Michigan has joined the electronic benefits transfer parade and plans to include smart cards in its program.

The state is seeking proposals from contractors for a system covering 520,000 households receiving cash assistance; food stamps; and women, infant, and children benefits. Bids are due April 18.

Conventional magnetic-stripe cards will be issued to food stamp and cash assistance recipients. Households in the WIC program will get cards with computer chips.

Michigan is one of a handful of state governments using chip technology. Ohio and Wyoming are rolling out their own chip programs, while North Dakota, Idaho, and Nevada are joining Wyoming in the smart card Health Passport program, which provides government benefits for health services.

Maureen McNulty of Michigan's Department of Management and Budget said the state opted for two payment technologies to reduce costs. The more expensive chip cards will be issued only to a small portion of households.

Ms. McNulty said the state expects a pilot to begin in Jackson County by February 1998, with about 7,200 households using cards to buy food and withdraw cash from automated teller machines. A statewide rollout could begin by the following fall. More than $138 million per month in benefits will ultimately be transferred through point of sale devices and ATMs, she said.

In anticipation of any challenges to the contract award, similar to those that occurred elsewhere, Michigan built an appeal process into the procurement policy.

Elsewhere, Alabama has become the first member in a consortium of eight southern states to implement an EBT program.

Working with the Treasury Department, the Southern Alliance of States designed a program that delivers both state and federal benefits on a single card.

The contract, estimated to be worth $400 million over seven years, was awarded to Citibank EBT Services, a unit of Citicorp.

On April 1, 42,000 households receiving food stamps and cash assistance in three Alabama counties began using the Benefits Security Card, emblazoned with an American flag.

Eligible recipients who get federal Supplemental Security Income benefits can use the same card to access their funds at ATMs.

"We're the first state in the nation to combine federal-direct and state-administered benefits," said Gene Gandy, EBT director for Alabama. He said he was expecting "a hurricane of problems" but was surprised at the smoothness of the implementation.

In June, said Mr. Gandy, the Treasury Department will conduct a mass marketing campaign informing federal recipients in Alabama about the program. Recipients will have the choice of receiving Social Security and other federal benefits through direct deposit into a bank account or via the Benefits Security Card.

The Southern Alliance requires point of sale and ATM networks participating in the program to follow operating rules developed by the National Automated Clearing House Association. The Quest debit card mark will identify participating outlets to cardholders, who will be able to use any Quest terminal to receive benefits, even across state lines.

Mr. Gandy said Southern Alliance member Missouri will begin implementation in May, followed by Arkansas and Georgia in July and Florida in October. Kentucky, North Carolina, and Tennessee are also part of the alliance.

Alabama's program will expand to 240,000 recipients by October. A total of $552 million annually in food stamps and cash assistance will pass through the system. Mr. Gandy does not have the federal benefits total, which will grow monthly.

In October, the state plans to test card-based delivery of WIC benefits to 600 families.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.