suggesting that 35 States, or whatever the number it is that have it, that we employ the very simple process and ask them to take the card out of their wallet.

Mr. ESCHWEGE. Senator, I might say that in the District of Columbia they have used this for some time, and we had suggested over 2 years ago that the Department should go into the District and see how well it is working there, but I am not aware that they ever did.

They were kind of slow in getting this thing going. It has been talked about for years.

Senator DIXON. Mine is a big State, and there are a lot of food stamps used in my State, and I would simply suggest to you that certainly my State would be a place that you could employ that appropriate remedy.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator.

Senator Hawkins?

Senator HAWKINS. I apologize also for not being here earlier. It seems to be a rule of the Senate that you have three meetings at the same time. Secretary Schweiker was appearing before the Labor and Human Resources Committee, and I was interested in asking him quite a few questions about the emergency health requirements that we seem to have in Florida with the CubanHaitian influx, and he has a new recovery program that we needed to discuss. In fact, he is still there, and I am supposed to go back. My concern is in Florida where we have so many elderly who are really a very proud generation. They worked very hard for their money, and through no fault of their own find themselves forced almost into a poverty class, and yet they have that great pride that whenever I recommend that maybe their income would let them qualify for food stamps, they are really outraged that I should even suggest that. So there is that element when we talk about the elderly, because they were raised in a different generation.

Therefore, I am wondering when we discussed keeping the fund intact because we need to provide for those that need assistance, the truly needy, and workfare is good for those that are able to work, so we have to put all of these quotients into the formula when we are talking about the truly needy.

We find in Florida, we monitor this I think maybe closer than in most States, that fraud is probably one of the biggest expenses that we have had, because it is so easy to get food stamps and there is no penalty in most instances.

I was wondering what your experience has been when the stamps are mailed, when they go in the mailbox?

Mr. SARGOL. The only problem we have seen is that there are thefts out of the mailbox.

Senator HAWKINS. That is the only one that you have? That is the only problem you have, they are stolen out of the mailbox? Is there any figure for that?

Mr. SARGOL. No. I do not know whether OIG has any numbers on that, but we do not.

Senator HAWKINS. How could you trace that? Could they call and say I did not get them this month, and is there an automatic sending of the second set in case you do not get the first set?

Mr. SARGOL. Yes.

Senator HAWKINS. So I can call you up on the telephone and say I did not get my stamps this month, they are not in the mailbox? Mr. SARGOL. I am not sure you can do it over the phone, or if you must come in and report the theft. I do not really know, but you can get replacement.

Mr. ESCHWEGE. Of course, this is a problem too, Senator, because people can abuse this kind of procedure.

Senator HAWKINS. That is my point. No. 1, why do we mail them, why can't we pick them up?

Mr. ESCHWEGE. I would think that perhaps in Florida, it is because you have an aged group. In some cases they need to be mailed if no one can pick them up.

In other cases, in rural areas particularly, I would think that it would save quite a bit of

Senator HAWKINS. Don't I have to say I want them mailed to me, do I have a preference picking them up or having them delivered? Mr. SARGOL. I don't know. I think in some places they are just mailed totally.

Senator HAWKINS. Totally mailed?

Mr. SARGOL. I think so.

Senator HAWKINS. Would you favor allowing law enforcement officials access to food stamp applications for the purpose of verifying the information that is contained on them?

Mr. ESCHWEGE. Yes.

Senator HAWKINS. Do you have any figures on how much fraud there is on the application in overstating need?

Mr. SARGOL. We know what the total overissuances are. We can give you an estimate on that, but that is everything, mistakes, errors, by whoever. In 1980 it was $886 million.

Senator HAWKINS. $886 million?

Mr. SARGOL. Yes. That is the amount of benefits that were obtained incorrectly, should not have gone to the household, but did for one reason or another.

Senator HAWKINS. Is there a penalty if they overstate their needs?

