39198 Federal Register / Vol. 74, No. 149 / Wednesday, August 5, 2009 / Proposed Rules 

DEPARTMENT OF LABOR 

Employment and Training 

Administration 

20 CFR Part 618 

RIN 1205–AB56 

Trade Adjustment Assistance; Merit 

Staffing of State Administration and 

Allocation of Training Funds to States; 

Proposed Rule 

AGENCY: Employment and Training 

Administration, Labor. 

ACTION: Proposed Rule; request for 

comment. 

SUMMARY: On February 17, 2009, 

President Obama signed into law the 

American Recovery and Reinvestment 

Act of 2009, commonly called the 

Recovery Act, which reauthorized and 

significantly amended the Trade 

Adjustment Assistance for Workers 

(TAA) program under the Trade Act of 

1974, as amended (Trade Act). In 

accordance with those amendments, the 

Employment and Training 

Administration (ETA) of the Department 

of Labor (Department) is issuing this 

notice to propose regulations addressing 

how the Department distributes TAA 

training funds to the States that 

administer the program as agents of the 

United States. The notice also proposes 

that personnel engaged in TAA-funded 

functions undertaken to carry out the 

worker adjustment assistance provisions 

must be State employees covered by the 

merit system of personnel 

administration applicable to personnel 

engaged in employment security 

administration. 

DATES: Interested persons are invited to 

submit comments on this proposed rule. 

To ensure consideration, comments 

must be received on or before October 

5, 2009. The Department will not 

consider any comments received after 

the above date. 

ADDRESSES: You may submit comments, 

identified by Regulatory Information 

Number (RIN) 1205–AB56, by any one 

of the following methods: 

• Federal e-Rulemaking Portal: http:// 

www.regulations.gov. Follow the Web 

site instructions for submitting 

comments. 

• Mail and hand delivery/courier: 

Written comments, disk, and CD–ROM 

submissions may be mailed to Thomas 

M. Dowd, Administrator, Office of 

Policy Development and Research, U.S. 

Department of Labor, 200 Constitution 

Avenue, NW., Room N–5641, 

Washington, DC 20210. 

Instructions: Label all submissions 

with RIN 1205–AB56. 

Please submit your comment by only 

one method. Please be advised that the 

Department will post all comments 

received on http://www.regulations.gov 

without making any change to the 

comments, or redacting any 

information. The http:// 

www.regulations.gov Web site is the 

Federal e-rulemaking portal and all 

comments posted there are available 

and accessible to the public. Therefore, 

the Department recommends that 

commenters safeguard any personal 

information such as Social Security 

Numbers, personal addresses, telephone 

numbers, and e-mail addresses included 

in their comments as such information 

may become easily available to the 

public via the http:// 

www.regulations.gov Web site. It is the 

responsibility of the commenter to 

safeguard any such personal 

information. 

Also, please note that due to security 

concerns, postal mail delivery in 

Washington, DC may be delayed. 

Therefore, the Department encourages 

the public to submit comments on 

http://www.regulations.gov. 

Docket: All comments on this 

proposed rule will be available on the 

http://www.regulations.gov Web site 

and can be found using RIN 1205–AB56. 

The Department also will make all the 

comments it receives available for 

public inspection by appointment 

during normal business hours at the 

above address. If you need assistance to 

review the comments, the Department 

will provide you with appropriate aids 

such as readers or print magnifiers. The 

Department will make copies of the rule 

available, upon request, in large print 

and electronic file on computer disk. 

The Department will consider providing 

the rule in other formats upon request. 

To schedule an appointment to review 

the comments and/or obtain the rule in 

an alternative format, contact the Office 

of Policy Development and Research at 

(202) 693–3700 (this is not a toll-free 

number). You may also contact this 

office at the address listed above. 

FOR FURTHER INFORMATION CONTACT: 

Thomas M. Dowd, Administrator, Office 

of Policy Development and Research, 

U.S. Department of Labor, 200 

Constitution Avenue, NW., Room N– 

5641, Washington, DC 20210; telephone 

(202) 693–3700 (this is not a toll-free 

number). 

Individuals with hearing or speech 

impairments may access the telephone 

number above via TTY by calling the 

toll-free Federal Information Relay 

Service at 1–800–877–8339. 

SUPPLEMENTARY INFORMATION: The 

preamble to this proposed rule is 

organized as follows: 

I. Background—provides a brief description 

of the development of the proposed rule. 

II. Rationale for the Proposed Rule— 

summarizes the reasons for the proposed 

rule. 

III. Section-by-Section Review of the 

Proposed Rule—summarizes and 

discusses the provisions of the proposed 

regulations. 

IV. Administrative Information—sets forth 

the applicable regulatory requirements. 

I. Background 

The TAA program, under chapter 2 of 

title II of the Trade Act, provides 

adjustment assistance (including 

training, case management and 

reemployment services, income support, 

job search and relocation allowances, a 

wage supplement option for older 

workers, and eligibility for a health 

coverage tax credit) for workers whose 

jobs have been adversely affected by 

international trade. There are two steps 

for workers to obtain program benefits. 

A group of workers, or specified 

entities, must file, with the Department 

and the State in which the jobs are 

located, a petition for certification of 

eligibility to apply for TAA benefits and 

services. (The States administer the 

TAA program as agents of the United 

States. They do so through a State 

agency designated as the Cooperating 

State Agency (CSA) in an agreement 

between the Secretary of Labor 

(Secretary) and the Governor (the 

Governor-Secretary agreement), as 

required under section 239 of the Trade 

Act. The CSA may also include the State 

Workforce Agency (if different) and 

other State or local agencies that 

cooperate in the administration of the 

TAA program, as provided in the 

Governor-Secretary agreement. If the 

Department certifies the petition, based 

upon statutory criteria that test whether 

the group of workers was adversely 

affected by international trade, then the 

workers may individually apply with 

the CSA for TAA benefits and services. 

The Trade and Globalization 

Adjustment Assistance Act of 2009 

(TGAAA), a part of the Recovery Act 

(Pub. L. 111–5, Div. B, Title I, Subtitle 

I), reauthorized and substantially 

amended the TAA program by 

amending the certification criteria to 

expand the types of workers who may 

be certified and by expanding the 

available program benefits. Section 1893 

of the TGAAA provides that, for the 

most part, the TGAAA amendments will 

expire on December 31, 2010. The 

TGAAA amendments generally apply to 

workers covered under petitions for 


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certification filed on or after May 18, 

2009, and before January 1, 2011. To 

incorporate into regulations the 

substantial changes to the TAA 

program, the Department proposes 

creating a new 20 CFR part 618, which 

will implement the entirety of the TAA 

program, including the changes made by 

the TGAAA amendments. 

This will be done through two 

rulemakings. This first rulemaking 

addresses the allocation of TAA training 

funds to the States and merit staffing of 

State administration of the program. 

(The TGAAA uses the term ‘‘apportion’’ 

when discussing the dividing of training 

funds among the States, but this 

proposed rule uses the term 

‘‘allocation’’ to avoid confusion, since 

customarily the Office of Management 

and Budget ‘‘apportions’’ appropriated 

funds to the Department, which 

‘‘allocates’’ them to the States.) The 

Department plans a second rulemaking 

that will implement the remainder of 

the TAA program. 

The Department published two 

Notices of Proposed Rulemaking 

(NPRMs) in 2006 that were part of a 

rulemaking process to implement the 

amendments made by the Trade 

Adjustment Assistance Reform Act of 

2002 (Pub. L. 107–210). The Department 

first published a NPRM covering TAA 

program benefits and administration (71 

FR 50760, Aug. 25, 2006), and soon 

thereafter published a NPRM covering 

the Alternative Trade Adjustment 

Assistance for Older Workers (ATAA) 

program (71 FR 61618, Oct. 18, 2006). 

Then, Congress, in the Continuing 

Appropriations Resolution, 2007 (Pub. 

L. 110–5), the Consolidated 

Appropriations Act, 2008 (Pub. L. 110– 

161), and the Omnibus Appropriations 

Act, 2009 (Pub. L. 111–8), explicitly 

prohibited the Department from 

finalizing or implementing these 

proposed regulations until the Trade 

Act was reauthorized. However, the 

substantial amendments made by the 

TGAAA rendered the two 2006 NPRMs 

obsolete, and therefore the Department 

withdrew them on June 9, 2009 (74 FR 

27262). 

II. Rationale for the Proposed Rule 

Merit Staffing 

This rulemaking proposes that a State 

must, after a transition period, engage 

only State government personnel to 

perform TAA-funded functions 

undertaken to carry out the worker 

adjustment assistance provisions of the 

Trade Act and must apply to such 

personnel the standards for a merit 

system of personnel administration, in 

accordance with Office of Personnel 

Management (OPM) regulations at 5 

CFR Part 900, Subpart F. These OPM 

regulations specify the merit system 

standards required for certain Federal 

grant programs, and have long been 

required for personnel administering 

Unemployment Insurance (UI) (section 

303(a)(1) of the Social Security Act) and 

Wagner-Peyser Act-funded Employment 

Service (ES) programs in the States (20 

CFR 652.215). Under this proposed rule, 

TAA-funded personnel would be 

subject to the same State merit system 

requirements applicable to personnel 

administering the UI and ES programs 

in a State. The purpose of this proposed 

requirement is to promote consistency, 

efficiency, accountability, and 

transparency in the administration of 

the TAA program. 

