[Federal Register Volume 79, Number 52 (Tuesday, March 18, 2014)]
[Proposed Rules]
[Pages 15052-15058]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-05491]


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DEPARTMENT OF AGRICULTURE

Rural Business-Cooperative Service

Rural Housing Service

Rural Utilities Service

Farm Service Agency

7 CFR Part 1940

RIN 0570-AA30


Methodology and Formulas for Allocation of Loan and Grant Program 
Funds

AGENCY: Rural Business-Cooperative Service, Rural Housing Service, 
Rural Utilities Service, and Farm Service Agency, USDA.

ACTION: Proposed rule.

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SUMMARY: The Rural Business-Cooperative Service (RBS) is proposing to 
amend its regulations found in 7 CFR part 1940, subpart L for 
allocating program funds to its State Offices. RBS is proposing to 
amend 7 CFR part 1940, subpart L to add three programs--the Rural 
Energy for America Program, the Value-Added Producer Grant program, and 
the Intermediary Relending Program. In addition, RBS is proposing 
revisions to its state allocation formulae for existing programs within 
7 CFR part 1940, subpart L to account for changes in data reported by 
the U.S. Bureau of the Census' decennial Census. RBS is also proposing 
to make various other changes including: revising the weight 
percentages associated with each of the allocation criteria; providing 
flexibility in determining when not to make state allocations for a 
program; restricting the use of the transition formula and changing the 
limitations on how much program funds can change when the transition 
formula is used; adding provisions for making state allocation for 
other RBS programs, including new ones; and providing consistency, 
where necessary, in the allocation of RBS program funds to State 
Offices.

DATES: Written comments must be received on or before May 19, 2014 to 
be assured of consideration.

ADDRESSES: Submit your comments on this rule by any of the following 
methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Submit written comments via the U.S. Postal Service 
to the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, STOP 0742, 1400 Independence Avenue SW., 
Washington, DC 20250-0742.
     Hand Delivery/Courier: Submit written comments via Federal 
Express Mail, or other courier service requiring a street address, to 
the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, 300 7th Street SW., 7th Floor, Washington, 
DC 20024.
    All written comments will be available for public inspection during 
regular work hours at the 300 7th Street SW., 7th Floor address listed 
above.

FOR FURTHER INFORMATION CONTACT: Chad Parker, Deputy Admininstrator 
Business Programs, Rural Business-Cooperative Service, U.S. Department 
of Agriculture, STOP 3220, 1400 Independence Avenue SW., Washington, DC 
20250-3225; email: chad.parker@wdc.usda.gov; telephone (202) 720-7558.

SUPPLEMENTARY INFORMATION: 

Executive Order 12866, Classification

    This rule has been determined to be not significant for purposes of 
Executive Order 12866 and has not been reviewed by the Office of 
Management and Budget.

Programs Affected

    The Catalog of Federal Domestic Assistance Program numbers for the 
programs affected by this action are 10.352, Value-Added Producer Grant 
Program; 10.767, Intermediary Relending Program; 10.768, Business and 
Industry Guaranteed Loan Program; 10.769, Rural Business Enterprise 
Grant Program; 10.773, Rural Business Opportunity Grant Program, 
10.868, Rural Energy for America Program.

Executive Order 12372, Intergovernmental Consultation

    This action is not subject to the provisions of Executive Order 
12372, which requires intergovernmental consultation with state and 
local officials.

Executive Order 12988, Civil Justice Reform

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. The Agency has determined that this rule meets 
the applicable standards provided in section 3 of the Executive Order.

[[Page 15053]]

Additionally, (1) all state and local laws and regulations that are in 
conflict with this rule will be preempted; (2) no retroactive effect 
will be given to the rule; and (3) administrative appeal procedures, if 
any, must be exhausted before litigation against the Department or its 
agencies may be initiated, in accordance with the regulations of the 
National Appeals Division of USDA at 7 CFR part 11.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' Rural Development has determined 
that this action does not constitute a major Federal action 
significantly affecting the quality of the human environment and, in 
accordance with the National Environmental Policy Act (NEPA) of 1969, 
42 U.S.C. 4321 et seq., an Environmental Impact Statement is not 
required.

Unfunded Mandates Reform Act

    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the Unfunded Mandates Reform Act of 1995) for 
State, local, and tribal governments or the private sector. Thus, this 
rule is not subject to the requirements of sections 202 and 205 of the 
Unfunded Mandates Reform Act of 1995.

