[Federal Register Volume 66, Number 91 (Thursday, May 10, 2001)]
[Rules and Regulations]
[Pages 23854-23860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11767]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Administration for Children and Families

45 CFR Part 270

RIN 0970-AC06


High Performance Bonus Awards Under the TANF Program

AGENCY: Administration for Children and Families, HHS.

ACTION: Interim final rule; request for comments.

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SUMMARY: The final rule covering the Temporary Assistance for Needy 
Families (TANF) high performance bonuses to States in FY 2002 and 
beyond was published August 30, 2000 (65 FR 52814). This interim final 
regulation further implements the child care measure, one of the 
measures on which we will award bonuses to States in FY 2002 and FY 
2003.
    Specifically, we explain how we will compute scores and rank States 
on the affordability component using four income ranges and a 
comparison of the number of children eligible under the State's income 
limits compared to the federal eligibility limits. We also specify how 
we will compute scores and rank States for the child care quality 
component based on new reporting requirements for market rate surveys 
for child care.

DATES: Effective date: This interim final rule is effective on May 10, 
2001, except for Sec. 270.4(e)(2)(ii) which requires an information 
collection that is not yet approved by the Office of Management and 
Budget (OMB). We will publish a document in the Federal Register 
announcing the effecitve date of Sec. 270.4(e)(2)(ii) when the 
additional data collection requirement is approved by OMB.
    Comment period: You may submit comments through July 9, 2001. We 
will not consider comments received after this date.

ADDRESSES: You may mail comments to the Administration for Children and 
Families, Child Care Bureau, 330 C Street SW., Room 2046, Washington, 
DC 20447. Attention: Gail Collins.
    Commenters may also provide comments on the ACF website. Electronic 
comments must include the full name, address and organizational 
affiliation (if any) of the commenter. This interim rule is accessible 
electronically via the Internet from the ACF Welfare Reform Home Page 
at http:www.acf.dhhs.gov/news/welfare.

[[Page 23855]]


FOR FURTHER INFORMATION CONTACT: Gail Collins, Acting Deputy 
Commissioner, Administration for Children, Youth and Families at (202) 
205-8347. Ms. Collins's e-mail address is: <a href="/cdn-cgi/l/email-protection#6502060a09090c0b16250406034b010d0d164b020a13"><span class="__cf_email__" data-cfemail="5433373b38383d3a27143537327a303c3c277a333b22">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
    A. The Temporary Assistance for Needy Families Program.
    B. Summary of the Statutory Provisions Related to the High 
Performance Bonus Awards.
    C. High Performance Bonus Regulations.
II. The Child Care Measure
    A. Summary of the Child Care Measure in the Final Rule.
    B. Consultation with States and Other Organizations.
    C. Changes Made in this Interim Final Rule.
III. Justification for an Interim Final Rule
IV. Regulatory Impact Analyses
    A. Executive Order 12866.
    B. Regulatory Flexibility Analysis.
    C. Assessment of the Impact on Family Well-Being.
    D. Paperwork Reduction Act.
    E. Unfunded Mandates Reform Act of 1995.
    F. Congressional Review.
    G. Executive Order 13132.

I. Background

A. The Temporary Assistance for Needy Families Program

    Title I of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996, Pub. L. 104-193, established the Temporary 
Assistance for Needy Families (TANF) program under title IV-A of the 
Social Security Act (the Act), 42 U.S.C. 401 et seq. TANF is a block 
grant program designed to make dramatic reforms in the nation's welfare 
system. Its focus is on moving recipients into work and turning welfare 
into a program of temporary assistance, preventing and reducing the 
incidence of out-of-wedlock births, and promoting stable two-parent 
families. Other key features of TANF include provisions that emphasize 
program accountability through financial penalties and rewards for high 
performance.

