IN THE MATTER OF THE DISAPPROVAL OF IOWA'S AFDC PLAN AMENDMENT, DAB NO. 1215

Department of Health and Human Services

IN THE MATTER OF THE DISAPPROVAL OF IOWA'S AFDC PLAN AMENDMENT,
Docket No. 90-125
Decision No. 1215
TRANSMITTAL NO. AP-89-4

RECOMMENDED FINDINGS AND PROPOSED DECISION

The Iowa Department of Human Services (Iowa or the State) requested
reconsideration of a decision by the Regional Administrator, Family
Support Administration (FSA). The Regional Administrator disapproved
part of Iowa's proposed amendment to the Iowa State Plan for Aid to
Families with Dependent Children (AFDC) under Title IV-A of the Social
Security Act (Act). The proposed amendment was submitted as Transmittal
No. AP-89-4. (See Appendix A to this decision for the text of the
proposed amendment.)

Pursuant to 45 C.F.R. 213.21, the Assistant Secretary for Family Support
designated me as Presiding Officer for the purpose of providing the
State with a hearing and related procedures, and rendering a proposed
decision. The Assistant Secretary shall review the proposed decision
and, within 60 days of its issuance, issue her own decision. See 45
C.F.R. 213.32(b)(3). Notice of the hearing and the issues to be
addressed were identified in the Federal Register. 55 Fed. Reg. 28100
(1990).

Prior to the hearing, Ms. Jamie Allen filed a petition requesting to
participate as a party, or in the alternative, as an Amicus Curiae in
this case. On July 31, 1990, I issued a ruling denying Ms. Allen party
status, but permitting her to participate as an Amicus Curiae. A
hearing was held in Kansas City, Missouri on August 16, 1990. The
hearing was in the nature of an oral argument since the parties agreed
there were no disputes of material fact. The parties and the Amicus
submitted both prehearing and posthearing briefs.

Pursuant to 45 C.F.R. 213.32 and based on my conclusions regarding the
legal issues raised, I propose that the plan amendment be disapproved.

Below, I first provide background information. Then I provide a summary
of the basis for my proposed decision. Finally, I discuss each of the
arguments raised and explain my legal conclusions related to those
issues.

I. Background

Title IV-A of the Act establishes a program of aid for "needy dependent
children and the parents or relatives with whom they are living to help
maintain and strengthen family life and to help such parents or
relatives to attain or retain capability for self-support and personal
independence . . . ." Section 401 of the Act. 1/ This program provides
monthly income maintenance payments to qualified families and is
referred to at the federal level as "Aid to Families with Dependent
Children," or AFDC. The AFDC program is administered jointly by the
federal government and the participating states. In order to
participate in the program, a state must submit a plan which complies
with the Act and the implementing regulations. Iowa has an approved
state plan under Title IV-A, but refers to its program as "Aid to
Dependent Children," or ADC.

In order to measure the need of its recipients, a state must set forth
in its state plan a standard of need expressed in money amounts. 45
C.F.R. 233.20(a)(2). A standard of need is composed of basic needs and,
if a state chooses, special needs. 45 C.F.R. 233.20(a)(2). Special
needs are those needs that are recognized by the State as essential for
some persons but not for all, and that must therefore be determined on
an individual basis. Characteristics of State Plans for Aid to Families
with Dependent Children under Title IV-A of the Social Security Act, p.
13, 1989 Edition; FSA's Ex. 2. In the past, Iowa had provided for some
education and training costs, including some child care, as AFDC special
needs.

Prior to 1988, federal law provided for a number of optional work and
training programs for AFDC recipients, such as the Work Incentive (WIN)
program. However, in 1988, Congress enacted the Family Support Act,
which created the Job Opportunities and Basic Skills Training (JOBS)
Program for recipients of AFDC and repealed the WIN program. Pub. L.
100-485 (1988). The purpose of JOBS is "to assure that needy families
with children obtain the education, training, and employment that will
help them avoid long-term welfare dependence." Section 481 of the Act.
Under JOBS, a state must provide certain education and training
activities and, consistent with state resources, may provide certain
other such activities as well as supportive services such as
transportation and child care. AFDC recipients are required to
participate, unless exempt. State IV-A agencies must conduct an initial
assessment of each participant's employability and develop an
employability plan in consultation with the JOBS participant based on
the assessment. See section 482(b) of the Act. Under certain
circumstances, a state may consider participation in an education or
training program which the recipient has herself initiated as
satisfactory participation in JOBS.

As a condition for receiving federal funds under Title IV-A, the Family
Support Act required state IV-A agencies to have a JOBS program no later
than October 1, 1990, under a plan approved by the Secretary of Health
and Human Services. The plan had to meet the requirements of a new
Title IV-F of the Act. Iowa's JOBS program is referred to as PROMISE
JOBS. Iowa's PROMISE JOBS program has been implemented in all areas of
the State.

Federal funding for the JOBS program was provided for in the form of a
"capped entitlement." S. REP. NO. 377, 100th Cong., 2d Sess. 1,
reprinted in 1988 U.S. CODE CONG. & ADMIN. NEWS 2808. Federal matching
is 90% with respect to amounts allocated to a state that do not exceed
the 1987 WIN allocation; for additional amounts, the federal match is at
the Medicaid matching rate, with a minimum matching rate of 60%,
including matching for the cost of staff who work full time on JOBS
activities. Other administrative costs are matched at a 50% rate.
However, the Act provides that a state's funding under Title IV-F may be
reduced unless: (1) 55% of such expenditures are made with respect to a
"target population;" and (2) the state meets a specified "participation
rate." Section 403(l) of the Act. Moreover, the total amount of
federal funding a state can receive is limited by a ceiling (that is,
the "cap"), determined according to a specified formula. Section 403(k)
of the Act.

The Family Support Act also provided federal matching for child care
under Title IV-A, on an open-ended entitlement basis at the Medicaid
matching rate (varying from 50% to 80%, depending on state per capita
income).

The regulations implementing the Family Support Act specifically
prohibit use of special needs allowances to cover the costs of education
and training, and supportive services, including child care, in a state
which has a JOBS program. See 45 C.F.R. 233.20(a)(2)(v)(B)(2); 250.46;
and 255.4(e).

On September 22, 1989, Iowa submitted to FSA a proposed plan amendment
seeking to provide special needs allowances under Title IV-A for the
costs of educational expenses, including tuition, child care, and
transportation for recipients enrolled as participants in certain
training, referred to as "ADC Special Needs Classroom Training." Iowa
also sought to provide special needs allowances for child care costs
incurred while a recipient participated in a training program
administered under the Job Training Partnership Act (JTPA), Pub. L. No.
97-300 (1982), if these costs were not covered under ADC Special Needs
Classroom Training or JOBS. See Appendix A.

