Testimony of Eric M. Bost
Under Secretary, Food, Nutrition and Consumer Services
Before the House Committee on Agriculture
Subcommittee on Department Operations, Oversight, Nutrition and Forestry

July 24, 2003

Good afternoon, Mr. Chairman and Members of the Committee. I am Eric Bost, Under Secretary for Food, Nutrition and Consumer Services (FNCS) at the U.S. Department of Agriculture (USDA). I appreciate the opportunity to join you today to discuss our progress implementing the food stamp provisions of the Farm Security and Rural Investment Act of 2002 (P.L. 107-171), commonly referred to as the Farm Bill.

Enacted in May of last year, the Farm Bill continues this nation’s commitment to a national nutrition safety net. The Food Stamp Program stands as a testament to our country’s compassion. For over thirty years, it has served as the first line of the nation’s defense against hunger; a powerful tool to improve nutrition and health among low-income people. It touches the lives of millions of people who need a helping hand to put food on the table. Unlike most other assistance programs, the Food Stamp Program is available to nearly anyone with little income and few resources, serving low-income families and individuals wherever they live with benefits that increase a household’s food expenditures, and its access to nutritious food.

Over the years, the Food Stamp Program has demonstrated its responsiveness to economic changes, expanding to meet increased need when the economy is in a slowdown and contracting when the economy is growing, making sure that food gets to people who need it. Because benefits automatically flow into communities, States or regions of the country that face rising unemployment or poverty, the program tends to soften some of the harsher effects of an economic downturn. Every $5 in Federal food stamps issued generates $9.20 in local and State economic activity.

With a commitment to sustaining and improving this critical program, the Administration worked hard with the Committee and the Congress to craft Farm Bill provisions that would enhance access, simplification and integrity in the Food Stamp Program. When President Bush signed the bill into law last May, the Department was ready to spring into action.


Smooth Transition

Keenly aware of the importance of the provisions of the Farm Bill to so many of our citizens, the Department moved quickly to ensure a smooth transition. As soon as President Bush signed the new law, USDA Secretary Veneman formed a special Farm Bill Task Force within USDA to oversee and expedite its implementation. 

One day after the bill’s signing, the Food and Nutrition Service (FNS) posted a summary of food stamp provisions on our Web site. Within a month of the bill’s enactment, we had trained 160 State staff from 52 State agencies, issued general implementing guidance, and sent letters to all State welfare commissioners notifying them of the changes and urging them to take advantage of the Farm Bill’s flexibility.

At the Secretary’s direction, FNS moved quickly to reach out to our partners and solicit their input on implementing its provisions. Because it is so important to be inclusive, we met last summer with State agencies as well as advocacy groups and State organizations such as the Food Research and Action Center, American Public Human Services Association, National Governors Association, the Center on Budget and Policy Priorities, Catholic Charities, the National Immigration Law Center, National Council of La Raza, National Law Center on Homelessness and Poverty, National Coalition Against Domestic Violence, and the National Network to End Domestic Violence.

As a result, we were able to develop guidance very promptly so that many of the new Farm Bill provisions could be implemented by October 1, 2002. I am pleased to report to you this morning that all the mandatory provisions have been implemented, save the provision affecting immigrant children that, by law, becomes effective October 1, 2003.


Simplifying Administration and Improving Program Access

The Farm Bill’s primary focus is on providing States with increased flexibility—rather than new requirements—to make administering the Food Stamp Program easier. Provisions also reflected the Congress’ and the Administration’s commitment of making it easier for low-income Americans to apply for and receive the benefits to which they are entitled with less “red tape.”

Since the Farm Bill was enacted fourteen months ago, the Department has worked closely with States to encourage their consideration of the many new policy options now available to them. The new simplification and administrative reforms offer a wide array of policy options, and provide each State with greater flexibility to customize Food Stamp Program operations and facilitate access to benefits. 

The expanded options provided under the Farm Bill make it easier for States to administer the Food Stamp Program and, just as importantly, make it easier for low-income households to participate by reducing the red tape – especially for working households. Within the first month of the Farm Bill’s enactment, I sent two letters to all State Commissioners informing them about our implementation plans and encouraging them to take full advantage of the flexibility provided with the various options which both improve administration and client access for the program. The Food and Nutrition Service (FNS) also provided technical assistance in the form of guidance and training sessions for all States on the major provisions. 

