income groups receiving food stamps, its impact would be greatest on those families with the least income. Since many families who do not receive food stamps also receive free lunches, and since some of these families' income is much higher than food stamp eligibility standards, they would be the group that would be benefiting from the free lunch program and not food stamp recipients. This situation is well illustrated in the Durham City schools as all children in elementary and junior high receive free lunches. I would also point out to you that food stamp allotments are not individualized based on age or developmental need, thus the provision of free lunches should be considered a necessary nutritional supplement for growing children. The other thing I would point out is that food stamps issuance is not based on designation of age or sex, and as such we should see that growing children have an adequate nutritional diet, and this should be seen as a necessary supplement.

We also have serious concerns I would say at this point about an administration proposal of a system that does establish food stamp benefits based on age and sex because of the administrative burden on those at the local level.

I notice the proposal would be a $600 million savings from implementing this change. While this is considered a savings in program cost, I would emphasize to you that this does not include an offset for the increase in administrative costs. An annual estimate of implementing this change in Durham County is $60,000. I tried to do an estimate for our own county and came up with a cost of $60,000, and that would include the children, and an additional hour and a half on eligibility for each of those families over a period of a year, and I think that is probably a conservative estimate overall of the time that would be required to change benefit levels during the year, so speaking from both the administrative standpoint and also in support of benefits to growing children, I would strongly urge that change not be approved.

This estimate is based on 4,000 households with school-age children and an average of 11⁄2 additional hours annually for eligibility determination and related administrative requirements. While I propose to you that this is a conservative estimate this $60,000 still represents an increase in our administrative costs of 10 percent. Speaking from an administrative standpoint and also in support of benefits for growing children, I would strongly propose that this change not be approved.

The third proposal is to set the gross income eligibility at 130 percent of the poverty line. It should be pointed out that this proposal affects primarily working households and would probably eliminate between 15 and 20 percent of the households with earned income. It should also be noted that this group receives a very small amount of food stamp benefits but a very essential supplement to their low wages. In North Carolina, for example, where we have the lowest industrial wages in the country, many families qualify for minimal benefits. I have serious concerns about the impact of this change on low-income working families and the fact that we should assure it will always be more financially rewarding for families to exist on earned income rather than a public assist

ance benefit. This may not be the case if this change is made in eligibility limits.

Another group that would be severely affected by this change would be elderly and disabled participants. Many in this group have very high medical costs that allow them to qualify for food stamps. And since this group has few options in terms of supplementing their income, the effects would be even more severe than on working families.

The next item is the repeal of the liberalized food price projection and deduction schedule for fiscal year 1982. This proposal would have serious impact on food stamp recipients if the rate of inflation continues at the current double digit level. Under this proposal food stamp recipient benefits would run from 3 to 15 months behind the actual increases in the cost of food. While the initial impact will not be serious, by the end of the year period it will probably be extremely difficult for families to meet their nutritional needs.

I am not sure that putting it at the 130 would not have the impact, and in some cases make it more beneficial for some to receive public assistance. Another group would be severely affected by this would be elderly people, and we see that because there are many medical bills that would make these individuals eligible for more food stamps.

The proposal to freeze standard and shelter/dependent care deductions also creates serious problems for recipients. The 1977 Food Stamp Act provided for standard deductions as a means of replacing a variety of itemized deductions for the purpose of simplifying administration of the program. To freeze this deduction has the impact of reducing benefits for nearly all households across the board. This is especially a problem for those areas where utilities are high and this will impact many food stamp recipients in North Carolina where such a large portion of our food stamp recipients live in substandard housing and pay a large proportion of their income for utilities. For that reason I would strongly recommend that standard deductions be allowed to go up so as to accurately reflect the inflated costs of shelter and dependent care.

The last of the Reagan proposals that I would react to is the mandatory retrospective accounting. It is noted that this proposal would actually add $23 million in costs in fiscal year 1982 but that there would be savings in future years. If this change were implemented, I would be concerned about the ability of the food stamp program to respond immediately to families in need. For those of us who witnessed the effects of the 1974-1975 recession in North Carolina, the food stamp program was one program that was there to provide immediate benefits to families who were in serious need of assistance. Those of us who work in the food stamp program have a saying that I think applies and that is "families cannot eat retroactive benefits," and I think that is a factor you have to consider when you go to a retroactive accounting system.

This change would take away a strong advantage that the food stamp program has over many benefit programs, such as unemployment insurance, and that is that we can respond immediately to the basic needs of individuals and families. Retrospective accounting will also create additional administrative requirements

and as such will further add to the administrative costs of the program.

A review of the above recommended changes indicates that they will increase the administrative costs associated with operating the food stamp program at the local level. Currently in Durham we estimate our cost of administration is running about 10 percent of the benefit level. Most of the above proposals would reduce the amount of benefits provided while at the same time increasing administrative costs. It is my estimate that if the above proposals were implemented instead of spending 10 percent of program costs on administration, we would be spending closer to 20 percent. From a practical standpoint I would urge you not to transfer costs within the program from benefits to recipients to administration. At a time when we are concerned about the amount of Government regulation and paperwork, I would propose to you that if the above changes are implemented, we would only increase the amount of regulation and paperwork with a corresponding increase in the need for more manpower.