Regulatory Flexibility Act

    Under section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 
605(b), the Agency certifies that this rule will not have a significant 
economic impact on a substantial number of small entities because the 
action will not affect a significant number of small entities as 
defined by the Regulatory Flexibility Act (5 U.S.C. 601). RBS made this 
determination based on the fact that this action only impacts internal 
Agency procedures for determining how much of available program funds 
are allocated to each state. Small entities will not be impacted to a 
greater extent than large entities.

Executive Order 13132, Federalism

    The policies contained in this rule do not have any substantial 
direct effect on states, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
proposed rule impose substantial direct compliance costs on state and 
local governments. Therefore, consultation with states is not required.

Executive Order 13175, Consultation and Coordination with Indian Tribal 
Governments

    This executive order imposes requirements on Rural Development in 
the development of regulatory policies that have tribal implications or 
preempt tribal laws. Rural Development has determined that the proposed 
rule does not have a substantial direct effect on one or more Indian 
tribe(s) or on either the relationship or the distribution of powers 
and responsibilities between the Federal Government and Indian tribes. 
Thus, this proposed rule is not subject to the requirements of 
Executive Order 13175. If interested, please direct Tribal Consultation 
inquiries and comments to Rural Development's Native American 
Coordinator at aian@wdc.usda.gov or (720) 544-2911.

Paperwork Reduction Act

    There are no reporting and recordkeeping requirements associated 
with this proposed rule.

E-Government Act Compliance

    Rural Development is committed to complying with the E-Government 
Act, to promote the use of the Internet and other information 
technologies, to provide increased opportunities for citizens to access 
Government information and services electronically.

Background

    RBS proposes to amend its regulations for allocating program funds 
among its State Offices. This action is necessary to provide a 
regulatory basis for allocating funds for the Rural Energy for America 
Program, the Value-Added Producer Grant program, and the Intermediary 
Relending Program. In addition, because of changes to the reporting of 
data by the Census Bureau, RBS needs to use an alternative data source 
for unemployment rates. Other changes are being proposed to:
     Allow RBS to not allocate funds to states if RBS 
determines that it is in the Federal Government's best financial 
interests not to make state allocations;
     adjust the application of the transition allocation 
formula;
     address making state allocations for RBS programs that are 
not specifically identified in 7 CFR part 1940, subpart L;
     provide consistency among RBS programs; and
     remove unnecessary text.

Discussion of Changes

A. Addition of New Programs
    As discussed below, RBS is proposing to add three new programs to 7 
CFR part 1940, subpart L. The inclusion of a specific program within 7 
CFR part 1940, subpart L does not mean that RBS is bound to make state 
allocations for that program each fiscal year. The current rule allows, 
and the proposed rule continues to allow, RBS to not make state 
allocations for a particular program in any fiscal year when funds 
allocated to a program are insufficient. Thus, for example, including 
the Value-Added Producer Grant program does not mean that RBS will 
allocate program funds to the States each fiscal year.
    1. Rural Energy for America Program (REAP). RBS is proposing to add 
a new section to 7 CFR part 1940, subpart L, to address allocating REAP 
funds for renewable energy system projects and energy efficiency 
improvement projects to its State Offices. (Note: This proposed 
addition does not apply to renewable energy system feasibility study 
grants, the energy audit grants, or the renewable energy development 
assistance grants.) The proposed sections are essentially identical to 
those currently included for the other RBS programs (i.e., Business and 
Industry Guaranteed Loans, Rural Business Enterprise Grants, and Rural 
Business Opportunity Grants). The key consideration for REAP is the 
criteria to use in the formula for making state allocations.
    RBS determined that the first two criteria used for the other RBS 
programs are also appropriate for REAP. These two criteria are:
     State's percentage of national rural population
     State's percentage of national rural population with 
incomes below the poverty level
    The third criterion currently used is the State's percentage of 
national nonmetropolitan unemployment. This criterion is appropriate 
for programs where job creation is a primary goal. Projects funded 
under REAP, however, are designed primarily to help agricultural 
producers and rural small businesses lower their energy costs either 
through the implementation of energy efficiency improvements or the 
purchase of renewable energy systems. While job creation is important 
to all of its programs, RBS has determined that a more appropriate 
criterion for REAP would be associated with energy, especially those 
areas of the country facing high energy costs.
    For the reasons stated above, RBS is proposing to use data 
published by the Energy Information Administration. These data include 
estimate of energy production, consumption, prices, and expenditures 
broken down by energy source and sector. The multi-

