is similar to distinctions made under tax law. For example, we would
refer you to Notice 93-3, issued by the Internal Revenue Service on
December 17, 1998. This notice explains that TANF payments that meet
certain conditions would not be income, earned income, or wages for
Federal income and employment tax purposes. The notice provides that:
``Payments by a governmental unit to an individual under a
legislatively provided social benefit for the promotion of the general
welfare that are not basically for services rendered are not includible
in the individual's gross income and are not wages for employment tax
purposes, even if the individual is required to perform certain
activities to remain eligible for the payments. * * * Similarly, these
payments are not earned income for Earned Income Credit (EIC)
purposes.'' It also notes that, under amendments to the Internal
Revenue Code under the Taxpayer Relief Act of 1997, Pub. L. 105-34,
``earned income for EIC purposes does not include amounts received for
[TANF work experience and community service activities] to which the
taxpayer is assigned * * *, but only to the extent such amount is
subsidized under [TANF].' ''
Our definition of assistance distinguishes between work subsidies
paid to employers and community service and work experience on a
similar basis. We believe that payments to participants in work
experience and community service are closely associated with
traditional welfare benefits and are designed primarily to meet basic
needs rather than as compensation for services performed. This view is
also reflected in the Conference Report, H. Rep. 105-217, for Pub. L.
105-34, which added the WtW program. In discussing the treatment of WtW
cash assistance for time-limit purposes, it indicates that wage
subsidies are indirect cash assistance. We believe the reference to
wage subsidies as cash assistance is to such payments as part of work
experience and community service where, as in the tax provisions,
welfare law determines the size of the payments and limits the hours of
work so that it is, in effect, assistance received indirectly. Thus, we
generally include such subsidies in the definition of assistance.
We do not believe that the mere fact that the benefits received by
recipients in work experience or community service activities are
conditional on work is sufficient to view it as nonassistance. The
expectation under TANF is that adult recipients will generally
participate in work activities as a condition of receiving TANF. This
expectation is evident in the work requirement in section
402(a)(1)(A)(ii) and the fact that Congress based the calculation for
work participation in section 407 on all families with adults, instead
of retaining the numerous exemptions that existed under JOBS.
The regulatory text also indicates that benefits conditioned on
other work activities (e.g., job search) are not excluded from the
definition of assistance. We do not think that anyone would conclude
that such benefits would be excluded, because there would be no
historical basis for such a conclusion. However, we decided to include
the broader reference to foreclose any future questions.
Comment: One commenter said we should exclude on-site case
management services provided by an employer under contract from the
definition of assistance.
Response: Our definition already excludes case management services
provided under the TANF program. It is irrelevant who provides the case
management services.
Comment: One commenter noted that the preamble in the NPRM excluded
``information about child care, child care referral services, child
care counseling services and child care provide on an ad hoc basis''
and asked that we add that language to the regulatory text.
[[Page 17759]]
Response: We do not believe it is appropriate or even possible to
specify all types of excluded services in the regulatory text. However,
we have inserted ``child care information and referral'' as an example
of an excluded service.
(e) Nonrecurrent, Short-Term Benefits
Comment: We received a significant number of comments from
respondents who were concerned about the narrowed exclusion for ``one-
time, short-term'' assistance. The major concern of commenters was that
the 30 existing State welfare diversion programs, together with their
local variations, could not meet such a tight definition because they
might provide more than one payment in a year if a family encounters an
unforeseen subsequent crisis. They suggested broader language that
would exclude short-term, episodic assistance for families in discrete
circumstances and encompass nonrecurrent, short-term payments that
could occur more than once in 12 months. They questioned the basis for
creating restrictions based on the old EA definitions. They raised
concerns about the negative effect on State innovation. They also
raised concerns about the administrative burdens associated with
tracking eligibility, especially when outside providers, such as
emergency shelters, deliver emergency services or when a State is
operating both diversion and emergency assistance programs and has not
administratively connected those programs.
Response: In part, the narrower language in the proposed rule
reflected a concern that States could avoid TANF requirements by
changing the manner in which they assisted families. We did not believe
that it would be appropriate to exempt families that received a
substantial amount of assistance, assistance over a significant period
of time, or assistance provided on a recurring basis from child support
assignment, work requirements, and time limits. Based on prior
experience with the Emergency Assistance program, we believed that
States could expand the concept of one-time, short-term assistance to
cover benefits that extended over time and encompassed substantial
expenditures.
At the same time, we did not intend our definition to undermine
existing State efforts to divert families from the welfare rolls by
providing short-term relief that could resolve discrete family
problems. Based on both the comments we received and other sources of
information, we realize that diversion activities are an important part
of State strategies to reduce dependency and that restrictive Federal
rules in this area could stifle the States' ability to respond
effectively to discrete family problems. We also understand that
subjecting families in diversion programs to all the TANF
administrative and programmatic requirements would not represent an
effective use of TANF or IV-D resources. For example, it does not
necessarily make sense to require that, for a single modest cash
payment, the State must open up a TANF case, collect all the case-
record data which that entails, require the assignment of rights to
child support, open up a IV-D case, and start running a Federal time-
limit clock.
Much of the aid provided through these programs is work-focused,
and, under our definition, the benefits to these families are
nonrecurrent and short-term in nature. Thus, we believe that excluding
this aid from the definition of assistance does not undermine the TANF
provisions on work, time limits, or self-sufficiency. However, as we
proposed in the NPRM, we will be collecting aggregate information on
expenditures on aid that is not assistance (i.e., on
``nonassistance''). This information will be valuable in helping us to
assess the extent to which benefits being provided with TANF and MOE
funds fall under, or outside of, the major TANF program requirements.
Finally, we recognize that this is a policy area where policy and
programs are evolving quite rapidly. Within the next year or two, we
would expect to have a better knowledge base for assessing diversion
programs and making policy judgments. For example, the Office of the
Assistant Secretary for Planning and Evaluation and ACF are jointly
sponsoring a study by George Washington University to examine the State
diversion programs and activities and explore their Medicaid
implications.
Thus, the final rules include a revised definition that excludes
more than one payment a year, so long as such payments provide only
short-term relief to families, are meant to address a discrete crisis
situation rather than to meet ongoing or recurrent needs, and will not
provide for needs extending beyond four months. The revised definition
uses the term ``nonrecurrent'' rather than ``one-time'' because the
former term is more consistent with the intended policy. A family may
receive such benefits more than once. However, the expectation at the
time they are granted is that the situation will not occur again, and
such benefits are not to be provided on a regular basis. We believe the
revised exclusion is limited enough in nature and scope not to
undermine the statutory provisions of the TANF program, while giving
States the flexibility to design effective diversion strategies.
The definition also would exclude supports provided to individuals
participating in applicant job search. Applicant job search is a common
form of diversion that clearly fits within the goals of TANF and within
this exclusion's view of a ``short-term'' benefit. (The job search
itself would be excluded under the general services exclusion at
paragraph (6).)
Similarly, the definition would exclude supports for families that
were recently employed, during temporary periods of unemployment, in
order to enable them to maintain continuity in their service
arrangements. Unnecessary disruptions in these arrangements could
negatively affect the family's ability to re-enter the labor force
quickly and, in the case of child care, could negatively affect the
children in the family.