In closing, I would say to you that while the food stamp program is not perfect, and that those of us who are responsible for its administration have concerns, our major concern is that the food stamp program continue to function in such a way that it will provide nutritional benefits to those in need. We believe that the program has been appropriately targeted and that for this Nation to spend approximately 11⁄2 percent of the Federal budget to provide for the nutritional needs of the 20 million people in our country who find themselves in nutritional risk, is not only morally right but a good investment for the richest country in the world. The CHAIRMAN. Thank you very much.

We will now hear from LaNelle Eakes.

STATEMENT OF V. LaNELLE EAKES, ELIGIBILITY SUPERVISOR I, DURHAM COUNTY DEPARTMENT OF SOCIAL SERVICES, DURHAM, N.C.

MS. EAKES. Good afternoon.

First of all, I would like to say I appreciate the opportunity to come here and talk about the areas in the food stamp program where I feel improvements are needed.

For time's sake, I am just going to cover three areas today.1 However, I want to assure you that there are other areas of equal importance regarding the program and deficiencies that need to be looked into.

For purposes today, I am addressing first the household concept provision; second, the voluntary quit provision; and, third, the adverse action provision.

Now, the household concept regulation works on the premise that households consist of those persons who cook and eat together. By claiming to be separate households, that one cooks and eats separately from the other members of the household, this allows the applicant to obtain increased benefits, or to make the part of the group eligible by excluding those with income and assets.

1See p. 428 for the prepared statement of Ms. Eakes.

The present system allows for as many ATP authorizations to purchase cards to be mailed to a household as persons presenting themselves to be cooking and eating separately.

The problems with this regulation are obvious. Beyond inviting manipulation of a household's true circumstances, it is costly in terms of manpower required to certify the individual separate households, paperwork, envelopes, and postage. Because the household's eating arrangements are virtually impossible to verify, the eligibility worker is forced to accept a verbal statement regarding separate household status even though the circumstances are highly questionable.

Because of its manipulative nature, this regulation has served to reduce morale of eligibility workers perhaps more than any other. The eligibility workers and eligibility supervisors must apply and adhere to a regulation that they do not support, respect, or believe in.

I am proposing a simple solution, that solution is that all persons living in the same house or apartment must be certified together with all members' income and assets included, with no exceptions. The voluntary quit, under this regulation a household will be found to be ineligible and disqualified for 2 months when the primary wage earner of that household quits his or her job without good cause.

On the surface this looks like a fine regulation, until you read the first exception to that rule. That exception states that households with primary wage earners certified at the time of the quit will continue to be eligible simply because they were certified at the time of the quit.

As long as a household is certified, a person may enter and leave employment situations at whim, with no adverse effect on the food stamp eligibility.

On the other hand, an uncertified household containing a primary wage earner who quit his or her job without good cause is disqualified for 2 months. The regulation is not equally applied, and it should be.

I am suggesting correction in two areas in the way of voluntary quit. The first suggestion I am proposing is that the regulation should be changed making all households ineligible to participate for 6 months when any primary wage earner quits a job without good cause, regardless of whether the household was certified at the time of the quit or not.

Second, I am in favor of extending the disqualification period from 2 months to 6 months because the extension would encourage the primary wage earner to seek other employment.

The current disqualification period is 2 months and begins with the month of the quit which many times, in effect, allows only for what amounts to a 1-month disqualification period, depending on when the household applies.

In these cases the eligibility must then be determined for the subsequent month.

As the regulation stands, it is possible for the household to simply wait out the disqualification period. Were a 6-month disqualification period imposed, it would encourage the primary wage earner to actively seek other gainful employment.

Currently, this regulation is ineffective in its attempt to apply some punitive measure to the household. The above suggestions would provide adequate sanctions to the household and make this regulation a more meaningful one.

The adverse action regulation states before any action may be taken to reduce or terminate a household's benefits, the county is required to provide a minimum of 10 days advance notice before that action can be taken.

The waste in this area is phenomenal. Because of this requirement many wages go unaccounted for an additional month, and many households continue to receive food stamps for persons not in the home for an additional month.

This regulation should be changed to allow counties to act on changes of these kinds immediately. Untold sums of Federal dollars are lost by requiring a 10-day advance notice prior to reducing allotments.

Not only do households continue to receive a higher allotment than they should based on income and household size information available to the county, but inconveniences to clients occur.

The 10-day adverse action requirement entangles the eligibility determination whenever these household members who have moved from a certified household attempt to apply in their own right.

In many cases, their eligibility cannot be determined until a subsequent month because they are already certified in a household.

I am suggesting the addition of two more instances in which 10day notices of adverse actions are not necessary.

One is when an increase in income is sufficient to result in an allotment decrease, and, two, when there is a reduction in household size. I am also suggesting an alteration in the appeal request procedure.

The reasoning behind the 10-day notice is to afford the household time to request a hearing. At present, should the hearing be requested within 10 days, and the household so requests, the household can continue to receive benefits at the original level.

If it is then determined by the State that the county was correct in their determination, the household is simply requested to repay the overissues.

Recoupment of these funds I might add is improbable. Certainly a household should have the right to appeal any action they feel is an error or unfair to them; however, the county should be able to take immediate action in cases of income increases and household member decreases.

An appeal could then be heard, and the county could restore benefits to the household, should any error be found to be the fault of the county.

Altering the appeal procedure in this manner, and adding the above instance to the list of items requiring an adverse action notice could save the American taxpayer countless dollars.

In conclusion, I would like to say that the food stamp program was founded on ideals of which no reasonable person can take exception.