State Children's Health Insurance Program (SCHIP); Retrospective Adjustment for Additional Allotments To Eliminate Fiscal Year (FY) 2007 Funding Shortfalls; Final SCHIP Allotments for FYs 2008 and 2009; Redistribution of Unused SCHIP FY 2005 Allotments To Eliminate FY 2008 Funding Shortfalls; Additional Allotments To Eliminate FY 2008 Funding Shortfalls; and Provisions for Continued Authority for Qualifying States To Use a Portion of Certain SCHIP Funds for Medicaid Expenditures, 30112-30128 [E8-11612]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 73, Number 101 (Friday, May 23, 2008)]
[Notices]
[Pages 30112-30128]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-11612]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-2273-N2 and CMS-2265-N]
RIN 0938-AO99 and 0938-APO7


State Children's Health Insurance Program (SCHIP); Retrospective 
Adjustment for Additional Allotments To Eliminate Fiscal Year (FY) 2007 
Funding Shortfalls; Final SCHIP Allotments for FYs 2008 and 2009; 
Redistribution of Unused SCHIP FY 2005 Allotments To Eliminate FY 2008 
Funding Shortfalls; Additional Allotments To Eliminate FY 2008 Funding 
Shortfalls; and Provisions for Continued Authority for Qualifying 
States To Use a Portion of Certain SCHIP Funds for Medicaid 
Expenditures

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: This notice describes the implementation of certain funding 
provisions under title XXI of the Social Security Act (SCHIP) as 
amended by the Medicare, Medicaid, and SCHIP Extension Act of 2007 
(MMSEA), (Pub. L. 110-173), and other related SCHIP legislation. These 
funding provisions include: The retrospective adjustment of the 
additional allotments to eliminate fiscal year (FY) 2007 SCHIP funding 
shortfalls; the final FYs 2008 and 2009 SCHIP allotments; the 
redistribution of the amounts of States' unused FY 2005 allotments to 
eliminate FY 2008 SCHIP funding shortfalls; the provision of additional 
allotments to eliminate FY 2008 SCHIP funding shortfalls; and the 
provision for ``qualifying States'' to elect to use a portion of their 
available SCHIP allotments as increased Federal matching funds for 
certain expenditures in their Medicaid programs under title XIX of the 
Act.

DATES: Effective Date: This notice is effective on June 23, 2008. The 
allotments set forth in this notice are available for expenditures on 
or after the start of the identified fiscal year to which they pertain.

FOR FURTHER INFORMATION CONTACT: Richard Strauss, (410) 786-2019.

SUPPLEMENTARY INFORMATION

I. Background

A. Availability and Redistribution of SCHIP Fiscal Year Allotments

    Title XXI of the Social Security Act (the Act) sets forth the State 
Children's Health Insurance Program (SCHIP) to enable States, the 
District of Columbia, and specified Commonwealths and Territories to 
initiate and expand health insurance coverage to uninsured, low-income 
children. The 50 States, the District of Columbia, and the 
Commonwealths and Territories may implement the SCHIP through a 
separate child health program under title XXI of the Act, an expanded 
Medicaid program under Title XIX of the Act, or a combination of both.
    Federal funds appropriated for Title XXI are limited, and the law 
specifies a formula to divide the total annual appropriation into 
individual allotments available for each State, the District of 
Columbia, and each U.S. Territory and Commonwealth with an approved 
child health plan.
    Section 2104(b) of the Act requires States, the District of 
Columbia, and U.S. Territories and Commonwealths to have an approved 
child health plan for the fiscal year in order for the Secretary to 
provide an allotment for that fiscal year.
    Section 2104(e) of the Act specifies that in general the SCHIP 
allotments for a Federal fiscal year are available for payment to 
States for their expenditures under an approved State child health plan 
for an initial 3-fiscal year period of availability, including the 
fiscal year for which the allotment was provided. Section 2104(f) of 
the Act specifies that in general the amounts of States' allotments 
which are not expended during the initial 3-year period of availability 
are to be redistributed to those States that have fully spent these 
fiscal year allotments during this period of availability in accordance 
with an appropriate procedure determined by the Secretary. Furthermore, 
section 2104(e) of the Act specifies that the amounts of the 
redistributed allotments continue to be available for expenditure by 
the States receiving these redistributions to the end of the fiscal 
year in which these funds are redistributed.

[[Page 30113]]

B. Enactment of the National Institutes of Health Reform Act, the U.S. 
Troop Readiness, Veteran's Care, Katrina Recovery, and Iraq 
Accountability Appropriations Act, and Special Rules for Addressing FY 
2007 SCHIP Funding Shortfalls

    Under section 2104(e) and (f) of the Act, in general any unexpended 
SCHIP allotments remaining following the end of the initial 3-year 
period of availability would otherwise be redistributed in accordance 
with an appropriate procedure determined by the Secretary. However, 
section 201(a) of the National Institutes of Health Reform Act of 2006 
(NIHRA) (Pub. L. 109-482, enacted on January 15, 2007) amended the 
SCHIP statute to add a new section 2104(h) of the Act. This legislation 
provided for special rules to address States' FY 2007 SCHIP funding 
shortfalls. Specifically, in order to address States' FY 2007 SCHIP 
funding shortfalls, section 2104(h)(1) of the Act provided for the 
redistribution in FY 2007 of the unexpended FY 2004 allotments 
remaining at the end of FY 2006. Furthermore, section 2104(h)(2) of the 
Act provided for the redistribution in months after March 31, 2007 of 
certain amounts of unexpended FY 2005 allotments. On May 29, 2007, we 
published a notice in the Federal Register (72 FR 29502) describing the 
implementation of section 201(a) of the NIHRA and containing the 
amounts of the States' redistributed FY 2004 and FY 2005 allotments, 
determined in accordance with the NIHRA legislation.
    In accordance with the methodology established under NIHRA, the 
amounts of the States' projected FY 2007 shortfalls, and the associated 
FY 2004 and FY 2005 redistributed allotments, were determined on a 
monthly basis to address the FY 2007 shortfalls. Since the total 
amounts of the FY 2004 and FY 2005 allotments available for 
redistribution were limited (to about $146.9 million and $137.8 
million, respectively), the total FY 2007 shortfalls for the 6 States 
receiving the redistributions were not fully addressed. The total 
amounts of the FY 2004 and FY 2005 redistributed allotments that were 
provided to the six recipient States were only sufficient to address 
the States' FY 2007 shortfalls experienced through May 2007. These 
amounts were not sufficient to cover the States' remaining FY 2007 
shortfalls occurring in months after May 2007; nor were these amounts 
sufficient to address other States' FY 2007 projected shortfalls 
occurring after May 2007.
    On May 29, 2007, the U.S. Troop Readiness, Veteran's Care, Katrina 
Recovery, and Iraq Accountability Appropriations Act, 2007 (UTRA), 
(Pub. L. 110-28) was enacted; in particular, title VII of this law 
amended section 2104(h) of the Act (as amended by NIHRA), to provide 
for additional allotment amounts to fund States' remaining SCHIP 
funding shortfalls in FY 2007.
    Under paragraph 2104(h)(7) of the Act as amended by the NIHRA, the 
special rules for the redistribution of the unexpended FY 2004 and FY 
2005 allotments in FY 2007 to address FY 2007 SCHIP funding shortfalls 
apply only to a State that receives an allotment for FY 2007 under 
section 2104(b) of the Act. Under section 2104(b) of the Act, 
allotments are made only to the 50 States and the District of Columbia. 
Therefore, section 2104(h) of the Act, as amended by NIHRA and as 
further amended by UTRA, does not apply to the Commonwealths and 
Territories, which received SCHIP allotments for FY 2007 under the 
authority of section 2104(c) of the Act. Accordingly, unless otherwise 
indicated in this notice, in referring to the redistribution of the FY 
2004 and FY 2005 allotments or the additional allotments for 
eliminating FY 2007 shortfalls, the term ``State'' means only the 50 
States and the District of Columbia, as applicable.
    On December 19, 2007 we published a notice in the Federal Register 
(72 FR 71915) which indicated the amounts of States' additional 
allotments to eliminate SCHIP funding shortfalls in FY 2007. These 
additional allotments were determined based on the most recent data 
available prior to the end of FY 2007. As indicated in that notice, 
under section 2104(h)(5) of the Act a retrospective adjustment may be 
applied with respect to the amounts of the redistributions and 
additional shortfall allotments the States' received in FY 2007 to 
eliminate the FY 2007 shortfalls based on States' actual FY 2007 SCHIP-
related expenditures reported no later than November 30, 2007. Section 
II of this notice contains the final additional FY 2007 shortfall 
allotments determined based on the retrospective adjustment provision 
of section 2104(h)(5) of the Act.