[[Page 15054]]

dimensional completeness of the data allows users to make comparisons 
across states, energy sources, sectors, and time. The data include 
primary energy of coal, natural gas and petroleum, biomass, and retail 
electricity. The value for these energy sources are reported in dollars 
per British thermal unit (Btu). The value provides a total energy cost 
on a state-wide basis.
    Lastly, RBS is proposing the following weight factors for these 
three critiera, which in part reflect the Agency's priority on 
addressing persistent poverty in rural America:
     25 percent for rural population;
     50 percent for poverty; and
     25 percent for energy costs.
    2. Value-Added Producer Grant (VAPG) Program. RBS is proposing to 
add a new section to 7 CFR part 1940, subpart L, to address allocating 
the VAPG general funds to its State Offices. This allocation of VAPG 
general funds to State Offices does not include allocation of VAPG set-
aside funds to State Offices. The proposed sections are essentially 
identical to those currently included for the other RBS programs (i.e., 
Business and Industry Guaranteed Loans, Rural Business Enterprise 
Grants, and Rural Business Opportunity Grants). The key consideration 
for VAPG is the criteria to use in the formula for making state 
allocations.
    The focus of VAPG is to provide producers with funds to add value 
to their products. RBS determined that two of the three criteria used 
for the other RBS programs are also appropriate for VAPG. These two 
criteria are:
     State's percentage of national rural population
     State's percentage of national rural population with 
incomes below the poverty level
    The third criterion currently used is the State's percentage of 
national nonmetrolpolitan unemployment. This criterion is appropriate 
for programs where job creation is a primary goal. While job creation 
is important to all of its programs, RBS has determined that a more 
appropriate criterion for VAPG would be associated with the state's 
percentage of farms.
    For the reasons stated above, RBS is proposing to use data 
published by the U.S. Department of Agriculture (USDA). The data 
provides a detailed picture of U.S. farms and ranches and the people 
who operate them. It is the only source of uniform, comprehensive 
agriculture data for every state and county in the United States. The 
USDA data provides the most accurate number of farms within a state.
    Lastly, RBS is proposing the following weight factors for these 
three criteria, which in part reflect the Agency's priority on 
addressing persistent poverty in rural America:
     25 percent for rural population;
     50 percent for poverty; and
     25 percent for number of farms.
    3. Intermediary Relending Program (IRP). The goals of the IRP are 
essentially the same as for the Business and Industry (B&I) Guaranteed 
Loan program, Rural Business Entreprise Grant (RBEG) program, and Rural 
Business Opportunity Grant (RBOG) program. Therefore, RBS is proposing 
to allocate IRP funds to the states using the same criteria and formula 
used for these three other RBS programs.
B. Data Sources for Weighting Criteria
    RBS has implemented the existing formulae using data provided by 
the U.S. Census Bureau. Beginning with the 2010 decennial Census, 
income/poverty data and unemployment data are no longer included in the 
decennial Census. Because of this change, RBS needs to update and 
clarify the data sources for the current criteria.
    1. State's percentage of national rural population (rural 
population). RBS is proposing to clearly identify that the data source 
for this criterion is the U.S. Bureau of Census' decennial Census, 
which RBS has been using.
    2. State's percentage of national rural population with incomes 
below the poverty level (poverty). After examining several alternative 
data sources, RBS determined that income data published by the Bureau 
of the Census in the American Community Survey (ACS), as found in the 
5-year survey component of the ACS, provides the best source of data 
for estimates of state-level income and poverty data, even though such 
are no longer being published in the decennial Census. RBS is also 
aware that the ACS may at some point in the future be replaced or 
discontinued. For these reasons, RBS is proposing to use ``the most 
recent 5-year survey of the American Community Survey (ACS) or other 
Census Bureau data if needed'' to indicate the source of the data to be 
used.
    3. State's percentage of national nonmetropolitan unemployment 
(unemployment). RBS also examined several alternative data sources for 
unemployment data and determined that unemployment data published by 
the Bureau of Labor Statistics provides the best source of data for 
estimates of state-level unemployment rates and for unemployment rates 
in rural or non-metropolitan areas. Therefore, RBS is proposing to use 
the ``most recent Bureau of Labor Statistics data'' as the data source 
for unemployment.
C. Criteria weight factors
    Currently, the criteria used to make state allocations are assigned 
the following weight factors to the three ``traditional'' criteria of 
rural population, rural poverty, and rural unemployemt:
     50 percent for rural population;
     25 percent for poverty; and
     25 percent for unemployment.
    While these weight factors have well served the Agency's priorities 
in the past, RBS is proposing to revise the basic weight factors for 
the ``traditional'' three criteria to reflect a greater emphasis of the 
Agency's priority to address persistent poverty in rural America. 
Specifically, RBS is proposing the following new weight factors:
     25 percent for rural population;
     50 percent for poverty; and
     25 percent for unemployment.
    The proposed changes would reduce the rural population weight 
factor from 50 to 25 percent and increase the poverty weight factor 
from 25 to 50 percent. The Agency is not proposing any change to the 
unemployment weight factor.
    As noted earlier, RBS is proposing this same distribution of weight 
factors for the REAP and VAPG programs, with 50 percent factor for 
poverty and 25 percent factors for the other two weighting criteria for 
those two programs.
D. Not Making State Allocations
    The current regulations allow RBS to not allocate a program's 
funding to the states when funding in a particular fiscal year is 
insufficient. RBS is proposing to add a second condition such that RBS 
may elect not to allocate a program's funds to States in a particular 
fiscal year if RBS determines that it is in the Federal Government's 
best financial interests not to make state allocations. RBS is 
proposing this new condition to provide administrative flexibility and 
to account for time and availability of RBS resources.
E.Transition Formula
    The purpose of the transition formula is to reduce the impact of a 
large change to any one state's allocation when new decennial Census 
data are used. Under the proposed rule, except for rural population 
(which would still be changed every 10 years based on the decennial 
Census), the state allocation formulae would be rerun every year 
reflecting new yearly data for the other two criteria. As a result, RBS 
does not expect a large change to any one state's

