U.S. SENATE, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY, Mr. JOHN FREDERICKS, New York State Department of Social Services, DEAR JOHN: I enjoyed seeing you and hearing your testimony on March 16. I found your testimony most helpful. As Chairman Helms mentioned, witnesses might be asked a few additional questions for the record. I would very much appreciate your providing answers to these questions by April 3, 1981. Question No. 1. Would you support reinstating the purchase requirement, in whole or in part, in the food stamp program? If not, why not? Answer. This Department would not support a reinstatement of the purchase requirement. It was long our position that the purchase requirement served as a deterrent to program participation by those most in need of the program's benefits. Experience since the purchase requirement was eliminated has proven our position true. The number of elderly in the program has increased 32 percent overall, and in rural areas, participation increased by 19 percent for all households. In addition, participation by public assistance households has also risen appreciably since the purchase requirement was dropped. Reinstatement of the purchase requirement, while it would reduce overall program outlays, would do so at the expense of those most vulnerable, i.e., elderly, rural poor and public assistance households. Question No. 2. What would be your reaction to administering a dual program-with no purchase requirement for elderly and disabled participants and a purchase requirement for everyone else? Would this result in higher administrative costs than restoring the purchase requirement for everyone? Answer. This Department would also oppose reinstatement of the purchase requirement for all households, even if it excluded the elderly and disabled. Currently, more than 50 percent of participating NPA households contain a member aged 60 or older. Operating a dual program would be complex, costly, and error prone. While the administrative costs of reinstating the purchase costs, for some part of the eligible population would conceivably be less than for all at first blush, it may in fact be more costly. Maintenance of dual systems capability would, I believe, be more costly. In addition, the programmatic costs in erroneously issued benefits would also be a major factor. Question No. 3. When you and Mr. Harwick were asked about the administrative costs of restoring the purchase requirement, one of you mentioned that a return to twice-a-month issuance would add to costs. Are there not other cost increases which would be incurred? Are there potentially significant additional costs in paying banks or other issuance agents for cash transactions they would have to perform every month (or perhaps more often) with most food stamp recipients? Also, please comment upon the possible problem of being able to find enough issuance agents. Given the stringent provisions of the 1976 Food Stamp Vendor Accountability Act, would it be difficult to find enough vendors to insure full accessibility to the program? Answer. Restoring the purchase requirement and returning to twice-a-month issuance would double issuance costs immediately. We expect that banks in New York State would insist on increased transaction fees to cover additional workload occasioned by increased Food Stamp inventory maintenance and record keeping. In addition, banks would again be required to handle cash which should be deposited in United States Government accounts. Cash flow problems, a major concern before elimination of the purchase requirement, would again be a major issue. If the purchase requirement were restored, many more Food Stamps would be required to be in circulation with the incumbent problems of inventory control, theft, misuse, and loss exacerbated. USDA's costs to maintain adequate coupons in circulation would surely escalate as well, with ever-rising printing and distribution costs. What I see as a major problem with a restoration of the purchase requirement is bank participation. Generally, banks do not care to have our clients in their facilities at all, and we would expect increased resistance from them to continue participation as well as demand for higher transaction fees. Question No. 4. Do you favor the President's proposals to freeze the standard deduction and the upper limit on shelter cost deductions? What would be the impact on New York State if the shelter deduction maximum were frozen? Do you know what percentage of participants are already at the shelter deduction maximum? Answer. While this Department does not advocate freezing the standard deduction and maximum shelter deduction, this would be one of the less painful approaches to reduce overall benefit outlay. I have included Mr. Harwick's March 10, 1981 letter to Ms. Feibel (Exhibit I) that gives detailed information on the shelter cap. It is significant that 63.2% of NPA nonaged households receive the maximum shelter allowance now. Question No. 5. What is your reaction to setting a gross income eligibility limit at 130 percent of poverty? At 115 percent of poverty? Would either or both of these proposals pose significant work disincentives in New York State? Would either result in some working people having less disposable income, after taxes and work related expenses are considered, than persons with no income who receive a combination of AICD and food stamp benefits? Answer. Setting gross income eligibility limits at 130 percent of the poverty level would not have a major negative impact on New York's Food Stamp caseload. We estimate that approximately 19,000 households would lose their eligibility in New York with a resultant saving of $20 million a year in benefit outlay. Setting maximum gross income levels at 115 percent would have a significant negative impact on our caseload. I have attached, for your convenience, a chart (Exhibit II) which shows the current gross income distribution for NPA cases in New York City. I will attempt to get an analysis of the impact of a 115 percent gross income limit on New York City's NPA caseload to you by April 15. We are unable to produce this for upstate districts. However, since New York City represents 70-80 percent of the caseload, you should be able to extrapolate from City data for Statewide impact. Establishment of a gross income eligibility cutoff, might pose some work disincentive for marginal income households. I do not feel the disincentive would be significant, however, and am more concerned with the disposable income notch which would be created. Establishing a gross income limit to the program is a relatively clean method for reducing participation. The problem with this approach is that it creates a significant notch between eligible and ineligible households. For example, the attached budget (Exhibit III) shows a household in New York City with an earned income of $11,000. This household would currently be eligible for $73 in Food Stamps each month; under the Administration's proposal, this household would be cut off the program. Thank you for your prompt response. Sincerely yours, Attachments. ROBERT J. FERSH, Professional Staff Member. 79-755 O - 81 - 21 DEAR MARGARET: Here is the information you requested on the shelter cap. Please call me if you need other information. Sincerely, JOHN L. HARWICK, Director, Food Stamp Bureau. MARCH 5, 1981. To: John Hardwick. From: Ruth Lowell. Subject: NPA Excess Shelter Cost. Attached is the table requested by Margaret Feibel of Senator Moynihan's office. It shows monthly excess shelter costs plus dependent care costs by $25 intervals for the two types of NPA food stamp households in New York City as of February 1981. Households containing one or more persons aged 60 or older or in receipt of SSI or Social Security Disability payments have no cap on excess shelter costs. For the rest of the caseload, on the other hand, a cap of $115 is applied to the sum of excess shelter costs plus dependent care costs. Thus, 63.2 percent (34,799) of these "other" households, whose excess shelter plus dependent care costs were higher than $115, had their costs reduced to the $115 cap in their food stamp calculation. For households billed separately for fuel and/or utilities, a $235 standard is substituted for the actual costs when the actual costs are below the standard, tending to place these households over the $115 cap. Of all NPA food stamp households residing in private housing, 62.7 percent pay separately for fuel and/or utilities. PRESENT DISTRIBUTION OF MONTHLY EXCESS SHELTER COSTS PLUS DEPENDENT CARE COSTS BY TYPE OF NPA FOOD STAMP HOUSEHOLD IN NEW YORK CITY, FEBRUARY 1981 Notes: Excess shelter costs include utility/fuel standard of $235 for households billed for utilities or fuel when the actual amount billed is lower than the standard. Dependent care costs higher than the $115 allowable maximum are entered as $115. Source: New York City NPA food stamp file, February 1981. Prepared by Bureau of Policy Analysis and Development, Mar. 5, 1981. |