UNITED STATES DEPARTMENT OF AGRICULTURE
Food and Nutrition Service

March 20, 2002

Thank you, Mr. Chairman, and members of the Subcommittee for allowing me this opportunity to present our budget request for fiscal year 2003. As this is my first appearance before the Committee, I would like to introduce myself briefly.

I was confirmed as Under Secretary for Food, Nutrition, and Consumer Services (FNCS) in June 2001. Prior to that time, I served for almost four years as Commissioner of the Texas Department of Human Services, one of the Nation’s largest human services agencies, under then-Governor George W. Bush. As Commissioner, I was responsible for administering State and Federal programs that served more than 2 million needy, aged or disabled Texans each month. I took that position after more than twenty years of experience managing human services agencies across the country including Arizona, Pennsylvania, Florida, North Carolina and the District of Columbia.

With your permission I would also like to introduce three new members of the FNCS team. Suzanne Biermann, the Deputy Under Secretary for Food, Nutrition, and Consumer Services, Dr. Peter Murano, the Deputy Administrator for Special Nutrition Programs at the Food and Nutrition Service, and Steven Christensen, the Acting Deputy Director of the Center for Nutrition Policy and Promotion.

When President Bush and Secretary Veneman asked me to join the team at the Department of Agriculture, I was extremely pleased to have the opportunity to put my experience to work to effectively manage and improve the Federal nutrition assistance programs – programs that use the abundance of American agriculture to promote the nutrition and health of our Nation. I feel especially fortunate to have the opportunity to personally participate in the reauthorization of the Food Stamp and Child Nutrition Programs. All of us at FNCS look forward to working with you and committee staff to do the best job possible managing the nutrition assistance programs. Everyone here knows how important these programs are, but I would like to cite just a few facts that underscore their importance:

• We know that a poor diet is a significant factor in 4 of the 10 leading causes of death in the United States -- coronary heart disease, cancer, hypertension and stroke, and diabetes;

• We know that poor nutrition and lack of physical activity account for 300,000 deaths per year;

• We know that the economic cost of poor nutrition accounts for at least $200 billion per year in medical costs and lost productivity; and

• We know that participation in the school feeding programs leads to improved education outcomes.

Federal nutrition assistance programs have a critical role to play in promoting health and preventing diet-related health problems by ensuring access to nutritious food to those who need it, and by promoting better diets and physical activity through nutrition education and promotion to program participants. The need to improve diets to fight overweight and obesity extends to the general public. Our request also supports USDA’s Center for Nutrition Policy and Promotion, which works with the Department of Health and Human Services and other agencies to promote good nutrition to all Americans.

I view the focus of my responsibility as Under Secretary in terms of two broad objectives: first, to ensure that all those eligible to participate in Federal nutrition assistance programs have the opportunity to do so, if they wish; second, and equally important to ensure the integrity of the programs through solid public stewardship. The President’s Budget requests a total of $41.9 billion in budget authority for Food, Nutrition, and Consumer Services for fiscal year 2003. This supports the operation of Federal nutrition assistance programs, as well as a number of important initiatives that should advance our program access and integrity. In the remainder of my remarks, I would like to highlight a few key components of our request.

Highest-Ever Funding for WIC

The President’s budget includes $4.8 billion for the Special Supplemental Nutrition Program for Women, Infants and Children, the WIC program. The requested level, an increase of $364 million over fiscal year 2002, would allow local communities to provide food, nutrition education, and a link to health care to a monthly average of 7.8 million needy women, infants and children during fiscal year 2003. The request includes a $150 million contingency fund, which can be used as needed if food costs or participation exceed current estimates.

This request reflects the growing demand for WIC during fiscal year 2001 and continuing into this fiscal year; participation reached 7.53 million in October 2001, a record high. It also reflects a firm commitment by this Administration to ensure that resources are directed carefully to programs that make a real difference in people’s lives. WIC is just such a program, with an impressive body of research showing that it is a sound investment of the taxpayer’s dollar. As the President said in his January radio address that highlighted his budget, we must set priorities for the government to meet the most important needs for the Nation. Our request for WIC does just that.