[[Page 15055]]

allocation as a result of applying the formulae each year. Therefore, 
RBS is proposing that the transition formula would not be used except 
in instances when RBS revises the weight factors for a program's 
criteria. RBS notes that, under the current regulation found in the 
Code of Federal Regulations, the transition formula only applies to the 
RBEG program; it does not apply to the B&I Guaranteed Loan program and 
the RBOG program.
    RBS is also proposing revising the amount by which a state's 
funding can change when the transition formula is applied. Currently, 
the regulation limits the amount a state's funding can change to either 
plus or minus 15 percent over the previous year's allocation amount. 
RBS is proposing to make two changes to when the transition formula is 
applied.
    1. RBS is proposing to eliminate the restriction on how much a 
state's allocation can increase over the previous year's allocation. 
Currently, when the allocation formula is applied, a state's allocation 
cannot increase more than 15 percent over its previous year's 
allocation for that program. RBS has decided that, if a state's 
condition has changed significantly enough as to warrant an increase in 
allocation, then there should be no limit on how much of an increase 
that state can receive.
    2. RBS is proposing to keep a restriction on how much a state's 
allocation can decrease from one year to the next, but to limit the 
decrease to 10 percent. This allows a ``softer'' landing for those 
states receiving a reduction in allocation.
F. Other Existing RBS Programs and Newly Authorized Programs
    As proposed, the revised 7 CFR part 1490, subpart L addresses six 
RBS programs for which RBS intends to make state allocations of each 
programs' funds. There are other existing RBS programs that are 
administered at the National Office level, but for which RBS does not 
intend, at this time, to make state allocations. However, it is 
possible that RBS may decide in the future to make state allocations 
for an existing program not currently included in 7 CFR 1940, subpart 
L. In addition, as new legislation is passed, RBS may be required to 
develop new programs, as occurred with the passage of the 2008 Farm 
Bill. For such newly authorized programs, RBS may determine that 
allocating the program's funds to the states is appropriate.
    RBS is proposing to add a new section to address these situations. 
As proposed, RBS will first determine whether or not one of the three 
formulae in proposed Sec.  1940.588, Sec.  1940.589, or Sec.  1940.590 
is appropriate for the program.
    1. If RBS determines that one of the three formulae in these 
section matches, or closely matches, the purposes of the ``new'' 
program, RBS will publish a Federal Register notice informing the 
public as to which formula RBS will use for making state allocations 
for the program.
    2. If RBS determines that none of the three state allocation 
procedures is appropriate for the ``new'' program, RBS will identify 
and publish a preliminary allocation formula via the Federal Register. 
RBS will then use that preliminary formula to begin making immediate 
state allocation. RBS will then identify a new allocation formula and 
associated administrative requirements for incorporation into 7 CFR 
1940, subpart L via a proposed rule published in the Federal Register 
for public comment. Until the new allocation formula is finalized, the 
Agency will continue to use the preliminary allocation formula.
G. Miscellaneous
    RBS is also proposing to make the changes to consolidate similar 
programs, create consistency between the programs, and remove text that 
is administrative in nature.
    1. Consolidation. RBS is proposing to consolidate the B&I 
Guaranteed Loan program, the RBEG program, and the RBOG program into 
one section, because they use the same criteria for making state 
allocations. The IRP will also be included in this same section.
    2. Base allocations. RBS is proposing to include the following in 
the provisions for base allocations: ``Jurisdictions receiving 
administrative allocations do not receive base allocations.'' The 
current provisions for RBEG and RBOG do not contain this text, but it 
is applicable to both programs.
    3. Administrative allocations. RBS is proposing to include the 
following in the provisions for administrative allocations: 
``Jurisdictions receiving formula allocations do not receive 
administrative allocations.'' The current provisions for RBEG do not 
contain this text, but it is applicable to the program. In addition, 
the administrative allocations provisions would now apply to the RBOG 
program.
    4. Reserve. RBS is proposing to remove the following text from the 
provisions that affect the B&I Guaranteed Loan program because it is 
unnecessary for and unrelated to the implementation of the allocation: 
``States may request reserve funds from the B&I reserve when all of the 
state allocation has been obligated or will be obligated to the project 
for which the request is made.''
    5. Pooling of funds. RBS is proposing to revise these provisions to 
point to the general provisions for pooling and removing all other 
text, which was not necessary. The changes are not substantive.
    6. Availability of the allocation. RBS is proposing to remove the 
following text from the B&I Guaranteed Loan program provisions because 
it is unnecessary for and unrelated to the implementation of the 
allocation: ``There is a 6-day waiting period from the time project 
funds are reserved to the time they are obligated.''
    RBS is proposing to remove the following text from the RBEG program 
provisions because it is only explanatory in nature and is unnecessary 
in determining how allocations are made: ``The allocation of funds is 
made available for States to obligate on an annual basis although the 
Office of Management and Budget apportions funds to the Agency on a 
quarterly basis.''