The merit system standards contained 

in 5 CFR 900.603 are as follows: 

(a) Recruiting, selecting, and advancing 

employees on the basis of their relative 

ability, knowledge, and skills, including 

open consideration of qualified applicants for 

initial appointment. 

(b) Providing equitable and adequate 

compensation. 

(c) Training employees, as needed, to 

assure high quality performance. 

(d) Retaining employees on the basis of the 

adequacy of their performance, correcting 

inadequate performance, and separating 

employees whose inadequate performance 

cannot be corrected. 

(e) Assuring fair treatment of applicants 

and employees in all aspects of personnel 

administration without regard to political 

affiliation, race, color, national origin, sex, 

religious creed, age or handicap and with 

proper regard for their privacy and 

constitutional rights as citizens. This ‘‘fair 

treatment’’ principle includes compliance 

with the Federal equal employment 

opportunity and nondiscrimination laws. 

(f) Assuring that employees are protected 

against coercion for partisan political 

purposes and are prohibited from using their 

official authority for the purpose of 

interfering with or affecting the result of an 

election or a nomination for office. 

From 1975, when the Department 

began administering the TAA program, 

until 2005, the Governor-Secretary 

agreements required that TAA-funded 

administrative functions be carried out 

exclusively by staff subject to these 

merit system standards. In 2005, the 

Governor-Secretary agreements were 

modified to exempt from the merit 

system standards personnel engaged in 

the administration of the TAA program, 

other than those personnel who also 

were engaged in administering the UI 

and ES programs. This proposed rule 

would restore what had been the longstanding practice of using merit staffed 

personnel to administer the TAA 

program. 

Requiring the use of State merit staff 

is particularly appropriate given the 

nature of the TAA program. The TAA 

program is a complex entitlement 

program that requires that the States, 

acting as agents of the United States, 

make substantive determinations about 

the services and benefits that are to be 

provided to workers. Section 239 of the 

Trade Act specifically provides that the 

States are agents of the United States in 

administering TAA, which is distinct 

from the relationship under other 

Federally-funded workforce investment 

programs, such as Title I of the 

Workforce Investment Act of 1998 

(WIA). Under these other programs, 

there is a grantor-grantee relationship 

under which the Department allocates 

funds to the States to perform public 

purposes, but the States have 

considerable discretion in how they 

carry out those purposes. In contrast, 

the Trade Act establishes a principalagent relationship, under which the 

Department directs State program 

administration. 

This principal-agent relationship is 

established because, unlike participants 

in WIA-funded workforce investment 

programs, workers under the TAA 

program are legally entitled to receive 

Federally-funded services and benefits 

if they meet exclusively Federal 

eligibility criteria. The wide range of 

benefits and services to which a worker 

may be entitled under the TAA 

program, each of which requires a 

separate determination based on distinct 

criteria, and are subject to continuing 

eligibility, includes the payment of 

income support (trade readjustment 

allowances (TRA)); the payment of wage 

supplements under ATAA and 

reemployment trade adjustment 

assistance (RTAA); the payment of job 

search and relocation allowances; and 

the approval of and enrollment in 

training and the issuance of waivers of 

the training requirement as a condition 

of TRA. The TGAAA added a 

requirement to provide employment and 

case management services to eligible 

TAA-certified workers, underscoring 

Congress’ recognition that the proper 

provision of these services is essential to 

ensure that workers receive the full 

range of benefits and services to which 

they are entitled. The TGAAA also 

added the RTAA benefit, enhanced 

other benefits and services, and 

expanded group eligibility for the TAA 

program. These features add complexity 

and additional challenges to the 

administration of the TAA program. 

The other major State entitlement 

program overseen by the Department is 

the UI program, which is administered 

by State merit staff, as required as a 


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condition of receipt of UI administrative 

grants under 42 U.S.C. 503(a)(1). The 

TAA and UI programs are integrally 

related. TRA, the Federally funded 

income support provided under the 

TAA program, is a UI benefit payable 

after exhaustion of other forms of UI, 

and is subject to many of the same or 

similar requirements and procedures 

that apply to State UI. Indeed, the TRA 

weekly benefit amount is based on the 

State UI weekly benefit amount, and 

review of all determinations with 

respect to TAA entitlements (such as 

training, TRA and job search and 

relocation) must be conducted in the 

same manner and to the same extent as 

UI determinations under State law. The 

determination of an individual’s 

entitlement to a publicly-funded benefit, 

such as TRA (a type of unemployment 

insurance), is an ‘‘inherently 

governmental’’ function, as defined in 

Office of Management and Budget 

(OMB) Circular No. A–76 (Revised) (68 

FR 32134, May 29, 2003). 

It is imperative that where individual 

entitlement to services and benefits 

exists, there be consistency in the 

application of eligibility criteria and the 

treatment of workers nationally, and 

where the TAA program permits 

variation based upon State law, that 

there be consistency statewide. The 

Department believes that statewide 

consistency is best achieved by 

administering the TAA program through 

merit staff who are hired, trained and 

employed by one or two State agencies 

under the same merit system (the 

Governor-Secretary agreements provide 

that a State must designate a lead 

agency, though other agencies may 

assist in the provision of TAA benefits 

and services) and receive the same 

guidance and are accountable to the 

same State agency or agencies. Nonmerit staff personnel employed outside 

of the State agency, often by several 

different employers that are either local 

agencies or non-profits, are subject to 

varying procedures and work rules, as 

well as different and potentially 

conflicting obligations to their actual 

employers, which is more likely to 

produce an inconsistent application of 

the eligibility criteria for the various 

TAA benefits and services. 

Similarly, placing administrative 

responsibility with the merit staffed 

personnel of one or two State agencies, 

rather than with personnel from a 

number of different entities and 

contractors with differing internal rules 

and practices, promotes efficiency and 

makes it easier to hold the State 

agencies accountable to address or 

remedy administrative issues that may 

arise. For example, a State agency is in 

a better position than a locally-based 

administrative structure to detail staff to 

areas in the State where their services 

are most needed in response to the 

layoff events that may trigger TAA 

eligibility and require services to large 

numbers of TAA workers. Focusing 

responsibility on State agencies also 

makes it easier for the public to know 

who administers the program and 

thereby further promotes accountability 

and transparency. 

State personnel serving under a merit 

system are non-partisan public servants 

who are directly accountable to 

government entities. The standards for 

their performance and their 

determinations on the use of public 

funds require that decisions be made in 

the best interest of the public and of the 

population to be served. The use of a 

State merit system is further intended to 

ensure that the administrative personnel 

meet objective professional 

qualifications, provide fair treatment to 

participants, comply with strict 

government standards on the use of 

personal information, and perform in a 

setting where decisions are made in 

accordance with high standards of 

public transparency. The Department 

believes that these features of a State 

merit system are appropriate to apply to 

the statewide administration of the TAA 

program. 

Under the amendments made by 

TGAAA, for the first time the TAA 

program will be able to devote its own 

funds to the provision of employment 

and case management services. The 

Department intends to ensure that these 

and other TAA-funded services are 

provided in a high quality and in-depth 

manner. TAA-certified workers 

currently receive many services, 

including supportive services and other 

wrap-around services that are funded 

and provided under other programs for 

which TAA-certified workers also 

qualify. The Department will continue 

to encourage the provision of services to 

TAA-certified workers by such other 

programs in order to supplement TAAfunded services. In fact, the GovernorSecretary agreements require 

coordination with activities carried out 

under WIA to help ensure that a 

comprehensive array of services is 

available to TAA-certified workers. 

The proposed merit staffing 

requirement would apply only to TAAfunded functions undertaken to carry 

out the worker adjustment assistance 

provisions of the Trade Act. Thus, while 

the merit staffing requirement would 

apply to the approval of training, it 

would not extend to training providers. 

The requirement also would not 

prohibit a State from outsourcing ‘‘noninherently governmental’’ functions 

ancillary to program administration, 

such as the provision of information 

technology support or janitorial services 

for State TAA staff. Unemployment 

Insurance Program Letter No. 12–01, 

Outsourcing of Unemployment 

Compensation Administrative Functions 

(Dec. 28, 2000), 66 FR 1696 (Jan. 9, 

2001), and its Change 1 (Nov. 26, 2007) 

applies this principle to the outsourcing 

of State UI activities, and the proposed 

rule would apply this principle to the 

outsourcing of State TAA activities. 

The authority the Department relies 

upon in proposing the merit staffing 

requirement is found in section 239 of 

the Trade Act and is the same authority 

under which the Department establishes 

the requirements of and executes the 

Governor-Secretary agreements. Section 

239 establishes the Department’s role as 

principal in the principal-agent 

relationship with the States, sets a 

number of conditions that must be 

included in the Governor-Secretary 

agreements and grants the Secretary 

broad authority to assure the proper and 

efficient functioning of the TAA 

program. Section 239(a)(1) provides that 

the States are agents of the United States 

in operating the program. The 

Department has the responsibility to 

ensure that, as its agents, the States 

administer the program in the most 

effective, efficient, consistent and 

transparent manner possible. For the 

reasons stated in this section, the 

Department has concluded that these 

goals can best be accomplished through 

the use of State merit staff. 

