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This file includes material relating to the efforts attempting to reform the Food Stamps program administratively and legislatively, and court cases challenging those reforms.
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Food Stamps (1)
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1515837
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Food Stamps (1)
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This file includes material relating to the efforts attempting to reform the Food Stamps program administratively and legislatively, and court cases challenging those reforms.
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James M. Cannon Files (Ford Administration)
James Cannon's Issues Files
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The original documents are located in Box 15, folder "Food Stamps (1)" of the James M.
Cannon Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 15 of the James M. Cannon Files at the Gerald R. Ford Presidential Library
AMERICAN STATISTICAL ASSOCIATION
copy
to O'Neill O. Paul NEILL
PROCEEDINGS
an
of the
72012611.10
SOCIAL STATISTICS SECTION
1974
FORD i LIBRARY GERALD
Papers presented at the Annual Meeting of the American
Statistical Association, St. Louis, Missouri, August 26-29,
1974 under the Sponsorship of the Social Statistics Section.
Price: $9.00
AMERICAN STATISTICAL ASSOCIATION
806 15th Street, N.W. Washington, D.C. 20005
RESULTS OF A SURVEY ON HOUSEHOLD PARTICIPATION IN THE FOOD STAMP PROGRAM: DATA FROM THE JUNE 1973
CURRENT POPULATION SURVEY
by
John F. Coder
Bureau of the Census
Introduction
data covering income, migration, educational
attainment, and many other demographic, economic,
Since June 1961, the Federal Food Stamp Program
and social characteristics of the population. To
has been in operation assisting low income fami-
evaluate the quality of the food stamp data col-
lies and individuals in the purchase of food.
lected using the June 1973 CPS, a comparison was
Households which qualify under the eligibility
made between the survey data and data published
requirements established by the United States
by the United States Department of Agriculture.
Department of Agriculture and apply for certifi-
cation become eligible to purchase food stamps.
Comparison of published information from the
Participants purchase food stamps at prices below
Department of Agriculture and data from the June
the face value of the stamps then redeem the
1973 CPS indicate that, although the survey data
stamps for food at supermarkets or other stores
apparently underestimate the number of persons in
which have been certified to handle transactions
households purchasing food stamps in May 1973,
involving food stamps. The difference between
the survey universe of food stamp households is
the purchase price and face value of the stamps
representative of the USDA universe of food stamp
is termed bonus value. The purchase price of the
households with respect to household size, bonus
food stamps is based on the household's net
values, and participation in public assistance
monthly income while the monthly coupon allotment
programs.
(face value) is determined by the size of the
household.
The number of persons in households reporting the
purchase of food stamps in May 1973 on the CPS
The food stamp program has grown from approxi-
was 9,881,100. This figure compares to a USDA
mately 50,000 participants receiving $381,000
published figure of about 12,358,200. The CPS
in food stamp bonus value in June 1961 to nearly
figure which is approximately 80 percent of the
13,600,000 participants receiving approximately
USDA estimate differs from the USDA figures for
$271 million in bonus value in March 1974.
several reasons. As in all household surveys, the
Throughout this twelve year period of growth lit-
data are subject to sampling and nonsampling
tle information has been available concerning the
errors. Of the factors causing the discrepancy
characteristics of households participating in
between the two estimates, nonsampling errors
the food stamp program. To provide such data, the
such as misreporting and nonreporting are proba-
Bureau of the Census, under sponsorship of the
bly the most important.
Office of Economic Opportunity, conducted a house-
hold survey in June 1973. The questions concern-
Two other factors which may also contribute to the
ing food stamps were designed mainly to collect
20 percent difference between these estimates are
information concerning household participation in
possible errors in the USDA administrative data
evertm
the food stamp program during the month of May
and the occurrence of multiple USDA food stamp
stupy
1973 with additional questions on participation
households within the CPS household structure.
during the previous twelve month period.
Because the USDA estimates are derived from infor-
37%
mation provided by local (in most cases counties)
This presentation which is largely based on infor-
food stamp agencies, some of which undoubtedly do
mation collected by this survey has two objec-
a better record keeping job than others, the USDA
VIZLIST
tives. The first objective is to provide a brief
estimates are also subject to error and should not
analysis covering the quality of the food stamp
be used as a tool for evaluation without this fact
information col ected using the June 1973 Current
in mind. Whether errors in the administrative
Population Surv (CPS). The second cojective is
data tend to lessen or widen the gap between these
to develop a profile of food stamp households with
estimates has not been determined. Evidence from
respect to their economic and demographic charac-
a record check study indicate that some of the CPS
teristics including their annual income in rela-
households contain two or more USDA food stamp
tion to official Federal poverty levels.
units. This situation may occur, for example, in
the case of a CPS household containing both a pri-
Quality of Food Stamp Survey Data
mary family and a subfamily consisting of the pri-
mary family head's son and the son's wife and
The survey data presented here pertaining to food
child. Although this group represents one CPS
stamp recipients were collected by supplementing
household, it is conceivable that both the primary
the June 1973 Current Population Survey question-
family and the subfamily could receive food stamps
naire with a group of questions covering household
as separate units. The design of the question-
purchases of food stamps during the month of May
naire, however, allowed only one food stamp house-
1973 and during the previous twelve month period,
hold for each CPS defined household. This fact
June 1, 1972 to May 31, 1973. The Curr Popula-
caused a portion of the difference in the number
tion Survey is a monthly household suivey of ap-
of participating households (see table 1) but
proximately 50,000 households designed primarily
should have had little effect on the count of the
to provide national estimates of employment, unem-
number of persons in food stamp households, a
ployment, and other characteristics of the labor
figure which could be recorded correctly regard-
force. It has also been widely used to provide
less of the number of food stamp households within
275
the CPS household. Although these facts would
Characteristics of Food Stamp Households
suggest that the underestimate of the number of
food stamp households would be greater than that
Shown in tables 2 and 3 are data for families
for persons in the households, the underestimate
reporting the purchase of food stamps in May 1973
for both figures was about the same, 20 percent.
by selected characteristics Data in table 2 show
the proportion of the selected universe reporting
An evaluation of the CPS estimate of the total
the purchase of food stamps in May while the data
number of households purchasing food stamps in
in table 3 sho the distribution of food stamp
the twelve month period, June 1, 1972 to May 31,
households for each selected universe. These data
1973 was also made. The June CPS data show a
have not been adjusted for the 20 percent differ-
total of about 3,938,000 different households
ence between USDA figure and the survey figure of
participating during this period. Of this total,
the number of households purchasing food stamps
829,000 households reported purchasing food
in May 1973.
stamps during the specified twelve month period
but not in May 1973. A method offered by USDA
Since the data which will be presented in the fol-
for determining the number of different house-
lowing sections are based on a sample, they are
holds participating in the food stamp program in
subject to sampling variability as well as errors
a given twelve month period was 1.5 times the num-
of response and nonreporting. None of the state-
ber participating in any single month. If this
ments in this report have been tested for statis-
figure is used and May 1973 is taken as the base
tical significance, therefore, an attempt has been
month then an estimate of the total number of
made to limit comparisons to situations where
households derived from administrative data is
obvious significant differences exist.
1.5 X 3,941,000 or 5,912,000. The survey under-
estimate of the number of households participating
Overall approzimately 4.2 percent all families
between June 1, 1972 and May 31, 1973 using this
and 5.7 percent of all households aded by a pri-
method is about 33 percent.
mary individual reported purchases of food stamps
in May 1973. Almost one of every five families
Estimates derived from the CPS for both bonus
headed by a woman purchased food stamps in May
value per participant and participation rates in
while only 2.2 percent of all families headed by
public assistance programs by food stamp house-
men purchased food stamps.
holds are also very similar to USDA published
figures. The aggregate bonus value for May 1973,
Participation rates for Negro families were
defined as the difference between the purchase
higher than rates for white families for each
price and coupon allotment, was estimated from the
characteristic shown; the high participation rate
CPS to be $141.7 million This figure is about
for Negro families reflecting the lower income
80 percent of the USDA estimate of $178.5 million.
and greater proportion of families headed by women
The average bonus value per participant calculated
for this group. Participation rates for families
from CPS data, however, was $14.27, about 99 per-
were higher in the South than in any other region,
cent of the corresponding figure of $14.45 pub-
a result apparently of the lower incomes in this
lished by the USDA for May 1973. USDA estimates
region.
also show that in May 1973, 61 percent of all per-
sons receiving food stamps were in households
Participation rates by income class decline, as
which received food stamps as a direct result of
would be expected, as income increases. The par-
their participating in the public assistance pro-
ticipation rates for Negro families appear to be
gram in May. Data compiled from the CPS indicate
higher than for white families at each income
that in May 1973 about 58 percent of all persons
level. This higher participation rate for Negro
in food stamp households were in households headed
families may result from the fact that a larger
by a person reporting the receipt of public
proportion of Negro families with low incomes
assistance in May.
receive public assistance than white families and
therefore a larger proportion of Negro families
Evaluation of the CPS food stamp data with respect
are categorically eligible to participate in the
to many important demographic characteristics of
food stamp program.
the household such as income, age, race, and sex
of head, and labor force status of head, etc.,
Negro families which comprise about 11 percent of
could not be made because littleor no information
all families and 32 percent of all families with
is available from administrative sources. An
incomes below poverty level in 1972 made up about
evaluation of the survey data with respect to
42 percent of the families purchasing food stamps
reliable demographic information from administra-
in May 1973. Approximately 70 percent of all
tive sources could show that the difference is
Negro families purchasing food stamps were headed
not proportionally distributed between demographic
by a woman. This contrasts with the corresponding
subgroups and that the survey households are not
figure of 43 percent for white families.
representative of the USDA food stamp households
with respect to certain demographic characteris-
The South which has the largest population of the
tics. If differential underreporting could be
four regions in the U.S. also accounts for the
determined using reliable administrative figures
largest group of food stamp families, 38.4 per-
as a control, adjustments could be made to improve
cent, a rate which slightly exceeds its proportion
the usefulness of the data by simultaneously cor-
of the total number of families in March 1973
recting for the underreporting of food stamp pur-
(31.8 percent).
chases and the differences in demographic compo-
sition.
The distribution of food stamp families by residence
276
areas shown in table 3 varies somewhat with re-
of other matched status had undergone some compo-
spect to the distribution of all families within
sitional change between March and June, a fact
these areas. While both 67 percent of all fami-
which would complicate the analysis. Households
lies and families purchasing food stamps reside
which moved between March and June were by defini-
in metropolitan areas, 30 percent of all families
tion excluded from the analysis since no data
and 48 percent of all food stamp families live in
from the June CPS was available.
the central city. Farm families which comprise
about five percent of all families constitute only
After matching of the data files further screening
2.5 percent of the total number of food stamp
of the matched records was required before the
families.
analysis could begin. Since the food stamp infor-
mation on the June 1973 CPS was collected for
Participation rates for primary individuals which
households and poverty status is developed on a
make up approximately 30 percent of all food stamp
basis of families and unrelated individuals, all
households were highest for Negro females age 65
secondary families and secondary unrelated indi-
or older (25.5 percent) and lowest for white males
viduals were eliminated from the matched data
less than 25 years old (1.4 percent). As was the
file. An assumption was made, therefore, that
case with families, Negro primary individuals had
the unit receiving food stamps within the CPS
higher participation rates than white primary
household was always the primary family or the
individuals. Of all primary individuals purchas-
primary unrelated individual.
ing food stamps in May 1973, 74 percent were
women; 41 percent were women age 65 and over.
Tabulations made from the matched data file indi-
cate that approximately half (52.8 percent) of
Available information which have not been included
the families and two-thirds (68.7 percent) of the
in any of the tables indicate that of the house-
unrelated individuals purchasing food stamps
holds reporting the purchase of food stamps in
had annual incomes below the poverty level in
May 1973, more than 60 percent reported purchasing
1972. These figures vary somewhat by race and
food stamps in each of the previous twelve months.
sex of head, with food stamp families headed by a
Over 80 percent reported purchasing food stamps
white male having a 42.4 percent poverty rate and
for six or more months during this period. The
food stamp families headed by a Negro female
mean number of months purchased for this group
having a poverty rate of 60.2 percent.
was approximately 9.3.
The fact that only about 50 percent of all fami-
For the household which reported purchasing food
lies purchasing food stamps during the specified
stamps during the twelve month period June 1, 1972
twelve month period had incomes below the poverty
to May 31, 1973 but not in May 1973 (a total of
level in 1972 is not surprising for several rea-
828,000 households), the average number of pur-
sons. First, eligibility for food stamps is
chase months was 3.8. Sixty percent of these
based on a net monthly income figure while the
households purchased food stamps for three months
poverty status is based on an annual income con-
or less months with almost 30 percent reporting a
cept. As a result, a household may be eligible
purchase in only one month in the past twelve.
for food stamps for several months because of
some short term decrease in income but on an
Food Stamps and the Low Income Population
annual basis have income above the poverty level.
Secondly, USDA maximum monthly income amounts,
One obvious topic of interest concerning the food
which help determine a household's eligibility to
stamp population is the status of this population
participate in the food stamp program are higher
with respect to official Federal poverty standards
than one twelth of the poverty level which is an
and, conversely, the status of the poverty popula-
annual gross income amount. Thirdly, since
tion with respect to participation in the food
monthly income used to determine eligibility is a
stamp program. To provide information on these
net figure derived after deductions are made for
subjects, a match of two Census Bureau data files,
payroll taxes, shelter costs, medical expenses,
the March 1973 CPS file containing detailedincome
etc., the annual gross income of a participating
data and poverty status for calendar year 1972
household may be considerably higher than the
and the June 1973 CPS file containing food stamp
poverty level.
information was made. As a result of the CPS
sampling design, households are interviewed for
In addition to these two factors which demonstrate
four consecutive months, released from the sample
that a considerable number of families with annual
for eight months, and returned to the sample for
incomes above the poverty level are eligible for
a final four month period. One fourth of the
food stamps, guidelines set up for the food stamp
households in the March 1973 CPS sample, there-
program provide that all persons receiving public
fore, were also in the June 1973 CPS sample and a
assistance are also eligible to participate in the
match of these data files thus provided informa-
food stamp program. About one half of the fami-
tion from both data files for the households com-
lies and one-third of the unrelated individuals
mon to these monthly surveys.
receiving public assistance in 1972 had annual
incomes above the poverty level, yet were categor-
The total number of households available for
ically eligible to participate in the food stamp
matching (based on the March 1973 CPS data file)
program while receiving public assistance income.
was 11,186 (actual number of sample households).
Of these 8,596, or 77 percent, were termed fully-
Estimates of participation in the food stamp pro-
matched+ Only these fully-matched households
gram by families and unrelated individuals with
were used for analytical purposes since households
incomes below the poverty level in 1972 are shown
277
in table 4. Several adjustments, were made to the
appear to closely represent the total universe in
survey data before the estimates of participation
many important respects.
in food stamp program by the poverty population
could be derived. First, adjustments were made
The data presented here pertaining to the rela-
to the survey data for the underestimate of the
tionship between the food stamp and official Fed-
number of food stamp households by assuming the
eral poverty universes must be used only keeping
underestimate was distributed proportionally
in mind the assumptions which have been made.
between demographic subgroups and between the
Since the data used to develop these estimates
poverty and nonpoverty population. This adjust-
were not collected for the specific purpose of
ment also assumed that the survey underestimated
estimating the relationship between poverty and
the number of households purchasing food stamps
food stamps, some useful information pertinent to
during the 12 month period June 1, 1972 to May
the analysis such as changes in household composi-
31, 1973 by 33 percent. Because the food stamp
tion during the year, financial assets, and pur-
program was in operation in only about two-thirds
chases of food stamps covering all of calendar
of the counties in the U.S. in May 1973, a second
year 1972 were not collected. The fact that the
adjustment was made which excluded from the anal-
analysis required a match of the March 1973 CPS
ysis sample households located in sampling areas
and June 1973 CPS files resulted in some problems.
(primary sampling units) containing one or more
Households which moved during the period between
counties which did nothave the food stamp program
March and June were necessarily excluded from the
in May 1973. This adjustment allowed the deriva-
final sample used in the analysis. The sample
tion of participation rates based only on house-
size was reduced considerably and, therefore,
holds residing in areas administering the food
sampling errors increased to levels which are much
stamp program.
higher than those associated with the entire CPS
sample. Even in the light of these problems, this
The data shown in table 4 indicate that overall,
study has produced some interesting findings which
53.3 percent of all families and 30.8 percent of
should serve to increase our knowledge about the
all unrelated individuals with incomes below the
food stamp program and to promote more detail and
poverty level in 1972 purchased food stamps
specialized studies in this area.
between June 1, 1972 and May 31, 1973. The par-
ticipation rate in the food stamp program for
female headed families with incomes below the
The estimate of $141.7 million bonus value from
poverty level in 1972 was 71.1 percent while the
the CPS was derived assuming households reporting
rate for families headed by an elderly male was
the purchase of food stamps in May but failing to
34.2 percent. About 75 percent of the families
report the necessary information to calculate
and 80 percent of the primary individuals below
bonus value received, on the average, the same
the poverty level who purchased food stamps, pur-
bonus values as households reporting both purchase
chased food stamps in six or more months during
price and coupon allotment. Approximately 10 per-
this period.
cent of the food stamp households did not provide
all information required to calculate the bonus
Participation rates were significantly higher for
value.
both Negro families and primary individuals below
the poverty level than for white families and
Negro actually refers to Negro and other races
individuals. This, again, may result, in part,
throughout this paper.
from the fact that a larger proportion of low
income Negro families receive public assistance
As a result of residents moving from the sample
than white families.
address, noninterviews, and errors in recording
identifying information, some households could not
Summary
be matched.
The June 1973 CPS represents the first attempt by
A fully-matched code was assigned to a household
the Census Bureau at collecting information
only if records for each person 14 years and older
concerning household participation in the food
within the household were present on both data
stamp program on a national scale. The role of
files. Therefore, these households have undergone
food stamps as well as other sources of what have
no compositional changes among their members 14
been termed "nonmoney" or "noncash" income as an
years old and over.
important source of income to both families and
individuals has been increasing at a rapid rate.
Since the number of secondary families is very
More efforts will be needed by the Bureau of the
small (about 100,000 of a total of 54.3 million
Census and others to expand our knowledge as to
total families in March 1973) and 75 percent of
the effects of "noncash" income on the total wel-
all unrelated individuals are primary individuals
fare of the population.
living alone, this assumption will be a correct
one in almost all cases.
Collection of food stamp data using the June 1973
CPS was an experience which resembles our previous
Families and unrelated individuals were classi-
survey experiences in collecting public transfer
fied as food stamp recipients if any person in the
money income data such as public assistance. This
family or anyone in the household headed by the
experience has been that the number of recipients
primary individual reported purchasing food stamps
and the aggregate amount of benefits, in terms of
in any month between June 1, 1972 and May 31, 1973.
dollars, have been substantially underestimated by
the surveys but that the reporting recipients
278
TABLE 1. A COMPARISON OF JUNE 1973 CPS SURVEY DATA AND U.S. DEPARTMENT OF AGRICULTURE DATA ON THE NUM-
BER OF HOUSEHOLDS PURCHASING FOOD STAMPS IN MAY 1973
Food Stamp Households by Size
Ratio of CPS Households to
Size of Household
Number (thous.)
Percent
Number (thous.)
Percent
USDA households
(1)
(2)
(3)
(4)
(1+3)
Total
3,110
100.0
3,941
100.0
.79
1
874
29.2
1,186
30.1
.74
2
655
21.9
822
20.9
.80
3
451
15.1
581
14.7
.78
4
305
10.2
445
11.3
.69
5
228
7.6
304
7.7
.75
6
170
5.7
210
5.3
.81
7
131
4.4
143
3.6
.92
8 or more
175
5.6
250
6.3
.70
Size not available
121
3.92/
(x)
(x)
(x)
Mean size
3.19
(x)
3.13
(x)
1.02
Percents are calculated based on the total number of households reporting on the number of persons
covered under the food stamp program.
This figure represents the percent of all households reporting the purchase of food stamps in May
which did not report the number of persons covered under the food stamp program.
FORD
X Not applicable.
