2025-00124. Amendments to Definitions and Related Provisions Under the Randolph-Sheppard Vending Facility Program

FY 2021-2023 Randolph-Sheppard Expenditures by Source of Funding

	FY 2021	FY 2022	FY 2023
Federal Vending Machine Income	$3,103,501	$3,077,666	$3,616,697
Non-Federal Vending Machine Income	10,589,070	10,662,860	10,480,002
RSVFP Set-Aside	9,943,153	8,783,719	10,446,738
State Appropriated Funds	8,002,944	9,929,055	9,353,040
VR Federal Funds	38,392,506	40,713,782	45,604,065
Other Sources of Funding	364,236	210,264	584,218
Total Funds Expended	70,384,755	73,377,346	80,084,760

3. Fiscal Impact of RSVFP Expenditures on the VR Program

According to data submitted by SLAs to RSA annually through the RSA-15 report, VR program funds represent the dominant source of funding used for most expenditures incurred for the benefit of the RSVFP with respect to vending facilities and other equipment and vending machines. RSVFP set-aside funds represent other critical sources of funding for these expenditures, albeit much smaller sources than those expenditures incurred under the VR program for the benefit of the RSVFP.^[43] When States pay RSVFP-related costs with non-Federal funds, it can have a direct impact on the VR program as described herein.

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As noted in the “VR Program” section of “RSVFP Funding Sources” above, pursuant to sections 110(a) and 111(a)(1) of the Rehabilitation Act, each State receives a Federal grant, based on a formula, to administer the VR program and pay the Federal share ( i.e., 78.7 percent) of costs of that program. RSA awards the VR grant to each State for a one-year period; however, a State may carry over unspent Federal funds for use into a second year, pursuant to section 19 of the Rehabilitation Act, if the State provided sufficient non-Federal match ( i.e., 21.3 percent) by September 30 of the year of appropriation ( i.e., the year in which the grant was awarded). If a State is unable to spend all of its funds by the end of the year of appropriation or provide sufficient match to carry the funds over into a second year by the end of the year of appropriation, a State may relinquish its unspent VR funds to RSA in accordance with section 110(b) of the Rehabilitation Act; RSA, in turn, awards these funds to other States that can use them and provide the requisite match prior to the end of the year of appropriation.

Despite statutory provisions that allow for the carryover of funds for use in a second year and the ability to relinquish Federal VR funds so they may be reallotted to other States that can use those funds, there has been an increasing trend in recent years in the amount of Federal VR funds remaining available after reallotment. The VR funds that remain available after the VR program reallotment process, because States did not request to receive all funds that were available during that process, are unavailable for VR program use after the expiration of the year of appropriation for which the funds were awarded and have been repurposed by Congress for new discretionary grant programs assisting individuals with disabilities under the Disability Innovation Fund (DIF).^[44] Similarly, the VR program funds that lapsed after the carryover year because they were retained by the VR agencies but not spent by the end of that year were unavailable for VR program use after the end of the carryover year and were returned to Treasury. According to RSA's fiscal data at the end of the award period, in FYs 2021 and 2022 VR State agencies lapsed ^[45] a total of approximately $139.6 million and $90.8 million, respectively, of Federal VR grant funds awarded to States.

RSA has learned over the years as part of its monitoring efforts that there is no single reason for the unspent VR funds. For example, some States are not able to match their full VR grant award and, thus, relinquish the unmatched funds to RSA during the reallotment process. Other States match and reserve the full 15 percent minimum required for the provision of pre-employment transition services to students with disabilities, but for a variety of reasons, are not able to expend the full amount reserved by the end of the carryover period; these funds, however, cannot be spent for any other VR program purpose and so they remain unspent and lapse. Still other States can match their full grant awards, but do not expend their full Federal award because they either do not have sufficient State personnel or community providers necessary to use the funds to serve VR program participants.

Therefore, to the extent that States can provide additional match beyond the requisite match to access funds available through the reallotment process, and to the extent that States are not currently able to expend all of their fully matched funds, it appears there would be sufficient funds remaining available for States to access to cover at least some of the costs that could be generated by these proposed regulations without negatively impacting direct services to individuals with disabilities served under the VR program.

However, the same is not likely to be true for those States that cannot match their full VR grant. Even though excess VR funds remain available, these States are not able to access those additional funds because they cannot provide the requisite non-Federal share of 21.3 percent. Similarly, States reserving funds as required by section 110(d)(1) of the Rehabilitation Act for the provision of pre-employment transition services would not be able to use those funds for costs associated with RSVFP vending facilities and vending machines under these proposed regulations because those funds must be reserved solely for the provision of pre-employment transition services.