On March 20, 1989, the Regional Administrator disapproved the plan
amendment, having determined that parts of the amendment violated
section 402(a)(19)(F)(iii) of the Act, as well as 45 C.F.R.
233.20(a)(2)(v)(B)(2); 250.46; and 255.4(e).

The issues raised by the disapproval, as identified in the Notice of
Hearing, are:

1. Whether the proposed State plan amendment provisions
(Transmittal No. AP-89-4) comply with the regulatory provisions
in 45 C.F.R. 233.20(a)(2)(v)(B)(2); and

2. Whether the State can provide, as special need items under
AFDC, supportive services and/or vocational training, for
individuals where JOBS funding is no longer available or where
the special need could not be provided under JOBS.

See 55 Fed. Reg. 28100 (1990).

II. Summary of the proposed decision

Iowa's plan amendment establishes new special needs allowances under its
AFDC program. Iowa's position is that the states have broad discretion
in establishing the needs under their AFDC programs and that Congress,
in enacting Title IV-F, did not intend to prohibit the use of special
needs allowances under Title IV-A for educational and training expenses,
or supportive services, including child care costs. Iowa argued that
FSA's regulations were ambiguous and should not be applied to preclude
Iowa from using special needs to enable recipients to participate in
education and training activities, not funded under Iowa's PROMISE JOBS
program, which would lead to self-sufficiency. In response to FSA's
argument that these activities could be funded under JOBS, Iowa raised a
number of funding concerns which it claimed precluded the State from
doing this.

FSA's position was that Congress had provided for certain types of
activities under the Family Support Act and had appropriated money for
work, training and education activities, and certain supportive services
to the extent of a capped entitlement. FSA asserted that "the
regulations were designed to limit the amounts the federal government
will reimburse for these activities." FSA's Reply Br., p. 2. FSA
argued that to allow Iowa to be reimbursed for education and training
under Title IV-A, which is an open-ended entitlement, would circumvent
the statutory cap on IV-F funding and vitiate the legislative scheme
provided by Congress in the Family Support Act. FSA also argued that
Iowa's funding concerns were unfounded.

I concur with FSA's determination that Iowa's plan amendment violates
applicable federal requirements and circumvents the legislative scheme
provided for in the Family Support Act.

Specifically, I conclude as follows:

o The plan amendment violates section 402(a)(19)(F)(iii)
of the Social Security Act, which provides that the costs of
certain self-initiated education and training are not eligible
for federal funding under section 403 of the Act.

o The plan amendment violates 45 C.F.R.
233.20(a)(2)(v)(B)(2), which prohibits the use of special needs
allowances to cover the costs of education (including tuition,
books, and fees) resulting from participation in JOBS or any
other education or training activity.

o The plan amendment violates 45 C.F.R. 250.46, which
prohibits the use of special needs allowances for the costs of
postsecondary education, including tuition, books, and fees.

o The plan amendment is contrary to the intent of Congress
as reflected in the Family Support Act to provide funding for
Title IV-F expenditures in the form of a capped entitlement.

o The plan amendment is contrary to the intent of Congress
as manifested by provisions of the Act which provide a separate
funding stream for child care costs, with related protections
for recipients and the federal government.

o The plan amendment violates 45 C.F.R. 255.4(e), which
prohibits the use of special needs allowances for child care
expenses.

o The plan amendment is contrary to the intent of Congress
as manifested by provisions of the Act in that the amendment
seeks to fund education and training, supportive services, and
child care costs with Title IV-A funds, without meeting the
requirements imposed by Congress.

o FSA has not exceeded its authority in promulgating
regulations which restrict the State's discretion in its AFDC
program.

o FSA's regulations are not ambiguous as applied to Iowa's
plan amendment.

o The State's concerns do not provide a basis for
approving its plan amendment.

The following part of the decision contains my supporting analysis for
each of these conclusions. However, first, I address a jurisdictional
issue raised by FSA during the proceedings.

III. Threshold issue

During the reconsideration proceedings, FSA argued that my review is
limited by 45 C.F.R 213.22(c) to determining whether Iowa's plan
amendment complies with federal requirements. FSA asserted that here,
the federal requirements are contained in the regulations and that it is
beyond my authority to determine whether the regulations are
inconsistent with the Act, as alleged by the State and the Amicus.
FSA's Posthearing Br., pp. 14-16.

FSA's position directly conflicts with applicable regulations, which
contemplate that the presiding officer propose a decision on the issues
raised in a reconsideration proceeding based on the record developed
during the reconsideration proceedings. See, e.g., 45 C.F.R. 201.6;
Part 213. Section 213.22(c) of the regulations does not limit the
review of the hearing officer, as FSA suggested, to determining whether
Iowa's plan amendment is in compliance with federal regulations.
Rather, section 213.22(c) refers to "federal requirements," which would
include statutory provisions. Section 213.22(c) is primarily a
limitation on the hearing officer's authority with respect to the amount
of federal payments which will be withheld from a state in the event of
a finding of noncompliance. See also 45 C.F.R. 201.6.

FSA also asserted that the Administrator (now the Assistant Secretary)
has no authority to determine that a regulation is inconsistent with a
federal statute, so that a presiding officer designated by her likewise
lacks that authority. Since I have determined that the regulations at
issue are consistent with congressional intent as reflected in the Act,
I do not need to address this assertion. I note, however, that FSA
cited no basis for its proposition, and that, generally, the Secretary's
delegation to a program agency would include at least the authority to
interpret regulations and to recommend changes.

IV. Analysis

A. The plan amendment would fund "educational expenses" as a special
need, in violation of section 402 of the Act and 45 C.F.R.
233.20(a)(2)(v)(B)(2).

Among other costs, Iowa's plan amendment would provide special needs
allowances for "educational expenses (including tuition, books, and
fees)," which are not covered by other educational programs. See
Appendix A.

Iowa's plan amendment violates both the Act and the implementing
regulations. Section 402(a)(19)(F) of the Act states:

(i) if the parent or other caretaker relative or any dependent
child in the family is attending (in good standing) an
institution of higher education . . . . or a school or course
of vocational or technical training (not less than half time)
consistent with the individual's employment goals, and is making
satisfactory progress in such institution, school, or course, at
the time he or she would otherwise commence participation in the
program under this section, such attendance may constitute
satisfactory participation in the program (by that caretaker or
child) so long as it continues and is consistent with such
goals;

* * *

(iii) the costs of such school or training shall not constitute
federally reimbursable expenses for purposes of section 403.

(Emphasis added.)

FSA's regulations which implement section 402(a)(19)(F) refer to this as
"self-initiated education and training." The language of Iowa's plan
amendment is clearly broad enough to cover such self-initiated education
and training and therefore conflicts with the plain language of section
402(a)(19)(F), which prohibits matching such costs under section 403 of
the Act. As FSA pointed out, section 403 of the Act contains the
funding provisions for all of Title IV, not just for JOBS.