LIBRARY
TABLE 2. PERCENT OF FAMILIES PURCHASING FOOD STAMPS DURING MAY 1973 BY SELECTED CHARACTERISTICS
(Data from the June 1973 CPS. Numbers as of June 1973)
All families
White Families
Negro and Other
Races Families
Selected Characteristics
Number
Percent
Number
Percent
Number
Percent
(Thou-
Purchasing
(Thou-
Purchasing
(Thou-
Purchasing
sands)
Food Stamps
sands)
Food Stamps
sands)
Food Stamps
All families
54,309
4.2
48,154
2.8
6,155
15.5
Sex of Head
Male,
47,794
2.2
43,531
1.8
4,262
6.6
Female
6,515
19.0
4,623
12.2
1,892
35.5
Age of Head
Less than 25
4,113
6.7
3,548
4.4
564
21.2
25 to 54
33,779
4.1
29,660
2.6
4,119
15.1
55 to 64
8,699
3.2
7,947
2.1
752
14.6
65 years or older
7,718
4.2
6,999
3.2
719
14.1
Residence
Farm.
2,538
2.2
2,399
1.6
139.
14.1
Nonfarm, total
51 771
4.3
45,755
2.8
6,016
15.5
In metrOpolitan areas,
36,531
4.2
31,733
2.6
4,798
15.0
In central city
16,427
6.6
12,751
3.6
3,676
17.0
Qutside central city
20,104
2.2
18,982
1.8
1,122
8.3
Outside metropolitan areas.
15,240
4.6
14,022
3.4
1,218
17.8
Region
Northeast
12,831
3.8
11,713
2.5
1,117
17.8
North Central
15,098
3.5
13,871
2.3
1,227
17.3
South
17,001
5.2
14,053
2.9
2,948
15.7
West
9,380
4.1
8,517
3.6
863
9.1
Income
Under $2,000.
1,102
31.6
770
24.8
332
45.6
$2,000 - $2,999
2,062
21.5
1,637
15.8
425
40.0
$3,000 - $3,799
2,285
15.7
1,830
12.5
455
27.9
$4,000 - $4,999
2.348
10.6
2,071
6.9
277
33.4
$5,000 $5,999
2,905
5.0
2,456
3.3
449
13.9
$6,000 or more
39,003
0.9
35,297
0.6
3,712
3.8
NA
4,537
2.3
4,045
1.8
492
8.0
The money income levels shown here may be somewhat understated. These data which are from the June
1973 CPS control card are based on the respondent's estimate of total family money income for the
preceding 12 month period coded in broad, fixed income intervals.
279
TABLE 3. FAMILIES PURCHASING FOOD STAMPS DURING MAY 1973 BY SELECTED CHARACTERISTICS
(Data from the June 1973 CPS. Numbers as of June 1973)
Selected Characteristics
All Families
White Families
Negro and Other Races Families
Total purchasing food stamps.
2,281
1,327
954
Sex of Head
Total
100.0
100.0
100.0
Male
45.8
57.5
29.6
Female
54.2
42.5
70.4
Age of Head
Total
100.0
100.0
100.0
Less than 25
12.2
11.9
12.6
25 to 54
61.4
58.5
65.3
55 to 64
12.2
12.7
11.5
65 years or older
14.2
16.9
10.6
Residence
Total
100.0
100.0
100.0
Farm
2.5
2.8
2.0
Nonfarm, total
97.5
97.2
98.0
In metropolitan areas
67.0
61.2
75.2
In central city
47.6
34.7
65.4
Outside central city
19.4
26.5
9.8
Outside metropolitan areas
33.0
38.9
22.8
Region
Total
100.0
100.0
100.0
Northeast
21.6
22.1
20.9
North Central
23.1
23.8
22.3
South
38.4
31.2
48.6
West
16.8
23.0
8.3
Income
Total
100.0
100.0
100.0
Under $2,000
21.7
19.7
24.6
$2,000 - $2,999
23.7
22.8
24.9
$3,000 - $3,999
17.6
19.1
15.5
$4,000 - $4,999
11.8
11.4
12.3
$5,000 - $5,999
6.3
6.2
6.4
$6,000 or more
14.3
15.4
12.9
NA
4.6
5.4
3.5
The money income levels shown here may be somewhat understated. These data which are from the June
1973 CPS control card are based on the respondent's estimate of total family money income for the
preceding 12 month period coded in broad, fixed income intervals.
TABLE 4. PERCENT OF FAMILIES AND PRIMARY INDIVIDUALS WITH INCOMES BELOW THE POVERTY LEVEL IN 1972 AND
PURCHASING FOOD STAMPS DURING THE PERIOD JUNE 1, 1972 TO MAY 31, 1973
Percent Below the Poverty Level in 1972 Purchasing
Age and Sex of Head
Food Stamps
All Races
White
Negro and Other Races
FAMILIES
Total
53.3
49.2
61.1
Male head, total
40.3
38.8
45.6
Under 65 years
42.2
41.2
45.2
65 years or older
34.2
31.6
(B)
Female head, total
71.1
71.8
70.5
Under 65 years
74.4
78.0
69.6
65 years or older
(B)
(B)
(B)
PRIMARY INDIVIDUALS
Total
30.8
26.2
59.2
Male, total
38.5
36.5
(B)
Under 65 years
38.6
(B)
(B)
65 years or older
(B)
(B)
(B)
Female, total
28.7
24.0
(B)
Under 65 years
38.0
32.1
(B)
65 years or older
23.6
20.1
((B)
B
Base less than 50,000
280
OF COMMERCE
UNITED STATES DEPARTMENT OF COMMERCE
Social and Economic Statistics Administration
UNITED STATES OF AMERICA
BUREAU OF THE CENSUS
Washington, D.C. 20233
Collection of Food Stamp Data in the Current Population Survey
I. June 1973 CPS Supplement
A. Sponsor - DHEW/Office of Economic Opportunity
B. Contacts - 1. Mr. Wray Smith, Director for Technical Support Systems,
Office of the Assistant Secretary for Planning and
Evaluation, DHEW
2. Mr. John Coder, Income Statistics Branch, Population
Division, Census Bureau
C. Content - Household (not individual person) based questions concerning
cost and value of food stamps received during May 1973, number
of persons for whom stamps were to be used, and number of
months during period May 1972-June 1973 for which food stamps
were received. For each individual age 14+ (regardless of
whether household received food stamps) questions were asked
about income from wages or salary, Social Security, and
other transfer payments.
D. Data Release - Partially edited microdata tapes to DHEW/OEO
E. Reports - Preliminary report by John Coder (attached). Subsequent
reports and papers by Population Division and DHEW.
II. August 1974 CPS Supplement (to be repeated in August 1975 and August 1976).
A. Sponsor - DHEW/Office of the Assistant Secretary for Planning and
Evaluation
B. Contacts - 1. Mr. Wray Smith, DHEW
2. Mr. Roger Herriot, Income Statistics Branch, Population
Division, Census Bureau
C. Content - Household questions concerning whether food stamps received
during previous 12 months, and, by month, during the previous
4 months. Questions concerning cost, value, and number of
persons for whom used were asked in regard to the most recent
of the past 4 months in which stamps were received. All
households asked about receipt of certain transfer payments
during July 1974 and the total income for the household
during that month. Amount of July rent or mortgage payment
was asked for households with monthly income under $1,250.
AMERICAN REVOLUTION WEENTENNING
1776-1976
5
The Chilton Research Services, located in Radnor, Pa., collected
and tabulated the survey data. They pretested the questionnaires
simultaneously in Philadelphia, Pa. and Wilmington, Del. in October
1973. The actual survey data were collected in January and February
1974. But, the data reflect the situation that existed in each house-
hold in November 1973. If data for November 1973 were not available,
monthly data were obtained in terms of the last 12 months or other
appropriate time periods, and apportioned to November 1973. Any
exceptions to these rules are footnoted in the text and tables.
2364
During this collection period, personal interviews were completed
in 2,191 food stamp and 2,364 food distribution households out of the
4555
7,200 household sample. The major reasons and number of noncom-
pletions were as follows:
%
7200
Reason for noncompletion:
Number 7.
4555
(1) Unable to locate
833 31.5
11.6
2:45
(2) No one at home
684 25.3
9.5
(3) No longer eligible
204 7.7
2.8
(4) No eligible respondent 1 at home
132
5.0
1.8
(5) Moved out of county
152
5.8
2.1
(6) No such address
122
4.6
1.7
37%
(7) Eligible respondent ill or hospitalized, or death in family
119
4.5
1.7
(8) Refused
73
28
1.0
(9) Eligible respondent not in county for duration of survey
40
1.5
.6
(10) Language barrier or hearing difficulty
41
1.6
.6
(11) Other reasons such as the contractor's inability to locate qualified
interviewers, interviewer illness, bad weather, and inability to
obtain gasoline due to rationing or shortage
245
9.2
3.4
I Eligible respondents are either male or female heads of households, or their spouse, or any other 2645 adult
130
36.8
household member who is familiar with the sources of household income(s) and expenditures.
INTERVIEWS
4555
63.2
For reasons of uniqueness, the Puerto Rican food distribution
100
sample households are tabulated separately from the U.S. food
distribution samples and are not discussed in this report.
DEFINITION OF TERMS
Household.-A household is all persons, excluding roomers, boarders,
and unrelated live-in attendants necessary for medical housekeeping,
or child care reasons, residing in common living quarters (residents
must not be resident of an institution or boarding house). It is the
basic unit of observation in this survey. Households may include
more than one family; for example, a married couple with children
may live with the wife's parents.
Income.-Income data were collected for each person in the sample
18 years of age and over. Money income was defined as the cash
amount of (1) earned income, after taxes (Federal, State, local, and
social security), from money wages or salary, net income from non-
farm self-employment, net income from farm self-employment;
(2) interest, dividends, and net rent income; (3) private pensions,
annuities, alimony, and regular contributions including scholarships
and fellowships; (4) social security; (5) unemployment compensa-
tion; (6) veterans' payments; (7) aid to families with dependent
children (AFDC); (8) old age assistance (OAA); (9) aid to the blind
(AB); (10) aid to the permanently and totally disabled (APTD);
and (11) general assistance (GA). (OAA, AB, and APTD were re-
placed by the Federal supplemental security income program and
2
D. Data Release - Partially edited microdata tapes to DHEW.
E. Reports - Contact Wray Smith
III. August 1974 Reverse Record Check of Food Stamp Recipients
A. Sponsor - USDA and DHEW
B. Contacts - 1. Mr. John Galvin, USDA
2. Mr. Wray Smith, DHEW
C. Sample - 700 households selected from USDA's food stamp roles. Included
100 households in each of Niagra County, New York, Crisp County,
Georgia, and Vigo County, Indiana; and 200 households in
each of Orleans Parish, Louisiana and Riverside County,
California.
D. Content - Identical to August 1974 CPS supplement.
E. Data Release - Questionnaires returned to Mr. Galvin, USDA
F. Reports - Analysis being performed by DHEW.
IV. December 1974 CPS Supplement (to be repeated in December 1975 and December 1976)
A. Sponsor, Contacts, and Data Release - Same as for August 1974 CPS.
B. Content - One question for each household asking whether food stamps
were received during the month of November.
V. April 1975 CPS Supplement (to be repeated in April 1976)
A. Sponsor, Contacts, and Data Release - Same as for August 1974 CPS.
B. Content - Household questions concerning number of months food stamps
were received during 1974 and whether food stamps were
received during January-March 1975. Cost and value of
stamps were asked for most recent month if January-March 1975.
ATTACHMENT 4
Interviewed
Households
[2.4% of Households
68,782,692
NA on
"No" Food
Food Stamps
Stamps in May
64,023,859
1,648,495
(.03%)*
Food Stamps
in May
"Yes"
3,110,338
NA or Don't
Fully Reported
(2.0%)*
Know on One
Price, Value
or More F.S.
Number (56, 57, 58)
Items (56, 57, 58)
2,751,040
359,298
(2.0%)*
NA on Number
Covered (56) Only
NA on Number
9+ Size
39,533
and NA or DK
Households
on Either or
NA or DK on
Both Price & Value
122,143
Either or Both
81,813
1-8 Size
(9.0%)*
Price & Value
Households
237,952
2,628,897
(2.0%)*
1/
* Percentages in parentheses are the
Reported Outside
sampling variance as a percent of
Reported Within
USDA Purchase
the estimate. That is, the coefficient
USDA Purchase
Req. Coupon
of variance.
Req. Coupon
Value Table
Value Table
1,118,790
1,510,107
(3.0%)*
(2.5%)*
1/ Households reporting outside the USDA purchase requirement and coupon value
table are not necessarily misreporting the food stamp information. Households
may elect to purchase 1/4, 1/2, or 3/4 or their food stamp allotment as shown in the
table. Other reasons for households reporting outside the table values include:
(1) more than one "food stamp household" per CPS household (occurred frequently
in the reverse record check of D.C. food stamp recipients), (2) reporting the
incorrect number of participants, (3) reporting coupon value correctly but purchase
requirement incorrectly, (4) reporting purchase requirement correctly but coupon
value incorrectly, and (5) or any combination of the above errors.
CHILTON SURVEY:
NUMBER OF FAMILIES IN EACH INCOME/FAMILY SIZE CELL
NUMBER OF CELLS OUT OF TOTAL 64
30-
(25)
-
TORDO LIBRARY * GENELD
-
20-
-
-
(12)
(11)
10-
-
(8)
-
(4)
-
(3)
(1)
0 I
O
o- 10- 20-
30-
60-
100-
150-
300-
9 19 29
59
99
119
179
329
CELL SIZE: NUMBER OF FAMILIES
Total Number of Families in the Chilton Study by Income and Family Size
Family Size
After tax
monthly income
1
2
3
4
5
6
7
8+
$0
16
10
7
8
2
0
3
4
1 - 99
152
54
27
19
7
6
0
4
LIBRARY
101 - 199
317
152
71
38
31
13
11
10
200 - 299
73
159
96
80
35
24
20
26
300 - - 399
7
26
40
50
57
33
12
10
400 - 599
1
14
21
43
36
23
25
50
600 - 799
1
2
2
5
0
10
10
14
800+
0
1
1
3
2
0
1
9
Source: JEC Subcommittee on Fiscal Policy Studies in Public Welfare - No. 17,
Appendix III, Table 1.
Hoed Stamps
ne Food Stamp Kefori
Act of
food
Republican
Study
Committee
1975
FORD
FOOD STAMP INVESTIGATION
Background Paper
BER
LIBRARY
25r. BUCKLET. Mr. President serious
for the 94th
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cerned = and by -alarmed
Number 4
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EXPRESS
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to
PREFACE
One of the most critical areas facing the 94th Congress is the spiraling
growth of governmental transfer payments -- particularly in the public
assistance programs of this nation. Reform, to direct resources to those
most critically in need, is long overdue.
The following proposal, which concerns the nation's Food Stamp program,
is the second in a series of proposals which will address the entire
public assistance field: AFDC, food stamps, Medicaid, Supplementary
Security Income (the adult categories), and a number of the ancillary
programs administered by the Department of Health, Education, and Welfare.
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HO
FORD
THE NATIONAL FOOD STAMP REFORM ACT OF 1975
Table of Contents
GERALD
1. A Guide to the Food Stamp Program
133
2. Food Stamps: A Program Virtually Out of Control
134-136
a. Table A: Food Stamp Program Growth
137
b. Table B: Participants vs Eligibles
138
3. Summary of Recommendations
139-141
4. Overview
142-143
5. Food Stamps: Eight Problem Areas
a. Problem Area: Expanded Eligibility to the Non-Needy: Persons
with High Incomes
144
1. Specific Problem: Gross VS Net Income
144-146
2. Specific Problem: No maximum ceiling
146-148
3. Specific Problem: Purchase requirements and the
Average American Family
148-150
4. Specific Problem: Duplicative cost-of-living increases 151
5. Specific Problem: No indexing of purchase requirements
152
6. Specific Problem: Insufficient resource limitations
152-153
7. Specific Problem: Market value vs equity
153-154
8. Specific Problem: No prohibition against property
transfer
154
9. Specific Problem: Categorical eligibility of public
assistance recipients
154
b. Problem Area: Level of Benefits to the Genuinely Needy
155
1. Specific Problem: The Economy Diet Plan
155
2. Specific Problem: Benefits to Senior Citizens
155-156
c. Problem Area: Eligibility Loopholes
157
1. Specific Problem: No minimum age
157
2. Specific Problem:
Current work requirements
157-158
3. Specific Problem:
Drug addicts and alcoholics
158
4. Specific Problem:
Voluntary quits
158-159
5. Specific Problem:
No referral to union jobsites
159
6. Specific Problem:
Food Stamps for strikers
159-160
7. Specific Problem:
College student eligibility
160-161
8. Specific Problem:
"Buying and Preparing Food Separately 162
9. Specific Problem: Alien eligibility
162
10. Specific Problem: Multiple public benefits
163
d. Problem Area: Administrative Complexities
164
1. Specific Problem: USDA VS HEW
164
2. Specific Problem:
No demonstration project authority
164-165
3. Specific Problem: Outreach direction
165
4. Specific Problem: Public assistance withholding
165-166
e. Problem Area: Insufficient Cash and Coupon Accountability
167
1. Specific Problem: Inadequate deposit notification
167
2. Specific Problem: No fiscal sanctions re agents
167
3. Specific Problem: Delays in deposits
167-168
4. Specific Problem: Inadequate shipment notification and
delivery safeguards
168
5. Specific Problem: No monthly reconciliation
169
6. Specific Problem: The U.S. Postal Service
169
f. Problem Area: Criminal Activities (Fraud, Theft, Counter-
feiting, Black Marketing Activities) and Lax Recipient
Identification
170
1. Specific Problem: Lax recipient identification
170
2. Specific Problem: Easy food stamp negotiability
170-171
3. Specific Problem: Fraud control sharing
172
4. Specific Problem: The "county or state hopper"
172-173
5. Specific Problem: When a recipient moves
173
6. Specific Problem: Methods to verify earnings
173
7. Specific Problem: No monthly income reporting
174
g. Problem Area: Purposes of the Program
175
1. Specific Problem: Nutrition and surpluses
175
2. Specific Problem: Regular review of problem areas
176
h. Problem Area: Funding
177
1. Specific Problem: No State or local participation
177
A GUIDE TO THE FOOD STAMP PROGRAM
Food stamps are provided to both public assistance recipients (categorically,
because they are public assistance recipients) and non-public assistance
recipients, on the basis of their income.
Three factors are critical: coupon allotments, which are a monthly dollar amount
based upon the Economy Diet Plan, issued by USDA; purchase requirements, which
are varying amounts recipients have to pay for food stamps, depending upon their
income; and, of course, the income of the applicant or recipient. Some recipients
have no purchase requirement.
Current food stamp law says that no one may pay more than 30% of their income for
food stamps. This means every time the coupon allotments are adjusted upward, bot
eligibility and purchase requirements change, making more people eligible.
The difference between the purchase requirement and the coupon allotment is the
"bonus value. The bonus value is funded 100% by the federal government, while
administrative costs (the program is administered by states and counties, through
their welfare departments) are shared 50-50.
Applicants complete an application form; if eligible, they are issued an authori-
zation-to-purchase (ATP). With this and any purchase requirement, they secure foo
stamps either from welfare departments or contract issuing agents.
Food stamps may be used for any food or food product except alcoholic beverages,
tobacco, imported packaged foods, and imported meats or meat products. Redeemable
in normal grocery outlets, the stamps are deposited like cash in banks, as are the
purchase requirement funds collected by issuing agents.
FOOD STAMPS: A Program Virtually Out of Control
At the time the Congress first established the food stamp program in
1939, when it had a four-year life; again in 1961, when it was established
as a pilot project; and finally in 1964, when the Food Stamp Act was
adopted - there appeared little question that the intent was limited
to two basic purposes: to assist the legitimately needy of America in
meeting their nutritional needs, and to assist in the problem of dis-
position of agricultural surpluses.
In March of 1965, the food stamp caseload stood at 442,359. In March
of 1975, just ten years later, it numbered 19,142,359 an incredible
increase of 4,227%. Total expenditures mirror the caseload growth but
are even more staggering: in fiscal 1965, the total expenditures for
the food stamp program were $36,353,797; in fiscal 1975, they are estimated
to be almost $5.2 billion - an increase of 203%!