Other provisions in section 239 also 

provide authority for the Department’s 

proposed rule. Section 239(a)(4) 

requires the States to ‘‘cooperate with 

the Secretary and with other State and 

Federal agencies in providing payments 

and services’’ under the program, which 

affords the Secretary authority to ensure 

that payments and services are 

administered in a consistent and 

efficient manner through State merit 

staff. Section 239(e) requires 

coordination of employment services 

between the TAA and WIA programs 

‘‘on such terms and conditions as are 

established by the Secretary,’’ which 

affords the Secretary the authority to 

establish merit staffing as a requirement 

for TAA-funded employment and case 

management services and in the 

approval of training. Section 239(e) also 

instructs the Department to consult with 

the States on how to administer the 

provisions of sections 235 and 236 of 

the Trade Act and title I of the WIA. The 

Department has consulted with and 

continues to consult with the States on 

merit staffing of State TAA 


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administration. Finally, new section 

239(i), added by the TGAAA, directs the 

Secretary to require each cooperating 

State and cooperating State agency ‘‘to 

implement effective control measures 

and to effectively oversee the operation 

and administration’’ of the TAA 

program, which the Department again 

has determined can be best carried out 

by requiring the use of State merit staff. 

To facilitate the implementation of 

the State merit staffing requirement in 

an orderly manner, and to assure that 

the staffing changes proposed in this 

rule do not disrupt the provision of 

services to eligible workers, the 

proposed rule allows for a transition 

period. The proposed rule requires the 

use of merit staff to carry out functions 

other than employment and case 

management services by July 1, 2010. As 

explained below in the ‘‘Allocation’’ 

section of this preamble, the Department 

intends to issue a final rule on or before 

February 17, 2010. Thus, the States 

would have at least four and one-half 

months to meet this requirement after 

the promulgation of the final rule. 

Recognizing that employment and case 

management services are a newly 

funded TAA function and that such 

services may have been provided 

through arrangements with other 

programs in the past, the proposed rule 

provides a longer transition period for 

merit staffing such services and requires 

the use of merit staff to carry out those 

services beginning October 1, 2010. 

The proposed rule permits the three 

States (Michigan, Colorado and 

Massachusetts) that are currently 

exempted from ES merit staffing 

requirements to continue to use nonState and non-merit staff authorized 

under those exemptions to administer 

functions under the TAA program, 

except that TRA must continue to be 

administered by State merit staff, as 

currently required under the GovernorSecretary Agreement. The Department 

proposes this exception because ES staff 

may administer TAA, which in turn can 

make it difficult for a State that does not 

use State merit staff for the ES program 

to also use State merit staff for the TAA 

program. This exception will prevent 

the complications that might arise in 

those States that are exempted from ES 

merit staffing requirements if they 

attempt to require both State merit staff 

and non-State or non-merit staff to 

perform similar functions within the 

same ES agency. 

In sum, given the nature of the TAA 

program as a complex entitlement 

program administered by the States as 

agents of the Department, the objectives 

of ensuring consistency, efficiency, 

accountability and transparency in the 

administration of the program can best 

be achieved by restoring the 

requirement that the program be 

administered by State merit staff. In so 

doing, the proposed rule advances the 

ultimate goal of the TAA program to 

provide effective benefits and services 

that will help trade-impacted workers 

obtain reemployment. 

Allocation of Training Funds to States 

This proposed rule also provides for 

the Department’s allocation of training 

funds to the States. Section 1828(a) of 

the TGAAA amended section 236(a)(2) 

of the Trade Act to increase the annual 

statutory ‘‘cap’’ on TAA training funds 

and to set forth the terms under which 

the Department distributes these funds 

to the States. Section 1828(c) of the 

TGAAA added a new section 236(g)(1) 

to the Trade Act directing the 

Department to issue ‘‘such regulations 

as may be necessary to carry out the 

provisions of subsection (a)(2)’’ on or 

before February 17, 2010. This NPRM 

proposes the regulations referred to in 

section 236(g)(1). 

Before the TGAAA, the TAA program 

was most recently reauthorized in the 

Trade Adjustment Assistance Reform 

Act of 2002 (Pub. L. 107–210), which 

expanded program coverage and 

increased the training cap from $80 

million to $220 million to provide 

training for the newly covered workers. 

The TGAAA amendments further 

increased the cap to $575 million for 

each of fiscal years (FY) 2009 and 2010, 

and provided a cap of $143,750,000 for 

the period from October 1 to December 

31, 2010. The Conference Report on the 

Recovery Act, H.R. Rep. No. 111–16, 

entitled Making Supplemental 

Appropriations for Job Preservation and 

Creation, Infrastructure Investment, 

Energy Efficiency and Science, 

Assistance to the Unemployed, and 

State and Local Fiscal Stabilization, for 

the Fiscal Year Ending September 30, 

2009, and for Other Purposes 

(Conference Report), made clear that 

Congress increased the cap on training 

funds not only because of the expanded 

program coverage but also because 

training funds have at times been 

insufficient. H.R. Rep. No. 111–16, 

p. 672. 

The process by which training funds 

are allocated has also evolved over 

recent years. Before FY 2004, the 

Department allocated TAA training 

funds to the States entirely through a 

request process. States were not 

provided with any initial annual 

allocation of funds; instead, all 

distributions of TAA training funds 

were made in response to State requests. 

States would submit requests on an asneeded basis, but, because the requests 

typically far outstripped available 

training funds, the training funds 

regularly ran out early in the fiscal year. 

Once the TAA training funds were 

exhausted, States would request 

National Emergency Grant (NEG) funds 

under section 173 of the WIA to enable 

them to continue to enroll trade-affected 

workers in approved training. The 

uncertainty of the funding process made 

it difficult for the States to anticipate 

how much funding they would receive, 

and therefore made it difficult for the 

States to plan and manage resources. 

Thus, this process proved to be 

inefficient, protracted, and cumbersome. 

To address these problems, beginning 

with FY 2004, the Department issued 

annual guidance establishing a formula 

for allocating TAA training funds to the 

States. The Department first issued a 

specific funding formula for TAA 

training funds in Training and 

Employment Guidance Letter (TEGL) 

No. 6–03 (Oct. 1, 2003), and after a 

change in the weighting of the factors 

used in the formula for FY 2005, the 

formula remained the same through the 

beginning of FY 2009. The Department’s 

formula-based methodology for State 

TAA funding initially allocated 75 

percent of the Department’s 

appropriation of a fiscal year’s training 

funds and held the remaining 25 

percent in reserve. The reserve funds 

could be accessed by States that had 

expended at least 50 percent of their 

allocation, or otherwise demonstrated 

need. Each year, a TEGL described the 

formula for allocating the 75 percent 

initial distribution ($165 million) among 

the States. After FY 2005, the formula 

did not change from year to year, and 

the Department issued a TEGL each year 

as a reminder to the States and to 

indicate that the formula for that fiscal 

year would use data from the more 

current time periods. The TEGL on this 

topic for FY 2009 was TEGL No. 4–08 

(Oct. 28, 2008). 

Under the old formula, the 

Department allocated one-half of the 

funds based on accrued training 

expenditures, as reflected in the 

previous 21⁄2 years’ reported data, and 

allocated the other one-half based on the 

average number of training participants 

for the same reporting period. The 

Department calculated a State’s 

percentage of total training expenditures 

by taking the State’s average total 

expenditures over the previous 21⁄2

years and dividing that number by the 

average national training expenditures 

during the same time period. Each State 

was assigned a weight representing each 

State’s share of the national TAA 

activity. The weight was used to 


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determine a State’s unadjusted base 

allocation for a fiscal year. This weight 

was calculated by using each of two 

factors as half of the total for the final 

weight each State receives. A State’s 

unadjusted base allocation for a fiscal 

year was calculated by multiplying the 

State’s weight against the training funds 

being allocated. Therefore, if a State 

represented 10 percent of the national 

participation and expenditures, the 

State weight would be 10 percent and 

the State would receive 10 percent of 

the $165 million as an unadjusted base 

allocation. If a State had an allocation of 

less than $100,000, the funds allocated 

for it were redistributed to the other 

States, and that State had to apply for 

reserve funding as needed. 

The formula included a hold harmless 

feature, under which the initial 

allocation to a State was held to at least 

85 percent of the amount the State 

received in its initial allocation for the 

prior fiscal year. TEGL No 6–03 

introduced the hold harmless feature 

with the creation of the formula in order 

to minimize fluctuations in State 

funding from year to year which, as 

explained above, made it hard for States 

to plan and manage resources. Although 

the hold harmless feature was an 

attempt to ensure funding stability 

while States were becoming accustomed 

to the new methodology, it has proven 

to be problematic. In some instances, 

States have had atypically large layoffs 

one year, leading to high TAA training 

activity and expenditures that year and 

high initial allocations in the following 

fiscal year. Then, if a State’s TAA 

activity decreased considerably the 

following fiscal year, the 85 percent 

hold harmless provision prevented the 

formula from properly adjusting the 

amount of funding needed by the State. 