C. Enactment of Continuing Appropriations and Medicare, Medicaid, and 
SCHIP Extension Act of 2007

    The continuing appropriation legislation enacted on September 29, 
2007 (Pub. L. 110-92) contained provisions to extend funding under the 
SCHIP through November 16, 2007. In particular, section 136(a) of 
Public Law 110-92 appropriated $5 billion for the purposes of providing 
FY 2008 allotments to the 50 States, the District of Columbia, and the 
Commonwealths and Territories. Additionally, $40 million was 
appropriated by this section to provide additional allotments to the 
Commonwealths and Territories in FY 2008. Section 136(b) of Public Law 
110-92 provided that the FY 2008 allotments be determined in accordance 
with the same methodology as previous SCHIP fiscal year allotments were 
determined. Section 136(c) of Public Law 110-92 amended the SCHIP 
statute to add a new section 2104(i) of the Act to provide for the 
redistribution in FY 2008 of the unexpended FY 2005 allotments 
remaining at the end of FY 2007 to those 50 States or the District of 
Columbia that had estimated shortfalls in FY 2008. Finally, section 106 
of Public Law 110-92 provided that the FY 2008 allotment funds were 
only available for States' SCHIP expenditures for assistance provided 
through November 16, 2007.
    Subsequent to the enactment of Public Law 110-92, further 
continuing appropriation legislation was enacted which extended the 
dates through which the FY 2008 allotment funds were available as 
provided in section 106 of Public Law 110-92; in particular, Public Law 
110-116 (enacted on November 13, 2007), Public Law 110-137 (enacted on 
December 14, 2007), and Public Law 110-149 (enacted on December 21, 
2007) extended the dates to December 14, 2007, December 21, 2007, and 
December 31, 2007, respectively.
    Section 201 of MMSEA amended section 2104(a) of the SCHIP statute 
to explicitly provide funding for SCHIP allotments in the amount of $5 
billion for each of FYs 2008 and 2009 for the 50 States and the 
District of Columbia and the Commonwealths and Territories, and for $40 
million for the Commonwealths and Territories for each of FYs 2008 and 
2009. These allotments would be determined in accordance with the 
existing methodology in SCHIP statute for fiscal years prior to FY 
2008. The funding provided for FY 2008 under the Continuing 
Appropriation Acts discussed above and enacted prior to MMSEA would no 
longer be available (and thus expenditures for FY 2008 would be paid 
from the MMSEA allotments). MMSEA provides that the FY 2008 and FY 2009 
allotment funds were only available for expenditures through March 31, 
2009.
    Section 201 of MMSEA amended SCHIP statute to add section 2104(j) 
of the Act which appropriates $1.6 billion for the purpose of providing 
additional

[[Page 30114]]

allotments to eliminate States' SCHIP shortfalls in FY 2008.

D. Expenditures, Authority for Qualifying States To Use Available SCHIP 
Allotments for Medicaid Expenditures

    Under section 2105(a)(1)(A) through (D) and (a)(2) of the Act, and 
before enactment of Public Law 108-74 (Extension of Availability of 
SCHIP Allotment Act, enacted on August 15, 2003), only Federal payments 
for the following Medicaid and SCHIP expenditures were applied against 
States' available SCHIP allotments: (1) Medical assistance provided 
under Title XIX (Medicaid) to targeted low-income children in a SCHIP-
related Medicaid expansion, for which the enhanced SCHIP Federal 
Medical assistance program (FMAP) rate is available; (2) medical 
assistance provided on behalf of a child during a period of presumptive 
eligibility under section 1920A of the Act (these funds are matched at 
the regular Medicaid FMAP rate); (3) child health assistance to 
targeted low-income children that meets minimum benefit requirements 
under SCHIP; and (4) expenditures in SCHIP that are subject to the 10-
percent limit on non-primary expenditures (including other child health 
assistance for targeted low-income children, health services 
initiatives, outreach, and administrative costs).
    Section 1(b) of Public Law 108-74, as amended by Public Law 108-127 
(Social Security Act, Technical corrections, enacted November 17, 
2003), added new section 2105(g) to the Act under which certain 
``qualifying States'' that met prescribed criteria could elect to use 
up to 20 percent of any of the States' available SCHIP allotments for 
FY 1998, 1999, 2000, or 2001 to increase the FMAP rate for regular 
Medicaid expenditures to the enhanced FMAP rate available under SCHIP. 
As described in the Federal Register published on July 23, 2004 (69 FR 
44013), if a qualified State submitted both 20 percent allowance 
expenditures and other ``regular'' SCHIP expenditures at the same time 
in a quarter, the 20 percent allowance expenditures would be applied 
first against the available fiscal year reallotments. However, the 20 
percent allowance expenditures could be applied only against the 
specified fiscal year allotment funds (upon which the 20 percent 
allowances were based) and which would remain available. Under section 
2104(g)(1)(B)(iii) of the Act, the amounts of States' FY 2001 
reallotments would only be available through the end of FY 2005; 
therefore, the FY 2001 20 percent allowances for the qualifying States 
are only available through the end of FY 2005.
    Section 6103 of the Deficit Reduction Act of 2005 (Pub. L. 109-171, 
enacted on February 8, 2006) amended section 2105(g) of the Act to 
provide for continued authority for qualifying States to use a portion 
of their available FY 2004 and FY 2005 SCHIP allotments to allow the 
use of the enhanced (FMAP) rate (as determined under section 2105(b) of 
the Act) for certain expenditures made under the Medicaid program.
    Section 201(b) of the NIHRA amended section 2105(g) of the Act to 
provide for continued authority for qualifying States to use a portion 
of their available FY 2006 and FY 2007 SCHIP allotments to allow the 
use of the enhanced Federal Medical assistance percentage (FMAP) rate 
(as determined under section 2105(b) of the Act) for certain 
expenditures made under the Medicaid program.
    Finally, section 201(b) of MMSEA amended 2105(g) of the Act to 
provide for continued authority for qualifying States to use a portion 
of their available FY 2008 and FY 2009 SCHIP allotments to allow the 
use of the enhanced Federal Medical assistance percentage (FMAP) rate 
(as determined under section 2105(b) of the Act) for certain 
expenditures made under the Medicaid program. Thus, MMSEA provides that 
the FY 2008 and FY 2009 allotment funds were only available for 
expenditures through March 31, 2009.

