Original Notice.

     Preproposal statement of inquiry was filed as WSR 03-13-044 on June 11, 2003.

     Title of Rule: Amending WAC 388-273-0025 Benefits you receive as a WTAP participant, 388-273-0030 How you can apply for WTAP, and 388-273-0035 What we reimburse the local telephone company.

     Purpose: These rule changes are necessary to limit reimbursements to telephone companies in order to keep the Washington telephone assistance program (WTAP) fund within budget and to add community service voice mail (CSVM) as a WTAP benefit as mandated by the 2003 legislative session, chapter 134, Laws of 2003.

     Statutory Authority for Adoption: RCW 74.04.050, 74.04.055, 74.04.057, 74.08.090, 80.36.440.

     Statute Being Implemented: RCW 74.04.050, 74.04.055, 74.04.057, chapter 80.36 RCW, chapter 134, Laws of 2003.

     Summary: These changes clarify the WTAP payment limit for reimbursable services; streamline billing procedures for the WTAP program; and add community service voice mail (CSVM) as a WTAP benefit.

     Reasons Supporting Proposal: Since limiting the reimbursement levels by emergency rule on June 1, 2003, the fund has stabilized and monthly expenditures no longer exceed monthly revenues.

     Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Steve Ebben, 1009 College S.E., Lacey, WA 98504, (360) 413-3096.

     Name of Proponent: Department of Social and Health Services, governmental.

     Rule is not necessitated by federal law, federal or state court decision.

     Explanation of Rule, its Purpose, and Anticipated Effects: See Title of Rule, Purpose, Summary, and Reasons Supporting Proposal above.

     Proposal Changes the Following Existing Rules: See Title of Rule, Purpose, Summary, and Reasons Supporting Proposal above.

     A small business economic impact statement has been prepared under chapter 19.85 RCW.

     1. Once-a-year waiver of deposit for local service;

     2. Once-a-year 50% discount on connection fees;

     3. A reduction in the monthly flat fee for telephone services; and

     4. A discount on a community service voice mailbox that provides recipients with an individually assigned telephone number, the ability to record a personal greeting, and a private security code to retrieve messages.

     In 2003, the legislature permanently authorized WTAP, which previously had been operating under a sunset provision and needed to be reauthorized each year.

     The Department of Social and Health Services (DSHS), Economic Services Administration (ESA), Division of Employment and Assistance Programs (DEAP) is proposing to amend via formal rule adoption WAC 388-273-0025 Benefits you receive as a WTAP participant, 388-273-0030 How you can apply for WTAP, and 388-273-0035 What we reimburse the local telephone company. These rules were amended by emergency adoption effective June 1, 2003, in order to maintain WTAP fund solvency.

     The proposed amendments to this chapter include:

     1. Expanding covered services to include a community service voice mailbox offered by a community agency that has contracted with the Department of Community, Trade and Economic Development (DCTED) to provide the service.

     2. Establishing limits to monthly reimbursements to local telephone companies to ensure WTAP remains within established funding.

     The purpose of this document is to describe the costs and benefits to small businesses and clients resulting from this rule change. In addition, it addresses the requirements of the Regulatory Fairness Act (RFA) and the Administrative Procedure Act (APA) as it relates to significant legislative rules.

     Small Business Economic Impact Statement: Chapter 19.85 RCW, the Regulatory Fairness Act, requires that the economic impact of proposed regulations be analyzed in relation to small businesses and it outlines the information that must be included in a small business economic impact statement (SBEIS). Preparation of an SBEIS is required when a proposed rule has the potential of placing a more than minor economic impact on small businesses. DEAP has analyzed the proposed amendments to its rules and has determined that the rule to establish limits to monthly reimbursements to local telephone companies will have an impact on three out of nineteen small businesses with some costs considered "more than minor" while the remaining sixteen small businesses will not be impacted.

     Industry Analysis: DEAP is responsible for development and promulgation of the WAC rules governing the administration of WTAP. The Community Services Division (CSD) within ESA is responsible for the daily operations of the WTAP program. As part of the ongoing daily operations, CSD maintains an internal database that identifies all telephone companies that currently participate in WTAP by providing basic telephone service and which subsequently bill the department for these services. Since internal industry information can be obtained at a more accurate level than is required by chapter 19.85 RCW, it is unnecessary to conduct an industry analysis using the four-digit North American Industry Classification System (NAICS) codes (formerly know as the Standard Industrial Classification (SIC) codes) which are published by the United States Department of Commerce. The 2002 NAICS code for Wired Telecommunications Carriers is 517110.