The growth in the food stamp program is demonstrated equally sharply by
the following statistics, which show the numbers of Americans
who are receiving food stamps:
1965 - One in 439
1967 - One in 157
1970 - One in 47
1973 - One in 17
1975 - One in 13
The number of Americans who can be eligible for food stamps is even more
startling. Late in 1973, a report submitted to the Joint Economic Committe
of the Congress stated that, at the then-present growth rate, one out of
every four Americans would be eligible for food stamps at least one month
out of the year.
By July 1974 that already occurred. In that month, 13.9 million Americans
were receiving food stamps. Potential eligibles have been estimated to
be 52.8 million persons - one fourth of the population of the country.
That pattern continues into the present year: in June of 1975, it has
been estimated there will be 21.8 million participants in the food stamp
program, with 57.3 million potentiall eligible - again maintaining the
*
one in four ratio.
[See Tables A & B at the end of this section.]
There are those who take the above statistics and argue that 62% of the
eligibles (21.8 million VS. 57.3 million) are not availing themselves of
food stamps because they are not aware of the program and that, in turn,
demonstrates the insufficiency of outreach efforts, suggesting that 62%
of the people are somehow undernourished.
*
It may be argued that the potentially eligible figure does not take
into account resource limits, and that assets owned may disqualify
the applicant. The food stamp program, however, unlike the welfare
program, contains no prohibition whatever against rearranging assets
with the deliberate intent to qualify.
A more compelling reason for the disparity between the participants and
the eligibles is the defective nature of the food stamp formula itself --
it is artificially making an increasing number of people eligible in the
higher income brackets, who are not in fact in need, by any standard,
of nutritional assistance.
The following paper will demonstrate how this occurs.
Other significant statistics illustrate the point:
In July, 1974, over half (57%) of the potential eligibles had incomes
above the poverty line
The estimate of 19.1 million recipients in fiscal 1975 compares
with 12.8 million only a year ago
Between March and June of 1975, the caseload is expected to grow
from 19.1 million to 21.8 million in just three months
When the eligibility levels and coupon allotments are again adjusted
on July 1, 1975, it is expected that a substantial number of additiona
persons will qualify
Equally of concern (and partially responsible for the above statistics)
are the following facts:
There is no maximum income limit to qualify for food stamps
There is no minimum age for eligibility as a separate household
College students whose parents earn $100,000 a year may qualify
Major items of personal property (boats, airplanes, etc.) may be
exempt from the resource limits
Money from a student under 18, irregular income from part-time jobs
totalling less than $30 a month, and money from loans is not counted
as income
Ownership of an expensive home actually helps one to qualify
Car payments, union dues, utilities, and a host of other deductions
enable persons with high incomes to qualify
Sending a child to private school helps to assist in eligibility
The reasons for the caseload increase, and the massive growth in expenditure
are not lost upon the taxpayer. He notes with increasing dissatisfaction
the types of foods purchased with food stamps in the grocery check-out
line. He reads full-page advertisements that tell him that persons earning
$16,000 a year are eligible. He learns that assets may be rearranged to
establish eligibility. He knows that welfare departments in college
communities are jammed at the start of each semester with students who,
irrespective of their potential personal resources or the fact that they
have exercised a personal choice for additional education in lieu of
employment, have learned to take advantage of food stamps. He knows of
group living arrangements wherein individuals have learned to manipulate
the rules so that each may qualify separately for a full allotment of
food stamps.
More than anything else, he knows that none of these things are free --
that the middle-income taxpayer, himself faced with rising food costs,
must not only make ends meet, but must pay the increasing taxes for a
$5.2 billion program that constitutes more than 60% of the entire Department
of Agriculture budget. He finds it increasingly difficult to resist the
temptation to join those who have found their way to one of the nation's
largest welfare programs.
Meanwhile, on the other side of the coin, legitimately needy recipients ----
persons living on meager incomes, who must rely upon food stamps to
augment their diets to secure adequate nutrition -- find the tax resour ces
that might be directed to a more sufficient program totally consumed by
the caseload growth. They must subsist upon the so-called Economy Diet
Plan. They must endure long waiting lines and processing delays.
Meaningful reform, in the most complete and analytical sense possible,
is long overdue. The following paper suggests 41 specific proposals, in
eight major problem areas, which will insure that resources are more
properly allocated to persons in genuine need, that savings are realized
for the taxpayer, and that significant progress is made in bringing
both control and equity to the food stamp program.
FOOD STAMP PROGRAM GROWTH
1965
1975
% INCREASE
PERSONS
442,359
19,142,145
4,227%
(MARCH)
TOTAL
EXPENDITURES
$36,353,797
$5,200,000,000
14,203%
AVERAGE NUMBER OF AMERICANS RECEIVING FOOD STAMPS
1965 ONE IN 439
TABLE A
1967 - ONE IN 157
1970 - ONE IN 47
1973 - ONE IN 17
1975 - ONE IN 13 (ESTIMATE)
REPORT TO JOINT ECONOMIC COMMITTEE ESTIMATED THAT BY 1977, AT PRESENT GROWTH RATES, ONE IN FOUR
AMERICANS COULD BE ELIGIBLE TO RECEIVE FOOD STAMPS AT LEAST ONE MONTH DURING THE YEAR.
ONE IN FOUR ALREADY POTENTIALLY ELIGIBLE IN JULY 1974.
57% OF POTENTIAL ELIGIBLES IN JULY 1974 WERE ABOVE POVERTY LINE
JANUARY 1975: ALL HOUSEHOLD SIZES EXCEPT ONE HAD MAXIMUM ELIGIBILITY LEVELS ABOVE POVERTY LINE --
:
AND BASED ON NET INCOME, AFTER GENEROUS DEDUCTIONS
PARTICIPANTS VS. ELIGIBLES
FOOD STAMP PROGRAM*
PERSONS
JULY 1974
JUNE 1975
PARTICIPANTS
13.9 million
21.8 million
ELIGIBLES
52.8 million
57.3 million
% OF PARTICIPANTS
26.3 %
38.0 %
TO ELIGIBLES
% OF PARTICIPANTS
one in fifteen
one in ten
TO TOTAL POPULATION
TABLE B
% OF ELIGIBLES
one in four
one in four
TO TOTAL POPULATION
AVERAGE MONTHLY BONUS VALUE PER HOUSEHOLD
$66
1974-75
TOTAL BONUS VALUE COST
$4.6 billion
1974-75
TOTAL BONUS VALUE COST IF ALL ELIGIBLE
$12.1 billion
HOUSEHOLDS PARTICIPATED
1974-75
LIBRARY
* BASED UPON DATA PROVIDED BY THE UNITED STATES DEPARTMENT OF AGRICULTURE
SUMMARY OF RECOMMENDATIONS
EXPANDED ELIGIBILITY TO THE NON-NEEDY: PERSONS WITH HIGH INCOMES
Base eligibility upon gross, rather than net, income
Prohibit eligibility on the part of anyone whose gross income
exceeds the official poverty indices, as established and defined
by the Office of Management and Budget
Base purchase requirements upon the percentage of income expended
for food by average household of same size and income range, with
regional variations, as established by the most recent Consumer
Expenditure Survey of Bureau of Labor Statistics, or 30%, whichever
is less
Adjust coupon allotments semi-annually by overall change in CPI,
rather than food component alone
Adjust purchase requirements in same fashion
Place limitations upon property
Evaluate property on market value, not equity
Prohibit deliberate transfer of property
Eliminate categorical eligibility of public assistance recipients
LEVEL OF BENEFITS TO THE GENUINELY NEEDY
Substitute Low Cost Diet Plan for Economy Diet Plan, raising coupon
allotments by 29%
Reduce food stamp costs for the aged, with a $25 monthly income
deduction
ELIGIBILITY LOOPHOLES
Establish minimum age as age of majority in state (to qualify as
separate household)
Require able-bodied recipients with no children under six to
register for work, engage in proven job search, and participate in
community work training programs, if established by the States, as
a condition of eligibility
Apply work registration and job search requirements to drug addicts
and alcoholics who are involved in rehabilitation programs
Prohibit eligibility when there is voluntary termination of
employment without good cause
Halt the current practice of not referring persons to employment
where union membership is required
Preclude strikers from eligibility unless otherwise qualified
Eliminate eligibility of college students as voluntarily unemployed
Direct Secretary to establish precise criteria to preclude
individuals living as one household from establishing eligibility
as separate households
Require 100% assumption by federal government of alien costs,
with referral system to INS to determine legal status
Require recognition, as income, of any other publicly funded
program which provides cash or in-kind assistance to food stamp
family for food or housing
ADMINISTRATIVE COMPLEXITIES
Transfer program from USDA to HEW
Provide demonstration project authority
Redirect outreach to provide for nutritional education and assistance
and for more immediate receipt of and processing of applications,
to relieve logjam and delays in processing; redirect funding
to these purposes
Make public assistance withholding optional at discretion of local
agency
INSUFFICIENT CASH AND COUPON ACCOUNTABILITY
Require immediate certification of deposits made by issuing agents
to local entities
Require fiscal sanctions against agents for failure to meet
depositing requirements in a timely fashion
Identify all receipts as federal funds, and prohibit any use for
individual or corporate profit
Revise coupon shipment procedures to insure local notification of
time and quantity of coupon shipments, centrally compute adjustments
to agents' orders and notify local entities of change in allotment
tables, notify local entities when agents' order is adjusted, and
assure that deliveries are made only to authorized persons
Institute federal/local monthly reconciliation of records
Require Postal Service to serve as issuing agents upon request of
state and to assume normal liability of issuing agents
CRIMINAL ACTIVITIES (FRAUD, THEFT, COUNTERFEITING, BLACK MARKETING
ACTIVITIES) AND LAX RECIPIENT IDENTIFICATION
Require photo identification card
Replace food stamp coupons with countersigned food stamp warrants
Provide 75% federal funding for the costs of investigations,
prosecutions, collection of federal funds, and related activities
Require development of central clearing house of information and
referral system to preclude recipients from receiving food stamps
in more than one jurisdiction
Limit continuation for 30 days when recipient moves and require
immediate reapplication and recertification
Require development of earnings clearance system to check actual
earned income against income reported by households
Require monthly income reporting
PURPOSES OF PROGRAM
Permit choice of commodities or food stamps by local jurisdictions
Require Secretary to file annual report with Congress reviewing
data collection status, quality control, and general character
of program to insure cost/beneficial use of public funds for
legitimately needy
FUNDING
Set State participation in bonus value at same rate as AFDC, with
system of "block grants" to States to offset added State costs
OVERVIEW
The proposals which are embodied in the National Food Stamp Reform Act of
1975 are derived from a thorough analysis of all of the elements of the food
stamp program that make it both complex and se rapidly growing. These include
the eligibility, bonus value, purchase requirement, and coupon allotment
criteria; the tests of income and resources which are applied; the numerous
loopholes that permit abuse of the program; the manner in which cash and
coupons are handled; current funding methods; and the basic purposes for which
the program was enacted in the first place.
If enacted, the proposals which are contained in the National Food Stamp
Reform Act will:
Place realistic limits SO that persons with high incomes will not
qualify and thereby drain resources from a program that is to meet the
needs of the legitimately needy
Institute a food stamp formula that is based upon what the average
American family, by size and income range, spends for food, eliminating
the many complex deductions and exemptions
Close numerous loopholes that permit the voluntarily unemployed to
receive food stamps and others to manipulate the system
Tighten work requirements, SO that the food stamp program does not
subsidize idleness or serve as a substitute for gainful employment
Simplify administration, by basing eligibility on gross income, by
permitting demonstration projects to test management improvements, and
by linking with welfare administration
Require recognition of multiple public benefits that go to the same
family
Direct additional funding to swifter processing of applications and to
nutritional education
Improve cash and coupon handling methods to minimize opportunities for
theft, loss, and misuse of federal coupons and funds
Enhance fraud control efforts
Increase amounts paid to the truly needy, by
-- Substituting the Low Cost Diet Plan for the Economy Diet Plan,
raising coupon allotments by 29%
- Reducing food stamp costs for the aged, with a $25 monthly
income deduction
It is possible through the enactment of these long over due reforms
to:
(a) Substantially increase benefits which are paid to the persons
who genuinely need nutritional assistance, and
(b) realize, at the same time, significant savings for the taxpayer.
By closing loopholes, correcting defective elements of the eligibility
formula, tightening work requirements, and curtailing opportunities for
fraud and other criminal activities, the food stamp program can be restored
to the purposes originally intended when it was first enacted. This can
be done without detrimental effect upon the persons who are in legitimate
need -- and, as indicated, they will in fact realize increased aid as a
result of the reforms.
FOOD STAMPS: EIGHT PROBLEM AREAS
PROBLEM AREA: EXPANDED ELIGIBILITY TO THE NON-NEEDY: PERSONS WITH HIGH
INCOMES
Specific Problem: A defective eligibility formula permits high income
persons to qualify for food stamps.
Apart from other tests of assets and resources, the main criterion for
eligibility for the food stamp program is essentially a function of the
interaction of three things: the coupon allotment, which is based upon
the Economy Diet Plan; the purchase requirements, which are related to the
coupon allotment in that the existing law says that no household is to
expend more than 30% of its income to purchase the coupons; and, neces-
sarily, the total family income.
The existing formula, then, works something like this:
The Agricultural Research Service of the U.S. Department of
Agriculture determines the necessary amount (coupon allotment)
for a family of four to be $154. $154 divided by 30% = $513,
which is the maximum income for eligibility. The purchase
requirement for a family with income is $130 -- the maximum
purchase requirement for any family of four, and based upon
net income after substantial deductions.
Other purchase requirements are lesser amounts, ranging from
$0 to $130, based upon the family's monthly income between
$0 and $513.
The 30% is a totally arbitrary criterion in the law, and presumably has
its origin in the poverty index computations of Mollie Orshansky in 1964,
wherein she determined the basic poverty guidelines on the basis of
roughly three times food consumption. However, its use in the food stamp
program is totally arbitrary in that it bears no relationship to what the
average American family, by size and income range, actually spends for
food, and income is not gross income but net income after a whole host of
deductions. This is explained in detail below.
The problems with regard to high income qualification is as follows:
Income is measured as net, not gross, income, after numerous
exemptions and deductions. Included among the many deductions
are the following:
Federal, state, and local income taxes
Retirement payments
Social Security taxes
Union dues
10% of earned income for working applicants, not to exceed $30
Some type of garnishments
Losses due to disaster (fire, theft, etc.)
Medical costs in excess of $10 a month, including Medicare
and insurance
Eight Problem Areas
Expanded Eligibility to the Non-Needy
Child or invalid care payments
Child support and alimony
Tuition
Shelter costs which are more than 30% of net income
(after all of the above are deducted), which include
utilities, rent, mortgage payments including interest,
property taxes, water and sewer, garbage and trash
collection, and telephone.
Example:
A family earns $1,090 per month. They own a house with payments of $300
per month and have the following deductions:
Federal and state income taxes
$200
Retirement contributions
25
Social Security taxes
50
Union dues
15
10% allowance for working applicants,
30
Mediup to $30
Medical costs
60
Child care
60
$440
Housing
Mortgage (principal, interest,
$300
taxes, and insurance)
Gas and electricity
50
Water and sewer
10
Garbage and trash collection
5
Telephone
20
$385
The food stamp program requires that the individual spend only 30%
of his net income for housing. This family's income has been reduced
from:
$1,000
gross income
440 deductions and earnings exemptions
$ 560
"net income"
"
30% of $560 = S168. The Department of Agriculture has arbitrarily
said that nacone need spend more than 30% of his income ----- not
his gross income for housing. That means that all of the housing
and utility costs above $168, therefore, are also deductible.
$ 385 housing and utility costs
-168
$ 217 further deductible "excess housing"
allowance
This family, therefore, has the following total deductions:
$1,000 gross income
-440 deductions and earnings exemptions
-217 "excess housing allowance
$
343 COUNTABLE ADJUSTED NEW INCOME FOR FOOD
STAMP PURPOSES
Eight Problem Areas
Expanded Eligibility to the Non-Need
Assume this is a family of four. While their gross income is $1,000 a
month, they easily qualify for food stamps, because their "adjusted net
income" of $343 is below the $513 [see P. II-144] which is the present income
limit for a family of four. They then qualify for $154 a month in food
stamps at a cost of $95, which means that a family earning $12,000 a year
qualifies for a welfare subsidy of $708 per year.
THE INCOME TO WHICH THE LIMIT OF $513 APPLIES, WHICH IS DERIVED FROM THE
30% COMPUTATION, IS NOT DEFINED IN THE LAW AS ANYTHING OTHER THAN "INCOME."
IT IS THROUGH ADMINISTRATIVE ACTION THAT THE UNITED STATES DEPARTMENT OF
AGRICULTURE HAS MADE IT "ADJUSTED NET INCOME," AND NOT GROSS INCOME.
ALL OF THE MANY DEDUCTIONS AND EXEMPTIONS HAVE BEEN ADOPTED BY REGULATION,
AS HAS THE "EXCESS HOUSING ALLOWANCE" AND THE FACT THAT IT IS DEDUCTED
LAST.
The deductions would be even greater if the family sent their child to a
private school or moved into a more expensive home.
Other actual examples abound. Recently, the Executive City Editor of the
Atlanta Constitution went to his local welfare office, informed them that
he has a gross income in exeess of $20,000, a $40,000 house, a three-acre
lot, two late-model automobiles, and a wife and three children. He
qualified for $180 worth of food stamps every month at a cost to him of
$140, for an annual subsidy of $480.
A recent full-page advertisement in Parade magazine described how a family
of four grossing $10,000 a year qualified for an annual bonus of $444.
The advertisement went on to describe how families earning $15,000 per year
could be eligible.
These, in the large part, are the people who make up the 62% of the populace
who are "eligible" but who are not now receiving food stamps (a figure often
cited to emphasize the failure of the outreach program, implying that they
are all needy). They are, however, also becoming an increasing part of
the 38% who are taking advantage of the program, swelling the ranks of the
food stamp population with non-needy persons.
Recommendation #1:
Income should be defined in the law as gross income.
*****
Specific Problem: Because of the large number of deductions and exemptions,
and the current tie between 30% and the coupon allotment,
there is NO maximum ceiling upon income eligibility for
the food stamp program.
As discussed in the preceding section, the Economy Diet Plan coupon allot-
ment divided by 30% is supposed to establish a ceiling upon income: SO
that, for example, the current ceiling for a family of four is ostensibly
Eight Problem Areas
Expanded Eligibility to the Non-Nee
$513 ($154, the Economy Diet Plan coupon allotment for a family of four,
divided by 30%). However, because this is net, and not gross, income,
after the numerous deductions and exemptions outlined above, there is in
fact no maximum ceiling upon income for the purposes of qualifying for
the food stamp program.
One is clearly needed, and the most suitable would be the official poverty
indices issued annually by the federal government, based upon the low-
income thresholds of the Bureau of the Census, and quantified and defined
by the Office of Management and Budget. The current poverty index for a
family of four is $5,050 -- in gross income - and in an era of increasingly
scarce resources, it does not appear that that is an unrealistic limit
for the provision of nutritional assistance in the form of governmental
aid to those truly in need.
By substituting the poverty indices, by family size, for the current com-
plicated coupon allotment ÷ 30% formula, a substantial measure of admini-
strative simplification would be achieved as well. In combination with
the use of gross, rather than net, income, the maximum eligibility
criteria for a given individual would be easily determined. Such limits
would then be as follows:
For all States except Alaska and Hawaii
Family size
Nonfarm family
Farm family
1
$2,590
$2,200
2
3,410
2,900
3
4,230
3,600
4
5,050
4,300
5
5,870
5,000
6
6,690
5,700
For family units with more than six members, $820 would
be added for each additional member in a nonfarm family
and $700 for each additional member in a farm family.
For Alaska
1
$3,250
2,750
2
4,270
3,620
3
5,290
4,490
4
6,310
5,360
5
7,330
6,230
6
8,350
7,100
For family units with more than six members, $1,020 would
be added for each additional member in a nonfarm family
and $870 for each additional member in a farm family.
Eight Problem Areas
Expanded Eligibility to the Non-Ne
For Hawaii
Family size
Nonfarm family
Farm family
1
$2,990
$2,540
2
3,939
3,340
3
4,870
4,140
4
5,810
4,940
5
6,750
5,740
6
7,690
6,540
For family units with more than six members, $940 would
be added for each additional member in a nonfarm family
and $800 for each additional member in a farm family.