Farmer’s Market Nutrition Program

At the same time that we are focusing resources on the most important priorities, we must also be willing to make the tough choices not to fund programs that, however worthy, do not most effectively support those priorities. This, too, is reflected in our request.

The President’s budget does not provide funding for the Farmer’s Market Nutrition Program in fiscal year 2003. While all can agree that supporting America’s farmers and providing low-income families access to fresh fruits and vegetables is a laudable goal, the FMNP is a small program that does not operate in all States, is not operated State-wide by any participating State, and provides limited benefits to only some WIC participants. While the FMNP is a worthy program, the Administration is making the difficult choice of discontinuing the funding in an effort to focus on broad-based, more universally established programs. This kind of hard choice is central to the Administration’s responsibilities and we accept the need and responsibility for making tough choices.

Maintaining the Food Stamp Program Benefit Reserve

Our fiscal year 2003 request also sustains the full $2 billion Food Stamp benefit reserve Congress appropriated in fiscal year 2002. As you know, one of the greatest strengths of the Federal nutrition safety net is its ability to respond to economic change. The current economic difficulties are no exception. In December 2001, the Food Stamp Program served 18.7 million people, 1.6 million more than a year ago. Nearly all States are serving more people than they did a year ago, and participation has increased in 15 of the 17 months between July 2000 and December 2001. We expect to use most of the $2 billion reserve this year, but we do not believe we will need a supplemental appropriation. For the coming fiscal year, we recommend continuation of the benefit reserve at the $2 billion level.

Program Integrity Initiatives

As I mentioned before, I view effective stewardship of Federal funds as a central responsibility for our mission area, and for me personally. I’m pleased to report on some successes in this area, but also to note substantial continued challenges. Our request includes funding to support increased program integrity activity to address a number of critically important issues:

Food Stamp Payment Accuracy

The Food Stamp Program is the cornerstone of our Nation’s defense against hunger and a powerful tool to improve nutrition among low-income families and individuals. But for the program to be effective in serving this neediest population, it must accurately target benefits. Those who are eligible for program benefits should have easy access to them and the amount they receive should be the amount allowed under law – no more, no less.

As you may know, the accuracy of food stamp payments is at its highest level ever. In fiscal year 2000, 91.1% of all food stamp benefits were issued correctly. Unfortunately, this still means that States overissued about 6.5% more in benefits than they should have and underissued about 2.4% (people that should have received more benefit actually received less). The result of which is that $1.33 billion in erroneous payments were made -- $970 million in overpayments and $360 million in underpayments. This occurred under the existing Quality Control system, which we propose to refine and improve via proposals I helped craft in the President’s budget.

On a personal note, I have a good sense of how QC works at the State level, and, I am proud to point out, that as Commissioner in the State of Texas I was able to substantially improve the payment accuracy in our Food Stamp Program and for three years in a row achieved enhanced funding for maintaining an error rate well below that of the national average. However, despite Texas’ achievement, and the recent progress nationally on error rates, the costs of errors are still too high Every percentage point increase in the error rate represents about $200 million in improper payments.

Rising overpayments, which go to a fraction of the caseload, reflect a real loss to American taxpayers and could erode support for the program and its participants. Equally important, rising underpayments reflect a real loss to low-income families and individuals who need assistance.

The President’s budget proposes a comprehensive and balanced approach to reforming the current QC system that not only ensures a high degree of program integrity but also simplifies the program for States who administer the program and makes it easier for citizens to understand and comply with program requirements. The Administration’s proposal would focus sanctions on States with the most serious and consistently high error rates, and replace current enhanced funding with $70 million in annual performance bonuses that would balance payment accuracy with customer service and other measures of program outcomes.

I seek your support in reforming the QC system in a way that provides some relief to States while balancing the need to maintain and improve integrity in our program.

Food stamp caseloads are rising in response to the current recession, State administrative resources are stretched then, and with growing pressures to eliminate State budget deficits, attention to program management and payment accuracy may suffer if there is not a QC system that holds States accountable.

Food Stamp Trafficking

Trafficking of food stamp benefits for cash by authorized retailers remains a serious concern. While the most recent data, for 1996 through 1998, showed a substantial decrease in trafficking from previous estimates, the volume of misused benefits – estimated at $660 million annually – is still far too high. Our request supports additional efforts to identify and take action against traffickers through the analysis of electronic benefit transfer data, and through increases in FNS retailer compliance staff.