II. Provisions of This Notice

    The purpose of this notice is to: Describe the retrospective 
adjustment for the FY 2007 shortfall funding; set forth the FY 2008 and 
FY 2009 allotments for the 50 States and the District of Columbia, and 
the U.S. Commonwealths and Territories; describe the methodology and 
process used to implement the MMSEA provisions for eliminating States' 
SCHIP funding shortfalls in FY 2008 including the determination of FY 
2005 redistributions and the additional FY 2008 allotments; and 
describe the implementation of the continued authority for ``qualifying 
States'' to elect to receive a portion of certain of their available FY 
2008 and FY 2009 SCHIP allotments as increased Federal matching funds 
for certain expenditures in their Medicaid programs.

A. Retrospective Adjustment of FY 2007 Shortfall Allotments

    Section 2104(h)(5) of the Act, as amended by NIHRA and UTRA, 
provides for a potential retrospective adjustment with respect to the 
amounts of States' FY 2004 and FY 2005 redistributed funds and FY 2007 
shortfall allotments provided to them in FY 2007 and based on 
expenditure reports for FY 2007 submitted no later than November 30, 
2007. Prior to the end of FY 2007 and based on States' estimated FY 
2007 SCHIP expenditures, we had provided approximately $616.0 million 
in total additional FY 2007 shortfall allotments to States with 
projected FY 2007 shortfalls. However, based on the States' actual FY 
2007 expenditures, as submitted through November 30, 2007, the actual 
shortfalls after the provisions of the FY 2004 and FY 2005 
redistributed allotments in FY 2007 totaled only to approximately 
$528.2 million. Therefore, there was approximately $87.8 million 
($616.0 million minus $528.2 million) in excess FY 2007 shortfall 
allotments provided to States in FY 2007 to address FY 2007 shortfalls; 
this $87.8 million represents the total of the amounts of retrospective 
adjustments that will be made to the FY 2007 shortfall allotments made 
under the provisions of section 2104(h)(5) of the Act. Since States 
still had $528.2 million in shortfalls in FY 2007 without consideration 
of the FY 2007 shortfall allotments, we will not make any retrospective 
adjustments to the FY 2004 and FY 2005 redistributed allotments made in 
FY 2007. Table 1 in this notice presents the final FY 2007 shortfall 
allotments after making the retrospective adjustment under section 
2104(h)(5) of the Act.

B. Final FY 2008 and FY 2009 Allotments

    Initially, section 136 of the continuing appropriation legislation 
(Pub. L. 110-92) appropriated $5.0 billion for the purpose of providing 
FY 2008 allotments to the 50 States and the District of Columbia and 
the Commonwealths and Territories, and $40 million for the purpose of 
providing additional allotments to the Commonwealths and Territories. 
Subsequently, this authority was replaced by the provisions of section 
201 of MMSEA, which amended section 2104(a)(11) of the Act to 
appropriate $5.0 billion for each of FYs 2008 and 2009 for the purpose 
of providing FY 2008 and FY 2009 allotments to the 50 States and the 
District of Columbia and the Commonwealths and Territories, and $40 
million for each of FYs 2008 and 2009 for the purpose of providing 
additional allotments to the Commonwealths and Territories in FYs 2008 
and 2009. As described in detail below, the FYs 2008 and 2009 
allotments are determined in

[[Page 30115]]

accordance with the same methodology as applicable to the calculation 
of SCHIP fiscal year allotments prior to FY 2008. Under section 
201(a)(2) of the MMSEA, the FYs 2008 and 2009 allotments are not 
available for States' expenditures for child health assistance for 
items and services furnished after March 31, 2009.
    Section 2104(a) of the Act provides that, for purposes of providing 
allotments to the 50 States and the District of Columbia, the following 
amounts are appropriated: $4,295,000,000 for FY 1998; $4,275,000,000 
for each FY 1999 through FY 2001; $3,150,000,000 for each FY 2002 
through FY 2004; $4,050,000,000 for each FY 2005 through FY 2006; and 
$5,000,000,000 for FY 2007. Additionally, as amended by MMSEA, section 
2104(a)(11) of the Act appropriates $5,000,000,000 for each of FY 2008 
and FY 2009. However, under section 2104(c) of the Act, 0.25 percent of 
the total amount appropriated each year is available for allotment to 
the U.S. Territories and Commonwealths of Puerto Rico, Guam, the Virgin 
Islands, American Samoa, and the Northern Mariana Islands. The total 
amounts are allotted to the U.S. Territories and Commonwealths 
according to the following percentages: Puerto Rico, 91.6 percent; 
Guam, 3.5 percent; the Virgin Islands, 2.6 percent; American Samoa, 1.2 
percent; and the Northern Mariana Islands, 1.1 percent.
    Section 2104(c)(4)(B) of the Act provides for additional amounts 
for allotment to the Territories and Commonwealths: $34,200,000 for 
each FY 2000 through FY 2001; $25,200,000 for each FY 2002 through FY 
2004; $32,400,000 for each FY 2005 through FY 2006; and $40,000,000 for 
FY 2007. Additionally, as amended by MMSEA, $40,000,000 is appropriated 
for additional allotments for the Commonwealths and Territories for 
each of FY 2008 and FY 2009. Since, for FY 2008 and FY 2009, title XXI 
of the Act provides an additional $40,000,000 for allotment to the U.S. 
Territories and Commonwealths, the total amount available for allotment 
to the U.S. Territories and Commonwealths in FY 2008 and FY 2009 is 
$52,500,000; that is, $40,000,000 plus $12,500,000 (0.25 percent of the 
FY 2008/2009 appropriation of $5,000,000,000).
    Therefore, the total amount available nationally for allotment for 
the 50 States and the District of Columbia for FY 2008 and FY 2009 was 
determined in accordance with the following formula:

AT = S2104(a) - T2104(c)
AT = Total amount available for allotment to the 50 
States and the District of Columbia for the fiscal year.
S2104(a) = Total appropriation for the fiscal year 
indicated in section 2104(a) of the Act. For FY 2008 and FY 2009, 
this is $5,000,000,000.
T2104(c) = Total amount available for allotment for the 
U.S. Territories and Commonwealths; determined under section 2104(c) 
of the Act as 0.25 percent of the total appropriation for the 50 
States and the District of Columbia. For FY 2008 and FY 2009, this 
is: .0025 x $5,000,000,000 = $12,500,000.