As indicated earlier, over half - 57% --- of the potentially eligible in
July, 1974, had incomes above the then-current poverty line. 31% of the
participants had incomes above the poverty line. Placing such a maximum
on eligibility would have a marked effect upon freeing resources for
redirection to the truly needy.
Recommendation #2:
Prohibit eligibility on the part of anyone whose gross income exceeds the
poverty index, as established and defined by the Office of Management and
Budget.
Specific problem: A defective formula permits food stamp recipients to
commit far less of their income to food than the average
American family.
Stemming directly from the high rate of deductions and the net VS. gross
problem described earlier, food stamp purchase requirements bear no
relationship whatever to what the average American family, by size and
income range, spends for food. This is often revealed time after time
when the non-food stamp recipient in the check-out line at the grocery
store sees the food stamp recipient ahead of him being able to purchase
steaks and gourmet foods, while the nonfood stamp recipient must budget
carefully for lesser expensive cuts of meat, casseroles, and simple but
nutritional meals for his family.
The most recent Consumer Expenditure Survey of the Bureau of Labor
Statistics demonstrates this disparity dramatically. Tables I, II, III,
and IV, which follow, array for various family types, sizes, and incomes,
the following:
a) The cost of the Economy Diet Plan, as a percentage of gross
income;
b) The food stamp coupon allotments, as a percentage of gross
income;
c) The expenditure for food in 1972-73 by the average American
family of that size and income range, as a percentage of gross
income;
Eight Problem Areas
Expanded Eligibility to the Non-Ne
d) What the food stamp program requires the recipient to pay, as
a percentage of gross income.
The pattern is mistakably clear, as described in the following examples:
Examples:
A single individual with an income at the current poverty index of $2,590
must spend $521 for the Economy Diet Plan, or 20.1% of his income. The
food stamp allotment mirrors that approximately (as it should), providing
him with a coupon allotment of $576, which equals 22.2% of his income.
The food stamp program requires him to contribute only $288 of his income,
or 11.1%, meaning that the food stamp program, in effect, pays the differ-
ence between the 11.1% and the 22.2%. Yet the Consumer Expenditure Survey
of the Bureau of Labor Statistics says that, in 1972-73, the average
individual in this income category spent $710 of his income for food, or
27.4%.
A family of two with an income at the current nonfarm poverty index of
$3,410 must spend $929 for the Economy Diet Plan, or 27.2% of their
income. The food stamp allotment, approximately mirroring that, provides
them with a coupon allotment of $1,080, which equals 31.7% of their income
The food stamp program requires them to contribute only $744 of their
income, or 21.8%, meaning that the food stamp program, in effect, pays
the difference between the 21.8% and the 31.7%. Yet the Consumer Expen-
diture Survey of the Bureau of Labor Statistics says that, in 1972-73,
the average family in this income category spent $1,184 of their income
for food, or 34.7%.
A family of four with an income at the current nonfarm poverty index of
$5,050 must spend $1,933 for the Economy Diet Plan, or 38.2% of their
income. The food stamp allotment, approximately mirroring that, provides
them with a coupon allotment of $1,944, which equals 38.5% of their
income. The food stamp program requires them to contribute only $996 of
their income, or 19.7%, meaning that the food stamp program, in effect,
pays the difference between the 19.7% and the 38.5%. Yet the Consumer
Expenditure Survey of the Bureau of Labor Statistics says that, in
1972-73, the average family in this income category spent $1,648 of
their income for food, or 32.6%.
A family of six with an income at the current nonfarm poverty index of
$6,690 must spend $2,259 for the Economy Diet Plan, or 33.8% of their
income. The food stamp allotment, approximately mirroring that, provides
them with a coupon allotment of $2,664, which equals 39.9% of their
income. The food stamp program requires them to contribute only $1,488
of their income, or 22.2% meaning that the food stamp program, in effect,
pays the difference between the 22.2% and the 39.9%. Yet the Consumer
Expenditure Survey of the Bureau of Labor Statistics says that, in 1972-73
the average family in this income category spent $2,399 of their income
for food, or 35.9%.
Eight Problem Areas
Expanded Eligibility to the Non-Nee
It should be noted, of course, that the figures used for the Economy Diet
Plan, the coupon allotment, and the food stamp purchase requirement are
all 1975 figures. If the amount spent for food according to the Consumer
Expenditure Survey of the Bureau of Labor Statistics were updated for the
change in the cost of food between 1972-73 and the current time, the
percentages actually spent would be greater and the disparities with what
the food stamp recipient is asked to pay would be even more significant.*
Irrespective of which CES figure is used, the actual 1972-73 percentage
or an update 1975 one, the pattern is clear: the average American family
spends far more, as a percentage of gross income, than the current food
stamp formula requires the food stamp recipient to commit to food from
his own budget. What is needed, therefore, appears to be a correlation
between what the average American family, by size and income range, spends
or must budget for food and what the food stamp recipient is similarly
required to contribute.
It would be possible to substitute this formula for the 30% in the law
presently. However, it would benefit more recipients to retain the 30%
as a maximum: i.e., to say that the formula should be based upon what the
average American family, by size and income range, spends for food, or
30%, whichever is less
At present, the CES is conducted only once every ten years, with the
most recent having been in 1972-73. The Bureau of Labor Statistics,
however, has a recommendation currently before the Congress which would
call for the CES to be done annually in any event. Even should this not
occur, it should be noted that the use of percentages - as they exist in
the 1972-73 survey, or updated by the food component of the CPI or the
CPI alone --- would still be more reflective of reality than the 30%
arbitrary figure now in the law or the varying percentages now present
in the basis of issuance tables.
In addition, it should be noted that the Consumer Expenditure Survey
demonstrates regional variations: into Standard Metropolitan Statistical
Areas and non-SMSA's, with urban, central city, rural distinctions in
varying combinations within each. This should assist in bringing needed
regional variations to the food stamp program.
Recommendation #3:
Base purchase requirements upon the percentage of income expended for
food by average household of same size and income range, with regional
variations, as established by the most recent Consumer Expenditure
Survey of the Bureau of Labor Statistics, or 30%, whichever is less.
* On the one hand, one might conclude that persons living particularly
on fixed incomes would encounter the even higher percentage expenditures
as the food prices are updated to 1975. On the other hand, one may argue
that such persons may alter their buying habits in order to keep the
percentage of income committed to food approximately as they actually
existed in 1972-73.
Eight Problem Areas
Expanded Eligibility to. the Non-Ne
Specific Problem: The defective eligibility formula permits persons who
have received a full cost-of-living increase in their
wages to become eligible for food stamps, even though
that increase fully covers the increased cost of food.
Under current law, the coupon allotments ---- and therefore the maximum
eligibility levels -- are adjusted upward every six months in accord with
the changing cost of food. While this appears to make empirical sense,
since the food stamp program is a food-related program, it is in fact the
wrong approach for the following reasons.
Adjustments upward are presumably made to compensate for the loss in
purchasing power caused by inflation. When an employee who has a
contract calling for an annual increase in his wages commensurate with
the increased cost of living, included in that wage increase is an amount
which fully accounts for the increased cost of food. It is, of course,
balanced by other things in the "market basket" which is used to compute
the Consumer Price Index upon which such adjustments are based.
When the food stamp formula is tied only to the cost of food, and when
it goes up more rapidly than the overall CPI, suddenly workers who have
received a full cost-of-living increase (covering food as well) in their
wages find themselves eligible for food stamps!
Example:
A wage-earner receives an annual cost-of-living increase in his wages
which has within it 22% for food, but because it is balanced by other
factors, the overall increase is 11%. Yet because the food stamp
eligibility formula escalates every six months in accord with the cost
of food, he becomes eligible, even though his wages fully cover that
increased cost of food.
It therefore appears desirable to base the cost-of-living escalations
in the food stamp formula upon the overall CPI, and not the food
component alone. There are those who will argue that when the situ-
ation reverses itself, and the cost of food grows at a lesser rate than
the CPI, the food stamp formula would be going up at an inordinately
greater rate in that circumstance. This appears equally erroneous,
because the food stamp program is nothing but an income supplement
program delivered in kind (or in a form that is a substitute for cash),
and therefore it ought to be tied to the general purchasing power of
the recipient.
Finally, it should be noted that the poverty index itself, which is
recommended as the substitute eligibility formula, is adjusted upward
in accord with the overall change in the CPI. This would dovetail the
changes made in the coupon allotments with that approach.
Recommendation #4:
Adjust coupon allotments semiannually upon overall change in the
Consumer Price Index, rather than the food component alone.
*
Eight Problem Areas
Expanded Eligibility to the Non-Needy
Specific Problem: The purchase requirement formula is not also adjusted
upward when the coupon allotments are adjusted upward
to keep pace with inflation.
There appears to be no reason why purchase requirements should not also
be indexed, i.e., raised as inflation causes the coupon allotments to be
raised. Dr. Kenneth Clarkson, in his recent study entitled Food Stamus
and Nutrition (pp. 37-40), states:
the participant's bonus (the difference between the
market value of the food stamps and the amount of pur-
chasegrequirement) can be divided into three parts: (1)
a transfer in general purchasing power, (2) a transfer in
specific or food purchasing power, and (3) an amount which
to the recipient measures waste
The transfer in
general purchasing power is the difference between the
recipient's expenditure on food in the absence of the
food stamp program and the purchase price of the food
coupons
Since the monthly food stamp allotments and
purchase requirements as developed in 1965 were
supposed to correspond to the market price of a nutri-
tious diet and to previous food expenditures, respec-
tively no transfer in general purchasing power was
intended.
This transfer in "general" purchasing power, as opposed to "specific
or food purchasing power,' has occurred largely because purchase
requirements have not been updated as have coupon allotments.
Recommendation #5:
Adjust purchase requirements in the same fashion as coupon allotments
are adjusted
Specific Problem: Realistic limitations upon resources are nonexistent.
Presently the food stamp program permits all of the following to be exempt
from consideration as resources:
A home and lot "normal to the community"
One currently licensed vehicle used for household transportation and
any other vehicles necessary for the employment of household
members.
All personal effects, including clothing and jewelry
All household goods, including furniture and appliances
The cash value of all life insurance policies and pension funds
Any property which "is producing income consistent with its fair
market value," or other property "essential to the employment
of a household member; machinery, livestock, or land of a
farmer; and goods, property, vehicles, etc., used by self-
employed persons in their self-employment enterprise
Irrevocable trust funds, property in probate, and notes receivable
"which cannot be readily liquidated"
Eight Problem Areas
Expanded Eligibility to the Non-Needy
Money which has been pro-rated as income for self-employed persons
or students
Indian lands held jointly with the Tribe or land that can be sold
only with the approval of the Bureau of Indian Affairs
Relocation assistance payments
Payments made to persons participating in programs sponsored by ACTION
Benefits received under the WIC Program (Special Supplemental Food
Program for Women, Infants, and Children).
While some of these exemptions have significant merit, many are so loosely
defined and constructed so as to permit retention of resources far beyond
what would be called for under a realistic implementation of resource limits.
As noted previously, ownership of an expensive home actually helps one to
qualify. In February of this year, a Louisiana recipient's home was robbed
of $3700 in jewelry, $240 in cash, and $500 in food stamps. Presumably boats
and airplanes are exempt if they can qualify as a vehicle somehow related to
employment or as part of the recipient's personal effects. The only standards
or limits present in the food stamp program are an amount of $1,500 set as a
maximum on household nonexempt resources or, in the event there is a household
with two or more members in which at least one is 60 years of age or older, $3,0
The standards set in the Supplementary Security Income (SSI) program are far
more realistic and capable of careful determination and assessment. Exempt
from consideration in the SSI program are the following principal items:
A home and lot, to the extent their value does not exceed $25,000,
or $35,000 in Alaska and Hawaii
One motor vehicle, to the extent its value does not exceed $1,200
Household goods and personal effects to the extent that their total
value does not exceed $1,500
Property of a trade or business which is essential to the means of self-
support of the household
Non-business property which is essential to the means of self-support
of the household
Recommendation #6:
The same property limitations should be adopted for the food stamp program as
for SSI.
Specific Problem: Property is valued at "its fair market value less encumbrance
Again, a sharp departure is seen from the SSI program, where property is
considered at its fair market value. Enabling the recipient to deduct
encumbrances permits--and, in fact, may encourage--him to purchase expensive car
color television sets, silver, china, etc., on time and not have them count
against his property allotment in any significant amoung. (Indeed, as noted
above, these specific items would not count at all under current food stamp
rules; other nonexempt items do enjoy the benefit of the "less encumbrances"
interpretation and, if the limits are established as recommended by the previous
section, they should be based upon fair market value along, as is present in the
SSI program).
Eight Problem Areas
Expanded Eligibility to the Non-Needy
Recommendation #7:
Property should be evaluated on its fair market value, not less encumbrances.
Specific problem: There is no prohibition against the transfer of property,
or the rearranging of assets and resources, in order to
qualify.
Such a prohibition, to guard against someone placing property in a trust or
otherwise rearranging his assets (e.g., converting cash to jewelry) has long
been present in the nation's welfare programs. While it may not be a loophole
that is exercised frequently, it is, nonetheless, one that deserves to be closed
Recommendation #8:
A prohibition against deliberate transfer of property or rearranging of assets
should be built into the food stamp program.
Specific Problem: Currently, public assistance recipients may have higher
incomes than non-public assistance cases, at such a level
that the former would otherwise be ineligible, and they
continue to receive food stamps.
Because, by regulation, public assistance recipients have been granted blanket
eligibility for the food stamp program ( except in five states in the SSI progra
which have cashed out food stamps), the inequity has been created that a non-
public assistance recipient with an equal income may be ineligible. With the
standards that are created for a poverty index cut-off, it seems manifestly
equitable to treat income as income as income as income, irrespective of its.
source (so long as it does not contain funds representing the cashout of food
stamps,) and treat all applicants alike, irrespective of their public assistanc
or non-public assistance status.
Doing this, moreover, will insure that county eligibility workers need not go
through two separate sets of computations of eligibility determinations (with
respect to exemptions, deductions, etc.), since the food stamp eligibility
formula would be greatly simplified as described by establishing the relationsh
to the poverty index.
Recommendation #9:
The categorical eligibility of public assistance recipients should be eliminate
PROBLEM AREA: LEVEL OF BENEFITS TO THE GENUINELY NEEDY
Specific Problem: The Economy Diet Plan provides a minimal subsistence level
of benefits.
There has been continuing criticism from some quarters-some well-founded, some
ill-founded- on the adequacy of the Economy Diet Plan upon which the food stamp
allotments are based.
On the one hand, there are those who allege that the Economy Diet Plan cannot
provide a continuing level of nutrition adequate to sustain a family for any
length of time. On the other hand, we find such disparities as noted by Jodie
Allen of Mathematica, Inc., in which she observed that (again, using the Consumer
Expenditure Survey of the Bureau of Labor Statistics) that the "average" middle
income [previously defined as $11,824] family of four now spends about $170 a
month on food, only $16 more than the minimum food guarantee established for
families of their size with little or no income [referring to the $162 monthly
coupon allotment under the Economy Diet Plan for a family of four effective
July 1, 1975].
There appears little disagreement, however, that it takes considerable skill in
order to provide, on a continuing basis, a wholesome and flavorful diet on the
present amounts contained in the Economy Diet Plan. A publication of the United
States Department of Agriculture entitled "Ideas for Leaders Working with Economy
Minded Families" states as follows: "Studies show that most families spending
as little as the cost for the Economy Plan do not select foods that make a
good diet for every family member. A homemaker needs considerable skill and
interest in buying and preparing food, if she is to provide her family with a
good diet for as little as the cost of the plan. Many homemakers with limited
budgets do not have the skill or interest, or the equipment needed to do this."
The so-called Low Cost Diet Plan has also been established by the Department
of Agriculture, and it stands at roughly 129% of the Economy Diet Plan ($208.20
per month VS $161.10 per month for a family of four).
With the savings generated by this bill, and the limit upon eligibility
described earlier in this section, it will be possible to adopt the Low Cost
Diet Plan for all remaining eligibles and still generate substantial savings for
the taxpayers.
Recommendation #10:
Replace the Economy Diet Plan with the Low Cost Diet Plan, which will mean an
increase of approximately 29% in food stamp coupons for all recipients.
*****
Specific Problem: Senior citizens in the United States live on fixed incomes
and often have the most difficulty in either funding, cooking,
or securing three adequate meals a day.
While the Meals on Wheels and free lunch programs for senior citizens have mitiga
this problem, there is still the circumstance of the senior citizen living alone
or with an aged spouse, often in a small apartment or hotel with limited cooking
facilities, who does not have the skill, energy or transportation to do the kind
of meal planning and preparation that is possible with persons of younger ages.
Eight Problem Areas
Benefits to Genuinely Needy
It is possible, through a special deduction for persons 65 and over, in
effect to lower the purchase requirement for such persons, thereby increasing
the bonus value of their coupons.
Recommendation #11:
Provide a special deduction of $25 per month for all households in which
the head of the household is aged 65 or over.
*****
PROBLEM AREA: ELIGIBILITY LOOPHOLES
Specific Problem: There is no minimum age to qualify as the "head of a
household" to receive food stamp benefits.
Today the existence of a program to augment one's income, with the only
test insufficient funds below a certain standard, has established a
means for young people to subsist--or augment their subsistence-- at
public expense, The parents of many minors are fully capable of supporting
their children in many cases would be more than willing to do so if they
were only asked. Frequently, however, we are dealing here with "runaway"
children or children who leave home to live with another household, who
then receive food stamps on their own. A 17-year-old California boy, still
in high school, recently decided he no longer wanted to live with his
parents; he moved in with friends and received free food stamps.
His case, and others like them, are particularly illustrative of the
problem of the so-called "zero-purchase" cases, where the young persons
simply affirm they have no income and qualify.
Recommendation #12:
Establish a minimum age for the food stamp program as the age of majority
in the state, in order to qualify as a separate household.
Specific Problem: Work registration and job search requirements need
strengthening.
Under the AFDC program, a positive duty is placed (under the Talmadge
amendments to the Social Security Act) upon every able-bodied caretaker on
welfare, as a condition of eligibility, to register for manpower services,
training, and employment, unless the individual is under age 16 or attending
school full time; is 111, incapacitated or of advanced age; is required
in the home because of illness or incapacity of another member of the house-
hold; is caring for a child under six; or has the father or an adult male
relative who has so registered.
A number of states have also established job search and community work
training programs, wherein they require the recipient to conduct a
specified number of job searches per month and to participate, as a condition
of eligibility, in public service employment not more than half-time in
return for their welfare stipend, as long as it does not work out to be
less than the minimum wage.
Comparable work requirements are lacking in the food stamp law. Currently,
in this program, caretakers of children of any age are exempt, as are all
students, even though they may be registered for school only half-time and
are out of school in the summertime. The law speaks of registering for and
accepting employment if offered, but it says nothing about job search
requirements or participation in community work training programs.
Eight Problem Areas
Eligibility Loopholes
Recommendation #13:
All able-bodied recipients with no children under six should be required
to register for work, engage in proven job search, accept employment at
applicable minimum wage rates or the equivalent when offered, and parti-
cipate in community work training programs if established by the States.
Specific Problem: Drug addicts and alcoholics are eligible for food
stamps when they are enrolled in a rehabilitation
program, yet there is no corollary requirement that
they, too, engage in work registration, job search,
and community work training programs.
Under an amendment added to the law in August of 1973, drug addicts and
alcoholics became eligible for food stamps if they were a regular participant,
as a resident or nonresident, in "any drug addiction or alcoholic treatment
and rehabilitation program. At the same time, they were excepted from
the work requirements.
There appears to be no valid reason. for excluding such persons from work
requirements, particularly if they are enrolled in bona fide rehabilitation
programs. In fact, participation in such work or training programs may
have a therapeutic effect. Of course, such an individual may be physically
or emotionally unable to proceed with full-time employment in a continuing
and capable fashion, but his ability to do so can be evaluated just like
any other physical disability that may exempt one under the work requirements
found in the AFDC program, on an individual basis.
