have found that five out of six families buying food at the Thrifty Plan cost level do not get 100 percent of the recommended daily allowance for nutrients. Virtually all families receiving food stamps spend additional amounts on food in order to get by. They do not by any stretch of the imagination "live high off the hog."

AFSCME is gravely concerned about the devastating impact that the proposed reductions will have upon those millions of Americans who will either be forced out of the program, or whose benefits will be lowered, if the proposals are approved. Many of them will sink deeper into the throes of deprivation, malnutrition, and hunger. The suffering that especially the children and elderly will endure and the costs which will largely have to be borne out of public funds in meeting their deteriorating health needs are too high a price to pay for the sake of cutting back federal spending. Empty stomachs and the agony of hunger will become the cruel and inhumane outcomes of injudicious and callous actions that are taken to get the budget closer into balance.

Yet this is precisely what we are convinced will happen if these proposals are approved. For fiscal year 1982, the administration is recommending a $1.8 billion cut in the food stamp appropriation by implementing a series of changes which are intended to: Drop nearly 500,000 households (about two million persons) from the program. Reduce the number of households and persons entering into the program. Reduce food stamp benefit levels.

AFSCME has subjected each of the proposed changes to intensive scrutiny. We urge the committee to disapprove the proposed revisions which follow:

1. PLACING A GROSS INCOME LIMIT AT 130 PERCENT OF THE POVERTY LINE

Currently, food stamp households must have net incomes below the poverty line ($8,450 for an urban family of four.) Because a number of deductions are presently allowed, the gross income can be, and is, somewhat higher.

The administration proposes to eliminate all households with gross incomes above 130 percent of the poverty line. For an urban family of four, the eligibility cut-off level would be $10,985. This change alone will drop one of seven households with incomes from the program.

We must bear in mind that the amount of food stamps a family receives is based on available income. A family of four with no income at all now receives about $210 a month in food stamps; if the family's net monthly income is $500 ($6,000 a year), it receives $59 worth of food stamps each month; if its net monthly income is $600 ($7,300 a year) or more, it receives nothing. In other words, the higher an eligible family's income is, the smaller is the amount of food stamps it receives.

For the vast majority of families with earnings who are in the program, the reduced amount of food stamps they receive is vital to them in meeting the minimal nutritional needs of the members of their families. If this benefit-however small it may be is lost, their ability to cope will be seriously impaired.

In today's world, a family of four with a gross annual income of $11,000, that is living in an urban area, is struggling to survive. It is not far removed from actually living in poverty. To the extent that we increase the heavy burdens it already bears, to that extent will it fail in the struggle.

We recommend that this proposal be rejected and that the present method of treating earned income for food stamp recipients and applicants be continued.

2. REDUCING FOOD STAMP BENEFITS FOR ALL FAMILIES WITH CHILDREN RECEIVING FREE SCHOOL LUNCHES

The administration is proposing to reduce the food stamp allotments for households to reflect the value of free school meals. Its rationale for this Draconian action is that these families are receiving duplicate benefits because the Federal Government is subsidizing four rather than three meals each school day. The administration is wrong.

Since food stamp benefits now average only forty-four cents per person per meal, it is just not correct to view the free school lunch as duplicative by providing a fourth meal. Families cannot get three solid meals a day from the food stamps they are allotted under the thrifty food plan. Ironically, when the Department of Agriculture adopted the thrifty food plan in 1975, the Ford administration cited the availability of free school lunches as a reason for its decision to implement the spartan thrifty food plan.

There are other serious deficiencies in this proposal. It assumes that a child enrolled in a school with a lunch program receives a lunch each day, and in some cases breakfast as well. As a result, food stamp benefits will be lowered even though the child may be absent from school for a variety of reasons. Furthermore, the adoption of this proposal will complicate the administration of the program enormously even though the administration is saying that it is determined to simplify and streamline programs.

AFSCME recommends that this proposal be disapproved.

3. REPEALING PROVISIONS OF THE 1980 FOOD STAMP AMENDMENTS

Food stamp benefit levels are adjusted each January 1 in accordance with changes in food prices. Earlier, they were adjusted twice each year, on January 1 and July 1.