School Meals Certification Accuracy

The evidence is strong that more students are certified for free or reduced-price school meals than appear to be eligible. The trend has worsened significantly in recent years. The most recent data shows that, in 1999, significantly more children were certified for free meals than survey data showed to be eligible. Although we are not certain of the exact scope of the problem including those who are eligible but not served, we are seeking a solution to address it.

While the cost of such errors is unclear, FNS is strongly committed to improving program integrity without overburdening schools or compromising access to the programs for eligible children. We are pilot-testing potential policy changes to improve the certification process. This issue is complicated because certification data is used to distribute billions of dollars in education aid, telecommunications funds and other funding. We must work with the education and other affected communities in developing a solution. Our request supports these efforts, as well as additional oversight of State and local program operations in this area.

Child Care Integrity

The integrity of the Child Care and Adult Care Food Program has been a focus of concern and action for a number of years. FNS has intensified management evaluations at the State and local levels, developed and trained program staff on improved management procedures, and developed legislative proposals to strengthen program management. Despite these efforts, additional resources are needed to effect lasting improvements in child care integrity, and our request supports modest increases in this area.

Program integrity is fundamental to the Department’s stewardship responsibilities; just as importantly, it is fundamental to the success of the programs themselves, for funds lost or misused due to poor integrity represent a lost opportunity for the program to better serve those truly in need. I know you share my commitment to program integrity, and I look forward to working with you in this important area.

I will now touch briefly on the more general programmatic components of our request:

Food Stamp Program

The President’s budget requests $26.2 billion for the Food Stamp Program, enough to serve an average of 20.6 million people each month. As noted before, we have proposed to maintain the $2 billion benefit reserve appropriated last year. Our request also reflects a number of proposals for legislative changes, designed to further the goals of the program by simplifying rules, better supporting work, strengthening the nutrition safety net, and improving accountability. These proposals have a net cost of $29 million in fiscal year 2003 and $4.2 billion over ten years.

Special Supplemental Nutrition Program for Women, Infants and Children (WIC)

As I noted previously, the President’s budget includes $4.8 billion for WIC in fiscal year 2003, including a $150 million contingency fund. It does not include funding for the WIC Farmer’s Market Nutrition Program.

Child Nutrition Programs

The budget requests $10.6 billion for the Child Nutrition Programs, which continue to provide millions of nutritious meals to all children in schools and in child care settings every day. The budgeted increases in these programs are due to economic conditions that increase the need for assistance, rising school enrollment, and increases in payment rates to cover inflation.

The Emergency Food Assistance Program (TEFAP)

The budget requests $50 million for States’ storage and distribution costs and $100 million for food purchases for this important program. We project that the current high volume of surplus commodities will continue to be available to TEFAP in fiscal year 2003. Such donations triple the amount of commodities that we purchase with appropriated funds. In addition to the $100 million available under the food stamp account, we are requesting funds for $50 million for States’ storage and distribution costs in fiscal year 2003, the maximum amount authorized.

Commodity Supplemental Food Program (CSFP)

The budget requests $95.0 million for CSFP, which also benefits from surplus donations to serve elderly people and women with infants and young children. The funds requested plus surplus donations and commodities currently in inventory will be sufficient to continue expansion in States that joined the program prior to this year. It will also allow the six States that recently initiated programs to expand their participation up to their assigned caseload, including North and South Dakota, Wisconsin, Pennsylvania, Missouri and Washington.

Food Program Administration (FPA)

We are requesting $155.9 million in this account, this includes an increase of $7 million and 58 staff years in our administrative budget, which supports the program integrity initiatives I have described, as well as pay cost adjustments. We are also requesting that $19 million previously appropriated to other accounts be appropriated in the FPA account. This repositioning request reflects the President’s initiative to show the full cost of support services, retirement and other non-direct costs with the program activities these costs support.

In sum, our request sets the right priorities to ensure access to the Federal nutrition assistance programs for the children and low-income people who need them, while maintaining and improving their integrity. Thank you for your attention; I would be happy to answer any questions you may have.

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