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of a State for a fiscal year is less than 40
percent but exceeds by at least 5 percent-
age points the arrearage payment perform-
ance level of the State for the immediately
preceding fiscal year, then the applicable
percentage with respect to the State’s ar-
rearage payment performance level is 50
percent.
‘‘(E) COST-EFFECTIVENESS.—
‘‘(i) DETERMINATION
OF
COST-EF-
FECTIVENESS PERFORMANCE LEVEL.—The
cost-effectiveness performance level for a
State for a fiscal year is equal to the total
amount collected during the fiscal year
under the State plan approved under this
part divided by the total amount expended
during the fiscal year under the State plan,
expressed as a ratio.
‘‘(ii) DETERMINATION OF APPLICABLE
PERCENTAGE.—The applicable percentage
with respect to a State’s cost-effectiveness
performance level is as follows:
‘‘If the cost effectiveness perform-
ance level is:
The applicable
percentage is:
At least:
But less than:
5.00 ......................
...............................
100
4.50 ......................
4.99 ......................
4.00 ......................
4.50 ......................
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‘‘If the cost effectiveness perform-
ance level is:
The applicable
percentage is:
At least:
But less than:
3.50 ......................
4.00 ......................
3.00 ......................
3.50 ......................
2.50 ......................
3.00 ......................
2.00 ......................
2.50 ......................
0.00 ......................
2.00 ......................
0.
‘‘(c) TREATMENT OF INTERSTATE COLLECTIONS.—
In computing incentive payments under this section, sup-
port which is collected by a State at the request of another
State shall be treated as having been collected in full by
both States, and any amounts expended by a State in car-
rying out a special project assisted under section 455(e)
shall be excluded.
‘‘(d) ADMINISTRATIVE PROVISIONS.—The amounts
of the incentive payments to be made to the States under
this section for a fiscal year shall be estimated by the Sec-
retary at or before the beginning of the fiscal year on the
basis of the best information available. The Secretary shall
make the payments for the fiscal year, on a quarterly basis
(with each quarterly payment being made no later than
the beginning of the quarter involved), in the amounts so
estimated, reduced or increased to the extent of any over-
payments or underpayments which the Secretary deter-
mines were made under this section to the States involved
for prior periods and with respect to which adjustment has
not already been made under this subsection. Upon the
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making of any estimate by the Secretary under the preced-
ing sentence, any appropriations available for payments
under this section are deemed obligated.
‘‘(e) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary governing the cal-
culation of incentive payments under this section, includ-
ing directions for excluding from the calculations certain
closed cases and cases over which the States do not have
jurisdiction.
‘‘(f) REINVESTMENT.—A State to which a payment
is made under this section shall expend the full amount
of the payment to supplement, and not supplant, other
funds used by the State—
‘‘(1) to carry out the State plan approved under
this part; or
‘‘(2) for any activity (including cost-effective
contracts with local agencies) approved by the Sec-
retary, whether or not the expenditures for the activ-
ity are eligible for reimbursement under this part,
which may contribute to improving the effectiveness
or efficiency of the State program operated under
this part.’’.
(b) TRANSITION RULE.—Notwithstanding any other
provision of law—
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(1) for fiscal year 2000, the Secretary shall re-
duce by 1⁄3 the amount otherwise payable to a State
under section 458 of the Social Security Act, and
shall reduce by 2⁄3 the amount otherwise payable to
a State under section 458A of such Act; and
(2) for fiscal year 2001, the Secretary shall re-
duce by 2⁄3 the amount otherwise payable to a State
under section 458 of the Social Security Act, and
shall reduce by 1⁄3 the amount otherwise payable to
a State under section 458A of such Act.
(c) REGULATIONS.—Within 9 months after the date
of the enactment of this section, the Secretary of Health
and Human Services shall prescribe regulations governing
the implementation of section 458A of the Social Security
Act when such section takes effect and the implementation
of subsection (b) of this section.
(d) STUDIES.—
(1) GENERAL REVIEW OF NEW INCENTIVE PAY-
MENT SYSTEM.—
(A) 
IN
GENERAL.—The 
Secretary 
of
Health and Human Services shall conduct a
study of the implementation of the incentive
payment system established by section 458A of
the Social Security Act, in order to identify the
problems and successes of the system.
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(B) REPORTS TO THE CONGRESS.—
(i) REPORT ON VARIATIONS IN STATE
PERFORMANCE ATTRIBUTABLE TO DEMO-
GRAPHIC VARIABLES.—Not later than Oc-
tober 1, 2000, the Secretary shall submit
to the Congress a report that identifies any
demographic or economic variables that ac-
count for differences in the performance
levels achieved by the States with respect
to the performance measures used in the
system, and contains the recommendations
of the Secretary for such adjustments to
the system as may be necessary to ensure
that the relative performance of States is
measured from a baseline that takes ac-
count of any such variables.
(ii) INTERIM REPORT.—Not later than
March 1, 2001, the Secretary shall submit
to the Congress an interim report that con-
tains the findings of the study required by
subparagraph (A).
(iii) FINAL REPORT.—Not later than
October 1, 2003, the Secretary shall sub-
mit to the Congress a final report that
contains the final findings of the study re-