Therefore, for each of FY 2008 and FY 2009, the total amount available 
for allotment to the 50 States and the District of Columbia is 
$4,987,500,000. This was determined as follows:

AT ($4,987,500,000) = S2104(a) ($5,000,000,000) - 
T2104(c) ($12,500,000)

    For purposes of the following discussion, the term ``State,'' as 
defined in section 2104(b)(1)(D)(ii) of the Act, ``means one of the 50 
States or the District of Columbia.''
    Under section 2104(b) of the Act, the determination of the number 
of children applied in determining the SCHIP allotment for a particular 
fiscal year is based on the three most recent March supplements to the 
Current Population Survey (CPS) of the Bureau of the Census officially 
available before the beginning of the calendar year in which the fiscal 
year begins. The determination of the State cost factor is based on the 
annual average wages per employee in the health services industry, 
which is determined using the most recent 3 years of such wage data as 
reported and determined as final by the Bureau of Labor Statistics 
(BLS) of the Department of Labor to be officially available before the 
beginning of the calendar year in which the fiscal year begins. Since 
FY 2008 begins on October 1, 2007 (that is, in calendar year 2007), in 
determining the FY 2008 SCHIP allotments, we are using the most recent 
official data from the Bureau of the Census and the BLS, respectively, 
available before January 1 of calendar year 2007 (that is, through the 
end of December 31, 2006). Similarly, with respect to the FY 2009 SCHIP 
allotment we are using the most recent official data from the Census 
and the BLS, respectively, available before January 1 of calendar year 
2008 (that is, through the end of December 31, 2007).
1. Number of Children
    For FY 2008, as specified by section 2104(b)(2)(A)(iii) of the Act, 
the number of children is calculated as the sum of 50 percent of the 
number of low-income, uninsured children in the State, and 50 percent 
of the number of low-income children in the State. The number of 
children factor for each State is developed from data provided by the 
Bureau of the Census based on the standard methodology used to 
determine official poverty status and uninsured status in the annual 
CPS on these topics. As part of a continuing formal process between the 
Centers for Medicare & Medicaid Services (CMS) and the Bureau of the 
Census, each fiscal year we obtain the number of children data 
officially from the Bureau of the Census.
    Under section 2104(b)(2)(B) of the Act, the number of children for 
each State (provided in thousands) was determined and provided by the 
Bureau of the Census based on the arithmetic average of the number of 
low-income children and low-income children with no health insurance as 
calculated from the three most recent March supplements to the CPS 
officially available from the Bureau of the Census before the beginning 
of the 2007 calendar year. In particular, through December 31, 2006, 
the most recent official data available from the Bureau of the Census 
on the numbers of children were data from the three March CPSs 
conducted in March 2004, 2005, and 2006 (representing data for years 
2003, 2004, and 2005). Similarly, for the FY 2009 SCHIP allotments the 
most recent official data available from the Bureau of the Census on 
the numbers of children were data from the three March CPSs conducted 
in March 2005, 2006, and 2007 (representing data for years 2004, 2005, 
and 2006).
2. State Cost Factor
    The State cost factor is based on annual average wages in the 
health services industry in the State. The State cost factor for a 
State is equal to the sum of: 0.15 and 0.85 multiplied by the ratio of 
the annual average wages in the health industry per employee for the 
State to the annual wages per employee in the health industry for the 
50 States and the District of Columbia.
    Under section 2104(b)(3)(B) of the Act, as amended by the Balanced 
Budget Refinement Act of 1999 (BBRA) Public Law 106-113, enacted on 
November 29, 1999, the State cost factor for each State for a fiscal 
year is calculated based on the average of the annual wages for 
employees in the health industry for each State using data for each of 
the most recent 3 years as reported and determined as final by the BLS 
in the Department of Labor and available before the beginning of the 
calendar year in which the fiscal year begins. Therefore, the State 
cost factor for FY 2008 is based on the most recent

[[Page 30116]]

3 years of BLS data officially available as final before January 1, 
2007 (the beginning of the calendar year in which FY 2008 begins); that 
is, it is based on the BLS data available as final through December 31, 
2006. In accordance with these requirements, we used the final State 
cost factor data available from BLS for 2003, 2004, and 2005 in 
calculating the FY 2008 final allotments. Similarly, for the FY 2009 
allotments we used the final State cost factor data available from BLS 
for 2004, 2005, and 2006.
    The State cost factor is determined based on the calculation of the 
ratio of each State's average annual wages in the health industry to 
the national average annual wages in the health care industry. Since 
BLS is required to suppress certain State-specific data in providing us 
with the State-specific average wages per health services industry 
employee due to the Privacy Act, we calculated the national average 
wages directly from the State-specific data provided by BLS. As part of 
a continuing formal process between CMS and the BLS, each fiscal year 
CMS obtains these wage data officially from the BLS.
    Section 2104(b)(3)(B) of the Act, as amended by the BBRA, refers to 
wage data as reported by BLS under the ``Standard Industrial 
Classification'' (SIC) system. However, in calendar year 2002, BLS 
phased-out the SIC wage and employment reporting system and replaced it 
with the ``North American Industry Classification System'' (NAICS). In 
accordance with section 2104(b)(3)(B) of the Act, for purposes of 
calculating the FY 2008 allotments, BLS provided wage data for the 3 
most recent years as available through December 31, 2006; in this case, 
the 3 years of wage data are 2003, 2004, and 2005. Because of the wage 
and employment classification change at BLS, the BLS wage data used in 
calculating the FY 2008 SCHIP allotments necessarily reflect NAICS 
data, rather than SIC data, to obtain the 3-year average required for 
the allotments. Similarly, for purposes of calculating the FY 2009 
SCHIP allotments, BLS provided wage data for the 3 most recent years as 
available through December 31, 2007; in this case, the 3 years of wage 
data are 2004, 2005, and 2006.
    Under the SIC system, BLS provided CMS with wage data for each 
State under the SIC Code. However, the wage data codes under the SIC 
system do not map exactly to the wage data codes under the NAICS. As a 
result, BLS provided us with wage data using three NAICS wage data 
codes that represent approximately 98 percent of the wage data that 
would have been provided under the related SIC Code 80. Specifically, 
in lieu of SIC Code 80 data, BLS provided CMS data that are based on 
the following three NAICS codes: NAICS Code 621 (Ambulatory health care 
services), Code 622 (Hospitals), and Code 623 (Nursing and residential 
care facilities).
    Under section 2104(b)(4) of the Act, each State and the District of 
Columbia is allotted a ``proportion'' of the total amount available 
nationally for allotment to the States. The term ``proportion'' is 
defined in section 2104(b)(4)(D)(i) of the Act and refers to a State's 
share of the total amount available for allotment for any given fiscal 
year. In order for the entire total amount available to be allotted to 
the States, the sum of the proportions for all States must exactly 
equal one. Under the statutory definition, a State's proportion for a 
fiscal year is equal to the State's allotment for the fiscal year 
divided by the total amount available nationally for allotment for the 
fiscal year. In general, a State's allotment for a fiscal year is 
calculated by multiplying the State's proportion for the fiscal year by 
the national total amount available for allotment for that fiscal year 
in accordance with the following formula:

SAi = Pi x AT
SAi = Allotment for a State or District of Columbia for a 
fiscal year.
Pi = Proportion for a State or District of Columbia for a 
fiscal year.
AT = Total amount available for allotment to the 50 
States and the District of Columbia for the fiscal year. For each FY 
2008 and FY 2009, this is $4,987,500,000.