B. Summary of the Statutory Provisions Related to the High Performance 
Bonus

    Section 403(a)(4) of the Act requires the Secretary to award 
bonuses to ``high performing States.'' (Indian tribes are not eligible 
for these bonuses.) The term ``high performing State'' is defined in 
section 403(a)(4) of the Act to mean a State that is most successful in 
achieving the purposes of the TANF program as specified in section 
401(a) of the Act. These purposes are to--
    (1) Provide assistance to needy families so that children may be 
cared for in their own homes or in the homes of relatives;
    (2) End the dependence of needy parents on government benefits by 
promoting job preparation, work, and marriage;
    (3) Prevent and reduce the incidence of out-of-wedlock pregnancies 
and establish annual numerical goals for preventing and reducing the 
incidence of these pregnancies; and
    (4) Encourage the formation and maintenance of two-parent families.
    Section 403(a)(4)(B) of the Act specifies that the bonus award for 
a fiscal year will be based on a State's performance in the previous 
fiscal year and may not exceed five percent of the State's family 
assistance grant.
    Section 403(a)(4)(C) of the Act requires the Department to develop 
a formula for measuring State performance in consultation with the 
National Governors' Association and the American Public Welfare 
Association, now known as the American Public Human Services 
Association.
    Section 403(a)(4)(D) of the Act requires the Secretary to use the 
formula developed to assign a score to each eligible State for the 
fiscal year preceding the bonus year and prescribe a performance 
threshold as the basis for awarding the bonus. Section 403(a)(4)(D) of 
the Act also specifies that $1 billion (or an average total of $200 
million each year) will be awarded over five years, beginning in FY 
1999.

C. High Performance Bonus Regulations

    On December 6, 1999, we published a Notice of Proposed Rulemaking 
(NPRM) covering the bonus awards in FY 2002 and beyond. The NPRM 
proposed the measures, the formula for allocating funds, and the data 
sources, methodologies, and specifications for each measure. The final 
rule, published on August 30, 2000 (65 FR 52814), provided that we 
would base the bonuses in FY 2002 and beyond on four work measures; a 
measure on family formation and stability; and three measures that 
support work and self-sufficiency, i.e., participation by low-income 
working families in the Food Stamp Program, participation in the 
Medicaid and State Children's Health Insurance Program (SCHIP), and a 
child care measure. The methodologies and specification for all of the 
measures, except for the child care measure, were completely specified 
in the final rule.
    Although it had not been proposed in the NPRM, we added the child 
care measure in the final rule since we strongly agreed with commenters 
that child care subsidies or assistance represent an essential support 
for low-income families and are a critical part of a successful welfare 
reform program. We stated in the preamble to the final rule that we 
planned to engage States and others, particularly data experts, in 
discussions regarding the technicalities of implementing key elements 
of the child care measure. While there were many comments in support of 
a child care measure, there was no opportunity for detailed 
consultation or public comment on the technical aspects of the new 
measure, as it had not been included in the NPRM.
    We particularly wanted to obtain the States' views on, and 
information about, issues for which we lacked specific knowledge, such 
as State data systems. We stated that we planned to hold these 
consultations and issue details regarding the components of this 
measure by the end of the calendar year.

II. The Child Care Measure

A. Summary of the Child Care Measure in the Final Rule

    The final rule provided that $10 million would be allocated 
annually for bonus awards under the child care measure. The specific 
provisions of the measure appear at Sec. 270.4(e) of the final rule. 
See regulatory text at the end of this document.
    Briefly, the measure includes three components:
    <bullet> Child care accessibility, as measured by the percent of 
children, eligible under the Child Care and Development Fund (CCDF) 
requirements, who are receiving services, including eligible children 
served with additional funds;
    <bullet> Child care affordability, based on a comparison of 
reported assessed family co-payment to reported family income; and
    <bullet> Child care quality, as indicated by a comparison of the 
actual amounts paid for children receiving CCDF subsidies to local 
market rates in the State.
    We will base the bonus awards for FY 2002 on a composite ranking of 
State scores on accessibility and affordability. We will base the bonus 
awards for FY 2003 on a composite ranking of accessibility, 
affordability, and quality. The weights of the various components in 
computing the composite score are specified in Sec. 270.4(e).
    No new data collection is required in order to compete on the two 
components of the child care measure in FY 2002. We will use existing 
CCDF data and Census Bureau data as the data source for family incomes 
at 85 percent of the State's median income, i.e., the Federal 
eligibility limit in the CCDF program. We will also calculate the

