We do have some regulations that would tighten up on that further and limit the number of times a person could get a replacement.

Senator HUDDLESTON. Is there any checking behind that affidavit?

With many people, that is routine, that is automatic?

MS. FROST. The person is required to file a police report.

Senator JEPSEN. If a person owns $2 million of property and has no income, can he receive food stamps?

Mr. HOAGLAND. That is correct, if you are talking about farmland, or other income producing property. That is excludable from the definition of the assets for the purposes of qualifying.

Senator JEPSEN. So that as long as you have a good CPA, and as long as you plan well and show no taxable income, or even some income below a certain amount, you are eligible for full food stamps?

Mr. HOAGLAND. That is correct. They would meet the asset test and then they would have the basic income test, in which case they would not qualify for full food stamps.

Senator JEPSEN. I said they showed no income.

Mr. HOAGLAND. No income whatsoever, then they would qualify for full food stamp benefits, that is correct, if they met the asset test also.

Senator JEPSEN. I think that is wrong. There are people in Iowa who are worth millions of dollars who are getting full food stamps. Mr. LYNG. The typical tax shelters do not work in hiding income from food stamps, income from tax exempt bonds, for example, would be income for the food stamp recipient, so there should not be very many of those.

I would think there is some fraud involved.

Senator JEPSEN. That is bad for the image of the program. I do not know how many there are. But we have reports on this that say this happens. It burns a lot of other people, who are on social security and fixed incomes, and I have reports on this. My daughter is a chief checkout cashier in a supermarket. She has been for a couple of years. She goes through this every day-people coming out with steaks or hams, while the social security recipient, the person trying to get by on the money they have, come out with hamburger, maybe.

The CHAIRMAN. One final question, Mr. Secretary, and then we will let you go.

What thought have you given to correcting, if it can be corrected, the theft from the mail, or the alleged theft from the mail?

Now, we had testimony last week that in one county in eastern North Carolina, Wayne County, which roughly averaged in that one county out of 100, there is a $4,000 a month loss to the Treasury in food stamps that are stolen or lost in the mails.

Now, if you spread that across 100 counties, obviously that is $400,000 a month.

That is in my State, and if you project that to the entire United States, this is a real problem.

Now, have you looked into the matter of whether able bodied people must come to get their food stamps instead of receiving

them by mail, and sending the others by registered mail to the disabled, and that sort of thing?

Mr. LYNG. I have not looked into it thoroughly, but I did talk to the administrator of the welfare department in Los Angeles County in California, which I think is one of the largest food stamp, if not the largest food stamp disbursing agency in the Nation. They simply do not mail any, because he said there was no way that they could handle the problems of theft.

Food stamps, being as totally convertible as cash, they insist that people take their authorization to purchase. They still call it vendors, even though they no longer are selling food stamps, but they have contracts with vending agencies, where people can go with their authorization cards and pick up their food stamps.

Now, to what extent that is being done around the country, I don't know.

Mr. HOAGLAND. Mr. Chairman, we do have regulations that we are in the process of designing which would establish some error tolerance levels before an area locality can go in and start mailing the ATP's. We have those on our fast track. We are trying to restrict those areas that have a high level of error and loss in the mails. We would not permit them to mail ATP's; people would have to come to the welfare office and pick up their food stamp ATP's.

Senator JEPSEN. Do you still have allowances in the budget of the administration's program for advertising, to get people to come in and apply for food stamps?

Mr. HOAGLAND. We are simply not asking for any additional funding for outreach activities.

We are leaving it to the States' discretion as to what outreach they want to carry on, but there will not be any mandated outreach requirements under our bill.

Senator JEPSEN. In 1978, in Iowa, while I was campaigning for office, they were spending $3,500 on newspaper ads to have people come in. They would tell them, "You may not think you are eligible, but you really are; come in and we will see that you get them." When the question was asked, "Why are you doing it?", the answer came back that they had so many that had to be picked up on the basis of a yearly amount.

Mr. LYNG. Senator, this is required by law. At one time the Department determined not to expend those funds and was taken into court under the illegal impoundment provisions, and we were forced to continue it.

Congress has some control over what we are required to do, and we are going to propose that we not be required to do as much. Senator JEPSEN. What would your recommendations be, would you recommend we continue to spend taxpayers' money to try to get as many people as possible into this program?

Mr. HOAGLAND. Simply leave it to the States' discretion as to whether or not they want to spend their money on this. We would not enter into any specific requirements.

Senator JEPSEN. I understood the Deputy Secretary to say that this was required by law.

Is this a law that should be changed?

Mr. LYNG. Yes, I think it should be.

The CHAIRMAN. Mr. Secretary, we have kept you here longer than we intended, but we appreciate you and your associates coming.

Mr. LYNG. Mr. Chairman, it is nice to be here.

The CHAIRMAN. With that, if there is no further business, then the committee will stand adjourned.

[Whereupon, at 11:20 a.m., the committee adjourned, subject to call of the Chair.]

PREPARED STATEMENTS AND SUBMITTED MATERIAL

STATEMENT OF HON. BOB Dole, a U.S. SENATOR FROM KANSAS

Mr. DOLE. Mr. Chairman, and members of the Agriculture Committee, I am pleased to be here again after my unexpected stay at Walter Reed Army Hospital. I have missed my duties here in the Senate, and it is with great enthusiasm and renewed energy that I resume my activities in committee.

Today, we are privileged to have with us a very distinguished group of witnesses who will present us with their point of view on the President's intended budget proposals and their ideas as to changes that should be made in the laws that provide the working framework for the Food Stamp program.