List of Subjects in 7 CFR Part 1940

    Administrative practice and procedure, Agriculture, Allocations, 
Grant programs--Housing and community development, Loan programs--
Agriculture, Rural areas.
    For the reasons set forth in the preamble, we propose to amend 
chapter XVIII, title 7, of the Code of Federal Regulations as follows:

CHAPTER XVIII--RURAL HOUSING, RURAL BUSINESS-COOPERATIVE SERVICE, RURAL 
UTILITIES SERVICE, AND FARM SERVICE AGENCY, DEPARTMENT OF AGRICULTURE

PART 1940--GENERAL

0
1. The authority citation for part 1940 continues to read as follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.

Subpart L--Methodology and Formulas for Allocation of Loan and 
Grant Program Funds

0
2. The Table of Contents is amended to read as follows:
Sec.
* * * * *
1940.588 Business and Industry Guaranteed and Direct Loans, Rural 
Business Enterprise Grants, Rural Business Opportunity Grants, and 
Intermediary Relending Program.
1940.589 Rural Energy for America Program.

[[Page 15056]]

1940.590 Value-Added Producer Grant Program.
1940.593 Other Rural Business-Cooperative Service Programs.
* * * * *
0
3. Section 1940.588 is revised to read as follows:


Sec.  1940.588  Business and Industry Guaranteed and Direct Loans, 
Rural Business Enterprise Grants, Rural Business Opportunity Grants, 
and Intermediary Relending Program.

    The Agency will allocate funds to the States each Federal fiscal 
year for the programs identified in this section using the procedures 
specified in paragraph (a) of this section. If the Agency determines 
that it will not allocate funds to the States for a program identified 
in this section in a particular Federal fiscal year, the Agency will 
announce this decision in a notice published in the Federal Register. 
The conditions under which the Agency will not allocate a program's 
funds to the States are identified in paragraph (b) of this section.
    (a) Procedures for allocating funds to the States. Each Federal 
fiscal year, the Agency will use the amount available to the program 
and the procedures identified in paragraphs (a)(2) through (a)(10) of 
this section to determine the amount of program funds to allocate to 
each of the States. The Agency will make the allocation calculation 
each Federal fiscal year.
    (1) Amount available for allocations. See Sec.  1940.552(a) of this 
subpart.
    (2) Basic formula criteria, data source and weight. See Sec.  
1940.552(b) of this subpart.
    (i) The criteria used in the basic formula are:
    (A) State's percentage of national rural population.
    (B) State's percentage of national rural population with incomes 
below the poverty level.
    (C) State's percentage of national nonmetropolitan unemployment.
    (ii) The data sources for each of the criteria identified in 
paragraph (a) of this section are:
    (A) For the criterion specified in paragraph (a)(2)(i)(A), the most 
recent decennial Census data.
    (B) For the criterion specified in paragraph (a)(2)(i)(B), the most 
recent 5-year survey of the American Community Survey (ACS) or other 
Census Bureau data if needed.
    (C) For the criterion specified in paragraph (a)(2)(i)(C), the most 
recent Bureau of Labor Statistics data.
    (iii) Each criterion is assigned a specific weight factor according 
to its relevance in determining need. The percentage representing each 
criterion is multiplied by the weight factor and summed to arrive at 
State Factor (SF). The SF cannot exceed 0.05. The Agency may elect to 
use different weight factors than those identified in this paragraph by 
publishing a timely notice in the Federal Register.