[[Page 23856]]

percentage of potentially-eligible children served by dividing the 
number of children served with ``pooled'' funds, that is, CCDF funds 
(including transfers from TANF) and any other funds States use to serve 
eligible children, by the number of children eligible under the Federal 
criteria.
    For bonus awards FY 2003 and beyond, we will base the quality 
component on the actual rates States pay for children receiving CCDF 
subsidies, as reported on the ACF-801, as compared to State data on 
actual market rates.

B. Consultations With States and Other Organizations

    In determining the specifications for the affordability component, 
we were aware that States have tremendous flexibility in setting 
sliding fee scales under the regulations governing the CCDF program 
which they use to balance different needs and make child care 
affordable for families at a range of incomes. How to fairly score and 
rank States in light of the diversity in State practice was one of the 
major issues on which we sought further advice.
    The market rate survey and the data collected as a part of the 
survey were also issues on which we sought advice. The CCDF statute 
requires States to conduct a market rate survey periodically as a way 
of monitoring their program, but there is no consistency in how States 
conduct these surveys, and we have not required States to submit their 
surveys or the survey results to ACF. In the preamble to the final 
rule, we stated that we would consult with States and other experts on 
the market rate data States would need to submit in order to compete on 
this measure, the process for submitting the data, and the methodology 
we would use for ranking States on this component.
    Beginning in October, 2000, we contacted all States and 
approximately 30 advocacy organizations, including agencies and 
organizations that had commented on this issue in the NPRM, inviting 
them to consult with us on issues related to the child care measure.
    At the first consultation meeting, we asked for individuals to 
participate in intensive discussions over the next two months.
    We established two child care workgroups--one for State agency 
staff and the other for representatives of advocacy and other agencies 
and organizations.
    The State workgroups, made up of approximately 20 State 
representatives, met on five occasions by conference call. We faxed 
information to the workgroup members for review prior to each 
conference call and had extensive follow-up discussions. The advocate 
workgroup, made up of representatives of approximately 10 
organizations, met twice in two months by similar conference calls. In 
addition, the Child Care Bureau in ACF requested input from all States 
through the regional offices of ACF and in public presentations to 
State representatives.
    The consultations focused on the following major issues:
Accessibility
    <bullet> Were the data readily available?
    <bullet> What did States need to know to ``pool'' data properly?
Affordability
    <bullet> What was the effect of using the State's Median Income as 
a standard for this component?
    <bullet> Did it matter how States define ``income'?
    <bullet> What income levels, if any, should be used in this 
component?
    <bullet> How should we address family size in the calculations?
Quality
    <bullet> How reliable are the data collected by the States in their 
market rate surveys?
    <bullet> What types of child care should be compared?
    <bullet> How could this component account for States with large 
rural populations as compared to States with large urban centers?