The administration is proposing to use food price increases through the previous September in making this adjustment each year. This means that benefit levels-in terms of actual value-will lag well behind food prices. This method of basing benefits adjustments on September 100d prices was actually implemented last January. However, under the 1980 food stamp amendments, more current food price data is to be used in fiscal year 1982 and in future years. The administration wants to delete this provision of the law. Further, it is also proposing to repeal increases in the medical deduction for the elderly and disabled, and in the child care deduction that were scheduled to take effect in fiscal year 1982.

These proposed actions deny the full level of benefits to which food stamp households and individuals would have otherwise been entitled by law. We recommend that they be rejected.

4. BASING ELIGIBILITY AND BENEFITS ON INCOME DURING A PRIOR PERIOD RATHER THAN ON CURRENT NEED

As in AFDC, the administration proposes to require the use of the retrospective method in determining eligibility. Eligibility would be based on income during a priod period-two months, three months, or as long as a year.

This is a pernicious method. It means that current need is ignored. For example, if a family experiences a sudden loss of income because the bread-winner is laid off, it could have to wait one to three months, perhaps longer, before being able to receive any food stamps, regardless of how destitute it may be at the time it applies for enrollment. The current prospective method, on the other hand, is based upon the applicant's actual circumstances at the time of application and a projected estimate of any future income. It is far more responsive in meeting human needs.

We strongly recommend that the retrospective method be rejected.

5. ELIMINATING THE INFLATION ADJUSTMENT ON THE FOOD STAMP MAXIMUM-INCOME SHELTER DEDUCTION AND ON THE STANDARD DEDUCTION

Food stamp households are currently allowed a monthly standard deduction of $85. They are also given a deduction for the amount by which their shelter costs exceed 50 percent of their net incomes, up to a maximum of $115 a month. The standard deduction and the $115 maximum of the shelter deduction are presently adjusted once a year to keep pace with inflation.

The administration is proposing to end the annual inflation adjustment and to freeze the deductions at their current levels, despite the fact that heating bills continue to rise sharply. As a result, many households with increased shelter costs-and decreased funds available for purchasing food-will be de nied an increase in their shelter deduction and an adjustment in food stamp allotments to reflect their loss of disposable income. This proposed cut will hurt all food stamp households, including the poorest.

AFSCME recommends its disapproval.

As concerned as we are over the proposed actions to which we have directed our recommendations, AFSCME has considerable anxiety over the funding crisis that looms in the immediate future for the food stamp program. It is, of course, precipitated by the appropriation ceiling that has been placed on the program. In order to avoid the disaster that will fall upon the 22 million persons who are participating in the program if benefits are reduced or eliminated during the

last half of the current fiscal year because there are no funds, we strongly recommend the approval as soon as possible of the $1.4 billion fiscal year 81 supplemental request for this program.

STATEMENT OF THE NATIONAL LABOR-MANAGEMENT FOUNDATION

The National Labor-Management Foundation has offices in Washington, D.C. and Louisville, Kentucky and represents business and industrial firms in the 50 states. It was chartered in Illinois in 1947 as a non-partisan, non-profit organization to provide research, education and information to develop clearer understanding and better communication among employees, employers, and the general public in labor-management relations.

The Foundation studies and supports federal legislation it believes will help bring about improved labor-management relations and better working conditions. We believe our laws should give every working man and woman the greatest possible opportunity to grow in his or her work and be compensated appropriately, and at the same time provide adequate protection for the rights of employers.

The food stamp program affects many employees and employers, directly and indirectly. It is for this reason that the National Labor-Management Foundation is presenting its views on the program.

The purposes of the Food Stamp Act of 1964, was to "make use of food surpluses and to provide improved levels of nutrition among low income households". The Foundation endorses the original intent of the program and supports a national policy to fight and prevent malnutrition and hunger.

Under the original act, standards of eligibility were established by the states. In 1965 one in 439 Americans received food stamps. In 1980 one in 10 received food stamps. In its first year, the food stamps program cost the federal government $30.5 million. By 1980 the cost had soared to over $9 billion.

This committee is now considering tightening food stamp eligibility requirements to get spending for the program under control. In this regard the Foundation urges the Congress to modify the eligibility standards for high income persons who walk off their jobs in a labor-management dispute. Past debates in Congress over the food stamps for strikers issue have been distorted by the power of union lobbyists and testimony ringing with cliches about children of strikers going hungry.