It is true that, over the years, this program has grown to tremendous proportions, but the size and cost of this program are merely a reflection of the unstable economic times in which we all live. Most of us are lucky that we do not have to depend upon benefits from Federal programs to help us make ends meet for the bare necessities of life. We should approach changes in programs such as food stamps with a great amount of sensitivity and appreciation for the circumstances affecting those less fortunate members of our society. We have been blessed with an abundance which is not prevalent throughout our society, and, at times, it is very difficult to comprehend the daily survival situation which millions within our population face.

The price we pay for programs such as food stamps merits a responsiveness to taxpayers' concerns. We in Congress have a responsibility to see that the money our citizens invest in helping their less fortunate neighbors is not squandered. Over the last several years, the Food Stamp program has been tightened considerably in order to address many of the fraud and abuse problems that evolved as the size of the program reached new heights. Nevertheless, it has become increasingly clear that we cannot save billions of dollars by merely attacking fraud and abuse in this program. These kinds of dollars are simply not to be found. This is not to say, however, that there is no more room for improvement.

We on the Senate Agriculture Committee welcome the input from the witnesses who come here to testify. As Chairman of the Subcommittee on Nutrition, I welcome you this morning. We need to listen to you and work closely with you and those who are familiar with the detailed workings of the Food Stamp program in order to effect changes that will save taxpayers money, while at the same time preserving benefits for those who need them most.

CONGRESS OF THE UNITED STATES,

HOUSE OF REPRESENTATIVES, Washington, D.C., March 16, 1981.

Hon. JESSE HELMS,

Chairman, Senate Agriculture Committee, U.S. Senate,
Washington, D.C.

DEAR CHAIRMAN HELMS: I am aware that your Committee will soon begin hearings on the reauthorization of the food stamp program.

As a member of the House Budget Committee during the 96th Congress, I had the opportunity to study this program closely, and discovered that the current provisions are badly in need of fundamental reform. The number of participants and the cost of the program have grown unabated over the last decade because the eligibility requirements have failed to focus benefits on the truly needy.

Reasonable reforms can be enacted to target assistance to those who need it, at considerable savings to the taxpayers. I have introduced legislation which outlines a number of these reforms.

I would like to submit the enclosed statement to be included in the record of the hearing on food stamps. Thank you in advance for your cooperation. With best personal regards,

Sincerely,

ELDON RUDD, Member of Congress.

STATEMENT OF HON. ELDON RUDD, A U.S. REPRESENTATIVE IN CONGRESS FROM THE 4TH DISTRICT OF ARIZONA

Mr. Chairman and distinguished members of the Committee, I have recently introduced legislation which would substantially reduce the costs of the food stamp program by targeting assistance to those most truly in need and removing other recipients from the rolls.

No federal program is in more need of fundamental reform and cost reduction than the food stamp program.

Countless working Americans have witnessed the abuses first-hand in grocery stores across this country. They have observed fellow citizens-many of whom are not much, if any, financially worse off than they-obtaining free groceries with food stamps supplied by the federal government.

Of course, food stamps are not free. Taxpaying Americans spent $9.2 billion for this program in fiscal year 1980. Costs are now predicted to be at least $11.1 billion, perhaps more, during fiscal year 1981 unless meaningful efforts are made to restrict benefits to only the truly needy and deserving.

The need for cost-saving reforms is further underlined by the fact that the fiscal year 1981 budget-once portrayed as balanced-will now result in a deficit of $50 billion or more.

The growth in the food stamp program has been astronomical. What started out in 1965 at a level of $34 million serving 435,000 recipients has skyrocketed to $9.7 billion, and in September of 1980 served 22 million, or one out of every ten Americans. Congressional Budget Office's projected cost for fiscal year 1982 is now $12.5 billion and the current budget request for fiscal year 1982 is $12,882,000. During the past four years, the Carter Administration and the Democratic leadership in the Congress have been totally unresponsive to the need for reform in this program. President Reagan has recognized the pressing need to revamp the food stamp program and has recommended savings in his budget amendments. These are a step in the right direction, but I believe that further savings can be realized.

I hope this legislation can serve as a focal point for meaningful and long overdue reform as reauthorization is considered. This list is not comprehensive, but does present a number of proposals which deserve serious consideration by those truly interested in making the food stamp program more responsive to recipients and taxpayers alike. The CBO estimates that the changes made by the bill would save $3.7 billion from an otherwise estimated cost of $12.5 billion in fiscal year 1982.

PURCHASE REQUIREMENT

A great part of the growth in program costs of the food stamp program is attributable to the decision by the Congress in 1977 to eliminate the purchase requirement as a prerequiste for participation.

Under the purchase requirement, participants with income were expected to contribute a small percentage of their incomes in exchange for food stamps representing larger denominations in value. Households with little or no income were not required to pay anything. Higher income households were required to pay up to 30 percent of their net income for food stamps.

The Congressional Budget office has estimated that many low and lower-middle income families have chosen to reallocate their limited incomes so as to select those commodities which are subsidized, thereby continuing to maintain their real purchasing power in non-subsidized goods.

The CBO noted in an April 22, 1980 memorandum that since the elimination of the purchase requirement, the fool stamp program has become more of a direct income transfer program, directly substitutable for non-food purchases. Hence, the propensity to participate in the program increases with relatively high rates of inflation in non-food, but still basic items.

In other words, low and lower-middle income families are responding to inflation by enrolling in the food stamp program in order to spend what money they have on other necessities-and sometimes unessential items-which are not subsidized by the Federal Government.

The Congressional Budget Office has estimated that the full restoration of the purchase requirement, at the same level as when terminated in 1977, would reduced food stamp costs by $774 million in fiscal year 1981.

Surely, the Congress should not be so blind to the post-1977 escalation of participation but to admit that the total elimination of the purchase requirement was a mistake, and that it should be reinstituted.