[Federal Register Volume 61, Number 94 (Tuesday, May 14, 1996)]
[Rules and Regulations]
[Pages 24390-24403]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-11808]



      

[[Page 24389]]


_______________________________________________________________________

Part III





Department of Education





_______________________________________________________________________



34 CFR Part 361



The State Vocational Rehabilitation Services Program; Final Rule

Federal Register / Vol. 61, No. 94 / Tuesday, May 14, 1996 / Rules 
and Regulations

[[Page 24390]]



DEPARTMENT OF EDUCATION

34 CFR Part 361

RIN 1820-AB13


The State Vocational Rehabilitation Services Program

AGENCY: Department of Education.

ACTION: Final regulations.

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

SUMMARY: The Secretary amends the regulations governing The State 
Vocational Rehabilitation Services Program. These regulations are 
needed to implement section 12(d) of the Rehabilitation Act of 1973 
(Act), as amended by the Rehabilitation Act Amendments of 1992 (1992 
Amendments) and the Rehabilitation Act Amendments of 1993. Section 
12(d) of the Act requires that the Secretary promulgate regulations 
establishing requirements for the implementation of an order of 
selection for the receipt of vocational rehabilitation services. An 
order of selection is required under section 101(a)(5)(A) of the Act if 
a designated State unit (DSU) determines that it is unable to provide 
services to all eligible individuals who apply for services. If a DSU 
establishes an order of selection, it must first provide services to 
individuals with the most severe disabilities before serving other 
eligible individuals. The regulations are necessary to ensure the 
proper administration of the order of selection requirements by DSUs.

EFFECTIVE DATE: These regulations take effect on June 13, 1996.

FOR FURTHER INFORMATION CONTACT: Suzanne Tillman, U.S. Department of 
Education, 600 Independence Avenue, S.W., Room 3220, Mary E. Switzer 
Building, Washington, D.C. 20202-2735. Telephone: (202) 205-8303. 
Individuals who use a telecommunications device for the deaf (TDD) may 
call the Federal Information Relay Service (FIRS) at 1-800-877-8339 
between 8 a.m. and 8 p.m., Eastern time, Monday through Friday.

SUPPLEMENTARY INFORMATION: The State Vocational Rehabilitation Services 
Program is a State-administered program that provides individualized 
vocational rehabilitation (VR) services to eligible individuals with 
disabilities. The purpose of the program is to assist States in 
operating a comprehensive, coordinated, effective, efficient, and 
accountable program for vocational rehabilitation designed to assess, 
plan, develop, and provide VR services for individuals with 
disabilities so that they may prepare for and engage in gainful 
employment.
    The program supports the National Education Goal that, by the year 
2000, every adult American, including individuals with disabilities, 
will possess the knowledge and skills necessary to compete in a global 
economy and exercise the rights and responsibilities of citizenship.
    On July 16, 1993, the Secretary published a notice of proposed 
rulemaking (NPRM) in the Federal Register (58 FR 38482) to implement 
section 12(d) of the Act, as amended by the 1992 Amendments (Pub. L. 
102-569) and the Rehabilitation Act Amendments of 1993 (Pub. L. 103-
73), which requires that the Secretary issue regulations on the 
requirements for implementing an order of selection by a DSU.

Analysis of Comments and Changes

    In response to the Secretary's invitation in the NPRM, 45 parties 
submitted comments on the proposed regulations. An analysis of the 
comments and of the changes in the regulations since publication of the 
NPRM follows.
    Major issues are grouped according to subject under appropriate 
sections of the regulations. Technical and other minor changes--and 
suggested changes the Secretary is not legally authorized to make under 
the applicable statutory authority--are not addressed. The Secretary 
also has not addressed comments that relate to issues that are more 
appropriately dealt with in other program regulations being developed 
to implement the 1992 Amendments.
    In addition, the proposed regulations have been reviewed and 
revised in accordance with the Department's principles for regulating, 
which were developed as part of the Administration's regulatory 
reinvention initiative under the National Performance Review II. The 
principles are designed to ensure that the Department regulates in the 
most flexible, most equitable, and least burdensome way possible. As a 
result of that review, several non-statutory paperwork requirements in 
the proposed regulations have been eliminated or modified. These 
changes are discussed in the following paragraphs and in the section-
by-section summary.
    Section 101(a)(5)(A) of the Act requires a DSU to explain how it 
will provide VR services to all eligible individuals or, if it cannot 
provide services to all these individuals, to describe and justify the 
order of selection the DSU will follow in serving eligible individuals, 
with first priority being given to individuals with the most severe 
disabilities. Accordingly, Sec. 361.36(a)(1) of the final regulations 
requires DSUs that do not establish an order of selection to explain 
how, on the basis of its projected fiscal and personnel resources and 
its assessment of the rehabilitation needs of individuals with severe 
disabilities within the State, the DSU will continue to serve all 
individuals currently receiving services, provide assessment services 
to all applicants and VR services to all individuals determined to be 
eligible in the next fiscal year, and meet all other program 
requirements.
    The proposed regulations would have required each DSU that does not 
establish an order of selection to provide detailed information to 
support that decision, including its projected number of applicants, 
eligible individuals, and qualified personnel, projected costs of 
services and administration, and projected revenues. The Secretary 
believes that requiring all DSUs to submit these projections is overly 
burdensome and unnecessary for those States that have not experienced 
problems in serving all eligible individuals in recent years. Thus, the 
requirements in the final regulations are more narrowly tailored to 
address the underlying problem of ensuring that DSUs do not improperly 
avoid establishing an order of selection.
    The final regulations establish two different information 
requirements for DSUs that do not plan to establish an order of 
selection: one for DSUs that have demonstrated the ability to serve all 
eligible individuals and meet all program requirements and one for DSUs 
that have not demonstrated this ability. The first information 
requirement (Sec. 361.36(a)(2)) applies to DSUs whose past practice 
demonstrates their ability to serve all eligible individuals without an 
order of selection. DSUs will be subject to this requirement if they 
have provided assessment services to all applicants, provided the full 
range of services to all eligible individuals, made referral forms 
widely available, conducted outreach efforts to identify and serve 
those underserved in the past, and have not delayed the development of 
individualized written rehabilitation programs (IWRPs) or the provision 
of services for eligible individuals. This provision permits these DSUs 
to submit a narrative explanation of their ability in the next year to 
continue to serve everyone and meet all program requirements.
    The second information requirement (Sec. 361.36(a)(3)) applies to 
DSUs that have not demonstrated their ability to serve all eligible 
individuals and meet all program requirements without an

[[Page 24391]]

order of selection. This more detailed information requirement would 
apply to DSUs that--(1) Said in their State plans for the current or 
past year that they could serve everyone, but, in fact, did not do so; 
(2) Served all eligible individuals in the current or past year by not 
meeting the requirements in Sec. 361.36(a)(2); or (3) Provided services 
under an order of selection in the current or preceding fiscal year, 
but believe that they can serve all eligible individuals in the next 
fiscal year. These DSUs will be required to provide information, 
including projections, similar to the information that would have been 
required of all DSUs under the NPRM. Specifically, these DSUs must 
describe the changed circumstances that will enable them to serve all 
eligible individuals in the forthcoming fiscal year and must submit the 
projections required under Sec. 361.36(a)(3) to support this 
determination, including projected numbers of applicants, eligible 
individuals, and qualified personnel, projected costs of services and 
administration, and projected revenues. In addition, Sec. 361.36(a)(3) 
requires these DSUs to provide, as relevant, comparable data for the 
current or preceding fiscal year, or both years, of these projected 
costs and resources.
    These changes in the final regulations are intended to reduce 
paperwork burdens on DSUs that have a demonstrated capacity to serve 
all eligible individuals and, at the same time, to ensure that if a DSU 
decides not to implement an order of selection, even though it has not 
been able to serve all eligible persons in the past, that the decision 
is supported in the State plan by sufficient data showing the DSU's 
projected costs and resources.

Section 361.36(a)--General Provisions

    <bullet> Assurance of ability to serve all eligible individuals.

--Range of Services

    Comments: Several commenters on Sec. 361.36(a)(1)(i) of the 
proposed regulations requested that this provision specify that a DSU 
is able to provide the full range of services listed in section 103(a) 
of the Act. These commenters were concerned that a DSU could interpret 
the wording ``able to provide services'' to mean that it may avoid 
establishing an order of selection if it is able to provide some, but 
not all, of the services listed in section 103(a) of the Act.
    Discussion: The Secretary agrees with these commenters. A DSU that 
assures that it is able to provide services to all eligible individuals 
must be able to provide all of the services listed in section 103(a) of 
the Act.
    Changes: The Secretary has revised Sec. 361.36(a)(1)(i) to provide 
that the State plan must contain an assurance that the DSU is able to 
provide the full range of services listed in section 103(a) of the Act, 
as appropriate, to all eligible individuals.