     DEAP has determined that there are twenty-eight companies that participate in WTAP, of which, there are nineteen that meet the criteria for small businesses as specified under RCW 19.85.020, e.g., independently owned and employing fifty or fewer employees. Attachment A - WTAP Providers, identifies all of the companies providing service to WTAP clients in Washington state, the number of employees, and whether or not the company qualifies as a small business.

     Involvement Of Small Businesses: All telephone companies that participate in WTAP, including those classified as small businesses, were provided notification of the proposed changes to the reimbursement rates on May 30, 2003. No comments were received from any small businesses regarding these changes. Comments on the permanent adoption of the rule were solicited in January 2004 thereby providing small business an additional opportunity to participate in the development of the new rules. To date, no comments have been received from any small businesses.

     The department receives monthly invoices and billings for administrative costs, discounted monthly service, and discounted connection fees from all of the telephone companies that participate in WTAP. This up-to-date monthly information was used in developing the cost benefits and economic impacts contained in this statement.

     Evaluation of Probable Costs and Probable Benefits: Since the proposed amendments "make significant amendments to a policy or regulatory program" (see RCW 34.05.328 (5)(c)(iii)), the ESA's DEAP has determined the proposed rules to be "significant" as defined by the legislature.

     As required by RCW 34.05.328 (1)(c), the ESA's DEAP has analyzed the probable costs and probable benefits of the proposed amendments, taking into account both the qualitative and quantitative benefits and costs. The businesses impacted by these rules are telephone companies that participate in WTAP.

     Cost Of Compliance: The effect of the rule change was to place a limit on the amount of monthly service fees that a telephone company could be reimbursed from the WTAP fund for providing discounted monthly service to participating WTAP clients. Prior to June 1, telephone companies were free to charge the WTAP fund for monthly service without limitation under the existing Washington Administrative Codes. After June 1, the amount telephone companies were allowed to charge the WTAP fund for discounted monthly service was limited to the lesser of: (1) The existing rate that was available to incumbent telephone companies providing service in the client's exchange area, or (2) $19.00.

     In order to demonstrate the impact of the rate limit, cost estimates were developed using the 129,117 WTAP clients being served for the month of June. These estimates use client caseload data from February and May for two of the small businesses which was the last month for which data was available. The focus of this analysis is to assess the impact on the monthly fees for discounted basic telephone service being paid out of the WTAP fund before and after the implementation of the June 1 rate limit and their effects on small businesses and clients. This rule change did not impact the amount the vendors were being paid for administrative costs per client or for discounted connection fees.

     Total reimbursements to vendors would have been approximately $1,187,484.45 without the limit in place. With the limit in place, vendor reimbursements were reduced to $673,813.58 which represented a savings of $513,670.87 to the WTAP fund. The reimbursement rates being paid to vendors ranged from a low of $1.81 to a high of $50.00 per client. After implementation of the rate limit, the reimbursement rates ranged from a low of $1.81 to a high of $18.50 per client. See Attachment B: Comparison of Residential Rate Costs for All Vendors for an illustration of the effect of the rate limit on all vendors operating in the state of Washington who serve WTAP clients.

     Further analysis has indicated that of the twenty-eight vendors, there were four that experienced reduced reimbursements under the rate limit imposed on June 1. The remaining twenty-four vendors did not experience a loss of revenue due to the rate limitation. Of those four that were impacted, there were three that are classified as small businesses while the remaining sixteen small businesses were not affected. Attachment C: Comparison of Residential Rate Costs for Impacted Vendors illustrates the effect of the June 1 rate limit imposed on the four impacted vendors again using the June number of WTAP clients being served.

     Without the rate limit in place, the WTAP fund was being depleted which would have resulted in termination of the program. If this were the case, the cost of obtaining telephone services would have shifted to the clients. To illustrate the cost burden this would place on clients, refer to Attachment D: Client Impacts From Program Discontinuation. This table uses the WTAP client caseload for June and identifies the monthly basic rate for all twenty-four vendors. The monthly cost for clients with the program still in operation was $516,468 based upon the $4.00 monthly rate that clients were required to pay in June. The amount which clients saved with the WTAP program in place ranged from a low of $4.90 to a high of $50.99 per client. If the program were to be eliminated, these clients would be required to pay the basic rate for continued service which ranged from a low of $8.47 to a high of $54.99 per client. The total cost to clients would have been an estimated $2,088,424.69, which represents a monthly cost increase of $1,571,956.69 over the amount paid with the program in place and the client copay set at $4.00 per client.