Because these States were allocated 

more than they needed, other States 

could receive inadequate initial training 

allocations that they exhausted 

relatively early each fiscal year. The 

Trade Act, as amended by the TGAAA, 

still includes a hold harmless provision, 

but at a much lower level of 25 percent 

of the prior year’s allocation, thus 

addressing the problem just described. 

Once the funds to make up the hold 

harmless amount are distributed, and 

the amounts from those States whose 

allocations were less than $100,000 are 

added back to the remaining pool of 

funds, the remaining funds are allocated 

among those States whose unadjusted 

allocation was at or above the hold 

harmless amount using the same 

formula. 

The Department has very limited 

authority to move money between States 

once the funds are distributed. The 

Department is allowed to reclaim 

unexpended training funds from a State, 

with the State’s agreement, and to 

redistribute those funds to other States 

only within a current fiscal year. This 

means that if a State is allocated FY 

2009 training funds, those funds may be 

returned to the Department and 

provided to another State only during 

FY 2009. After the end of the fiscal year, 

the Department has no authority to 

redistribute any unused funds received 

from a State. Training funds are 

available for State expenditure in the 

fiscal year in which they are obligated 

and in the two following fiscal years, 

per section 245(b) of the Trade Act. 

Training funds that are not expended by 

the end of the third fiscal year must be 

returned to the U.S. Treasury, as 

required by section 241(b) of the Trade 

Act. 

The TGAAA prescribes a process for 

allocating training funds. Although the 

process described in the statute is 

similar in many respects to the process 

just described, it will require some 

significant changes to the Department’s 

methodology. 

The Omnibus Appropriations Act, 

2009 (Pub. L. 111–8) provided increased 

TAA funding which will be used for a 

FY 2009 supplemental distribution to 

the States and other purposes. The 

Department issued a Change 1 to TEGL 

No. 04–08 to explain the formula 

methodology used to develop this 

supplemental distribution and describe 

the process for States to request 

additional TAA program reserve funds 

for training. 

Section 236(a)(2)(B)–(E) of the Trade 

Act, as amended by the TGAAA, now 

establishes a methodology for 

distributing TAA training funds: 

(B)(i) The Secretary shall, as soon as 

practicable after the beginning of each fiscal 

year, make an initial distribution of the funds 

made available to carry out this section, in 

accordance with the requirements of 

subparagraph (C). 

(ii) The Secretary shall ensure that not less 

than 90 percent of the funds made available 

to carry out this section for a fiscal year are 

distributed to the States by not later than July 

15 of that fiscal year. 

(C)(i) In making the initial distribution of 

funds pursuant to subparagraph (B)(i) for a 

fiscal year, the Secretary shall hold in reserve 

35 percent of the funds made available to 

carry out this section for that fiscal year for 

additional distributions during the remainder 

of the fiscal year. 

(ii) Subject to clause (iii), in determining 

how to apportion the initial distribution of 

funds pursuant to subparagraph (B)(i) in a 

fiscal year, the Secretary shall take into 

account, with respect to each State— 

(I) The trend in the number of workers 

covered by certifications of eligibility under 

this chapter during the most recent 4 

consecutive calendar quarters for which data 

are available; 

(II) The trend in the number of workers 

participating in training under this section 

during the most recent 4 consecutive 

calendar quarters for which data are 

available; 

(III) The number of workers estimated to be 

participating in training under this section 

during the fiscal year; 

(IV) The amount of funding estimated to be 

necessary to provide training approved under 

this section to such workers during the fiscal 

year; and 

(V) Such other factors as the Secretary 

considers appropriate relating to the 

provision of training under this section. 

(iii) In no case may the amount of the 

initial distribution to a State pursuant to 

subparagraph (B)(i) in a fiscal year be less 

than 25 percent of the initial distribution to 

the State in the preceding fiscal year. 

(D) The Secretary shall establish 

procedures for the distribution of the funds 

that remain available for the fiscal year after 

the initial distribution required under 

subparagraph (B)(i). Such procedures may 

include the distribution of funds pursuant to 

requests submitted by States in need of such 

funds. 

(E) If, during a fiscal year, the Secretary 

estimates that the amount of funds necessary 

to pay the costs of training approved under 

this section will exceed the dollar amount 

limitation specified in subparagraph (A), the 

Secretary shall decide how the amount of 

funds made available to carry out this section 

that have not been distributed at the time of 

the estimate will be apportioned among the 

States for the remainder of the fiscal year. 

Thus, the amended Trade Act requires 

the Secretary to make an initial 

distribution of training funds equal to 

65 percent of the training cap, holding 

35 percent in reserve to be distributed 

to States on an as-needed basis. Section 

236(a)(2)(C)(ii) establishes four factors 

that the Secretary must take into 

account in allocating this initial 

distribution. These factors are: (1) The 

trend in the number of workers covered 

by certifications of eligibility during the 

most recent four consecutive calendar 

quarters for which data is available; (2) 

the trend in the number of workers 

participating in training during the most 

recent four consecutive calendar 

quarters for which data is available; (3) 

the number of workers estimated to be 

participating in TAA-approved training 

during the fiscal year; and (4) the 

amount of funding estimated to be 

necessary to provide approved training 

during the fiscal year. Section 

236(a)(2)(C)(ii) also permits the 

Secretary to use ‘‘such other factors as 

the Secretary considers appropriate 

relating to the provision of approved 

training.’’ The Department has decided 

not to propose any new factors at this 

time but will revisit this issue in the 

future as it gains experience operating 


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Federal Register / Vol. 74, No. 149 / Wednesday, August 5, 2009 / Proposed Rules 39203 

the new formula. The proposed rule 

authorizes the Department to add factors 

at its discretion through administrative 

guidance published for comment. 

The Department proposes to assign 

each of these factors an equal weight, 

but the proposed rule authorizes the 

Department to change the weights 

through administrative guidance 

published for comment. As under the 

old formula, the Department will 

determine the national total and each 

State’s percentage of the national total 

for each factor. Using each State’s 

percentage of each of these weighted 

factors, the Department will determine 

the unadjusted percentage that the State 

will receive of the amount available for 

base allocations. The percentages for all 

the States will total 100 percent of 

$373,750,000, which is 65 percent of the 

training cap. 

The Department does not yet have 

experience using several of the statutory 

factors in the funding formula. 

Similarly, the Department cannot 

accurately predict how the TGAAA’s 

expansion of program coverage to 

include workers in service industries 

and workers in firms producing 

component parts will have on the data 

that States provide, nor for the impact 

on their funding needs. Because the 

Department has little experience 

working with these four factors in the 

new funding formula, the Department 

has determined that, for the time being, 

it is best to weight each factor equally. 

The Department proposes to administer 

the program with equally weighted 

factors until the TGAAA amendments 

sunset on December 31, 2010 under 

section 1893 of the TGAAA. The 

Department believes that by the sunset 

of the TGAAA amendments, it will have 

had enough experience using the new 

funding formula to determine whether it 

is appropriate to change the weights of 

the existing four factors or to add 

factors. Any change to the weights of the 

four statutory factors or additions of 

factors will be made through 

administrative guidance published for 

comment. 

The Trade Act, as amended by the 

TGAAA, includes a hold harmless 

feature, but at a much lower level than 

the Department has been using. While 

the initial allocation to a State has been 

at least 85 percent of the amount the 

State received in its initial distribution 

in the prior fiscal year, the statute now 

requires that a State’s initial allocation 

be at least 25 percent of the amount the 

State received in its initial allocation for 

the prior fiscal year. Considering the 

challenges with the 85 percent hold 

harmless feature noted earlier, the 

Department proposes to limit the hold 

harmless feature to the minimum 

statutory level of 25 percent. 

It has been the Department’s practice 

that, if a State’s initial allocation is less 

than $100,000, that State’s allocation is 

reapportioned to the other States. If a 

State has an initial allocation of less 

than $100,000, it may request reserve 

funds in order to obtain the limited 

TAA funding that the State requires. 

The proposed rule continues this 

practice, because it imposes no 

hardship. The Department is able to 

quickly process the relatively small 

requests for reserve funds made by these 

States. 

The proposed rule provides that, after 

the unadjusted allocations are 

calculated, the allocations to States 

whose unadjusted allocations were less 

than their hold harmless amounts are 

adjusted to their hold harmless amount. 

The funds used for that adjustment are 

subtracted from the total funds available 

for distribution. Next, the funds that 

become available from those States 

whose unadjusted allocation is less than 

$100,000 are added back into the total 

funds available. The amount remaining 

after those subtractions and additions is 

distributed among the remaining States, 

the States whose unadjusted allocations 

were as much or more than their hold 

harmless amounts using the same 

formula to recalculate the allocations. 