The four-month limitation reflects our belief that we could not
maintain the integrity of the short-term exclusion without providing
some regulatory framework. As written, the four-month limitation does
not restrict the amount of accrued debts or liabilities (such as
overdue rent) that a State may cover or impose a specific monetary
limit on the amount of benefits that the State may provide.
You should note that we have added a new requirement at
Sec. 265.9(b)(6) for States to report annually on the nature of
nonrecurrent, short-term benefits. More specifically, we are asking
States to describe the benefits they are providing, including their
eligibility criteria (together with any restrictions on the amount,
duration, or frequency of payments), any policies they have instituted
that limit such payments to families eligible for assistance or that
have the effect of delaying or suspending eligibility for assistance,
and any procedures or activities developed under the TANF program to
ensure that individuals diverted from TANF assistance receive
appropriate information about, referrals to, and access to Medicaid,
food stamps, and other programs that provide benefits that could help
them successfully transition to work.
To the extent that a State provides the required information either
in the State plan or in the data it reports under Sec. 265.9(b)(6), it
would not have to duplicate this information.
Because of the tremendous importance of food stamp and Medicaid as
supports for working families, we
[[Page 17760]]
strongly encourage States to maintain critical linkages among these
programs because accessing these other program benefits could further
the goals of TANF. In addition, diverting individuals from programs
where they have an entitlement to benefits or to prompt action on a
request for assistance could represent a violation of rules in the
other programs.
According to the Health Care Financing Administration (HCFA),
section 1931 of the Social Security Act establishes rules for Medicaid
eligibility for low-income families based on the income and resources
of the family. Under section 1931, States must provide Medicaid
coverage at least to families with a dependent child living with them
whose income and resources would have qualified them for AFDC benefits
under the State plan in effect on July 16, 1996. Therefore, Medicaid
eligibility is not tied to or based on eligibility for TANF-financed
assistance. Also, States cannot limit Medicaid eligibility to families
receiving TANF.
Medicaid regulations (at 42 CFR 435.906) require States to provide
the opportunity for families to apply for Medicaid without delay.
In States that use joint TANF-Medicaid applications or utilize the
State TANF agency to make Medicaid eligibility determinations, the TANF
office is considered a Medicaid office. Therefore, in this situation, a
TANF agency, like any Medicaid agency, must immediately furnish a
Medicaid application (joint or separate) upon request and act upon that
application promptly. If there is a delay in accepting or filing an
application for TANF assistance (e.g., because the family is served
through a diversion program, is subject to up-front job search
requirements, or faces other behavioral or administrative requirements
that delay assistance), the agency must make a Medicaid application
available immediately. If there is a delay in processing the TANF
portion of a joint application, the agency must process the Medicaid
portion of the application immediately.
According to the Food and Nutrition Service (FNS), at the
Department of Agriculture, in enacting PRWORA, Congress thoroughly
reviewed the Food Stamp Act of 1977, as amended, and made changes to
many of its provisions. However, it made clear that the Food Stamp
Program continued to have a distinct set of nationwide application
rights and responsibilities. Section 11(e) of the Food Stamp Act sets
forth requirements that a State agency administering the Food Stamp
Program must follow. Among other things, it requires that the Agency:
(1) provide timely, accurate, and fair service for applicants for, and
participants in, the Food Stamp Program; (2) develop an application
containing the information necessary to comply with the Act; (3) permit
an applicant household to apply to participate in the program on the
same day the household first contacts the food stamp office in person
during office hours; and (4) consider an application that contains the
name, address, and signature of the applicant to be filed on the date
the applicant submits the application.
Where PRWORA did not amend the Food Stamp Act, current food stamp
regulations remained in effect. The regulations at 7 CFR 273.2(c)
provide that: (1) each household has the right to file an application
on the same day that it contacts the food stamp office during office
hours; (2) the State agency must advise the household that it does not
have to be interviewed before filing an application, and it may file an
incomplete application as long as the applicant's name and address are
recorded on an appropriately signed form; (3) State agencies shall
encourage households to file an application form the same day the
household contacts the food stamp office and expresses interest in
obtaining food stamp assistance. If individuals express interest in the
Food Stamp Program, or have concerns about food security, States have a
responsibility to inform them about the Food Stamp Program and their
right to apply; and (4) the State agency must make application forms
readily accessible to potentially eligible households.
Although PRWORA amended section 11(e) of the Food Stamp Act by
eliminating the requirement for joint processing of food stamp and TANF
applications, State agencies that continue to do so must abide by the
food stamp regulations at 7 CFR 273.2(j). These regulations set forth
requirements regarding interviews, verification, and application
processing procedures for joint applications. Most importantly, the
regulations at 7 CFR 273.2(j)(1)(iii) provide that households whose
public assistance applications are denied shall not be required to file
new food stamp applications, but shall have their food stamp
eligibility determined or continued on the basis of the original
applications filed jointly for public assistance and food stamp
purposes.
We advise you to look for additional guidance on food stamp and
Medicaid requirements through the HCFA and FNS web sites (www.hcfa.gov/
medicaid/medicaid.htm and www.usda.gov/fcs/, respectively).
We strongly believe that effective procedures to ensure that
diverted individuals access Medicaid, food stamps, or other programs
are critical to the success of TANF programs in achieving lasting
employment for the families they serve. In addition, such procedures
might help States avoid compliance and legal problems in the other
programs. Given the importance of this issue, the additional
information on State practices that we are requiring in the annual
report will be extremely helpful in assuring the role TANF agencies are
playing with individuals receiving diversion benefits.
While we dropped our proposal for a separate annual program and
performance report, we still need information on key aspects of State
programs in order to prepare the annual report to Congress required at
section 411(b)(3) of the Act. To the maximum extent possible, we will
draw upon data available through the State plans and other reports
submitted by the States. However, because diversion benefits fall
outside of the definition of assistance, and we have chosen not to set
standards of completeness for State plan submissions, we may not have
adequate information on this major feature of TANF programs to fulfill
our responsibilities under section 411(b)(3).
The new reporting focuses on diversion because it is one of the
major new tools States are using to achieve the work objectives of the
Act and, under section 413(d), Congress has shown an interest in
looking at State performance in this specific area. Also, the burden
associated with providing this aggregate program information is
substantially less than the burden that would be associated with
providing disaggregated data; because diversion payments fall outside
the definition of assistance, the disaggregated data requirements do
not apply.
Comment: Several commenters also expressed concerns about the
proposed limits on the amount of assistance and the meaning of the
proposed 90-day restriction. Commenters were not sure whether the 90-
day restriction represented a limit on the period of needs to be met or
a limit on the total monetary value of assistance. They objected to
both possible interpretations. While they generally seemed to prefer an
interpretation that limited the duration of need that could be met,
they also expressed concern about restrictions that would affect the
States' ability to deal effectively with past debts or liabilities or
meet needs that extended beyond 90 days.
Response: As discussed previously, we have replaced the 90-day
limitation
[[Page 17761]]
with a more flexible four-month limitation. The new provision is more
flexible with respect to past debts or liabilities; it merely limits
the extent to which payments for future needs can be excluded from the
definition of assistance. We also clarified in the preamble that the
four-month limitation does not impose a specific monetary limit on the
amount of benefits that may be excluded. Rather, the limitation
reflects the period of time for which future needs can be addressed by
a single ``nonrecurrent, short-term'' benefit.