FSA's regulation at 45 C.F.R. 233.20(a)(2)(v)(B)(2) provides that:

(2) In a State which has a JOBS program under Part 250, . . . .
the costs of education (including tuition, books, and fees)
resulting from participation in JOBS (including participation
pursuant to [sections] 250.46, 250.47, and 250.48) or any other
education or training activity cannot be special needs.

Part of FSA's rationale for this regulatory provision was that to allow
a state to cover as a special need the costs of tuition, books, and fees
for self-initiated education and training within the scope of section
402(a)(19)(F) would directly contravene the clear intent of that
provision that no funds be provided under section 403 of the Act for
such costs.

The Amicus argued that the regulations promulgated by FSA to implement
section 402(a)(19)(F) of the Act go beyond the scope of the legislation
and are therefore invalid. The Amicus asserted that the prohibition on
payment under section 402(a)(19)(F), for costs of self-initiated
education or training, does not encompass all self-initiated education
and training. Rather, the Amicus argued, section 402(a)(19)(F) (as
implemented by FSA) refers to education and training meeting certain
conditions: (1) it must be postsecondary education, vocational training,
or technical training attended at least half time; and (2) the
individual must have been participating in such education or training at
the time the individual would have otherwise commenced participation in
JOBS. 2/ Amicus Br., p. 16; see 45 C.F.R. 250.48(a).

I conclude that although it goes beyond the scope of section
402(a)(19)(F), FSA's regulation at 45 C.F.R 233.20(a)(2)(v)(B)(2) is
nonetheless a reasonable interpretation of the statute. A review of the
provisions of the Family Support Act, as well as its legislative
history, shows that FSA reasonably determined that the overall intent of
Congress was to set up a program to provide education and training for
AFDC recipients within the strict parameters of JOBS.

Within JOBS, the State has the option to provide both self-initiated
education and training (other than that described in 402(a)(19)(F)) and
postsecondary education. See 45 C.F.R. 250.46; 250.48. Accordingly,
costs not subject to the prohibition under section 402 could be covered
under the State's JOBS program at its option, but, as intended by
Congress, would be subject to the requirements of the JOBS program.
Those requirements serve important purposes, such as ensuring that the
education or training is likely to lead to employability and that
available resources are focused on the "target population" identified by
Congress.

Thus, I conclude that, to the extent Iowa's plan amendment would cover
self-initiated education and training within the meaning of
402(a)(19)(F), it specifically contravenes the Act. I further conclude
that to the extent Iowa's plan amendment would cover other education and
training, it conflicts with FSA's regulations, which are a reasonable
interpretation of the Act.

B. The plan amendment violates FSA's regulations and the intent of the
Family Support Act by circumventing the funding cap under Title IV-F.

Iowa's plan amendment would provide for the costs of classroom training
and supportive services that would otherwise be paid for under JOBS, to
be covered as special needs "when JOBS funding has been exhausted or
eliminated." See Appendix A, Table 3. 3/ I conclude that this part of
the amendment should be disapproved because it would permit the State to
circumvent the cap on Title IV-F JOBS funds by shifting JOBS costs to
Title IV-A, contrary to congressional intent, FSA's regulations, and
basic principles of grants law.

Federal payments to a state to carry out a program under Title IV-F are
subject to the limitation (cap) set out at section 403(k)(2) of the Act.
The funding cap for each state is an amount equal to the state's WIN
allotment for fiscal year 1987 plus additional funds allotted to the
state based on the ratio of the number of adult AFDC recipients in the
state to the number of such recipients in all states.

Iowa argued that its plan amendment would not circumvent the cap. At
the hearing, however, it became clear that Iowa's understanding of how
the cap applied was different from FSA's understanding. Iowa's view was
that in referring to JOBS as a "capped entitlement" program Congress
meant that a recipient would be entitled to JOBS services only to the
extent that federal and state funds were available. Tr., pp. 111-129.
The State explained that it had tried to design a program with limited
participation so that it could be operated year-round, utilizing
available state and federal resources. The State indicated, however,
that at the point those resources were exhausted in any fiscal year,
even individuals who had been receiving JOBS services would no longer be
considered JOBS participants. Id.

FSA's position was that the cap was a limit on the federal matching that
a state could receive. A state may design a program within its
resources, FSA said, but the state is required to operate a JOBS program
and must have it in effect on a statewide basis, and this would be
violated if the state did not operate a program year-round. Tr., pp.
122-126. FSA's position is supported by the wording of the Act and the
legislative history of the Family Support Act.

Section 403(k)(1) of the Act provides in pertinent part:

Each State with a plan approved under part F shall be entitled
to payments . . . for any fiscal year [according to the
percentages and limits in subsection (l)], but such payments . .
. may not exceed the limitation determined under paragraph (2)
with respect to the State.

Thus, the reference in the legislative history to JOBS as a "capped
entitlement" program means that the State's entitlement is limited.

FSA's position that the State must continue to operate its JOBS program
even after that limit is reached is supported by the wording of section
482(a)(1)(A) of the Act. That section provides:

As a condition of its participation in the program of aid to
families with dependent children under part A, each State shall
establish and operate a job opportunities and basic skills
training program . . . .

(Emphasis added.)

As FSA pointed out, this provision is unqualified. If a state must be
operating a JOBS program as a condition for receiving funding under
Title IV-A, the implication is that the program must be in operation at
all times.

The legislative history of the Family Support Act also supports FSA's
position. Congress was concerned that the WIN program had "suffered in
the past because of uncertain and erratic appropriations," and that it
was necessary to assure the states "of a stable and sustainable level of
funding." S. REP. NO. 377, 100th Cong., 2d Sess. 1, reprinted in 1988
U.S. CODE CONG. ADMIN. NEWS 2808, 2855. To allow a state to discontinue
services to JOBS participants at whatever point funds ran out would be
contrary to congressional intent that the JOBS program have a stability
that WIN had lacked.

The legislative history also supports FSA's contention that another
purpose of the cap was to avoid the prospect of runaway costs to the
federal government by constraining spending. Id. FSA reasonably
determined that, if a state could simply shift its claiming for
education and training costs to Title IV-A once it reached the cap on
Title IV-F funding, this would violate congressional intent to limit the
federal commitment of funds for these purposes.

FSA's interpretation of the cap is reflected in the regulation at 45
C.F.R. 233.20(a)(2)(v)(B)(2), which prohibits special needs payments for
costs "resulting from participation in JOBS." The costs at issue here
result from participation in JOBS because they are costs incurred for
services which are the basis for a recipient being counted as a JOBS
participant. See 54 Fed. Reg. at 42242 (referring to costs "related to
participation in JOBS"). 4/

FSA's position is also consistent with how other federal funding caps
have been interpreted in previous Board decisions. See New York
Department of Social Services, DAB No. 908 (1987); New York Department
of Social Services, DAB No. 938 (1988). FSA also pointed out that those
decisions refer to Office of Management and Budget Circular A-87, which
prohibits states from shifting costs from one program to another to
avoid a funding restriction.

