This year 26 million people will receive monthly food stamp benefits, at a cost to taxpayers of more than $24 billion.
Despite the increased emphasis on self-reliance as directed by President Clinton and Congress through the Personal Responsibility and Work Reconciliation Act of 1996, analysts anticipate there will be little impact on food stamp rolls.
Why? Because the food stamp program is exempt from the 1996 Congressional mandate, thus paving the way for one of the most wasteful cyber-funding agendas in recent federal history-the electronic transfer of food stamp benefits.
Some background: The food stamp program is perhaps the most paper- intensive of federal benefits programs. More than three billion food stamps are printed yearly and distributed monthly in coupon booklets to more than 10 million households.
Each month 210,000 food retailers receive the coupons in exchange for food items. The retailers carry stacks of food stamps to 10,000 participating financial institutions, which credit the store accounts for their value.
The banks send the food stamps to a Federal Reserve Bank, which credits the banks' accounts, bills the Treasury, and destroys the coupons. Food stamps cost federal and state governments $400 million a year to print, ship, store, distribute, reconcile, and destroy.
How to fix the problem? The Department of Agriculture has dictated the outmoded, paper-based food stamp program will be replaced by proven, cost- effective technology-electronic benefits transfer.
This concept already has proven relatively successful and cost-effective in the private arena. We are all familiar with the use of banking cards to debit our checking, savings, or credit card accounts.
Philosophically, the use of electronic benefits transfer to convey food stamp benefits seemed a valid solution to the paper morass. Each month the states would credit the food stamp allotment into an individual account, and the recipient would simply present the card to authorized food retailers. The purchase would be deducted from a person's food stamp account.
To sell the concept to federal officials, the USDA touted savings. Delivering benefits electronically, it said, would cost taxpayers 6 cents per transaction versus 36 cents for paper.
In New Mexico and Minnesota, pilot projects to replace paper benefits systems confirmed electronic delivery could reduce costs. The Agriculture secretary reported that EBT saved 24% of operating costs in New Mexico and 3% in Minnesota. Stores also benefited because processing costs to retailers dropped.
Finally, banks that participated in the pilot witnessed costs plummeting by as much as $5.48 per $1,000 of redeemed benefits. This, coupled with vague estimates that food stamp fraud would be reduced 81% in Minnesota, made it all seem fiscally palatable.
The federal government, with the goal of implementing EBT nationally, sold the concept with a simple approach: States that do not begin to implement EBT will lose federal funds.
The question then became the endgame. The Agriculture Department eventually wants a person receiving food stamp benefits in, say, North Dakota, to be able to buy groceries in Florida. And although there is some logic to the capability-searching for jobs and attending to an ailing relative are trendy arguments-among cynical insiders, irreverent comments persist: "Have you suffered a North Dakota winter?" or "Is Disney World a food stamp retailer now?"
Naysayers aside, the die was cast. The food stamp program would indeed become electronic, and the program, under threat of sanction, would be expanded to all states.
About five years ago, when the notion of a nationwide electronic food stamp program was but a twinkle in the Agriculture Department's eye, initial discussions with state agencies were focused on the most cost- effective means of implementing the national plan.
Two schools of thought quickly emerged. One faction, which included me, proposed enlisting the services of an existing corporate partner, such as MasterCard, Visa, or American Express. States would qualify someone and wire the funds into the client's individual account. Existing laws and procedures would regulate the account, and, using the existing electronic infrastructure, funds would be immediately available nationwide.
Further, other federal-state administered programs such as child support, the WIC (Women, Infants, and Children) supplemental food program, and cash assistance for families could be phased into the account.
To close an account or reduce benefits, states needed simply to adjust the flow of monies to the corporate partner, whose incentive would be account transaction fees, divided equally between program administrative costs and the client.
But this, following Department of Agriculture protocol, emerged as the minority school of thought. Indeed, why employ existing technology when one can reinvent one of the largest wheels in America's public assistance culture? As mandated by the department, the approach that is currently, and painfully, being required involves every state's designing its own stand- alone EBT system.
Once all states have their own programs up and running, the Agriculture Department will connect regional systems so that a client in, say, New Mexico can access his or her account in Louisiana or Oklahoma.
Ultimately, when all the states in Agriculture's seven regions are operating, the department will link the regions, finally providing that client in North Dakota the opportunity to access benefits in Florida.
This method, particularly when contrasted with the relative simplicity of the corporate partner strategy, seems curiously myopic. Following Agriculture's approach, each state will be required to seek new EBT laws from their legislatures; to design, release, and evaluate requests for proposals; to award contracts; and to develop new quality control evaluation procedures.
Will it save the states time and money? Does it promote economy and efficiency in government? Is it really progress? Not really. In the final analysis, this is just another case of federal administrative tangos, of states swaying in passive obedience, and of the obviousness of a solution being exceeded by only the frequency with which it is ignored.