--Monitoring and review of assurances

    Comments: Several commenters were concerned that the Secretary 
would not adequately monitor compliance with the assurances provided by 
a DSU. Several commenters recommended that the Secretary thoroughly 
examine a DSU's decision not to implement an order of selection and 
approve or disapprove that decision, as appropriate.
    One commenter feared that, in order to avoid implementing an order 
of selection, DSUs may expand counselor caseload sizes beyond the 
capacity of counselors to serve eligible individuals in a meaningful 
way. Caseload sizes could continue to grow but might not trigger an 
order of selection.
    One commenter suggested adding factors to measure a DSU's 
compliance with these regulations. This commenter also suggested that 
if a DSU is found in substantial noncompliance and fails to take 
corrective action, it should be subject to financial sanctions.
    Several commenters stated that a DSU should be required to evaluate 
the impact of its order of selection to determine if there are any 
unintended consequences or exclusions of specific groups of individuals 
with disabilities.
    Discussion: The Secretary ensures that a DSU is complying with its 
assurances through annual reviews and periodic on-site monitoring of 
State vocational rehabilitation programs required by sections 
107(a)(3)(A) and 107(a)(4)(B) of the Act. Section 107(a)(3)(A) of the 
Act requires the Secretary, as part of the monitoring process, to 
conduct on-site visits, including on-site reviews of records, to verify 
that a DSU is following requirements regarding order of selection. 
Section 107(a)(4)(B) requires the Secretary to examine, in conducting 
the review and monitoring, a DSU's provision of services, including, if 
applicable, order of selection requirements.
    Section 101(a)(7) of the Act requires a DSU to ensure, as part of 
its comprehensive system of personnel development, that it has an 
adequate supply of qualified personnel to provide vocational 
rehabilitation services. The regulations require DSUs that do not 
establish an order of selection to satisfy all VR program requirements, 
including those relating to the comprehensive system of personnel 
development. The Secretary also reviews and monitors compliance with 
section 101(a)(7) of the Act.
    The Secretary does not believe it is necessary to add factors to 
measure a DSU's compliance with the order of selection requirements of 
the State plan. A DSU's compliance with the order of selection 
requirements will be monitored like any other State plan requirement, 
and a DSU's noncompliance with these requirements will be dealt with 
like any other finding of noncompliance with the State plan 
requirements.
    The Secretary believes that a DSU (along with the State 
Rehabilitation Advisory Council (Council), if the DSU has a Council), 
should evaluate the impact of its order of selection as part of its 
administration of the program and would expect a discussion of this 
impact in its annual evaluation of the program.
    Changes: None.
    <bullet> Explanation of how a DSU will serve all eligible 
individuals.

--Detailed nature of explanation

    Comments: Several commenters opposed the proposed requirement that 
a DSU provide a detailed explanation of the methods by which it will 
provide services to all eligible individuals because they believe it is 
overly burdensome. One commenter believed that the required projections 
in Sec. 361.36(a)(1)(ii) of the proposed regulations might prevent 
closer cooperation between consumer groups and DSUs because consumer 
groups might believe that the incidence and prevalence of their 
disability is greater than indicated in the statistical data used by 
the DSU.
    Several commenters believed that there is no practical way for a 
DSU to make the required projections because of the uncertainty of 
future funding levels and of the effect of the revised eligibility 
requirements under the Act.
    One commenter stated that if projections are required, the 
Secretary should keep documentation to a minimum. This commenter 
requested that a DSU be able to use existing data, e.g., Federal census 
and population data, to make its projections.
    Discussion: The legislative history accompanying the 1992 
Amendments to the order of selection requirement indicates an 
expectation on the part of the Congress that the Secretary will 
promulgate regulations that will obligate States wishing to avoid 
establishing an order of selection to prove that they are indeed able 
to serve all eligible individuals. Nevertheless, the data

[[Page 24392]]

projections required in the proposed regulations have been 
significantly reduced in accordance with the Department's principles 
for regulating. Application of the remaining documentation requirements 
is limited to--(1) Those DSUs that were unable to serve all eligible 
individuals (including DSUs that established an order of selection) in 
the current or preceding fiscal year, but contend they will be able to 
do so in the next fiscal year; and (2) Those DSUs that were able to 
serve all eligible individuals in the current or preceding fiscal year 
only by not meeting the requirements in Sec. 361.36(a)(2). The 
Secretary believes that the documentation requirements remaining in the 
regulations to support a DSU's conclusion that it is able to serve all 
eligible individuals, even though it has been unable to serve all 
eligible persons in the past, is fully consistent with congressional 
intent.
    The Secretary believes that the required explanation will not 
impose any additional data collection burdens on a DSU. The Secretary 
believes that existing information in a DSU's required statewide 
studies and annual evaluations, comprehensive statewide assessments of 
the rehabilitation needs of individuals with severe disabilities, 
comprehensive system of personnel development, and budget data would 
enable a DSU to provide the required explanation without any need for 
additional data collection.
    The Secretary believes that a DSU should be able to predict funding 
levels for the program during the upcoming fiscal year through use of 
State and Federal budget data.
    The Secretary believes that Federal census and population data 
alone are not sufficient for a DSU to make the required projections. 
These data are not updated often enough for a DSU to rely solely on 
these sources in making its projections, but may be useful in 
conjunction with information from a DSU's statewide studies, 
comprehensive statewide assessments, comprehensive system of personnel 
development, and budget data.
    Changes: The Secretary has revised Sec. 361.36(a)(1)(ii) of the 
proposed regulations to reduce the data projections that a DSU must 
provide as part of its explanation of how it is able to serve all 
eligible individuals. This provision has been relocated to 
Sec. 361.36(a)(3) of the final regulations and applies only to--(1) 
DSUs that were unable to serve all eligible individuals during the 
current or preceding fiscal year; and (2) DSUs that contend that they 
served all eligible individuals in the preceding and current fiscal 
years, but cannot attest to meeting the program requirements listed in 
Sec. 361.36(a)(2) for both those years.

--Projections for serving all eligible individuals with disabilities

    Comments: Several commenters suggested that the Secretary require a 
DSU to provide separate projections for serving individuals with non-
severe, severe, and the most severe disabilities in providing the data 
in Sec. 361.36(a)(1)(ii) (A) and (B) of the proposed regulations. These 
commenters believed that the approach taken in the proposed regulations 
would allow a DSU to average the costs of serving all populations, and 
the commenters recommended that a DSU be required to break out the 
costs of serving individuals with severe and the most severe 
disabilities. Commenters contended that the average projected cost of 
serving all individuals is substantially less than the cost of serving 
the subgroup of individuals with the most severe disabilities because 
of the variety of services and supports that individuals in this 
category require. One of these commenters also believed that providing 
specific data on each of these populations would help to determine the 
extent to which a DSU has engaged in aggressive outreach efforts to 
serve a greater number of individuals with the most severe 
disabilities.
    One commenter requested that, in making its projections, a DSU be 
required to take into consideration the likelihood that more 
individuals will be applying for services as a result of the revised 
eligibility requirements established under the 1992 Amendments and that 
more of these individuals will be individuals with the most severe 
disabilities because of the expanded requirements to provide personal 
assistance and rehabilitation technology services.
    Discussion: As discussed previously, the Secretary has 
significantly revised the proposed regulations to require DSUs to 
submit projections as part of their State plan only in limited 
circumstances. Specifically, Sec. 361.36(a)(3) requires DSUs that were 
unable to serve all eligible individuals during the current or previous 
fiscal year, but believe that they do not need to establish an order of 
selection in the next fiscal year, to include in their State plans the 
projected numbers of eligible individuals, the projected costs of 
serving those individuals, the projected revenues, and the projected 
number of qualified personnel. (These State plan requirements also 
apply to DSUs that do not establish an order of selection but cannot 
provide the assurances in Sec. 361.36(a)(2).) However, any DSU that 
does not establish an order of selection must still consider the 
rehabilitation needs of individuals with severe disabilities as part of 
its explanation under Sec. 361.36(a)(1)(i), even though the final 
regulations do not require separate projections for individuals with 
non-severe, severe, and most severe disabilities under 
Sec. 361.36(a)(3).
    The Secretary agrees that averaging the costs of serving all 
eligible individuals would not provide an accurate estimate of the 
costs of serving individuals with severe and the most severe 
disabilities if a State relied solely on cost data for years prior to 
the enactment of the 1992 Amendments in making its projections. The 
Secretary believes that in making projections with respect to the cost 
of serving all eligible individuals, a DSU must consider the costs of 
serving individuals with severe disabilities.
    The Secretary agrees that more individuals with severe disabilities 
and individuals with the most severe disabilities have become eligible 
to receive services under the revised eligibility requirements in the 
1992 Amendments. However, the Secretary believes that any significant 
expansion in the number of eligible individuals that is attributable to 
the revised eligibility criteria has already taken place. Consequently, 
the Secretary believes there is no need to require DSUs under 
Sec. 361.36(a)(3) to provide separate projections for serving 
individuals with non-severe, severe, and most severe disabilities as 
long as the projected number of all eligible individuals and the 
projected costs of serving those individuals is provided.
    Changes: The Secretary has revised Sec. 361.36(a)(1)(ii) of the 
proposed regulations to reduce the amount of data and related 
explanations that must be submitted as part of the State plan. In 
addition, the regulations require that this data be included as part of 
the State plan only if--(1) The DSU was unable to serve all eligible 
individuals in the current or preceding fiscal year; or (2) The DSUs 
did not meet the requirements in Sec. 361.36(a)(2) in serving all 
eligible individuals in the current and preceding fiscal years. This 
provision has been relocated to Sec. 361.36(a)(3) in the final 
regulations.