To claim that children will starve if strikers are denied food stamps is typical of union attempts to preserve their special interest at an unwarranted cost to the general public. Less than 22 percent of American workers belong to unions, yet union political and economic clout has enabled them to obtain many special privileges such as food stamps for strikers.. I strongly suspect, that if the majority of Americans knew that food stamps were doled out to workers on strike that public confidence in government would sink still lower.

Over the years, most labor unions have obtained higher wage rates and generally improved the lot of their members. Today American workmen are among the highest paid in the world. When union members vote to go out on strike, the majority of the workers are not poor. Instead, we have the unwarranted situation of people earning $15,000, $18,000 or even more a year, who qualify for government handouts. If people who work full time earning this kind of money cannot qualify for food stamps, why should people who voluntarily leave their jobs qualify? The Foundation does not object to individuals receiving food stamps during a strike if they were qualified prior to the strike.

Unfortunately our lawmakers have intervened in collective bargaining by making strikers eligible for food stamps. The balance of power in collective bargaining is upset and tilted heavily toward labor unions by a government subsidy in the form of food stamps. Taking food stamps away from strikers who are not otherwise qualified to receive them would not cause hunger and malnutrition among children of union families. It would not subsidize management but would help return the balance of power in collective bargaining to what it was before enactment of the food stamp program in 1964.

Prohibiting food stamp for strikers would strengthen the food stamp program in several respects. First, it could cut the cost of the program by approximately one quarter billion dollars per year and thereby help reduce the huge federal deficit. Second, it would help return government to a position of neutrality in

labor-management affairs by stopping a subsidy of one side. Third, it will help put a lid on the inflationary impact of upcoming union wage settlements by forcing labor and management to compromise on a reasonable contract within a reasonable amount of time. Those truly concerned about stemming the tide of inflation should consider the inflationary force of one-sided governmental interference in collective bargaining.

Finally, and most importantly, prohibiting food stamps for those who voluntarily leave their jobs would help restore public confidence in the program and in government in general. As an important first step, the National Labor-Management Foundation urges the Committee to amend the Food Stamp Act to prohibit food stamps for strikers. This reform would help direct the benefits of the program more directly and more equitably to Americans in real need of assistancethe elderly living on insufficient fixed incomes, the disabled. and victims of our current high unemployment rate who are actively, seriously seeking gainful employment.

The issue is clearly not one of children in a striker's family starving during a labor-management dispute. The fact is, union officials want their members to continue their standard of living during a strike. This is clearly an important bargaining weapon for union officials who need not worry about pressure from the rank and file to return to work.

In the light of these factors, it should not be surprising that unions are depending more and more on hand outs from the government to keep their members satisfied while officials bargain with management. Today, most union dues no longer go for strike funds, but for political purposes, union officials' salaries and other costs unrelated to collective bargaining.

Therefore, the reason for the great interest shown by union officials in the food stamp program is obvious. They are seeking to protect the practice of providing public assistance to support strikers which is rapidly becoming institutionalized regardless of its lack of common sense and rip-off of taxpayers. As time goes on, the argument that, "it has always been this way, so why change", becomes stronger and more frequently incorporated in the tone of union arguments. The real challenge to this Committee is to make a decision based upon facts. Since the 1930's the federal government has been trying to achieve equilibrium in the relationship between unions and managements. Consistent with this objective is a congressionally sanctioned policy that the federal government shall remain neutral in labor-management disputes. Archibald Cox summed up the reasoning for this posture when he wrote, "the conflicting interests of management and workers can be adjusted only by private negotiation, backed, if necessary, by economic weapons, without the intervention of law."

STATEMENT OF TIMOTHY M. SMEEDING, AMERICAN STATISTICAL ASSOCIATION RESEARCH FELLOW, AND ASSOCIATE PROFESSOR OF ECONOMICS, UNIVERSITY OF UTAH

POLICY OPTIONS FOR FOOD STAMP BUDGET REDUCTIONS

Mr. Chairman and Members of the Committee: I am Timothy Smeeding, an Associate Professor of Economics at the University of Utah, and currently a research fellow of the American Statistical Association advising the Census Bureau on methods for measuring and valuing in-kind income. I am not a Census Bureau employee and my comments and views should not in any way be interpreted as those of the Census Bureau.

My purpose today is to provide testimony as an expert witness on two matters of considerable importance to this committee: first, some mention of the strengths and weaknesses of new Census Bureau data on recipiency patterns for in-kind benefits; and second, an illustration of the usefulness of this data source in evaluating the budget reductions in the Food Stamp program which have either been proposed by the Reagan Administration or which have been proposed by others.

