I guess it has been proposed by the Department of Human Services, so that people who have been convicted of fraud cannot move from one locality to another and get back on the program, but are eliminated from participation; until the amount of fraud is repaid or eliminated permanently.

A client who has violated by participating in the program by robbing the people of the United States of money, should not be allowed to get back on the program with no obstacles whatsoever. They have no right to remain on the program, when people definitely needy are being eliminated because funds are drying up. Once a person has demonstrated that they are not trustworthy, and that they will take advantage of the law, I do not see why we have to defer for the sake of excess generosity or compassion to allow these people to get back on the program.

We cannot even recoup benefits from people who we know have defrauded, and we cannot turn in and prosecute all of the people we find we know have committed fraud; some are people who have participated and been overissued, and there is no intent established. We should be able to recoup some benefits, but we ought to have some sort of nonjudicial system of deciding that these people who have participated with intent to defraud, and eliminate that participation, establish a State hearing system, so that when we discover a person has unreported income, that we can take him off the program federally, so that they cannot move from one jurisdiction to another and get back on the program.

I believe there are a lot of things worthy of salvation in the program, but I do not think people who fraud it are worthy of protecting.

If we could cut out 15 percent of the budget by eliminating a block of people because of fraud, I do not see any qualm about eliminating those individuals.

The CHAIRMAN. Thank you very much.

I am going to have Mr. Boney to question you. I have to step out. If you will answer those questions, and I will be right back. Mr. BONEY. The question that came up in a number of letters that Senator Helms received, some from small businessmen, with reference to being called about verification of employment of somebody, how much money they earned, and the question is apparently strictly how much they earned, and how many hours they worked, rather than how many hours they were available, we have had different businessmen who would say they worked 20 hours, but I wanted them to work 40 hours, is that correct, in terms of what you are allowed to ask?

Mr. PETERSON. It would not affect it. Even though the hours are there, they are only required to work 30 hours a week, and as long as they have worked 30 hours a week, there is nothing they can do. MS. EAKES. What you said is technically correct. We call an employer, if we can get the information from the employer. Many times the Privacy Act knocks that completely out.

You have occasions where the employer says yes, John could have worked 40 hours, but he only worked 20. We are only basing income on what hours he did actually work-20 hours.

We are not basing the income on what is actually available to do, and I would like to see something in that area.

Mr. BONEY. You have had that happen when you called around? People tell you that?

Ms. EAKES. Mr. Stott deals a lot in investigations, as far as contact with employers, and he is more familiar with that than I

am.

Mr. BONEY. On the households that do come before you in terms of having the fraud element, once they are penalized, they are off the program for how long?

Mr. STOTT. That varies. If there is an administrative hearing, which we chose not to do in Durham County, it is 3 months. If you go through a court of law, it can range anywhere up to a 2-year period.

If the court does not actually make this disposition, if it does not address the disqualification, then you do it automatically for a 6month period.

In a case that recently came up, where I took a lady to court, she was found guilty of having committed fraud.

She came in to reapply, and we imposed the disqualification period.

The regulations say you are disqualified, and your income is prorated. When we took this lady's full income for her household, she would have had too much money to participate, but because we had to prorate her income when disqualifying her, her child was eligible, and for the same amount of money the court had ordered this lady to repay.

I might need to clarify that to some extent.

Mr. BONEY. This was the second time it happened for her?

Mr. STOTT. The case itself was the first time she actually went to court.

She was working and not reporting it.

We caught her, took her through the court system, and she was convicted of food stamp fraud.

At that point in time, the month following the conviction we had to impose the disqualification period.

With the disqualification period we had to adjust the income. She was not certified at the time, so we put the notice in her record to insure that when she came in she would be disqualified.

When she reapplied we had the notice where she was disqualified, and because of regulations, we had to prorate her income, and we had to apply it to the remaining members of the household, which made them eligible.

Mr. HUDGINS. Could I clarify, that is when we talk if 600 or 700 pending investigations, those are not all fraud cases.

Mr. STOTT. No, these are potential fraud cases, pending investigation.

Mr. HUDGINS. That is what I do not want to document is that we have 600 or 800.

Mr. STOTT. With new regulations we cannot qualify them as fraud without appropriate administrative or judicial action.

Mr. HUDGINS. We were not aware when we prepared our testimony that the rules have been broadened about the question of criteria.

We are still operating under that restriction where it has to be questionable criteria in order to investigate, is that not correct?

MS. EAKES. Yes.

Mr. HUDGINS. The change in regulations has not been passed to us in North Carolina.

Mr. BONEY. One question Senator Hawkins wanted answered, especially for Mr. Peterson from Virginia, do you believe that stiffer criminal penalties in food stamp fraud and abuse prosecution will provide effective deterrent?

There was an article in the paper recently about Alexandria's work on investigations, and which indicated a low prosecution rate. Mr. PETERSON. Only the localities are allowed to have a prosecutor. The prosecutors will not look at a case if it is a minor fraud. We cannot eliminate people from participation unless they are convicted by the courts.

Now, court time and costs effectively eliminating these people, it will cause some discrepancy.

If you are going to have effective fraud units, you have to have free prosecutor information in every locality, and it will cost a lot of money.

I do not know whether it will eliminate fraud. We put one person in jail for I think 2 weeks or a month out of the convictions we have gotten.

The courts are not inclined to impose penalties.

Mr. BONEY. How many prosecutions?

Mr. PETERSON. One.

Mr. BONEY. How many in Durham County?

Mr. HUDGINS. We had 38.

Mr. BONEY. How many people in your department are in charge? Mr. STOTT. I am the only person doing food stamp investigations. Mr. BONEY. How about prosecutions?