C. Changes Made in this Interim Final Rule

    As a result of our consultations, we are amending the child care 
measure to add the following clarifications and specifications.
The Accessibility Component
    In the final rule, we referenced the ACF-696 financial reporting 
form as the source of the information on the counting of children 
served by ``pooled'' funds. We are taking this opportunity to update 
Sec. 270.4(e)(1)(i) to delete the reference to the ACF-696 and replace 
it with a reference to the recently revised ACF-800 and ACF-801. These 
two reporting forms are now better sources of the data on the number of 
children served with all sources of funds used by the State. We believe 
this change is not only an update for accuracy, but also will avoid 
confusion in the future. We are deleting the phrase ``including any 
such eligible children served with additional funds reported on the 
ACF-696 financial reporting form'' and replacing it with the words 
``and who are included in the data reported on the ACF-800 and the ACF-
801.''
    No additional guidance or specifications are needed to implement 
this component. We will use data from the ACF-800 and ACF-801 to 
compute scores and rank States.
The Affordability Component
    There is considerable variation among States in the amount of co-
payments, expressed as a percent of income, that parents are asked to 
pay at different income levels, particularly above the poverty level. 
In our consultations with both States and advocate groups, we were 
encouraged to look at affordability for families at several different 
increments of income.
    Therefore, we specify in Sec. 270.4(e)(3) that we will compare 
family income to the assessed State co-payment for child care, based on 
four income ranges. These income ranges refer to percentages of the 
Federal Poverty Guidelines for a family of three persons. The income 
ranges are as follows:
    <bullet> Income below the poverty level;
    <bullet> Income at least 100 percent and below 125 percent of 
poverty;
    <bullet> Income at least 125 percent and below 150 percent of 
poverty; and
    <bullet> Income at least 150 percent and below 175 percent of 
poverty.

For a family of three in FY 2001,
100 percent of the Federal Poverty Guidelines is $14,150;
125 percent of the Federal Poverty Guidelines is $17,687;
150 percent of the Federal Poverty Guidelines is $21,225; and
175 percent of the Federal Poverty Guidelines is $24,762.
    Although the maximum allowable income eligibility limit for child 
care is based on State Median Income (e.g., 85 percent of the SMI), we 
were encouraged in our consultations to use percent of the poverty 
level for this comparison between family income and assessed family co-
payments. The poverty level remains constant across States, while the 
SMI varies from State to State.
    We were also encouraged to consider family size in the measure of 
affordability. However, family size is not currently included in the 
data reported by States on the ACF 800 or 801. Therefore, we have 
chosen not to require this information at this time because it would 
result in additional data collection and reporting burden.
    We have selected these income ranges that refer to percentages of 
poverty for a family of three for comparison of assessed co-payments 
across States because existing State data indicate that the majority of 
families are receiving

[[Page 23857]]