--Cost-containment

    Comments: Several commenters suggested that a DSU be required to 
control costs before implementing an order of selection. One commenter 
suggested adding a new requirement to the regulations that a DSU, prior 
to

[[Page 24393]]

implementing an order of selection, implement methods to control costs, 
including, but not limited to, rigorous administrative controls and 
oversight, aggressively pursuing comparable services and benefits, 
paying vendors based on performance outcomes, developing equitable 
financial need policies, and establishing collaborative program funding 
through interagency agreements that will enable the DSU to provide 
services to all eligible persons.
    Another commenter requested that a DSU that is unable to secure its 
full Federal allotment for the program due to insufficient State match 
be required to demonstrate efforts to obtain the full match in order to 
be able to implement an order of selection. This commenter also 
requested that the Secretary question or not approve a DSU's decision 
to implement an order of selection if it is unable to fill vacant 
counselor positions due to a statewide freeze on hiring, since 
counselor salaries are primarily funded by Federal funds.
    On the other hand, several commenters requested that a DSU be 
prohibited from establishing inappropriate, arbitrary, or groundless 
policy restrictions on the provision of services that are intended to 
avoid implementation of an order of selection. Some of these commenters 
recommended that the Secretary establish an appeal process to the 
Rehabilitation Services Administration (RSA) Regional Offices so that 
parties may challenge these types of restrictions.
    Discussion: The Secretary agrees that a DSU should undertake all 
efforts to control costs before it opts to establish an order of 
selection. Some of the means suggested by commenters for controlling 
costs are already Federal requirements (e.g., program costs must be 
reasonable and necessary and DSUs must pursue comparable services and 
benefits before providing most services), while others are State 
options (e.g., paying vendors based on performance outcomes, developing 
equitable financial need policies, and establishing collaborative 
program funding through interagency agreements). The Secretary 
encourages DSUs to use these State options whenever possible to contain 
costs.
    In conjunction with a DSU's determination of whether it needs to 
establish an order of selection, a DSU should consider whether the 
adoption of certain cost containment measures would enable the DSU to 
serve all eligible individuals. Adoption of cost containment measures, 
therefore, should be considered both at the time the DSU develops its 
State plan submission on order of selection prior to the beginning of 
the fiscal year and whenever changed circumstances during the fiscal 
year warrant reevaluation of the need to establish an order of 
selection in accordance with Sec. 361.36(b). If a DSU undertakes cost 
containment strategies and is still unable to serve all eligible 
individuals, it is required to establish an order of selection for 
services.
    The Secretary does not believe there is authority to establish a 
link between a DSU's ability to meet its full matching requirement--and 
therefore earn its entire allotment--and its right to implement an 
order of selection. In fact, the inability of a DSU to obtain its full 
matching contribution may be a factor in its need to establish an order 
of selection, since a DSU would have fewer program funds available 
because of insufficient State dollars and the loss of some Federal 
funds.
    As previously noted, the Secretary agrees that DSUs need to proceed 
carefully in establishing an order of selection. Therefore, the 
Secretary requires, under Sec. 361.36(e)(1), that a DSU consult with 
and seriously consider the advice of the Council regarding the need to 
establish an order of selection. The Secretary does not believe it is 
necessary or advisable to establish an appeal process that is 
specifically for order of selection compliance issues. Section 107(c) 
of the Act provides a general appeals process for substantial 
noncompliance with any State plan requirement under this program.
    Changes: None.

--Assessment of rehabilitation needs of individuals with severe 
disabilities

    Comments: One commenter requested that the provision in 
Sec. 361.36(a)(1)(ii)(B)(1) of the proposed regulations requiring a DSU 
to assess the rehabilitation needs of ``individuals with severe 
disabilities'' within the State be changed to require a DSU to assess 
the needs of ``individuals with the most severe disabilities.'' The 
commenter believed that this change would be consistent with section 
101(a)(5)(A) of the Act.
    Discussion: Section 101(a)(5)(A) of the Act provides that the State 
plan shall contain the plans, policies, and methods to be followed in 
carrying out the State plan and in its administration and supervision, 
including the results of a comprehensive, statewide assessment of the 
rehabilitation needs of ``individuals with severe disabilities'' 
residing within the State. Therefore, Sec. 361.36(a)(1)(i) of the final 
regulations correctly tracks the language in section 101(a)(5)(A) of 
the Act. The Secretary notes, however, that the broad category of 
``individuals with severe disabilities'' would include as a subcategory 
``individuals with the most severe disabilities.''
    Changes: None.

--Interagency cooperative agreements

    Comments: One commenter requested that the provision in 
Sec. 361.36(a)(1)(ii)(B)(4) of the proposed regulations, which 
highlighted or emphasized the consideration of cooperative agreements 
serving certain groups of individuals with disabilities, be changed to 
read ``including individuals served by the Individuals with 
Disabilities Education Act, * * * and any other cooperative 
agreements'' in order to ensure that equal weight is given to all 
cooperative arrangements.
    One commenter recommended that the Secretary require a DSU to 
include in its projections estimates of the number of individuals with 
severe disabilities that will be provided services under the 
interagency cooperative arrangement with programs that rely on Javits-
Wagner-O'Day Act (JWOD Act) set-asides.
    Discussion: The Secretary believes that requiring in the State plan 
separate estimates of the number of individuals with disabilities to be 
served under interagency cooperative arrangements is overly burdensome. 
As long as the DSU considers these agreements when ascertaining the 
projected numbers of eligible individuals and the projected costs of 
administering its program, there is no need to provide a separate 
breakdown of the number of applicants or eligible individuals receiving 
services under each type of agreement.
    Changes: In accordance with the Department's principles for 
regulating, the Secretary has revised the proposed regulations to 
eliminate the requirement that the DSU include estimates of the number 
of individuals to be served under interagency cooperative agreements as 
part of its projected costs of administering the program.

--Development of order of selection as a contingency plan

    Comments: Several commenters requested that a DSU be required to 
develop an order of selection regardless of whether it needs to be 
implemented in the current fiscal year. These commenters believed it is 
important for each DSU to have an order of selection available as a 
contingency measure.
    Discussion: There is no statutory authority to require a DSU to 
develop an order of selection if a DSU determines it is presently able 
to serve all eligible individuals and will be able to do so throughout 
the fiscal year. Section 101(a)(5)(A) of the Act requires a DSU

[[Page 24394]]

to establish an order of selection only if it is unable to serve all 
eligible individuals.
    A DSU could, however, choose to develop the priority categories in 
an order of selection in anticipation of possible future need, but 
would still be required at the time of implementation of the order of 
selection to meet the public participation requirements of section 
101(a)(23) of the Act, including consultation with the Council.
    Changes: None.
    <bullet> Order of selection.

--Applicability of order of selection to funds not included in State 
match or Federal allotment

    Comments: One commenter requested that the order of selection 
requirement not apply to service funds that are not included in the 
State match or Federal allotment.
    Discussion: The order of selection requirement applies to all 
expenditures under the State plan, including expenditures made with 
Federal funds and DSU expenditures made with non-Federal funds that are 
necessary to meet a DSU's matching and maintenance-of-effort 
requirements.
    Changes: None.

--Outcome and service goals

    Comments: One commenter suggested adding a paragraph to 
Sec. 361.36(a)(2) of the proposed regulations requiring a DSU to show 
the outcome and service goals and the time in which they may be 
achieved for individuals. The commenter believed that this reporting 
requirement should be added to ensure that the Secretary will know with 
specificity the types of services and service outcomes being provided, 
either if a DSU elects to establish and implement an order of selection 
or if a DSU assures that it is able to serve all eligible individuals. 
According to the commenter, if a DSU establishes an order of selection 
for services, it will be very important for evaluation purposes to 
define the mix of services, goals, and timelines for providing services 
to individuals with the most severe disabilities.
    Discussion: The Secretary agrees with the change suggested by the 
commenter. Section 101(a)(5)(A) of the Act requires a DSU to show the 
outcomes and service goals, and the time within which they may be 
achieved, for individuals provided services under an order of selection 
established by a DSU. Section 101(a)(10)(A) of the Act requires a DSU 
to include in its State plan the outcomes, service goals, and service 
costs for individuals under each priority category in a DSU's order of 
selection.
    Changes: The Secretary has revised Sec. 361.36(a)(2) of the 
proposed regulations to provide that a DSU's order of selection must 
include the order to be followed in selecting eligible individuals to 
be provided services, a justification of that order of selection, and a 
description of the outcome and service goals and service costs for 
individuals with disabilities in each priority category within the 
order and the time within which these goals may be achieved. This 
provision has been relocated to Sec. 361.36(a)(1)(ii) of the final 
regulations.

Section 361.36(b)--Time for Determining Need for and Implementation of 
an Order of Selection

--Implementation of an order of selection and opening and closing of 
priority categories during the fiscal year

    Comments: One commenter recommended requiring a DSU to periodically 
review whether it needs to establish an order of selection. This 
commenter also recommended requiring a DSU to periodically update its 
projections under Sec. 361.36(a)(1) of the proposed regulations so that 
the DSU, with advice and input from the Council (if the DSU has a 
Council), can make decisions with current information.
    One commenter recommended that the regulations require a DSU to 
reevaluate its decision not to establish an order of selection at some 
regular interval identified in the regulations, rather than permit the 
DSU to determine the timing of its reevaluation. Otherwise, the 
commenter feared that many DSUs would delay reevaluation and likely be 
forced to implement an order of selection on an emergency basis.
    One commenter suggested that a DSU submit reports to the Secretary 
and to the Council comparing the actual costs and numbers of 
individuals served with its projections under Sec. 361.36(a)(1) of the 
proposed regulations and any adjustments to the projections.
    Other commenters suggested that a DSU be required, no later than 45 
days after the end of each quarter, to submit a report on how service 
and expenditure levels for that quarter and cumulatively for the fiscal 
year compare to the projections made by the DSU under Sec. 361.36(a)(1) 
of the proposed regulations. These commenters believed that this type 
of reporting would allow the Secretary to track the accuracy of a DSU's 
projections. Other commenters recommended requiring a DSU to submit 
quarterly reports to the Secretary on the accuracy of a DSU's 
projections and the need to establish an order of selection.
    One commenter inquired whether a DSU may implement an order of 
selection during the fiscal year, rather than at the beginning of the 
fiscal year. This commenter believed that requiring a DSU to establish 
an order of selection at the beginning of each fiscal year might cause 
a DSU to be overly conservative and to close more priority categories 
than is necessary.
    One commenter inquired whether a DSU may adjust, during the fiscal 
year, which priority categories are open and closed.
    Discussion: The Secretary considers DSU reevaluation of the need to 
establish an order of selection necessary to the proper management of 
the program. However, the Secretary does not believe that requiring 
reevaluation at regular intervals during the course of each fiscal year 
is necessary. A requirement of this type would be overly burdensome and 
would apply an inflexible standard to determinations that are best 
governed by a DSU's individual circumstances. The regulations, 
therefore, require a DSU to reevaluate its decision not to implement an 
order of selection for services, in consultation with the Council, 
whenever changed circumstances, such as a decrease in its fiscal or 
personnel resources or an increase in program costs, indicate that it 
may no longer be able to provide the full range of services to all 
eligible individuals. In addition, documentation related to 
reevaluations is to be provided to the Council, as well as to the 
Department during RSA's monitoring and review of the order of selection 
requirement under sections 107(a)(3)(A) and 107(a)(4)(B) of the Act.
    A DSU is required to determine the need for an order of selection 
prior to the beginning of the fiscal year and to reevaluate that need 
during the year under Sec. 361.36(b) if circumstances change after the 
beginning of the fiscal year. If changed circumstances warrant 
establishing an order of selection during the fiscal year, a DSU may 
implement an order of selection at that time. The Secretary prefers, 
however, for a DSU to implement an order of selection at the beginning 
of the fiscal year if it foresees any circumstances that may affect its 
ability to serve all eligible individuals throughout the year. The 
preparations needed to establish and implement an order of selection 
take time. During this time, resources may be further strained. Thus, 
the Secretary believes that a conservative approach toward implementing 
an order of selection and opening priority categories is preferable so 
that sufficient resources are available