One alternative to the $100,000 

threshold would be to provide each 

State a minimum initial allocation. For 

example, the Department could allocate 

to each State its hold harmless amount 

without applying a $100,000 threshold, 

and then subtract the sum total of those 

hold harmless amounts from the 

remaining initial allocation funds before 

running the calculations outlined above 

for those remaining funds. This would 

reduce the amount that is allocated 

proportionately according to State need 

while ensuring a few States would 

receive initial allocations that otherwise 

would not. Another alternative would 

be to set a certain minimum initial 

allocation, which would be the same 

dollar amount for all States, then 

increase to their hold harmless amounts 

the States whose hold harmless amounts 

are higher than the fixed minimum 

amount. The remaining initial allocation 

monies then would be allocated by 

formula. The Department welcomes 

public comments on its proposal and 

the suggested alternatives and any other 

alternatives commenters wish to 

suggest. 

The amended Trade Act establishes 

the reserve level of funds at 35 percent 

of the total appropriated to the program, 

a higher level than the Department’s 

previous 25 percent reserve. These 

funds will be held in reserve, as they 

have in the past, to be distributed to 

States on an as-needed basis and are 

designed to provide funding to those 

States that experience high activity 

levels that cannot be addressed with the 

funds received in the initial allocation. 

The amended Trade Act requires the 

Department to make the initial 

distribution to States ‘‘as soon as 

practicable after the beginning of each 

fiscal year,’’ and requires that 90 percent 

of a fiscal year’s training funds be 

distributed to the States by July 15 of 

that fiscal year. In order for the 

Department to meet the July 15 

deadline, we propose to address any 

reserve requests received before June 1, 

and after all reserve requests are 

satisfied, to distribute the remaining 

training funds using the same process 

used for initial allocations. Any requests 

for reserve funds received after June 1 

will be funded from the remaining (10 

percent) reserve funds. 

In accordance with section 235A of 

the Trade Act, the Department will also 

provide an additional 15 percent of the 

amount allocated for training for TAA 

administration and employment and 

case management services, as well as an 

additional $350,000 to each State 

specifically for employment and case 

management services. 

III. Section-by-Section Review of the 

Proposed Rule 

Subpart H—Administration by 

Applicable State Agencies 

Merit Staffing (§ 618.890) 

Paragraph (a) of proposed § 618.890 

requires that a State apply to personnel 

engaged in TAA-funded functions 

undertaken to carry out the worker 

adjustment assistance provisions of the 

Trade Act the merit system of personnel 

administration applicable to personnel 

covered under 5 CFR part 900, subpart 

F, which applies to, among other 

agencies, State UI and ES agencies. 

The Department recognizes that this 

requirement must be implemented in 

such a way as to minimize any 

disruption in services to trade-impacted 

workers. Accordingly, rather than an 

immediate conversion to merit staffing, 

proposed paragraphs (b)(1) and (b)(2) 

provide a transition period for States to 

transition to the merit system. 

Proposed paragraph (b)(1) requires 

that activities related to employment 

and case management services be 

administered by merit-staffed State 

personnel no later than October 1, 2010. 

Proposed paragraph (b)(2) requires that 

the other TAA activities be 

administered by merit-staffed State 

personnel by July 1, 2010. 


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39204 Federal Register / Vol. 74, No. 149 / Wednesday, August 5, 2009 / Proposed Rules 

Paragraph (c) of proposed § 618.890 

provides an exemption from the merit 

staffing requirement for the three States 

the Secretary has exempted from the ES 

merit staffing requirement: Colorado, 

Massachusetts, and Michigan. The 

exemption is, however, limited. The 

exemption would not apply to the 

State’s administration of TRA, which 

would remain subject to the merit 

staffing requirement. Further, to the 

extent that these States provide TAAfunded services using staff of a State 

agency other than the ES, the ES 

exemption would not apply, and staff of 

these agencies would have to be merit 

staffed. 

Proposed paragraph (d) provides that 

the requirements of paragraph (a) do not 

prohibit a State from outsourcing 

functions that are not inherently 

governmental, as defined in OMB 

Circular No. A–76 (Revised). 

Subpart I—Allocation of Training Funds 

to States 

Annual Training Cap (§ 618.900) 

Proposed § 618.900 implements 

section 236(a)(2)(A) of the Trade Act 

which caps the amount of TAA training 

funds available in each fiscal year. 

Proposed paragraph (a) states that 

training funds for fiscal years 2009 and 

2010 are limited to $575 million 

annually. Proposed paragraph (b) states 

training funds for the period between 

October 1 and December 31, 2010 will 

not exceed $143.75 million. 

Distribution of the Initial Allocation of 

Training Funds (§ 618.910) 

Proposed § 618.910 implements the 

initial distribution of TAA training 

funds requirements in section 

236(a)(2)(B) and section 236(a)(C)(ii) of 

the Trade Act. 

Proposed paragraph (a) provides that 

the initial allocation of training funds to 

the States will be 65 percent of the 

available training funds for a given 

fiscal year, as required by section 

236(a)(2)(C)(i) of the Trade Act. 

Proposed paragraph (b) provides that 

the Department will make an initial 

allocation of training funds to the States 

as soon as is practicable after the 

beginning of each fiscal year. The 

Department often does not have full 

budget authority at the beginning of 

each fiscal year and often operates 

under a continuing resolution for some 

period during the fiscal year. As a 

result, proposed paragraph (b) also 

provides that the full initial allocation 

for a State may not be available at the 

beginning of a particular fiscal year. The 

Department will announce the States’ 

full initial allocation at the beginning of 

each fiscal year based on the applicable 

training cap, but the Department will 

not be able to distribute the full amount 

of the initial allocation until it receives 

a full year’s appropriation. Finally, 

proposed paragraph (b) provides that 

should the full year’s appropriated 

amount of training funds be less than 

the training cap, then the initial 

allocation will be based on the amount 

appropriated. 

Proposed paragraph (c) implements 

the hold harmless provision, required 

by section 236(a)(2)(C)(iii) of the Trade 

Act. Congress set the TGAAA’s hold 

harmless provision to require that a 

State receive no less than 25 percent of 

its previous fiscal year’s initial 

allocation. This is lower than the 

Department’s practice of using a hold 

harmless percentage of at least 85 

percent. Congress wanted the allocation 

of these funds to be more responsive to 

economic conditions, which can change 

rapidly, even within a single fiscal year 

(H.R. Rep. No. 111–16, pp. 672–73). 

Although intended to help States better 

plan their training needs, the 

Department’s higher hold harmless 

percentage led to inequitable 

distributions of training funds. The 

lower hold harmless percentage will 

allow the Department to more nimbly 

respond to the changing economic 

needs among the States. Proposed 

paragraph (c) proposes a hold harmless 

percentage of the statutory minimum, 

that is, 25 percent, except as provided 

in proposed paragraph (d) of proposed 

§ 618.910, for States with very limited or 

no TAA needs. 

Proposed paragraph (d) provides that 

a State whose unadjusted initial 

allocation is less than $100,000 will not 

receive an initial allocation, and its 

initial allocation amount will be 

allocated instead to other States. A State 

that does not receive an initial 

distribution may apply for reserve funds 

to obtain the training funding that it 

requires. Reserve funds will be 

distributed in accordance with proposed 

§ 618.920(b). Proposed paragraph (d) 

reflects the Department’s practice, and 

is based on a determination that TAA 

training fund use of less than $100,000 

in any fiscal year represents only 

sporadic TAA activity within a State; it 

is best to serve States that need 

relatively small amounts of training 

funds with a reserve funding request. 

Proposed paragraph (e) explains the 

process through which the initial 

allocation of training funds is made. In 

order for the Department to distribute 

the initial allocation properly it must 

factor in the hold harmless provision 

(proposed § 618.910(c)), the $100,000 

threshold (proposed § 618.910(d)), and 

the initial allocation factors (proposed 

§ 618.910(f)). 

Proposed paragraph (e)(1) provides 

that the Department begins the process 

of determining each State’s initial 

allocation by applying the four factors 

in proposed § 618.910(f), as required by 

section 236(a)(2)(C)(ii) of the Trade Act. 

Applying these factors results an 

unadjusted initial allocation for each 

State. 

Proposed paragraph (e)(2) provides 

that the Department then applies to the 

unadjusted initial allocation the hold 

harmless provision of proposed 

§ 618.910(c). Proposed paragraph 

(e)(2)(i) provides that a State whose 

unadjusted allocation is less than its 

hold harmless amount, but is $100,000 

or more, will have its allocation 

adjusted upward to meet the hold 

harmless amount (25 percent of its last 

year’s allocation). If a State’s unadjusted 

allocation is less than $100,000, the 

State will receive no initial allocation. 

Those funds will be shared among other 

States. (States that receive no initial 

allocation may apply for reserve funds.) 

Proposed paragraph (e)(2)(ii) provides 

that a State whose unadjusted allocation 

is no less than its hold harmless amount 

will receive its hold harmless amount 

and a recalculated share of remaining 

initial allocation funds. 

Proposed paragraph (e)(3) provides 

that the initial allocation funds 

remaining after the adjusted initial 

allocations are made to those States 

receiving only their hold harmless 

amounts, will be distributed among the 

States with unadjusted initial allocation 

that were no less than their hold 

harmless amounts. The Department 

reallocates the remaining funds by 

applying the factors listed in proposed 

§ 618.910(f) and by repeating the 

calculations in proposed paragraphs (c)– 

(e). 