The State pointed to nothing in the wording of the Act, its the
legislative history, or the implementing regulations which would support
the State's view of the cap. The State argued, however, that 1) FSA's
view of the cap was a "post-hoc rationalization"; 2) under FSA's
interpretation, states would be required to meet "all training and
schooling needs"; and 3) using special needs to cover education and
training costs would not represent the kind of shift of funds which is
prohibited. Iowa Posthearing Br., pp. 4, 6. These arguments have no
merit, for the following reasons:

o In the preamble to both the proposed and final regulations
implementing the Family Support Act, FSA based its prohibition
on use of special needs funding for costs which could be covered
by JOBS on the rationale that this would permit states to
circumvent the cap. 54 Fed. Reg. 15670, 42233 (1989). This
rationale would have made no sense if FSA had viewed the cap, as
Iowa did, as a limit on the recipient's entitlement under JOBS,
rather than as a limit on federal funding for JOBS-type
services.

o FSA recognized, in its argument and in its regulations, that
a state may design a JOBS program which fits within the state's
limited resources and which may not meet all recipients'
education and training needs. It is not inconsistent with this
recognition, however, to conclude that once the State has
established a JOBS program and accepted a recipient as a
participant, the State cannot simply stop considering the
recipient as a participant once federal (or state-appropriated)
JOBS funds are exhausted.

o The State's argument that no impermissible shift of costs was
at issue here was based on its view that costs related to an
education and training program for a recipient counted as a JOBS
participant would not be JOBS costs once state or federal funds
had been exhausted. The costs, however, do not change their
nature as the costs of a JOBS program simply because the State
or federal government has not appropriated sufficient funds.

Finally, I note that the Amicus did not support the State's view of the
cap. Instead, the Amicus took the position that a state would have a
duty to continue to provide services to any recipient admitted to the
JOBS program, even if the cap had been reached, and that to abruptly
terminate those services would violate the recipient's rights. Amicus
Posthearing Br., p. 6.

Based on the foregoing, I conclude that the State plan amendment would
violate the Act, the regulations, and basic grants principles by
permitting the State to circumvent the cap by shifting JOBS costs to
Title IV-A.

C. The plan amendment would circumvent child care protections.

Iowa's plan amendment would provide a special needs allowance for the
"cost of child care incurred while the ADC client is participating in a
training program administered by JTPA that does not qualify for child
care payment under JOBS or ADC Special Needs Classroom Training . . . ."
See Appendix A. Iowa provided examples of AFDC recipients who would be
eligible for this allowance. See Appendix B. The plan amendment would
also cover child care as a special need when JOBS funding was "exhausted
or eliminated" or "federal JOBS funds cannot be used to pay for the
training program." Appendix A, Table 3. It became clear from Iowa's
presentation that the JTPA and other training programs for which the
State wished to provide child care as a special need could be covered
under the federal JOBS program, but were precluded from funding under
Iowa's PROMISE JOBS program for various reasons discussed below. See,
e.g., Iowa Ex. 2, Ch. 41, p. 31; Iowa Ex. 3, page 1; Letter of April
17, 1990, p. 2.

As discussed in section E below, the regulation at 233.20(a)(2)(v)(B)(2)
is somewhat ambiguous on the question of whether it prohibits child care
as a special need related to education and training for a recipient who
is not a JOBS participant. Section 255.4(e), however, clearly states:

The State IV-A agency is not permitted to provide payment for
child care or any other supportive service or work-related
expense as an AFDC special need pursuant to [section]
233.20(a)(2)(v)(B)(2).

This section thus removes any doubt about whether FSA intended to
prohibit a state from covering child care as a special need in
circumstances such as those identified in the plan amendment.

In the preamble statement to the proposed section 255.4(e), FSA
explained: "With the enactment of JOBS and the new child care
provisions, Congress established specific programs for funding such
services and eliminated the need to treat such costs as special needs."
54 Fed. Reg. 15670 (1989). Also, in response to a comment on proposed
section 233.20(a)(2)(v)(B)(2), objecting to exclusion of the use of
special needs funds to pay for supportive services for those in
self-initiated activities, FSA stated that child care was available
under Title IV-A for this category of individuals. 54 Fed. Reg. 42185
(1989). At the hearing, FSA further explained its concern that
permitting a state to provide child care as a special need for
individuals in training programs would permit a state to avoid the
limitations Congress placed on such child care. Tr., p. 73.

An examination of the Family Support Act and its legislative history
supports FSA's view that Congress intended that child care provided to
individuals in training programs like JTPA be subject to certain
requirements. Section 402(g)(1)(A)(i)(II) of the Act provides that a
state must guarantee child care--

for each individual participating in an education and training
activity (including participation in [a JOBS program]) if the
State agency approves the activity and determines that the
individual is satisfactorily participating in the activity.

Section 402(g)(1)(B) sets out various means through which a state may
provide child care and requires that the state take into account the
individual needs of the child. Other sections limit the amount a state
can pay for such child care, require that such child care meet certain
health and safety standards, and ensure that the entity providing such
care allows parental access. Sections 402(g)(1)(C); 402(g)(3)(B); and
402(g)(4). Funding for such child care is not subject to the IV-F cap,
but is provided for in a separate funding stream under IV-A. Section
402(g)(3)(A).

FSA reasonably determined that it would be inconsistent with the
statutory scheme enacted in the Family Support Act if states used
special needs funding to circumvent requirements such as those for: 1)
protecting recipients by ensuring access and quality of child care; 2)
protecting the federal fisc by limiting amounts paid for child care; and
3) ensuring that funds are spent only in support of activities which are
approved and in which the recipient is satisfactorily participating.

Iowa argued that its history of operating an effective training program
showed it would not attempt such circumvention. Iowa also said that all
child care in Iowa was subject to quality standards. Tr., p. 206.
Iowa's behavior does not, however, undercut the reasonableness of the
regulatory prohibition in general or as applied here. While the Iowa
plan provision on child care for JTPA participants would limit the
special needs allowance to the documented amount paid and to the "going
rate in the community," this arguably could exceed the payment limits
established in the Act. Also, the Iowa plan provision has no
requirement that the JTPA training be approved by the IV-A agency or
that the recipient be satisfactorily participating in the training.
Thus, approval of this plan amendment could mean that federal funds
would be expended for child care not subject to the protections set out
in the Act.