[[Page 24395]]

throughout the year to serve all individuals with severe disabilities, 
including individuals with the most severe disabilities.
    If a DSU implements an order of selection during the fiscal year, 
rather than at the outset, and thereafter cannot serve all individuals 
with severe and the most severe disabilities, it would be out of 
compliance with the order of selection requirement.
    The Secretary believes that a DSU may use its discretion as to the 
timing for opening and closing priority categories as long as the order 
of categories is maintained. When considering whether to open a 
category, a DSU should evaluate not only current resources but also the 
impact that continuing to serve these eligible individuals under this 
category will have on resources expected to be available in the next 
fiscal year, or possibly beyond.
    Changes: The Secretary has revised Sec. 361.36(e)(1) to provide 
that the DSU shall consult with and seriously consider the advice of 
the Council regarding the need to establish an order of selection, 
including any reevaluation of the need to establish an order of 
selection under Sec. 361.36(b)(2).

Section 361.36(c)--Establishing an Order of Selection.

--Further guidance on factors to be considered in establishing an order 
of selection

    Comments: Several commenters recommended that the Secretary provide 
further guidance on what factors a DSU should use in establishing an 
order of selection. One of these commenters suggested adding five 
factors that a DSU should consider in establishing an order of 
selection: Lower levels of educational achievement; longer lengths of 
unemployment, under-employment, or lower level jobs; lower levels of 
self-esteem and self-worth; need for two or more services; and need for 
services for a longer length of time.
    One commenter requested that a statement be added to Sec. 361.36(c) 
indicating that the criteria for determining which individuals are 
individuals with the most severe disabilities must be equally 
applicable to, and not lead to the exclusion of, transitioning 
students. This commenter was concerned that a DSU may define an 
``individual with the most severe disability'' by using factors, such 
as an employment history of repeated failures, that may exclude youth 
with severe disabilities.
    Discussion: In establishing an order of selection a DSU can only 
consider severity of disability. The Secretary believes that an order 
of selection must be based on the factors or criteria contained in the 
definition of an ``individual with a severe disability'' in section 
7(15)(A) of the Act. An ``individual with a severe disability'' is 
defined as an individual with a disability (1) who has a severe 
physical or mental impairment that seriously limits one or more 
functional capacities (such as mobility, communication, self-care, 
self-direction, interpersonal skills, work tolerance, or work skills) 
in terms of employment outcome; (2) whose vocational rehabilitation can 
be expected to require multiple vocational rehabilitation services over 
an extended period of time; and (3) who has one or more physical or 
mental disabilities, as identified in section 7(15)(A) of the Act, or 
any other disability or disabilities that cause comparable substantial 
functional limitation.
    In determining which individuals with severe disabilities are 
individuals with the most severe disabilities, for purposes of 
providing them with the highest priority in an order of selection, a 
DSU cannot merely apply the criteria in this definition. Because 
individuals with the most severe disabilities are a subgroup of 
individuals with severe disabilities, the Secretary believes that a DSU 
must refine these criteria to identify this subgroup.
    A DSU may refine these factors, for example, by basing its order of 
selection on the number and degree of functional limitations, the 
amount of time vocational rehabilitation services would be needed, and 
the number of vocational rehabilitation services needed. When refining 
these factors, a DSU may choose to refine one factor or a combination 
of factors. The purpose of refining these factors is to link the nature 
and depth of the individual's functional limitations with the need for 
multiple and complex services that require an extended period of time 
for completion.
    A DSU could refine the first criterion by requiring that an 
individual demonstrate limitations in three or more functional 
capacities, such as mobility, communication, self-care, self-direction, 
interpersonal skills, work tolerance, or work skills. Alternatively, a 
DSU could specify the degree of functional limitations within one or 
more functional capacities by requiring that an individual demonstrate 
a minimum number of specific functional limitations, such as five 
specific functional limitations, within one or more functional 
capacities.
    Possible examples of specific functional limitations within the 
functional capacity of self-direction include--(1) Purposeless shifting 
from one activity to another; (2) Inability to follow through with and 
complete assignments; (3) Problems related to time management; (4) 
Making decisions impulsively without consideration for previous plans 
or experience; (5) Limitations in gathering, organizing, and analyzing 
information; (6) Difficulties in adapting to changing work 
requirements; and (7) Inability to monitor work performance and to 
adjust behaviors and activities if the current performance is not 
adequate.
    A DSU could refine the second criterion by specifying the minimum 
number of vocational rehabilitation services required by the individual 
or by specifying the extended period of time required for the provision 
of services. For example, in order to link the complexity or 
substantiality of the services provided to the severity of functional 
limitations, a DSU could establish a criterion that an individual 
require 2 or more major services that will be at least 12 months in 
duration. Major services could be defined as those services described 
in section 103(a) of the Act, excluding diagnostic services; supportive 
services, such as maintenance and transportation, that complement the 
provision of major services; and the counseling, guidance, and service 
coordination provided to every eligible individual.
    A DSU could base the minimum time period required for the provision 
of multiple vocational rehabilitation services on a DSU's experience 
with the length of time necessary for individuals with severe 
disabilities to achieve an employment outcome. This extended period of 
time could be defined as the period of time at the upper end of the 
range required for individuals with severe disabilities to achieve an 
employment outcome, after eliminating any exceptional cases.
    Socioeconomic factors, such as levels of educational achievement or 
length of unemployment or underemployment, and personal traits, such as 
levels of self-esteem, however, cannot be used in establishing an order 
of selection because these factors are not measures of severity of 
disability or even measures of disability. For example, using a factor 
such as low level of educational achievement would tend to include 
individuals whose disabilities were acquired at birth or during the 
developmental years while excluding individuals whose disabilities were 
acquired after having completed high levels of education, even though 
both groups of individuals might demonstrate equal substantial

[[Page 24396]]

functional limitations and have an equal need for multiple services 
over an extended period of time. Using a factor such as an employment 
history of repeated failures would have the effect of excluding youth 
who may have little or no employment history.
    Changes: The Secretary has revised Sec. 361.36(c) by adding a new 
paragraph (1) that states that an order of selection must be based on a 
refinement of the three criteria in the definition of ``individual with 
a severe disability'' in section 7(15)(A) of the Act.
    <bullet> Priority for individuals with the most severe 
disabilities.

--Federal criteria for defining individuals with the most severe 
disabilities

    Comments: Several commenters expressed concern about the potential 
for an individual to be denied services if the individual moves to a 
State in which the DSU uses different criteria for determining which 
individuals have the most severe disabilities. One commenter inquired 
as to whether there will be a consistent procedure for determining 
severity of disability, and other commenters requested that the 
regulations include appropriate criteria for defining ``most severe.''
    Discussion: There is no statutory authority for the Secretary to 
establish Federal criteria to determine which individuals are 
individuals with the most severe disabilities. Section 101(a)(5) of the 
Act mandates that each DSU has the responsibility to develop its own 
criteria in this regard.
    Changes: None.

--Functional limitations

    Comments: One commenter requested that the Secretary clarify that a 
DSU may base an order of selection on limitations of functional 
capacities in addition to those listed in the statutory definition of 
``individual with a severe disability'' in section 7(15)(A)(i) of the 
Act.
    Another commenter suggested that the Secretary encourage DSUs to 
determine which individuals are the most severely disabled based on the 
types of functional limitations specified in the definition of 
``developmental disability'' in section 6001(5) of the Developmental 
Disabilities and Bill of Rights Act (DD Act). ``Developmental 
disability'' is defined, in part, as a severe, chronic disability that 
results in substantial functional limitations in three or more of the 
following areas of major life activity: (1) Self-care. (2) Receptive 
and expressive language. (3) Learning. (4) Mobility. (5) Self-
direction. (6) Capacity for independent living. (7) Economic self-
sufficiency.
    Discussion: A DSU may base an order of selection on limitations of 
functional capacities in addition to those functional capacities listed 
in section 7(15)(A)(i) of the Act. This listing is not all-inclusive 
because it is preceded by the words ``such as.'' However, functional 
limitations under this program must affect the achievement of an 
employment outcome. The DD Act definition specifies functional 
limitations that affect major life activities. Under The State 
Vocational Rehabilitation Services Program, some of the functional 
areas specified in the DD Act, such as economic self-sufficiency and 
capacity for independent living, would not necessarily be considered a 
functional limitation that impedes the achievement of an employment 
outcome, but rather would be considered a potential outcome or benefit 
of the VR program. Therefore, they could not be used as a factor in 
determining severity of disability under the VR program. As part of a 
review of a DSU's criteria for identifying individuals with the most 
severe disabilities, the Secretary would assess the appropriateness of 
using particular different functional capacities.
    Changes: None.
    <bullet> Factors that cannot be used in determining order of 
selection of eligible individuals.