care for only one or two children. While some States establish their 
income eligibility limits below 175 percent of the Federal Poverty 
Guidelines, all States are serving some larger households with incomes 
up to $25,000, which equals approximately 175 percent of the Federal 
Poverty Guidelines for a family of three. However, we are limited in 
our ability to measure and compare co-payments across States for 
families with income levels beyond $25,000 because some States are 
serving few families beyond this point.
    Limiting our measure of average co-payments to families earning up 
to $25,000 could potentially disadvantage States that choose to serve 
families with higher incomes. We know that some States make use of 
modest co-payments across a broad range of income in order to extend 
eligibility higher up the income scale. Families above the State's 
income guidelines would not be eligible to be served at all and would, 
therefore, pay 100 percent of the cost of care.
    States serving households above $25,000 could have lower than 
average co-payments across the range of incomes that they serve, but 
this would not be captured in the measure that examines co-payments 
only up to $25,000. For example, State A has established an income 
eligibility limit of $24,000 for a family of three. State B has 
established an income limit of $28,000 for a family of the same size, 
and a co-payment rate of 11 percent of family income. Although a family 
with an annual income below $24,000 might face higher co-payments in 
State B than in State A, a family with income above $24,000 would be 
ineligible in State A. A family in State A with an annual income of 
$26,000 would pay 100 percent of the cost of care, which would likely 
be 20 percent or more of annual income. A family with the same income 
in State B would have an assessed co-payment rate of only 11 percent.
    In order to address this diversity, our methodology also addresses 
State effort to provide access to affordable co-payments to a broader 
range of families. As a part of the affordability component, we will 
also rank States based on the ratio of the number of children eligible 
under the State-defined income limits, as specified in the State CCDF 
Plan, compared to the number of children eligible under the Federal 
eligibility limit for the CCDF (85% of State's median income (SMI)).
    In Sec. 270.4(e)(4), we clarify how we will compute the scores and 
rank the States on this component. We specify that, for each State 
competing on this measure, we will calculate, for each of the four 
income ranges, the average of the ratios of family co-payment to family 
income for each individual family. Next, we will calculate a fifth 
ratio of the number of children eligible under the State's defined 
income limits compared to the number of children eligible under the 
Federal eligibility limits in the CCDF, i.e., 85 percent of the State's 
median income. Finally, we will rank each State based on each of the 
five ratios and will combine the five rankings for each State to obtain 
the State's score on this component.
The Quality Component
    We specify in Sec. 270.4(e)(5) that we will compare the actual 
rates paid by the State as reported on the ACF-801 (not the published 
maximum rates) to the market rates applicable to the performance year. 
In order to have the data to make this comparison, we are requiring 
that, if a State wishes to compete on this measure, it must submit two 
specific items of information from its market rate survey. The two 
items are:
    <bullet> Age-specific rates for children 0-13 years of age as 
reported by the child care centers and family day care homes responding 
to the State's market rate survey; and
    <bullet> the provider's county or, if the State uses multi-county 
regions to measure market rates or set maximum payment rates, the 
administrative region.
    We have selected the parameters of age of child, type of provider, 
and location of provider, because the rates charged by providers (that 
is market rates) vary substantially based on these factors. States must 
take these factors into account when setting payment rates that assure 
equal access to the full range of provider types for children from 0-13 
years of age.
    In Sec. 270.4(e)(6), we specify how we will compute the scores and 
rank States on this component. We will compute the percentile of the 
market represented by the amount paid for each child as reported on the 
ACF-801 by comparing the actual payment for each child to the array of 
reported market rates for children of the same age in the relevant 
county or administrative region. (Payments for children in center-based 
care will be compared to reported center care rates; payments for 
children in non-center-based care, i.e., family day care and unlicensed 
child care, will be compared to reported family child care provider 
rates.)
    Finally, we will take the percentile that results from the per-
child comparison of the actual payment to the reported market rates and 
compute separate State-wide averages for center-based and non-center-
based care. Each State will be ranked on each of the two averages. The 
two rankings will be combined to obtain the State's final score on this 
component.

III. Justification for This Interim Final Rule

    The time frames for implementing and operationalizing the high 
performance bonus award system are extremely short. It became clear, 
even as we published the final high performance bonus rule in August, 
2000, that States would need immediate and additional guidance, 
clarification, and specificity about our expectations in order to make 
program decisions, collect data, and prepare themselves to compete 
successfully for child care bonuses in FY 2002 and FY 2003. However, it 
was equally clear that in order to arrive at a reliable and workable 
measurement system, it was necessary to consult extensively with the 
National Governors' Association (NGA), the American Public Human 
Services Association (APHSA), States, and others, which we did through 
early December. The provisions of this interim final rule reflect the 
information and recommendations we received in these consultations.
    We have determined that publication of an NPRM is unnecessary, 
impractical, and not in the public interest. We believe it is in the 
public interest to have the maximum possible number of States compete 
for bonuses under the TANF program and that they be able to structure 
their programs to successfully compete on each of the bonus measures. 
Without the additional information contained in this interim final 
rule, States will not know how they will be ranked on the child care 
affordability measure in FY 2002. The performance year for FY 2002 is 
FY 2001, the current fiscal year. Unless States are given this 
information in a timely way, they will be unable to have an opportunity 
to make program changes or take other actions in this fiscal year to 
prepare themselves to compete on this measure. There is insufficient 
time to issue both an NPRM and a final rule and still provide States 
with enough advance notice to be able to make changes in time to have 
them be operational during the performance year.
    Moreover, unless this information is issued as a final rule, States 
will not know what information they must collect as a part of their 
child care market rate surveys in order to compete successfully in FY 
2003. States are only required to conduct these surveys every two 
years. Since some States are conducting their market rate surveys in

[[Page 23858]]

FY 2001, it is crucial to advise them quickly about what types of data 
they would need to collect in order that they can design and conduct 
their FY 2001 surveys in a way that will enable them to compete for the 
child care bonus in FY 2003.
    Finally, we believe issuance of an NPRM is unnecessary because we 
have consulted with the States and others who commented on the earlier 
NPRM about the issues covered by this interim final rule and received 
their input. We have incorporated their concerns in this interim final 
rule.
    In spite of the need to advise States immediately, we are sensitive 
to the issue of public notice and comment. For that reason we invite 
comment on these proposals for the next 60 days.

