E6-13153. Priority for Partial Grants to States for Construction or Acquisition of State Home Facilities

AGENCY:

Department of Veterans Affairs.

ACTION:

Interim final rule.

SUMMARY:

This document amends the Department of Veterans Affairs (VA) regulations regarding grants to States for construction or acquisition of State homes. This amendment is necessary to ensure that projects designed to remedy conditions at an existing State home that have been cited as threatening to the lives or safety of the residents receive priority for receiving VA grants in the future (including in fiscal year 2007).

DATES:

Effective Date: This interim final rule is effective August 11, 2006. Comments must be received on or before October 10, 2006.

ADDRESSES:

Written comments may be submitted by: mail or hand-delivery to Director, Regulations Management (00REG1), Department of Veterans Affairs, 810 Vermont Ave., NW., Room 1068, Washington, DC 20042; fax to [phone]; or e-mail through http://www.Regulations.gov. Comments should indicate that they are submitted in response to “RIN 2900-AM42.” All comments received will be available for public inspection in the Office of Regulations Management, Room 1063B, between the hours of 8 a.m. and 4:30 p.m., Monday through Friday (except holidays). Please call [phone] for an appointment.

FOR FURTHER INFORMATION CONTACT:

Frank Salvas, Chief, State Home Construction Grant Program (114), Veterans Health Administration, Department of Veterans Affairs, 810 Vermont Ave., NW., Washington, DC 20420, 202-273-8534.

SUPPLEMENTARY INFORMATION:

Congress has authorized VA to provide grants to States for the construction and acquisition of State homes for the care of veterans. See 38 U.S.C. 8131-8137. The law mandates that VA use certain priorities in establishing a list of approved projects to receive funding. VA has used these priorities to establish the priority and subpriority groups that are set forth in 38 CFR 59.50. For instance, the top priority group is for projects from States that have made sufficient funds available for their projects. That group is divided into six sub-groups, which are (in order of priority): (1) Projects to remedy conditions found to threaten the lives or safety of patients (i.e., life safety projects that may include, for example, seismic concerns, egress, smoke barriers and fire walls, fire alarm and detection, or asbestos and other hazardous materials), (2) projects from States that have not previously applied for the construction or acquisition of a State nursing home, (3) projects from States that have a great need for new State home beds, (4) other projects for the renovation of a State home, (5) projects from States that have a significant need for new State home beds, and (6) projects from States that have a limited need for new State home beds.

Sometimes, States with higher-ranking applications within the top priority group deplete the available funding to the extent that VA is able to offer the State with the lowest-ranking application (for which grant funds are available) only a partial grant. Currently, 38 CFR 59.50(b) provides that if a State accepts a partial grant in a given fiscal year, that State's project will have the highest priority for funding in the next fiscal year. This provision was promulgated originally because States were hesitant to accept a partial grant if there was uncertainty of receiving sufficient grant funding in the next fiscal year. The existing regulation encourages States to accept a partial grant by giving them the highest priority for appropriated grant funds in the subsequent fiscal year. Without receiving the highest priority for appropriated grant funds, States offered a partial grant would likely turn it down, and the money would go to lower-priority projects.

VA foresees that the regulatory provision granting the highest priority for appropriated funds in the subsequent fiscal year to States accepting partial grants may render VA unable to meet its statutory obligations for prioritizing grant applications, especially for giving top priority to life safety projects. A revision is needed immediately due to the pendency of one large construction project from a State with “great” need which is in line to receive a partial grant this year and which would otherwise then consume all the funding expected for grants during fiscal year (FY) 2007. This would result in no available funds for grants for life safety projects during FY 2007, contrary to the statutory priority that is to be given those projects.

This rule changes the priority that a project receiving a partial grant may receive during the next fiscal year. Rather than receiving highest priority in the next fiscal year, a project receiving a partial grant would receive highest priority only with respect to 30 percent of the funds actually appropriated for grants. In other words, such a project would qualify to receive no more than 30 percent of the funds appropriated for this purpose. The partial-grant project could receive more funding but would have to compete for it without the advantage of any special priority. For example, a State seeking a grant for $160 million that has received a partial grant of $70 million in the 2006 fiscal year would qualify to receive up to 30 percent of the funds available to VA for the award of State home grants during FY 2007. If VA has $85 million available for State home grants for FY 2007, the partial-grant State would receive 30 percent of that amount ($25.5 million) because of its highest priority as a partial-grant recipient. If the partial-grant recipient also ranks number 15 on the priority list with respect to the rest of the 70 percent of available funds, and the higher-ranked applicants seek only $45.5 million, the partial-grant recipient would be awarded an additional $14 million for a total of $39.5 million. This rule provides VA with the flexibility to set aside at least 70 percent of the grant funds for life safety projects consistent with the priority for such projects mandated by Congress. Based on past experience and our best estimates, we anticipate a 70-percent allocation would provide sufficient funds to cover anticipated life safety projects in FY 2007 and subsequent years. Life safety projects used 10 percent of available funds in FY 2004 and 5 percent of available funds in FY 2005, and will use about 34 percent of available funds in FY 2006. However, based on existing and recent life safety applications, and indications from States that more such applications will be submitted, we estimate that the demand for life safety projects in FY 2007 may require up to 70 percent of the available funds. At the same time, we believe a 30-percent allocation to partial-grant recipients in the following year will provide some incentive for States to accept a partial grant.

