Technical amendment to Welfare-to-Work formula-fund obligations

The advisory's full letter text appears in ETA's official TEGL listing. The linked statutory-text attachment is transcribed below.

TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 9-98
DATE: December 2, 1998
TO: All State Welfare-To-Work Contacts; All State JTPA Liaisons
FROM: David Henson, Director, Office of Regional Management
SUBJECT: Technical Amendment to Welfare-to-Work on the Obligation of Formula Funds to the States

Purpose: To provide States with information regarding the enactment of a technical amendment changing the requirements for the obligation of Welfare-to-Work (WtW) formula funds.

Authorities and References: Balanced Budget Act of 1997 (Pub. L. 105-33) (amending Title IV-A of the Social Security Act); the Non-citizen Benefit Clarification and Other Technical Amendments Act of 1998 (Pub. L. 105-306); and the Welfare-to-Work Interim Final Rule, 20 CFR Part 645 (published at 62 FR 61588 (Nov. 18, 1997)).

Background: The Balanced Budget Act of 1997 authorizes the Department of Labor to provide WtW grants to public and private entities in States and local communities for transitional employment assistance to move hard-to-employ Temporary Assistance to Needy Families (TANF) recipients with significant employment barriers and certain non-custodial parents into unsubsidized jobs. Seventy-five percent of WtW funds (less small set-asides for specific statutory purposes) are available to States in amounts based on the statutory formula set forth in Section 403(a)(5)(A)(v) of the Social Security Act. A State is required to allocate at least 85 percent of the formula funds among the Service Delivery Areas (SDAs) in the State and may retain up to 15 percent of the funds for WtW projects that focus on helping long-term welfare recipients enter unsubsidized employment.

At Section 403(a)(5)(A)(iv)(II), the statute originally provided that a State receiving formula funds must obligate all funds allotted to it by the end of the fiscal year in which those funds were appropriated. Any funds not obligated would be added to the amount to be allotted by formula to States in the subsequent fiscal year. This provision had the effect of requiring States to obligate the entire formula allotment each fiscal year or face the consequence of losing any unobligated funds. States fulfilled the obligation requirement for the majority of the funds when they allocated the 85 percent funds to SDAs. However, in States that have only one SDA, which is usually an agency of the State government that also serves as the grant recipient, the obligation of these funds presented particular difficulties. In addition, the provision also required States to fully obligate the 15 percent of funds reserved for special projects. This requirement generally conflicts with other authority provided in the Social Security Act allowing funds to be expended over a three-year period.

Technical Amendment Affecting the Obligation of Funds: On October 28, 1998, President Clinton signed into law the Non-citizen Benefit Clarification and Other Technical Amendments Act of 1998 (Pub. L. 105-306). The technical amendment harmonizes the obligation requirement and the three-year expenditure provision. It also reiterates that States, excluding single SDA States, are required to expeditiously allocate the 85 percent of the formula funds among the SDAs in the State; and that these formula grant funds must be allocated by the end of the fiscal year in which the funds were appropriated. The requirement to obligate funds by the end of the fiscal year does not apply to the 15 percent of funds reserved by the States for special projects or to the funds that are available to single SDA States. However, the provision would continue to require States to expeditiously allocate formula funds among the SDAs in the State.

Retroactivity: The technical amendment is retroactive to the date of the passage of the Balanced Budget Act, which was signed into law August 5, 1997.

Action Required: States should provide this guidance to appropriate staff.

Inquiries: Inquiries on this TEGL should be directed to your Regional Office.

Attachment: Section 403(a)(5)(A)(iv) of the Social Security Act, as Amended

(iv) AVAILABLE AMOUNT.—As used in this subparagraph, the term “available amount” means, for a fiscal year, the sum of—

(I) 75 percent of the sum of—

(aa) the amount specified in subparagraph (I) for the fiscal year, minus the total of the amounts reserved pursuant to subparagraphs (E), (F), (G), and (H) for the fiscal year; and

(bb) any amount reserved pursuant to subparagraph (F) for the immediately preceding fiscal year that has not been obligated; and

(II) any available amount for the immediately preceding fiscal year that has not been obligated by a State, other than funds reserved by the State for distribution under clause (vi)(III) and funds distributed pursuant to clause (vi)(I) in any State in which the service delivery area is the State.