While those funds appear to be available for expenditure, they are not available for an unfettered use. To the extent States in either of these categories ( i.e., those unable to fully match their VR grant or those with reserved, but unspent, funds for the provision of pre-employment transition services) would choose to acquire vending equipment, for example, in connection with these proposed regulations, it is likely there would be less funds available in those States for the delivery of direct services under the VR program to individuals with disabilities to assist them in achieving employment outcomes.

Finally, as explained further in the “RSVFP Funding Sources” section above, it is likely that the proposed regulations would result in SLAs receiving additional opportunities for blind vendors to operate vending facilities resulting in an increase in assessments on earnings from blind vendors set aside by the SLA and potentially an increase in unassigned Federal vending machine income if blind vendors are not available to operate all opportunities for vending machines on Federal property. See “RSVFP Set-Aside Funds” in the “RSVFP Funding Sources” section above for a more detailed discussion of RSVFP set aside funds and their requirements.

The SLAs could use these increased set-aside funds to purchase new equipment or maintain or replace equipment for the benefit of the RSVFP, and these expenditures could count towards the State's non-Federal share under the VR program. It is possible States receiving the increased set-aside funds under the RSVFP may be able to access more Federal VR funds ( i.e., more of their own VR grant funds and, to the extent funds are available, more funds during reallotment), which would benefit both the RSVFP and individuals with disabilities. The interplay between the VR program and the RSVFP will be analyzed more fully below with respect to the benefits and costs of these proposed regulations.

Furthermore, we believe that the proposed regulations would benefit blind vendors who would have more opportunities to operate evolving vending facilities and provide more choices for customers who use the vending facilities.

Discussion of Costs and Benefits

Overview: After conducting a costs and benefits analysis of these proposed ( print page 2566) regulations, the Department believes additional net costs are likely for the acquisition of vending facilities and equipment for some SLAs and State VR agencies, as they replace outdated equipment and identify additional or more modern vending facility opportunities for blind vendors to the extent they are not already doing so under current Department guidance. We also expect that the proposed regulations could result in VR agencies incurring additional costs to convert existing vending facilities from one type of business model to another and purchase initial stocks and supplies for those new vending facilities to allow them to evolve with the vendors' needs to remain competitive and self-supporting, as is the purpose of the RSVFP. Although current Department guidance permits these costs, the Department recognizes there is inconsistency among States, with some working with blind vendors to modernize and evolve the RSVFP, while others remain locked in more traditional RSVFP business models.^[46]

Despite some anticipated increased expenditures to be incurred by States, particularly those incurred under the VR program, these same expenditures, if paid with non-Federal funds, could increase the amount of Federal VR funds States may draw down, to the extent Federal funds are available. When States use non-Federal funds to pay these allowable RSVFP expenditures and, thus, increase the amount of matching funds they could otherwise provide, States may receive more Federal VR funds to the extent they are available, thereby potentially incurring more costs under the VR program for purposes related to the RSVFP. See a more comprehensive discussion of the VR program as a “RSVFP Funding Source” above. Furthermore, the Department believes that the proposed regulations would benefit blind vendors and customers who use RSVFP vending facilities through increased earnings and increased product selection, respectively, to the extent the products are not already available through the vending facilities, given the inconsistency nationwide with the scope of articles sold or dispensed through RSVFP vending facilities. In so doing, licensed blind vendors would benefit by increased earnings, expanded vending opportunities, and increased customer satisfaction. Through increased earnings to the licensed blind vendors, the State would benefit as well through increases to the RSVFP set-aside funds, to the extent the State places assessments on vendor net proceeds to accrue such funds.

The Department believes the benefits to blind vendors and their customers generated by the proposed rule's flexibilities under the RSVFP will outweigh the increased expenditures by the states and the Federal Government.

Non-Monetized Benefits of the Proposed Regulations

1. Definition of “Articles”

We anticipate that the proposed definition of “articles” would provide clarification on and consistency for implementation of the provisions relating to vending facilities and vending machines (which are a type of vending facility) and could result in an increase in the variety of articles sold in vending facilities under the RSVFP. This could also potentially lead to increased income for blind vendors and an increase in set-aside assessments received by the SLAs.

In FY 2023, gross sales for the RSVFP were $747,455,376. Of this, blind vendor gross income represented $147,206,158. We estimate that up to 48 of the 51 SLAs would make changes to increase the variety of articles that may be sold in vending facilities in their States due to this proposed change. The Department uses this estimate because three SLAs are quite small, with only one to two blind vendors in the program, and these small SLAs may not have the capacity or customer demand to increase the variety of articles sold in their vending facilities. While some States already allow vending facilities to sell articles that were not traditionally sold by blind vendors, since there is nothing in the R-S Act to preclude such sales, we expect that this clarification would lead to the sale of a larger variety of articles through existing vending facilities in most States. Because the permit for a vending facility, other than a cafeteria, is negotiated between the Federal agency and SLA prior to the placement of the blind vendor, it is necessary for all SLAs and Federal agencies to have greater clarity on what is permitted to ensure consistency throughout the RSVFP.