--Applying eligibility restrictions to order of selection decisions

    Comments: Several commenters opposed applying eligibility 
restrictions to order of selection decisions. These commenters stated 
that the eligibility and order of selection requirements are intended 
to stand alone under the Act.
    Discussion: The Secretary agrees that the eligibility requirements 
and the order of selection requirements are separate requirements. 
Eligibility determinations can be based only on the statutory 
eligibility criteria in section 102(a)(1) of the Act. Determinations of 
the order of serving eligible individuals can be based only on severity 
of disability in accordance with section 101(a)(5)(A) of the Act. 
Neither determination can be based on any of the factors in 
Sec. 361.36(c)(2).
    Changes: None.

--Residency prohibition

    Comments: One commenter believed that the residency prohibition 
needed to be clarified because, as worded in the NPRM, it would 
encourage individuals who live in one State to apply for services in 
another State.
    Discussion: The Secretary's intention was to prohibit an order of 
selection from being based on any particular durational residency 
requirement as long as the individual is present in the State and can 
complete a program of services. The Secretary did not intend to address 
the issue of the ability of residents of one State to receive VR 
services in another State.
    Changes: The Secretary has revised Sec. 361.36(c)(1)(i) of the 
proposed regulations to prohibit an order of selection from being based 
on any duration of residency requirement, provided the individual is 
present in the State. This provision has been relocated to 
Sec. 361.36(c)(2)(i) of the final regulations.

--Type of disability prohibition
--Individuals who are blind or visually-impaired

    Comments: One commenter urged the Secretary to ensure that State 
rehabilitation agencies that serve only individuals who are blind or 
visually impaired be permitted to continue to serve these individuals 
if those agencies are operating under an order of selection. In 
addition, this commenter recommended that State rehabilitation agencies 
that serve all individuals with disabilities be required to recognize 
blindness as a severe disability for purposes of order of selection.
    Discussion: If a DSU that serves only individuals who are blind or 
visually impaired is unable to serve all eligible individuals, it must 
prioritize according to severity of disability.
    An individual who is blind or visually impaired must be assessed 
like all other eligible individuals with disabilities according to the 
three criteria in the definition of an ``individual with a severe 
disability'' in section 7(15)(A) of the Act. A DSU may not determine 
that an individual who is blind or visually impaired automatically 
meets this definition, i.e., that every individual who is blind or 
visually impaired is an individual with a severe disability or an 
individual with a most severe disability. An individual who is blind, 
however, would automatically satisfy the third element in the 
definition because ``blindness'' is included among the listing of 
physical or mental disabilities that the Act recognizes as causing 
substantial functional limitation.
    In addition, if an individual is determined blind pursuant to Title 
II or Title XVI of the Social Security Act, section 102(a)(2) of the 
Rehabilitation Act considers that individual to have a severe physical 
or mental impairment that seriously limits one or more functional 
capacities in terms of an employment outcome, thus satisfying the first 
criterion in the definition of an

[[Page 24397]]

``individual with a severe disability.'' There is no basis in the Act, 
however, for automatically determining that an individual who is blind 
or visually impaired would require multiple vocational rehabilitation 
services over an extended period of time.
    Changes: None.

--Individuals with disabilities of alcoholism and other drug abuse

    Comments: One commenter was concerned that individuals with 
disabilities of alcoholism and other drug abuse would not receive fair 
consideration under an order of selection. In order to ensure fair 
consideration for these individuals, the commenter requested that 
criteria be added that require a DSU to include among individuals with 
the most severe disabilities those individuals with chronic relapsing 
conditions.
    Discussion: Section 105(a)(5)(A) requires a DSU, not the Secretary, 
to establish criteria for determining which individuals with severe 
disabilities are individuals with the most severe disabilities. Any 
criteria established by a DSU for identifying individuals with the most 
severe disabilities should apply equally to individuals with chronic 
and individuals with acute disabling conditions. Many individuals with 
chronic relapsing conditions, such as alcohol or drug abuse, may 
experience substantial functional limitations and require multiple 
vocational rehabilitation services over an extended period of time. 
However, an assessment of whether a particular individual with a 
disability meets these criteria, including an assessment of an 
individual who is disabled because of alcohol or drug abuse, must be 
done on a case-by-case basis.
    Changes: None.

--Source of referral prohibition

    Comments: One commenter inquired whether the emphasis on 
interagency cooperative arrangements in the Act allows a DSU to 
establish a priority under an order of selection for eligible 
individuals referred by school systems under the Individuals with 
Disabilities Education Act (IDEA) or the Carl D. Perkins Vocational and 
Applied Education Act (Perkins Act).
    Discussion: A DSU may not establish a priority under an order of 
selection for eligible individuals referred by school systems under 
IDEA or the Perkins Act because the source of referral is not 
necessarily an indicator of severity of disability. While some of these 
individuals might be individuals with severe or the most severe 
disabilities, all individuals referred by schools under these programs 
may not necessarily meet these criteria. This determination must be 
made on an individual basis.
    Changes: None.

--Prohibition against using type of expected employment outcome

    Comments: Several commenters opposed this prohibition. Several 
commenters contended that the purpose of the Title I program is to 
assist individuals with disabilities to enter into gainful employment, 
and, therefore, the type of expected employment outcome should be used 
as a factor in establishing an order of selection. One commenter 
contended that one of the evaluation standards for the program to be 
developed by the Secretary under section 106(a)(2) of the Act may 
relate to the achievement of competitive employment outcomes and an 
increase in post-placement earnings. The commenter believed it is 
unfair to evaluate a DSU on the level of earnings of the individuals it 
places in employment if it cannot use type of employment and amount of 
earnings as a factor in establishing an order of selection.
    Finally, one commenter inquired whether, given the increased 
emphasis in the Act on supported employment, a DSU should be permitted 
to establish a priority in its order of selection for eligible 
individuals whose employment outcome is in a supported employment 
setting.
    Discussion: Individuals with multiple functional limitations and a 
need for multiple services over an extended period of time will have 
varying expected employment outcomes, including competitive employment, 
supported employment, and other types of employment. Thus, type of 
expected employment outcome and level of post-placement earnings are 
not indicative of severity of disability and cannot be used as criteria 
for determining the level of severity of disability.
    Although an individual whose employment outcome is in a supported 
employment setting would be included in the group of individuals with 
the most severe disabilities because supported employment services 
under the Act can only be provided to individuals with the most severe 
disabilities, a DSU cannot give individuals whose employment outcome is 
in a supported employment setting priority over other individuals with 
the most severe disabilities who have different employment outcome 
goals.
    Changes: None.

--Prohibition against considering the particular service needs of an 
individual or anticipated cost of services required by an individual

    Comments: Several commenters opposed these prohibitions. Several 
commenters questioned the logic of prohibiting consideration of service 
needs when establishing an order of selection because the need for 
multiple services is part of the definition of ``individual with a 
severe disability.'' One commenter also pointed out that this 
restriction is contrary to previous RSA sub-regulatory guidance that 
has allowed DSUs to use service needs and costs in establishing 
priority categories for individuals with non-severe disabilities. 
Finally, one commenter inquired whether it is consistent with the Act 
for a DSU to establish a priority in its order of selection for 
eligible individuals who require rehabilitation technology devices and 
services.
    Several commenters believed that the Secretary should revise the 
regulations to allow a DSU to develop an IWRP for only non-purchased 
services if resources are not available to also provide purchased 
services. These commenters requested that a DSU that has established an 
order of selection for services be allowed to provide a priority to 
persons who do not have a severe or most severe disability and who need 
only non-purchased services as long as adequate resources are available 
to serve first those individuals who are the most severely disabled.
    Discussion: The Secretary agrees that clarification is needed. This 
provision is intended to prohibit a DSU from giving priority to an 
individual who has one or more specific service needs over another 
individual who has different service needs. For example, a DSU is 
prohibited from giving priority to individuals who require physical 
restoration services over individuals who require vocational training. 
A DSU is also prohibited from giving priority to individuals who 
require rehabilitation technology devices and services, as raised by 
one commenter, over any other individual who requires a different 
service.
    One of the examples provided in the preamble to the proposed 
regulations to illustrate this provision may have caused confusion. The 
example stated that a DSU is prohibited from establishing an order of 
selection that gives priority to individuals who require short-term 
services over individuals who require long-term services. Since a DSU 
is required to consider, in establishing its order of selection, an 
individual's need for vocational rehabilitation services over an 
extended period of time under the second factor of the definition of 
``individual with a