Recommendation #14:
Apply work registration, job search, and community work training requirements
to drug addicts and alcoholics who are involved in rehabilitation programs.
Specific Problem: There is no prohibition against a person voluntarily
leaving employment without good cause, thereby becoming
eligible for food stamps.
A number of income maintenance programs, such as Unemployment Insurance,
contain a specific provision that precludes an individual from eligibility
if he has voluntarily left employment without good cause.
The food stamp program relies, instead, on work registration and referral
requirements, which are less effective because they still permit a person
to effect a voluntary "quit" and then to proceed through the work registration
and referral process while receiving food stamps.
Eight Problem Areas
Eligibility Loopholes
Recommendation #15:
Prohibit eligibility when there is a voluntary termination of employment
without good cause.
*****
Specific Problem: Persons are not referred to work opportunities if
union membership is required.
Current regulations of the Department of Agriculture state that: "No
employment shall be considered suitable if the registrant, as a condition
of employment, is required to join, resign from, or refrain from joining
any legitimate labor organization."
Irrespective of one's views concerning compulsory union membership, it is
a manifest loophole in the program when an able-bodied food stamp recipient
is not referred to available employment simply because union membership may
be required. Humboldt County, California, first called attention to the
problem, where jobs in logging and other industries went begging while, at
the same time, able-bodied food stamp recipients were never referred.
Regulations have been proposed to rescind the current practice but have
not been adopted.
Recommendation #16:
Halt the current practice of not referring persons to employment where union
membership is required.
*****
Specific Problem: Persons who leave work voluntarily as participants in a
strike or other labor dispute can have strike benefit
funds augmented with food stamps.
The problem of food stamps for strikers has been long debated, and the issues
are fairly well understood, although the incidence of receipt of food stamps
by strikers may be less SO. A Wharton School of Finance study has documented
the massive use of food stamps by strikers in major steel, electrical,
automotive and other strikes in 1969-71 at a cost to the public at the time
of $240 million. A General Motors strike in 1970 resulted in about half of
the 170,000 strikers receiving food stamps with the cost to the federal
government and the State of Michigan reaching between $10.7 million and
$14.3 million. Over 97% of the striking work force at Westinghouse, in
Delaware County, Pennsylvania, in late 1970 received food stamps for the
duration of the strike, costing the taxpayers approximately $659,000. A
strike at the Johns Manville Company in New Jersey cost $230,000 in additional
food stamps when 38% of the work force applied. The provision of public
assistance, either in cash or food stamps, to one sector of the voluntarily
unemployed makes it extremely difficult to refuse such aid to other sectors
Eight Problem Areas
Eligibility Loopholes
of voluntarily unemployed. Moreover, of course, the provision of such aid
both unduly weights the bargaining process on one side and diverts public
funds away from those whose only means of support or nutritional assistance
may be cash or food stamps. In so doing, higher settlements may occur after
a labor dispute is extended by the provision of food stamps benefits, and
persons at the lowest end of the economic spectrum, such as those on fixed
retirement incomes, end up paying a high proportion of the costs of such
settlements and, or course, a portion of the provision of the aid itself.
Recommendation #17:
Preclude strikers from eligibility unless otherwise qualified.
Specific Problem: College students receive food stamps in massive numbers
while they may both have access to other resources and are,
at the same time, voluntarily unemployed.
The problem of college student receipt of food stamps has been a subject of
debate equal to that involving strikers. Attempts have been made to deal
with various aspects of the problem, although the central issue remains.
A student's ability to qualify for food stamps simply because he chooses to
continue his education away from home provides him with an unfair advantage
over the young person who, for a myriad of reasons, may not be able or wish
to do 30. Attempts have been made by regulation to prohibit college students
whose parents have claimed them as deductions from receiving food stamps,
although there does not appear to be an effective system in place for
cross-checks with IRS to determine if this has been done. Similar cross-
checks with college financial aids offices are lacking, to determine if a
student is also receiving a tax-supported scholarship which has an amount
within it for food.
There is no standard placed upon the type of schooling a student may be
receiving, even though the subject matter may in no way prepare the student
to become self-supporting. A girl was enrolled in a southern California
school studying, among other things, witchcraft.
Federal regulations allow students to save up to $1500 in a bank for the
school year and still receive $46 per month in food stamps.
Arrangements may be made to apportion income and tuition expenses in such
a way as to maximize eligibility for food stamps, and college newspapers
regularly counsel students on the best way to make such arrangements.
Because of the method whereby allotments are computed, six college students
living together can receive over $3,300 in free food stamps every year.
Food stamp recipients living with other persons, in order to increase their
food stamp benefits, also may claim to pay a disproportionately high share
of rent and utilities.
Eight Problem Areas
Eligibility Loópholes
All of this has resulted in the following statistics, among others:
-- In February 1973, Champaign County, Illinois, home of the University
of Illinois, 85% of all food stamp recipients not on public welfare
were students.
-- In Jackson County, Illinois, home of Southern Illinois University,
the figure was 78%.
-- In DeKalb County, Illinois, home of Northern Illinois University,
the figure was 75%.
-- A DeKalb caseworker quit when she found herself processing student
food stamp applications only, rather than helping the needy.
-- In Santa Clara County, California, home of Stanford University, there
were in October 1974, 15,000 student food stamp recipients.
-- At the same time, October 1974, the University of California at
Berkeley had 11,000 food stamp recipients; the University of
Minnesota, 4,700; the University of Florida, 3,000; the University
of Michigan, 2,100; and Western Michigan University, 600.
- A survey by Congressman Anderson (R-I11.) revealed that among the
36 major university counties contacted in Illinois an average of
1000+ students were receiving food stamps and that in over half of
those counties student participation represented over 20% of the
caseload.
Students, as well, are eligible when they register for school only half-time,
yet there is no requirement that they register for work the other half-time
nor in the summer time when they are not in school.
The above details the manifold problems and abuses that occur in college
food stamp eligibility, but, as stated earlier, the central issue remains
that they have chosen higher education and become voluntarily unemployed
for a period and at a time when others may not be able to make that choice.
To require the working taxpayer (who may be often of the same age) to support
such voluntarily unemployed persons in manifestly inequitable and a
misallocation of scarce resources. If the college student needs assistance
to complete higher education, there are sufficient scholarship, loan, and
work/study programs to enable him to do so--and if there are not, public
policy should address that issue in that arena, and not in that of food
stamps and public assistance. Voluntary unemployment for whatever reason
should not enable one to qualify for tax-supported living.
Recommendation #18:
Eliminate eligibility of college students from the food stamp program as
voluntarily unemployed persons.
*****
Eight Problem Areas
Eligibility Loopholes
Specific Problem: Through manipulation of the "buying and preparing food
separately" criterion, persons living as one household
may each claim and receive separate food stamp allotments
as separate individuals.
The "buying and preparing food separately" standard is a criterion that exists
within the food stamp program for determining who comprises a separate
household. In group living arrangements, this is easily circumvented by
placing labels with separate names on shelves, and insisting that the food
is prepared separately. It is essential that means be found to insure that
such practices do not continue, which only deplete resources that are needed
for persons who must rely on the basic food stamp allotment-and not upon a
false multiplication ofmit.
Such a standard is, of course, difficult to develop and enforce, since one
must guard against depriving legitimate separate household groups from
receiving correct food stamp entitlements. Nonetheless, attention of the
Secretary must be directed toward curbing this significant area of abuse.
Recommendation #19:
The Secretary should establish precise criteria to preclude individuals
living as one household from establishing eligibility as separate households.
Specific Problem: Enforcement of alien eligibility for food stamps continues
to be a significant problem.
While regulations were recently adopted which preclude the illegal alien
from eligibility, there still are a number of problems in this area. The
problems of enforcement, and the eligibility of aliens who have legally
established permanent residency in the United States and who are on food
stamps, still exist. No effective system of cross-checking with the Immigratic
and Naturalization Service has been developed. States with proximity to
international borders, or who customarily receive a large number of immigrants
have no voice in determining federal immigration policy, in setting citizen-
ship standards, or in establishing food stamp eligibility requirements.
The federal government can and should solve this dilemma by assuming complete
responsibility for food stamps paid to aliens and for the accompanying
administrative costs. While bonus values are borne 100% by the federal
government, administrative costs are not (currently at 50-50). In addition,
effective systems should be established for verifying the legal status of
alien applicants.
Recommendation #20:
Require 100% assumption by federal government of alien costs, with a
referral system to the Immigration and Naturalization Service to determine
legal status.
Eight Problem Areas
Eligibility Loopholes
Specific Problem: Food stamp recipients simultaneously may receive
substantial sources of other income, provided in kind,
and not have it count as income, even when it is provided
for normal living expenses.
Many food stamp families also receive benefits for living expenses from one
or more other publicly funded programs, which often provide assistance which
is not taken into account in determining the level of the resources of the
multiple-benefit family. Other families, not eligible or able to avail
themselves of these other resources, find themselves at a disadvantage, for
income therefore is not computed equally.
Many of these additional publicly funded programs provide outright assistance
for food, yet they are never counted as an offset against the assistance
provided by the food stamp program. (The entire premise of the food program
is to bring the individual's diet up to a given level, within the limit of
the public resources that are availabe, not to supplement other programs
that in fact provide the same assistance.) Examples include the School
Lunch program; the Special Supplemental Food Program for Women, Infants,
and Children; the School Breakfast Program; special summer feeding programs;
free lunches provided the elderly under the Older Americans Act; Meals on
Wheels; reduced prices at military commissaries, etc. Yet these are never
evaluated to recognize the offset which certainly must exist against food
stamp requirements.
Similarly, other living expenses of the recipient may be met in whole or in
part by other publicly funded program. As described by the report issued
by the Joint Economic Committee of the Congress under former Representative
Martha Griffiths (D-Mich.), these can have a substantial cumulative effect
on enabling the multiple-recipient to have resources above that which the
wage earner may secure. The food stamp program is actually simply an income
supplement, yet when two applicants' eligibility is evaluated, no recognition
is made of the fact that one may also be receiving benefits under rent
supplement programs under the United States Housing Act of 1937, section 236
of the National Housing Act, and section 101 of the Housing Act of 1965.
Resources for normal living expenses of applicants should be treated and
evaluated in an equal manner. None should approach eligibility with an
unfair or multiple-benefit advantage.
Recommendation #21:
Require recognition, as income, of any other publicly funded program which
provides cash or in-kind assistance to the food stamp applicant for food or
housing.
PROBLEM AREA: ADMINISTRATIVE COMPLEXITIES
Specific Problem: Administration of the food stamp and cash assistance
programs by two separate federal departments (Agriculture
and Health, Education and Welfare) compounds administrative
complexities and confusion for the recipient and taxpayer
alike.
Due to the changes in the food stamp program, wherein it has evolved from a
program initially conceived in part to deal with agriculture surpluses which
now have measurably disappeared to an income supplement program, it appears
eminently sensible to combine its administration with that department which
is responsible for other like programs: the Department of Health, Education,
and Welfare. This is recommended not only because of the logic and character
of the programs, but because separate administration causes substantial confusi
and administrative complexities in almost every sector that must deal with the
two respective areas.
The effect of continuing to view food stamps as a "food" program, rather
than a welfare program, in terms of federal policy, legislation, administration
and option selection, is at the heart of many of the food stamp program's
present problems. As each additional item of special consideration,
exemption, or deduction is tacked onto the food stamp program, the confusion
and headaches for the eligibility worker and recipient multiply many-fold.
Two completely separate evaluations must be made of resources, for example,
to compute food stamp vs AFDC benefits, for the same recipient.
This often reveals itself in the error rate which accompanies food stamp
eligibility determinations. One recent study indicated 27.2% error rate
in food stamp cases handled by county workers who must handle AFDC cases for
the same recipients. The-error rate for non-AFDC food stamp cases was less
than half this rate. It has been estimated that, quite apart from the
savings in more accurate determinations, conforming the two programs under
one administrative structure would save as much as $31 million annually in
California alone; using a commonly accepted multiplier of ten, this could
mean savings of as high as $310 million in administrative savings alone.
Recommendation: #22:
Transfer the food stamp program from the Department of Agriculture to the
Department of Health, Education and Welfare.
LIBRARY
Specific Problem: No statutory authority exists in the food stamp program
for demonstration, research, or pilot projects which may
test various possible program improvements in various
parts of the country.
As administrative improvements have been suggested over the past years from
different sources, including from within the Department of Agriculture, there
has been no ability on the part of the department to conduct demonstration
or research projects in various parts of the country. Such a provision has
long existed in Section 1115 of the Social Security Act, with respect to
public assistance.
Eight Problem Areas
Administrative Complexities
The ability to conduct such projects is a critical part of the ability to
effect program improvements, and such demonstration project authority should
be granted.
Recommendation #23:
Provide demonstration project authority to the food stamp program.
*****
Specific Problem: The outreach program continues to seek new recipients
based upon an unsubstantiated premise of massive numbers
of needy eligible nonparticipants (see previous discussion
on the reasons for nonparticipation), while eligibility
processing and nutritional education of existing applicants
and recipients continues to deserve additional resources.
The premise for continued outreach efforts and vigorously expanded funding
for such efforts has often been the observation that "62% of the potential
eligibles are not participating in the program." The reasons for such
nonparticipation, as stated earlier, may have very much more to do with
the nonneedy character of the 62%, which have been artificially reached by
a defective eligibility formula, than any inability to hear of, or avail
one's self of, the food stamp program.
At the same time, eligibility offices find it difficult to respond as
swiftly as would be desirable to existing applicants and their needs. More-
over, funds directed to nutritional education would play a very strong and
supportive role and have a beneficial effect upon current recipients in
assisting them to plan, purchase, and prepare nutritional meals. It often
seems to be forgotten that one of the goals of the food stamp program should
be not simply maintenance of the status quo--i.e., providing public assistance
to persons with inadequate incomes for an undefined period into the future-
but enabling them to plan their expenditures, both public and private, in
such a fashion as to maximize the manner in which their nutritional needs
are met.
Recommendation #24:
Redirect outreach to provide for nutritional education and assistance and
for more immediate receipt of and processing of applications, to relieve
logjams and delays in processing; redirect funding to these purposes.
****
Specific Problem: Public assistance withholding continues to be mandated
for every section of the country effective July 1, 1975.
Public assistance withholding is the system whereby a public assistance
recipient, who under the current programs is categorically eligible for
Eight Problem Areas
Administrative Complexities
food stamps, may elect to have his purchase requirement withheld from his
grant and his coupons mailed to him.
While this may be a desirable option in many if not most parts of the nation,
concern has been expressed by a number of local jurisdictions that public
assistance withholding places undue burdens upon local postmen in certain urban
areas, since they will be carrying instruments as easily negotiated as cash.
The recipient himself may be disadvantaged with increases in theft. The
federal government has been called upon to make public assistance withholding
optional at the discretion of the local agency, and they appear to be in the
best position to make the decision which areas in which public assistance
withholding suitably may be used.
Recommendation #25:
Make public assistance withholding optional at the discretion of the local
agency.
*
PROBLEM AREA: INSUFFICIENT CASH AND COUPON ACCOUNTABILITY
Specific Problem: Local jurisdictions receive no timely notification whether
issuing agents with whom they have contracted to issue
food stamps have made deposits of receipts secured by
them through the purchase requirements.
Under current regulations, local jurisdictions are accountable to the
federal government to insure that correct amounts are collected from
recipients, for the purchase requirements, and that the funds are deposited
at a Federal Reserve Bank in a timely fashion. No notification is sent on
a current basis, however, to enable counties to know when these deposits
occur. The timeliness of sales agents' deposits should not be determined by
audits alone; it is important to know if there are problems in agents'
meeting depositing requirements, for these may be indicative of bad
management or impending bankruptcy.
Recommendation #26:
Require immediate certification of deposits made by issuing agents to
local entities.
*****
Specific Problem: Just as counties are not notified when purchase
requirement deposits are made by issuing agents,
such agents may fail to make such deposits in a complete
or timely fashion, thus operating on federal funds.
Some issuing agents, under current procedures, may fail to make complete or
timely deposits of the federal funds that are represented by the purchase
requirements which they collect. Auditors in Los Angeles County discovered
that one of their sales agent corporations failed to deposit all funds
collected from food stamp recipients during the period between January and
June 1973; sales agent deposits fell short of eollections by $135,000.
In other cases, sales agents may drag their feet in making such deposits,
because they have a cash flow problem or are utilizing the federal funds
to capitalize their operation.
Recommendation #27:
Require fiscal sanctions against agents for failure to meet depositing require-
ments in a timely fashion.
Specific Problem: The magnitude of the food stamp program may mean that
delays in deposits by issuing agents cause the federal
government to lose substantial sums in interest.
Purchase requirements add up to roughly 2/3 of the bonus values of food
stamp coupons (or 40% of the total value of the coupons). With bonus values
reaching $4.5 billion, this means that substantial sums in purchase require-
ments are present in the nation at any given time. Delays of even one day
Eight Problem Areas
Coupon Accountability
or one week, in depositing, may mean losses in interest on federal funds
of considerable magnitude.
Recommendation #28:
Identify all receipts as federal funds, and prohibit any use for individual
or corporate profit.
*****
Specific Problem: Counties are not even informed of the amounts of coupons
which are ordered by, shipped to, and received by issuing
agents, nor when such coupons are shipped, yet counties
are held fiscally liable for any losses. In addition,
the deliveries of negotiable instruments could be made
in a more careful fashion.
Since many counties operate through issuing agents, the agents themselves
place orders for coupons from the appropriate printing facility in Washington
or New York Although the counties are held liable for any losses, they
are not notified when or in what amount the coupons are shipped. It would
be a very simple matter to provide the "Advice of Shipment" form to the
counties on a basis concurrent with the shipment of the coupons. It has been
estimated that an average of $10 million per month in food stamp coupons
may be received by agents without such notification going to the counties
on a timely basis.
Additionally, the manner in which the coupons are handled at the receiving
end has occasionally left something to be desired. Appropriate receiving
point signatories are sometimes lacking. For example, in one case $2,476,000
in food stamps were delivered to a county welfare department after hours.
They were signed for by the night watchman, In another case, $455,200 of
food stamps was delivered to a county welfare department, where there
was no one there but the janitor, who refused to sign the receipt. They
were finally dropped off, instead, at the sheriff's office.
Recommendation #29:
Revise coupon shipment procedures to insure local notification of time
and quantity of coupon shipments, centrally compute adjustments to agents!
orders and notify local entities of change in allotment tables, notify
local entities when agents' order is adjusted, and assure that deliveries
are made only to authorized persons.
*****
Eight Problem Areas
Coupon Accountability
Specific Problem: Tracking food stamp transactions is very difficult
because of the lack of an adequate national system for
reconciliation of federal/local records of a monthly
basis.
A final monthly reconciliation by counties and the federal government is
essential in order to tie together the many records which are related, directl
or indirectly, to the issuance of the food stamp coupons. Systems, as
indicated above, are lacking to insure that states and/or counties may
promptly verify that sales agents have appropriately deposited funds into
the Federal Reserve system, or that coupons have in fact been received by
agents in the same amount and in a timely fashion following shipment.
Recommendation #30:
Institute federal/local monthly reconciliation of records.
Specific Problem: The U.S. Postal Service (with some exceptions) has refused
to accept the same liability for losses that other issuing
agents accept, and thus continuation of use of Postal
Service outlets has been in jeopardy.
U.S. post offices are used in a number of sections of the country to serve
as issuing outlets for food stamps. The Postal Service has, with some excep-
tions, refused to accept, however, the same liability that other issuing
agents accept for any losses that may occur. As a result, states and/or
counties are left with liability for losses over which only the U.S. Postal
Service has control and which involve one arm of the federal government
refusing to accept liability for a federal program that other local entities
accept when they participate in the administration of the program.
Recommendation #31:
Require Postal Service to serve as issuing agents upon request of a state and
to assume the normal liability of issuing agents.
PROBLEM AREA: CRIMINAL ACTIVITIES (FRAUD, THEFT, COUNTERFEITING, BLACK
MARKETING ACTIVITIES) AND LAX RECIPIENT IDENTIFICATION
Specific Problem: Lax recipient identification is at the heart of many of
the criminal activities which continue to be found in the
food stamp program.
The food stamp program currently requires an identification card for food
stamp purposes, but there are no meaningful minimum standards for the content
of that card; its usage is not widespread because grocers may not be aware
of its existence; and it may be easily multi-lithed or counterfeited.