When we issued the proposed rule, we did not necessarily envision a
single Federal interpretation of the 90-day limitation. Our intent was
to keep State payments for needs that were ongoing or extended over a
significant period of time within the definition of assistance. We did
not want a State to bundle several months' worth of assistance into a
single assistance payment in order to avoid TANF requirements for
itself or the family.
Our expectation for the language in the final rule is no different.
It is appropriate for States to treat short-term assistance that
addresses discrete episodes of need as ``nonassistance.'' It is not
appropriate for States merely to condense the time period over which
they pay assistance to needy families so that they can categorize the
benefits as ``nonassistance'' and avoid TANF requirements. Also, if a
family's emergency is not resolvable within a reasonably short period
of time, the State should not keep the case indefinitely in emergency
status, but should convert it to a TANF assistance case.
At the same time, if a family receives aid in one month that falls
under the nonrecurrent, short-term exclusion, but suffers a major set-
back later in the year, develops a need for ongoing aid, and starts
receiving TANF assistance, we would not require the State to re-define
the month of initial aid as assistance and retroactively subject the
family to TANF requirements.
(f) Benefits and Supports for Noncustodial Parents
Comment: Commenters also expressed some concern about the potential
effects on the custodial parent and children (especially under time
limits) when a noncustodial parent receives benefits. This issue was of
particular concern in light of the focus given to assistance for
noncustodial parents under Welfare-to-Work.
Response: Many services and supports that States might provide to
noncustodial parents (such as transportation and most work activities)
are excluded under the final definition of assistance. Also, as we
discuss in the preamble to Sec. 264.1, assistance provided to
noncustodial parents does not count against the time limit of the
custodial parent or children living in a different household unless the
noncustodial parent is receiving assistance as a member of that same
family and is the spouse of the head of the TANF household.
Comment: A couple of commenters expressed concern about the effect
of assistance that might be paid to a noncustodial parent. For example,
a noncustodial father is paying support. However, the noncustodial
parent of a second child in the family is receiving assistance. The
State takes the support paid by the first noncustodial father and
reimburses itself for assistance paid to the noncustodial parent of the
second child. The mother and two children are not receiving any
assistance for themselves and do not receive any child support because
the State is retaining it. Commenters believe that it would be unfair
to the custodial parent and children if assistance provided to a
noncustodial parent resulted in the custodial parent's losing her right
to receive child support and remaining subject to child support
cooperation requirements.
Response: We do not believe that the statute intends or requires
this absurd result. Rather, the assignment of the rights to support by
the custodial parent is only intended to cover assistance paid to the
custodial parent and the child(ren) living with the custodial parent.
It does not cover assistance that the noncustodial parent receives
based on his or her inclusion in the family as a noncustodial parent.
Thus, the State may not reimburse itself for assistance given to the
noncustodial parent, as a noncustodial parent, from child support paid
for the children. However, if noncustodial parents of a TANF child are
receiving assistance as the custodial parents or caretakers of another
TANF child, they may be subject to separate assignment requirements.
They might also have responsibility under individual State law to
reimburse the State for assistance provided.
(g) Benefits and Supports From the WtW Program
Comment: A couple of commenters said that we should exclude noncash
assistance paid through WtW funds from the definition of assistance.
One commenter indicated that we had mentioned this exclusion in the
preamble to the NPRM, but did not exclude it in the regulatory text.
Another commenter expressed particular concern about child care
assistance under WtW because States do not have the same authority to
transfer WtW funds to the Discretionary Fund of the Child Care and
Development Fund as they do with Federal TANF funds.
Response: Section 408(a)(7)(G) of the Act, which was added by the
Balanced Budget Act, provides that noncash assistance paid by WtW funds
``shall not be considered assistance.'' However, this exclusion is only
for the purpose of the time limit, and the regulation at Sec. 264.1
provides that we will not count months of receipt of noncash WtW
assistance against an individual's Federal clock.
We do not believe that the statutory language supports a broader
exclusion of WtW assistance from the definition of assistance. However,
the general changes we have made to the definition of assistance in
this final rule should help alleviate this concern. Further, we would
point out that many of the TANF requirements (such as participation
rates) do not apply to WtW because they apply only to the ``State
program funded under this part.'' This latter phrase refers to TANF
only, not to WtW. (At the same time, the spending restrictions
generally do apply to WtW, as they refer to grants under section 403
and WtW grants are provided under section 403(a)(5).)
The Department of Labor has received numerous questions from its
grantees about the definition of ``noncash'' assistance and asked us to
define the term in our rules. At the new Sec. 260.32, you will find a
definition for WtW cash assistance. If a benefit falls within the
definition of assistance, but does not meet the definition of ``WtW
cash assistance,'' it would be ``noncash'' assistance. Examples of
``noncash'' assistance would include housing vouchers or a State
version of food stamps. You will find additional discussion in the
preamble for Sec. 260.32.
(h) Transitional Services
Comment: We received a few comments suggesting that we should
explicitly exclude ``transitional assistance'' or services in support
of continued employment from the definition of assistance.
Response: We do not believe it is possible to exclude
``transitional assistance'' from the definition of assistance without
substantially altering the basic time-limited nature of the TANF
program, and we find no statutory basis for such an exclusion.
The concept of ``transitional'' services for families that get a
job and are no longer eligible for regular benefits is
[[Page 17762]]
recognized in the statute at section 411(a)(5), which requires a report
on expenditures and a description of the services provided. However,
the language there only addresses ``transitional services.'' Thus, it
does not indicate that Congress envisioned a full array of transitional
benefits, including ongoing needs-based payments, being available to
former recipients.
To the extent that States provide only supports for working
families, such as child care and transportation or work subsidies, or
work-related services such as counseling, coaching, referrals, and job
retention and advancement services under their transitional services
programs, we already exclude those services from the definition of
assistance. Also, we would exclude short-term benefits such as cash
assistance to stabilize a housing situation as ``nonrecurrent, short-
term'' assistance.
States wanting to provide ongoing transitional payments that meet
the definition of assistance to former recipients have three options:
(1) fund those programs under TANF as assistance, but use different
need standards than they do for other forms of TANF assistance; (2)
fund those programs with MOE money under a separate State program; or
(3) transfer the funds from TANF under section 404(d). If they fund
transitional benefits with State-only money, the Federal time limit
will not apply, regardless of whether they provide the benefits within
TANF or in separate State programs. States may also provide
transitional services without invoking time limits by transferring
funds to either the Discretionary Fund of the Child Care and
Development Fund or the Social Services Block Grant.
(i) Housing and Related Benefits
Comment: One commenter said the short-term, one-time rules should
exclude some of the former EA benefits for arrears and shelter.
Response: The proposed and final language would both exclude
certain payments for rent arrears, utility arrears, security deposits
and other shelter-related expenses that were previously covered in
State EA programs.
However, we cannot categorically state that all former EA benefits
would be excludable from the definition of assistance. For example, in
some cases, States claimed shelter expenses under EA that addressed
long-term, ongoing needs of families.
Comment: One commenter said that we should not consider housing and
utilities to be part of ``income support.''
Response: We disagree with the comment. Housing and utilities have
traditionally been major components in the definition of basic needs
used in determining welfare payments. Further, the TANF statute
provides no basis for excluding them from the definition of assistance
under TANF. However, certain shelter or utility costs might be
excludable under the two general exclusions (i.e., because they are
``nonrecurrent, short-term'' or they entail services such as counseling
that do not provide income support).