    In accordance with the statutory formula for determining 
allotments, the State proportions are determined under two steps, which 
are described below in further detail.
    Under the first step, each State's proportion is calculated by 
multiplying the State's Number of Children and the State Cost Factor to 
determine a ``product'' for each State. The products for all States are 
then summed. Finally, the product for a State is divided by the sum of 
the products for all States, thereby yielding the State's preadjusted 
proportion.
3. Application of Floors and Ceiling
    Under the second step, the preadjusted proportions are subject to 
the application of proportion floors, ceiling, and a reconciliation 
process, as appropriate. The SCHIP statute specifies three proportion 
floors, or minimum proportions, that apply in determining States' 
allotments. The first proportion floor is equal to $2,000,000 divided 
by the total of the amount available nationally for the fiscal year. 
This proportion ensures that a State's minimum allotment would be 
$2,000,000. The second proportion floor is equal to 90 percent of the 
allotment proportion for the State for the previous fiscal year; that 
is, a State's proportion for a fiscal year must not be lower than 10 
percent below the previous fiscal year's proportion. The third 
proportion floor is equal to 70 percent of the allotment proportion for 
the State for FY 1999; that is, the proportion for a fiscal year must 
not be lower than 30 percent below the FY 1999 proportion.
    Each State's allotment proportion for a fiscal year is also limited 
by a maximum ceiling amount, equal to 145 percent of the State's 
proportion for FY 1999; that is, a State's proportion for a fiscal year 
must be no higher than 45 percent above the State's proportion for FY 
1999. The floors and ceiling are intended to minimize the fluctuation 
of State allotments from year to year and over the life of the program 
as compared to FY 1999. The floors and ceiling on proportions are not 
applicable in determining the allotments of the U.S. Territories and 
Commonwealths; they receive a fixed percentage specified in the statute 
of the total allotment available to the U.S. Territories and 
Commonwealths.
    As determined under the first step for determining the States' 
preadjusted proportions, which is applied before the application of any 
floors or ceiling, the sum of the proportions for all the States and 
the District of Columbia will be equal to exactly one. However, the 
application of the floors and ceiling under the second step may change 
the proportions for certain States; that is, some States' proportions 
may need to be raised to the floors, while other States' proportions 
may need to be lowered to the maximum ceiling. If this occurs, the sum 
of the proportions for all States and the District of Columbia may not 
exactly equal one. In that case, the statute requires the proportions 
to be adjusted, under a method that is determined by whether the sum of 
the proportions is greater or less than one.
    The sum of the proportions would be greater than one if the 
application of the floors and ceiling resulted in raising the 
proportions of some States (due to the application of the floors) to a 
greater degree than the proportions of other States were lowered (due 
to the application of the ceiling). If, after application of the floors 
and ceiling, the sum of the proportions is greater than one, the 
statute requires the Secretary to determine a maximum percentage 
increase limit, which, when applied to

[[Page 30117]]

the State proportions, would result in the sum of the proportions being 
exactly one.
    If, after the application of the floors and ceiling, the sum of the 
proportions is less than one, the statute requires the States' 
proportions to be increased in a ``pro rata'' manner so that the sum of 
the proportions again equals one. Finally, it is also possible, 
although unlikely, that the sum of the proportions (after the 
application of the floors and ceiling) will be exactly one; in that 
case, the proportions would require no further adjustment.
4. Determination of Preadjusted Proportions
    The following is an explanation of how we applied the two State-
related factors specified in the statute to determine the States' 
``preadjusted'' proportions for FY 2008 and FY 2009. The term 
``preadjusted,'' as used here, refers to the States' proportions before 
the application of the floors and ceiling and adjustments, as specified 
in the SCHIP statute. The determination of each State and the District 
of Columbia's preadjusted proportion for both FY 2008 and FY 2009 is in 
accordance with the following formula:

PPi = (Ci x SCFi)/ ?(Ci 
x SCFi).
PPi = Preadjusted proportion for a State or District of 
Columbia for a fiscal year.
Ci = Number of children in a State (section 
2104(b)(1)(A)(i) of the Act) for a fiscal year. This number is based 
on the number of low-income children for a State for a fiscal year 
and the number of low-income uninsured children for a State for a 
fiscal year determined on the basis of the arithmetic average of the 
number of such children as reported and defined in the three most 
recent March supplements to the CPS of the Bureau of the Census, 
officially available before the beginning of the calendar year in 
which the fiscal year begins. (See section 2104(b)(2)(B) of the 
Act.)

    For FYs 2008 and 2009, the number of children is equal to the 
sum of 50 percent of the number of low-income uninsured children in 
the State for the fiscal year and 50 percent of the number of low-
income children in the State for the fiscal year. (See section 
2104(b)(2)(A)(iii) of the Act.)

SCFi = State Cost Factor for a State (section 
2104(b)(1)(A)(ii) of the Act). For a fiscal year, this is equal to: 
0.15 + 0.85 x (Wi/WN).
Wi = The annual average wages per employee for a State 
for such year (section 2104(b)(3)(A)(ii)(I) of the Act).
WN = The annual average wages per employee for the 50 
States and the District of Columbia (section 2104(b)(3)(A)(ii)(II) 
of the Act).

    The annual average wages per employee for a State or for all 
States and the District of Columbia for a fiscal year is equal to 
the average of such wages for employees in the health services 
industry, as reported and determined as final by the BLS of the 
Department of Labor for each of the most recent 3 years officially 
available before the beginning of the calendar year in which the 
fiscal year begins. (See section 2104(b)(3)(B) of the Act).

(Ci x SCFi) = The sum of the products of (Ci x SCFi) for each State 
(section 2104(b)(1)(B) of the Act).

    The resulting proportions would then be subject to the application 
of the floors and ceiling specified in the SCHIP statute and 
reconciled, as necessary, to eliminate any deficit or surplus of the 
allotments because the sum of the proportions was either greater than 
or less than one.
    Section 2104(e) of the Act requires that the amounts allotted to a 
State for a fiscal year be available to the State for a total of 3 
years; the fiscal year for which the amounts are allotted, and the 2 
following fiscal years.
    Table 2 and Table 3 in this notice present the FY 2008 and FY 2009 
SCHIP allotments, respectively, determined in accordance with section 
2104 of the Act.