County workers have been known to set up "dummy" food stamp cases in order
to receive the stamps themselves; in California, $35,000 worth of food stamps
were embezzled by a county employee for which the federal government was
forced to compensate. One California county worker forged food stamp
identification and authorization to purchase cards and then used the
cards to buy $12,000 worth of food stamps. In 1970, two men stole food stamp
identification and authorization cards and proceeded to purchase more than
$50,000 worth of food stamps with the help of twelve accomplices.
A Washington, DC food stamp certifier was indicted last October for
bribery, conspiracy, wrongful acquisition of food stamps, and mail fraud.
He allegedly obtained the names of real and fictitious persons and proceeded
to certify them as eligible for food stamps. The authorization to purchase
cards would then be picked up by a fellow conspirators or, through
previous arrangements, turned over to him by actual recipients. This plot
continued for two years, reportedly, costing the food stamp program
"thousands of dollars" according to fraud officials.
A photo-identification card would make much more difficult the unauthorized
use of food stamps and would, at the same time, provide an effective means
for the grocer to make sure that he is cashing food stamp coupons for the
party for whom they were issued. A number of jurisdictions have already
successfully implemented a photo-identification card system for public
assistance.
Recommendation #32:
Require a photo identification card, with specified minimum requirements.
*****
Specific Problem: The easy negotiability of food stamps facilitate fraud,
theft, counterfeiting and black marketing activity.
Food stamp coupons are as easily negotiable as cash and have no identifying
requirements upon them that insure that the user is the person for whom or
to whom they were issued. During an eighteen month stretch from 1973-74,
75 separate illegal food stamp trafficking incidents were investigated by
federal authorities in California. In May 1974, federal agents in California
confiscated $5 food stamp coupons of "very good quality" valued in excess of
$1,300,000. In San Antonio, eighteen persons were indicted for exchanging
food stamps for one-half of their face value. Also in San Antonio, a man
was alleged to have accepted $300 in food stamps for performing car repairs
and painting, $300 in food stamps for a used car, $250 in food stamps for a
mini-bike, and $300 worth of food stamps for $150 cash.
Eight Problem Areas
Criminal Activities
There is no reason why food stamp coupons could not be converted to
something akin to a traveler's check, where a signature is required on
the coupon at the time of purchase and at the time of use. Used in
conjunction with a photo-identification card, such a system effectively
would eliminate 99% of the cases in which the above kinds of criminal
activities, and those described in the previous section, occur.
Recommendation #33:
Revise food stamp coupon to conform format approximately to that used in
a traveler's check (see example below).
*****
DO NOT
FOOD COUPON
DO NOT
FOLD
SPINDLE
Agricultural Adversess
Healthier Families
NON THANSFERABLE
EXCEPT UNDER CONDITIONS PRESCRIBED BY THE SECRETARY OF AGRICULTURE
VS.
SIGNATURE AT TIME OF PURCHASE
750-638-626
(4)
UNUSED CHECKS FOR FUTURE TRIPS
GOOD UNTIL USED NO TIME LIMIT
FIRST NATIONAL CITY BANK
WILL
TMC
KEEP
SAMPLE
If
CHAIRMAN FIRST AATIONAL CITY CORPORATION
⑆8000⑉0008⑆ 750638626⑈
SIGNATURE AT TIME OF USE
Eight Problem Areas
Criminal Activities
Specific Problem: The state and the counties must pay 50% (and, in
some cases, 100%) of the costs of preventing fraud
and retrieving food stamp losses, yet the federal
government receives, in entirety, any recoveries.
Recent federal action changed the sharing ratio in federal/local administrative
costs from 62 1/2% of only certain items to 50% of all administrative costs,
and this has assisted somewhat in providing federal funds for fraud control
and recovery actions. However, depending upon where the unit is located,
local governments may still incur 100% of enforcement and recovery admini-
strative costs.
The anomaly of the situation is intensified when 100% of any recoveries must
be returned to the federal government.
Federal funding in social worker (social services) salaries is 75%. To
achieve equity and provide further incentive for improved fraud control,
investigative and prosecution activities, 75% federal funding is recommended.
Recommendation #34:
Provide 75% federal funding for the costs of investigations, prosecutions,
collection of federal funds, and related activities.
Specific Problem: There is no effective system now in place to prevent a
food stamp recipient from receiving food stamps in more
than one jurisdiction.
Effective means do not now exist to stop the "county-hopper" or "state-
hopper": the individual who files for and collects food stamps in more
than one jurisdiction.
A number of food stamp recipients have crossed the California-Oregon border
at Del Norte County in order to receive multiple food stamp benefits in
both states. A man and woman were found guilty of receiving both AFDC and
food stamp benefits in Montana, Oregon, Utah, and 18 California counties.
In addition, it was reported that one migrant farm family in California finished
their fruit harvest circuit with $1300 in food stamps collected from several
counties. Under investigation, as well, in 1974 in California was the case
of a farm labor contractor who traveled within four western states including
California; in addition to his contractor's fees, welfare officials had reason
to believe he also was receiving unemployment insurance, AFDC and food stamp
benefits in each state.
California has begun experiments with a system whereby there is a central
clearing house of information and a referral system when it is suspected
that a recipient is receiving public assistance in more than one jurisdiction.
At a minimum, such a system needs to be established on the federal level,
covering all 50 states and the local jurisdictions within them. In addition.
however, means should be established to cross-check elements of a recipient's
application (name, address, Social Security number, etc.) to preclude as much
as possible any eventuality of multiple receipt of food stamp benefits.
Eight Problem Areas
Criminal Activities
Recommendation #35:
Require development of a central clearing house of information and a referral
system to preclude recipients from receiving food stamps in more than one
jurisdiction.
Specific Problem: When a recipient moves, he is under no requirement for
immediate recertification and may continue to receive
food stamps for 60 days or longer.
When a recipient moves to a new jurisdiction, he may continue his receipt
of food stamps for as long as 60 days or perhaps longer if his prior certifi-
cation period was longer and the 60-day requirement is not met. Moving may
well be an index of changed circumstances, as it affects both household
size and income. There should be a requirement of receipt of food stamps
under the old certification for no longer than 30 days, in addition to
immediate reapplication and certification in the new jurisdiction.
Recommendation #36:
Limit continuation for 30 days when recipient moves and require immediate
reapplication and recertification.
Specific Problem: There is no system now in place to check the actual
income of the recipient with the income that he reports
for food stamp purposes.
A fairly effective and simple system for verifying the accuracy of income
reports for receipt of public assistance, either cash or food stamps, is
to utilize reports filed by employers with the state for unemployment insurance
disability insurance, or state income tax purposes. Such reports are filed
by individual and Social Security number, and can be cross-checked either
manualiy 02 electronically with income reports by recipients at the local
levri. The cost/bowefit in fraud deterrence and accurate income reporting
is significant. With regard to AFDC, where such a system was instituted in
California, there initially were found discrepancies in 41% of the cases
among the top 10% of the earners.
Recommendation#37:
Require development of an earnings clearance system (a method to cross-check
earnings reported by edipients with earnings reports filed by employers)
to check actual earned income against income reported by households.
Eight Problem Areas
Criminal Activities
Specific Problem: There is no requirement now that income be reported
on a monthly basis.
Although it would appear to be a common-sense requirement, monthly income
reporting has been only a recent development in public assistance; where
it has been instituted, however, it has been found substantially to reduce
error rates and the accuracy of payments. Testimony from Jodie Allen of
Mathematica, Inc., indicates that "experience with income maintenance
experiments has shown that a requirement for monthly reporting of income and
family composition can substantially reduce welfare program costs and
caseloads while at the same time improving program responsiveness to the
neediest famflies. HEW is currently considering mandating monthly income
reporting for the AFDC program and even greater savings might be anticipated
for the food stamp program in which a much higher proportion of partici-
pating families have reportable income".
Currently, in the food stamp program, income reporting can be as little
as one month or as much as one year, depending upon the period for which
the family is certified.
A Gio study shows that 18% of all public assistance, active food stamp
CASHR nationally are considered ineligible and $23 million monthly in
bocus allotments is paid to ineligible familes. There is, in addition,
a 37.2 error rate in the amount paid for food stamps. In a program of this
magnitude, such errors results in sizeable misappropriation of taxpayer
funds.
Recommendation #38:
Require monthly income reporting in the food stamp program.
PROBLEM AREA: PURPOSES OF THE PROGRAM
Specific Problem: Neither of the food stamp program's initial purposes
(nutritional improvement and alleviation of agricultural
surpluses) are necessarily present in the current
operation of the program.
A basic concern with the food stamp program has been that while it places
additional buying power in the hands of recipients for food, there is no
specific guarantee that it will be used to purchase foods that are
particularly an improvement in nutritional value. Moreover, there is the
problem with "substitute" expenditures: provision of food stamp coupons,
particularly to zero-purchase cases, may simply free income which can be
used for other things. Finally, of course, there is no longer any relation-
ship between the food stamp program and disposition of agricultural
surpluses.
While the reduction in such surpluses also provides an argument against
operation of the commodity program, certain jurisdictions have expressed
a preference for the commodity program (wherein given foods are distributed
directly) over the food stamp program, as being more effective in providing
specific foods to a target population to those most in need. Moreover,
there is some indication that the direct distribution of commodities,
while it involves a separate system, may be substantially cheaper in
terms of the total assistance delivered to the recipient for a nutritionally
adequate diet at a given cost. The cost of the food stamp program,
measured only in terms of the per person bonus, is $21.70 per month. The
current cost per person per month for the delivery of a nutritionally
adequate diet in terms of a complete food package delivered to eligibles
by USDA through State and local distribution systems is $9.27.
The costs of two other delivery systems operated by USDA may also be compared.
The Special Supplemental Feeding Program for Women, Infants, and Children
(WIC) operates on the basis of vouchers, like the food stamp program,
which recipients may use to redeem in stores. The Supplemental Feeding
Program delivers USDA-donated foods. Again, simply in terms of the per
person cost without including administrative costs, the cost of WIC is
$17.62 vs $10.94 for the Supplemental Feeding Program.
One of the principal reasons for the differences, of course, is the fact
that food stamps and WIC vouchers are used to purchase foods at retail,
whereas USDA distributes foods it has purchased with full federal buying
leverage. While surpluses themselves have diminished, federal purchases
of commodities can and do continue.
Recommendation #39:
Permit the choice of commodities or food stamps by local jurisdictions.
Eight Problem Areas
Purposes of the Program
Specific Problem: Problems of data sufficiency, quality control, and
overall allocation of resources in the most cost/
beneficial manner continue to hamper food stamp
program effectiveness.
The problems outlined, of course, can be remedied only through joint
legislative and administrative attention to the needs, problem causes, and
possible remedies. While substantial public attention has been directed
to the food stamp program in recent months, there needs to be a continuing
review of where the program stands with regard to some of its most basic
and critical elements.
Recommendation #40:
Require the Secretary to file an annual report with the Congress reviewing
data collection status, quality control, and general character of the program
to insure cost/beneficial use of public funds for the legitimately needy.
PROBLEM AREA: FUNDING
Specific Problem: The food stamp program, since its inception, has been
a program in which 100% of the benefits are federally
funded, yet it is administered by the states and local
entities without a fiscal stake.
While it has been said that the level of quality control in the food stamp
program is no worse than that found in AFDC, wherein the states and
counties have a fiscal stake, the fact remains that the food stamp program's
problems may very well have been recognized and dealt with earlier had
the states and counties had a fiscal interest in the many administrative
and policy decisions which have caused mushrooming caseload and benefit
growth. An awareness of some of the factors that were causing the program
to grow out of control may have been present at the local level, but it
may have also been accompanied by the general conclusion that "this is a
federal program, and they are the ones who have to deal with it." Such a
conclusion was, of course, reinforced by the fact that the states and counties
were given very little latitude to make changes in the food stamp program.
Recognizing this problem, attempts have been made in the past to secure
state and local participation in the costs of the program. This, of
course, has not only been politically difficult, but also a recognition
of the very real fiscal difficulties facing state and local government
in the presence of increasing demands upon revenues in those entities.
In the light of this, and the recent experiments in revenue sharing, it
would appear desirable to establish a system for state participation, but
where the state share in fact would be subvened to them by the federal govern-
ment under a "block grant" approach. Under this system, the states would
"incur" an obligation to share in the bonus value costs of the food stamp
program on the same ratio that is present in the AFDC program (generally
50-50, although this varies with states and claiming procedures), but
would be provided their share under federal "block grant." Should the
states by able to operate the food stamp program more effectively and
efficiently--within, of course, the continuing and future federal law and
regulations governing food stamps--they would be able to use the resultant
savings for other purposes.
Recommendation #41:
Set State participation in the bonus value at the same rate as that in the
AFDC program, with a system of "block grants" to the States to offset added
State costs.
GROSS INCOME,
FAMILY OF TWO,
USDA
MARCH 1975
PLAN
55-75 YEARS
ECONOMY FOOD
% OF INCOME
JULY 1975
ALLOTMENT
FOOD STAMP
% OF INCOME
SURVEY*
EXPENDITURE
CONSUMER
LABOR STATS.
BUREAU OF
z OF INCOME
FORMULA
FOOD STAMP
FOOD
SPENT FOR
MAXIMUM AMT.
% OF INCOME
$1,500
$929
61.9
$1080
72.0
$ 789
52.6
$252
16.8
($77.40
($90
($65.78
($21
per mo.)
per mo.)
per mo.)
per mo.)
$2,500
$929
37.2
$1080
43.2
$ 977
39.1
$456
18.2
($77.40
($90
($81.42
($38
per mo.)
per mo.)
per mo.)
per mo.)
$3,410
$929
27.2
$1080
31.7
$1184
34.7
$744
21.8
(nonfarm
($77.40
($90
($98.67
($62
poverty index)
per mo.)
per mo.)
per mo.)
per mo.)
$5,000
$929
18.6
$1080
21.6
$1110
22.2
$456
9.1
($77.40
($90
($92.51
($38
per mo.)
per mo.)
per mo.)
per mo.)
$7,000
$929
13.3
$1080
15.4
$1339
19.1
$528
7.5
($77.40
($90
($111.58
($44
per mo.)
per mo.)
per mo.)
per mo.)
$9,000
$929
10.3
$1080
12.0
$1358
15.1
A.N.E.**
($77.40
($90
($113.23
per mo.)
per mo.)
per mo.)
In 1972-73. If updated by food component of CPI to March, 1975, percentages would be even higher.
** Average family with income of $9,000 not eligible. Break-even point approximately $8,580 (assuming same deductions as
average family with incomes of $7200 and up. A family with higher deductions may receive food stamps even with income
in excess of $8,580).
GROSS INCOME,
SINGLE INDIVIDUAL,
USDA
MARCH 1975
PLAN
MAN, 35-55 YEARS
ECONOMY FOOD
2 OF INCOME
JULY 1975
ALLOTMENT
FOOD STAMP
% OF INCOME
SURVEY*
EXPENDITURE
CONSUMER
LABOR STATS.
BUREAU OF
% OF INCOME
FORMULA
F OOD STAMP
FOOD
SPENT FOR
MAXIMUM AMT.
% OF INCOME
$1,000
$521
52.1
$576
57.6
$470
47.0
$120
12.0
($43.40
($48
($39.17
($10
per mo.)
per mo.)
per mo.)
per mo.)
$2,590
$521
20.1
$576
22.2
$710
27.4
$288
11.1
(nonfarm
($43.40
($48
($59.19
($24
poverty index)
per mo.)
per mo.)
per mo.)
per mo.)
$4,000
$521
13.0
$576
14.4
$716
17.9
$144
3.6
($43.40
($48
($59.62
($12
per mo.)
per mo.)
per mo.)
per mo.)
$5,000
$521
10.4
$576
11.5
$899
18.0
$432
8.6
($43.40
($48
($74.92
($36
per mo.)
per mo.)
per mo.)
per mo.)
$7,000
$521
7.4
$576
8.2
$933
13.3
$216
3.1
($43.40
($48
($77.74
($18
per mo.)
per mo.)
per mo.)
per mo.)
$9,000
$521
5.8
$576
6.4
$1013
11.3
A.N.E.**
($43.40
($48
($84.45
per mo.)
per mo.)
per mo.)
* In 1972-73. If updated by food component of CPI to March, 1975, percentages would be even higher.
** Average individual with income of $9,000 not eligible. Break-even point approximately $8,484 (assuming same deductions
as average individual with income of $6,000 $7,188. An individual with higher deductions may receive food stamps even
with income in excess of $8,484).
TABLE III
GROSS INCOME,
FAMILY OF FOUR,
USDA
MARCH 1975
PLAN
TWO SCHOOL CHILDREN
ECONOMY FOOD
% OF INCOME
JULY 1975
(MAN & WOMAN 20-35 YEARS;
ALLOTMENT
FOOD STAMP
% OF INCOME
SURVEY*
EXPENDITURE
CONSUMER
LABOR STATS.
BUREAU OF
% OF INCOME
FORMULA
FOOD STAMP
FOOD
SPENT FOR
MAXIMUM AMT.
% OF INCOME
CHILD 6-9; BOY 9-12)
$ 3,000
$1933
64.4
$1944
64.8
$1425
47.5
$ 636
21.2
($161.10
($162.00
($118.78
($ 53
per mo.)
per mo.)
per mo.)
per mo.)
$ 4,000
$1933
48.3
$1944
48.6
$1709
42.7
$ 852
21.3
($161.10
($162.00
($142.39
($ 71
per mo.)
per mo.)
per mo.)
per mo.)
$ 5,050
$1933
38.3
$1944
38.5
$1648
32.6
$ 996
19.7
(nonfarm
($161.10
($162.00
($137.32
($ 83
poverty index)
per mo.)
per mo.)
per mo.)
per mo.)
$ 7,000
$1933
27.6
$1944
27.8
$1803
25.8
$1464
20.9
($161.10
($162.00
($150.28
($122
per mo.)
per mo.)
per mo.)
per mo.)
$ 9,000
$1933
21.5
$1944
21.6
$1835
20.4
$1656
18.4
($161.10
($162.00
($152.88
($138
per mo.)
per mo.)
per mo.)
per mo.)
$11,000
$1933
17.6
$1944
17.7
$1999
18.1
A.N.E.**
($161.10
($162.00
($166.62
per mo.)
per mo.)
per mo.)
*
Iff 1972-73. If updated by food component of CPI to March, 1975, percentages would be even higher.
* Average family with income of $11,000 not eligible. Break-even point approximately $9,588 (assuming same deductions as
average family with incomes of $7,200 and up. A family with higher deductions may receive food stamps even with income
in excess of $9,588).
TABLE LV
GROSS INCOME, FAMILY OF SIX
FOUR SCHOOL CHILDREN
(MAN & WOMAN 35-55 YEARS;
USDA
MARCH 1975
PLAN
1 BOY 15-20 YEARS;
1 GIRL 12-15 YEARS;
ECONOMY FOOD
% OF INCOME
JULY 1975
ALLOTMENT
FOOD STAMP
Z OF INCOME
SURVEY*
EXPENDITURE
CONSUMER
LABOR STATS
Z OF INCOME
FORMULA
GOOD I
GOOD
30
SPENT FOR
MAXIMUM AMT.
INCOME 20 %
1 BOY 9-12 YEARS:
1 CHILD 6-9 YEARS)
$ 3,000
$2,728
90.9
$2,664
88.8
$1,732
57.7
$ 732
24.4
($227.34
($222
($144.34
($61
per mo.)
per mo.)
per mo.)
per mo.)
$ 5,000
$2,728
54.6
$2,664
53.3
$2,184
43.7
$1020
20.4
($227.34
($222
($182.04
($85
per mo.)
per mo.)
per mo.)
per mo.)
$ 6,690
$2,728
40.8
$2,664
39.8
$2,399
35.9
$1488
22.2
($227.34
($222
($199.90
($124
per mo.)
per mo.)
per mo.)
per mo.)
$ 8,000
$2,728
34.1
$2,664
33.3
$2,358
29.4
$1704
21.3
($227.34
($222
($196.51
($142
per mo.)
per mo.)
per mo.)
per mo.)