(j) Foster Care and Child Welfare
Comment: A few commenters asked that we exclude payments for foster
care, out-of-home placements, and substitute care from the definition.
Response: With regard to foster care or other out-of-home
maintenance payments, we would note that such costs are not allowable
TANF costs under section 404(a)(1) of the Act since they are not
reasonably calculated to further a TANF purpose. However, in some
cases, where a State previously covered such benefits under its IV-A
plan, they could be allowable TANF costs under section 404(a)(2).
There are additional costs related to foster care or out-of-home
maintenance payments that may be allowable and referred to, in short-
hand, as foster care. For example, there are costs for family
preservation activities, such as counseling, home visits, and parenting
training, that would be allowable TANF costs because they are
reasonably calculated to enable a child to be cared for in his or her
own home.
There may also be other costs that were authorized under a State's
EA program for which Federal TANF funds could be used, under section
402(a)(2). Examples include costs such as administrative costs for
activities associated with determining whether an emergency exists and
costs for the temporary placement of the child, if determined
necessary, while an investigation takes place.
Comment: One commenter asked that we strengthen the definition of
assistance to urge States to use this flexibility in order to maintain
families intact, where services can achieve that end.
Response: Both the proposed and final definitions exclude certain
services directed at family preservation and certain forms of crisis
intervention from the definition of assistance. Some commenters would
have liked us to go further and exclude foster care, substitute care,
and out-of-home placements. As we just discussed, maintenance payments
for foster care, substitute care, and out-of-home placements (except
perhaps temporary emergency placements during an investigation of
abuse) are not eligible TANF expenditures unless allowable under
section 404(a)(2).
(k) Emergency Assistance
Comment: In different ways, a few commenters asked that we exclude
assistance provided under the prior EA program from the definition of
assistance. Among their underlying concerns were assistance that was
paid for longer than 90 days, emergency shelter, and certain child
welfare services.
Response: We can find no legal justification for categorically
excluding prior EA benefits from the definition. The statute authorizes
States to use Federal TANF funds for activities that were previously
authorized under EA, but otherwise does not give EA special status.
Most assistance that was provided under EA is excludable under one
or more of the general exclusions. However, there were EA programs that
provided assistance to families for basic needs and extended periods of
time. If we categorically excluded all prior EA benefits from the
definition of assistance, we could be perpetuating some of the same
problems that existed under prior law.
(l) Other Definitional Issues
Comment: One commenter requested exclusion of emergency shelters
for victims of domestic violence; of particular concern was the
potential running of the time-limit clock when individuals were
receiving such assistance.
Response: Depending upon the form and duration of this assistance,
it might be excludable under one of the general exclusions we provide.
We do not think a special, categorical exclusion is justified for this
type of benefit.
However, we would point out that, under section 402(a)(7) of the
Act, known as the Family Violence Option, States may waive program
requirements, including time limits, for victims of domestic violence.
If States exceed the 20-percent cap on time-limit exceptions as the
result of granting such waivers, they may be eligible for reasonable
cause. You should see the prior discussion entitled ``Treatment of
Domestic Violence Victims'' and the regulatory text at subpart B of
part 260 for additional information.
Comment: One commenter expressed concern about inclusion of
relatively insignificant amounts of assistance and the negative effect
of such a policy on
[[Page 17763]]
a family's willingness to seek assistance in light of time limits.
Response: While we understand the commenter's concern, we have no
basis for protecting families that receive small amounts of assistance
from the time limits; nothing in the statute or legislative history
suggests that a family would have to be receiving a threshold payment
level in order to be considered to be receiving assistance.
We have some early indication that families who have other income
and are eligible for smaller amounts of assistance are not necessarily
choosing to forego aid in order to reserve their months of assistance.
We will be paying attention to this issue over the coming months.
Comment: One commenter expressed concern about a broad definition
of assistance because other programs might count any aid in the form of
``assistance'' as income in determining eligibility for benefits.
Response: We must create a definition that conforms with the TANF
statute and the statutory intent of the TANF program. In that context,
we cannot assure that our definition will have no negative spill-over
effects on other programs. However, the additional exclusions from the
definition in the final rule should alleviate this concern. Further, if
we find out that definition is having adverse effects on other
programs, we are willing to work with the other programs in exploring
ways to resolve such problems. For example, we have worked with the
Office of Child Support Enforcement in revising guidance on the child
support distribution rules so that the interim definition of TANF
assistance did not inadvertently cause child support collections
intended for families to be diverted to government coffers.
Comment: One commenter asked that we explicitly exclude supportive
services provided to applicants from the definition of assistance,
particularly when the case does not get approved for regular TANF
benefits.
Response: We do not believe it is necessary to add this situation
as a separate exclusion. We would expect such applicant services to be
covered by the exclusion for nonrecurrent, short-term benefits or as
supports for working families. Also, if we explicitly excluded
applicant benefits, we might create an incentive for States to leave a
case open rather than to complete the eligibility determination
process. We would not want to create such an incentive; it is important
for States to act on applications and provide assistance in a timely
manner.
Comment: One commenter said we should clarify the definition of
assistance to exclude such items as State tax refunds. A few commenters
specifically suggested that we exclude earned income tax credits.
Response: We have excluded refundable earned income credits, but
have otherwise not given special consideration to tax refunds in the
definition. We had two basic concerns. First, we did not want to
suggest that tax refunds were categorically appropriate as either
Federal TANF or State MOE expenditures. It would depend on what the
nature and purpose of the ``refund'' was. Any payments have to meet at
least two tests--be an ``expenditure'' and be consistent with the
purposes of the program. In the case of MOE, it would also have to be
targeted at needy families. We believe a refundable earned income
credit can meet these tests. However, the vast majority of tax refunds
probably would not. For example, if a family gets a refund of its
income taxes because of over-withholding, that refund check does not
represent an allowable expenditure for Federal TANF or State MOE
purposes. If there were tax refunds (analogous to refundable tax
credits) that were allowable expenditures for TANF-related purposes,
they would be included or excluded from the definition of assistance
based on the existing principles and language in the definition.
We provide an exclusion for refundable earned income tax credits
because we consider them a work support rather than basic income
support. They normally serve to compensate low-income working families
for some of the tax-related costs of employment. Thus, they more
closely resemble work supports than traditional welfare payments.
(m) Tracking of Exclusions
Comment: A number of commenters objected to language in the
preamble of the NPRM indicating that we would track State expenditures
on assistance and nonassistance and look more closely if we found a
large portion of program resources being spent on ``nonassistance.'' We
also received a few comments saying that we needed to collect more
information on State TANF and MOE expenditures in order to maintain the
integrity of the program and protect the interests of needy families.
Response: In the preamble of the proposed rule, we expressed
concern that information showing large amounts of expenditures on
nonassistance might indicate that the flexibility we provided in the
definition of assistance might be undermining the goals of the
legislation. We believe this is a valid concern and have not changed
either the reporting requirements or our plans to look at this
information. In fact, because we have significantly narrowed the
definition of assistance (and thereby the categories of benefits and
supports on which State must report disaggregated and aggregate data),
we have decided to strengthen the fiscal reporting requirements. You
will find a discussion of these changes in part 265 and the specific
changes in Appendix D.