C. FY 2005 Redistributed Allotments and Additional Allotments to 
Eliminate States' SCHIP funding shortfalls in FY 2008

    Section 2104(i)(1) and (2) of the Act, as amended by section 136(c) 
of Public Law 110-92 specifies the methodology for determining the 
amounts of States' redistributions of the unexpended FY 2005 allotments 
remaining at the end of FY 2007.
    In general, section 2104(f) of the Act provides for the Secretary 
to determine an appropriate procedure to redistribute the entire amount 
of States' unexpended SCHIP allotments following the end of the related 
initial 3-year period of availability only to those States that fully 
expended the allotments by the end of the initial 3-year period of 
availability. However, section 2104(i) of the Act as added by section 
136(c) of Public Law 110-92, specifies the application of special rules 
for the redistribution of the unexpended FY 2005 allotments in FY 2008 
with respect to certain ``shortfall States.'' As described below, the 
procedure for redistribution of States' unexpended FY 2005 allotments 
remaining at the end of FY 2007 is in accordance with the provisions of 
section 2104(i) of the Act relating to the elimination of funding 
shortfalls in the SCHIP in FY 2008.
    Under section 2104(i)(2) of the Act, a shortfall State is a State 
with an approved child health plan under Title XXI of the Act, for 
which the Secretary estimates, on a monthly basis using the most recent 
data available to the Secretary, that the State's projected FY 2008 
expenditures under this plan will exceed the sum of:
     The amount of the State's allotments for each of FY's 2006 
and 2007 that were not expended by the end of FY 2007 and remain 
available in FY 2008;
     The amount of the State's allotment for FY 2008.
    In determining the amount of any unexpended FY 2005 allotments that 
might be redistributed to address a State's FY 2008 SCHIP funding 
shortfall, we first determined the amount, if any, of each State's FY 
2005 allotments that were not expended by the end of FY 2007 based on 
the States' quarterly expenditure reports (Forms CMS-21 and CMS-64) as 
submitted and certified by States through November 30, 2007. We also 
determined the amounts of each States' unexpended FY 2006 and FY 2007 
allotments that were not expended by the end of FY 2007, also based on 
States' quarterly expenditure reports (Forms CMS-21 and CMS-64) as 
submitted and certified by States through November 30, 2007. The 
amounts of the States' allotments for FY 2008 are as published in this 
Federal Register.
    For purposes of calculating the FY 2005 redistribution amounts, we 
initially based the determination of the amounts of States' projected 
FY 2008 expenditures using the States' most recent estimates for such 
expenditures available as of the date of the enactment of Public Law 
100-92, September 29, 2007; that is, we used the States' estimates of 
their FY 2008 expenditures obtained from their certified submissions of 
their August 2007 quarterly report forms CMS-21b and CMS-37. Using that 
data, we had projected that States would not face shortfalls in FY 2008 
until sometime in December 2007. Since section 2104(i)(2) of the Act 
requires that we determine the shortfall status of States on a monthly 
basis using the most recent data available for such purpose, we 
subsequently used the States' updated estimates of their FY 2008 
expenditures contained in their certified submissions of their November 
30, 2007 quarterly report Forms CMS-21b and CMS-37 to determine the 
States' FY 2008 funding shortfalls on a monthly basis for the months of 
December 2007 and following months through March 2008 (the month 
through which the FY 2005 redistributed allotments were exhausted). In 
accordance with section 2104(i)(4) of the Act, if the amounts of the 
unexpended FY 2005 allotments available for redistribution are less 
than the total amounts of the estimated

[[Page 30118]]

shortfalls determined for a month, the amount of the FY 2005 
redistribution for that month must be reduced proportionally. This was 
the basis for determining the amount of the March 2008 FY 2005 
redistributions. Table 4 provides the monthly determination and total 
of the FY 2005 redistributed allotments for the months of December 2007 
through March 2008.
    As indicated, the FY 2005 redistributed allotments determined under 
section 2104(i) of the Act were insufficient to fully eliminate the 
States' FY 2008 funding shortfalls; however, section 201(c) of MMSEA 
added a new section 2104(j) of the Act. Under that section, $1.6 
billion was appropriated for purposes of providing additional 
allotments to eliminate FY 2008 funding shortfalls for the 50 States 
and the District of Columbia; it also provides for certain amounts of 
that appropriation to be available for additional allotment to the 
Commonwealths and Territories.
    In particular, section 2104(j)(2) of the Act, as amended by MMSEA, 
provides for additional allotment amounts to eliminate the FY 2008 
SCHIP funding shortfalls remaining after the redistribution of the 
unexpended FY 2005 allotments in FY 2008, both for States that received 
the FY 2005 redistributions, as well as for other States that did not 
receive such redistributions, but which also have projected FY 2008 
shortfalls. Under section 2104(j)(2) of the Act, a ``shortfall State'' 
is defined as a State for which the Secretary estimates on the basis of 
the most recent data available to the Secretary as of November 30, 2007 
that the projected FY 2008 Federal SCHIP expenditures will exceed the 
sum of:
     The amounts of the State's allotments for FY 2006 and FY 
2007 that were not expended by the end of FY 2007.
     The amounts, if any, of the FY 2005 allotments that were 
redistributed to the State in FY 2008, in accordance with section 
2104(i) of the Act (as described above).
     The amount of the State's allotment for FY 2008.
    Furthermore, section 2104(j)(3) of the Act, as amended by MMSEA, 
provided for certain amounts to be provided as additional FY 2008 
allotments to the Commonwealths and Territories. In particular, 1.05 
percent of the sum of the FY 2008 shortfall allotments for the 50 
States and the District of Columbia (determined as indicated above) is 
available for additional allotments to the Commonwealths and 
Territories. This total amount is allocated to each Commonwealth/
Territory in accordance with the percentage specified in section 
2104(c)(3) of the Act.
    Finally, under the retrospective adjustment provisions sections 
2104(i)(5) and 2104(j)(5) of the Act, the Secretary may adjust the 
determinations of the FY 2005 redistributed allotments and the 
additional FY 2008 allotments, respectively, on the basis of actual 
expenditures for FY 2008 reported by States not later than November 30, 
2008 on the Forms CMS-64 or CMS-21.
    Table 5 indicates the calculation of the additional FY 2008 
shortfall allotments to the 50 States and the District of Columbia, and 
to the Commonwealths and Territories.

D. Ordering of Expenditures

    In applying States' expenditures against their available SCHIP 
allotments, expenditures are ordered in accordance with the provisions 
of section 2105(a)(1)(A) through (D) and 2105(a)(2) of the Act as 
follows:
     Title XIX SCHIP-related expenditures for which payment is 
made at the enhanced FMAP (section 2105(a)(1)(A) of the Act);
     Title XIX expenditures for medical assistance provided 
during a presumptive eligibility period under section 1920A of the Act 
(section 2105(a)(1)(B) of the Act);
     Child health assistance for targeted low-income children 
in the form of providing health benefits coverage that meets the 
requirements of section 2103 (per section 2105(a)(1)(C) of the Act);
     Expenditures listed in section 2105(a)(1)(D)(i) through 
(iv) of the Act, respectively: Other child health assistance for 
targeted low-income children; health services initiatives under the 
plan for improving the health of children (including targeted low-
income children and other low-income children); expenditures for 
outreach activities; and administration expenditures.
    In accordance with the ordering of allotments and expenditures 
provisions described above, for FY 2008 the expenditures of States will 
be applied against the FY 2006 and FY 2007 SCHIP allotments carried 
over into FY 2008, the FY 2008 allotments, the FY 2005 redistributed 
allotments, and the additional FY 2008 shortfall allotments.

E. No Ordering Election for Amounts of States' FY 2005 Redistributed 
Allotments and FY 2008 Shortfall Allotments

    In the past, for purposes of applying States' expenditures against 
the redistributed allotments, States receiving redistributed allotment 
amounts were given flexibility to decide the ordering of the 
redistributed allotments with respect to the States' other available 
allotments. This allowed the redistribution States to optimize the use 
of these redistributed funds. However, because of the statutory 
provisions made by the MMSEA on the identification of shortfall States 
and the determination of the amount of the funding shortfalls on a 
monthly basis, and the requirement that these redistributed allotments 
and additional allotments be available only after the States' other 
SCHIP allotment funds have been exhausted, we believe that the FY 2005 
redistributed allotments and the additional FY 2008 allotments must be 
ordered after the States' other available allotments are exhausted. 
Therefore, shortfall States must spend their available FY 2006, FY 
2007, and FY 2008 allotments first, before any amounts of redistributed 
FY 2005 allotments and FY 2008 shortfall allotments. Furthermore, since 
the FY 2008 shortfall allotments are only available for any remaining 
FY 2008 shortfalls, the FY 2005 redistributed allotments must be 
ordered prior to any FY 2008 shortfall allotments.
    As specified in section 2104(i)(6) of the Act (as amended by 
section 136(c) of Pub. L. 110-92), the amounts of the unexpended FY 
2005 allotments redistributed to a State in FY 2008, and the amounts of 
the FY 2008 shortfall allotments (as specified in section 2104(j)(6) of 
the Act (as amended by MMSEA) are only available for expenditure by the 
State through September 30, 2008; and, any amounts of these 
redistributed allotments or additional allotments remaining at the end 
of FY 2008 shall not be subject to redistribution under section 2104(f) 
of the Act.
    The amounts of the FY 2005 redistributed allotment amounts, and the 
amounts of the additional FY 2008 shortfall allotments, will be 
incorporated into the Form CMS-21C (Allocation of Title XIX and Title 
XXI Expenditures to the SCHIP Fiscal Year Allotment). Form CMS-21C is 
used for tracking States' expenditures against their available SCHIP 
allotments. The Medicaid and SCHIP expenditure system will then 
automatically apply expenditures reported on the quarterly expenditure 
reports for FY 2008 against all of the SCHIP allotment funds available 
in FY 2008.