$10,000
$2,728
27.3
$2,664
26.6
$2,435
24.4
$2280
22.8
($227.34
($222
($202.97
($190
per mo.)
per mo.)
per mo.)
per mo.)
$12,000
$2,728
22.7
$2,664
22.2
$2,856
23.8
A.N.E.**
($227.34
($222
($238.03
per mo.)
per mo.)
per mo.)
In 1972-73. If updated by food component of CPI to March, 1975, percentages would be even higher.
Average family with income of $12,000 not eligible. Break-even point approximately $11,004 (assuming same deductions as
average family with income of $7,200 and up. A family with higher deductions may receive food stamps even with income
{1975?]
STATEMENT ON FOOD STAMPS
The President regrets that the District of
Columbia District Court has acted to delay reform
of the food stamp program. The proposals the Adminis-
tration put forth are designed to eliminate abuses,
:
reduce unnecessary costs and provide greater benefits
to those most in need.
The food stamp program must be reformed. The
President has directed the Attorney General and the
Secretary of Agriculture to determine how this court
action can be dealt with most promptly and effectively
to bring about the reforms needed in the food stamp
program.
FORD i LIBRARY GERALD
THE WHITE HOUSE
WASHINGTON
April 21, 1975
MEMORANDUM FOR :
FROM :
MIKE JIM CANNON DUVAL JHJ for.
SUBJECT :
Plans to Standardize Deductions
for Purposes of Determining Food
Stamp Eligibility and Benefits
The attached has been forwarded from the Department
of Agriculture and is forwarded to you for information.
Attachment
GERALD R. LIBRARY FORD
UNITED STATES DEPARTMENT OF AGRICULTURE
FOOD AND NUTRITION SERVICE
WASHINGTON, D.C. 20250
April 17, 1975
Mr. James M. Cannon
Assistant to the President
for Domestic Affairs
The White House
Dear Mr. Cannon:
As the Department had indicated to you, we are continuing to develop
impact data on alternative plans to standardize deductions from income
for purposes of determining food stamp eligibility and benefits.
Enclosed are several tables demonstrating the impact of plans 3, 7,
and 10 which are the options recommended in our report. The following
data are included for each of these three plans:
1. An overall summary of the numbers of households who would
lose benefits and who would gain benefits broken out by
poverty status of the household and presence of an elderly
(65 and over) member.
2. A more detailed table showing households who lose benefits
but continue to participate, households who cease to
participate, households who become ineligible, as well as
those who gain benefits or become eligible participants.
This is, again, broken out by poverty and age status.
3. A finely detailed set of tables showing those who lose and
those who gain by income range.
Within a week we will submit the same type of data for three additional
plans--2, 5, and 9.
Sincerely,
Edward Hekman
Administrator
Enclosures
FORD LIBRARY & GERALD
ACTION
THE WHITE HOUSE
WASHINGTON
April 29, 1975
Food strups
MEMORANDUM FOR THE PRESIDENT
FROM:
JIM CANNON July
SUBJECT:
Supplemental Appropriations for FY 75
for the Department of Agriculture
OMB has prepared for your consideration the attached
letter to the President of the Senate transmitting
supplemental appropriations in the amount of $889,815,000
for FY 75 and an amendment to a pending supplemental for
FY 75 in the amount of $100,233,000 for the Department
of Agriculture.
This request would permit the Department of Agriculture
to finance mandatory reimbursements amounting to $1,015
million for the Food Stamp Program ($885 million),
Child Nutrition ($125 million) and Special Milk ($5
million) programs.
Additional information is provided in Jim Lynn's
memorandum at Tab A.
OMB, Max Friedersdorf, Phil Buchen (Lazarus) and I
recommend approval of the letter to the President of
the Senate which has been cleared by Paul Theis.
RECOMMENDATION
That you sign the letter to the President of the
Senate at Tab B.
FORD (1BRARY
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
SIGNATURE
April 23, 1975
MEMORANDUM FOR THE PRESIDENT
Subject: Supplemental Appropriation for the Department of
Agriculture
Attached for your signature are proposed FY 1975 supplemental
requests and an amendment to a pending supplemental for the
Department of Agriculture. This request would permit the
Department to finance mandatory reimbursements amounting to
$1,015 million for the Food Stamp ($885 million), Child
Nutrition ($125 million), and Special Milk ($5 million)
programs.
On March 31, the appropriation for the Food Stamp program was
apportioned on a deficiency basis indicating the necessity of
a supplemental due to action taken by the Congress subsequent
to submission of the 1976 budget. These actions prevented
any adjustment in the cost-sharing requirement for partici-
pants this year, and provided for an increase in the costs of
State program administration. In addition, Public Law 93-86
required semi-annual adjustments in coupon allotments. These
adjustments have significantly increased program benefits,
and unemployed workers have turned to food stamps in greater
numbers. The additional amounts for the Child Nutrition and
Special Milk programs also reflect mandated higher reimburse-
ment rates and increased participation.
Although the Department has provided estimates of costs which
exceed assumptions for unemployment and cost-of-living adjust-
ments now available, we believe that a supplemental of this
magnitude should go forward for the following reasons: (1)
this large an impact on the budget should be before the
congressional budget committees in order to graphically
illustrate the need for programmatic reform, (2) while the
Department's request may be high by several hundred million,
2
the excess funding will be available for financing
anticipated FY 1976 increased costs; and (3) requests
for additional funding for these activities later in
the year because of increased participation would
subject us to criticism.
Recommendation
We recommend transmittal of the attached supplemental
request to the Congress.
T.
James T. Lynn
Director
Attachments
FORD LIBRARY is GERALD
THE WHITE HOUSE
WAšHINGTON
May 7, 1975
MEMORANDUM FOR :
DICK DUNHAM
JIM CAVANAUGH
FROM :
JIM CANNON
SUBJECT :
Food Stamps Jim
At the 8:00 a.m.conference last Friday, I was
asked again, the status of the report the
President requested two months ago:
1. Examples of abuses of food stamps.
2. Suggestions about what could be done
administratively to tighten up on
the administration of the program.
I realize that OMB has said that they cannot
be ready until June 30, but the President
doesn't want to wait that long.
April 23, 1097
MEMORANDUM FOR MIKE DUVAL
FROM:
JIM CANNON
SUBJECT: Food Stamps
What the President really wants to know
is how we, that is the White House and/or the
Department of Agriculture, can take administrative steps
steps to reduce the cost of food stamps.
I realize that OMB is preparing a report,
but I would like you to send 6b me, as soon as
possible, three or four suggestions of how we might
tighten up the administration of this program.
Thank you.
JMC:jm
CC Dick Dunham
BEBAED ". FORD
Jim Cabanaugh
THE WHITE HOUSE
WASHINGTON
May 7, 1975
MEMORANDUM FOR:
JIM CANNON
FROM:
JIM CAVANAUGH
SUBJECT:
Food Stamp Reform
Art Quern and Dick Dunham are working with Paul O'Neill's
staff on a memorandum for the President on this issue.
You should probably sit down with Dick, Art and Paul
tomorrow to review the final draft before it goes to
the President.
RORD
CC: Art Quern
Dick Dunham
Jim leaunon
THE WHITE HOUSE
Far your information
WASHINGTON
May 8, 1975
MEMORANDUM FOR:
DICK DUNHAM
LIBRARY
FROM:
ART QUERN
SUBJECT:
Progress on Food Stamp Assignment
In regard to Jim Cannon's inquiry OR the status of the
Food Stamp proposals, we intend to meet the May 15 deadline
established at our last staff meeting. Options for Presi-
dential decision will be available at that time.
As OMB has pointed out, the information upon which these
options are based is extremely weak and therefore projections
of impact could be substantially inaccurate. It is my re-
commendation that this be made known to the President as
these options are presented and then he can determine if
we should take additional time to compile more useful and
accurate information.
Our present timetable requires Agriculture to have a final
draft back to us by close of business on Thursday, May 8th.
OMB and we will put together a final memo for Jim Cannon
on Friday so that he can review it over the weekend. I
would suggest that the meeting with Secretary Butz currently
scheduled for Friday morning, be rescheduled for Monday or
done,
Tuesday of next week so that Jim Cannon and Jim Lynn can
have the benefit of reviewing the draft prior to meeting
with the Secretary and in anticipation of having a final
document by Thursday the 15th.
It might be helpful to review the chronology leading to
our current status:
March 26
OMB and Domestic Council received
USDA's 170 page document detailing
various options and the background
to the issues.
April 1 - 30
OMB and Domestic Council held numerous
meetings with USDA and requested more
specific information on the options
to be considered.
-2-
April 30
USDA unable to meet deadline for
provision of detailed information.
May 1 - 7
OMB and Domestic Council staff formu-
lated draft memo for President without
specific information on impact on case-
load and costs.
May 8
Deadline for final information and
narrative items for decision memo.
ORD
LIBRARY
THE WHITE HOUSE
WASHINGTON
May 12, 1975
MEMORANDUM FOR:
JIM CANNON
FROM:
ART QUERN
SUBJECT:
Food Stamp Meeting
Attached materials are for your use in the meeting at
9:30 a.m. on May 13th to discuss Food Stamps. A much
longer draft decision memorandum has been circulated
but to simplify your preparation I have attached only
1. A proposed agenda for the meeting
2. A working paper for your review outlining
the decisions in question
Should you have any questions, I am available at your
convenience.
Those
Attachment
ISEAL FORD LIBRARY
- -2-
3. Set a single $100 national standard
but continue categorical eligibility
for public assistance recipients with
special deduction for the aged of $50
4. Set $100 national standard deduction,
deny categorical eligibility but add
$25 special deduction for aged
5. Create a progressive chart of income
eligibility and bonus values
6. Put dollar limits on amounts which
can be deducted under current law.
GERALD R. LIBRARY FORD
WORKING PAPER
Decisions Outline
A.
We (OMB, Agriculture, and Domestic Council) have
developed twelve specific proposals to simplify
administration, tighten accountability, and
penalize and retard abuses. These are relatively
clear and, in general, non-controversial and need
only be reviewed (see attached list).
B.
Three specific items need decisions by the
President:
1. Strikers - all recipients of food stamps
can lose eligibility if they refuse to
accept employment. Under current law being
on strike is not grounds for denying eligibility
-- we have proposed that strikers must
wait 60 days before becoming eligible
for food stamps.
2. Addicts and Alcoholics - all eligible food
stamps recipients must use their stamps to
purchase food they or someone in their house-
hold cooks. This denies eligibility to residents
of institutions. Current law exempts drug addicts
and alcoholics in institutional treatment programs
enabling them to be eligible for food stamps
--- we have proposed eliminating this exemption.
3. College Students - Two elements of the current
law affect eligibility of college students
for food stamps
a. law denies elibility to students who are
claimed as a tax deduction by families
who are not eligible
-- this is somewhat confused and difficult
to enforce.
b. students eligible to participate are
excluded from requirement to accept
employment
- 2 -
-- we offer two approaches:
(1) clarify tax dependency exclusion
and extend work requirement to
students, or
(2) clarify tax dependency but continue
exemption from work requirement.
C.
Income Eligibility
This complex issue boils down to three elements
which relate to the plans we have developed to
change income eligibility approach:
1. Should we choose one specific plan for
reforming eligibility.
2. Should we recommend a type of income eligibility
plan and let Congress select the dollar levels.
3. Should we offer all six plans and let Congress
choose.
The plans developed deal with:
-- deductions, currently a complex and arbitrary
system permits people to deduct a number of
items from their gross incomes to enable
their becoming eligible even though their
gross income may be well above poverty line.
-- automatic eligibility for welfare recipients
no matter what their actual cash and in kind
income is
-- minimum bonus which guarantees a minimum bonus
to anyone eligible even though calculation
of their bonus by regular formula might re-
sult in a much lower bonus.
The plans developed:
1. Set a $100 national standard deduction for
all families
2. Set a $100 national standard deduction which
varies by family size with special addition
for aged
AGENDA
FOOD STAMP MEETING
Tuesday, May 13, 1975
9:30 a.m.
PURPOSE OF MEETING
Review decisions and alternatives to be addressed in
presenting food stamp issues to the President.
DECISIONS
I.
Should basic reform of food stamp program
proceed now, or should it await comprehensive
welfare reform
II.
If we proceed now,
A.
We must make decisions on
-- strikers
-- addicts and alcoholics
-- college students
FORD LIBRARY & GERALD
B.
We must decide if we should
-- choose one specific plan for income
eligibility
-- recommend one type of plan (i.e. standard
deduction) and let Congress determine
specific dollar level
-- simply offer all six plans that we have
developed and let Congress select a plan
C.
If we decide to select and recommend one
specific plan, we must select from:
1. Set a $100 national standard deduction
for all families
2. Set a $100 national standard deduction
which varies by family size with special
addition for aged of $50.
- 3 -
3.
Set a single $100 national standard but continue
categorical eligibility for public assistance
recipients with special deduction for the aged
of $50
4. Set $100 national standard deduction, deny
categorical eligibility but add $50 special
deduction for aged
5. Create a progressive chart of income eligibility
and bonus values
6. Put dollar limits on amounts which can be
deducted under current law.
TWELVE ADMINISTRATION RECOMMENDATIONS
1.
Limit variable purchase to 50% or 100%
2.
State option on withholding of Food Stamp Purchase
requirement from public assistance checks
3.
Lower maximum fine to $1,000
4.
Permit Secretary to levy money penalties
5.
Clarify exclusion of illegal aliens
6.
Eliminate $25 countable for employer supplied
housing
7.
Permit demonstration projects
8.
Greater accountability by states for coupons
9.
"Reduce" definition of negligence
10.
Allow lump sum payments where benefits are wrongfully
denied
11.
Authorize cash payments where mechanical failures
prevent issuance of stamps
12.
Lower maximum work requirement age to 60
GERAL
LIBRARY
Some items in this folder were not digitized because it contains copyrighted
materials. Please contact the Gerald R. Ford Presidential Library for access to
these materials.
alease Return to Jou Hournstre
THE FOOD STAMP PROGRAM
Fraud and Administrative Weaknesses
May 15, 1975
Purpose:
The purpose of this report is to identify reports of fraud and abuse
of the Federal Food Stamp program, administered by the Food
Stamp Division of the U.S. Department of Agriculture.
Resources:
To acquire the information, a revew was made of the
Congressional Record and New York Times Index for the
period May 1, 1974 through April 30, 1975; copies of news
articles on file in the Research Office of the White House;
partial information from a study being conducted by the
House Republican Study Committee through the office of
Sen.
James Buckley (R., N. Y. ); and, American
Enterprise Institute Evaluation Study 18, titled, "Food
Stamps and Nutrition, " by Kenneth Clarkson, April 1975.
General Conclusions:
(1) Although USDA issued TWO reports in March, 1975
on financial losses in the Food Stamp Program (N. Y. Times
of 3/2/75 and 3/31/75), there is no current collection of
data to assess just how much fraud contributes those losses,
now estimated to be $740 million (NYT, 3/31/75).
FORD & LIBRARY GERALD
(2) In support of this, the Director of the Food Stamp
Division at USDA (Mr. Royal Shipp) conceded to the New
York Times that his Division "lacked valid data on the total
cost of fraud. " (Ibid, 3/31/75)
(3) This general conclusion was arrived at independently
by Kenneth Clarkson of the University of Viriginia when, in his
April 1975 study for the American Enterprise Institute, he said,
"There is little direct evidence on the ext, of trafficking [one of
the forms of fraud] in food stamps
11
(2) - Food Stamps Report
(4) Somewhat afield from this report, but parallel, was
an editorial comment in the N. Y. Daily News of May 13, 1975
which criticized HEW: "The Department concedes that it
doesn't know how extensive cheating is 'because it hasn't been
studied. I 11
Some Examples of the Forms of Fraud and Abuse:
FORD i LIBRARY
(1) A mother of three recently walked into a food
stamp office in Mississippi to apply for food stamps.
A short time later, her
husband appeared in the
same office. Soon, the family was getting a double
allotment.
(N. Y. Times, 3/31/75)
Note: An administrative weakness
in the regulations facilitates this kind
of fraud. The lack of a "common
case-numbering system, 11 coupled
with the lack of a residency requirement,
makes it possible for an applicant to
qualify in several counties or states at
the same time. "
(Congressional Record,
S8740, 5/21/74)
(2) Deliberate failure of a food stamp recipient to inform
the local administrator of the food stamp program that a minor
child has reached majority and has left home.
(AEI Evaluation Study 18,
April 1975, Pg. 32)
(3) "Trafficking" in food stamps. This usually occurs
in the form of either selling one's stamps directly or trading
them for non-food items.
(Ibid., Pg. 31)
It is so-called "loopholes" in the law, however, that give rise
to the greatest amount of public and press attention. These
reports often concern students, organized labor, or presumably
wealthy people availing themselves of their "eligibility" for the
stamps.
(3) - Food Stamps Report
For the purpose of this report, examples of how the "loopholes"
are used will be labeled abuses.
Abuses:
(1) The student: Although there is considerable reporting
in the press about student use of food stamps, it would appear
that the basic law was written without a view to excluding students
from eligibility. Students need meet only those requirements
that apply to all other persons (NYT, 1/2/75), although the law
was amended to exclude those whose parents claim them as
a tax deduction (House Republican Study Committee, 5/15/75).
GERALD FORD LIBRARY
(2) Some examples of student abuse:
(a) A father earning $100, 000 per year had a
son in California receiving foodstamps.
(Congressional Record,
H486, 2/4/75)
(b) A girl studying "witchcraft" in California
was exempted from the work requirement [that applies to
all others] because she attended classes at least half-time
at an accredited institution.
(Congressional Record,
H486, 2/4/75)
(c) Although the amended law excludes students
whose parents claim them as a tax deduction, it would appear
that enforcement of this is lax. The N. Y. Times said (1/2/75)
that USDA "makes no effort to find out how many of them [food
stamp recipients] are students. " In this report, the paper said
that in the county which houses the University of Wisconsin,
65% of the food stamp recipients are students; and, in the county
in which Michigan State University is located, nearly 50% are
students.
(d) A Brown University student, with parents able
and willing to provide for him above his actual needs, reported
(in a letter to the N. Y. Times) that he is eligible for $46 per
month in food stamps. He claimed that "droves" of Brown's
students, whose parents are "more than able to support them, "
are flocking to the local Food Stamp office each month.
(N. Y. Times / 2/20/75)
(4) Food Stamps Report
(3) Organized Labor:
(a) Some unions have dropped strike benefits [which
would be counted as income, ordinarily], paying "medical benefits"
instead, thus enabling a striking laborer to draw money from the
union and food stamps simultaneously.
(Congressional Record,
S8740, 5/21/74)
(b) Seasonal workers, such as those in the construction
trades, are eligible during months of unemployment since eligibility
is determined on a month-to-month basis.
(Congressional Record,
S8740, 5/21/74)
(4) General Forms of Abuse:
(a) The exemption of the home as a
factor
FORD & LIBRARY GERALD
in determining eligibility makes it possible for a person with
a $100, 000 home to qualify. Further exemptions would allow
such a person to also own a priceless stamp collection, expen-
sive jewelry and similar personal property, and still qualify
for food stamp assistance.
(Congressional Record, S8740
5/21/74 and HRSC, 5/15/75)
(b) There is no provision in the law that prohibits
a potential food stamp applicant from transferring such personal
assets as bank savings and checking account monies to a personal
friend or relative in order to qualify for food stamps.
( Congressional Record,
S8740, 5/21/74)
Based upon the "loopholes" cited in paragraph (3) and (4), above,
the following hypothetical could easily occur:
A carpenter living in southern Minnesota, having earned
$18, 000 in the past 12 months, could live in his $40,000
home. He could transfer his savings of $5,000 to his
brother, reduce cash-on-hand in his checking account,
sell his second car, and live out the winter months when
there is little or no work for carpenters and qualify for
food stamps.
(Hypothetical)
(5) - Food Stamps Report
Construction of such a hypothetical is not the sort of imaginary
work that would come only from an anti-food stamp source.
United Press International did a construction of its own last
month, which is attached as a further example of what some
consider an abuse of the food stamp program.
(UPI, See Atch. #1)
While there is no reliable data on fraud, administrative
error has been tabulated by USDA and & appears to account
for the large bulk of monetary loss to the government.