We are not saying that we will automatically change the definition
of assistance or take other action if we find large amounts of
resources on ``nonassistance.'' In fact, commenters noted some valid
reasons why we might expect to see growth in the amount of
``nonassistance'' as welfare reform progresses. For example, we might
see increasing investments in interventions and prevention strategies
(such as work supports, case management, mentoring, and job retention
services). Thus, we would not presume that growth in ``nonassistance''
was inappropriate. However, we would want to understand and be able to
explain the reason for the growth.
At this point, we are not going to prejudge State actions or write
rules that unduly limit State flexibility to develop innovative
programs that can effectively serve their needy families. However, in
light of our responsibility for ensuring program accountability, the
evolving and increasingly diverse nature of State TANF and MOE
programs, and the flexibility inherent in these rules, we believe it is
appropriate to gather information and monitor what is happening.
Section 260.32 What Does the Term ``WtW Cash Assistance'' Mean? (New
Section)
This is a new section in the final rule. As we discussed briefly in
the last section, the Department of Labor has received numerous
questions about the definition of the terms ``cash assistance'' and
``noncash assistance'' because if assistance provided under WtW is
noncash, it does not count against the TANF time limit. Therefore, at
the request of the Department of Labor, we have added a definition of
``WtW cash assistance'' in this new Sec. 260.32. This definition (in
conjunction with the regulation at Sec. 264.1(b)(1)(iii)) clarifies the
circumstances under which benefits received by a family under WtW count
against the TANF 60-month time limit. By statute (section 408(a)(7)(G)
of the
[[Page 17764]]
Act), WtW ``noncash assistance'' does not count for this purpose.
In defining ``WtW cash assistance'' (i.e., what does count), we
started with the presumption that, to be considered ``WtW cash
assistance,'' a benefit must fall within the definition of
``assistance.'' Thus, services, work supports, and nonrecurrent, short-
term benefits that are excluded from the definition of assistance at
Sec. 260.31(b) are not ``WtW cash assistance.'' Also excluded are
supportive services for nonworking families. Although they are
assistance, these benefits are services designed to meet specific
nonbasic needs and thus are not like cash.
Then, the definition clarifies what types of ``assistance'' under
WtW would be considered ``WtW cash assistance.'' First, it includes
assistance designed to met a family's ongoing, basic needs. Second, it
includes such benefits as cash assistance to the family, even when
provided to participants in community service or work experience (or
other work activities) and conditioned on work; the Conference Report
(H. Rept. 105-217) specifically mentions ``wage subsidies'' as an
example of WtW ``cash assistance.'' Finally, our definition
incorporates both cash payments and benefits in other forms that can be
legally converted to currency (e.g., electronic benefit transfers and
checks).
This definition does not limit the types of WtW benefits for which
families that have received 60 months of TANF benefits are eligible.
Under Sec. 264.1(a)(3), State and local agencies may provide cash and
noncash WtW assistance and other benefits to such families beyond the
60-month limit on assistance.
Section 260.33 When Are Expenditures on State or Local Tax Credits
Allowable Expenditures for TANF-Related Purposes? (New Section)
As discussed previously, in Sec. 260.30, we have added a definition
of ``expenditure'' that helps define what would be a qualified
expenditure of Federal TANF funds or State MOE funds. Within this
definition of ``expenditure,'' we indicate that refundable tax credits
could be an expenditure. The purpose of this section is to clarify how
to determine the amount of allowable expenditures in this situation.
More specifically, it says that, for an earned income tax credit or
other allowable credit, we would count as an expenditure only the
State's actual payment to the family for that portion of the credit
that the family did not use to offset their tax liability.
The family generally determines its income tax liability by
following a number of basic steps. First, the family determines its
adjusted gross income (income subject to a State's income tax). Then it
applies any allowable exemptions and deductions to reduce the adjusted
gross income. The net figure is the total amount of income that is
subject to taxation. The taxable income is the basis for determining
the amount of taxes owed. Then, the family applies any allowable
credits to reduce the amount of taxes that it owes.
For example, a wage earner qualifies for a $200 earned income tax
credit. The family's tax liability prior to the application of any
credits is $75. When reconciling at the end of the income tax year, the
eligible family uses the first $75 of the credit to reduce its State
income tax liability to zero. If the State elects to refund any part of
the remaining $125 in EITC, then the amount that it actually pays out
to the family is a qualified expenditure and counts toward the State's
TANF MOE. The $125 represents an actual outlay from State funds to
provide extra money to the family. In this regard, the State has spent
its own funds to provide a benefit to the family that is consistent
with a purpose of TANF.
For emphasis, this section also reiterates that, in order to count
as an expenditure of Federal TANF funds or State MOE funds, the purpose
of the tax credit program must be reasonably calculated to accomplish
one of the four purposes of the TANF program. We recognize that tax
credits might be an appropriate and highly efficient method for getting
benefits to needy families and want to support those efforts. In
particular, State earned income tax credits provide valuable supports
and incentives for low-income working families, and we do not want to
discourage more States from establishing these policies. At the same
time, we want to be sure that our policies support the goals of TANF
and promote continued State investments in needy families.
Also, because tax credits represent an area of significant interest
to States, the Congress, and fiscal authorities, we have added new
lines to the TANF Financial Report that will tell us how many Federal
and State dollars are going to refundable earned income tax credits or
other refundable State and local credits.
The mere fact that the State issues a tax refund check to a
taxpayer does not necessarily indicate that the family has received a
refundable tax credit. For example, a TANF-eligible family could
receive a refund check simply because the aggregate amount withheld
from its paychecks exceeded its tax liability. Such a refund would not
meet the definition of a refundable EITC.
For example, assume an individual has a $75 State income tax
liability for a year. Yet, through withholding, he or she paid a total
of $150 in State income taxes throughout the year. After reconciliation
at the end of the income tax year, the amount that the State owes the
individual due to tax withholding is not considered a refundable tax
credit. Nor is the return of an individual's overpayment of taxes an
expenditure of the State.
In determining the amount of MOE that may be claimed, all credits
would be subtracted from the amount of the tax liability. The family's
tax liability is the amount owed to the State prior to any adjustments
for credits or payments. Any excess credit remaining that the State
refunds to the family may count as an expenditure if the program for
tax credits is reasonably calculated to accomplish a purpose of the
TANF program.
Taking another example, suppose the wage earner, who has paid $150
through withholding, actually qualifies for an earned income tax credit
of $200. The $125 portion of the credit that exceeds the individual's
$75 State income tax liability could qualify as an expenditure if the
State pays it out to the family. The $150 withheld is irrelevant to the
calculation because this does not represent the family's actual income
tax liability. If the family were to receive a $275 refund, $125 (the
balance remaining of the EITC after the tax liability is subtracted)
would qualify as an expenditure.
Tax relief measures, including nonrefundable tax credits, as well
as exemptions, deductions, and tax rate cuts, that serve only to offset
a family's income tax liability do not qualify as expenditures.
In addition, tax credits that serve to rebate a portion of another
State or local tax, including sales tax credits and property tax
credits, are not expenditures under the definition of expenditure at
Sec. 260.30. This definition is consistent with longstanding Federal
policy on the meaning of expenditure, as reflected in the single
definition for outlays and expenditures at 45 CFR 92.3.
Also, if a State administers more than one tax credit program
allowable for Federal TANF or State MOE purposes, the State may count
as an expenditure the amount by which the combined value of the
allowable credits exceeds a TANF-eligible family's State income tax
liability prior to application of all allowable credits.