IV. Regulatory Impact Analyses

A. Executive Order 12866

    Executive Order 12866 requires that regulations be drafted to 
ensure that they are consistent with the priorities and principles set 
forth in the Executive Order. The Department has determined that this 
interim final rule is consistent with these priorities and principles.
    The Executive Order encourages agencies, as appropriate, to provide 
the public with meaningful participation in the regulatory process. As 
described earlier, ACF consulted with States, their representative 
organizations, and a broad range of advocacy groups, researchers, and 
others to obtain their views. This rule reflects the discussions with, 
and the concerns of, the groups with whom we consulted.
    This interim final rule will not have an effect on the economy of 
$100 million or more in any one year, according to section 3(F)(1) of 
the Executive Order. We believe the cost of competing for a high 
performance bonus award in FY 2002 should be minimal since competition 
for these awards will be based, to the extent possible, on existing 
data sources. This interim final rule was determined to be significant 
and has been reviewed by the Office of Management and Budget.

B. Regulatory Flexibility Analysis

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

C. Assessment of the Impact on Family Well-Being

    We certify that we have made an assessment of this rule's impact on 
the well-being of families, as required under section 654 of The 
Treasury and General Appropriations Act of 1999. The high performance 
bonus awards are a statutory part of the TANF program and are designed 
to reward State efforts in strengthening the economic and social 
stability of families and carrying out other purposes in the statute. 
This interim final rule does not limit State flexibility to design 
programs to serve these purposes.

D. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA), no persons are 
required to respond to a collection of information unless it displays a 
valid OMB control number. As required by the PRA, we will submit the 
data collection requirements to OMB for review and approval.
    In FY 2002, no additional reporting burden will be required of the 
States in competing on the child care measure since we will rank States 
based on data they currently report under the CCDF program (ACF Forms 
800 and 801).
    However, there will be a reporting burden for the information 
States must submit if they wish to compete on the child care measure in 
FY 2003. States must provide the following information based on the 
child care market rate surveys that they currently conduct every two 
years:
    <bullet> All age-specific rates for children 0-13 years of age 
reported by the child day care centers and family day care homes 
responding to the State's market rate survey; and
    <bullet> The provider's county or, if the State uses multi-county 
regions to measure market rates or set maximum payment rates, the 
administrative region.
    We estimate the reporting burden for reporting these data once 
every two years to be 40 hours per respondent times 54 respondents, or 
2,160 hours. Annualized, this equals a total burden of 1,080 hours as 
shown below:

----------------------------------------------------------------------------------------------------------------
                                                                Annual  number  Average  burden
          Instrument or requirement              Number of      of  responses      hours  per      Total annual
                                                respondents     per respondent      response       burden hours
----------------------------------------------------------------------------------------------------------------
Abstract of Market Rate Survey..............              54              0.5               40            1,080
                                             -------------------------------------------------------------------
    Estimated Total Annual Burden Hours.....  ...............  ...............  ...............           1,080
----------------------------------------------------------------------------------------------------------------

    We will submit this information to OMB for approval. These 
requirements will not become effective until approved by OMB.

E. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded 
Mandates Act) requires that a covered agency prepare a budgetary impact 
statement before promulgating a rule that includes any Federal mandate 
that may result in the expenditure by State, local, and Tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more in any one year.
    If a covered agency must prepare a budgetary impact statement, 
section 205 further requires that it select the most cost-effective and 
least burdensome alternative that achieves the objectives of the rule 
and is consistent with the statutory requirements. In addition, section 
203 requires a plan for informing and advising any small governmental 
entity that may be significantly or uniquely impacted by the proposed 
rule.
    We have determined that this interim final rule will not result in 
the expenditure by State, local, and Tribal governments, in the 
aggregate, or by the private sector, of more than $100 million in any 
one year. Competition for a high performance bonus is entirely at State 
option. Accordingly, we have not prepared a budgetary impact statement, 
specifically addressed the regulatory alternatives considered, or 
prepared a plan for informing and advising any significantly or 
uniquely impacted State or small government.

[[Page 23859]]

F. Congressional Review

    This interim final rule is not a major rule as defined in 5 U.S.C., 
Chapter 8.

G. Executive Order 13132

    On August 4, 1999, the President issued Executive Order 13132, 
``federalism.'' The purposes of the Order are: ``to guarantee the 
division of governmental responsibilities between the national 
government and the States that was intended by the Framers of the 
Constitution, to ensure that the principles of federalism established 
by the Framers guide the executive departments and agencies in the 
formulation and implementation of policies, and to further the policies 
of the Unfunded Mandates Reform Act.* * *''
    We certify that this final rule does not have a substantial direct 
effect on States, on the relationship between the Federal government 
and the States, or on the distribution of power and responsibilities 
among the various levels of government. The final rule does not pre-
empt State law and does not impose unfunded mandates.
    This rule does not contain regulatory policies with federalism 
implications that would require specific consultations with State or 
local elected officials. The statute, however, requires consultations 
with the National Governors' Association and the American Public Human 
Services Association in the development of a high performance bonus 
system. Prior to the development of the NPRM and this interim final 
rule, we consulted with representatives of these organizations, State 
representatives and a broad range of nonprofit, advocacy, and community 
organizations; foundations; and others.

List of Subjects in 45 CFR Part 270

    Grant programs--social programs; Poverty; Public assistance 
programs; Reporting and recordkeeping requirements.

Catalogue of Federal Domestic Assistance Programs: No. 93.558 
Temporary Assistance for Needy Families (TANF) Program; State Family 
Assistance Grants; Tribal Family Assistance Grants; Assistance 
Grants to Territories; Matching Grants to Territories; Supplemental 
Grants for Population Increases; Contingency Fund; High Performance 
Bonus; Decrease in Illegitimacy Bonus)
    Dated: March 14, 2001.
Diann Dawson,
Acting Principal Deputy Assistant Secretary, Administration for 
Children and Families.
    Approved: April 10, 2001.
Tommy G. Thompson,
Secretary, Department of Health and Human Services.

    For the reasons set forth in the preamble, we are amending 45 CFR 
Chapter II as follows:

PART 270--HIGH PERFORMANCE BONUS AWARDS

    1. The authority citation for part 270 continues to read as 
follows:

    Authority: 42 U.S.C. 603(a)(4).


    2. In Sec. 270.4, paragraph (e) is revised to read as follows:


Sec. 270.4  On what measures will we base the bonus awards?