I. CENSUS BUREAU DATA ON RECIPIENCY OF IN-KIND BENEFITS

While the growth of noncash transfer benefits in recent years has been significant, little information on the demographic and economic characteristics of these beneficiaries has been available. In 1979 the Bureau of the Census began to plan an effort to collect information on households receiving these in-kind benefits. This activity was coordinated through the Office of Federal Statistical Policy and

Standards. The data Collection effort took place in March 1980 as part of the monthly Current Population Survey (CPS). Questions covering annual money income and work experience in 1979 were supplemented with questions covering a selected number of in-kind benefits.

Data were collected for a total of eight different types of noncash benefits. In the area of public noncash benefits six programs were covered. These were the Food Stamp Program, the National School Lunch Program, public or subsidized housing, Medicare, Medicaid, and CHAMPUS or other military health care.

As you know, the Bureau of the Census has recently released a preliminary report on noncash benefits which provides some very general statistics from the March 1980 CPS to serve as an introduction to this new source of data on noncash benefits. In addition to its written report, the Bureau also has made a computer data file available for public use. The data file will provide researchers and analysts with the opportunity to study in detail the noncash data which is of most interest to them. My testimony is designed to provide advice as to the ways in which this data should and should not be used to investigate the impact of proposed changes in the Food Stamp Program.

Although these data on noncash benefits provide important and previously unavailable information on the characteristics of households and persons receiving benefits, the data have some important limitations which must be kept in mind when applying it for policy analysis. One major limitation is reliance on gross annual calendar year (CY) 1979 money income to measure the economic status of households.' It should be kept in mind that, of the public noncash transfer programs mentioned above, only the School Lunch Program uses annual income to determine eligibility for participation. Almost all "means tested" noncash transfer benefits are based, instead, on monthly or quarterly income "accounting" periods. Households with periodically low monthly or quarterly income but relatively high annual income may legally qualify for benefits.

In addition, eligibility for benefits for most types of in-kind programs is based on "countable" income, i.e., gross income less certain types of excluded income and other allowable deductions. It should also be noted that most means tested noncash transfer programs, including the Food Stamp program, require an "asset" or "resource" eligibility test in addition to the income test. Therefore, low income alone does not guarantee eligibility. Because of such limitations the data cannot be used, for instance, to estimate the total number of households eligible for Food Stamps at some time during 1979 with any degree of accuracy. Measures of poverty status in the Census Bureau's Advance Report (and in this testimony) are based on annual money income, i.e. excluding the value of noncash benefits. If we were to maintain the current poverty needs standard, and include a measure of the recipient value of noncash benefits in income, poverty would be reduced below the states levels.*

A final limitation involves data quality. A detailed evaluation of the quality of the noncash benefit data from the CPS will be presented in a report to be released by the Census Bureau later this year. A preliminary evaluation of the data quality indicated general trends toward underestimation of noncash beneficiaries similar to the underestimation problems experienced for recipients of public cash transfer prograins. As compared to a USDA administrative databased estimate, approximately 88 percent of the total number of children receiving free or reduced price School Lunch benefits during 1979 are counted in the March 1980 CPS. A similar comparison indicates that the CPS accounts for about 75 percent of all persons who received Food Stamps in 1979, and a like proportion of the face value of Food Stamps benefits paid out. However, average values of Food Stamps received and the overall characteristics of the CPS Food Stamp population compare well with USDA estimates. Thus while some underreporting is present in the CPS data, it does not seem to be biased in any damaging way.

1 The CPS includes only the civilian non-institutionalized United States. Thus Puerto Rico is not included in the population covered by the survey. 2 The School Lunch Program eligibility requirements also allow for deductions from gross income.

3A "means tested" transfer program requires that the household's income and/or assets (resources) fall below specified guidelines in order to qualify for benefits. The means tested programs mentiond in this testimony are Food Stamps, Free or Reduced-Price School Lunches, publicly owned or other subsidized housing. and Medicaid.

The question of how many less people would be poor if these benefits were counted in income is not an easy one. An exploratory report measuring the effect of in-kind benefits on poverty which employs several different methodological approaches in valuing these benefits will be published by the Census Bureau later this year.