Proposed paragraph (f)(1) describes 

the four factors that the Department will 

use in determining the amount of the 

initial distribution to the States. The 

Trade Act requires the consideration of 

these four factors. 

Proposed paragraphs (f)(1)(i) through 

(iv) list the four factors. Proposed 

paragraph (f)(1)(i) identifies as the first 

factor the trend in the number of 

workers covered by certifications of 

eligibility during the most recent four 

consecutive calendar quarters for which 

data is available. The trend will be 

established by assigning a greater weight 

to the most recent quarters, giving those 

quarters a larger share of the factor. The 

Department, under TEGL No. 04–08, 

Change 1, assigns weights of 40 percent 

for the most recent quarter, 30 percent 

to the next most recent quarter, 20 


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Federal Register / Vol. 74, No. 149 / Wednesday, August 5, 2009 / Proposed Rules 39205 

percent to the third most recent quarter, 

and 10 percent to the oldest quarter. The 

Department proposes not to codify these 

weights in regulation because it needs 

flexibility to change these weights 

quickly as the Department gains 

experience. 

Proposed paragraph (f)(1)(ii) identifies 

as the second factor the trend in the 

number of workers participating in 

training during the most recent four 

consecutive calendar quarters for which 

data is available. The trend will be 

established by assigning a greater weight 

to the most recent quarters, giving those 

quarters a larger share of the factor. The 

Department currently assigns weights by 

quarter for this factor in the same 

percentages as it does for the first factor. 

Proposed paragraph (f)(1)(iii) 

identifies as the third factor the number 

of workers estimated to be participating 

in training during the fiscal year. This 

estimate will be calculated by dividing 

the weighted average number of training 

participants for the State determined in 

proposed paragraph (f)(1)(ii) by the sum 

of the weighted averages for all States 

and multiplying the resulting ratio by 

the projected national average of 

training participants for the fiscal year, 

using the estimates underlying the 

Department’s most recent budget 

submission or update. 

Proposed paragraph (f)(1)(iv) 

identifies as the fourth factor the 

amount of funding estimated to be 

necessary to provide approved training 

during the fiscal year. This estimate will 

be calculated by multiplying the 

estimated number of participants in 

proposed paragraph (f)(1)(iii) by the 

average training cost for the State. The 

average training cost will be calculated 

by dividing total training expenditures 

for the most recent four quarters by the 

average number of training participants 

for the same time period. 

Proposed paragraph (f)(2) provides 

that the Department may use such other 

factors as it considers appropriate 

related to the provision of training. At 

this time the Department does not 

propose to consider any additional 

factors other than those listed in 

§ 618.910(f)(1)(i)–(iv). We invite the 

public to suggest additional factors and 

reasons for using them. The Department 

proposes to reserve the right to add 

additional factors in the future as 

described in paragraph (f)(4). 

Proposed paragraph (f)(3) provides 

that the Department will assign an equal 

weight to each of the four factors listed 

in proposed § 618.910(f)(1). For each of 

these weighted factors, the Department 

will determine the national total and 

each State’s percentage of the national 

total. Based on a State’s percentage of 

each of these weighted factors, the 

Department will determine the 

percentage that the State will receive of 

the amount available for unadjusted 

allocations. The percentages for all 

States will total 100 percent of the 

initial allocation of funds, 65 percent of 

the total training funds for a fiscal year. 

Proposed paragraph (f)(4) provides the 

mechanism by which the Department 

will change the weights of the factors or 

add new factors to the funding formula. 

As the Department gains experience 

with the effects of the equally weighted 

four factors and with the effects of the 

TGAAA amendments on the patterns of 

fund use, it will be able to determine 

whether any adjustments to the formula 

are necessary. At that time, the 

Department may change the weights of 

the four factors or suggest additional 

factors to better serve the tradeimpacted work force. Any changes will 

be made through administrative 

guidance published for comment. 

Reserve Fund Distribution (§ 618.920) 

Proposed § 618.920 addresses the 

distribution of the funds that remain 

after the initial distribution to the 

States, that is, the reserve funds. 

Proposed paragraph (a) provides that 

the remaining 35 percent of the total 

annual training funds would be held in 

reserve for later distribution, as required 

by section 236(a)(2)(C)(i) of the Trade 

Act. The statute specifically provides 

that the procedures the Secretary is 

required to establish for the distribution 

of the funds held in reserve may include 

the distribution of such funds in 

response to requests made by States in 

need of additional training funds. 

Reserve funds are distributed to the 

States on an as-needed basis and are 

designed to provide funds to those 

States that experience large, unexpected 

layoffs that did not receive an initial 

allocation or otherwise have training 

needs that are not met by their initial 

allocation. Proposed paragraph (a) also 

provides that reserve funds are not 

available for administrative expenses or 

for employment and case management 

services. Rather, the Department will 

provide States an additional 15 percent 

of the amount provided for TAA 

training for administration and 

employment and case management 

services. 

Proposed paragraph (b) provides the 

conditions under which reserve funds 

will be allocated. These conditions are: 

First, that a State must demonstrate 

either that at least 50 percent of its 

training funds has been expended, or 

that the it needs more funds to meet 

unusual and unexpected events; and 

second, that the State must provide a 

documented estimate of its expected 

funding needs for the remainder of the 

fiscal year. 

Proposed paragraphs (b)(1) through 

(b)(3) set forth the minimum 

information that a State must include in 

its analysis of its remaining fiscal year 

funding needs. The Department requires 

this information in order to determine 

whether there is a real need for funding. 

The analysis must include the average 

cost of training in the State; the 

expected number of participants in 

training through the end of the fiscal 

year; and the remaining funds the State 

has available for training. Standard 

Form (SF) 424 (OMB Approval No. 

4040–0004, expires March 31, 2012), 

Application for Federal Assistance, will 

continue to serve as the initial request 

for reserve funding, and must be sent to 

the appropriate regional office. The ETA 

9117 (OMB Approval No. 1205–0275, 

expires January 31, 2010), TAA Program 

Reserve Funding Request Form, will 

continue to serve to provide the 

supporting information needed. Any 

change to those procedures will be 

communicated through administration 

guidance. 

Second Distribution (§ 618.930) 

Proposed § 618.930 provides that at 

least 90 percent of the total training 

funds for a fiscal year will be distributed 

to the States by July 15 of that fiscal 

year, as required by section 

236(a)(2)(B)(ii) of the Trade Act. In order 

to meet this threshold the Department 

will first meet all timely filed acceptable 

requests for reserve funds. To be timely, 

the Department must receive a reserve 

fund request before June 1. (Any reserve 

fund requests received on or after June 

1 will be funded from the funds 

remaining after the July 15 distribution.) 

Any funds left over after all acceptable 

timely requests for reserve funds are 

satisfied will be distributed to those 

States which received an amount greater 

than the hold harmless amount 

according to the procedures established 

in proposed § 618.910. 

Insufficient Funds (§ 618.940) 

Proposed § 618.940 provides that if, in 

a given fiscal year, the Secretary 

estimates that the amount of funds 

necessary to pay for approved training 

will exceed the legislative cap, and 

therefore there will be insufficient funds 

to meet the needs of all States for the 

year, the Department will decide how 

the funds remaining in reserve at that 

time will be allocated among the States, 

as provided by section 236(a)(2)(E) of 

the Trade Act. The Department will 

communicate this decision through 

administrative notice. 


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IV. Administrative Information 

Regulatory Flexibility Analysis, 

Executive Order 13272, Small Business 

Regulatory Enforcement Fairness Act 

The Regulatory Flexibility Act (RFA), 

5 U.S.C. chapter 6, requires the 

Department to evaluate the economic 

impact of this proposed rule with regard 

to small entities. The RFA defines small 

entities to include small businesses, 

small organizations, including not-forprofit organizations, and small 

governmental jurisdictions. The 

Department must determine whether the 

rule imposes a significant economic 

impact on a substantial number of such 

small entities. 

The Department has determined that 

this NPRM does not affect a substantial 

number of small entities. As this 

proposed rule merely describes how the 

Department will allocate to the States 

training funds under the Trade Act, the 

only entities affected are the States. 

Because the rule does not impact a 

substantial number of small entities, we 

need not determine whether its 

economic impact is significant. 

This analysis is also applicable under 

Executive Order 13272; for those 

purposes as well the Department 

certifies that this proposed rule does not 

impose a significant economic impact 

on a substantial number of small 

entities. 

The Department has also determined 

that this rule is not a ‘‘major rule’’ for 

purposes of the Small Business 

Regulatory Enforcement Fairness Act of 

1996, as amended (SBREFA), Public 

Law 104–121. SBREFA requires 

agencies to take certain actions when a 

‘‘major rule’’ is promulgated. SBREFA 

defines a ‘‘major rule’’ as one that will 

have an annual effect on the economy 

of $100 million or more; that will result 

in a major increase in costs or prices for, 

among other things, State or local 

government agencies; or that will 

significantly and adversely affect the 

business climate. 