[[Page 24398]]

severe disability,'' the use of the words ``short-term'' and ``long-
term'' was inappropriate. The example was intended to illustrate the 
principle that the cost of services cannot be a factor in an order of 
selection and that DSUs cannot give priority to individuals who need 
short-term, less costly services over individuals who need longer term 
and more costly services.
    The Secretary believes that there is no basis under the Act for 
exempting from the order of selection requirement the provision of non-
purchased services. The Act does not draw any distinction between the 
provision of purchased and non-purchased vocational rehabilitation 
services with respect to a DSU's determination of the order in which it 
will provide services to eligible individuals if it cannot serve all 
eligible individuals. The order must be predicated, as section 
101(a)(5)(A) requires, on severity of disability: Individuals with the 
most severe disabilities must be served first.
    This means, for example, that if a DSU has established three 
service categories for serving eligible individuals (i.e., individuals 
with the most severe disabilities, individuals with severe 
disabilities, and individuals with non-severe disabilities), then it 
must be able to provide all needed services, whether purchased or not, 
to all individuals with the most severe disabilities before serving any 
individuals with severe disabilities. In addition, it must be able to 
provide all needed services to all individuals with severe disabilities 
before serving any individuals in the last category who have less than 
severe disabilities. An individual's need for only non-purchased 
services cannot override this order.
    Thus, the Secretary believes that a DSU cannot establish a priority 
category anywhere in its order of selection that provides solely for 
the provision of non-purchased services, even among individuals with 
non-severe disabilities. This interpretation represents a policy 
reversal by RSA of its position in subregulatory guidance (RSA-MT-92-
17, March 20, 1992), which permitted a DSU to give a service priority 
to non-severely disabled individuals whose rehabilitation needs do not 
require the expenditure of case service funds (i.e., individuals who 
need only counseling, guidance, and placement services that can be 
provided by DSU staff) over other non-severely disabled individuals.
    To address the concern of some DSUs on this issue, the Secretary 
has proposed regulations for this program in 34 CFR 361.37(c) that were 
published in the Federal Register on December 15, 1995 (60 FR 64476) 
and that would provide a limited exception to this prohibition. These 
proposed regulations would authorize any DSU that has implemented an 
order of selection to establish an expanded information and referral 
program that includes the provision of job referral services to 
eligible individuals who are not being served under a DSU's order of 
selection, provided that certain State plan requirements are met. These 
requirements include a description in the State plan of the level of 
commitment of staff and other resources for this purpose and an 
assurance that funds to carry out this program will supplement and not 
supplant funds available for providing VR services to eligible 
individuals who are able to be served under the DSU's order of 
selection.
    Changes: The Secretary has clarified Sec. 361.36(c)(1)(vi) of the 
proposed regulations by providing that the need for specific services 
by an individual cannot be the basis for an order of selection. This 
provision has been relocated to Sec. 361.36(c)(2)(vi) of the final 
regulations.

--Income level of the individual or the individual's family

    Comments: Several commenters recommended that a DSU be permitted to 
give priority to persons on public assistance in its order of selection 
because these individuals have a greater need for services than those 
who have larger incomes.
    Discussion: A DSU may not give priority to persons on public 
assistance under its order of selection because use of public 
assistance is a socioeconomic factor that may not necessarily be 
related to the presence of a disability or to the severity of that 
disability. Individuals who are on public assistance and who are 
included in a priority category currently being served by a DSU can 
receive services. As noted in the preamble to the NPRM, however, the 
income level of an individual or the individual's family can be a 
factor only in determining whether an individual is required by a DSU 
to pay part of the cost of a service. This is a State option permitted 
under current regulations in 34 CFR 361.47(a).
    Changes: None.

--Transitioning students

    Comments: One commenter believed the intent of section 
101(a)(24)(A) (i), (ii), and (iii) of the Act is to ensure that all 
eligible students receive services in a timely manner and to ensure 
that there is no gap in services between the school system and the 
vocational rehabilitation system.
    One commenter inquired how a DSU will handle transitioning special 
education students if an order of selection is implemented. 
Specifically, the commenter inquired whether a student who is receiving 
vocational rehabilitation services would continue to receive services 
if the student falls outside of the priority categories being served 
under an order of selection established by a DSU.
    Another commenter was concerned that transitioning students would 
be placed on waiting lists for services. This commenter recommended 
requiring a DSU operating under an order of selection to include in its 
State plan the plans, policies, and procedures to identify how the DSU 
will work with education officials and others to meet the needs of 
transitioning youth and to otherwise fulfill their obligations under 
the Act concerning the provision of transition services.
    Discussion: Even though section 101(a)(24)(A) (i), (ii), and (iii) 
of the Act strengthen the provisions for transition services to 
students with disabilities, a student who is determined eligible for 
services after a DSU implements an order of selection will be served 
only if the student is among those individuals included in a priority 
category that is currently being served under the DSU's order of 
selection.
    Section 361.36(d)(3), however, provides that a DSU must ensure that 
it will continue to provide all needed services under an IWRP to any 
eligible individual who has begun to receive services prior to the 
effective date of the order of selection, irrespective of the severity 
of the individual's disability. Thus, for example, if a transitioning 
student with severe disabilities is receiving vocational rehabilitation 
services under an IWRP prior to the effective date of the order of 
selection, the student will continue to receive all needed services 
even if the DSU is able under its order of selection to initiate 
services only to individuals with the most severe disabilities.
    Transitioning students who are not included in a priority category 
that is currently being served under a DSU's order of selection will be 
placed on a waiting list unless services were begun prior to the 
implementation of the order of selection.
    Changes: None.

--Individuals with less severe disabilities

    Comments: One commenter inquired whether individuals with less 
severe disabilities will be systematically left out of the process in 
those DSUs that implement an order of selection. This

[[Page 24399]]

commenter feared that the proposed regulations permit a DSU to refuse 
services to an individual because his or her disability is not severe 
enough.
    One commenter inquired whether a DSU may limit the number of 
individuals with non-severe disabilities who may be served under an 
order of selection so that there will be funds available to serve 
individuals with a severe disability who may apply for services.
    Discussion: The order of selection requirement mandates that 
services be provided first to individuals with the most severe 
disabilities before serving other eligible individuals. This means that 
individuals with the most severe disabilities are served before 
individuals with severe disabilities and individuals with non-severe 
disabilities. A DSU that implements an order of selection may be unable 
to serve eligible individuals with non-severe disabilities.
    The Secretary urges DSUs operating under an order of selection to 
be conservative in assessing their ability to serve individuals other 
than those with the most severe disabilities before opening additional 
priority categories. This approach is needed to ensure that sufficient 
resources are available throughout the year to serve individuals under 
higher priority categories (i.e., individuals with most severe 
disabilities and individuals with severe disabilities) who apply for 
services and become eligible after the beginning of the fiscal year. As 
stated previously, the Secretary prefers this conservative approach 
since a potential increase in the number of applicants with severe 
disabilities might affect the DSU's ability to comply with the order of 
selection requirements throughout the year.
    Changes: None.

Section 361.36(d)--Administrative Requirements

--Identify the order of selection as a State-imposed requirement

    Comments: One commenter recommended deleting this requirement. The 
commenter stated that the only legally permissible reason for 
implementing an order of selection policy is resource limitations. 
Since funding for the program is a shared responsibility of State and 
Federal governments, the commenter believed there was no reason to 
attribute resource shortfalls exclusively to a State.
    Discussion: The Secretary believes that the commenter 
misinterpreted this provision of the proposed regulations. The intent 
of the provision was for a DSU to identify its particular order of 
selection policy as a State-imposed requirement (not the order of 
selection requirement itself, which is a Federal requirement) since 
this policy is a State rule or policy relating to the administration or 
operation of the program under section 17 of the Act. Nevertheless, the 
Secretary believes that there is no reason to particularly highlight 
this one State-imposed requirement in the regulations over other State-
imposed requirements, such as a State's financial needs test. The 
Secretary intends to address State-imposed requirements in general in 
other regulations for this program.
    Changes: The Secretary has deleted the requirement in 
Sec. 361.36(d)(2) of the proposed regulations that a DSU identify its 
order of selection policy as a State-imposed requirement.

--Written policies

    Comments: Several commenters suggested that written policies for an 
order of selection include requirements that the policies must provide 
that affected individuals are notified of the State's particular order 
of selection, the priority category to which they have been assigned, 
and their right to appeal assignment to a particular priority category.
    One commenter suggested revising Sec. 361.36(d)(3) of the proposed 
regulations to provide that a DSU must establish written policies 
related to the development, establishment, and administration of the 
order of selection that should include, but not be limited to, the 
following: (1) Consultation with the Council. (2) Staff orientation and 
training. (3) Notification to individuals applying for services, or in 
an appropriate case, the parent, family member, guardian, advocate, or 
authorized representative of such an individual. (4) Monitoring 
procedures. (5) Caseload management. (6) Evaluation of effectiveness of 
the order of selection. The commenter believed that these policies 
should be required since they include important accountability 
elements.
    Discussion: The Secretary agrees that a DSU must ensure that each 
eligible individual is informed of the priority categories that have 
been established in a DSU's order of selection, of the particular 
priority category to which he or she has been assigned, and of his or 
her right to appeal assignment to a particular priority category under 
the State's procedures for reviewing rehabilitation counselor or 
coordinator determinations. The Secretary believes these are basic 
procedural rights that eligible individuals have under this program. 
These notification requirements are specified in Sec. 361.36(d)(2).
    In accordance with the Department's principles for regulating, 
however, the Secretary has eliminated the requirement in the proposed 
regulations that DSUs establish written policies related to the 
development, establishment, and administration of its order of 
selection. The Secretary believes that requiring DSUs to establish 
written policies covering all aspects of the implementation of an order 
of selection is overly burdensome. Nevertheless, the Secretary 
encourages a DSU to develop policies, as needed, to ensure proper 
administration of its order of selection, including policies in areas 
such as staff orientation and training, monitoring procedures, caseload 
management, and evaluation and management of the order of selection.
    Changes: The Secretary has revised Sec. 361.36(d)(3) of the 
proposed regulations to require a DSU to notify all eligible 
individuals of the priority categories in a DSU's order of selection, 
their assignment to a particular category, and their right to appeal 
assignment to a particular priority category. This provision has been 
relocated to Sec. 361.36(d)(2) of the final regulations.