Our most recent report indicates that 48 States have implemented one or more of the 
eight program simplification options available in the Farm Bill. One State, New York, has implemented all eight. Arizona has taken advantage of seven. New Hampshire has adopted five. Georgia, South Carolina, Colorado, and Maine have each elected to take four of the options. 

The nationwide average of options adopted was 1.8 per State.

One of the most popular options so far has been the expansion of reduced reporting requirements to more types of households than previously allowed. Of the 25 States that had previously implemented simplified reporting for earned income households through the waiver process, 13 have taken the opportunity afforded in the new legislation to include additional households in such a system. These thirteen include four of the ten largest States in terms of 
food stamp program participation: Texas, New York, Tennessee, and Georgia. Almost a third (32.75 percent) of the approximately 20.7 million people receiving food stamps as of February 2003 lived in States that afford households the advantage of having reduced reporting requirements while receiving benefits and the convenience of having to make fewer trips to the certification office with less paperwork involved in order to reapply. We are aware that other States intend to implement this option, and we expect to be able to report more extensive use of this provision in the future. 

The next most popular program simplification option implemented has been aligning food stamp policy on income with policy in State TANF and/or Medicaid programs. Eleven States had completed such alignments as of February 2003. Nine States had done the same with their policy on resources. 

One important option for better serving low-income working households, the Transitional Benefits Alternative, is a refinement of an option in existence prior to the Farm Bill that provides an uninterrupted stable food stamp benefit amount to families leaving TANF for up to five months after their time on public assistance ends. While before the only State to have adopted this option was New York, a total of six States have elected to provide this type of benefit as structured in the newest legislation.

FNS continues to promote these simplifications. In February, we published a “State Option Report” for States’ use in understanding what options all the States have implemented. This past spring, FNS hosted two bi-regional conferences and we hosted a tri-regional gathering of States officials in June. The simplification options of the Farm Bill are a central topic in these sessions. FNS policy officials and staff routinely promote the Farm Bill options in meetings and conferences.

The Farm Bill’s nutrition title mandated three new “access” related food stamp provisions for all States: a partial restoration of eligibility to legal immigrants—one of the priorities of the Bush Administration; a higher standard deduction for larger households; and an increase in the asset limit for households with a disabled member. 

In June 2002, we moved quickly to issue guidance to States to help them prepare to implement the immigrant provisions enacted in the Farm Bill. Then, in October, we issued supplementary implementation guidance relating specifically to the April 2003 and October 2003 restoration provisions. Finally, in January 2003, we issued a compilation of all non-citizen eligibility policies to illustrate the interaction of existing policies with the Farm Bill changes. 

As of April 1, 2003, immigrants who have lived in the U.S. for five years as qualified aliens and who are otherwise eligible may apply for and receive food stamp benefits. States have implemented the changes in a timely manner and without incident and continue to work with local advocates to reach out to their immigrant communities to spread the word about the new changes. We are on schedule to implement the October 1, 2003, provisions that will restore eligibility to approximately 60,000 children.

We expect immigrant eligibility restorations will be fully realized by Fiscal Year (FY) 2006, with over 400,000 legal immigrants receiving benefits, including immigrants from working-poor families, the elderly and disabled, and children. 

We have just released the results from our annual monitoring of participation among people eligible for food stamps. I am pleased to report that it shows that the participation rate for eligible individuals rose three percentage points between September 1999 and September 2001, from 59 percent to 62 percent, after falling for five consecutive years.

Still, we are aware that not everyone eligible for food stamp benefits is taking part in the program, and we have many initiatives underway to publicize the availability of the Food Stamp Program and make it easier for low-income and working families to access the benefits to which they are entitled. Here are some of our recent activities:

On June 5, Secretary Veneman unveiled Mrs. Bush’s National Hunger Awareness Day public service announcement (PSA) that encourages Americans to volunteer in the fight against hunger. The PSA is being broadcast nationwide on television. 