The proposed rule will also not result 

in a major increase in costs or prices for 

States or local government agencies; just 

the opposite, in fact, as the rule governs 

the distribution of certain funds to the 

States. Finally, this proposed rule will 

not have an annual effect on the 

economy of $100 million or more. 

Therefore, because none of the 

definitions of ‘‘major rule’’ apply, in this 

instance, we determine that this 

proposed rule is not a ‘‘major rule’’ for 

SBREFA purposes. 

Executive Order 12866 

Executive Order 12866 requires that 

for each ‘‘significant regulatory action’’ 

proposed by the Department, the 

Department conduct an assessment of 

the proposed regulatory action and 

provide OMB with the proposed 

regulation and the requisite assessment 

prior to publishing the regulation. A 

significant regulatory action is defined 

to include an action that will have an 

annual effect on the economy of $100 

million or more, as well as an action 

that raises a novel legal or policy issue. 

As discussed in the SBREFA analysis, 

this proposed rule will not have an 

annual effect on the economy of $100 

million or more. However, the rule does 

raise novel policy issues about the 

allocation of TAA training funds and 

State merit staffing. Therefore, the 

Department has submitted this proposed 

rule to OMB. 

Paperwork Reduction Act 

The purposes of the Paperwork 

Reduction Act of 1995 (PRA), 44 U.S.C. 

3501 et seq., include minimizing the 

paperwork burden on affected entities. 

The PRA requires certain actions before 

an agency can adopt or revise the 

collection of information, including 

publishing a summary of the collection 

of information and a brief description of 

the need for and proposed use of the 

information. Because this proposed rule 

does not require the collection of any 

new information, the PRA is not 

implicated. 

Unfunded Mandates Reform Act 

For purposes of the Unfunded 

Mandates Reform Act of 1995, this 

NPRM does not include any Federal 

mandate that may result in increased 

expenditure by State, local, and Tribal 

governments in the aggregate of more 

than $100 million, or increased 

expenditures by the private sector of 

more than $100 million. State 

governments administer TAA as agents 

of the United States and are provided 

appropriated Federal funds for all TAA 

expenses. 

Executive Order 13132 

Executive Order 13132 at section 6 

requires Federal agencies to consult 

with State entities when a regulation or 

policy may have a substantial direct 

effect on the States or the relationship 

between the National Government and 

the States, or the distribution of power 

and responsibilities among the various 

levels of government, within the 

meaning of the Executive Order. Section 

3(b) of the Executive Order further 

provides that Federal agencies must 

implement regulations that have a 

substantial direct effect only if statutory 

authority permits the regulation and it 

is of national significance. 

Further, section 239(f) of the Trade 

Act, upon which the Department relies, 

in part, for its authority to impose merit 

staffing, requires consultation with the 

States in the coordination of the 

administration of the provisions for 

employment services, training, and 

supplemental assistance under sections 

235 and 236 of the Trade Act and under 

title I of the WIA. 

Because a merit staffing requirement 

may fall within Section 3(b), and 

because of the consultation requirement 

in section 239(f) of the Trade Act, the 

Department has consulted on a variety 

of issues arising from the TGAAA 

amendments, including merit staffing, 

with the States both directly and 

through communication with the 

National Association of State Workforce 

Agencies, the National Association of 

Workforce Boards, and the National 

Governors Association, during the 

formation of the Governor-Secretary 

agreements between the States and the 

Department. The Department recognizes 

that there may be some costs to the 

States that have to convert some of their 

TAA-related staff to their merit staffing 

system. These costs will be primarily 

processing costs to take the steps 

necessary to establish the positions 

within the merit system and to hire staff 

into those positions. The Department 

does not have data on which to give a 

reasonable estimate of these costs but 

the Department is providing funds to 

the States specifically to cover the costs 

of these positions. 

Executive Order 13045 

Executive Order 13045 concerns the 

protection of children from 

environmental health risks and safety 

risks. This NPRM addresses TAA 

training funds and merit staffing, and 

has no impact on safety or health risks 

to children. 

Executive Order 13175 

Executive Order 13175 addresses the 

unique relationship between the Federal 

Government and Indian Tribal 

governments. The order requires Federal 

agencies to take certain actions when 

regulations have ‘‘Tribal implications.’’ 

Required actions include consulting 

with Tribal governments prior to 

promulgating a regulation with Tribal 

implications and preparing a Tribal 

impact statement. The order defines 

regulations as having ‘‘Tribal 

implications’’ when they have 

substantial direct effects on one or more 

Indian Tribes, on the relationship 

between the Federal Government and 

Indian Tribes, or on the distribution of 

power and responsibilities between the 

Federal Government and Indian Tribes. 


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Federal Register / Vol. 74, No. 149 / Wednesday, August 5, 2009 / Proposed Rules 39207 

Because this NPRM merely addresses 

how the Department distributes training 

funds to the States, we conclude that it 

does not have Tribal implications. 

Environmental Impact Assessment 

The Department has reviewed this 

NPRM in accordance with the 

requirements of the National 

Environmental Policy Act (NEPA) of 

1969 (42 U.S.C. 4321 et seq.), the 

regulations of the Council on 

Environmental Quality (40 CFR. part 

1500), and the Department’s NEPA 

procedures (29 CFR. part 11). The 

NPRM will not have a significant impact 

on the quality of the human 

environment, and, thus, the Department 

has not prepared an environmental 

assessment or an environmental impact 

statement. 

Assessment of Federal Regulations and 

Policies on Families 

Section 654 of the Treasury and 

General Government Appropriations 

Act, enacted as part of the Omnibus 

Consolidated and Emergency 

Supplemental Appropriations Act of 

1999 (Pub. L. 105–277, 112 Stat. 2681), 

requires the Department to assess the 

impact of this proposed rule on family 

well-being. A rule that is determined to 

have a negative effect on families must 

be supported with an adequate 

rationale. 

The Department has assessed this 

NPRM and determines that it will not 

have a negative effect on families. 

Indeed, we believe the proposed rule 

would strengthen families by providing 

training funds for workers adversely 

affected by trade. 

Executive Order 12630 

This NPRM is not subject to Executive 

Order 12630, Governmental Actions and 

Interference with Constitutionally 

Protected Property Rights, because it 

does not involve implementation of a 

policy with takings implications. 

Executive Order 12988 

This proposed regulation has been 

drafted and reviewed in accordance 

with Executive Order 12988, Civil 

Justice Reform, and will not unduly 

burden the Federal court system. The 

proposed regulation has been written so 

as to minimize litigation and provide a 

clear legal standard for affected conduct, 

and has been reviewed carefully to 

eliminate drafting errors and 

ambiguities. 

Executive Order 13211 

This NPRM is not subject to Executive 

Order 13211, because it will not have a 

significant adverse effect on the supply, 

distribution, or use of energy. 

Plain Language 

The Department drafted this rule in 

plain language. 

List of Subjects in 20 CFR Part 618 

Administrative practice and 

procedure, Grant programs—Labor, 

Reporting and recordkeeping 

requirements, trade adjustment 

assistance. 

For the reasons discussed in the 

preamble, the Department of Labor 

proposes to add 20 CFR part 618 to read 

as follows: 

Add part 618, reserving subparts A 

through G, and add subparts H and I to 

read as follows: 

PART 618—TRADE ADJUSTMENT 

ASSISTANCE UNDER THE TRADE ACT 

OF 1974 FOR WORKERS CERTIFIED 

UNDER PETITIONS FILED AFTER MAY 

17, 2009 

Subpart A–G [Reserved] 

Subpart H—Administration by Applicable 

State Agencies 

Sec. 

618.890 Merit staffing. 

Subpart I—Apportionment of Training 

Funds to States 

618.900 Annual training cap. 

618.910 Distribution of initial allocation of 

training funds. 

618.920 Reserve fund distributions. 

618.930 Second distribution. 

618.940 Insufficient funds. 

Subpart A–G [Reserved] 

Subpart H—Administration by 

Applicable State Agencies 

Authority: 19 U.S.C. 2320; Secretary’s 

Order No. 03–2009, 74 FR 2279. 

§ 618.890 Merit staffing. 

(a) Merit-based State personnel. The 

State must, subject to the transition 

period in paragraph (b) of this section, 

engage only State government personnel 

to perform Trade Adjustment Assistance 

(TAA)-funded functions undertaken to 

carry out the worker adjustment 

assistance provisions of the Trade Act of 

1974, as amended, and must apply to 

such personnel the standards for a merit 

system of personnel administration 

applicable to personnel covered under 5 

CFR Part 900, subpart F. 

(b) Transition period. A State not 

already in compliance with the merit 

system requirement of paragraph (a) of 

this section must comply with this 

requirement with respect to the 

personnel responsible for: 

(1) Employment and case 

management services under section 235 

of the Trade Act by October 1, 2010; and 

(2) All other TAA administrative 

activities, that are required to be merit 

staffed, by July 1, 2010. 