--Continuity of services

    Comments: One commenter requested clarification of this provision. 
The commenter noted that a person could have a completed and signed 
IWRP, but not yet have begun to receive services under the IWRP. This 
commenter requested that the regulations be revised to provide that 
anyone with a completed and signed IWRP must continue to receive 
services in accordance with their approved IWRP, irrespective of the 
severity of their disability. Another commenter inquired whether the 
continuity of services requirement entitles an individual who is 
receiving services under one DSU's order of selection to receive 
services from a DSU in another State if that individual moves and falls 
outside of the priority categories being served by the DSU in the 
second State.
    Discussion: The continuity of services requirement ensures that an 
eligible individual who has begun to receive services under an IWRP 
prior to the effective date of a DSU's order of selection will continue 
to receive all needed services, including services that may be 
necessary because of amendments to the IWRP, irrespective of the 
severity of that individual's disability.
    An eligible individual who has a completed IWRP, but who has not 
begun to receive services under that

[[Page 24400]]

IWRP, would not be covered by this requirement. This means that the 
continuity of services requirement does not apply to any services 
provided in developing an eligible individual's IWRP. This requirement 
takes effect at the point in the rehabilitation process when services 
leading to an employment outcome have been initiated under an IWRP. 
Finally, the continuity of services requirement is DSU-specific and 
does not entitle an individual who is receiving services under one 
DSU's order of selection to receive services under another DSU's order 
of selection if the individual is not included among the individuals 
being served under the second DSU's order of selection.
    Changes: The Secretary has revised Sec. 361.36(d)(4) of the 
proposed regulations to ensure that a DSU continues to provide all 
services needed by any eligible individual who has begun to receive 
services ``under an IWRP'' prior to the effective date of the order of 
selection, irrespective of the severity of the individual's disability. 
This change is necessary to clarify that it is the receipt of services 
under an IWRP that triggers the continuity of services requirement. 
This provision has been relocated to Sec. 361.36(d)(3) of the final 
regulations.

--Third-party funding arrangements

    Comments: One commenter recommended that the Secretary permit 
third-party funding arrangements that conflict with a DSU's order of 
selection if these arrangements reflect priorities in national or State 
policy. Another commenter feared that requiring DSUs to renegotiate 
third-party arrangements will result in a considerable reduction in 
resources to serve individuals with disabilities.
    One commenter recommended that the Secretary provide a further 
explanation of how a DSU can ensure that its third-party arrangements 
are ``consistent'' with its order of selection for services. This 
commenter also requested that the Secretary take into consideration the 
practical difficulties for a provider of renegotiating a contract 
midstream. Another commenter inquired whether cooperative arrangements, 
like third-party arrangements, must be consistent with a DSU's order of 
selection.
    One commenter questioned whether a DSU may select a category of 
individuals for priority under its order of selection because that 
category is funded by targeted funds from another agency.
    Discussion: The Secretary believes that a DSU's funding 
arrangements for providing services, such as third-party arrangements 
and cooperative arrangements, cannot override its order of selection if 
those funds are used under the State plan. For example, a DSU that 
receives third-party funding to serve individuals with mental illness 
may not serve individuals with mental illness who fall outside of the 
priority categories being served under the order of selection. This is 
necessary to ensure that an order of selection is applied fairly and 
evenly to all individuals regardless of whether funding arrangements 
are in place to serve individuals from particular disability groups. If 
a funding arrangement is inconsistent with a DSU's order of selection, 
a DSU must renegotiate these arrangements so that individuals are 
served in a manner consistent with the DSU's order of selection.
    Changes: The phrase ``under the State plan'' has been added to 
Sec. 361.36(d)(4) to clarify that any funding arrangements that are 
used by a DSU to provide services under the State plan must be 
consistent with a DSU's order of selection.

--Other requirements

    Comments: Several commenters were concerned that there is an 
inadequate number of counselors qualified to properly evaluate severity 
of disability. These commenters suggested that the Secretary ensure 
that qualified counselors are available to evaluate individuals to 
determine whether they will receive services under an order of 
selection.
    Discussion: Section 101(a)(7) of the Act requires a DSU to develop 
a comprehensive system of personnel development to ensure that an 
adequate supply of qualified State rehabilitation professional and 
paraprofessionals is available in the State. The Secretary believes 
that this provision mandates that staff in sufficient numbers be 
qualified to properly evaluate functional limitations for purposes of 
determining severity of disability. The Secretary believes that all 
DSUs operating under an order of selection must provide staff with 
appropriate training to be able to make these determinations.
    Changes: None.

Section 361.36(e)--State Rehabilitation Advisory Council

    Comments: One commenter recommended that the Secretary highlight 
the responsibility of the DSU to seek and seriously consider the advice 
of the Council on DSU criteria for determining which individuals are 
individuals with the most severe disabilities.
    Several commenters suggested that a DSU that has implemented an 
order of selection be required to consult other advisory boards, 
service providers, advocacy organizations, consumers, family members, 
and rehabilitation vendors, in addition to the Council, regarding the 
content of the order of selection. One of these commenters stated that 
this consultation is necessary because the composition of the Council 
may not ensure sufficient or equal representation by persons of 
different disabilities, such as persons with mental illness.
    Several commenters recommended that the Secretary add a new 
Sec. 361.36(f) stating that the client assistance program and other 
parties must be consulted, under section 101(a)(23)(C) of the Act, 
before revisions are made to a DSU's order of selection.
    Discussion: The Secretary does not believe that it is necessary to 
further highlight the responsibility of a DSU to seek and seriously 
consider the advice of the Council when developing the criteria for 
determining which individuals are the most severely disabled. The 
Secretary believes that Sec. 361.36(e)(3) sufficiently highlights this 
responsibility.
    The Secretary agrees with the commenters who suggest that advisory 
boards, other than the Council, service providers, advocacy 
organizations, consumers, family members, rehabilitation vendors, and 
the director of the client assistance program (CAP) are valuable 
sources of information and should be consulted by a DSU in determining 
the content of its order of selection. The Secretary believes that 
consultation with these and other groups as to the content of the DSU's 
order of selection is sufficiently addressed under sections 101(a)(18), 
101(a)(23), and 105(b)(1) of the Act. These statutory provisions 
provide for broad public participation in the development of the State 
plan and of policies governing the provision of vocational 
rehabilitation services under the plan.
    Changes: None.

Additional comment

--Development of IWRP

    Comments: Several commenters requested that a DSU not be required 
to develop an IWRP for all individuals eligible for vocational 
rehabilitation services under the Act if the DSU cannot serve all 
eligible individuals and is providing services under an order of 
selection. These commenters stated that requiring a DSU that has 
implemented an order of selection to develop IWRPs for all eligible 
individuals, regardless of

[[Page 24401]]

whether the individual could currently be served, would result in 
unnecessary work for vocational rehabilitation counselors and would 
give false hope to individuals who fall outside of the categories being 
served.
    Discussion: The Secretary understands the concern expressed by 
these commenters and is addressing this issue in other vocational 
rehabilitation program regulations. The proposed regulations concerning 
development of an IWRP for this program published in the Federal 
Register on December 15, 1995 (60 FR 64476, proposed Sec. 361.45(a)) 
would require a DSU that has implemented an order of selection to 
develop an IWRP only for each eligible individual that it is able to 
serve.
    Changes: None.

Executive Order 12866

Assessment of Costs and Benefits

    These final regulations have been reviewed in accordance with 
Executive Order 12866. Under the terms of the order the Secretary has 
assessed the potential costs and benefits of this regulatory action.
    The potential costs associated with the final regulations are those 
resulting from statutory requirements and those determined by the 
Secretary to be necessary for administering this program effectively 
and efficiently.
    In assessing the potential costs and benefits--both quantitative 
and qualitative--of these regulations, the Secretary has determined 
that the benefits of the regulations justify the costs.
    The Secretary has also determined that this regulatory action does 
not unduly interfere with State, local, and tribal governments in the 
exercise of their governmental functions.

Summary of Potential Benefits Relative to Potential Costs of the 
Regulatory Provisions Discussed Previously in This Preamble

    The Secretary believes that the final regulations represent the 
least burdensome way to implement the statutory requirement that a DSU 
explain the methods by which it will serve all eligible individuals for 
VR services or, in the alternative, establish and justify the order of 
selection it shall follow in serving first those individuals with the 
most severe disabilities. In addition, the Secretary believes that the 
regulations present the most effective means of ensuring that DSUs do 
not improperly avoid establishing an order of selection (i.e., failing 
to establish an order of selection even though the DSU cannot serve all 
eligible individuals). Reduction of burden on DSUs and other benefits 
resulting from the final regulations are discussed in the following 
paragraphs of this section and throughout the analysis of comments and 
changes section of the preamble.

Reduction of Paperwork Burden on Grantees

    As stated previously in this preamble, review of the final 
regulations in accordance with the Department's principles for 
regulating resulted in two major, burden-reducing changes from the 
proposed regulations. First, under the final regulations, DSUs that 
have successfully served all eligible individuals in the past are not 
required to include detailed projections (e.g., projected number of 
eligible individuals, projected program costs and revenues) as part of 
their explanation of how they will continue to serve everyone and meet 
all other program requirements in the next year. As long as a DSU can 
provide the assurances required in the regulations to confirm its past 
ability to serve all eligible individuals, the DSU's explanation under 
Sec. 361.36(a)(1) is not subject to minimum content requirements. 
Second, the regulations reduce the number of data projections and 
related demonstrations that must be included as part of the explanation 
for DSUs that have been unable to serve all eligible individuals in the 
past. The remaining projections are needed to indicate whether a DSU 
that has been unable to serve all eligible individuals previously can 
serve everyone in the next year.

Evaluation of Need to Establish an Order of Selection

    Once a DSU decides, prior to the beginning of the fiscal year, that 
it does not need to establish an order of selection, the final 
regulations require the DSU to reevaluate this decision whenever 
changed circumstances indicate that it may no longer be able to serve 
all eligible individuals. DSUs, therefore, are responsible for 
determining whether they need to implement an order of selection after 
the start of the year. The Secretary prefers this flexible approach 
rather than imposing in the regulations a specific time when all DSUs 
must reevaluate the need to establish an order of selection, as some 
commenters on the proposed regulations suggested.

