this magnitude be enacted in the reauthorization of the Food Stamp Program for which this Committee has responsiblity? There may be several approaches that are not cumbersome nor which would make program administration more complicated than it already is.

One of these may be to redefine the gross income eligibility to such a level that only the lowest income households would be eligible for benefits. Based upon the assumption that persons with $5,000 of annual income receive 85 percent of the program's benefits and there will be no adjustments that take into account cost of living increases, we estimate that program expenditures for fiscal 1982 would be $10.37 billion. The enactment of such a stringent eligibility standard would probably result in the complete loss of eligibility for 40 percent of the households currently receiving food stamps or about 3,100,000 families. Let me hasten to add that neither the Council nor I are recommending such a drastic action; it is only mentioned because it is straightforward and would further complicate program management. Another possibility is to simply reduce benefits for all households in a pro rata amount. The required reduction would be 14.5 percent for all households to keep expenditures at the targeted $10.4 billion.

Finally, as we understand it the Administration has recommended changes in the authorizing legislation that would reduce 1982 program costs by an estimated $486.8 million. To achieve total savings of $1.8 billion the magnitude of either of the above approaches could be lessened and other changes could be accomplished in the reauthorization process or through regulatory improvements.

It is important, however, for the Committee to realize that the tireless tinkering with the minute details of the program may not produce the desired results-cost containment-and could even result in greater administrative costs.

STATEMENT OF MARY P. LOEPP, PROGRAM STAFF DIRECTOR, ECONOMIC SERVICES, DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES, STATE OF FLORIDA The food stamp caseload in Florida has grown 51.5 percent in the 24 month period from January 1979 to January 1981. It has expanded to approximately 10 percent of the State's total population, almost one million people, representing a $450 million annual expenditure. This situation, as many here are aware, has been impacted on by the influx of approximately 140,000 Cuban and Haitian entrants. Seventy thousand Cuban and Haitian entrants and refugees received food stamps in August 1980. This growth has strained the capacity of our administrative structure in providing quality service for eligible recipients while at the same time protecting the integrity of the program. It has brought several problems into focus, some of which I would like to briefly review:

1. Program error and abuse, on the part of recipients and agency staff, is more prevalent than it should be. A review of the Florida Food Stamp Program, conducted in November 1979, by the State Auditor General, concluded that 15.8 percent of the food stamps issued in the State, during the test month, were issued in error with a high probability of fraud. This resulted in a potential improper issuance of approximately $4,000,000 in food coupons. Though a recent audit of the Dade County Food Stamp Program (whose caseload represents one-third of the State's total program) discovered a slightly smaller rate of issuance errors (13.3%), the amount of loss involved is still excessive.

This error rate is a direct reflection of inaccurate or false reporting of income, savings and checking accounts, shelter deductions, utility allowances and household size and composition. With the exception of income, Federal regulations currently in force prohibit verification of these factors of eligibility, unless there is a reason to question the validity of the information provided by the applicant. In the case of expedited services, households who receive food stamps within three days from the date of application because of immediate need, even income cannot be verified until the next month if such vertification will prevent issuance of stamps within the three day requirement.

In December 1979, Florida requested waivers from USDA to permit the State to require documentation of factors of eligibility, other than income, which contribute to the value of the coupon allotment. We further requested waivers to allow the State to control the amount and number of coupons replaced as a result of loss or theft, and we requested a waiver to permit us to verify residency and identity prior to certification. On July 22, 1980, eight months after the date of our request, USDA denied the requests on the grounds that they did not have such waiver authority. We are encouraged by the recently issued USDA proposed regulations which will enable the states to implement all of the verification procedures we had previously requested by waiver, and to place substantial controls on the number and value of replacements of lost and stolen stamps.

Florida has already implemented an income matching system which compares income reported by recipients to earned income, unemployment compensation, and workmen's compensation benefits reported by employers. We are in the process of developing a similar match of reported SSI, SSA and AFDC income with corresponding administrative records. The recent Federal regulation permitting the State to require a social security number for all members of a food stamp household enabled these matching systems to be developed.

Concurrent with tighter procedures for verifying reported information, the State is implementing a systematic employee selection, training and monitoring program to reduce agency error. State policy requires a thorough background check be conducted on applicants for food stamp positions. New employees are fingerprinted and cleared through the local police department to determine any past convictions which would indicate a lack of suitability for employment as a food stamp eligibility

worker or cashier.