The Secretary also announced the availability of new tools designed to increase access to the Food Stamp Program to help raise awareness of the resources available to those in need. “Step1” is a new pre-screening tool available via the Internet to help partner organizations help their clients determine their eligibility for Food Stamps and get an estimate of monthly benefits in as little as 15 minutes. Step 1 is an example of another Presidential initiative—the e government initiative—to use technology more effectively to deliver programs to the public. The tool can be accessed as www.FoodStamps-Step1.usda.gov  or at www.govbenefits.gov .

Providing bilingual services is a longstanding program requirement and essential to ensuring that nutritional benefits are accessible to all eligible households. To meet this need, FNS is working with contractors to translate general program materials into 34 languages. Information in 20 languages is already available on our website with the other 14 expected by the end of the month. The material explains general eligibility requirements as well as specific requirements for immigrants and how to apply for food stamps. 

One of the complaints we heard over and over again when we were consulting with our stakeholders during reauthorization is that the length and complexity of State application forms create a barrier to participation. In response, FNS contracted with a firm specializing in document design (Kleimann Communication Group) to provide free technical assistance to States to make their forms more user-friendly. During the four-year contract, the firm will work with 6 to 8 States each year. Currently the contractor is working with California, Rhode Island, West Virginia, Nebraska, Wisconsin and Arizona.

To ensure States’ compliance with national standards, minimize barriers to applicants, and provide technical assistance, FNS regional offices began conducting program access reviews of selected certification offices in all States in FY 1999. Review results have led to corrective action in some local offices to remove barriers or potential barriers to participation. FNS continues to work with States that are not in compliance with Federal standards and monitors States’ implementation of corrective action.

Integrity

A crucial part of the President’s and Secretary Veneman’s commitment to delivering nutrition assistance to needy Americans is ensuring the integrity of the Food Stamp Program by protecting it from those who would misuse or abuse it. The Food Stamp Program is our nation’s most important nutrition program, and protecting its integrity is one of our highest priorities. We work tirelessly to identify ways to strengthen program management and keep public confidence high in this vital program. 

The Food Stamp Program delivers billions of dollars in benefits with a high degree of accuracy and accountability. The vast majority of program benefits go only to households that need them. Almost all households getting food stamps are eligible for some benefit, only 2 percent are ineligible.

On June 27, USDA announced States’ FY 2002 food stamp Quality Control (QC) payment error rates and I am proud to report that the error rate is now the lowest in the program’s history at 8.26 percent, down from 8.66 percent in FY 2001. We have now seen five years of sustained improvement. This is great news. About 6 percent of the error rate represents over-payments in which households received too many benefits and about 2 percent were under-payments in which households should have received more benefits. For their achievements in payment accuracy, 13 States are receiving approximately $77 million in enhanced funding. I am gratified that so many States are being justifiably recognized for management improvements and excellent stewardship of Federal funds.

The Farm Bill made a number of changes to our approach to holding States accountable for accurately issuing benefits, revising the way sanctions and incentives are calculated for States’ performance. In September, the Department issued guidance on the Farm Bill provisions governing high performance bonus criteria and these criteria are in place and ready to serve as the basis of next year’s awards for FY 2003.

Next year, under this guidance, USDA will be awarding $48 million in performance bonuses, recognizing and rewarding States that have done the best job in: issuing benefits accurately; achieving the most improved combined payment error rate; achieving the lowest negative error rates (or making the most progress in reducing these errors); reaching more eligible households (increasing participation rates); and processing applications timely. We will be issuing new guidance for FY 2004, as well as publishing rulemaking for 2005.

In spite of States’ overall success in making payment accuracy a priority, this Administration remains concerned over the failure of a few States to bring payment errors under control, and the millions of Federal dollars that are being wasted. For example, in eight out of the last ten years, California’s error rate has exceeded the national average. And for the last two years, California’s error rate has been the highest in the nation. While California did reduce its error rate from 17.37 percent last year (for FY 2001) to 14.84 percent this year (for FY 2002), California’s error rate remains unacceptably high. Let me break this down – 10.15 percent of the error rate is attributed to overpayments representing a loss to the Federal government of $172 million. At the same time, recipients did not receive almost $80 million in benefits to which they were entitled. Nationwide, California is responsible for 15 percent of the total dollars over-issued.