SF = (criterion (a)(2)(i)(A) x 25 percent) + (criterion (a)(2)(i)(B) x 
50 percent) + (criterion (a)(2)(i)(C) x 25 percent)

    (iv) The Agency will recalculate, as necessary, each criterion 
specified in paragraph (a)(2)(i) of this section each year. In making 
these recalculations, the Agency will use the most recent data 
available to the Agency as of October 1 of the fiscal year for which 
the Agency is making state allocations. Each criterion's value 
determined at the beginning of a fiscal year for a program will be used 
for that entire fiscal year, regardless of when that fiscal year's 
funding becomes available for the program.
    (3) Basic formula allocation. See Sec.  1940.552(c) of this 
subpart.
    (4) Transition formula. The transition provisions specified in 
Sec.  1940.552(d) of this subpart apply to the programs identified in 
this section except as follows:
    (i) The transition formula will be used only when the weight 
factors identified in paragraph (a)(2)(iii) of this section are 
modified; and
    (ii) When the transition formula is used, there will be no upper 
limitation on the amount that a State's allocation can increase over 
its previous year's allocation and the maximum percentage that funding 
will be allowed to decrease for a State will be 10 percent from its 
previous year's allocation.
    (5) Base allocations. See Sec.  1940.552(e) of this subpart. 
Jurisdictions receiving administrative allocations do not receive base 
allocations.
    (6) Administrative allocations. See Sec.  1940.552(f) of this 
subpart. Jurisdictions receiving formula allocations do not receive 
initial administrative allocations.
    (7) Reserve. See Sec.  1940.552(g) of this subpart.
    (8) Pooling of funds. See Sec.  1940.552(h) of this subpart.
    (9) Availability of allocation. See Sec.  1940.552(i) of this 
subpart.
    (10) Suballocation by the State Director. Suballocation by the 
State Director is authorized for each program covered by this section.
    (b) Conditions for not allocating program funds to the States. The 
Agency may elect to not allocate program funds to the States whenever 
one of the conditions identified in paragraphs (b)(1) or (b)(2) of this 
section occurs.
    (1) Funds allocated in a fiscal year to a program identified in 
this section are insufficient, as provided for in Sec.  1940.552(a) of 
this subpart.
    (2) The Agency determines that it is in the best financial interest 
of the Federal Government not to make a State allocation for any 
program identified in this section and that the exercise of this 
determination is not in conflict with applicable law.

0
4. Section 1940.589 is revised to read as follows:


Sec.  1940.589  Rural Energy for America Program.

    The Agency will allocate funds to the States each Federal fiscal 
year for renewable energy system and energy efficiency improvement 
projects under the Rural Energy for America Program (REAP) using the 
procedures specified in paragraph (a) of this section. If the Agency 
determines that it will not allocate funds to the States for REAP in a 
particular Federal fiscal year, the Agency will announce this decision 
in a notice published in the Federal Register. The conditions under 
which the Agency will not allocate the program's funds to the States 
are identified in paragraph (b) of this section.
    (a) Procedures for allocating funds to the States. Each Federal 
fiscal year, the Agency will use the amount available to the program 
and the procedures identified in paragraphs (a)(2) through (a)(10) of 
this section to determine the amount of program funds to allocate to 
each of the States. The Agency will make this calculation each Federal 
fiscal year.
    (1) Amount available for allocations. See Sec.  1940.552(a) of this 
subpart.
    (2) Basic formula criteria, data source, and weight. See Sec.  
1940.552(b) of this subpart.
    (i) The criteria used in the basic formula are:
    (A) State's percentage of national rural population.
    (B) State's percentage of national rural population with incomes 
below the poverty level.
    (C) State's percentage of energy cost.
    (ii) The data sources for each of the criteria identified in 
paragraph (a)(2)(i) of this section are:
    (A) For the criterion specified in paragraph (a)(2)(i)(A), the most 
recent decennial Census data.
    (B) For the criterion specified in paragraph (a)(2)(i)(B), the most 
recent 5-year survey of the American Community Survey (ACS) or other 
Census Bureau data if needed.