It is possible that there may be more than one partial-grant recipient in a given fiscal year. In the above example, another higher-priority applicant seeking a $25 million grant could receive the remaining $14 million from the 70 percent of the funds as a partial grant. Under this regulation, this partial-grant recipient would also receive priority over all other applicants for up to 30 percent of the funding that would be set aside for partial-grant recipients during the next fiscal year. To address this possibility, this regulation further prioritizes the partial-grant recipients on the priority list for the next fiscal year based on the date that VA first awarded a partial grant for the projects (the earlier the grant was awarded, the higher the priority given).

Administrative Procedure Act

In accordance with 5 U.S.C. 553(b)(3)(B), the Secretary of Veterans Affairs finds that there is good cause to dispense with the opportunity for prior comment with respect to this rule. The Secretary finds that it is impracticable, unnecessary, and contrary to the public interest to delay this regulation for the purpose of soliciting prior public comment. This action is consistent with the priorities established by Congress and is needed on an expedited basis because the current regulation may preclude VA from funding life safety projects during FY 2007. While it is important to give States receiving partial grants priority for continued funding, these regulations need to recognize the other priorities for awarding State home grants including the top priority for projects that protect the lives and safety of veterans residing in existing State homes. For the foregoing reasons, the Secretary of Veterans Affairs is issuing this rule as an interim final rule.

Unfunded Mandates

The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in an expenditure by the State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any given year. This amendment would have no such effect on State, local, and tribal governments, or on the private sector.

Executive Order 12866

Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). The Order classifies a rule as a significant regulatory action requiring review by the Office of Management and Budget if it meets any one of a number of specified conditions, including having an annual effect on the economy of $100 million or more; creating a serious inconsistency or interfering with an action of another agency; materially altering the budgetary impact of entitlements or the rights of entitlement recipients, or raising novel legal or policy issues. VA has examined the economic, legal, and policy implications of this interim final rule and has concluded that it is a significant regulatory action because it raises novel policy issues.

Paperwork Reduction Act

This document contains no provisions constituting a collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521).

Regulatory Flexibility Act

The Secretary hereby certifies that this regulatory amendment will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. The rule will affect grants to States and will not directly affect small entities. Therefore, pursuant to 5 U.S.C. 605(b), this amendment is exempt from the initial and final regulatory flexibility analyses requirements of sections 603 and 604.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic Assistance program number and title for this rule are as follows: 64.005, Grants to States for Construction of State Home Facilities.

List of Subjects in 38 CFR Part 59

• Administrative practice and procedure; Alcohol abuse; Alcoholism; Claims; Day care; Dental health; Drug abuse; Foreign relations; Government contracts; Grant programs-health; Grant programs-veterans; Health care; Health facilities; Health professions; Health records; Homeless; Medical and dental schools; Medical devices; Medical research; Mental health programs; Nursing homes; Reporting and Recordkeeping requirements; Travel and transportation expenses
• Veterans

Approved: June 23, 2006

R. James Nicholson,

Secretary of Veterans Affairs.

For the reasons stated above, the Department of Veterans Affairs amends 38 CFR part 59 as follows:

PART 59—GRANTS TO STATES FOR CONSTRUCTION OR ACQUISITION OF STATE HOMES

1. The authority citation for part 59 continues to read as follows:

Authority: 38 U.S.C. 101, 501, 1710, 1742, 8105, 8131-8137.

2. Amend § 59.50 by revising paragraph (b) to read as follows:

§ 59.50

Priority List.

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(b)(1) If a State accepts a partial grant for a project under § 59.80(a)(2), VA will give that project the highest priority for the next fiscal year within the priority group to which it is assigned (without further prioritization of that priority group) to receive up to 30 percent of the funds available for that year. Funds available do not include funds conditionally obligated in the previous fiscal year under § 59.70(a)(2).

(2) If, in a given fiscal year, more than one State previously accepted a partial grant under § 59.80(a)(2), these partial-grant recipients will be further prioritized on the priority list for that fiscal year based on the date that VA first awarded a partial grant for the project (the earlier the grant was awarded, the higher the priority given). The partial-grant recipients, in aggregate, may receive up to 30 percent of the funds available for that year that would be set aside for partial-grant recipients.

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