FORD & LIBRARY LERALD
USDA reported (N. Y. Times, 3/2/75) that from its sampling
of 25, 585 households in 46 states, errors were found in
56.1% of the cases certified. The error rate ranged widely,
from a high of 80% in Rhode Island to a low of 21. 8% in the
state of Washington.
From both the Congressional Record and the AEI study, the
implications of the
present administration of the food
stamp program on the error rate was reflected.:
(1) The fact that AFDC and Food Stamp programs are
supervised by different Federal agencies "is an administrative
nightmare" for county welfare departments which must administer
both program.
(Remarks of Ronald Reagan,
Sept. 1974, in the Congressional
Record, H486, 2/4/75)
(2) Some believe that the Federal and State instruction
manuals have increased to the point where no single department
or agency can assess the food stamp operation.
(Congressional Record,
S8740, 5/21/74)
(3) The costs of enforcing the provisions governing the
Food Stamp Program are not easily quantifiable because the
activities of separate agencies are involved, including USDA,
the FBI, Department of Justice, and state and local law enforce-
ment agencies.
(AEI Evaluation Study 18,
Pg. 31)
(6) - Food Stamps Report
(4) As a final example that illustrates how paper-work
at the local level is conducive to administrative error, the
Wall Street Journal reported this observation from Boston
on December 20, 1974:
"Applicants fill out seven-page questionnaires
detailing their income and expenses, and take
pay stubs and receipts to local welfare offices
to substantiate their claims. 11
****
FORD LIBRARY & GERALD
LIBRARY
FORD
&
GERALD
$40,000
Hom
WASHINGTON (UPI)
for the bone
John Jones 32. has a wife,
and hungry.
160 hildren. house,
The "Jones" family is
two and a of $800 a
real -it's a statistical exam
month. He qualities for food
to show how many people y
stamps.
don't regard themselves
with an income of $9,600 a
'welfare cases" may be el
year, "Jones" is well out of the
blc for federal help with &
poverty class. But his fellow
bills.
taxpayers are paying part of his
grocery bill under a rapidly ex-
Real families have be
panding food stamp program
swelling food stamp rolls in
which most Americans once
past year. By February, 1
Adjusted Net Income Ceilings
Set By Agricultural Department
nouse worth withit $40,000. Bill
union dues. All such uman-
the family home is not a
daton deductions," including
WASHINGTON (UPI) Here
Three persons
$106
$122
"resources" for food stamp
state or local income taxes and
are current "adjusted net
Four persons
$513
$154
purposes Neither is the family
even some types of gar-
income" ceilings set by the
Five persons
$606
$182
clothing, furniture, jewelry like
nishments, are ignored. This
Agriculture Department for
Six persons
$700
$210
the $500 diamond ring "Mrs,
brings the net (i) $046.80.
families applying for food
Seven persons
$793
$238
Jones' inherited, the cash
At this point a "work
stamps, monthly allotments,
Eight persons $886 $266
value of 'Jones' insurance,
allowance covers things like
and rush prices.
The price of the stamp
his 1973 car. the family freezer
commuting costs and meals
The income figure represents
alloiments vary with the
and color TV.
away from home during work.
monthly household income after
household's adjusted net month-
Assets that count include $300
It's 10 per cent of gross income
subtracting all tax, medical,
ly income. Examples of prices
in a avings bank, $100 in
with a ceiling of $30 d month.
housing and other deductions.
for a family of four at
savings bonds. " d second car
"Jones" takes off $30, bringing
Monthly allotments are adjust-
various income levels:
whed at $600, which must he
his net to $616.40.
ed in January and July to keep
Income
Cost
Stamp
ted as a "resource"
If medical bills run over $10 a
pice with changes in retail food
Value
it's not used to get to
month, Including health insur-
preces.
Under $30
Charge
The $1.000 total means
ance premiums, there's
Family Size
Income
$100
family Heats the
another destuction. In this case,
$200
essume costs of $10 di month,
persons
4
516
5.00
any
making the net $570 80
persons
$280
$81
$ 100
of
don t
After that, deductions are
allowed for some educational
Alch #1
DEPARTMENT OF AND WELFARE
HEALTH.
THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE
WASHINGTON, D.C. 20201
MAY 1 5 1975
P-
four strump
MEMORANDUM TO HONORABLE JAMES M. CANNON:
1ssue
As a result of the meeting Tuesday with OMB, the Domestic Council, and
the Department of Labor, we have agreed upon the format appropriate for
presenting the Food Stamp issues for the President's decision. This
structure frames the decision in the broad context of whether or not
food stamp reform should proceed now, or be subsumed in a more compre-
hensive welfare replacement effort. The attached Tab A sets forth this
primary decision and the pros and cons of moving now or delaying action.
As you know, I strongly advocate that any initiative in the Food Stamp
Program be taken in conjunction with overall reform of the welfare system,
as embodied in the Income Supplement Program I have submitted to the
President.
Should we decide to proceed with food stamp reform now, one of the prin-
cipal options is the following package: cash out the program (i.e.,
supply the bonus value of food stamps in cash), eliminate all categorical
eligibility for food stamp receipt, and introduce a standard deduction
into the program. This option is briefly described and analyzed at Tab
B. The pros and cons of this approach from our viewpoint are also pre-
sented there. I strongly caution that this approach should not and cannot
be considered without simultaneous consideration of the relationship of
the new cash assistance program (i.e., cashed-out Food Stamps) and the
various other cash assistance programs (such as AFDC) and Senator Long's
new work bonus scheme, enacted as part of the tax cut. While the problem
is discussed in Tab B, I would simply point out here that such a strategy
would result in the coverage of heavily overlapping populations by three
different cash assistance programs.
At Tab C I have attached a restructured format for presenting all of the
various alternatives for immediate food stamp reform -- including the
Tab B option -- in a simplified and manageable framework for Presidential
decision. If pressed to move now on food stamp reform, I would opt for
the cash-out option. Anything else is like entering a jungle thicket in
which one becomes more firmly enmeshed the further one penetrates.
With regard to the specific issues surrounding eligibility of addicts,
alcoholics, strikers, and students, I recommend the following:
dicts and Alcoholics. We concur in the elimination of
the special eligibility of addicts and alcoholics residing
in institutions without cooking facilities.
Page 2 -- Honorable James M. Cannon
Strikers. A recent court decision has forced HEW to
also consider this issue in the context of the AFDC-UF
program. At present our Federal regulations leave
both the definition of strikers and the question of
their inclusion or exclusion to each state that has
an AFDC-UF program. Under the court decision the
Federal government must define the category strikers,
but otherwise we continue to have the present options
of Federally mandating exclusion, Federally mandating
inclusion, or leaving the question to each state.
Since the Food Stamp Program is a fully Federal program
(although state-administered), the option of leaving the
issue to the states does not seem to be a viable alter-
native. If the President decides to exclude strikers
from the Food Stamp Program, the definition of strikers
will have to be consistent across programs. Some may
claim that his decision will have consequences as to
whether to continue to leave the question in the AFDC-UF
program to the states, but I do not believe we need
change our present "leave it to the state's decision"
rule, because AFDC is much more of a state program than
food stamps.
College Students. Full-time students are today exempt
from the food stamp work requirement. We believe a
requirement that college students seek full-time employ-
ment would be inconsistent with student status; however,
a requirement that students seek part-time (20 hours per
week or less) employment would be reasonable.
We also believe that college students should only be
eligible for food stamps if their family is eligible.
Failure to have this rule in effect has justly caused
great criticism of the program.
FORDO & LIBRARY GERALD
Tab A
TAB A
DECISION ON TIMING OF BASIC REFORM
OF FOOD STAMP PROGRAM
FORD
Issue
LIBRARY
Should the basic reform of the Food Stamp Program proceed now,
or should it await comprehensive welfare reform?
Discussion
The Food Stamp Program is a major component of the income-tested
transfer system. Consequently, any changes proposed in that program
should be consistent with (1) policy toward that system and its
ultimate replacement or reform, and (2) the short and long-term
strategy for developing and introducing legislation to effect that
policy.
The basic reforms in the Food Stamp Program -- relating to
cashing-out Food Stamps, eligibility, and structure of deductions --
would each be subsumed by a major restructuring of the welfare system,
such as that proposed in HEW's Income Supplement Program. In addition,
each of the major changes would raise many of the same very difficult
substantive and political issues. Currently, the Domestic Council is
examining various options for domestic policy, particularly as regards
welfare reform and health insurance. At a minimum, your response to
S.R. 58 should not foreclose any welfare reform options that you might
wish to exercise, nor should it take on issues that are better dealt
with in the context of a major reform of the income security system.
2
The principal decision is not whether or not to propose major
alterations in the Food Stamp Program; rather, it is when and through
which vehicle to propose such changes. If you should decide to defer
action on major changes in Food Stamps now, it would be possible to
respond to S.R. 58 with a host of minor administrative changes in
the Food Stamp Program (at Tab _), while acknowledging the need
for the major changes and expressing your interest to achieve them
via major reform of the welfare system, which you will be proposing
later this year.
Pros of Deferring Consideration of Basic
Reform in the Food Stamp Program
Any proposal for major changes in the Food Stamp Program
is likely to embroil the Administration in a lengthy
debate with the Congress. This could prejudice later
attempts to enact a comprehensive welfare reform
proposal that in effect includes the Food Stamps changes.
Changes in Food Stamps should be carefully integrated
with other means-tested transfer programs, particularly
AFDC and SSI.
Cons of Deferring Consideration of Basic
Reform in the Food Stamp Program
The Congress may be dissatisfied with a response that
does not include major reform.
Comprehensive reform of the welfare system would take at
least three years to enact and implement, while certain of
the major changes in the Food Stamp Program could be imple-
mented much sooner if enacted quickly.
3
Decision
I wish to consider basic reforms in the
Food Stamp Program only as part of a
comprehensive welfare reform plan to be
submitted to the Congress next year.
I wish to proceed at this time with basic
reforms in the Food Stamp Program.
Tab T a b B
BERALA
LIGHARY
TAB B
CASH OUT OF FOOD STAMP BONUS VALUES
An alternative for reforming the Food Stamp program is to convert
the benefits from vouchers to cash. In accordance with the recent
trends in making welfare programs more efficient, a cashed-out Food
Stamp program would also be streamlined in other ways. The current
itemized deductions would be replaced with a standard deduction
of $100 per month; the current benefit schedule would be replaced
by a flat 30 percent benefit reduction rate for income' above the
standard deduction; and categorical eligibility of AFDC and SSI
recipients would be eliminated. Thus, the cash-out alternative for
Food Stamp reform would essentially replace the current Food Stamp
program with a relatively straightforward, low-benefit/low-benefit
reduction rate means tested cash assistance program. This cashed-out
Food Stamp program would increase estimated FY 76 expenditures
of $5.5 billion by about $2 billion.
The cash-out alternative, as presented above, does not
address some important interrelationships between the existing
cash assistance programs and the potential cash-out of the
Food Stamp program. Although no administering agency has been
mentioned, there does not appear to be any reason for HEW to
run cash assistance programs for the AFDC and SSI populations
while USDA runs a separate cash assistance program that covers
the same populations. With some slight alterations, the same
results could be obtained more efficiently. The cashed-out
2
Food Stamp bonus could be added to the existing cash assistance
programs, fully financed by the Federal government and administered
through the existing structures. (This solution presumes a set
of accommodating changes in the AFDC law and program which have
not been fully examined. However, those changes could be quite
complex and controversial.) The remainder of the cashed-out
Food Stamp program would be administered separately by USDA
or HEW. Thus, there would be three categorical cash assistance
programs: AFDC for single-parent families and SSI for the
aged, blind and disabled - both with higher benefits to replace
the Food Stamp bonus - and a new cash assistance program that
would replace the Food Stamp bonus for the rest of the low-
income population.
Since it would be administratively inefficient to provide cash
assistance to an identical population through two separate programs,
and since in any case there is no rationale for USDA to administer
an unconstrained cash assistance program, the following discussion
of the pros and cons of the cash-out alternative is based on the
assumption that the three categorical cash assistance programs would
be integrated in an administratively efficient manner.
Pros
O Cash assistance is preferrable to vouchers for several
reasons. Cash requires less administrative expense:
there is no need to print, issue, collect and destroy
coupons. Moreover, cash allows the recipient the
freedom, and the responsibility, to determine the
best use of available resources.
3
Cash-out of the Food Stamp program would move toward
the basic goal of providing cash assistance to
the entire low-income population.
Many households that are eligible to participate in the
Food Stamp program but do not, would participate in a
cash assistance program. These households would clearly
be better off under the cash-out scheme. In addition,
many current participants will receive higher benefits
by using the standard deduction.
Although the cash-out alternative is more expensive now,
it would lower the net cost of a comprehensive
cash assistance program later.
Cons
The cash-out alternative does move in the direction of
welfare reform; however, it is not an adequate sub-
stitute for a comprehensive cash assistance program.
Even if well-integrated with existing cash assistance
programs, the cash-out alternative would still leave
three separate, categorical cash assistance programs.
The system would still provide widely different benefits
to similar families in different residences or with
different family structures. The welfare system
would still be out of phase with the tax system.
Nevertheless, the cash-out alternative to Food Stamp
reform could become de facto welfare reform without
addressing many of the major problems with the
current system.
Politically, it would be very difficult to persuade
the Congress to pass cash-out legislation. It may
be that Congress would be more willing to accept a
comprehensive welfare reform that subsumes the
Food Stamp program (as well as the other big
welfare programs) with a single cash assistance
program than to accept a radical change in the
Food Stamp program alone.
While many eligible non-participants and many current :
participants would be better off under the cash-out
alternative, many other current participants would
be worse off. Congress is notably reluctant to
change a program in a way that makes any participants
worse off.
4
Since many eligible non-participants would accept
cash benefits, the budget of the cashed-out Food
Stamp program would be significantly higher. A
preliminary estimate suggests the costs would be
some $2-$3 billion, or 40 percent, higher than
the current $5 billion budget.
Tab C
TAB C
OPTIONS FOR MAJOR REFORM OF THE FOOD STAMP PROGRAM
In this section several modifications in the Food Stamp program are
discussed. One change, the elimination of categorical eligibility,
is recommended; other possible modifications are provided as options
for your decision. All modifications discussed, except the cash-out
option in Tab B, can be implemented within the current structure of
the Food Stamp program.
Background
The Senate has requested that the administration submit
recommendations for improvements in the Food Stamp program. The
changes discussed are designed to improve the distributional equity
of the benefits and to simplify the administrative structure of
the program. Two major issues are addressed: categorical
eligibility for benefits and allowable deductions from income.
Issue: Categorical eligibility of certain public assistance
recipients.
Current Situation: Categorical eligibility is extended to some
public assistance households in which all members are receiving
public assistance. Included in categorical eligibility are:
AFDC recipients in all states, SSI recipients in 46 states*,
*In the four remaining states, SSI recipients are categorically
ineligible due to the cash-out of Food Stamps in the SSI state
supplemental payment.
2
and general assistance recipients in over 20 states. These
households are not required to meet the additional income and
resource standards of the Food Stamp program.
Problems: Categorical eligibility has been criticized for allowing
some families to receive Food Stamp benefits even though their
income or resources are above the standards required for non-
public assistance recipients.
Possible Change: Elimination of categorical eligibility.
Pros
Would require all households to meet a common
set of eligibility rules (an income standard, a
resource standard, and a work test).
Would eliminate some high income households from
eligibility.
Would simplify the structure of the program by
requiring one set of rules for all participants.
Would improve equity among Food Stamp participants.
Cons
Some households would be made worse off and pressure
might develop to grandfather these households into
the program.
Recommendation: Eliminate categorical eligibility for public
assistance households.
Approve
Disapprove
3
Issue: Itemized deductions.
Current Situation: Seven deductions from gross income are currently
permitted before eligibility and benefit determinations are made
in the Food Stamp program. The deductions include:
Medical Expenses - Medical payments made by members
of the household in excess of $10 per month.
Mandatory Deduction - Mandatory deductions from
earned income such as Federal income and Social
Security taxes.
Work Allowance - Ten percent of earned income up to $30
per month.
Child Care - Payments for the care of a child when
LIBRARY
necessary to accept or continue employment.
Tuition and Mandatory Education Fees - Tuition and
mandatory fees assessed by an educational institution.
Unusual Expenses - Disaster or casualty losses which
could not be reasonably anticipated by the household.
Shelter Deduction - Shelter costs including utilities
and mortgage payments in excess of 30 percent of
income after all other allowable deductions.
Problems: The itemized deductions allow households with gross incomes
considerably above the normal income standards of the program
to qualify for benefits. Further, the deductions are difficult
to administer and, according to quality control studies,
contribute to relatively high error rates.
4
Four options are presented for your decision. Program costs
would remain approximately at the current level under the first
three options; the fourth, the cash-out option presented in Tab B,
would be more expensive. The four options are summarized in the
attached chart.
Option 1
Maintain a set of itemized deductions but modify the existing
structure in the following way.
Medical Expenses - No change
Mandatory Deductions - No change
Work Allowance - Eliminate
Child Care - Child care payments up to a maximum of 50%
of gross income or [$60_7 per week. [ USDA analysts
use $60/week, this seems excessive to HEW staff. I
Tuition and Mandatory Education Fees - eliminate.
Unusual Expenses - No change
Shelter Deduction - Housing expenditures (up to the
BLS Low Budget allowance for housing) in excess of
30% of income may be deducted.
These changes will tend to reduce program transfers and make
some households worse off. Total transfers would be held approximately
constant by reducing the benefit reduction rate to 25% and this is
recommended as part of this option.
5
Pros
Would eliminate some high income families from the
program.
Would reduce the number of students receiving benefits.
Should be well received by Congress. Senator McGovern
has proposed moving to a 25 percent benefit reduction
rate.
Cons
would involve only minor simplification of administration.
Some recipients would be made worse off.
Option 2
Modify the current set of deductions by replacing all deductions,
except the mandatory deductions from earned income, with a standard
deduction of $125.
Benefit reduction rate would be changed to a flat 30%.
Pros
Would simplify program administration and should reduce
error rates and administrative costs.
Would treat similar households more equally.
Would target benefits to households with the
lowest incomes.
Would make a substantial number of current recipients
better off.
Cons
Would make a substantial number of current recipients
worse off, especially small recipient households
with aged members. This will create pressure to
grandfather current recipients.
6
Congress might accept Senator McGovern's proposal
to make the standard deduction optional, increasing
program costs without simplifying administration.
Option 3
Modify the current set of deductions in the same way as Option 2
(by replacing all deductions, except the mandatory deductions from
earned income, with a $125 standard deduction); however, the standard
deduction for a household that contained an aged member would be
raised to $150.
Benefit reduction rate would be at 30%.
Pros
Same as for Option 2.
In comparison to Option 2, would make fewer households
with aged members worse off.
Cons
Same as for Option 2.
The special standard deduction for aged households
cannot be defended on equity grounds.
Option 4
Cash-out option as presented in Tab B.
OPTIONS
Current Program
Option 1
Option 2
Option 3
Option 4
Deductions:
1. All mandatory
1. All manda-
1. All manda-
1. All manda-
CASH OUT
payroll with-
tory payroll
tory payroll
tory payroll
FOOD STAMP
holding
withholding
withholding
withholding
BONUS VALUE
2. Work expenses
2. Medical over
2. Standard
2. Standard
1. Standard
($30 maximum)
$10/month
deduction
deduction of
deduction
of $125/
$125/month,
of $100/
month
$150/month
month
if aged member
3. Medical over
3. Child care
$10/month
up to 50%
of gross
income or
$60/week
4. Child care
4. Disaster
losses
5. Education fees
5. Shelter ex-
ceeding 30%
of gross
income, (BLS
shelter maximum)
6. Disaster losses
7. Shelter exceeding
30% of income net
of 1 - - 6.
Benefit
Reduction
Rate:
30%
25%
25%
25%
30%
Impact
Number of house-
holds with:
USDA
USDA
2.9
USDA
higher benefits
---
USDA
USDA
1.2
USDA
same benefits
--
lower benefits
---
USDA
USDA
1.9
USDA
(millions)
Budget Costs (FY 77)
100% partici-
USDA
USDA
6.6
9.4
pation
$6.9
expected parti-
5.4
USDA
USDA
4.8
7-8
cipation
(Billions)
USDA - To be developed by the Department of Agriculture