While we do not know how much additional income for blind vendors would be generated by the sale of the increased variety of articles, we expect that this change could yield an increase in gross sales in the 48 SLAs that are likely to make at least some changes to existing vending facilities as a result of this proposed change because, while many blind vendors are already selling the types of articles clarified as allowable in these proposed regulations, it is likely that some Federal agencies and SLAs would provide additional opportunities for blind vendor sales as a result of the clarity provided by these proposed definitions, particularly in areas where blind vendors are not selling the types of articles clarified in this proposal. Additional income for blind vendors will also result in additional set-aside funds that SLAs in States that have an assessment on blind vendor net proceeds can use for the authorized purposes under 34 CFR 395.9.

In addition, if contractors are already operating vending machines that sell articles on Federal property, under the proposed regulations, SLAs would be entitled to receive a priority for establishing vending machines operated by blind vendors, and if no blind vendor in that State is available, receive any unassigned Federal vending machine income funds from the operation of such contractor operated vending machines. See “RSVFP Set-Aside Funds” in “RSVFP Funding Sources” section of the RIA's Background above for a more detailed discussion.

We welcome public comment regarding the likely impact on gross program sales and blind vendor income due to the proposed definition of “articles” and the changes that would result from it.

2. Definition of “Vending Facility”

We anticipate that adding illustrative examples of vending facilities to provide the best interpretation of the terms “snack bars,” “cart services,” “shelters,” and “counters” as including micro markets, laundry and catering establishments, shops that dispense articles, such as gift shops and retail stores, and other establishments, such as food trucks and pop-up stands, would provide additional clarity regarding the broad range of vending facilities encompassed by the RSVFP.

While we know that some States already allow blind vendors to operate these types of vending facilities under the RSVFP, and as such is consistent with current Department guidance, we anticipate that the inclusion of this modernized, illustrative list would clarify that blind vendors are not limited to the business models listed in the statute, as they existed in 1974, and would encourage SLAs and Federal agencies to allow for the addition of modernized types of these vending facilities as technology continues to ( print page 2567) evolve. For example, the Department is aware, through its work with SLAs, that many States already allow extensive use of micro markets under the RSVFP. While some SLAs have inquired about the option to allow food trucks, the extent to which State RSVFPs currently have any food trucks operating is unclear.

The Department welcomes public comment on the number of blind vendors operating micro markets, laundry or catering establishments, retail shops, pop-up stands, or food trucks, either directly or through arrangements with third parties to do so under the RSVFP, as well as information on the costs associated with operating these types of vending facilities. The Department is also interested in information about the extent to which Federal agencies are issuing permits for such types of vending facilities and the likely impact of the addition of this illustrative list to the “vending facility” definition.

3. Definition of “Vending Machine”

The Department intends that the proposed change to amend the definition of “vending machine” by removing the qualifier “for purposes of assigning vending machine income under this part” would clarify that the definition of “vending machine” would apply throughout part 395. The Department expects that the proposed changes to the definition of vending machine to replace “coin or currency” with “cash” and add “electronic payment methods” to the payment methods specified would clarify the methods available to accept payment through vending machines, reflect modern methods of payment aligned with industry standards, simplify the current regulatory text, and meet changing demand from vending facility customers.

For blind vendors who are not already accepting electronic payment, the addition of electronic payment as a payment option would likely result in additional sales as individuals who do not carry cash would be able to use the vending machines. To provide a reasonable estimate of the impact of this change, the Department is interested in public comment on the number of vending machines operated by blind vendors under the RSVFP and the number of such vending machines that do not already accept electronic payment.

The proposed change to remove “services” from the definition of “vending machine” would clarify that vending machines may only dispense articles of a tangible nature, leaving the dispensing of services to other types of vending facilities and their appropriate auxiliary equipment ( i.e., that are not vending machines). This change would better align the regulations with the statute's intent. RSA is not aware of any blind vendor operating vending machines that dispense services so we do not believe this proposed change would have any quantifiable benefits. However, as noted above, we invite comment on the proposed removal of “services” from within the vending machine definition and the impact of this proposed change.