[[Page 15057]]

    (C) For the criterion specified in paragraph (a)(2)(i)(C), the most 
recent U.S. Energy Information Administration data.
    (iii) Each criterion is assigned a specific weight factor according 
to its relevance in determining need. The percentage representing each 
criterion is multiplied by the weight factor and summed to arrive at 
State Factor (SF). The SF cannot exceed 0.05. The Agency may elect to 
use different weight factors than those identified in this paragraph by 
publishing a timely notice in the Federal Register.

SF = (criterion (a)(2)(i)(A) x 25 percent) + (criterion (a)(2)(i)(B) x 
50 percent) + (criterion (a)(2)(i)(C) x 25 percent)

    (iv) The Agency will recalculate, as necessary, each criterion 
specified in paragraph (a)(2)(i) of this section each year. In making 
these recalculations, the Agency will use the most recent data 
available to the Agency as of October 1 of the fiscal year for which 
the Agency is making state allocations. Each criterion's value 
determined at the beginning of a fiscal year for a program will be used 
for that entire fiscal year, regardless of when that fiscal year's 
funding becomes available for the program.
    (3) Basic formula allocation. See Sec.  1940.552(c) of this 
subpart.
    (4) Transition formula. The transition provisions specified in 
Sec.  1940.552(d) of this subpart apply to the program(s) identified in 
this section except as follows:
    (i) The transition formula will be used only when the weight 
factors identified in paragraph (a)(2)(iii) of this section are 
modified; and
    (ii) When the transition formula is used, there will be no upper 
limitation on the amount that a State's allocation can increase over 
its previous year's allocation and the maximum percentage that funding 
will be allowed to decrease for a State will be 10 percent from its 
previous year's allocation.
    (5) Base allocations. See Sec.  1940.552(e) of this subpart. 
Jurisdictions receiving administrative allocations do not receive base 
allocations.
    (6) Administrative allocations. See Sec.  1940.552(f) of this 
subpart. Jurisdictions receiving formula allocations do not receive 
initial administrative allocations.
    (7) Reserve. See Sec.  1940.552(g) of this subpart.
    (8) Pooling of funds. See Sec.  1940.552(h) of this subpart.
    (9) Availability of the allocation. See Sec.  1940.552(i) of this 
subpart.
    (10) Suballocation by the State Director. Suballocation by the 
State Director is authorized for this program.
    (b) Conditions for not allocating program funds to the States. The 
Agency may elect to not allocate REAP program funds to the States 
whenever one of the conditions identified in paragraphs (b)(1) or 
(b)(2) of this section occurs.
    (1) Funds allocated in a fiscal year to REAP are insufficient, as 
provided for in Sec.  1940.552(a) of this subpart.
    (2) The Agency determines that it is in the best financial interest 
of the Federal Government not to make a State allocation for REAP and 
that the exercise of this determination is not in conflict with 
applicable law.

0
5. Section 1940.590 is added to read as follows:


Sec.  1940.590  Value-Added Producer Grant Program.

    The Agency will allocate the general funds to the States each 
Federal fiscal year for the Value-Added Producer Grant (VAPG) program 
using the procedures specified in paragraph (a) of this section. If the 
Agency determines that it will not allocate funds to the States for the 
VAPG program in a particular Federal fiscal year, the Agency will 
announce this decision in a notice published in the Federal Register. 
The conditions under which the Agency will not allocate the program's 
funds to the States are identified in paragraph (b) of this section.
    (a) Procedures for allocating funds to the States. Each Federal 
fiscal year, the Agency will use the amount available to the program 
and the procedures identified in paragraphs (a)(2) through (a)(10) of 
this section to determine the amount of program funds to allocate to 
each of the States. The Agency will make this calculation each Federal 
fiscal year.
    (1) Amount available for allocations. See Sec.  1940.552(a) of this 
subpart.
    (2) Basic formula criteria, data source, and weight. See Sec.  
1940.552(b) of this subpart.
    (i) The criteria used in the basic formula are:
    (A) State's percentage of national rural population.
    (B) State's percentage of national rural population with incomes 
below the poverty level.
    (C) State's percentage of total farms.
    (ii) The data sources for each of the criteria identified in 
paragraph (a)(2)(i) of this section are:
    (A) For the criterion specified in paragraph (a)(2)(i)(A), the most 
recent decennial Census data.
    (B) For the criterion specified in paragraph (a)(2)(i)(B), the most 
recent 5-year survey of the American Community Survey (ACS) or other 
Census Bureau data if needed.
    (C) For the criterion specified in paragraph (a)(2)(i)(C), the most 
recent U.S. Department of Agriculture data.
    (iii) Each criterion is assigned a specific weight factor according 
to its relevance in determining need. The percentage representing each 
criterion is multiplied by the weight factor and summed to arrive at 
State Factor (SF). The SF cannot exceed 0.05. The Agency may elect to 
use different weight factors than those identified in this paragraph by 
publishing a timely notice in the Federal Register.