[[Page 17765]]
The questions about State tax credits generally arose in the
context of what is a ``qualified State expenditure'' for MOE purposes.
In particular, the issue principally centered on whether States might
count the portion of an earned income credit attributable to revenue
loss toward their MOE. To properly address this issue, it is important
to note that, in addition to the ``eligible families'' requirement
discussed at Sec. 263.2, the statute requires two key criteria to be
met for MOE purposes. These criteria are: (1) the State's cost must be
an expenditure; and (2) the expenditure must be reasonably calculated
to accomplish a purpose of the TANF program. The second criterion is
not a difficult standard to meet. States just need to be able to
demonstrate that the specific tax benefit program is ``reasonably
calculated'' to accomplish a purpose of the TANF program. Because more
questions were raised as to what is an expenditure, this issue required
more extensive deliberation.
To consider fully the argument that the entire cost of an earned
income credit might represent an expenditure, we had to consider this
issue within the broader framework of the full range of potential tax
relief measures. Since we published the NPRM, we have received several
inquiries regarding whether the cost of other tax relief measures were
expenditures for MOE purposes.
An earned income credit is but one example of a tax relief measure.
Some States also have other credits available to residents. These
include, but are not limited to, property tax and homestead credits,
child and dependent care credits, sales tax credits, credits for
families that purchase a car seat, and credits for individuals with
significant medical expenses. Tax relief also takes the form of income
tax deductions and exemptions. Some States also offer tax credits to
investors and businesses, e.g., credits that help or promote employment
of low-income residents such as a rent reduction program credits,
neighborhood assistance act credits, an enterprise zone act credits,
day-care facility investment tax credits, and major business facility
job-tax credits.
Few of these activities result in refunds in excess of any tax
liability (whether it be income, sales, property tax liability). But,
all of these activities cost the State lost tax revenue. Therefore, we
had to consider whether lost revenue equals an expenditure. While the
statute under 409(a)(7) uses the term ``expenditures,'' it does not
define it. However, since 1988, when the Department issued its common
administrative rule at 45 CFR 92.3, the term expenditures has been
defined as outlays, for purposes of Federal grant funds. Because
Congress did not provide another definition of expenditure in the TANF
statute, we have presumed that the existing regulation defining
expenditure as an outlay is applicable.
To outlay is to expend, spend, lay out, or pay out. We therefore do
not consider that a decrease in a State's revenue associated with a tax
credit program or other tax relief measure meets the common rule
definition of an ``expenditure.'' Accordingly, we conclude that tax
provisions that only serve to provide a family with relief from State
taxes such as income taxes, property taxes, or sales tax represent a
loss of revenue to the State, but not an expenditure. However, the
portion of a tax credit that exceeds a family's income tax liability
and is paid to the family is an expenditure. That expenditure would
count toward a State's TANF MOE requirement if it is reasonably
calculated to meet a purpose of the TANF program.
Arguably, accepting less revenue (taxes) from the income of
families (or business), provides a financial benefit to the family (or
business) by allowing them to retain a greater share of their own
money. As such, tax relief activities in general can serve to
complement welfare reform efforts. However, tax relief measures that
solely provide a family (or business) with relief from various State
taxes are not expenditures.
In determining that the common rule Federal definition of
expenditures was appropriate to use in the TANF context, we also
examined the broader policy implications. Including nonrefundable
credits and other tax relief measures that served solely to reduce tax
liability could redirect Federal TANF and State MOE expenditures away
from the neediest families (who get no direct benefit from
nonrefundable credits) and could allow States to claim as MOE an
extremely wide range of tax cuts. We do not think this result would be
consistent with the intent of TANF.
At Sec. 263.2, you will find additional discussion about the
treatment of tax credits and other tax provisions.
Section 260.35--What Other Federal Laws Apply to TANF? (New Section)
As we indicated in the section of the preamble entitled ``Recipient
and Workplace Protections,'' a number of commenters expressed concerns
about the NPRM's failure to support the protections available to TANF
recipients under Federal nondiscrimination and employment laws. We
added this section to the regulations in response to those comments.
Please see the earlier preamble section for a more detailed discussion
of the commenters' concerns and our response.
Section 260.40--When Are These Provisions in Effect? (Sec. 270.40 of
the NPRM)
Background
This section of the proposed rules provides the general time frames
for the effective dates of the TANF provisions. As we noted in the
NPRM, many of the penalty and funding provisions had statutorily
delayed effective dates. For example, most penalties would not be
assessed against States in the first year of the program, and
reductions in grants due to penalties would not occur before FY 1998
because reductions take place in the year following the failure. We
referred readers to the discussion on the individual regulatory
sections for additional information.
We also made the important point that we did not intend to apply
the TANF rules retroactively against States. We indicated that, with
respect to any actions or behavior that occurred before final rules, we
would judge State actions and behavior only against a reasonable
interpretation of the statute.
As we reviewed the comments, we noted a discrepancy between this
preamble discussion and the proposed regulatory text. The preamble
indicated that States would operate under a ``reasonable interpretation
of the statute'' until issuance of final rules; the regulatory text
said that the ``reasonable interpretation'' standard would apply until
the ``effective date'' of the final rules. As you will see in the
regulatory text at Sec. 260.40 of this final rule, the correct policy
is that the ``reasonable interpretation'' standard applies to all State
behavior prior to October 1, 1999, the effective date of these rules.
Also, in the proposed rule, at Sec. 270.40(a), we incorporated
language explaining when the statutory requirements went into effect
for States implementing their TANF programs. Because States all
implemented their TANF programs by July 1, 1997, as required by
statute, this language is obsolete, and we deleted it from the final
rule.
Comments and Responses
We received several comments on this section of the rule.
Commenters' greatest concern was the effective date of the proposed
rule.
Comment: A significant number of commenters asked that we delay the
effective date of the final rule to allow
[[Page 17766]]
States time to implement all the regulatory provisions, e.g., to change
their administrative rules, conduct staff training, make necessary
computer systems modifications, and ensure data validity. Clearly, the
major area of concern was the States' ability to implement new rules on
data collection and reporting. We received three dozen comments that
specifically asked for a phase-in period for meeting the reporting
requirements.
A number of commenters did not offer a specific suggestion as to
how long this phase-in period should be. Among the commenters who did
make suggestions, the suggested period of time ranged from 9 months to
2 years. The most common suggestion was 12 months. Some commenters
noted that States would be simultaneously addressing Year 2000
compliance problems and would need added time for that reason.
Response: In response to those comments, we have decided to make
the effective date of the final rule the beginning of the next fiscal
year. Our initial inclination was to make the rule generally effective
within two to three months of publication, but to lag the data
reporting requirements an additional six months. However, we realized
that we could not successfully implement some of the general provisions
until we had the revised data reporting in place. For example, we could
not adjust a State's work participation rates based on the new welfare
reform waiver provisions before the new reporting took effect. Also,
many of the significant provisions in this rule (including the caseload
reduction credit and the administrative cost caps) would be difficult
to implement part way into a fiscal year.
To clarify the meaning of this effective date, States will continue
program and fiscal reporting under the ``emergency reporting''
provisions for assistance provided, and expenditures made, through
September 30, 1999. The last reports under this old system will be due
November 14, 1999. States will begin reporting under these rules and
the forms in the appendices effective with the first quarter of fiscal
year 2000. The first TANF Data and Financial reports under these new
requirements will be due February 14, 2000.