Mr. SARGOL. No; unless it was deliberate.

Mr. ESCHWEGE. There is a penalty if there is fraud. The applicant I believe has to repay whatever the court orders. Also, the recipient can be suspended from the program.

Senator HAWKINS. Permanently?

Mr. ESCHWEGE. No; 3 months for administrative adjudication and 6 to 24 months for court-adjudicated fraud.

Senator HAWKINS. And then he could apply again?

Mr. ESCHWEGE. They have to justify again on what basis they are eligible for food stamps. The total family is not removed. It is just the one individual.

Senator HAWKINS. Let's say if it is a family with two parents and two teenagers, or the family of four that you are talking about with two small children-who is the person that is penalized if you find that there has been overpayment of needs?

Mr. SARGOL. One of the two adults, whichever one is represented as being head of the household and applies for food stamps.

If that individual provides incorrect information, and that turns out to be fraudulent, then the benefits for that one individual are removed from the total household benefits.

Senator HAWKINS. How do you find out they overstate their needs, now today, under the current law?

Mr. SARGOL. Under the current law, it is difficult. The verification procedures are very difficult. You have got to go and check the information on the application. If the information is not on that application, it is very difficult to check.

Senator HAWKINS. Can you spot check them?

Mr. SARGOL. Well, they are supposed to check them all. They are supposed to check the income that is reported.

This is often done through a phone call. It is sometimes done by reference to a pay slip or something like that which the individual presents.

In some matters the local people have been precluded from verifying some things unless there was some inconsistency in the application.

For example, the number of individuals in the household. If you came in and reported the number of individuals in the household, and the case worker had no really good basis for suspecting that was not accurate, they were not authorized to go and check whether in fact that was correct.

Senator HAWKINS. They are not authorized to check?

Mr. SARGOL. They were not. There have been some changes in recent law, and some of that will be rectified, I believe.

Senator HAWKINS. Let's say you were a mother claiming six children and indeed you only had three, there is no way you could check?

Mr. SARGOL. In the past you were not allowed to.

Mr. ESCHWEGE. The 1980 amendments do provide for additional verification procedures, Senator. One of the problems we find is that it takes so long from the time the law is enacted until the Department proposes regulations and then finally issues regulations, some of these are not coming out until June 1981.

Senator HAWKINS. My time has expired.

The CHAIRMAN. I might mention in terms of the cost of theft from the mails, there is one county which may or may not be roughly the average in North Carolina, Wayne County, and they discovered they are losing $4,000 a month in that one county, and there are 100 counties in North Carolina. You multiply that by 12, and that goes back to what we said earlier, all of these bits and pieces totals billions of dollars, and that is what we are talking about.

We need to tighten the program up. We have to move along. Thank you very much, gentlemen.

Senator LEAHY. Mr. Chairman, I would like to follow up on one question of Senator Hawkins to clarify the record.

A number of the regulations, a number of the things that Senator Hawkins has referred to, were not in effect at the time you made the study, but as of January of this year a number of new regulations came into effect, is that correct?

Mr. ESCHWEGE. Senator, there were some some regulations which came into effect and some that were proposed. The latter are not finalized.

Senator LEAHY. And then there was also another regulation to tighten up verification. And another to sanction States with high error rates which was one of the first regulations frozen as I understand it by the Reagan administration, and was unfrozen finally 3 days ago, is that correct?

Mr. ESCHWEGE. I am not aware that they were unfrozen, but there are some that were frozen.

Senator LEAHY. I asked Secretary Block yesterday, and there was some concern that one of the regulations based on the law that we had passed through the Congress last year to tighten up fraud and waste, was one of the first regulations frozen by the new administration. He assured us, and I asked the question the day before when he came in, that just prior to my asking the question for the record, the regulation was unfrozen, a happy coincidence, because we do want to tighten up on the questions of fraud and abuse. Thank you.

Mr. CROWLEY. Senator, this statement is updated as of today. It includes the regulations that were published in January.