All new eligibility workers must complete a two week training program and pass a comprehensive examination before they are permitted to certify the eligibility of a food stamp applicant. Workers and supervisors who are already employed will be required to participate in refresher (in-service) training on a regular basis and pass a series of policy and procedure examinations.

A food stamp monitoring system has been organized which requires each level in the state administrative structure to conduct frequent policy and compliance monitoring of food stamp operations. A corrective action program has been initiated to plan, implement and evaluate activities to remove deficiencies discovered in the monitoring process.

Florida has implemented an effective fraud detection and prosecution program through the Office of the Auditor General. While we believe that the most effective way to correct program error and abuse is to stop it before it happens, the work of the State's Division of Public Assistance Fraud has had a positive impact on deterring abuse.

2. Instability of the Food Stamp Program and lack of flexibility at the State level have seriously impaired operational effectiveness and efficiency. In the past 12 months USDA/FNS issued six new regulations and approximately 150 policy directives which required a change in operational procedures. Most of these changes required revision of manuals, retraining of staff, reeducation of recipients, and, in some instances, reprogramming of computers.

Contributing to the burden created by rapidly changing policies are the constraints which USDA has placed on the states to prohibit them from making independent operational or policy decisions. Though we support the need for uniformity throughout the country in major program policy, we see no reason why all policy interpretations, manual revisions, forms, special reporting requirements, and operational procedures determined necessary by the state for their own administrative and informational needs must require prior approval by USDA.

USDA dictates the specific functions assigned to state food stamp staff, the priorities for use of staff time, and the format for corrective action. Prior approval of all training materials, outreach posters, and computerized forms must also be obtained. We believe USDA/FNS concentrates too heavily on process issues, as distinct from general policy direction, the provision of technical assistance, and evaluation of results. The effect of this concentration is that states cannot be held singularly accountable for administrative procedures which determine program effectiveness, and limited staff time is spent exchanging information and seeking approval on minute operational matters which should be the option of the state. 3. Inconsistency between related federally funded programs with respect to eligibility requirements, verification procedures, and recipient responsibility is the third problem I would like to mention.

The Food Stamp, AFDC and Low Income Energy Assistance programs all exist to provide financial support for low-income people. In Florida, as in some other states, these programs are administered by a single agency and serve an overlapping clientele. Though we have taken steps to simplify administration and provide rapid service for applicants and recipients, such as the joint processing of AFDC and Food Stamp applications, it is impossible to make even these measures effective because of the variations within programs, many of which do not serve an essential program purpose. Let me cite a few examples:

The Food Stamp Program, by Federal Law, limits the amount of liquid assets allowable for eligibility to $1,500 for any household and $3,000 for a household of two or more members, one of whom is age 60 or older. The AFDC program, by State law, limits resources to $600 for one person and $1,200 for an assistance group. The Low Income Energy Assistance Program, by State policy, does not limit the amount of resources.

The Food Stamp Program, by Federal law, allows a deduction of 20 percent from gross income to compensate for work related expenses, income tax and social security tax. The AFDC Program, by Federal law, must allow a deduction of reasonable actual work related expenses from net earned income following disregards. Florida policy permits clients to chose to take a $30 standard deduction or to have reasonable, actual, verified work related expenses deducted.

The Food Stamp Program, by Federal law, allows a child care deduction, combined with an excess shelter allowance, for a maximum of $115. The AFDC Program, by Federal law and regulation, requires that reasonable actual expenses for child care be recognized as a deduction from net earned income along with other work related expenses. State policy permits clients to chose a standard deduction of $52 for one child, $104 for two children and $150 for three or more children, or to deduct reasonable, actual, verified child care expenses.

The Food Stamp Program, by Federal law, counts incentive grants received from the CETA or WIN programs as income. The AFDC Program, by Federal law, does not count these incentives as income.

The Food Stamp Program, by Federal law, exempts all recipients who are a caretaker of a child 12 years or younger from the requirement to register for work. The AFDC Program, by Federal law, exempts all recipients who are a caretaker of a child six years or younger from this requirement.

The Food Stamp Program, by Federal regulations, permits verification of income only prior to certification. The AFDC Program, by State policy, requires verification and documentation of all factors of eligibility which relate to the amount of the AFDC grant, whether or not the information reported by the applicant is questionable.

These examples illustrate the unnecessary complexity built into programs which are designed to serve the same people. A worker, responsible for determining the eligibility of an individual or a household for all types of public assistance, must learn several different criteria, and be retrained repeatedly as these criteria are revised. Control of administrative errors is almost impossible under these circumstances. Client frustration is magnified. The costs of manual revision, public information, forms preparation and production, staff duplication, and separate monitoring and information systems is immense.

