No. 42853 (Amendment): Section R986-200-236. Earned Income

(Amendment)

DAR File No.: 42853
Filed: 04/27/2018 12:13:35 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

This proposed rule change is to modify the standards for counting income earned by dependent children for the purposes of Family Employment Program (FEP) assistance in order to incentivize dependent children, in appropriate situations, to find employment without concern for whether their families' public assistance case will be closed as a result.

Summary of the rule or change:

The Department of Workforce Services (Department) is authorized by statute (Section 35A-3-301 et seq.) to administer the Family Employment Program (FEP), a cash assistance program for needy families that is funded via the federal Temporary Assistance for Needy Families (TANF) Block Grant, see 42 U.S.C. 601 et seq. The purposes of the TANF Block Grant include to "provide assistance to needy families" and to "end the dependence of needy parents on government benefits by promoting job preparation, work, and marriage", see 42 U.S.C. 601. The Utah Legislature has likewise authorized FEP to "assist a parent recipient to obtain employment that is sufficient to sustain a family", "ensure the dignity of those receiving assistance", and "strengthen families", see Section 35A-3-301. The Department is specifically authorized to make rules governing eligibility for FEP assistance under Section 35A-3-302. Eligibility for FEP assistance is determined by, among other factors, the amount of earned income a household receives; if the household's earned income exceeds a certain amount, the household loses its eligibility for FEP assistance. Currently, income earned by dependent children is always counted as earned income for the household. The Department has found that, in some cases, this facet of FEP has created a perverse incentive for dependent children who are able to work and earn income to refrain from doing so lest they cause their family income to exceed the eligibility threshold. Because it is contrary to the purposes of the TANF Block Grant and FEP to disincentivize work by persons who are able to work, the Department has determined it is necessary to modify the standards for how income earned by dependent children is counted. The proposed rule creates an exception for the counting of a dependent child's earned income against the household if the child is participating in the employment or training activities required by the Department as a condition of receiving FEP funds. "Training activities" is a broad term that includes full-time schooling as well as other educational and training activities. This proposed rule change is expected to encourage dependent children who wish to work while attending school to do so without fear of affecting their families' assistance case. In addition, numerous studies have shown the value of holding a job for teenagers in terms of teaching important life skills like workplace norms and expectations, effective time management, motivation to pursue long-term employment goals, and persistence. The Department believes this proposed rule change will contribute to helping dependent children learn these skills and ultimately progress toward the Department's and state's goal of ending the cycle of intergenerational poverty.

Statutory or constitutional authorization for this rule:

• 42 U.S.C. 601 et seq.
• Section 35A-3-302
• Section 35A-3-301 et seq.

Anticipated cost or savings to:

the state budget:

At the outset it should be noted that the costs and savings described in this section are applied to the TANF funds the Department receives from the federal government and do not require any independent appropriations from the Legislature. The Department has analyzed FEP case closures from fiscal years 2015, 2016, and 2017 and identified 73 cases in which a dependent child in the household reported earned income and the case closed due to the household's earned income exceeding the eligibility threshold. It is likely that not all of these closures can be attributed the earned income of a dependent child specifically; however, for the purpose of this analysis the Department assumes that the dependent child's earned income was a factor that caused the household's earned income to exceed the eligibility threshold. Based on this analysis, the Department expects that this proposed rule change will affect approximately 25 households per year by allowing them to receive FEP assistance they would not have received previously. Although monthly benefit amounts vary from one household to the next, the average monthly benefit amount for the 73 cases identified by the Department is approximately $523. Based on this information, the Department anticipates paying out approximately $12,700 in additional FEP assistance per month once this proposed rule change goes into effect. The annual cost is expected to be approximately $153,000 per year.

local governments:

This proposed rule change is not expected to impact local governments because FEP is a state-level program that does not rely on local governments for its funding, administration, or enforcement.

small businesses:

The Department anticipates that this proposed rule change will create a savings for small businesses by allowing them to retain employees who might otherwise be forced to choose between quitting their employment or causing their households to become ineligible for FEP assistance. Thus, this proposed rule change is expected to reduce the indirect fiscal costs to small businesses, although this savings is inestimable in light of the attenuated nature of the impact on small businesses. The Department has considered whether this proposed rule change will have a measurable negative fiscal impact on small businesses and has determined that this proposed rule change will not have a negative fiscal impact.

persons other than small businesses, businesses, or local governmental entities:

This proposed rule change is anticipated to create a savings for FEP-eligible households by allowing them to maintain their eligibility even if a dependent child is employed under certain circumstances. The Department has analyzed FEP case closures from fiscal years 2015, 2016, and 2017, and identified 73 cases in which a dependent child in the household reported earned income and the case closed due to the household's earned income exceeding the eligibility threshold. It is likely that not all of these closures can be attributed the earned income of a dependent child specifically; however, for the purpose of this analysis, the Department assumes that the dependent child's earned income was a factor that caused the household's earned income to exceed the eligibility threshold. Based on this analysis, the Department expects that this proposed rule change will affect approximately 25 households per year by allowing them to receive FEP assistance they would not have received previously. Although monthly benefit amounts vary from one household to the next, the average monthly benefit amount for the 73 cases identified by the Department is approximately $523. Based on this information, the Department expects approximately 25 affected households to receive approximately $6,300 each per year in additional FEP assistance, making an aggregate disbursement of approximately $153,000 per year. These amounts constitute savings to the affected households under this proposed rule change.

Compliance costs for affected persons:

No compliance costs are expected for any affected persons because this proposed rule change does not change any compliance or reporting requirements.

Comments by the department head on the fiscal impact the rule may have on businesses:

This proposed rule change is expected to have a positive fiscal impact on businesses by allowing them to retain employees who might otherwise be forced to choose between quitting their employment or causing their households to become ineligible for FEP assistance. The number of businesses receiving this benefit is inestimable at this time because the Department does not have information regarding the specific employers that may be affected.

Jon Pierpont, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Workforce Services
Employment Development
140 E 300 S
SALT LAKE CITY, UT 84111-2333

Direct questions regarding this rule to:

• Nathan White at the above address, by phone at 801-526-9647, by FAX at , or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

07/25/2018

This rule may become effective on:

08/01/2018

Authorized by:

Jon Pierpont, Executive Director

RULE TEXT

Appendix 1: Regulatory Impact Summary Table*

Fiscal Costs

FY 2019

FY 2020

FY 2021

State Government

$153,000

$153,000

$153,000

Local Government

$0

$0

$0

Small Businesses

$0

$0

$0

Non-Small Businesses

$0

$0

$0

Other Persons

$0

$0

$0

Total Fiscal Costs:

$0

$0

$0

Fiscal Benefits

State Government

$0

$0

$0

Local Government

$0

$0

$0

Small Businesses

$0

$0

$0

Non-Small Businesses

$0

$0

$0

Other Persons

$153,000

$153,000

$153,000

Total Fiscal Benefits:

$0

$0

$0

Net Fiscal Benefits:

$0

$0

$0

 

*This table only includes fiscal impacts that could be measured. If there are inestimable fiscal impacts, they will not be included in this table. Inestimable impacts for State Government, Local Government, Small Businesses and Other Persons are described above. Inestimable impacts for Non - Small Businesses are described below.

 

Appendix 2: Regulatory Impact to Non - Small Businesses

This proposed rule change may have an indirect fiscal benefit to non-small businesses that hire as employees dependent children whose households are affected by this rule. These businesses would experience a benefit from being able to hire and retain these employees without concern over whether the employee will be forced to quit in order to keep his or her household eligible for FEP assistance. This indirect fiscal benefit is inestimable because the Department lacks information regarding the specific employers that may be affected.

 

R986. Workforce Services, Employment Development.

R986-200. Family Employment Program.

R986-200-236. Earned Income.

(1) All earned income is counted when it is received even if it is an advance on wages, salaries or commissions.

(2) Countable earned income includes:

(a) wages, except Americorps*Vista living allowances are not counted;

(b) salaries;

(c) commissions;

(d) tips;

(e) sick pay which is paid by the employer;

(f) temporary disability insurance or temporary workers' compensation payments which are employer funded and made to an individual who remains employed during recuperation from a temporary illness or injury pending the employee's return to the job;

(g) rental income only if managerial duties are performed by the owner to receive the income. The number of hours spent performing those duties is not a factor. If the property is managed by someone other than the individual, the income is counted as unearned income;

(h) net income from self-employment less allowable expenses, including income over a period of time for which settlement is made at one given time. The periodic payment is annualized prospectively. Examples include the sale of farm crops, livestock, and poultry. A client may deduct actual, allowable expenses, or may opt to deduct 40% of the gross income from self-employment to determine net income;

(i) training incentive payments and work allowances; and

(j) earned income of dependent children, unless the child is participating in required employment or training activities.

(3) Income that is not counted as earned income:

(a) income for an SSI recipient;

(b) reimbursements from an employer for any bona fide work expense;

(c) allowances from an employer for travel and training if the allowance is directly related to the travel or training and identifiable and separate from other countable income; or

(d) Earned Income Tax Credit (EITC) payments.

 

KEY: family employment program, SNAP

Date of Enactment or Last Substantive Amendment: [September 14, 2016]2018

Notice of Continuation: September 2, 2015

Authorizing, and Implemented or Interpreted Law: 35A-3-301 et seq.

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