The timeframes we have provide in this final rule are fairly
rigorous. Also, they are substantially shorter than many States
requested. However, we think that States have sufficient resources to
meet these deadlines, and they will receive our continued support in
doing so. Any further delays could undermine the purposes of the law.
At the same time, we recognize that Y2K compliance and these new
TANF requirements may be placing extraordinary, simultaneous demands on
State staff and resources. For States that commit significant resources
to achieve Y2K compliance in time, we have added a reasonable cause
criterion at Sec. 262.5(b)(1). This new provision will provide some
penalty relief to States that cannot report one or both of their first
two quarters of TANF data on time due to Y2K compliance activities. You
will find additional discussion of that decision at Secs. 262.5, 265.5,
and 265.8.
Comment: Several commenters expressed support for our decision not
to apply the rules retroactively. A few commenters expressed concerns
about the ``reasonable interpretation'' standard we intended to apply
prior to issuance of rules was too strenuous. One said we should exempt
States from ``all but the most flagrant program infractions.'' Another
expressed concerns about the level of Secretarial discretion in such a
standard and the lack of clear criteria about what it meant. Another
asked that we accept any behavior that did not ``contradict any
provision of the law, court decisions or due process.''
Response: This section of the rule retains our proposal to judge
State actions prior to the effective date of these rules under a
``reasonable interpretation of the statute'' standard. We understand
the commenters' interest in clearer criteria. However, the standard in
the rule is a term of art and does in fact give most parties a very
good sense of where one would draw the line. Also, to develop very
specific criteria at this point would in fact amount to retroactive
rulemaking, which we promised we would not do.
At the same time, we want to assure States that we recognize that
this statute is complicated and do not intend to penalize anyone who
has exercised reasonable discretion and judgment during the period
before final rules take effect.
For example, we understand that there is a broad range of views
about the interpretation of section 415 on continuation of waiver
policies. Thus, in determining whether a State is liable for a penalty
for failing work participation rates for FY 1997, 1998, or 1999, we
would give substantial deference to the State's proposal for rate
adjustments based on waiver policies that it continued.
Also, we point out that States have the opportunity to dispute any
penalty finding through the administrative processes available at part
262. These processes provide a vehicle for addressing and resolving any
disagreements about whether a State was operating under a ``reasonable
interpretation of the statute.''
We disagree with that the view that the standard we proposed is too
strenuous. We do not necessarily want to provide cover to States that
pushed the envelope beyond reasonable bounds in terms of interpreting
the statute.
Subpart B--Domestic Violence
As we have noted earlier, we decided to consolidate the regulatory
provisions on domestic violence in this new subpart to part 260. You
can find a discussion of these provisions and the comments received on
the proposed rule in the earlier section of the preamble entitled
``Treatment of Domestic Violence Victims.''
Subpart C--Waivers
As we have noted earlier, we decided to consolidate the regulatory
provisions on section 1115 waivers in this new subpart to part 260. You
can find a discussion of these waiver provisions and the comments
received on the proposed rule in the earlier section of the preamble
entitled ``Waivers.''
VI. Part 261--Ensuring That Recipients Work
Section 261.1--What Does This Part Cover? (Sec. 271.1 of the NPRM)
This section identifies the scope of part 261 as the mandatory work
requirements of TANF.
We did not receive any comments that relate solely to the scope of
this part.
Section 261.2--What Definitions Apply to This Part? (Sec. 271.2 of the
NPRM)
This section cross-references the general definitions for the TANF
regulations established under part 260. We did not receive any comments
on this section. We have responded to cross-cutting comments under
other sections of this part.
Subpart A--What Are the Provisions Addressing Individual
Responsibility?
During our extensive consultations, a number of groups and
individuals asked how the requirements on individuals relate to the
State participation requirements and penalties. To help clarify what
the law expects of individuals (as opposed to the requirements that it
places on States), we have decided to outline a recipient's statutory
responsibilities as part of this regulation. In so doing, we only
paraphrase the statute, without interpreting these provisions.
Inclusion of these provisions in the regulation does not indicate our
intent to enforce these statutory provisions; rather, we
[[Page 17767]]
have included the requirements in the regulation for informational and
contextual reasons. Nevertheless, our expectation is that States will
comply with these requirements.
Section 261.10--What Work Requirements Must an Individual Meet?
(Sec. 271.10 of the NPRM)
PRWORA promotes self-sufficiency and independence by expanding work
opportunities for welfare recipients while holding individuals to a
high standard of personal responsibility for the support of their
children. The legislation expands the concept of mutual responsibility,
introduced under the Family Support Act of 1988. It espouses the view
that income assistance to families with able-bodied adults should be
transitional and conditioned upon their efforts to become self-
sufficient. As States and communities assume new responsibilities for
helping adults get work and earn paychecks quickly, parents face new,
tougher work requirements.
The law imposes a requirement on each parent or caretaker to work
(see section 402(a)(1)(A)(ii) of the Act). That requirement applies
when the State determines the individual is ready to work, or after he
or she has received assistance for 24 months, whichever happens first.
For this requirement, the State defines the work activities that meet
the requirement.
In addition, there is a requirement that each parent or caretaker
participate in community service employment if he or she has received
assistance for two months and is neither engaged in work in accordance
with section 407(c) of the Act nor exempt from work requirements. The
State must establish minimum hours of work and the tasks involved. A
State may opt out of this provision if it chooses. A State may impose
other work requirements on individuals, but there is no further Federal
requirement to work.
Readers should understand that these individual requirements are
different from the work requirements described at section 407 of the
Act. Section 407 applies a requirement on each State to engage a
certain percentage of its total caseload and a certain percentage of
its two-parent caseload in specified work activities. For the State
requirement, the law lists what activities meet the requirement. A
State could choose to use this statutory list for the work requirement
on individuals described above, but is not required to do so. Subpart B
below explains more fully what the required work participation rates
are for States and how we calculate them. Subpart C explains the work
activities and the circumstances under which an individual is
considered ``engaged in work'' for the purpose of those rates.
We made a minor change to the text of the regulation from the NPRM,
removing the reference to the date that the community service
employment provision took effect, since that date has already passed.
In addition to the comments discussed below, we received several
comments in support of the language that we used in this section.
Comment: A few commenters suggested that this section should
reference the fact that these work requirements must be consistent with
the provisions of section 407(e)(2) of the Act, exempting a single
custodial parent who cannot obtain needed child care from work.
Response: We agree that the work requirements on individuals should
more clearly refer to the child care exception and have amended
Sec. 261.10(a) and (b) accordingly.
Comment: One commenter urged us to specify that individuals in
active military service or participating in a National Community
Services Act program be considered to be meeting the individual work
requirement.
Response: As we indicated above, it is the State's prerogative and
responsibility to define the activities it considers to meet these
requirements; therefore, we have not modified the regulations in this
area.
Comment: One commenter expressed concern that States will classify
recipients prematurely as ``job-ready'' and urged us to ensure that
States assess the needs of recipients properly.
Response: The statute vests responsibility for determining when a
recipient is ``job-ready'' in the State. It requires each State to
assess the skills, prior work experience, and employability of each
recipient who is either 18 years of age or who has not completed high
school (or equivalent) and is not attending secondary school (see
Sec. 261.11).
We agree with the commenter that it is important for States to
assess individuals adequately before requiring them to work or engage
in any activity; however, as we indicated above, this section of the
regulation is intended to paraphrase the statute rather than to
interpret it. We have included these provisions to clarify the
differing work expectations that the statute imposes on individuals and
States.