IV. Tables

    Following are the keys and associated tables for the SCHIP funding 
provisions as discussed in previous sections:

Table 1. Retrospective Adjustment for the FY

[[Page 30119]]

2007 Shortfall Funding
Table 2. Final FY 2008 Allotments
Table 3. Final FY 2009 Allotments
Table 4. Redistribution of Unexpended FY 2005 Allotments
Table 5. Additional FY 2008 Allotments

A. Table 1--Retrospective Adjustment for FY 2007 Shortfall Funding

Key to Table 1
Column/Description
    Column A = State. Column A contains the name of the State, District 
of Columbia, U.S. Commonwealth or Territory.
    Column B = Final FY 2007 Expenditures Reported 11/30/07. Column B 
contains the final FY 2007 expenditures as reported and certified by 
States on the Forms CMS-21 and CMS-64 through November 30, 2007.
    Column C = NET FY 2005 Allotments. Column C contains the ``net'' FY 
2005 allotment for each State remaining after the application of 
section 2104(h)(3) of the Act. Under that provision, for specified 
States identified in section 2104(h)(3)(A) of the Act, certain amounts 
of their unexpended FY 2005 allotments in FY 2007 became unavailable to 
such States on and after April 1, 2007; such amounts were effectively 
``contributed'' as an FY 2005 redistribution in FY 2007 to certain 
States with SCHIP funding shortfalls in FY 2007. The implementation of 
this provision was described in the Federal Register published on May 
29, 2007 (72 FR 29502). The amount of the net FY 2005 allotment 
remaining after the application of the provisions of section 2104(h)(3) 
of the Act and available to each State for expenditure in FY 2007 is 
contained in Column C.
    Column D = FY 2006 Allotments C/O Fr. FY 2006. Column D contains 
the amount of the unexpended FY 2006 allotments remaining at the end of 
FY 2006 and available for expenditure in FY 2007.
    Column E = FY 2007 Allotments. Column D contains the full amount of 
each state's FY 2007 allotment available for expenditure in FY 2007, as 
contained in the Federal Register published on July 28, 2006 (71 FR 
42854).
    Column F = Tot. Allots in FY 07 NOT Incl. FY 04/05 Redists. C + D + 
E. Column F contains the total SCHIP allotment funds for each State 
available for expenditure in FY 2007 not including any FY 2004 or FY 
2005 redistributed allotments, calculated as the sum of the amounts in 
Column C, D, and E.
    Column G = Tot. FY 07 SF Before Redist. Or Addt'l Allots. B-F. For 
States with projected expenditures for FY 2007 in Column B that are in 
excess of their available SCHIP allotment funds in F, Column G contains 
the shortfall in SCHIP funds in FY 2007 calculated as the amount in 
Column B minus the amount in Column F.
    Column H = For SF States FY 2004 Redistributions u/NIHRA. For 
States with a projected FY 2007 shortfall in SCHIP funds in Column G, 
Column H contains the total FY 2004 redistribution provided to such 
State in FY 2007 as determined in accordance with the provisions of 
section 2104(h)(1) of the Act and as contained in the Federal Register 
published on May 29, 2007 (72 FR 29502).
    Column I = For SF States FY 2005 Redistributions u/NIHRA. For 
States with a projected FY 2007 shortfall in SCHIP funds in Column G, 
Column H contains the total FY 2005 redistribution provided to such 
State in FY 2007 as determined in accordance with the provisions of 
section 2104(h)(2) of the Act and as contained in the Federal Register 
published on May 29, 2007 (72 FR 29502).
    Column J = Tot. FY 04/05 Redist. Amounts. H + I. Column J contains 
the total of the FY 2004 and FY 2005 redistributed allotments available 
to each State in FY 2007, calculated as the sum of the amounts in 
Column H and Column I.
    Column K = Retro Adjusted FY 07 SF Allot After Redist. G-J. For 
States with FY 2007 shortfalls before the provision of any FY 2004 and 
FY 2005 redistributions as indicated in Column G, and for which such 
shortfalls are greater than the total available FY 2004 and FY 2005 
redistributed allotments as indicated in Column J, Column K contains 
the final remaining shortfall for the State, calculated as the amount 
of the shortfall in Column G minus the amount of the total FY 2004 and 
FY 2005 redistributions in Column J; the amount in Column K represents 
the amount of the final retrospective adjustment for the FY 2007 
shortfall allotment, determined under the purview of section 2104(h)(5) 
of the Act.

[[Page 30120]]

[GRAPHIC] [TIFF OMITTED] TN23MY08.002

B. Table 2 Final FY 2008 Allotments and Table 3 Final FY 2009 
Allotments

Key to Table 2 and Table 3
Column/Description
    Column A = State. Column A contains the name of the State, District 
of Columbia, U.S. Commonwealth or Territory.
    Column B = Number of Children. Column B contains the number of 
children for each State (provided in thousands) was determined and 
provided by the Bureau of the Census based on the arithmetic average of 
the number of low-income children and low-income uninsured children, 
and is based on the three most recent March supplements to the CPS of 
the Bureau of the Census officially available before the beginning of 
the calendar year in which the fiscal year begins. The FY 2008 
allotments were based on the 2004, 2005, and 2006 March supplements to 
the CPS; the FY 2009 allotments were based on the 2005, 2006, and 2007 
March supplements to the CPS. These data represent the number of people 
in each State under 19 years of age whose family income is at or below 
200 percent of the poverty threshold appropriate for that family, and 
who are reported to be without health insurance coverage. The number of 
children for each State was developed by the Bureau of the Census based 
on the standard methodology used to determine official poverty status 
and uninsured status in its annual March CPS on these topics.
    For FY 2008 and FY 2009, the number of children is equal to the sum 
of 50 percent of the number of low-income uninsured children in the 
State and 50 percent of the number of low-income children in the State.
    Column C = State Cost Factor. Column C contains the State cost 
factor for a State is equal to the sum of: 0.15, and 0.85 multiplied by 
the ratio of the annual average wages in the health industry per 
employee for the State to the annual wages per employee in the health 
industry for the 50 States and the District of Columbia. The State cost 
factor for each State was calculated based on such wage data for each 
State as reported and determined as final by the BLS in the Department 
of Labor for each of the most recent 3 years and available before the 
beginning of the calendar year in which the fiscal year begins. The FY 
2008 allotments were based on final BLS wage data for 2003, 2004, and 
2005; the FY 2009 allotments were based on final BLS wage data for 
2004, 2005, and 2006.
    Column D = Product. Column D contains the Product for each State 
was calculated by multiplying the Number of Children in Column B by the 
State Cost Factor in Column C. The sum of the Products for all 50 
States and the District of Columbia is below the Products for each 
State in Column D. The Product for each State and the sum of the 
Products for all States provides the basis for allotment to States and 
the District of Columbia.
    Column E = Proportion of Total. Column E contains the calculated 
percentage share for each State of the total allotment available to the 
50 States and the District of Columbia. The Percent Share of Total is 
calculated as the ratio of the Product for each State in Column D to 
the sum of the Products for all 50 States and the District of Columbia 
below the Products for each State in Column D.
    Column F = Adjusted Proportion of Total. Column F contains the 
calculated percentage share for each State of the total allotment 
available after the application of the floors and ceiling and after any 
further reconciliation needed to ensure that the sum of the State 
proportions is equal to one. The three floors specified in the statute 
are: (1) The percentage calculated by dividing $2,000,000 by the total 
of the amount available for all allotments for the fiscal year; (2) an 
annual floor of 90 percent