The proposal to remove the specific exclusion for machines providing recreational services and pay telephones would streamline the regulations. This exclusion would no longer be necessary as the proposed change to remove “services” from the definition of vending machine would clarify that such services may not be dispensed by vending machines, as defined in the proposed regulations. We do not anticipate any quantifiable benefits to this change since it preserves the status quo.

4. Priority on Certain Federal Property

The proposed change to align the application of the priority for blind vendors on Federal property administered by the NPS and NASA ^[47] with the proposed definition of “vending facility”, to include the sale of a wider variety of articles, as well as the related changes, could provide additional employment opportunities for blind vendors and income for SLAs and blind vendors, but it is unclear how significant the impact would be.

As of May 17, 2024, there were 50 NPS ^[48] sites located in States with RSVFP programs that had only one concessioner. Based on the current regulations, blind vendors therefore do not receive a priority for the operation of concessions on these sites. However, under the proposed regulations, blind vendors would receive a priority if the concessions on the NPS site meet the proposed definition of “vending facility.” As a result, blind vendors could have additional employment opportunities at these sites once the existing concessioner contracts or permits expire and become available, thereby not only increasing income for licensed blind vendors personally but also for some SLAs through any assessments on the blind vendor's net proceeds treated as set-aside funds. However, it is not clear to what extent the concessions on NPS sites meet the proposed definition of “vending facility”; the Department invites public comment on this topic, particularly with respect to whether the income generated will help offset any costs incurred due to these proposed regulations.

In addition, it is not clear to what extent blind vendors would take advantage of these potential opportunities due to the remoteness and lack of public transportation to many of these NPS sites; the Department also welcomes public comment on this topic to help inform the cost-benefit analysis associated with this proposed change.

A significantly higher percentage of blind vendor income comes from the operation of cafeterias than other types of vending facilities. In FY 2023, 65 of the 635 vending facilities operated on Federal property were cafeterias. The gross sales from those 65 cafeterias were $429,396,840, while the gross sales from all 635 vending facilities were only $747,455,376, meaning that 57.44 percent of the total gross sales came from cafeterias, even though cafeterias represented only 10.2 percent of the facilities. Twenty-six ^[49] of the NPS sites that have only one concessioner include food service operations. As a result, it is possible that this proposed change could result in a significant increase in the gross sales for blind vendors were they to operate the food service operations, or other concessions meeting the proposed updated definition of a vending facility, on these NPS sites.

In addition, to the extent that existing commercial concessioners are operating vending machines on NPS sites, any income received by NPS generated by the vending machines would be considered unassigned Federal vending machine income, the sharing of which with SLAs would result in additional income transferred from NPS to the SLAs for the benefit of the RSVFP. Based on currently available information, at least four NPS sites with only one concessioner currently operate vending machines.

Further, in addition to the new employment opportunities that could become available on NPS sites with only one concessioner, there are 46 other NPS sites in States with the RSVFP that contract with more than one concessioner. Under the current ( print page 2568) regulations, the priority for blind vendors on NPS sites does not apply if the concessions provide accommodations, facilities, or services of a scope or of a character not generally available at that time in vending facilities operated by blind vendors. Therefore, the clarification that the articles and services that may be sold in vending facilities are not limited to those traditionally sold by blind vendors could lead to additional opportunities for blind vendors on these NPS sites.

NASA already affords the priority to blind vendors on at least some of its sites. However, the Department welcomes input on the likely impact of these proposed changes for NASA sites.

Non-Monetized Costs of the Proposed Regulations

1. Implementation of Proposed Definitions

While the Department anticipates that the proposed regulations would require States to make changes to their current implementation of the RSVFP, by amending their policies and procedures to align them with these proposed changes, the proposed regulations would provide clarity on the scope of other existing opportunities, which could lead to additional vending opportunities for blind vendors.

Beyond the costs associated with updating their policies and procedures, the Department does not believe that implementation of the proposed regulations would necessitate any required costs for SLAs or blind vendors immediately. However, it is likely that blind vendors would increase the types of articles sold through vending facilities and vending machines, modernize with updates to their vending machine payment technology, and pursue new vending facility business models, which would likely lead to additional costs to the SLA and VR agency using, as applicable, RSVFP set-aside funds and VR program funds, for the costs to convert the facilities from one type of facility to another since these costs are typically borne by the VR program and not the blind vendor. To the extent the State uses non-Federal funds to pay these increased costs incurred for converting from one type of vending facility to another, the State may be able to draw down and expend additional Federal VR grant funds for the benefit of individuals with disabilities, including the RSVFP, thereby potentially further increasing costs to the State and Federal Governments. See “RSVFP Sources of Funding” in the “Background” section of this RIA for a more comprehensive discussion of the nexus between the VR program and RSVFP, including the use of non-Federal funds for matching purposes, to benefit the RSVFP.