As noted above, part of FSA's rationale given for the regulatory
prohibition at section 255.4(e) was that creation of the separate
funding stream under IV-A eliminated the need to treat child care as a
special need. If a recipient has child care available through the
separate funding stream, the "special need" no longer has to be
accounted for in determining the amount of her assistance payment.
Certain arguments raised at the hearing and in posthearing briefs
related to the question of the extent to which child care could in fact
be provided under the separate funding stream. This question arose
because of FSA's statements at the hearing to the effect that, in areas
of a state covered by a JOBS program, child care was guaranteed only for
JOBS participants. 5/ Iowa's concerns in this area were related to the
participation rate requirement, the target population requirement, and
lack of State resources. In section F below, I address these concerns
and explain why I do not consider them to have merit as a basis for
approving the plan amendment at issue here. 6/

Based on the foregoing, I conclude that Iowa's plan amendment would
violate the Act and FSA's regulations by using federal funds to pay for
child care for recipients engaged in education or training, without
providing the protections afforded by Congress.

D. FSA has not exceeded its authority in promulgating regulations
which restrict the State's discretion.

Both Iowa and the Amicus argued that: (1) FSA had exceeded its statutory
authority in adopting regulations which prohibit the use of special
needs; and (2) FSA's regulations impermissibly restrict the State's
discretion to set the level of benefits in its AFDC program. Iowa
Prehearing Br., pp. 1-4; Amicus Prehearing Br., pp. 9, 13-14. 7/

Section 203(a) of the Family Support Act directed the Secretary of
Health and Human Services, along with the Secretary of Labor, to issue
proposed regulations for the purpose of implementing the amendments made
by the Family Support Act. Moreover, under section 1102 of the Act, the
Secretary of Health and Human Services has the authority to promulgate
regulations "not inconsistent with the Act." Thus, FSA, acting on
behalf of the Secretary of Health and Human Services, had the authority
to promulgate regulations which were consistent with the provisions of
the Social Security Act, as amended by the Family Support Act.

As the Amicus pointed out, there is no specific provision of the Family
Support Act which supports FSA's restriction on special needs and there
is no mention of special needs in the legislative history. Amicus
Posthearing Br., pp. 1-2. Thus, Iowa and the Amicus argued that FSA had
no congressional authorization to limit the states' discretion to
provide for special needs in their AFDC programs. Amicus Posthearing
Br., pp. 20-21; Iowa Prehearing Br., pp. 3-4.

While it is true that the determination of the standard of need under
the AFDC program, as well as the amount of the level of benefits to be
paid, is something the federal government has generally left to the
states, this does not mean that the states' discretion is absolute or
may not be limited. Rosado v. Wyman, 397 U.S. 397 (1970); State of
Minnesota v. Heckler, 739 F.2d 370 (8th Cir. 1984). Both Iowa and the
Amicus acknowledged that the states' discretion must be consistent with
federal law, and that where there is a statutory conflict with respect
to the states' discretion, that discretion may be curtailed. Iowa
Prehearing Br. p. 3; Amicus Posthearing Br., p. 21.

The Amicus cited the cases of Quern v. Manley, 436 U.S. 725 (1978), and
Largo v. Sunn, 835 F. 2d 205 (9th Cir. 1987), to support the assertion
that FSA was without authority to prohibit special needs in its
regulation, unless Congress had specifically prohibited the use of
special needs in the Family Support Act. I do not agree with this
assertion. I find nothing in these cases which would have required that
Congress make specific provisions in the Family Support Act on "special
needs" in order for FSA to address them in its regulations. As many of
the cited cases hold, the determination to be made is one of
congressional intent, which can be gleaned from a number of factors.

In discerning the intent of Congress with respect to the Family Support
Act, and in determining whether FSA's regulations are consistent with
the Act, I considered the following factors: 1) the language of the
statute itself; 2) its legislative history; and 3) the interpretation
given the statute by its administering agency, FSA. Largo, supra. It
is clear from an examination of the statute and its legislative history
that with respect to education and training, and supportive services,
Congress intended to change the AFDC program, and to enact a separate
comprehensive program directed at assisting recipients to attain
self-sufficiency. Moreover, as I concluded above (see sections A-C), it
would be inconsistent with the statutory scheme of the Family Support
Act, if states were permitted to use special needs to circumvent the
requirements and limitations of the statute.

Iowa and the Amicus cited a number of cases in support of their
arguments that historically the states have been given the discretion to
set the standards of need in their AFDC programs. 8/ The cited cases
do not support the position that FSA does not have the authority to
limit special needs, nor do these cases support the exercise of state
discretion inconsistent with congressional intent. Some of the cited
cases dealt with the issue of whether it was permissible for a state to
set its level of benefits below its standard of need. 9/ Here, the
issues are whether FSA's regulations are consistent with the Act and
whether Iowa's plan amendments are consistent with FSA's regulations or
the Act.

The Amicus cited Quern to support the position that providing special
needs allowances under Iowa's AFDC program is not inconsistent with, and
does not circumvent the Act. In Quern, the Court considered the issue
of whether a state could provide emergency assistance as a special need
under its AFDC program, despite the fact that there was a federal
statute authorizing federal funding under a different funding system for
emergency assistance programs. The Court in Quern held that these
special needs were not prohibited simply because they addressed a need
which could alternatively be provided under another separate federal
program. However, the Court listed several factors as justification for
its decision which are not present here:

o Under the federal statute in Quern, the separate federal
emergency assistance program was optional with the states,
whereas here, states must have a JOBS program as a condition of
participating in the AFDC program.

o Since the federal statute in Quern offered the states an
option on whether to have an emergency assistance program, it
did not "eviscerate" the federal statute if a state chose not to
have one. 436 U.S. at 735.

o Neither the policies nor the legislative history of the
federal statute at issue in Quern indicated a contrary
congressional intent. 436 U.S. at 736. Here, the legislative
scheme of the Family Support Act and its history indicates that
Congress intended that certain activities be provided only under
JOBS. o In Quern, the administrative agency's interpretation
of the statute was the same as the state - here it differs.

Iowa and the Amicus also cited Rosado, arguing that FSA's restrictions
on special needs were contrary to section 402(a)(23) of the Act.
Section 402(a)(23) requires that a state plan for aid and services to
needy families with children:

provide that by July 1, 1969, the amounts used by the State to
determine the needs of individuals will have been adjusted to
reflect fully changes in living costs since such amounts were
established, and any maximums that the State imposes on the
amount of aid paid to families will have been proportionately
adjusted.

In Rosado, the Court held that section 402(a)(23) invalidates any state
program that decreases the content of the standard of need, unless the
state can demonstrate that the items formerly included no longer
constituted part of the reality of existence for the majority of welfare
recipients. 397 U.S. at 419-420.

However, the reliance on Rosado is misplaced because:

o Rosado was based on a statutory provision that both the
court and HEW (now Health and Human Services) interpreted as
prohibiting the states' reduction of a standard of need below
the 1969 level. Here, there is no allegation that Iowa's
standard of need would be reduced below this level.

o The particular items deleted as special needs in Rosado
were considered essential, regular, and recurring expenses for a
majority of the recipients. Here, as Iowa admitted, there will
be only a few individuals affected. Iowa Prehearing Br., p. 5.

o The Court in Rosado did not reach the issue of whether
special needs could be eliminated if they were provided through
other means. Here, other means are available through JOBS.

