ANALYSIS I. GROWTH OF THE FOOD STAMP PROGRAM "In terms of both participation and cost to the Federal Government, the growth of this program has been startling. The number of persons participating increased from 143,000 persons in FY 1962 to 17.1 million in FY 1975 (Exhibits 8 and 10). In FY 1975 alone it grew by more than four million. The cost to the Federal Government of the stamps (the bonus value) has grown at even greater rates, rising from $13.2 million in FY 1962 to $4.4 billion last year.” 1 "Eligibility guidelines are so loosely drawn and the program has grown so rapidly-from under one million recipients per month in 1965 to 17 million per month in FY 1975, to an anticipated 19 million per month during FY 1976-that it practically invites people to take advantage of it." 2 The implication of these statements is that the growth in the food stamp program has come about because of loose eligibility guidelines. Actually, all of the increased participation can be accounted for by other factors: The increase in the number of areas having food programs, the number of areas switching from the commodity distribution program to food stamps, the entry of Puerto Rico into the program, and the major increase in unemployment in the fall of 1974 and early 1975. The following table shows the number of program areas (usually counties) and the number of persons participating in each program during each fiscal year from 1961 to the first four months of fiscal 1976. The final columns list the total number of counties and participants in the two programs combined. An analysis of this information shows that growth in the program can be broken down into three major stages. (1) From 1961 to 1971, the number of counties participating in the food stamp program increased from 6 in 1961 to 2,027 in 1971. This led to a corresponding increase in the number of persons receiving food stamps during these years. By 1971, almost all areas had either a food stamp or a commodity distribution program. In fact, the number of program areas has declined since then as some adjoining smaller areas consolidated into one larger system. (2) Between 1972 and 1974, combined participation in the two programs (see combined total) remained about the same. The increase in food stamp participation during this time is the result of areas switching into the food stamp program from the commodity distribution program. (3) During fiscal year 1975 (July 1974 to June 1975), unemployment hit a high of 9.2 in May, bringing many newly unemployed into the food stamp program. This was also the year in which Puerto Rico, with its large poor population, joined the program. Just as the unemployment rate has declined since May, so participation in the food stamp program has declined from 19.5 million in May to 18.7 million in November. Secretary Simon also lists as causes of food stamp participation increase the rise in food prices and the more general inflation of prices for all products, which caused increases in the costs of deductible items. The available program data does not support this as a cause of increased participation. The greatest rise in food prices occurred in 1973 and 1974; at this time, the increase in participation in the two programs combined was negligible. Inflation also increased most sharply in the period between 1973 and 1974, the time in which there was almost no increase in participation. Although Secretary Simon quotes estimates of an average food stamp participation rate of 19 million per month in fiscal year 1976, the first five months of this fiscal year show participation figures lower than the estimated average. If these figures are indicative of participation for this year, it will decrease and stabilize at less than 19 million. Secretary Simon is also concerned about the cost of the food stamp program. He points out that the program cost $13.2 million in fiscal year 1962 and $4.4 billion last year. However, increases in the cost of the food stamp program can be ascribed to the same factors that caused increases in participation-new areas coming into the program and the effects of unemployment. Translated into constant 1964 dollars (and compared to the number of persons participating in the program), the cost of the food stamp program has not increased excessively from 1964 to 1975. "While the use of these programs was rising rapidly, the number of persons with incomes below the poverty line declined 27 percent from 1965 to 1974.” 3 The implication of this statement is that the food stamp program has grown to exceed the number of needy persons. However, although food stamp program participation has increased (for reasons explained previously) and the number of people below the official poverty line has decreased, the food stamp program still does not cover as many people as are officially living in poverty. "Today we have a program which permits participation by the truly poor, and also by those who are temporarily unemployed (even though they may have substantial assets), those who are not earning income because of personal choice, and those who have incomes above the poverty line but who are able to qualify because of See p. 19. the program's liberal eligibility criteria and/or shoddy administration in State welfare agencies.' A. INCOME "Another area open to error and abuse is the provision that permits deductions from a family's gross income in order to establish net income, which is the basis for establishing eligibility." 5 'According to a Treasury study of the tax and transfer payment system in FY 1974, nearly 15 percent of all families participating in programs with income eligibility criteria, such as Food Stamps, Aid for Dependent Children, or Medicaid, had total cash and in-kind incomes over $9,000 and some four percent of these families had incomes in excess of $18,000." 6 The argument here is that the present system of deductions from income in order to qualify for food stamps allows participation by high income families. This contention is not supported by the facts. The most recent statistics on the income of food stamp participants shows that the largest number of participants have very low incomes. Fifty-six percent of food stamp participants have monthly incomes. (before taxes) of less than $300, 84 percent have less than $500, and 94 percent have less than $750. TABLE 5. PERCENT DISTRIBUTION OF FOOD STAMP PARTICIPANTS BY GROSS MONTHLY INCOME CLASS AS REPORTED ON THE JULY 1974 CURRENT POPULATION SURVEY AND SIMULATED FOR JULY 1975 A further breakdown of these statistics shows that the majority of those households with higher incomes are very large households, households of six, seven, eight, or more people. This is reasonable since more income is needed to feed a larger family than a smaller one. TABLE 6. DISTRIBUTION OF PARTICIPANTS AND ELIGIBLES AS A PERCENT OF TOTAL The figures which show that 4 percent of families receiving food stamps, AFDC, or Medicaid have $18,000 a year incomes are based on a definition of income which includes estimates of the value of food stamp bonuses and Medicaid, Medicare, or VA health insurance, even for those families not receiving these benefits. In-kind benefits like these cannot be counted as if the families had received an equivalent amount of cash. There are several other factors which make this 4 percent an unrealistic figure. This figure is based on a family's total yearly income. But eligibility for the food stamp program is based upon income in the month in which the family actually receives food stamps. Especially in times of high unemployment, families with middle class incomes may find their monthly income reduced to almost nothing within a few months. Therefore, yearly income is not a reliable guide to the income available to a participating family at the time they are participating in the food stamp program. Another factor to consider is the definition of a household. Secretary Simon's statistics are based on the Census Bureau defintion. The Census defines a household as "all persons who occupy a housing unit." A household for food stamp program purposes includes only persons living together as one economic unit sharing common cooking facilities and for whom food is customarily purchased in common. Because of this difference in the definition of a household, persons living in the same housing unit and counted as one household by the Census may actually be counted as two or more separate households by food stamp program rules. One of these separate households may be eligible for and receiving food stamps, while another household may have an income much too high to be eligible for the program. Yet if these households are lumped together, as they are in Census Bureau statistics, their total combined income may be quite high. The Census Bureau does collect statistics on households in which all members of the household are receiving food stamps. These statistics are summarized in the following table. Table 7.-Food stamp households in which all members were receiving food stamps-July 1975 Gross monthly income $0. $1-99 $100-199. $200-299 $300-399 $400-499. $500-599. $600-749. Percent 1.9 6. 4 33. 7 26. 1 16. 0 8.7 4. 4 1.7 0.7 0.4 $750-999 $1,000 and up- Comparing this table to Table 5 very clearly shows the difference. Of those households in which all members were receiving food stamps, 92.8 percent had monthly incomes below $500. B. RESOURCES "The resources test creates inequities. It permits people who have a fair amount of wealth in these types of fixed assets to qualify. For example, it hypothetically would be possible for a recipient to have two expensive cars, a very valuable house, a boat, vacation 60-358-76- -8 |