In addition, changes to the definition of “vending facility” could also lead to Federal agencies applying the priority more often with the introduction of more modern business models of vending. With the clarification of the broad array of articles that can be sold through vending machines, it could also be that Federal agencies will need to apply the priority for vending machines that were previously operated by non-blind vendors or share additional Federal vending machine income with the SLA that they receive from those vending machines.

Due to limited information, the Department has no reliable method for estimating how many blind vendors will pursue these changes, or the likely resultant costs, but based on the information currently available, we do not anticipate that the proposed regulations would result in significant costs. However, the Department specifically requests public comments on whether the proposed definition of “articles” and the proposed changes to the definition of “vending facility” would have a quantifiable effect on the implementation of the RSVFP on Federal agencies, and particularly on military bases. It is unclear to the Department how many RSVFP vending facilities on Department of Defense property are already dispensing articles as broadly defined in the proposed regulation or operating business models proposed as illustrative examples of those listed in the R-S Act. For that reason, we specifically request public comment on the impact that these proposed regulations may have.

2. Definition of “Articles”

While predicting how licensed blind vendors might change behavior due to the proposed revisions to the definition of “vending facility” and “vending machine” and the addition of a definition of “articles” to include tangible personal property is speculative, we anticipate that some blind vendors may choose to increase the variety of articles they sell in their vending facilities, including vending machines. We note that blind vendors would not be required to make any changes as a result of the proposed revisions to the definition of “articles” and that we do not estimate any certain costs resulting from this proposed change. These proposed revisions may initially result in additional costs to blind vendors in the form of initial supplies to the extent that blind vendors choose to take on such cost. The Department believes that blind vendors would only assume these optional costs if there is a reasonable assurance that the resultant income would offset the costs. Therefore, to the extent that blind vendors choose to make any changes as a result of this proposed change, we assume that blind vendors would be able to recoup their initial costs when the items are eventually sold.

Similarly, these proposed revisions also could result in additional costs to SLAs and VR agencies in the purchase of new equipment or replacement ( e.g., improvement) of existing equipment as blind vendors expand the variety of articles they sell. For example, this proposed revision may result in additional costs for SLAs and VR agencies as new shelving and other equipment may be needed to display the new items. To the extent the State pays these additional costs with non-Federal funds used for matching purposes under the VR program and, thus, increases the amount of Federal VR funds it may draw down and expend, this spending by the State could further increase costs for the Federal Government.

In addition, if private contractors are already operating vending machines on Federal property that sell articles that the Department is now clarifying can be sold by blind vendors through vending machines ( i.e., articles that may not have traditionally been provided by blind vendors), the Federal agencies, not contractors, would have to provide up to 50 percent of the vending machine income they receive from the operation of the contractor's vending machines to the SLA under the vending income sharing requirements. The vending machine income sharing requirements impact Federal agencies for as long as vending machines are operated by a private contractor. This requirement continues even when an SLA does not have an available blind vendor to operate the vending machines at the Federal property in question.

The Department recognizes the proposed regulation could increase the application of the priority on Federal property resulting in Federal agencies entering into permits with SLAs to allow blind vendors to operate vending facilities including vending machines once a private company's contract expires. A consequence of SLAs seeking permits to assert the priority in the operation of vending facilities including vending machines on Federal property could be that the Federal agency would decline to enter into future contracts with private companies currently operating vending facilities including ( print page 2569) vending machines on such property. The Department recognizes this could be a cost to private companies. However, it is unclear how many private companies this would affect.

The Department does not have data available on the number of private companies operating vending machines on Federal and other property and is therefore unable to quantify or monetize possible costs. The Department requests comment on potential costs for private companies operating vending machines on Federal and other property.

The Department welcomes public comment on the likely cost impact of these changes to blind vendors, SLAs, and Federal agencies. We are especially interested in comments regarding the impact these costs could have on the State's ability to draw down additional Federal funds under the VR program, thereby further increasing costs to the State and Federal Governments. We are particularly interested in receiving comments whether these potential costs, particularly those incurred with non-Federal funds and used for matching purposes, would be offset by the benefits received by blind vendors because of the increased vending opportunities and increased earnings and the benefits received by other individuals with disabilities because of services provided by the increased VR funds received as a result of the matching funds.

3. Definition of “Vending Facility”

Regarding the proposed revision to include modern illustrative examples of vending facilities, the Department believes that the proposed regulations may encourage some blind vendors to alter or expand their business model to include, for example, food trucks or micro markets. While we do not estimate any certain costs resulting from this proposed revision, if blind vendors determine that they require new equipment to pursue these options, there may be additional costs to the SLA and VR agency, including the purchase of equipment. Such equipment purchases may be paid for with Federal VR State grant funds, State funds, or R-S Act set-aside funds. Such equipment could also be rented or leased.