Thus, I conclude that FSA reasonably determined that it was necessary to
limit the states' discretion on special needs in order to effectuate
congressional intent, and that FSA's regulations implementing the Family
Support Act are reasonable and do not impermissably restrict Iowa's
discretion in its AFDC program.

E. FSA's regulations are not ambiguous as applied here.

The regulations state at section 233.20(a)(2)(v)(B) that:

  (2) In a State which has a JOBS program under Part 250,
  child care, transportation, work-related expenses, other
  work-related supportive services, and the costs of
  education (including tuition, books, and fees) resulting
  from participation in JOBS (including participation
  pursuant to section 250.46, 250.47, and 250.48) or any
  other education or training activity cannot be special
  needs.

(Emphasis added.)

Iowa argued that the wording of this regulation was ambiguous.
According to Iowa, the language "child care, transportation,
work-related expenses, other work-related supportive services, and the
costs of education including tuition, books, and fees" could be read in
two ways: 1) "to represent the types or categories of expenses
reimbursed under JOBS;" or 2) "to mean the particular expenses for
specific clients who for some reason need assistance with child care or
transportation for work- related activities." Iowa Prehearing Br., p.
5. Iowa further argued:

This ambiguity is underscored by the addition of the word "or
any other education or training activity" which clearly
specifies that such expenses are not to be paid as special needs
for learning rather than work-type activities clients undertake.
If the expenses of clients are not to be paid for work-related
activities, why did the regulations not say "or any other
work-related activity"?

Iowa Prehearing Br., p. 5.

Iowa's first point appeared to be directed at the clarification FSA
provided about its position on special needs. Tr., pp. 141-142. The
Regional Administrator's decision had explained the regulations as
prohibiting special needs funding "when such activities and services are
provided for under JOBS." Letter of Regional Administrator dated March
20, 1990. During the hearing, FSA clarified that it did not mean by
this that the activities or services in question could in fact be
provided under Iowa's JOBS program. Rather, FSA meant that the
activities or services were of a type which could be covered under JOBS.
Tr., p. 142.

I fail to see the particular ambiguity alluded to by Iowa. The first
part of the regulation refers to costs "resulting from participation in
JOBS" and the second part to "other education and training." Thus, the
intent is not limited to activities actually covered under JOBS for
specific recipients, but covers any "other education or training"
because those activities are types which could be provided under JOBS.
To the extent the regulation may be ambiguous about expenses of
work-related activities, that is irrelevant here because the plan
amendment refers only to activities that are education or training
within the plain meanings of those terms.

Section 233.20(a)(2)(v)(B) applies on its face to certain of the
education costs (including tuition, books, and fees) for JOBS
participants which Iowa seeks to treat as special needs.

FSA's basis for applying the regulation to supportive services in the
plan amendment, however, is FSA's view that the regulation precludes
treating as special needs not only the actual costs of any education or
training activity, but also, any associated costs for supportive
services. In my view, the wording of section 233.20(a)(2)(v)(B)(2) is
not entirely free from ambiguity in this regard. FSA could have
expressed this intent more clearly through better sentence structure.
The current sentence structure could be read as prohibiting special
needs for: (1) the costs of supportive services and of education which
result from participation in JOBS; and (2) the costs of any other
education and training activity (but not the associated supportive
services). This reading of the regulation is somewhat strained,
however. A better reading is that costs of supportive services or of
education (including tuition, books, or fees) cannot be special needs if
the costs result from participation in JOBS or from participation in any
other education or training activity.

This latter reading (which is essentially that advocated by FSA),
moreover, is required to ensure consistency with the related provision
on special needs in the regulations on child care and supportive
services. Specifically, section 255.4(e) states:

The State IV-A agency is not permitted to provide payment for
child care or any other supportive service or work-related
expense as an AFDC special need pursuant to [section]
233.20(a)(2)(v)(B)(2).

The context of this provision indicates that it is not limited to child
care or other supportive services under JOBS, but also governs such
services provided to other eligible recipients participating in
education or training. The preamble indicates that FSA intended to
prohibit special needs funding for any costs associated with education
or training including supportive services. 10/ 54 Fed. Reg. 42233
(1989). In summary, while section 233.20(a)(2)(v)(B)(2) may be
ambiguous in one narrow respect, that ambiguity is irrelevant to the
approvability of the plan amendment provision on ADC Special Needs
Classroom Training. Moreover, when read together with section 255.4(e)
and the preamble, section 233.20(a)(2)(v)(B)(2) is clear and consistent
with FSA's application of the regulation to the plan amendment provision
on child care for JTPA participants. Accordingly, I conclude that both
provisions of the plan amendment violate section 223.20(a)(2)(v)(B)(2)
of FSA's regulations.

F. The various concerns of the State do not provide a basis for
approving the plan amendment.

I next turn to a discussion of various concerns expressed by the State
and the Amicus as reasons why the State should be permitted to provide
the special needs allowances at issue. As mentioned above, these
concerns arose in part because of FSA's position that, in JOBS areas,
the child care guarantee applies only to JOBS participants. I conclude,
for reasons explained below, that these concerns are either unfounded or
do not provide a basis for approval of the plan amendment.

1. The participation rate requirement

In explaining who would be eligible for a special needs allowance for
Classroom Training, the State acknowledged that it intended to cover
recipients who could be funded under the federal JOBS program, but whose
training the State would not approve for its JOBS program because the
training was less than 20 hours a week. The State argued that "the
federal requirement which mandates that the states' JOBS participants
must average 20 hours a week effectively discourages the states from
including persons in part-time training in the states' JOBS programs."
Iowa Ex. 3, p 1. The State and the Amicus also raised a concern about
counting as JOBS participants for purposes of providing child care
individuals participating in JTPA training for less than 20 hours per
week. 11/ Tr., pp. 166-167; Amicus Posthearing Br., p. 17.

FSA explained that the federal regulations did not mandate 20-hour a
week participation, but simply used this as a guide for measuring a
state's compliance with the participation rate requirement under section
403(l)(3)(A) of the Act. The State did not dispute this, but pointed
out that meeting the participation rate requirement was important to the
State since otherwise the State would lose $1.4 million in federal
funds.

At the hearing, FSA asserted that the State simply misunderstood the
participation rate requirement and that including these individuals as
JOBS participants would not affect the State's ability to meet the
requirement. An examination of the statute and regulations shows that
FSA is correct.

Section 403(l)(3)(A) of the Act, as amended, provides that a state will
receive federal funding of only 50% if the state's participation rate
for the preceding year does not exceed or equal the specified percentage
for a particular year (starting with a rate of 7%). The formula for
computing the rate is set out at section 403(l)(3)(B). The formula uses
certain averaging techniques, but is essentially a ratio of the number
of individuals actually participating in JOBS to the number of
individuals required to participate.