Having indicated some of the major operational problems facing the Food Stamp Program, I would like to share a few recommendations for your consideration as you address the budget and the reauthorization of the Food Stamp Act.

First, states should be allowed to require documentation and verification of all factors used in determining eligibility. Program abuse can most effectively be controlled if it is caught before it happens. The AFDC program demonstrated that error rates related to program abuse can be substantially reduced through proper documentation of eligibility factors prior to certification.

Second, states should be given the flexibility to establish resource limits, exemptions from work requirements, standard deductions, and other factors of eligibility which are as uniform as possible across programs designed to serve low-income persons. Congress could and should establish minimum and maximum ranges. This procedure would give states the ability to have more uniform standards across programs if they felt this was appropriate.

Flexibility in the area of deductions from income could be extended to permit states to utilize a single standard deduction in lieu of the complex set of deductions which now exist. The choice as to application of a single deduction or a package of deductions should be at the state level because of wide variations in the characteristics of food stamp recipients, the availability of other resources which may or may not meet some of the needs covered by a targeted deduction, and the cost of living. Third, states should be given the authority in the Food Stamp Program to make operational decisions, set organizational priorities, develop and release materials, establish priorities among program functions, and issue policy clarifications without the prior approval of the USDA. This authority would enable the states to organize the delivery of services in the most efficient manner to meet state needs and to correspond to state organizational structures, including the consolidation of programs and staff functions where appropriate.

Fourth, the Federal government should encourage states to develop pilot projects to improve program operations, such as cashing out food stamps for SSI and AFDC recipients.

This appeal for greater state flexibility requires a reexamination of the Federal/ State partnership. We support and encourage Federal authority to establish an equitable program throughout the country. The Federal role, however, is to set specific intent with broad policy directions, provide technical assistance, monitor and evaluate performance, and require corrective action when needed. The State

role is to implement broad policy in the local context, establish operational procedures and program priorities, deliver the required services, carry out corrective action and monitor and evaluate results. The Federal role is primarily policy and results oriented; the State role is primarily operational and results oriented.

Finally, any reform of food stamp and other public assistance programs needs to be accompanied by an employment, training and economic development program targeted to those public assistance recipients who are able to work. A successful program must understand the skill levels of public assistance recipients, their previous employment history, their need for supportive services such as child care, transportation, and medical care, and the potential of the labor market to provide jobs which will pay a wage that will enable the participant to become economically self-sufficient. The present work registration requirements in the Food Stamp Program have not resulted in a significant number of job placements (nine percent of the persons required to register with the Florida State Employment Service). Workfare pilot projects may have a marginal impact on the number of food stamp recipients, but, according to the Ketron Institute, which is evaluating these projects, they have not been proven to be cost effective nor have they resulted in permanent, unsubsidized employment for the majority of participants.

Fifty-eight percent of the food stamp recipients who are registered for work have less than a high school education, and 58 percent of food stamp households are headed by women. The preliminary findings of a study being prepared for the Florida Legislature of employment and training strategies indicate that public assistance recipients want to work and do work. Their predominant employment pattern, however, is repeated entry and exit from a series of low-skill, low-pay occupations. These employment situations do not provide adequate income or job stability and offer little opportunity for advancement. The "welfare" cycle can only be terminated with an aggressive training, job creation and employment program targeted to public assistance recipients.

In conclusion I would like to comment briefly on the Administration's proposed reductions in the Food Stamp Program.

While we accept the probability of some reduction in the expenditures for food stamps, we are concerned with any reduction that shifts the cost of the program to the State, severely undercuts the level of support for the elderly and children, and acts as a disincentive to employment of adult recipients.

The Administration's proposal to prorate the initial allotment to a food stamp household depending upon the time in the month that a household applies for stamps, and his proposal to tighten administration through simplifying or eliminating excessive regulations should result in program improvements without serious impact on recipients.

The Administration's proposal to require determination of eligibility based on income received 30 to 90 days prior to the date of application, as opposed to projected income, has both positive and negative implications. On the positive side, this proposal would eliminate those individuals who recently had adequate income from employment and are likely to return to that employment in the very near future. It would also provide some check on the number of expedited determinations if the states are given authority to require documentation of income for expedited cases prior to certification. On the other hand, the longer the period of past income that is required for determination of eligibility, the greater the possibility of undue hardship on households which experience a sudden change in circumstances.