In FY 2023, VR agencies used $12,446,353 of VR State grant funds to purchase new and replace ( e.g., improve) equipment under the VR program for the benefit of the RSVFP. Because the proposed regulations could enable some vending facilities to convert from one type of facility to another, it is likely that the proposed regulations would result in States spending at least as much in the first year on equipment as they reported spending in FY 2023, namely $12,446,353. However, we believe that the proposed revisions would likely lead to States incurring additional costs under the VR State grant program in the year or years immediately following implementation of the proposed regulations as blind vendors and SLAs take advantage of the flexibilities provided by the clarifications in these proposed regulations.

While the potential increase in the use of funds from the VR State grants program could negatively impact the availability of funds for the provision of services to individuals with disabilities under an approved Individualized Plan for Employment (IPE), this is potentially unlikely in some States. As discussed earlier, many VR State agencies are failing to use all of their VR State grant funds. See “Fiscal Impact of RSVFP Expenditures on the VR program” in the Background section of this RIA for a discussion of why States fail to expend their entire grant amounts.

According to RSA's fiscal data, between FY 2020 and FY 2022, States lapsed over $436.8 million.^[50] Of the total 163 VR awards to States during this time, there were at least 60 instances of VR State agencies returning more than $1.3 million each in unused VR funds. In seven cases, VR State agencies left between $10 million and $30.8 million each unspent under the VR program, including for the benefit of the RSVFP.^[51] Additionally, in FY 2020, $130.1 million of Federal VR State grant funds remained available following the reallotment of funds, in accordance with section 110(b)(2) of the Rehabilitation Act, to those States that could match them prior to the end of the year of appropriation.

Similarly, in FY 2021 and FY 2022, $177.4 million and $264.3 million, respectively, remained available following the reallotment of funds to States that could match the additional VR funds in each of those years. Although these funds were available to any State that could provide the requisite match under the VR program during the reallotment process, there were more funds available than requested by States during the VR reallotment process, and therefore became available under the DIF, through which Congress has authorized RSA to use the remaining VR funds for innovative activities that benefit individuals with disabilities in a wide variety of ways distinct from the RSVFP and the VR program, and other Congressionally-directed purposes. In other words, Federal funds initially appropriated for the VR program, but that remained unused by that program, were repurposed by Congress.

When considering that these particular funds were initially appropriated for the VR program for its own use, including for the benefit of the RSVFP, it is reasonable to project that some of these same funds would likely be available to VR agencies—and not repurposed by Congress—if States could increase their ability to generate match to help pay for many of the costs resulting from these proposed regulations, as described above, such as the costs that SLAs and VR agencies would bear in purchasing new vending equipment or improving vending facilities in response to these proposed regulations. In other words, to the extent States can generate more matching funds than they had in previous years for the VR program, such as from expenditures incurred by SLAs with RSVFP set-aside funds, VR agencies may be able to access additional VR funds ( i.e., more of their own VR grant funds and, to the extent funds are available, more funds during reallotment) that otherwise would have remained unspent and unused by the VR program without impacting the amount of VR funds available for services to individuals with disabilities.

For those States that could provide the requisite match but were unable to spend their VR grants, thus resulting in funds lapsing at the end of the carryover year, the Department believes these proposed changes would clarify the breadth of allowable expenditures under both the RSVFP and the VR program. In clarifying the wide breadth of allowable expenditures under these programs, the Department anticipates that some SLAs and VR agencies could increase their expenditures for the benefit of the RSVFP and thereby significantly reduce the amount of VR funds lapsing each year. Because of the large amount of VR funds that some VR agencies have lapsed in recent years, the Department believes that these VR agencies could implement policy changes consistent with these proposed regulations without negatively impacting direct services to individual VR program participants.

Due to the variety of approaches available to obtain equipment and the lack of relevant data, we cannot determine with specificity what the likely associated costs may be; the Department welcomes public comment on this topic so that we can provide a ( print page 2570) reasonable estimate of the likely cost impact on SLAs, VR agencies, and the VR State grant program. We are particularly interested in comments regarding whether VR agencies and SLAs believe additional matching funds will be available to cover costs that might be incurred for some of the potential improvements resulting from these proposed regulations, thereby reducing the amount of VR funds remaining unspent and unused by the VR program each year. Likewise, we are interested in how these increased non-Federal expenditures under the VR program could further increase costs to the State and any projected offsets to those costs by the benefits received by the increased opportunities to licensed blind vendors and services provided under the RSVFP and VR program. We also are interested in receiving comments from SLAs regarding whether these proposed regulations would generate increased RSVFP set-aside funds, which could be used to pay for the costs of acquiring new vending machines and appropriate auxiliary equipment, as well as the maintenance and replacement ( i.e., capital expenditures) of that equipment, for the benefit of the RSVFP.