     While four vendors would have experienced a monthly net loss of an estimated $513,670.87, the client population would have experienced a monthly cost increase of an estimated $1,571,956.69, assuming that all of the WTAP clients elected to continue telephone service at the basic rate established by each vendor. This cost burden would impose a significant financial hardship on low-income families that can ill afford it -- families that rely on financial, food, and medical assistance to meet their basic critical needs.

     Summation -- Disproportionate Impact and Mitigation: Monthly expenditures from the WTAP fund were exceeding monthly revenues so a rate limit was imposed on discounted monthly service. With the rate limit in place, monthly expenditures no longer exceeded monthly revenues but there were four vendors identified that have experienced a significant impact from the rule change. Three of these vendors are classified as small businesses.

     In looking at the largest 10% of vendors, the effect of this rule change did not have an impact upon their revenues. The two largest vendors, QWEST (82,359 customers) and Verizon Northwest (19,723 customers) accounted for over 78% of the WTAP caseload. Because three out of the nineteen small businesses have been negatively impacted by this rate change, it has been demonstrated that this rule change has had a disproportionate effect on small businesses, as defined under the Regulatory Fairness Act. Although three small businesses have experienced a decrease in their monthly revenues due to the rate change, the cost of shifting the expense of telephone service to the existing client populations exceeds the reductions experienced by the four impacted vendors.

     Without the rate limit in effect, the fund would have become insolvent by July 2003. With the rate limit in effect, the fund remained solvent. This is illustrated in Attachment E: WTAP Fund Solvency which projects the program balance with and without the rate change in effect.

     If the department were to mitigate the effects of this rule change on small business by continuation of the reimbursement rates at the pre-June 1, 2003, level, the program would have become insolvent by July 2003 and the department would have had to terminate the program. Therefore, in accordance with RCW 19.85.030(2), the department has determined that it is not feasible to mitigate the effects of this rule change on small businesses.

     Summary of Benefits: With these proposed rule changes, the program remains solvent and continues to provide discounts on telephone fees to approximately 108,000 low-income families each month - telephone service that is not merely a convenience, but provides access to emergency services when needed, as well as to information about jobs, services, and other supports that assist these families in moving to self-sufficiency and off public assistance.

     In addition, all twenty-eight participating telephone companies continue to receive reimbursement for administrative costs, discounted connection fees, and discounted monthly service fees. Therefore, ESA determines that the benefits to the proposed rule changes outweigh the costs.

     Agency Contact: Steve Ebben, Policy Analyst, Program Policy and Planning, Mailstop 45470, Division of Employment and Assistance Programs, Economic Services Administration, phone (360) 413-3096, e-mail ebbenst@dshs.wa.gov

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Projected Fund Balance Without Rate Limit In Effect	May-03	Jun-03	Jul-03
Monthly Program Revenue		$437,000	$416,667
Monthly WTAP Outlay		$1,187,484	$1,187,484
Treasury Fund Balance	$1,228,100	$477,616	-$293,201
Projected Fund Balance With Rate Limit In Effect	May-03	Jun-03	Jul-03
Monthly Program Revenue		$437,000	$416,667
Monthly WTAP Outlay		$673,813	$673,813
Treasury Fund Balance	$1,228,100	$991,287	$734,141

     A copy of the statement may be obtained by writing to Steve Ebben, Policy Analyst, Economic Services Administration, Division of Employment and Assistance Programs, Mailstop 45470, P.O. Box 45470, Olympia, WA 98504-5470, phone (360) 413-3096, fax (360) 413-3493.

     RCW 34.05.328 applies to this rule adoption. These amendments meet the definition of significant legislative rules. A small business economic impact statement, which contains a cost benefit analysis, has been completed, and may be obtained from the person listed above.

     Hearing Location: Blake Office Park (behind Goodyear Courtesy Tire), 4500 10th Avenue S.E., Rose Room, Lacey, WA 98503, on May 11, 2004, at 10:00 a.m.

     Assistance for Persons with Disabilities: Contact Andy Fernando, DSHS Rules Coordinator, by May 7, 2004, phone (360) 664-6094, TTY (360) 664-6178, e-mail fernaax@dshs.wa.gov.