In determining who has participated (the numerator of the ratio), FSA's
regulations use "the largest number of applicants and recipients whose
combined and averaged weekly hours of participation . . . equals or
exceeds 20 hours per week, whether or not the individual was required to
participate." 45 C.F.R. 250.78. In determining the denominator of the
ratio, however, only individuals required to participate will be
counted. 45 C.F.R. 250.74(b)(4); 54 Fed. Reg. 42168 (1989). Thus, once
the State has ensured that it has the specified percentage (7%
initially) of those required to participate actually averaging 20 hours
per week, the State can provide JOBS services to any additional number
of individuals (no matter how many hours they are participating), and
still meet the participation rate requirements. 54 Fed. Reg. 42203
(1989).

Thus, the State's concern about meeting the participation rate
requirement is unfounded.

2. The 55% requirement

Iowa gave as a reason for wishing to continue to provide child care for
JTPA training as a special need (rather than through JOBS) the fact that
counting a recipient who is not in the target population as a JOBS
participant might affect the State's ability to meet the requirement
that 55% of its JOBS expenditures be expended on the target population.
Tr., pp. 167-168.

FSA took the position that, since child care is not a IV-F expenditure,
counting these JTPA recipients as JOBS participants would not affect the
State's ability to meet this requirement. Tr., p. 171. FSA also argued
that the 55% requirement affected only the rate of funding the State
would receive for its JOBS program. FSA Posthearing Br., p. 10. The
State pointed out, however, that treating these recipients as JOBS
participants would require the State to expend IV-F funds to perform
assessments, develop employability plans, provide case management, and
meet reporting requirements, and that the State did not have the staff
and resources to do this. Tr., p. 176, 180. The State noted that the
statute and FSA's regulations permit it to withhold participation from a
client if the State determines that such participation would affect the
State's ability to meet the 55% requirement. Finally, the State pointed
out that meeting the requirement was a significant concern for it,
considering the amount of federal funds that would be at risk for the
State.

The State is correct that it would need to incur additional IV-F costs
if it treated the individuals at issue here as JOBS participants, since
a state must perform an assessment and develop an employability plan for
each JOBS participant. See section 482(b) of the Act; 45 C.F.R. 250.41.
12/ Also, the State is correct that under section 402(a)(19)(B)(iv) of
the Act and section 250.74(a)(3) of the regulations, the State need not
require or allow participation in JOBS of exempt recipients who
volunteer if this would lead to a reduction in federal funding. FSA's
position that the State must consider such individuals as JOBS
participants to have the child care guarantee apply means that the
State's exercise of its option to exclude such individuals from JOBS
would mean excluding them from the child care guarantee and,
effectively, from any education or training. FSA may wish to consider
this concern when deciding whether child care should be guaranteed for
any individuals in JOBS areas besides those who are JOBS participants.
See section C, note 5 above. This concern does not, however, provide a
basis for approval of the state plan amendment at issue here, for the
following reasons:

o The State's concern about meeting the 55% requirement arises
only if the recipient involved is not a member of the target
population. Iowa's proposed plan provision, however, is broad
enough to cover individuals in the target population. The State
would not be disadvantaged in meeting the 55% requirement by
treating these individuals as JOBS participants.

o Even for persons not in the target population, approving
payment of their child care as special needs under this plan
amendment could result in circumvention of the statutory child
care protections discussed in section C above.

o The State's concern is speculative. The costs for these
individuals charged to IV-F would be minimal since: (1) only a
few individuals would be affected; (2) JTPA would cover the
costs of training and some supportive services; and (3) child
care costs will be covered under Title IV-A. See Iowa
Prehearing Br., p. 5; section 402(g) of the Act; Tr. p. 172.
Also, failure to meet the 55% requirement may be waived in
appropriate circumstances. See section 403(l) of the Act.

In sum, there is some question about whether the State's concern is
well-founded, but, even if it was, it would not provide a basis for
approving the particular provision at issue here.

3. Resources

The State's arguments reflected a concern that if the State had to treat
individuals who volunteered for JTPA as JOBS participants, the State
would have to expend limited JOBS resources for the associated
administrative costs. Both the statute and the regulations recognize
that state resources are limited and, therefore, give states flexibility
in designing a program consistent with available resources. Part of the
goal of the Family Support Act, however, was to provide for an effective
planning process that would ensure the best use of limited resources.
FSA's Posthearing Br., pp. 6-7.

The problem with the State's argument is that it ignores the fact that
using State funds to provide child care as a special need expends State
resources which otherwise could be used for JOBS. By treating at least
some of these individuals as JOBS participants, with the related
requirements and protections, the State could provide for more effective
use of its resources, even if it could not provide child care for as
many recipients.

In light of the State's limited resources, FSA's position that the State
could simply exercise its option to include all of these recipients in
JOBS may be too facile. FSA is reasonable, however, in suggesting that
approval of the plan amendment would divert resources from the uses
Congress (and the State in its JOBS plan) have determined would be most
effective in increasing recipients' self-sufficiency.

V. Conclusion

Based on the foregoing analysis, I recommend that Iowa's plan amendment
be disapproved.

      ___________________________
      Judith A. Ballard
      Presiding Officer

December 20, 1990 . APPENDIX A

State Plan for Attachment 2.3A Title IV-A
Page 1b

IOWA TABLE OF ALLOWANCES FOR SPECIAL NEEDS

Table 1 - School Expense of a Child

The Schedule of Needs includes an allowance for basic school supplies,
such as tablets, pencils, crayons, etc. A special allowance may be
included for any specific charge arising from the school's requirements
for a course in the curriculum.

Table 2 - Guardianship/Conservatorship Fees

When the Court specifically orders the payment of guardianship or
conservatorship fee, the allowance may be included in the grant up to a
maximum of $10 per month. There is no provision for a fee in the
protective payment cases.

Table 3 - ADC Special Needs Classroom Training

ADC recipients who are approved to participate in ADC Special Needs
Classroom Training and who incur educational expenses which are not
covered by educational grants and scholarships receive special need
allowances to pay for tuition, books, fees, supplies, child care and
transportation.

The ADC recipient must select occupational areas which have positive
prospects for employment paying at least minimum wage and must
demonstrate academic capability to complete training as determined
through individual assessment and aptitude testing.

This special need is not available to parents under 20 who are involved
in high school completion activities nor for school expenses entitled to
payment under #1 above. In addition, ADC Special Needs Classroom
Training is only available to pay the expenses of classroom training
which would otherwise be paid by Iowa's Job Opportunities and Basic
Skills (JOBS) program when JOBS funding has been exhausted or eliminated
during any one state fiscal year or federal JOBS funds cannot be used
for the training program.

