Title of Regulation: 22VAC40-295. Temporary Assistance for Needy Families (TANF) (adding 22VAC40-295-145).

Statutory Authority: § 63.2-217 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: March 25, 2016.

Agency Contact: Mark Golden, Program Manager, Division of Benefit Programs, Department of Social Services, 801 East Main Street, Richmond, VA 23219, telephone (804) 726-7385, FAX (804) 726-7357, or email mark.golden@dss.virginia.gov.

Basis: Pursuant to § 63.2-217 of the Code of Virginia, the State Board of Social Services has authority to promulgate rules and regulations necessary for operation of all assistance programs.

Purpose: The purpose of the proposed action is to add penalties for persons violating spending restrictions. One of the main purposes of the Temporary Assistance for Needy Families (TANF) program, as set forth in the authorizing federal statute, the Personal Responsibility and Work Opportunity Reconciliation Act (Public Law 104-193), is to "provide assistance to needy families so that children can be cared for in their own homes or in the homes of relatives." TANF benefits are intended to be used to ensure that the needs of children are addressed in an effort to help them become productive citizens. TANF is not intended to provide assistance to enable a child's parent to purchase alcohol, gamble, obtain tattoos or to use it for any other purpose restricted by § 63.2-621 of the Code of Virginia. The intent of the penalties in the proposed regulation is to deter parents from using TANF for inappropriate purposes, thereby ensuring the benefits are used for the subsistence needs of the child to promote the child's health, safety, and welfare.

Substance: A new section will be added to the regulation. Recipients of TANF who violate the provisions of § 63.2-621 of the Code of Virginia will be penalized with the progressive loss of benefits. The first offense will result in the loss of TANF financial assistance for one month. The second offense will result in the loss of TANF financial assistance for three months. Subsequent offenses will result in the loss of TANF financial assistance for six months.

Issues: The primary advantage to the general public and the Commonwealth is that the proposed regulation will provide a deterrent to misusing taxpayer funded public benefits. The proper use of assistance will result in more efficient use of funds and will ensure that funds are used as intended for providing necessities to poor families with children. There are no known disadvantages to the regulation.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. To enact new legislative restrictions on temporary assistance to needy families (TANF) expenditures contained in § 63.2-621, the State Board of Social Services (Board) proposes to amend its TANF regulation to include sanctions for violating § 63.2-621.

Result of Analysis. There is insufficient information available to ascertain whether the benefits of this proposed regulatory change will outweigh its costs.

Estimated Economic Impact. To comply with federal restrictions placed on TANF funds, the General Assembly passed a law (§ 63.2-621) that prohibits electronic benefits transfers (EBT) used to purchase alcoholic beverages, tobacco products, lottery tickets or sexually explicit visual materials.

The law also prohibits any transaction, including ATM transactions, at government stores established for the sale of alcoholic beverages (ABC stores) and establishments in which pari-mutuel betting or charitable gaming is conducted, tattooing or body piercing is performed for hire or consideration and there is adult oriented entertainment provided by semi-nude or nude performers.

The Board now proposes to amend TANF regulations to set forth penalties for TANF recipients who use their EBT cards in prohibited establishments or to purchase prohibited items. The Board proposes to suspend benefits for one month for a first offense, three months for a second offense and six months for third and subsequent offenses.

Board staff report that they will investigate reports of prohibited use of TANF benefits and apply sanctions when the reports are accurate. Board staff also report that the average TANF benefit per family is $258 per month and that the Board expects there will be very low numbers of incidences where TANF benefits are suspended under these new provisions (approximately five suspensions per month for first time offenses). If benefit suspensions follow the pattern expected by the Board, approximately 60 families a year (out of the 30,000 that receive TANF) will lose one month of benefits. These families in total will lose $15,480 per year and the state will see an average savings of $15,480 per year that will not be paid out in TANF benefits.

While it is fairly easy to estimate the number of families that might be affected by these regulatory changes, estimating the number of businesses that might be affected is more complicated. There are thousands of grocery and drug stores across the Commonwealth that sell both wine and beer and tobacco products. The Department of Alcoholic Beverage Control (ABC) reports that there are 350 ABC stores around the state. Depending on how broadly sexually explicit visual material is defined, all bookstores in Virginia may be on the list of affected businesses. Nude and semi-nude bars and gentlemen's clubs will be affected although the Department of Planning and Budget (DPB) does not have access to the resources needed to estimate the number of these establishments in Virginia. The Department of Professional and Occupational Regulation (DPOR) reports that, as of April 1, 2014, there are 248 tattoo parlors and 196 body piercing establishments which may be affected. The Virginia Department of Agriculture and Consumer Services (VDACS) does not have any estimates of how many groups or establishments conduct charitable gaming but does report that such groups include churches, athletic associations and school clubs such as band boosters. All of these entities may lose revenues on account of § 63.2-621 and this proposed regulation. If the Board's estimates of sanction incidences and scope are correct, the total revenue lost to all businesses, clubs and organizations will be $15,480 per year. If the Board's estimates are not correct, total revenues lost will be equal to total sanctions imposed.

Businesses and Entities Affected. Board staff reports that approximately 30,000 families in the Commonwealth receive TANF benefits. All of these families, as well as many businesses, groups and establishments have the potential to be affected by these proposed regulatory changes. Please see the paragraph above this section for estimates of businesses, groups and establishments that may be affected.

Localities Particularly Affected. No locality will be particularly affected by this proposed regulatory action.

Projected Impact on Employment. Given the likely scope of potential revenue lost, this regulatory action is unlikely to have an effect on employment in the Commonwealth.

Effects on the Use and Value of Private Property. To the extent that monies received through TANF benefits can be considered the recipients' private property, this proposed regulation, and the law that necessitates it, restrict the use of that private property.

Small Businesses: Costs and Other Effects. No small businesses will incur costs on account of this regulatory action, but some small businesses may lose some revenue.

Small Businesses: Alternative Method that Minimizes Adverse Impact. There is likely no alternative method of regulation that would both meet the General Assembly's and the Board's goals and be less costly for affected businesses.

Real Estate Development Costs. This regulatory action will likely have no effect on real estate development costs in the Commonwealth.

Agency's Response to Economic Impact Analysis: The Department of Social Services reviewed the economic impact analysis prepared by the department of Planning and Budget and has no comment.

Summary:

The proposed amendment establishes penalties for recipients of benefits from the Temporary Assistance for Needy Families (TANF) program who violate § 63.2-621 of the Code of Virginia, which restricts how TANF program benefits may be used. The first offense will result in the loss of TANF financial assistance for one month; the second offense will result in the loss of TANF financial assistance for three months; and subsequent offenses will result in the loss of TANF financial assistance for six months.

22VAC40-295-145. Sanctions for violating spending restrictions.

Local departments of social services shall be authorized to sanction recipients of TANF by the full amount of the TANF grant for violating the TANF spending restrictions in § 63.2-621 of the Code of Virginia, as follows:

1. For the first offense, the full amount of TANF benefits for the family shall be suspended for one calendar month.

2. For the second offense, the full amount of TANF benefits for the family shall be suspended for three calendar months.

3. For the third offense, or subsequent offenses, the full amount of TANF benefits for the family shall be suspended for six calendar months.