     Submit Written Comments to: Identify WAC Numbers, DSHS Rules Coordinator, Rules and Policies Assistance Unit, mail to P.O. Box 45850, Olympia, WA 98504-5850, deliver to 4500 10th Avenue S.E., Lacey, WA, fax (360) 664-6185, e-mail fernaax@dshs.wa.gov, by 5:00 p.m., May 11, 2004.

     Date of Intended Adoption: Not earlier than May 12, 2004.

March 12, 2004

Brian H. Lindgren, Manager

Rules and Policies Assistance Unit

     (a) Discount on local telephone flat rate services, when the flat rate is more than the WTAP assistance rate;

     (b) Waiver of deposit requirements on local telephone service; ((and))

     (c) Fifty percent discount on service connection fees through June 30, 2003. Effective July 1, 2003, fifty percent discount for the first connection; and for a second or subsequent connection when you ask for service at a new address. Any connection fee discounts available from other programs are added to the WTAP discount, to pay part or all of the remaining fifty percent; or

     (d) Effective July 1, 2003, a community service voice mail box offered by a community agency that has been contracted with the department of community, trade and economic development to provide the service.

     (2) WTAP benefits are limited to one residential line per household.

     (3) ((The deposit waiver and the discount on connection fees are available once per service year. "Service year" means the period beginning July 1 and ending June 30 of the following calendar year.

     (4))) Your benefits begin the date you are approved for WTAP assistance and continue through the next June 30, except if you qualified for telephone assistance through using the community services voice mail programs, you will receive one additional service year of benefits((.

     (5))) . "Service year" means the period beginning July 1 and ending June 30 of the following calendar year.

     (4) WTAP benefits do not include charges for line extension, optional extended area service, optional mileage, customer premises equipment, applicable taxes or delinquent balances owed to the telephone company.

[Statutory Authority: RCW 74.08.090, 80.36.440, 2002 c 104. 02-18-106, § 388-273-0025, filed 9/3/02, effective 10/4/02. Statutory Authority: RCW 74.08.090, 80.36.440. 01-09-023, § 388-273-0025, filed 4/9/01, effective 6/1/01.]

     (2) The telephone company contacts us to verify that you are eligible for benefits under WAC 388-273-0020 before they add WTAP to your telephone account.

     (3) You will know you are receiving WTAP benefits when you have a WTAP credit on your telephone bill.

     (4) Effective July 1, 2003, you can apply for community service voice mail by contacting your local community service voice mail provider.

[Statutory Authority: RCW 74.08.090, 80.36.440. 01-09-023, § 388-273-0030, filed 4/9/01, effective 6/1/01.]

     (a) Program services provided to eligible households June 1, 2003 and beyond, and after eligibility for WTAP is verified;

     (i) Monthly flat rate service.

     We reimburse the local telephone company an amount equal to the monthly flat rate of the incumbent local exchange carrier providing service in the customer's exchange area, minus the WTAP assistance rate set by the commission, and minus the amount of federal lifeline program reimbursement available to an eligible telecommunications carrier. An "incumbent local exchange carrier" is a telephone company in the U.S. that was providing local service when the Telecommunications Act of 1996 was enacted, and is required to file tariffs with the commission. For all exchange areas, the WTAP reimbursement shall be limited to not more than nineteen dollars for each eligible household.

     (ii) Connection fee.

     We reimburse the local telephone company an amount equal to one-half the connection fee rate or twenty-two dollars, whichever is less.

     (iii) Waiver of local deposit.

     We reimburse the local telephone company an amount up to two times the WTAP assistance rate.

     (b) Correct, verifiable billing items;

     (c) ((Invoices)) One monthly invoice and supporting documentation submitted ((within ninety days)) and received by WTAP by the fifteenth day following the month the expense occurred;

     (d) Items charged in error that have been corrected within ((sixty)) thirty days from the date we return the report of invoicing error to the local phone company;

     (e) Salaries and benefits for time required to implement and maintain WTAP, with the exception that time required for the correction of billing, case number and client identification errors is not an allowable expense;

     (f) Travel expenses for attending hearings, meetings, or training pertaining to WTAP;

     (g) Expenses for supplies and materials for implementing and maintaining WTAP;

     (h) Postage and handling for delivery of WTAP material;

     (i) Administrative charge for change of service orders specified by tariffs; and

     (j) Pre-approved documented indirect costs associated with implementing and maintaining WTAP.

[Statutory Authority: RCW 74.08.090, 80.36.440. 01-09-023, § 388-273-0035, filed 4/9/01, effective 6/1/01.]

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