(c) The funds available to each county under the Pay for Performance Program shall be divided each year into as many equal parts as there are measures established for the year under this subdivision. A county shall earn payment of one equal part for each improvement standard that it achieves for the year or by ranking in the top 20 percent of all counties in a measure identified in paragraphs (1), (2), (3), (4), and (5), except as provided in subparagraph (B) of paragraph (4). Counties may receive a pro rata share of incentive funds for each improvement standard. The department shall consult with the County Welfare Directors Association, legislative staff, and other stakeholders, when developing improvement standards and the methodology for earning and distributing incentives for each of the following measures:

1. (1) The employment rate of county CalWORKs cases.
2. (2) The federal participation rates of county CalWORKs cases, calculated in accordance with Section 607 of Title 42 of the United States Code, but excluding individuals who are exempt in accordance with Section 11320.3 and including sanctioned cases and cases participating in activities described in subdivision (q) of Section 11322.6. If valid data does not exist to measure this outcome, the funds for this measure shall be made available for the Pay for Performance Program in the following fiscal year.
3. (3) The percentage of county CalWORKs cases that have earned income three months after ceasing to receive assistance under Section 11450.

4. (4)

   1. (A) The percentage of county CalWORKs cases, including cases that have ceased receiving assistance in the previous two quarters, with earned income that equals or exceeds the income level for the maximum EITC amount available to a household, as determined under Section 22 of the Internal Revenue Code.
   2. (B) This paragraph shall only become operative if the department, in consultation with the County Welfare Directors Association, legislative staff, and other stakeholders, determines that implementing its provisions will not create a substantial risk of California failing to meet federal welfare-to-work participation goals, and shall remain operative for so long as the department does not reverse that determination.
5. (5) Any additional measures that the department may establish in consultation with the County Welfare Directors Association, legislative staff, and other stakeholders.

(d) Performance measures, standards, outcomes, and payments to counties under subdivisions (a), (b), and (c) shall be based on the following schedule:

1. (1) For the performance measure described in paragraph (2) of subdivision (c), payments in fiscal year 2007–08 shall be based on outcomes for the period of July 1, 2006, through December 31, 2006, compared to outcomes for the period of January 1, 2007, through June 30, 2007, and payments in each subsequent fiscal year shall be based on outcomes for the fiscal year prior to payment, compared to outcomes for the fiscal year two years prior to payment.
2. (2) For all other performance measures, payments shall be based on outcomes for the fiscal year prior to payment, compared to outcomes for the fiscal year two years prior to payment.