Senator LEAHY. Including the ones unfrozen 2 days ago?

Mr. ESCHWEGE. No, the regulations unfrozen 2 days ago are not included.

The CHAIRMAN. Thank you very much.

Our next witness is Bob Greenstein, Project on Food Assistance and Poverty.

Without objection, since we are moving rather slowly, the Chair will limit himself to 5 minutes of questioning, if that is all right, and the other Senators, I would hope we can move along, because we have people who traveled here, and Bob has been before this committee so many times, he knows he has about 10 minutes, and he has a prepared statement.

STATEMENT OF ROBERT GREENSTEIN, DIRECTOR, PROJECT ON FOOD ASSISTANCE AND POVERTY

Mr. GREENSTEIN. Mr. Chairman, I would like to submit it for the record rather than read it.1 1

The CHAIRMAN. Then you can summarize it.

We welcome you, and it is good to see you.

Mr. GREENSTEIN. Mr. Chairman, I am Robert Greenstein, as you know, formerly the Administrator of the Food and Nutrition Service and currently the director of the Project on Food Assistance and Poverty, which studies and focuses on food programs, particularly in terms of their impact on low-income Americans.

I really would like to submit my statement for the record and summarize it and possibly provide some additional information such as in regards questions on mail losses, and so forth, that Senator Hawkins has raised, which I think would be of interest. Senator DIXON. Pardon me, Mr. Greenstein.

Does the Chair have copies of your statement? I do not have one nor does my staff.

[Statement handed over.]

'See p. 388 for the prepared statement of Mr. Greenstein.

Senator DIXON. Thank you.

Mr. GREENSTEIN. Mr. Chairman, before getting into the specifics of some of the food stamp proposals before the committee, I would simply like to comment that there has been a great deal of concern or controversy about whether the administration's budget proposals overall do protect those who are truly in need, and much of the attention on this has focused on the administration's statements that they have maintained a safety net for the poor, because there are seven basic problems that will not be cut, such as social security and medicare.

We have just completed an analysis of all of the census data on this, and of course most of these programs primarily focus on elderly people who are not poor, programs like medicare that are not means tested. Most who get aid under these programs are not poor, and what we have found unfortunately is that 64 percent of all people below the poverty line, or 16 million Americans living below the poverty line, either get nothing from any of these seven programs, or at most a free lunch. A free lunch is not a safety net in and of itself.

What heightens our concern is that programs such as food stamps which along with AFDC and SSI and similar programs really constitutes the true safety net for people below the poverty line, is where a number of the cuts are concentrated.

A couple of other preliminary observations I would like to make before getting into the specific proposals, is that while the food stamp program has certainly grown in cost in recent years, the major impact on this has been the state of the economy.

The Department's own figures are that each 1 percent in food prices adds $148 million in costs, and each 1 percent increase in unemployment adds $580 million in costs.

An update of the Department's analyses shows that if inflation and unemployment had held the levels predicted in 1977, when the 1977 Food Stamp Act was passed, then the cost to the food stamp program in the current fiscal year would be $7.2 billion rather than $11 billion.

A final preliminary observation is that the administration's proposals include a proposal to eliminate households with gross incomes over 130 percent of the poverty line.

I think it is important to note that this proposal accounts for only 15 percent of the savings in the administration's package of budget cuts in food stamps.

Senator LEAHY. What percent?

Mr. GREENSTEIN. Fifteen percent.

The point I am making is that 85 percent of the reductions come from households with gross incomes below 130 percent of the poverty line, and since the Department data shows very few households, fewer than 10 percent of the caseload, between 100 and 130 percent of poverty, indeed the great bulk, probably about 80 percent of the savings come from households with gross incomes below the poverty line itself.

I would certainly agree that a number of the proposals advanced by the administration for cutting the food stamp program do have merit, but I am particularly concerned about those proposals which cut some of the poorest families far below the poverty line and