* * * * *
    (e) Child care subsidy measure. (1) Beginning in FY 2002, we will 
measure State performance based upon a composite ranking of:
    (i) The accessibility of services based on the percentage of 
children in the State who meet the maximum allowable Federal 
eligibility requirements for the Child Care and Development Fund (CCDF) 
who are served by the State during the performance year, and who are 
included in the data reported on the ACF-800 and ACF-801 for the same 
fiscal year; and
    (ii) The affordability of CCDF services based on a comparison of 
the reported assessed family co-payment to reported family income and a 
comparison of the number of eligible children under the State's defined 
income limits to the number of eligible children under the federal 
eligibility limits.
    (2) Beginning in FY 2003, we will measure State performance based 
upon a composite ranking of:
    (i) The two components described in paragraph (e)(1) of this 
section; and
    (ii) The quality of CCDF services based on a comparison of 
reimbursement rates during the performance year to the market rates, 
determined in accordance with 45 CFR 98.43(b)(2), applicable to that 
year.
    (3) For the affordability component in paragraph (e)(1)(ii) of this 
section, we will compare family income to the assessed State family co-
payment as reported on the ACF-801 across four income ranges. These 
income ranges refer to percentages of the Federal Poverty Guidelines 
for a family of three persons. The income ranges are as follows:
    (i) Income below the poverty level;
    (ii) Income at least 100 percent and below 125 percent of poverty;
    (iii) Income at least 125 percent and below 150 percent of poverty; 
and
    (iv) Income at least 150 percent and below 175 percent of poverty.
    (4)(i) For the affordability component, we will calculate, for each 
income range, the average of the ratios of family co-payment to family 
income for each family served; and
    (ii) We will calculate a ratio of the number of children eligible 
under the State's defined income limits compared to the number of 
children eligible under the Federal eligibility limits in the CCDF, 
i.e., 85 percent of the State's median income.
    (iii) We will rank each State based on each of the four averages 
calculated in paragraph (e)(4)(i) of this section and the ratio 
calculated in paragraph (e)(4)(ii) of this section and combine the 
ranks to obtain the State's score on this component.
    (5) For the quality component specified in paragraph (e)(2)(ii) of 
this section, in FY 2003 and beyond, we will compare the actual rates 
paid by the State as reported on the ACF-801 (not the published maximum 
rates) to the market rates applicable to the performance year, i.e., FY 
2002. Each State competing on this measure must submit the following 
data as a part of its market rate survey:
    (i) Age-specific rates for children 0-13 years of age reported by 
the child care centers and family day care homes responding to the 
State's market rate survey; and
    (ii) The provider's county or, if the State uses multi-county 
regions to measure market rates or set maximum payment rates, the 
administrative region.
    (6) For the quality component, we will compute the percentile of 
the market represented by the amount paid for each child as reported on 
the ACF-801 by comparing the actual payment for each child to the array 
of reported market rates for children of the same age in the relevant 
county or administrative region. (We will compare payments for children 
in center-based care to reported center care provider rates. We will 
compare payments for children in non-center-based care, i.e., family 
day care and unlicensed child care, to reported family child care 
provider rates.)
    (i) We will take the percentile that results from the per-child 
comparison of the actual payment to the reported market rates and 
compute separate State-wide averages for center-based and non-center-
based care; and
    (ii) We will rank the State according to the two State-wide 
averages and

[[Page 23860]]

combine the ranks to obtain the State's score on this component.
    (7) For any given year, we will rank the States that choose to 
compete on the child care measure on each component of the overall 
measure and award bonuses to the ten States with the highest composite 
rankings.
    (8) We will calculate each component score for this measure to two 
decimal points. If two or more States have the same score for a 
component, we will calculate the scores for these States to as many 
decimal points as necessary to eliminate the tie.
    (9)(i) The rank of the measure for the FY 2002 bonus year will be a 
composite weighted score of the two components at paragraph (e)(1) of 
this section, with the component at paragraph (e)(1)(i) of this section 
having a weight of 6 and the component at paragraph (e)(1)(ii) of this 
section having a weight of 4.
    (ii) The rank of the measure for the bonus beginning in FY 2003 
will be a composite weighted score of the three components at paragraph 
(e)(2) of this section, with the component at paragraph (e)(1)(i) of 
this section having a weight of 5, the component at paragraph 
(e)(1)(ii) of this section having a weight of 3, and the component at 
paragraph (e)(2)(ii) of this section having a weight of 2.
    (10) We will award bonuses only to the top ten qualifying States 
that have fully obligated their CCDF Matching Funds for the fiscal year 
corresponding to the performance year and fully expended their CCDF 
Matching Funds for the fiscal year preceding the performance year.

[FR Doc. 01-11767 Filed 5-9-01; 8:45 am]
BILLING CODE 4184-01-P


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