Section 261.11--Which Recipients Must Have an Assessment Under TANF?
(Sec. 271.11 of the NPRM)
Each State must make an initial assessment of the skills, prior
work experience, and employability of each recipient who is at least
age 18 or who has not completed high school (or equivalent) and is not
attending secondary school.
With respect to the timing of assessments, the State may make the
assessment within 30 days of the date on which the individual is
determined to be eligible for assistance, but may opt to increase this
period to as much as 90 days.
Several commenters expressed support for the inclusion of this
section in the regulations.
Comment: One commenter urged us to define what an appropriate
assessment is to ensure that the examination of each recipient is
thorough and sensitive to barriers that a recipient may hesitate to
identify, such as domestic violence or substance dependence. Another
suggested including guidelines or standards for assessments. Others
urged us to indicate how we would address a State's noncompliance with
this provision or to include a penalty related to this requirement.
Response: Because we have included this provision in the
regulations for informational purposes, it would be inappropriate to
define its terms or include standards. We expect States to comply with
the requirements of this subpart, but including them in the regulations
does not indicate our intent to create regulatory expectations or to
enforce these statutory provisions. We do not have the authority to add
a penalty related to this requirement.
Comment: One commenter suggested that we do not have authority to
require assessment of recipients. Others expressed concern about which
clients must be assessed and urged us to interpret the requirement to
apply only to certain recipients, such as those who are subject to work
requirements.
Response: Section 408(b)(1) of the Act requires the State to assess
each recipient who is at least age 18 or who has not completed high
school (or equivalent) and is not attending secondary school. The
regulations reflect this language. Because we have included this
provision for informational purpose, we do not think it is appropriate
to interpret the statute further in this area.
Comment: One commenter thought that the regulations lacked clarity
concerning the timing of assessments for
[[Page 17768]]
TANF recipients who had been receiving AFDC compared to the timing for
those who become eligible for assistance after the State began its TANF
program. Another urged us to allow States more time for conducting
assessments.
Response: Because the statute specifies the timeframes in which
States may comply with the requirement for an assessment, we do not
think it is appropriate to modify those timeframes. However, we agree
that it was confusing to describe two different assessment periods for
different segments of a State's caseload. Since all States should
already have conducted assessments of any recipients that they
converted from AFDC to TANF, we have included only the description of
the assessment period for new TANF cases in these regulations.
Section 261.12--What Is an Individual Responsibility Plan? (Sec. 271.12
of the NPRM)
A State may require individuals to adhere to the provisions of an
individual responsibility plan. Developed in consultation with the
individual on the basis of the initial assessment described above, the
plan should set forth the obligations of both the individual and the
State. It should include an employment goal for the individual and a
plan to move him or her into private-sector employment as quickly as
possible. The regulation includes more detailed suggestions for the
content of an individual responsibility plan.
Comment: One commenter, acknowledging the ultimate goal of private-
sector employment, thought that the individual responsibility plan
should recognize and address all barriers to employment, such as mental
health or literacy problems. Another commenter suggested that the
State's responsibilities to the individual should be more explicit.
Another commenter thought that paragraph (d) did not accurately reflect
the statute.
Response: We agree that the plan should include whatever activities
the State, in consultation with the individual, deems appropriate for
overcoming barriers to employment. We reiterated the statute's list of
possible plan obligations in paragraph (b) as examples, not as an
exhaustive list. We think that paragraph (d) ensures that the plan will
describe the State's obligation to the individual. States have the
flexibility to draft the plan as explicitly as they find appropriate.
We also understand the commenter's concern about the accuracy of
paragraph (d) and have amended it to reflect the statute's references
to services that enable an individual to obtain and keep employment and
to job counseling.
Comment: Some commenters thought that we had overstepped our
authority by including anything in the regulations about individual
responsibility plans or that our language was too restrictive,
preventing States from including plan requirements that do not relate
to work. Others commended our inclusion of this section.
Response: As we indicated above, we have included this provision
for informational and contextual purposes. In doing so, we paraphrased
requirements specified in the statute. For this reason, we do not think
we have overstepped our authority or that the language is more
restrictive than the statute. Moreover, neither the regulations nor the
statute prohibits a State from including in the individual
responsibility plan other requirements that it finds appropriate for
the individual.
Section 261.13--May an Individual Be Penalized for Not Following an
Individual Responsibility Plan? (Sec. 271.13 of the NPRM)
If the individual does not have good cause, he or she may be
penalized for not following the individual responsibility plan that he
or she signed. The State has the flexibility to establish good cause
criteria, as well as to determine what is an appropriate penalty to
impose on the family. This penalty is in addition to any other
penalties that the individual may have incurred.
We received comments expressing support for the inclusion of this
section in the regulations.
Comment: Several commenters urged us to ensure that the good cause
exception referred to in this section protects a recipient from penalty
where the individual failed to follow the individual responsibility
plan due to a violation of employment laws, such as sexual harassment
or other forms of job discrimination. Another suggested we define the
term ``good cause'' to give States guidance about the appropriate
circumstances for imposing a penalty and urged a broad definition to
cover the many barriers to employment that welfare recipients face.
Another commenter wanted us to ensure that victims of domestic violence
are protected from penalty, i.e., to define good cause to cover these
individuals, regardless of whether the State has adopted the Family
Violence Option (FVO).
Response: We do not believe it is necessary to define ``good
cause'' exceptions. States have substantial experience in this area
based on prior law. We encourage States to recognize the special needs
of victims of domestic violence elsewhere in the preamble. Although we
recognize that it is optional for States, we promote adoption of the
FVO. We also encourage States to coordinate their policies on good
cause determinations to provide consistent protection for families.
While we have chosen not to regulate ``good cause'' criteria, in
order to protect individuals from violations of other employment laws,
we have included a new regulatory section at Sec. 260.35 to reference
employment protections that exist under other Federal laws. These laws
apply equally to welfare beneficiaries and other workers.
Comment: One commenter thought the regulations should explicitly
state that a State may define ``good cause'' differently in different
subdivisions.
Response: As we indicated above, States have the flexibility to
define ``good cause'' as they deem appropriate. Under section
402(a)(1)(A)(i) of the Act, they also have the flexibility to implement
their programs differently in different parts of the State. Thus, a
State could vary its good cause criteria from one subdivision to
another. Since the language of this section tracks that of the statute,
we do not think it necessary or appropriate to amend the regulatory
text in this regard.
Comment: One commenter urged us to ensure that the individual
responsibility plan includes the individual's right to challenge the
contents of the plan.
Response: States may design individual responsibility plans as they
determine suitable. Because we have included this provision for
informational and contextual purposes, we do not think it is
appropriate for us to expand upon the provisions of the statute, which
we have tracked closely in this section. However, section
402(a)(1)(B)(iii) of the Act requires the State to provide
opportunities for recipients who have been adversely affected to be
heard in a State administrative or appeal process. States should
consider when and how to accommodate this recipient right in the
development and implementation of individual responsibility plans.
Section 261.14--What Is the Penalty if an Individual Refuses To Engage
in Work? (Sec. 271.14 of the NPRM)
If an individual refuses to engage in work in accordance with
section 407 of the Act, the State must reduce the amount of assistance
otherwise payable to the family pro rata (or more, at State
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