4. Definition of “Vending Machine”

Regarding the proposed revisions to the listed payment methods in the definition of “vending machine,” to the extent that this updated technology has not been adopted, some blind vendors may choose to install new electronic readers on their vending machines. A new electronic reader costs approximately $300 to $500.^[52] Since the addition of an electronic reader to a vending machine would be an improvement to equipment as a capital expenditure, VR agencies and SLAs may pay for the improvement using VR program funds and RSVFP set-aside funds (as replacement of equipment).

The Department welcomes public comment on the number of vending machines under the RSVFP that do not have electronic payment options and the average cost to purchase an electronic reader. In addition, the Department welcomes public comment on whether vending machines that accept electronic payment in addition to cash payment result in more vending machine income, and if so, how much more than those vending machines that only accept cash payment. We also are particularly interested in comments regarding the impact the increased revenues to blind vendors will have on the RSVFP with respect to set-aside funds and, in turn, the impact this could have on a State's ability to generate more match under the VR program, thereby further potentially increasing costs to the State and Federal Governments.

The proposed regulations would no longer permit dispensing of services through vending machines; however, this proposed change will not likely have any impact on the RSVFP since we are unaware of blind vendors operating vending machines that dispense services and blind vendors may continue to sell services through vending facilities and use appropriate auxiliary equipment to provide those services.

Similarly, we do not expect the proposed change to remove the specific exclusion for machines providing recreational services and pay telephones to have any impact since the machines that sell such services would continue not to meet the definition of a vending machine under the proposed regulations. As a result, the Department does not estimate any cost associated with these proposed changes. To ensure that we are not overlooking any potential costs associated with these proposed changes, as noted earlier, we invite public comment on whether there is any impact of the proposed change on the RSVFP.

5. Priority on Certain Federal Property

The proposed revisions to align the application of the priority for blind vendors on Federal property administered by NPS and NASA with the proposed definition of “vending facility”, as well as the related changes, are likely to result in additional costs for State agencies and NPS, and potentially NASA. To the extent that licensed blind vendors receive a priority on NPS and NASA sites, and the SLAs receive a permit to operate a vending facility, there would likely be significant start-up costs to SLAs, and to VR agencies to the extent VR funds are used to benefit the RSVFP under these circumstances, for the new vending facilities. The actual cost would vary significantly based on the number of NPS and NASA sites on which SLAs receive a permit, the type of vending facility on each site, and the number of locations. In addition to the costs associated with new equipment and start-up supplies, these proposed revisions would likely result in a significant amount of time for SLA staff to consult with the on-site official responsible for each NPS and NASA site to determine what articles and services are suitable for sale at a particular location.

In addition, if private contractors are already operating vending facilities, including vending machines, on NPS or NASA sites, the NPS or NASA, would have to provide the priority to SLAs for blind vendors to operate such vending facilities when a contractor's contract expires. However, there is no guarantee that an SLA would seek to obtain a permit at these sites. A consequence of more blind vendors operating vending facilities on NPS or NASA property could be that the Federal agency would decline to enter into future contracts with private companies currently operating those vending facilities. The Department recognizes this could be a cost to private companies. However, as noted previously, it is unclear how many private companies this would affect.

We note that if no blind vendor is available to operate vending machines on certain NPS or NASA properties and the Federal agency does use a private company for that operation, the agency is required to provide up to 50 percent of the vending machine income it receives to the SLA. As noted earlier, any income an SLA receives due to these proposed regulations would increase the amount of funds the SLA has at its disposal to pay for the costs of the equipment. These expenditures can be used by the State to count toward its match requirement under the VR program, thereby increasing its ability to potentially access more VR program funds ( i.e., more of their own VR grant funds and, to the extent funds are available, more funds during reallotment), and thus potentially increasing the costs to the State and the Federal government. The Department welcomes public comment on the cost impact to SLAs and Federal agencies of these revisions, particularly the NPS and NASA, as well as the impact they could have on the VR program.

