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Additionally, the data on program participants only falls into two major categories-those on public assistance and those not on public assistance.

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1 Page 7, GAO report, Feb. 28, 1975. This example is based on a report from 1 county.

TARGET POPULATION

It is necessary that USDA begin collecting more detailed information about both the gross and net income levels of program participants and relating this data to bonus value of stamps received. Since testimony received at the hearing indicates that under present law and regulations, 25 percent of the nation's population is currently eligible. Congress must be kept informed about how well its objective of meeting the nutritional needs of the poorest persons is being met. It must also be informed of the potentials for program growth and cost in order to be able to refine its objectives in light of experience.

Different data sources make different estimates of the distribution of program participants by income level. None is definitive. Since the USDA reports data only on net income level, after deducting many expense items, it is impossible to judge the impact of USDA regulations on potential eligibility. The tables inserted on the following pages compare data on the gross income of food stamp participants as revealed by the Census Bureau's Current Population Survey (CPS) and the University of Michigan Survey Research Center's Longitudinal Survey (MLS). These data show that due to the effect of itemized deductions, a large percentage of food stamp participants have gross incomes over $10,000 per year. However, these data are not weighted for the lower bonus value of stamps purchased by these persons. It is not possible from any available data to determine the distribution of bonus value (the actual benefits of the program) by gross income level of participants.

TABLE 4.-INCIDENCE OF FOOD STAMP USE BY INCOME LEVELS, AND INCOME CHARACTERISTICS OF USERS— COMPARISON OF CPS AND MLS SURVEY FINDINGS [For families-i.e. 2 or more per households-only]

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TABLE 7.-REGULARITY OF FOOD STAMP USE AND OTHER CHARACTERISTICS OF FOOD STAMP USERS IN 1973, BY SELECTED INCOME/NEEDS LEVELS-MLS SURVEY DATA

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The following table [Insert T-16] supplied in the testimony of
Jodie Allen reveals two things. First, that the simple dichotomy
of poverty level vs. non-poverty level does not adequately describe
the distribution of program benefits. Second, there is a potential for
continued large program growth among the 50-60% of eligible non-
participants above the poverty line. The following tables also supplied
by Ms. Allen demonstrate that a considerable percent of non-
participant eligibles have relatively high incomes (above $7,000) and
moderate family size (2-4 persons). Congress should be informed of
social circumstances of these persons in order to judge whether pro-
gram benefits should be made available.

In general, USDA has not provided either a clear definition of
target population or clear data about present and potential program
participants from which Congress and the public can form expecta-
tions about program coverage and growth. Until this is done, the
program runs a grave threat of misrepresentation and political back-
lash and at the same time is open to criticism for inadequacy in
serving the persons who need its help.

PARTICIPANTS AND ELIGIBLE NONPARTICIPANTS BY POVERTY STATUS AND AGED, NONAGED

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CURRENT FOOD STAMP PLAN-ELIGIBLE NONPARTICIPANTS BY HOUSEHOLD SIZE AND ANNUAL INCOME

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CURRENT FOOD STAMP PLAN-PARTICIPANTS BY HOUSEHOLD SITE AND ANNUAL INCOME

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WHERE DO WE GO FROM HERE?

Senator Chiles in his opening statement said, "We (the Subcommittee) are ever mindful that criticism without remedy serves no constructive purpose".

Remedial suggestions were submitted by all of the witnesses and carefully considered by the Subcommittee both in its hearings and in follow-up investigations by the staff. The major areas where we recommend action are:

A. The Certification Process.

B. Relations with HEW.

C. Outreach and Targeting to Meet Program Objectives.

D. Quality Control, Administrative Efficiency and Program Accessibility.

E. Program Evaluation and Experimentation.

FOOD STAMP REPORT-RECOMMENDATIONS

A. CERTIFICATION PROCESS

The several difficulties discussed by witnesses-high rate of certification errors, long waits and inconvenience for applicants, inequities in dealing with gross income, dual certification for AFDC recipientsall seem to point to one direction. Forms and regulations for determining eligibility are all too complex. Since there is a 60% overlap of clients with the AFDC program, a revised eligibility determination form should be worked out jointly with HEW, so that applicants would only have to go through one certification interview. This would also produce a considerable savings in administrative costs.

Two major approaches to simplifying the certification process were presented at the hearings: a "standard deduction" and a "consolidated deduction". Either of these approaches would seem likely to meet the need of a simpler, more reliable process. However, they have very different outcomes in terms of equitable distribution of benefits.

The "standard deduction" approach currently being contemplated by USDA is simply a formula by which all applicants would have their gross income adjusted downward to reflect average levels of such minimum allowances as payroll tax deductions, and also provide credit for such special circumstances as presence of an elderly person in the household. However, the major thrust of this method would be to eliminate special considerations for such expenses as housing, medical costs, utility costs, school tuition, child care and alimony costs. The rationale for eliminating these, as noted in the study which Mathematica, Inc. performed for USDA, is that these deductions have the effect of making the food stamp program "remedy the defects in adequacy and coverage" of other social programs. This effect seems to the Subcommittee to be part of the trend for food stamps to lose their nutritional objective and become an income transfer program. Instituting a standard deduction would have the effect of eliminating a large number of persons with a gross income of over $10,000 who are currently eligible for the program. Depending upon the particular formula adopted, savings of up to 15 percent of bonus value could be realized. In addition, the simplified procedure would reduce both administrative costs and certification errors.

A major criticism of the stanard deduction is that while it increases income equity by insuring that only poor persons are eligible, it introduces geographic inequities. That is, since living costs are higher in urban areas and coastal areas, the same gross income level leaves the applicant less money to buy food. Moreover, if food costs are more in these areas, then the same bonus value of stamps buys the recipient less nutrition.

The "consolidated standard" approach proposed to the Subcommittee attempts to deal with regional variations while achieving administrative efficiency. It was proposed that the authorizing legislation be amended to give the Secretary of Agriculture discretion to allow States to institute a consolidated standard system. The State would then be responsible for calculating and justifying to the Secretary the average costs of deductible items, such as rent, utilities, etc. Moreover, the State could also attempt to justify different cost levels for its various counties. These average cost levels would then be deducted from applicants' gross income to determine eligibility. There seem to be several difficulties with the consolidated standard system. First, there is a lack of reliable data on living costs at the State level. Second, since the program is 100 percent federally funded, there would be an incentive to States to set deduction levels as high as possible in order to maximize federal benefits to their economies. Third, the net impact would be to distribute the greatest level of federal benefits to those areas with the highest income levels. One could even envisage a situation of a marginal family moving across state boundaries to become eligible for benefits. Finally, since the impact of deduction systems is on those with the highest levels of income, not the poorest, the overall effect would be to increase eligibility for a large percentage of the population with only a marginal level of need. This would exacerbate the problems of orientation already experienced by the program.

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