Sanctions will be imposed and resolved through a process that includes both repayment of funds to the Federal government and investment of State funds to improve the administration of the program. But let me be clear—under no circumstances will the loss to taxpayers and people in need go unaddressed by this Administration. Over the last several years, the Department has intensified its efforts with the State and individual counties to focus on the causes for these errors and to develop corrective measures. I personally have had numerous meetings with State officials and local administrators to emphasize our concern. Our Western regional office will redirect its ongoing work with the State to identify measures aimed at rapid improvement.

While we are very pleased with the continuing progress that States have made to reduce the national error rate, we are concerned that the Farm Bill’s provisions governing sanctions and rewards diminished State incentives to maintain this progress. We at FNS are determined to do whatever it takes to assist troubled States focus their resources on payment accuracy and we are using every measure within our power to help them succeed.

We need to be vigilant in pressing States for continued improvement in eligibility and benefit calculations. This Administration is committed to working with States to achieve continued improvement in payment accuracy and finding effective ways to ensure that Americans in every State get the food stamp benefits to which they are entitled.

Electronic Benefit Transfer

Over 92 percent of all households now receive their benefits electronically. Fifty-two State agencies, including the District of Columbia, and the Virgin Islands have operating Electronic Benefit Transfere (EBT) systems, 49 of which are Statewide. Puerto Rico also has an island-wide operational EBT issuance system to distribute their Food Stamp Program Block Grant. We continue to make good progress in achieving EBT implementation nationwide. 

And so, FNS has begun to phase out the use of paper food coupons. Last August, FNS placed the last order for food coupons. Until EBT is implemented nationwide, FNS will rely on coupons currently in inventory to issue to food stamp recipients in States that do not have an EBT system in place and to recipients that move to a non-EBT State.

FNS recently signed off on the EBT Inter-operability Final Rule. This rule lays out the technical requirements for food stamp interoperability and allows States to claim 100% reimbursement for the cost of switching and settling EBT transactions. The final rule also makes it optional for States to convert electronic benefits to coupons when a client moves to another State. States agencies, however, must continue to ensure that clients are able to use their electronic benefits upon relocation. All States, with the exception of Illinois, Wyoming and Ohio are interoperable. The Illinois system will be interoperable in September 2003, upon conversion to their new EBT system. Wyoming and Ohio were given an exemption to interoperability in the law because they have Smart Card Systems. 

Trafficking

Food stamps are intended for food. When individuals sell their benefits for cash it violates the spirit and intent of the Food Stamp Program as well as the law. This practice, known as trafficking, diverts food stamp benefits away from nutritional assistance and undermines public perceptions of the integrity and utility of the program. 

I am glad to report that program integrity in this area has improved substantially. To control trafficking, FNS conducts undercover investigations of authorized food stores. In addition, over the last few years we have developed powerful new EBT-based tools to identify and sanction traffickers.

Ten years ago, USDA developed a method to estimate the extent of food stamp trafficking. Earlier this month, we released the latest prevalence estimate. We have improved the estimate to take advantage of the new EBT-based results. It is based on 14,642 undercover investigations of trafficking and 1,537 EBT-based administrative actions conducted between 1999 and 2002.

The new estimate shows important improvements. About $395 million per year was diverted from food stamp benefits by trafficking between 1999 and 2002. This is less than two-thirds of the $660 million per year diverted between 1996 and 1998 and less than half of the $815 million diverted in 1993.

Trafficking now amounts to two-and-a-half cents of every benefit dollar issued, a 29 percent decline in the rate of trafficking between the periods 1996-1998 and 1999-2002.

The stores that redeem the majority of food stamp benefits continue to be stores with the lowest trafficking rates. Supermarkets redeemed nearly 83 percent of all benefit dollars but few of those dollars are trafficked.

Conclusion

Mr. Chairman, I am proud of the efforts that we have made to ensure that the provisions this Committee and the Administration worked so hard on a year ago have been implemented and given every chance to succeed. Ensuring that all eligible individuals, families and especially our children have access to the nutrition assistance they need is a top priority for the Bush Administration. We have worked very hard with our staff, with our States, advocates and other stakeholders to ensure that the intent and spirit of the law has been met and opportunities for enhancing the program are embraced, particularly in the areas of program simplification, access and integrity. 

Mr. Chairman, this concludes my remarks. I will be happy to answer any questions that you might have at this time.

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