6. Technical Changes

The Department does not expect there to be any additional costs, beyond the time needed to review the revised regulations and develop revised policies and procedures, as needed, associated with the non-substantive wording and organizational revisions to 34 CFR 395.1(x), including removing the phrase “and including the vending or exchange of changes” when describing the authorization to sell lottery tickets; and removal of the qualifier “for purposes of assigning vending machine income under this part” to 34 CFR 395.1(y). ( print page 2571)

Monetized Costs of the Proposed Regulations

1. Administrative Costs

While some SLAs may need to only align the definitions in their policies and procedures with the new proposed Federal definitions applicable to the RSVFP, other SLAs and VR agencies will likely need to make extensive changes. To ensure that the Department does not underestimate the burden associated with these proposed regulations in part 395, we are calculating the administrative cost burden to be $209,299.41 assuming all 51 SLAs operating their RSVFP review the revised regulations and make conforming changes to their policies and procedures.

The Department estimates that each SLA would have one director spend an average of 25 hours, at an hourly rate of $135.72 ($67.86 ^[53] per hour multiplied by 2.0 to reflect the loaded wage rate), reviewing the regulations and making conforming changes to their rules. This would result in a total cost to the State Government of $173,043 (51 SLAs × 25 hours × $135.72 per hour).

The Department estimates that each SLA would have one State Government attorney spend an average of three hours, at an hourly rate of $102.32 ($51.16 per hour multiplied by 2.0 to reflect the loaded wage rate), reviewing the regulations and the conforming changes to their rules. This would result in a total cost to the State Government of $15,654.96 (51 SLAs × 3 hours per SLA × $102.32 per hour).

The Department estimates that it would take three hours for an RSA staff member to review each State rule submitted. This would result in a total review time of 153 hours, with an hourly loaded wage rate to the Government of $61.96. This would result in a total cost to the Government of $9,479.88 (51 submissions × 3 hours per submission × $61.96 per hour).

The Department estimates that it would take three hours for an attorney from the Office of the General Counsel to review each State rule submitted. This would result in a total review time of 153 hours, with an hourly loaded wage rate to the Federal government of $72.69. This would result in a total cost to the Federal government of $11,121.57 (51 submissions × 3 hours per submission × $111.03 per hour).

In total, we estimate that total costs of $188,698 to State governments and total costs of $20,601 to the Department in Year 1 for grand total Year 1 cost of $209,299. The Department estimates net present value cost of $209,299 over ten years. This is equivalent to an annualized net cost of $23,300 over ten years.

Annual Administrative Costs, Years 1 Through 10

Year	Net annual costs
Year 1	$209,299
Year 2	0
Year 3	0
Year 4	0
Year 5	0
Year 6	0
Year 7	0
Year 8	0
Year 9	0
Year 10	0
Total Net Present Value (NPV)	209,299
Annualized	23,300

Assumptions

We assume that licensed blind vendors and vending facility customers would support the proposed changes as the proposed changes are likely to result in the availability of a wider variety of articles sold on Federal and other property, more modern business models focused on customer convenience, additional payment options in vending machines, and a resultant increase in the revenue generated by vending facilities and vending machines.

While we assume that SLAs would support most of the proposed changes, some SLAs may have concerns that these changes could cause them to consider altering plans in their State.

We acknowledge that some Federal agencies may have concerns about the proposed changes to what can be sold through vending facilities and machines. Specifically, because the definition of vending machines would be clarified by defining “articles” to include tangible personal property, additional articles that have not traditionally been considered articles sold through vending machines would fall under the proposed definition. As a result, the requirement for extending a priority to licensed blind vendors for vending machines on Federal property would apply, as well as the vending machine income sharing provisions in the R-S Act requiring Federal agencies to pay SLAs a portion of vending machine income earned by agencies when contractors operate vending machines on the Federal property. In addition, the revised definitions may raise concerns for such agencies about applying the priority for blind vendors to operate more modern business models for vending facilities where they had not previously considered those business models covered under the R-S Act.

Accounting Statement

As required by OMB Circular A-4, in the following table, the Department has prepared an accounting statement showing the classification of the expenditures associated with the provisions of these proposed regulations. This table provides the best estimate of the changes in annual costs of these proposed regulations. As discussed throughout the RIA, the Department is not able to monetize the projected benefits of these proposed regulations because it is unclear how many licensed blind vendors and SLAs will take advantage of the flexibilities afforded by these proposed regulations since some are already doing so based on the R-S Act itself. Finally, as the Department described previously in the background of the preamble, the RSVFP suffered some declines as a result of the COVID-19 pandemic and the closure of Federal buildings. However, even if more individuals, whether employees or visitors, were to frequent Federal office buildings and RSVFP vending facilities and vending machines, their increased use would result in increased costs to the RSVFP. Therefore, it is difficult to project any net benefit these policy changes would have on the RSVFP.

Accounting Statement Annualized Costs

	Annualized costs
	2% discount rate
SLAs updating policies and procedures	$21,007
( print page 2572)
Department of Education staff review	2,293
Total	23,300