Mr. STOTT. The district attorney is a State position in Durham County and throughout North Carolina

Mr. PETERSON. We have one person doing fraud.

Mr. BONEY. But in most cases you turn it over to the State? Mr. PETERSON. It serves our locality only and not the whole Virginia area.

I think if we had a hearing system that was administrative, you could remove people that way, you would have a more effective way of eliminating, getting people off of the case, off of the rolls, and you would be better off than if you tried to prosecute everybody.

I do think prosecution is worthwhile, but you just have so many people committing fraud that is minor, that you have to get rid of the people who are nickle and diming the program, rather than people who buy houses.

We have not uncovered anything like that yet, but anywhere from a couple of hundred dollars to several thousand dollars, we found that, but they are only going to go after the people who frauded it by maybe $1,500, or $1,000 or above, so there are a lot of people frauding on smaller levels that need to be eliminated administratively.

Mr. BONEY. One other thing, this morning attention was focused on the restoring of the stolen coupons from the mail.

Do you all have mail in Alexandria?

Mr. PETERSON. We do not have it.

MS. EAKES. We do send it.

Mr. BONEY. Do you have the same problems these other folks mentioned?

MS. EAKES. Yes

Mr. BONEY. When people report it stolen, how long do they have to report it?

MS. EAKES. Forty-eight hours.

Mr. BONEY. Forty-eight hours?

MS. EAKES. Yes.

Mr. BONEY. Is this prorated, or do you furnish a whole month's allotment, and how do you replace it?

MS. EAKES. Whenever they have stolen coupons, we require them. to go to the police department and file a stolen coupons report within 48 hours.

They then present this to our office. On the police report is the amount of coupons that they have reported stolen.

They sign an affidavit attesting to the fact that all of the information is accurate and correct, and we issue the amount they reported stolen to the police department.

Mr. HUDGINS. We do not issue our coupons by mail. We do not have coupon mail issuance. It is in a number of rural counties, and from the directors I have talked to, it has worked very well.

I do not believe it creates problems in some urban areas, especially where you have a large concentration of mailboxes, but we have not chosen to go that route in Durham County. Rural counties have not had any major problems.

We do the ATP card by mail, and when the ATP card is lost, they sign an affidavit, and another one is issued, and in some cases the card turns up, and that is when we turn that over for fraud investigation.

Sometimes it is done by someone whose handwriting is not the same, and we suspect it is done by individuals who have stolen those cards.

Mr. BONEY. Some of the Senators may want to send you all questions for the record.

We appreciate your testimony.

Senator HAWKINS. Our next witness is John Charles Houston, director, government relations, Public Service Research Council. Please proceed, sir.

STATEMENT OF JOHN CHARLES HOUSTON, DIRECTOR, CON.GRESSIONAL AFFAIRS, PUBLIC SERVICE RESEARCH COUNCIL, VIENNA, VA.

Mr. HOUSTON. Thank you, Madam Chairperson.

I would like to thank the Agriculture Committee for the opportunity to speak today. My name is John Charles Houston. I am the Director of Congressional Affairs for the Public Service Research Council in Vienna, Va.1

The Public Service Research Council is the Nation's largest citizens' lobby, with over 1 million members, devoted solely to curbing the influence of public employee unions on government-State, local, and Federal.

1 See p. 431 for additional material furnished by Mr. Houston.

The purpose of this hearing is to gather information on the use of funds for the food stamp program and food stamp distribution guidelines. It is a current practice to allow workers on strike to receive food stamps, even though when employed, a worker's salary may be more than adequate. This practice represents a conflict of interest in public policy.

Food stamps for strikers represent three-tenths of 1 percent of all food stamp expenditures. Although this is not a large portion of food stamp costs, it does represent a serious error in public policy. In some cases, subsidizing strikers can be detrimental to resolving the problem that triggered the strike. In West Virginia, recently, 35,000 miners struck. They received food stamps during their strike, and one miner admitted to the press that the fact that they were receiving food stamps prolonged the strike.

The purpose of a strike is to pit the collective action of employees against the economic power of an employer. In the private sector, the economic power of a business is measured by its ability to make a profit. The strength of a union is measured by its ability to restrict the work of its members. By restricting the work of its members, a union can force an employer to deal with it.

Current food stamp policy uses public money to support voluntarily and temporarily, unemployed, private sector workers who seek only personal gain from their job action. The alleged sufferers have actually risked very little; they have merely traded private sector income for public welfare. That isn't quite an even trade, but the assurance that the family will have food on the table, strike or not, could be encouragement for strikers to sit back and wait for management to give in, rather than compromise on their demands. From the Government's point of view, people who were once gainfully employed are now encouraged not to be. Private industry construes food stamps for strikers as a show of favoritism on the part of the Government-and it is. Strikers are aided financially, so that they will not feel the strain of a strike and can hold out for their demands, but where is the aid for the employer so that his business will not be wiped out in the course of a strike against him?

In light of the above, we can see that, by allowing strikers to receive food stamps, the Government is working against itself, against private sector industry, and aiding the strikers in a way that will encourage them not to be fairminded and willing to compromise in the future. So, not only is the Government doing harm at the time of the strike, but it is sowing seeds for more damaging future strikes in private industry. National labor laws are neutral on this subject, and it is clear, that by taking a stand for neutrality, the Government has inadvertently tipped the scales against private sector employers, and ultimately, against the economic welfare of our country.

In a recent newspaper article by Mel Triola, who is a local official of the Logan Coal Operators Association in Logan County, W. Va., he said that during the miners strike previously mentioned, the Department of Welfare of West Virginia encouraged miners to continue a wildcat strike by issuing them food stamps. Later on, PSRC learned that when news of a wildcat strike got around the town, the local welfare office called the union office and