[[Page 30121]]

of (that is, 10 percent below) the preceding fiscal year's allotment 
proportion; and (3) a cumulative floor of 70 percent of (that is, 30 
percent below) the FY 1999 allotment proportion. There is also a 
cumulative ceiling of 145 percent of (that is, 45 percent above) the FY 
1999 allotment proportion.
    Column G = Allotment. Column G contains the SCHIP allotment for 
each State, Commonwealth, or Territory for the fiscal year. For each of 
the 50 States and the District of Columbia, this is determined as the 
Adjusted Proportion of Total in Column F for the State multiplied by 
the total amount available for allotment for the 50 States and the 
District of Columbia for the fiscal year.
    For each of the U.S. Territories and Commonwealths, the allotment 
is determined as the Proportion of Total in Column E multiplied by the 
total amount available for allotment to the U.S. Territories and 
Commonwealths. For the U.S. Territories and Commonwealths, the 
Proportion of Total in Column E is specified in section 2104(c) of the 
Act. The total amount is then allotted to the U.S. Territories and 
Commonwealths according to the percentages specified in section 2104 of 
the Act. There is no adjustment made to the allotments of the U.S. 
Territories and Commonwealths as they are not subject to the 
application of the floors and ceiling. As a result, Column F in the 
table, the Adjusted Proportion of Total, is empty for the U.S. 
Territories and Commonwealths.
BILLING CODE 4120-01-P

[[Page 30122]]

[GRAPHIC] [TIFF OMITTED] TN23MY08.003


[[Page 30123]]


[GRAPHIC] [TIFF OMITTED] TN23MY08.004


[[Page 30124]]



C. Table 4--Redistribution of Unexpended FY 2005 Allotments

    Table 4 contains the amounts, if any, of each State's FY 2005 
redistributed allotment determined in accordance with section 2104(i) 
of the Act, as amended by section 136(c) of Public Law 110-92. Under 
this provision, in FY 2008 the redistribution of the unexpended FY 2005 
allotments remaining at the end of FY 2007 was determined on a monthly 
basis using the States' projected FY 2008 expenditures as compared to 
their other allotments available in FY 2008 to determine States' 
projected monthly shortfalls in FY 2008. The unexpended FY 2005 
allotments were applied towards meeting these projected State FY 2008 
monthly shortfalls.
Key to Table 4
Column/Description
    Column A = State. Column A contains the name of the State.
    Column B = FY 2005 Redistribution for December 2007. Column B 
contains the amount if any of the State's FY 2005 redistributed 
allotment for the month of December 2007, determined in accordance with 
the provisions of section 2104(i) of the Act.
    Column C = FY 2005 Redistribution for January 2008. Column C 
contains the amount if any of the State's FY 2005 redistributed 
allotment for the month of January 2008, determined in accordance with 
the provisions of section 2104(i) of the Act.
    Column D = FY 2005 Redistribution for February 2008. Column D 
contains the amount if any of the State's FY 2005 redistributed 
allotment for the month of February 2008, determined in accordance with 
the provisions of section 2104(i) of the Act.
    Column E = FY 2005 Redistribution for March 2008. Column E contains 
the amount if any of the State's FY 2005 redistributed allotment for 
the month of March 2008, determined in accordance with the provisions 
of section 2104(i) of the Act.
    Column F = Total FY 2005 Redistribution. B + C + D + E. Column F 
contains the total amount if any of the State's FY 2005 redistributed 
allotment in FY 2008, calculated as the sum of the amounts in Columns 
B, C, D and E, representing the amounts of such redistributions for the 
months of December 2007, and January, February, and March of 2008, 
respectively.

[[Page 30125]]

[GRAPHIC] [TIFF OMITTED] TN23MY08.005


[[Page 30126]]



D. Table 5--Determination of the Additional FY 2008 Shortfall 
Allotments

Key to Table 5--ADDITIONAL FY 2008 ALLOTMENTS TO ELIMINATE THE 
REMAINING FY 2008 SHORTFALLS
    Table 5 presents the determination of the amounts of the additional 
FY 2008 shortfall allotments to eliminate the shortfalls remaining in 
FY 2008 for the 50 States and DC based on the most recent expenditure 
projections for FY 2008, after the provision of the FY 2005 
redistributed allotments. It also presents the determination of the 
additional FY 2008 allotments provided to the Commonwealths and 
Territories.
Column/Description
    Column A = State. Column A contains the name of the State, District 
of Columbia, the Commonwealth or Territory.
    Column B = Total Expenditures FY 2008. Column B contains the 
projected FY 2008 Federal expenditures based on the submissions by 
State through November 30, 2007.
    Column C = Carryover FY 06 & 07 Allotments Avail. in FY 08. Column 
C contains the total unexpended FY 2006 and FY 2007 allotments 
remaining at the end of FY 2007 and carried over into and available in 
FY 2008.
    Column D = FY 2008 Allotments. Column D contains the amounts of the 
50 States' and District of Columbia FY 2008 allotments (same as in 
Table 2).
    Column E = FY 2005 Redistribution. Column E contains the total FY 
2005 redistributed allotments determined in accordance with section 
2104(i) of the Act (same as in Table 4).
    Column F = FY 2008 Total Available Allotments. Column F contains 
the total allotment funds available to each State in FY 2008, 
calculated as the sums of the amounts in Columns C, D, and E.
    Column G = FY 2008 Shortfall/FY 2008 SF Allotment. B-F. For the 50 
States and the District of Columbia, Column G contains the 
determination of the shortfall (if any) in SCHIP funding for each State 
in FY 2008 after the application of the projected expenditures for FY 
2008 against the total allotments available in FY 2008, calculated as 
the amount in Column B minus the amount in Column F. For the 50 States 
and the District of Columbia, the amount in Column G represents the 
amount of the FY 2008 shortfall allotment to eliminate the FY 2008 
shortfall in SCHIP funding. For the Commonwealths and Territories the 
amount in Column G is the additional FY 2008 allotment. The aggregate 
amount available for additional allotment to the Commonwealths and 
Territories ($12,164,562) is calculated as 1.05 percent of the total 
projected FY 2008 shortfalls ($1,158,529,602).

[[Page 30127]]

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BILLING CODE 4120-01-C

[[Page 30128]]

IV. Regulatory Impact Statement

    We have examined the impact of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 19, 1980 Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4) and Executive Order 13132 on 
Federalism, and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for maj