(c) Exemptions for States with 

employment service operation 

exemptions. A State whose employment 

service received an exemption from 

merit staffing requirements from the 

Secretary of Labor (Secretary) under the 

Wagner-Peyser Act, will retain an 

exemption from the requirements of 

paragraph (a) of this section. The 

exemption does not apply to the State’s 

administration of trade readjustment 

allowances which remain subject to the 

requirements of paragraph (a) of this 

section. To the extent that a State with 

an authorized ES exemption provides 

TAA-funded services using staff not 

funded under the Wagner-Peyser Act, 

the exemption in this paragraph does 

not apply, and they remain subject to 

the requirements of paragraph (a) of this 

section. 

(d) Exemptions for non-inherently 

governmental functions. The 

requirements of paragraph (a) of this 

section do not prohibit a State from 

outsourcing functions that are not 

inherently governmental, as defined in 

Office of Management and Budget 

Circular No. A–76 (Revised). 

Subpart I—Allocation of Training 

Funds to States 

Authority: 19 U.S.C. 2320; 19 U.S.C. 

2296(g); Secretary’s Order No. 03–2009, 74 

FR 2279. 

§ 618.900 Annual training cap. 

The total amount of payments that 

may be made for the costs of training 

will not exceed the cap established 

under section 236(a)(2)(A) of the Trade 

Act. 

(a) For each of the fiscal years 2009 

and 2010, this cap is $575,000,000; and 

(b) For the period beginning October 

1, 2010, and ending December 31, 2010, 

this cap is $143,750,000. 

§ 618.910 Distribution of initial allocation 

of training funds. 

(a) Initial allocation. The initial 

allocation for a fiscal year will total 65 

percent of the training funds available 

for that fiscal year. The Department of 

Labor (Department) will announce the 

amount of each State’s initial allocation 

of funds in accordance with the 

requirements of this section at the 

beginning of each fiscal year. The 

Department will determine this initial 

allocation on the basis of the full 

amount of the training cap for that year, 

even if the full amount has not been 


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39208 Federal Register / Vol. 74, No. 149 / Wednesday, August 5, 2009 / Proposed Rules 

appropriated to the Department at that 

time. 

(b) Timing of the distribution of the 

initial allocation. The Department will, 

as soon as practical after the beginning 

of each fiscal year, distribute the initial 

allocation announced under paragraph 

(a) of this section. However, the 

Department will not distribute the full 

amount of the initial allocation until it 

receives the entire fiscal year’s 

appropriation of training funds. If the 

full year’s appropriated amount of 

training funds is less than the training 

cap, then the Department will distribute 

65 percent of the amount appropriated. 

(c) Hold harmless provision. Except as 

provided in paragraph (d) of this 

section, in no case will the amount of 

the initial allocation to a State in a fiscal 

year be less than 25 percent of the initial 

allocation to that State in the preceding 

fiscal year. 

(d) Minimum initial allocation. If a 

State has an adjusted initial allocation 

of less than $100,000, as calculated in 

accordance with paragraph (e)(2) of this 

section, that State will not receive any 

initial allocation, and the funds that 

otherwise would have been allocated to 

that State instead will be allocated 

among the other States in accordance 

with this section. A State that does not 

receive an initial distribution may apply 

under § 618.920(b) for reserve funds to 

obtain the training funding that it 

requires. 

(e) Process of determining initial 

allocation. (1) The Department will first 

apply the factors described in paragraph 

(f) of this section to determine an 

unadjusted initial allocation for each 

State. 

(2) The Department will then apply 

the hold harmless provision of 

paragraph (c) of this section to the 

unadjusted initial allocation, as follows: 

(i) A State whose unadjusted initial 

allocation is less than its hold harmless 

amount but is $100,000 or more, will 

have its initial allocation adjusted up to 

its hold harmless amount. If a State’s 

unadjusted allocation is less than 

$100,000, the State will receive no 

initial allocation, in accordance with 

paragraph (d) of this section. Those 

funds will be shared among other States 

as provided in paragraph (e)(3) of this 

section. 

(ii) A State whose unadjusted initial 

allocation is no less than its hold 

harmless threshold will receive its hold 

harmless amount and will also receive 

an adjustment equal to the State’s share 

of the remaining initial allocation funds, 

as provided in paragraph (e)(3) of this 

section. 

(3) The initial allocation funds 

remaining after the adjusted initial 

allocations are made to those States 

receiving only their hold harmless 

amounts, as described in paragraph 

(e)(2)(i) of this section, will be 

distributed among the States with 

unadjusted initial allocations that were 

no less than their hold harmless 

amounts, as described in paragraph 

(e)(2)(ii) of this section (the remaining 

States). The distribution of the 

remaining initial allocation funds 

among the remaining States will be 

made by reapplying the calculation in 

paragraph (f) of this section. This 

recalculation will disregard States 

receiving only their hold harmless 

amount under paragraph (e)(2)(i) of this 

section, so that the combined 

percentages of the remaining States total 

100 percent. 

(f) Initial allocation factors. (1) In 

determining how to make the initial 

allocation of training funds, the 

Department will apply, as provided in 

paragraph (f)(3) of this section, the 

following factors with respect to each 

State: 

(i) The trend in the number of workers 

covered by certifications of eligibility 

during the most recent four consecutive 

calendar quarters for which data are 

available. The trend will be established 

by assigning a greater weight to the most 

recent quarters, giving those quarters a 

larger share of the factor; 

(ii) The trend in the number of 

workers participating in training during 

the most recent four consecutive 

calendar quarters for which data are 

available. The trend will be established 

by assigning a greater weight to the most 

recent quarters, giving those quarters a 

larger share of the factor; 

(iii) The number of workers estimated 

to be participating in training during the 

fiscal year. The estimate will be 

calculated by dividing the weighted 

average number of training participants 

for the State determined in paragraph 

(f)(1)(ii) of this section by the sum of the 

weighted averages for all States and 

multiplying the resulting ratio by the 

projected national average of training 

participants for the fiscal year, using the 

estimates underlying the Department’s 

most recent budget submission or 

update; and 

(iv) The amount of funding estimated 

to be necessary to provide approved 

training to such workers during the 

fiscal year. The estimate will be 

calculated by multiplying the estimated 

number of participants in paragraph 

(f)(1)(iii) of this section by the average 

training cost for the State. The average 

training cost will be calculated by 

dividing total training expenditures for 

the most recent four quarters by the 

average number of training participants 

for the same time period. 

(2) The Department may use such 

other factors that it considers 

appropriate. 

(3) The Department will assign each 

of the factors listed in paragraphs 

(f)(1)(i) through (f)(1)(iv) of this section 

an equal weight. For each of these 

weighted factors, the Department will 

determine the national total and each 

State’s percentage of the national total. 

Based on a State’s percentage of each of 

these weighted factors, the Department 

will determine the percentage that the 

State will receive of the amount 

available for initial allocations. The 

percentages of initial allocation amounts 

calculated for all States combined will 

total 100 percent of initial allocation 

funds. 

(4) The Department may, by 

administrative guidance published for 

comment, change the weights provided 

in paragraphs (f)(1) and (f)(3) of this 

section, or add additional factors. No 

such changes or additions will take 

effect before December 31, 2010. 

§ 618.920 Reserve fund distributions. 

(a) The remaining 35 percent of the 

training funds for a fiscal year will be 

held by the Department as a reserve. 

Reserve funds will be used, as needed, 

for additional distributions during the 

remainder of the fiscal year and for 

those States that do not receive an 

initial distribution. States may not 

receive reserve funds for TAA 

administration or employment and case 

management services without a request 

for training funds. 

(b) A State requesting reserve funds 

must demonstrate that at least 50 

percent of its training funds have been 

expended, or that it needs more funds 

to meet unusual and unexpected events. 

A State requesting reserve funds also 

must provide a documented estimate of 

expected funding needs through the end 

of the fiscal year. That estimate must be 

based on an analysis that includes at 

least the following: 

(1) The average cost of training in the 

State; 

(2) The expected number of 

participants in training through the end 

of the fiscal year; and 

(3) The remaining funds the State has 

available for training. 

§ 618.930 Second distribution. 

The Department will distribute at 

least 90 percent of the total training 

funds for a fiscal year to the States no 

later than July 15 of that fiscal year. The 

Department will first fund all acceptable 

requests for reserve funds filed before 

June 1. If there are any funds remaining 


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Federal Register / Vol. 74, No. 149 / Wednesday, August 5, 2009 / Proposed Rules 39209 

to be distributed after these reserve fund 

requests are satisfied, those funds will 

be distributed to those States that 

received an initial allocation in an 

amount greater than their hold harmless 

amount, using the methodology 

described in § 618.910. 

§ 618.940 Insufficient funds. 

If, during a fiscal year, the Department 

estimates that the amount of funds 

necessary to pay the costs of approved 

training will exceed the training cap 

under § 618.900, the Department will 

decide how the amount of available 

training funds that have not been 

distributed at the time of the estimate 

will be allocated among the States for 

the remainder of the fiscal year. That 

decision will be communicated through 

administrative notice. 

Signed at Washington, DC, this 29th day of 

July, 2009. 

Jane Oates, 

Assistant Secretary, Employment and 

Training Administration. 

[FR Doc. E9–18625 Filed 8–4–09; 8:45 am] 

BILLING CODE 4510–FN–P 


srobinson on DSKHWCL6B1PROD with PROPOSALS3