Table 4 - Job Training Partnership Act (JTPA) Child Care Expense

The cost of child care incurred while the ADC client is participating in
a training program administered by JTPA that does not qualify for child
care payment under JOBS or ADC Special Needs Classroom Training is
allowed. The amount allowed is the amount documented by the JTPA
worker. The amount paid will not exceed the going rate in the
community.. State Plan for Title IV-A Attachment 2.3A, Page 7a

IOWA

D. Special Needs

. APPENDIX B

o Mrs. B is exempt from PROMISE JOBS but is participating in
JTPA-funded institutional skills training. All of her training
expenses except child care are paid by JTPA. The JTPA Child
Care Special Need is used to pay her child care. This allows
Mrs. B to participate in the JTPA program and allows JTPA to
provide assistance to more individuals.

o Mr. C has been referred to the PROMISE JOBS program as a
mandatory participant. However, because of staffing and
caseload limitations, he has not been called in to participate
in PROMISE JOBS. In the meantime, he contacts JTPA staff who
agree to place him in a JTPA-funded training program. Usage of
the JTPA Child Care Special Need for Mr. C allows him to
participate in a training program that he is otherwise precluded
from participating in due to PROMISE JOBS staffing and resource
limitations.

o Ms. D has volunteered for PROMISE JOBS. However, Ms. D is
not a member of a target group and the state has been forced to
restrict assistance to non-target group members in order to
insure that 55% of the state's JOBS money is spent on target
group participants. . . . Although Ms. D has a lot of initiative
and a valid training goal, the state is forced to deny services
due to the 55% JOBS limitation. Ms. D approaches JTPA and is
approved for a JTPA funded program. Use of the JTPA Child Care
Special Need allows Ms. D to participate in training even though
training services have been denied by the state's JOBS program.

Iowa Ex. 3 (State's numbering omitted).

1. For ease of reference, citations are to sections of the Social
Security Act, as amended by the Family Support Act, unless otherwise
indicated.

2. The Amicus also pointed out that a person in a non-JOBS area would
not "otherwise commence participation in JOBS" and that an individual
cannot "otherwise commence participation in JOBS" if there is no JOBS
funding available. Since Iowa's JOBS program is statewide, the Amicus'
first point is irrelevant to the plan amendments at issue. The Amicus'
second point is addressed in section B.

3. Iowa explained that the phrase "when JOBS funding has been
exhausted or is eliminated" has two meanings. Iowa revealed that for
the year 1990 the State had not budgeted enough funds to match the
federal funds available for its JOBS program. Thus, for 1990 the phrase
would mean that State funds allocated for Iowa's JOBS program had been
used, whereas in other years, the phrase would mean that all of the
federal funds allocated for Iowa's JOBS program had been used. Tr., p.
14.

4. I note that section 233.20(a)(2)(v)(B)(2) would also prohibit as
special needs the costs of "other education and training" not resulting
from JOBS participation. FSA intended this to apply to costs for
education and training which would be "eligible for matching under
JOBS." 54 Fed. Reg. 42146, 42242 (October 13, 1989). FSA took the
position that no activities which could be provided under JOBS could be
covered as special needs without circumventing the JOBS cap. I have
focused in this section of the decision on the part of the plan
amendment applying "when JOBS funding has been exhausted or eliminated"
because circumvention of the cap is most clear in this circumstance.
However, to the extent FSA's prohibition on use of special needs funding
for costs related to education and training goes beyond actual JOBS
participants, that prohibition is nonetheless reasonable in light of the
legislative scheme of the Family Support Act, including the cap.

5. FSA's regulations at section 255.2(a)(2) are somewhat ambiguous on
this point, but it was clear from FSA's statements at the hearing that
FSA had presumed that a state would want to consider anyone in a
training program like JTPA in a JOBS area as a JOBS participant, and had
not considered some of the concerns raised by the State. Tr., pp.
166-168. In my view, the exact scope of the child care guarantee is a
policy question which is not yet definitively resolved by FSA's
published statements, and which I do not need to reach here.

6. The Amicus also raised an argument regarding the scope of the
child care guarantee, contending that restricting child care in JOBS
areas to JOBS participants would be inconsistent with the wording and
legislative history of section 402(g). Even assuming that the Amicus is
correct, however, this would not be a basis for approving Iowa's plan
amendment. Rather, reading the statute to apply the guarantee to any
approved education or training, as the Amicus did, would support FSA's
conclusion that any need to provide for such child care through a
special needs allowance has been eliminated.

7. Iowa also argued that the Family Support Act supports the use of
special needs funding for supportive services by providing that states
may not make any changes in the method of reimbursing child care costs
which have the effect of disadvantaging families by reducing their
income or through other adverse effect. However, this argument ignores
how FSA has implemented this requirement. FSA's regulations at 45
C.F.R. 255.3(e)(2) provide that a state must determine a family's
eligibility and payment (including child care needs), as if the method
of provision which was applicable on October 13, 1988, is still in
effect if: (1) the family was receiving AFDC on that date; and (2) would
be disadvantaged as a result of meeting the cost of child care through
another method which directly affect AFDC eligibility. See 54 Fed. Reg.
42224 (1989).

8. FSA did not dispute the holding of these cases, but, rather,
argued that in enacting the Family Support Act, Congress intended to
replace part of the AFDC program with "the comprehensive program of
mandatory child support and work training." Tr., p. 130. (During the
hearing FSA clarified an earlier position that it had taken that
Congress had enacted an entirely new welfare system.)

9. I did not address each of the cases cited by the parties or the
Amicus. As noted above, some of the cases were irrelevant to the issues
here, and others were cited for the undisputed principle that states
have in the past had broad discretion under their AFDC programs.

10. In support of its reading of section 233.20(a)(2)(v)(B)(2), FSA
also pointed to the following language in the preamble to the final
rule:

We have added the phrase "or other educational or training
activities" to clarify that the prohibition applies to all
educational or training activities, including those in areas
which do not have a JOBS program and those which are
self-initiated. Such costs are eligible for matching under
JOBS, or, in the case of self-initiated education or training
are not matchable pursuant to [section] 250.48. The additional
language clarifies this.

54 Fed. Reg. 42146, 42242 (1989).

This language does not specifically address whether all costs associated
with "other educational and training activities," including costs of
supportive services, are covered by the prohibition. The reference to
the costs of such activities in areas which do not have a JOBS program
being eligible for matching under JOBS, however, implies that costs of
supportive services are covered.

11. At the hearing, Iowa also expressed a concern that it would have
no control over participants of JTPA and, therefore, could not insure a
20-hour per week participation. However, both the statute and
regulations contemplate cooperation and coordination with other
resources. See section 403 of the Act.

12. I note however, that the state IV-A agency "may conduct the
initial assessment through various methods such as interviews, testing,
counseling and self-assessment instruments." See 45 C.F.R.
250.41(a)(2). In the preamble to the proposed rule, FSA states that "a
State IV-A agency may find it cost-efficient to do a limited initial
assessment for recipients, followed by a more in-depth assessment only
as participant needs dictate." 54 Fed. Reg. 15653