Instructions for Establishing an Order of Selection

    Section 361.36(c) provides, for DSUs unable to serve all eligible 
individuals, clear directives on how to establish an order of selection 
for providing services. In addition, this section includes specific 
factors that cannot be used in developing an order of selection. Many 
commenters on the proposed regulations had requested clarification as 
to whether these factors could be considered in formulating specific 
priority categories under an order of selection.

Additional Benefits

    The final regulations include provisions intended to enhance the 
protection of individuals with disabilities by DSUs operating under an 
order of selection. For example, the regulations require DSUs to notify 
all eligible individuals of the priority categories in the State's 
order of selection, as well as their assignment to a particular 
category. Additionally, the regulations require DSUs to continue to 
serve any eligible individual who has begun to receive services under 
an IWRP prior to the effective date of the order of selection, 
irrespective of the severity of the individual's disability.

Paperwork Reduction Act of 1995

    Under the Paperwork Reduction Act of 1995, no persons are required 
to respond to a collection of information unless it displays a valid 
OMB control number. The valid OMB control number assigned to the 
collection of information in these final regulations is displayed at 
the end of the affected section of the regulations.

Intergovernmental Review

    This program is subject to the requirements of Executive Order 
12372 and the regulations in 34 CFR Part 79. The objective of the 
Executive order is to foster an intergovernmental partnership and a 
strengthened federalism by relying on processes developed by State and 
local governments for coordination and review of proposed Federal 
financial assistance.
    In accordance with the order, this document is intended to provide 
early notification of the Secretary's specific plans and actions for 
this program.

Assessment of Educational Impact

    In the notice of proposed rulemaking, the Secretary requested 
comments on whether the proposed regulations would require transmission 
of information that is being gathered by or is available from any other 
agency or authority of the United States.
    Based on the response to the proposed regulations and on its own 
review, the Department has determined that the

[[Page 24402]]

regulations in this document do not require transmission of information 
that is being gathered by or is available from any other agency or 
authority of the United States.

List of Subjects in 34 CFR Part 361

    Administrative practice and procedures, Grant programs--education, 
Grant programs--social programs, Reporting and recordkeeping 
requirements, Vocational rehabilitation.

(Catalog of Federal Domestic Assistance Number 84.126--The State 
Vocational Rehabilitation Services Program)
    Dated: March 4, 1996.

Richard W. Riley,
Secretary of Education.
    The Secretary amends Part 361 of Title 34 of the Code of Federal 
Regulations as follows:

PART 361--THE STATE VOCATIONAL REHABILITATION SERVICES PROGRAM

    1. The authority citation for Part 361 continues to read as 
follows:

    Authority: 29 U.S.C. 711(c), unless otherwise noted.

    2. Section 361.36 is revised to read as follows:


Sec. 361.36  Ability to serve all eligible individuals; order of 
selection for services.

    (a) General provisions.
    (1) The State plan must contain--
    (i) An assurance that the designated State unit is able to provide 
the full range of services listed in section 103(a) of the Act, as 
appropriate, to all eligible individuals. The assurance must be 
supported by an explanation that satisfies the requirements of 
paragraph (a)(2) or (a)(3) of this section and describes how, on the 
basis of the designated State unit's projected fiscal and personnel 
resources and its assessment of the rehabilitation needs of individuals 
with severe disabilities within the State, it will--
    (A) Continue to provide services to all individuals currently 
receiving services;
    (B) Provide assessment services to all individuals expected to 
apply for services in the next fiscal year;
    (C) Provide services to all individuals who are expected to be 
determined eligible in the next fiscal year; and
    (D) Meet all program requirements; or
    (ii) The order to be followed in selecting eligible individuals to 
be provided services, a justification of that order of selection, and a 
description of the outcome and service goals and service costs to be 
achieved for individuals with disabilities in each category within the 
order and the time within which these goals may be achieved.
    (2) For those designated State units that provided assurances in 
their State plans for the current fiscal year and the preceding fiscal 
year that they are able to provide the full range of services, as 
appropriate, to all eligible individuals, the explanation required by 
paragraph (a)(1)(i) of this section must include a statement that, 
during the current fiscal year and the preceding fiscal year, the DSU 
has in fact--
    (i) Provided assessment services to all applicants and the full 
range of services, as appropriate, to all eligible individuals;
    (ii) Made referral forms widely available throughout the State;
    (iii) Conducted outreach efforts to identify and serve individuals 
with disabilities who have been unserved or underserved by the 
vocational rehabilitation system; and
    (iv) Not delayed, through waiting lists or other means, 
determinations of eligibility, the development of individualized 
written rehabilitation programs (IWRPs) for individuals determined 
eligible, or the provision of services for eligible individuals for 
whom IWRPs have been developed.
    (3) For those designated State units unable to provide the full 
range of services to all eligible individuals during the current or 
preceding fiscal year, or unable to provide the statement required in 
paragraph (a)(2) of this section, the explanation required by paragraph 
(a)(1)(i) of this section must include--
    (i) A description of the circumstances that have changed that will 
allow the DSU to meet the requirements of paragraph (a)(1)(i) of this 
section in the next fiscal year, including a description of--
    (A) The estimated number of and projected costs of serving, in the 
next fiscal year, individuals with existing IWRPs;
    (B) The projected number of individuals with disabilities who will 
apply for services and will be determined eligible in the next fiscal 
year and the projected costs of serving those individuals;
    (C) The projected costs of administering the program in the next 
fiscal year, including, but not limited to, costs of staff salaries and 
benefits, outreach activities, and required statewide studies; and
    (D) The projected revenues and projected number of qualified 
personnel for the program in the next fiscal year;
    (ii) Comparable data, as relevant, for the current or preceding 
fiscal year, or for both years, of the costs listed in paragraphs 
(a)(3)(i) (A) through (C) of this section and the resources identified 
in paragraph (a)(3)(i)(D) of this section and an explanation of any 
projected increases or decreases in these costs and resources; and
    (iii) A demonstration that the projected revenues and the projected 
number of qualified personnel for the program in the next fiscal year 
are adequate to cover the costs identified in paragraphs (a)(3)(i) (A) 
through (C) of this section so as to ensure the provision of the full 
range of services, as appropriate, to all eligible individuals.
    (b) Time for determining need for an order of selection.
    (1) The designated State unit shall determine, prior to the 
beginning of each fiscal year, whether to establish and implement an 
order of selection.
    (2) If the designated State unit determines that it does not need 
to establish an order of selection, it shall reevaluate this 
determination whenever changed circumstances during the course of a 
fiscal year, such as a decrease in its fiscal or personnel resources or 
an increase in its program costs, indicate that it may no longer be 
able to provide the full range of services, as appropriate, to all 
eligible individuals.
    (c) Establishing an order of selection.
    (1) Basis for order of selection. An order of selection must be 
based on a refinement of the three criteria in the definition of 
``individual with a severe disability'' in section 7(15)(A) of the Act.
    (2) Factors that cannot be used in determining order of selection 
of eligible individuals. An order of selection may not be based on any 
other factors, including--
    (i) Any duration of residency requirement, provided the individual 
is present in the State;
    (ii) Type of disability;
    (iii) Age, gender, race, color, creed, or national origin;
    (iv) Source of referral;
    (v) Type of expected employment outcome;
    (vi) The need for specific services or anticipated cost of services 
required by an individual; or
    (vii) The income level of an individual or an individual's family.
    (3) Priority for individuals with the most severe disabilities. The 
State plan must assure that those individuals with the most severe 
disabilities are selected for service before other individuals with 
disabilities. The designated State unit shall establish criteria for 
determining which individuals are individuals with the most severe 
disabilities. The criteria must be consistent with the definition of

[[Page 24403]]

``individual with a severe disability'' in section 7(15)(A) of the Act 
and the requirements in paragraphs (c)(1) and (2) of this section.
    (d) Administrative requirements. In administering the order of 
selection, the designated State unit shall--
    (1) Implement the order of selection on a statewide basis;
    (2) Notify all eligible individuals of the priority categories in a 
State's order of selection, their assignment to a particular category, 
and their right to appeal their category assignment;
    (3) Continue to provide all needed services to any eligible 
individual who has begun to receive services under an IWRP prior to the 
effective date of the order of selection, irrespective of the severity 
of the individual's disability;
    (4) Ensure that its funding arrangements for providing services 
under the State plan, including third-party arrangements and awards 
under the establishment authority, are consistent with the order of 
selection. If any funding arrangements are inconsistent with the order 
of selection, the designated State unit shall renegotiate these funding 
arrangements so that they are consistent with the order of selection.
    (e) State Rehabilitation Advisory Council. The designated State 
unit shall consult with and seriously consider the advice of the State 
Rehabilitation Advisory Council regarding the--
    (1) Need to establish an order of selection, including any 
reevaluation of the need under paragraph (b)(2) of this section;
    (2) Priority categories of the particular order of selection;
    (3) Criteria for determining individuals with the most severe 
disabilities; and
    (4) Administration of the order of selection.

(Approved by the Office of Management and Budget under control 
number 1820-0500.)

(Authority: Secs. 7(15)(A); 12(d); 17; 101(a)(4); 101(a)(5)(A); 
101(a)(7); 101(a)(11)(A); 101(a)(15)(D); 101(a)(24); 101(a)(30); 
101(a)(36)(A)(ii); 107(a)(4)(B); and 504(a) of the Act; 29 U.S.C. 
706(15)(A), 711(d), 716, 721(a)(4), 721(a)(5)(A), 721(a)(7), 
721(a)(11)(A), 721(a)(15)(D), 721(a)(24), 721(a)(30), 
721(a)(36)(A)(ii), 727(a)(4)(B), and 794(a))

[FR Doc. 96-11808 Filed 5-13-96; 8:45 am]
BILLING CODE 4000-01-P