SF = (criterion (a)(2)(i)(A) x 25 percent) + (criterion (a)(2)(i)(B) x 
50 percent) + (criterion (a)(2)(i)(C) x 25 percent)

    (iv) The Agency will recalculate, as necessary, each criterion 
specified in paragraph (a)(2)(i) of this section each year. In making 
these recalculations, the Agency will use the most recent data 
available to the Agency as of October 1 of the fiscal year for which 
the Agency is making state allocations. Each criterion's value 
determined at the beginning of a fiscal year for a program will be used 
for that entire fiscal year, regardless of when that fiscal year's 
funding becomes available for the program.
    (3) Basic formula allocation. See Sec.  1940.552(c) of this 
subpart.
    (4) Transition formula. The transition provisions specified in 
Sec.  1940.552(d) of this subpart apply to the program(s) identified in 
this section except as follows:
    (i) The transition formula will be used only when the weight 
factors identified in paragraph (a)(2)(iii) of this section are 
modified; and
    (ii) When the transition formula is used, there will be no upper 
limitation on the amount that a State's allocation can increase over 
its previous year's allocation and the maximum percentage that funding 
will be allowed to decrease for a State will be 10 percent from its 
previous year's allocation.
    (5) Base allocations. See Sec.  1940.552(e) of this subpart. 
Jurisdictions receiving administrative allocations do not receive base 
allocations.
    (6) Administrative allocations. See Sec.  1940.552(f) of this 
subpart. Jurisdictions receiving formula allocations do not receive 
initial administrative allocations.
    (7) Reserve. See Sec.  1940.552(g) of this subpart.
    (8) Pooling of funds. See Sec.  1940.552(h) of this subpart.
    (9) Availability of the allocation. See Sec.  1940.552(i) of this 
subpart.

[[Page 15058]]

    (10) Suballocation by the State Director. Suballocation by the 
State Director is authorized for this program.
    (b) Conditions for not allocating program funds to the States. The 
Agency may elect to not allocate VAPG program funds to the States 
whenever one of the conditions identified in paragraphs (b)(1) or 
(b)(2) of this section occurs.
    (1) Funds allocated in a fiscal year to VAPG are insufficient, as 
provided for in Sec.  1940.552(a) of this subpart.
    (2) The Agency determines that it is in the best financial interest 
of the Federal Government not to make a State allocation for VAPG and 
that the exercise of this determination is not in conflict with 
applicable law.

0
6. Section 1940.593 is revised to read as follows:


Sec.  1940.593  Other Rural Business-Cooperative Service Programs.

    If the Agency determines that it is in the best interest of the 
Federal government to allocate funds to States for existing RBS 
programs other than those identified in Sec. Sec.  1940.588 through 
1940.590 of this subpart and for programs new to RBS (e.g., through new 
legislation), the Agency will use the process identified in paragraph 
(a) or (b) of this section.
    (a) If the Agency determines that one of the State allocation 
procedures in Sec.  1940.588, Sec.  1940.589, or Sec.  1940.590 is 
appropriate for the program, the Agency will publish a Federal Register 
notice identifying the program and which State allocation procedure 
will be used for the program.
    (b) If the Agency determines that none of the procedures specified 
in Sec.  1940.588, Sec.  1940.589, or Sec.  1940.590 is appropriate for 
the program, the Agency will implement the following steps:
    (1) The Agency will either develop a preliminary state allocation 
formula and administrative procedures specific to the requirements of 
the new program or use whichever of the three procedures in Sec.  
1940.588, Sec.  1940.589, or Sec.  1940.590 the Agency determines most 
closely matches the purpose of the program. The Agency will publish in 
the Federal Register the state allocation formula and adminstrative 
procedures that it will use initially for the new program.
    (2) The Agency will develop a state allocation formula and 
administrative provisions specific to the new program and publish them 
as a proposed rule change to this part in the Federal Register for 
public comment.
    (3) Until the program's state allocation formula and administrative 
requirements are finalized, the Agency will use the preliminary state 
allocation formula established under paragraph (b)(1) of this section 
to make state allocations and administer the new program.

    Dated: March 4, 2014.
Doug O'Brien,
Deputy Under Secretary, Rural Development.
    Dated: February 27, 2014.
Michael Scuse,
Under Secretary, Farm and Foreign Agricultural Services.
[FR Doc. 2014-05491 Filed 3-17-14; 8:45 am]
BILLING CODE 3410-XY-P