If the proposal includes mandatory monthly reporting of income, as it would almost have to do to be effective, additional State funds will be needed to implement this provision. The need for additional administrative funds is based on four assumptions: that households on fixed incomes will not be required to report income monthly; that states will be able to eliminate existing notification requirements if a monthly household report does not change a household's allotment, that food stamp households will bear the cost of postage related to monthly reporting, and that no more than 25 percent of the new households required to report will have a change in their allotment. Given these assumptions, the number of interim changes (monthly reports) which Florida alone would have to process would increase by 212,000 per month. The total estimated cost for staff to carry out this activity would be $6,800,000; the cost to the State at the current 50 percent matching rate would be $3,400,000. This proposal, more than any other, would shift the cost of the program to the states.

While we support the concept of retrospective accounting, we recommend that the accounting period not exceed 30 days, and that the increased administrative burden created by this proposal be funded 100 percent by Federal funds.

The Administration's proposal to cancel the adjustment of allotment levels to reflect projected food cost increases and to cancel the increased child care and

expand medical deductions for the elderly seems to impact most heavily on persons who are least able to meet their needs: the elderly, children, and the long-term unemployed. We estimate that this proposal will impact 164,000 of Florida's food stamp recipients who are elderly and/or recipients of SSI, and the cancellation of the additional child care deduction may serve as a disincentive to employment. The Administration's proposal to deduct the cost of school meals from the household food allotment for each child eligible for a school meal, if not implemented with caution, could reverse years of improvement in child nutrition. There are 300,000 school age food stamp recipients in Florida. The average cost of a school lunch in the Administration's proposal is $.65; the average food stamp meal benefit is only $.38. If the household food stamp allotment is reduced by $.65/day the household would loose $11.50 per month, per child. This would result in a total annual loss of benefits in Florida of $31,050,000. If, on the other hand, the household food stamp allotment is reduced by a value equal to the average stamp benefit per meal (38 cents), the household would loose $6.70 per month, per child. This procedure would result in a total annual loss of benefits in Florida of $18,090,000. If this proposal is approved, we strongly urge that the reduction per child not exceed the value of the average food stamp benefit per meal.

The Administration's proposal to set income eligibility for food stamps at 130 percent of the poverty level, or approximately $11,000 for a family of four, would eliminate 1.5 percent of the food stamp households in Florida, approximately 5,700 households. This proposal would not have any impact on administrative costs because the number of households affected is so small.

[Subsequent to the hearing on April 2, 1981, the following written questions from Senator Helms were sent to Ms. Loepp. Ms. Loepp's responses follow:]

Hon. JESSE HELMS,

STATE OF FLORIDA, DEPARTMENT of Health and RehabilitaTIVE SERVICES, Tallahassee, Fla., April 29, 1981.

Chairman, Committee on Agriculture, Nutrition, and Forestry, U.S. Senate, Washington, D.C.

DEAR SENATOR HELMS: This is in response to your letter of April 16, 1981 requesting follow-up information to my recent testimony to your committee. Enclosed are my responses to each of your questions.

Thank you for the opportunity to comment on Food Stamp issues.
Sincerely,

MARY P. LOEPP, Program Staff Director, Economic Services.

Enclosure.

Question 1. Income Cross-Checking. You indicated that Florida has initiated an income matching system. I understand that your program is one whereby food stamp recipients are "cross-checked" with the latest wage information reported quarterly for unemployment compensation purposes. (Such cross-checking with unemployment compensation records is already required by Federal law for applicants for the Aid to Families with Dependent Children program for determining eligibility; those states which do not have quarterly reporting use wage data furnished from the Social Security Administration.) Would you outline for the record Florida's experience thusfar is cross-checking the food stamp recipients-procedure, savings, if any, and so forth?

Answer. In Florida, the income matching system is accomplished at the time of recertification for food stamp households. Social Security numbers are matched with information in the Department of Labor's files on unemployment benefits, workman's compensation, and wages reported by employers. An individual income history is printed for all matches and mailed to the appropriate Food Stamp Office to be discussed with the household during its recertification.

For the period October, 1980 through February, 1981, 2,600 recertifications were referred to the Office of Fraud and Recoupment for investigation and possible prosecution, and 735 were terminated from the program because of unreported income.

Claims against households who received an overissuance due to unreported income are still being processed to determine the total amount of overissuance. Local staff have indicated that the system results in more accurate reporting of income by recipients. The Department is pursuing a publicity campaign to inform