TITLE IV

NUTRITION

**SUMMARY OF IMPROVEMENTS TO NUTRITION PROGRAMS**

***Recommendations in Brief***

Simplify and modernize the Food Stamp Program to improve access and
better reflect the needs of recipients and States, while maintaining
continued focus on program integrity. Streamline other food assistance
programs to improve administration and efficiency of programs. Increase
support for healthy eating, including in schools and other facilities
that participate in food assistance programs.

***Problem***

The Food Stamp Program, established in 1964 and revised in 1977, is the
largest Federal nutrition program for low-income households. Over the
course of time, significant changes have been made in the program \--
most significantly, moving from stamps to coupons to electronic
benefits. Changes are needed in the law to allow simplification and
modernization of this program to keep pace with changes.

Additionally, requirements in other food assistance programs prevent
them from being run as efficiently as they could. Changes are needed to
allow nutrition assistance programs to effectively and efficiently serve
those in need.

Finally, obesity rates in this country continue at alarming levels. The
2005 Dietary Guidelines for Americans recommended higher fruit and
vegetable consumption levels for most Americans, yet only one in five
Americans consumes the recommended amount of fruit each day. Children
under 18 years of age generally consume 50 percent or less of the
recommended levels of fruits and vegetables. Providing increased fruit
and vegetable options in the food assistance programs can help to
increase consumption as well as improve the quality of many Americans'
diets.

***Recommended Solution***

The Administration is recommending a broad package of proposed changes
to the Title IV -- entitled "Nutrition Programs" -- to improve USDA
nutrition programs and better serve their beneficiaries. Following is a
list of the major components of the package.

***Food Stamp Program***

1.  Improve access to the working poor and elderly by excluding
    retirement savings accounts when determining eligibility, conducting
    a pilot to increase support to employed food stamp recipients,
    eliminating the cap on the dependent care deduction, excluding the
    value of Internal Revenue Service approved college savings plans
    from the resource limit when determining eligibility, and excluding
    combat-related military pay. These reforms are estimated to generate
    an additional \$1.38 billion over 10 years for participant benefits.
    (For further information, see the proposal entitled "Food Stamp
    Program: Working Poor and Elderly" on pages 87 -- 89.)

2.  Revise the name of the Food Stamp Program and de-obligate food stamp
    coupons to reflect that benefits are now provided electronically.
    Protect recipients from reimbursing States for overissuances that
    result from widespread systematic errors and hold States accountable
    for these errors. (For further information, see the proposal
    entitled "Food Stamp Program: Streamlining and Modernizing
    Proposals" on pages 90 -- 91.)

3.  Strengthen provisions to further improve program integrity by
    limiting categorical eligibility to those that receive only TANF or
    SSI cash benefits. Allow flexibility in the assessment of retailer
    fines in certain circumstances. Allow the Secretary, in certain
    egregious trafficking cases, to seize and transfer funds to the
    Treasury; prohibit the exchange of food purchased with food stamp
    benefits for cash. Authorize USDA to charge State agencies five
    percent of administrative costs if the State is more than fifty
    percent above the national negative error rate for two consecutive
    years. Remove the new investment option for States sanctioned for
    improper payments for three consecutive years. (For further
    information, see the proposal entitled "Improve Food Stamp Program
    Integrity" on pages 92 -- 94.)

4.  Strengthen efforts to integrate nutrition education into the food
    stamp program by recognizing that nutrition education is a component
    of the program and investing \$100 million to establish a five-year
    competitive grants demonstration program targeted at developing and
    testing solutions to the rising rates of obesity. (For further
    information, see the proposal entitled "Food Stamp Program:
    Improving Health through Nutrition Education" on pages 95 -- 96.)

    ***Other Food Assistance Programs***

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1.  Recognize the permanency of The Emergency Food Assistance Program
    (TEFAP) State plans and remove barriers for local organizations to
    more effectively compete to participate in the program. (For further
    information, see the proposal entitled "The Emergency Food
    Assistance Program (TEFAP)" on pages 97 -- 98.)

2.  Increase funding by \$27 million over 10 years to better reflect the
    actual administrative costs of the Food Distribution Program on
    Indian Reservations (FDPIR) and provide a structured method for
    allocating administrative funds among the Indian Tribal
    Organizations (ITO). Align nutrition assistance program
    disqualification policies to ensure that those barred from
    participation in FDPIR for intentional program violations are also
    disqualified from participation in the food stamp program. (For
    further information, see the proposal entitled "Food Distribution
    Program on Indian Reservations (FDPIR)" on pages 99 -- 100.)

3.  Exclude the value of the Seniors Farmers Market Nutrition Program
    benefits for tax purposes and when determining eligibility for any
    Federal or State means-tested programs; prohibit States from
    participating in the SFMNP if state or local sales tax is collected
    within the State on food purchased with SFMNP benefits. (For further
    information, see the proposal entitled "Seniors Farmers' Market
    Nutrition Program (SFMNP)" on pages 101 -- 102.)

    ***Promoting Healthy Diets***

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1.  Support school efforts to provide meals based on the most recent
    Dietary Guidelines for Americans. Invest \$6 million in mandatory
    funding to conduct a survey of foods purchased by school food
    authorities with Federal cash assistance once every 5 years. (For
    further information, see the proposal entitled "Promoting Healthful
    Diets in Schools" on pages 103 -- 104.)

2.  Provide new mandatory funding for the purchase of additional fresh
    fruits and vegetables for use in the National School Lunch and
    Breakfast Programs. This \$500 million of funding over 10 years
    represents a net increase in the total purchase of fruits and
    vegetables for school meals over levels available under any other
    authorities. (For further information, see the proposal entitled
    "Promoting Healthful Diets in Schools" on pages 103 -- 104.)

3.  Increase Section 32 spending on fruits and vegetables by \$2.75
    billion over 10 years. (For further information, see the proposal
    entitled "Promoting Healthful Diets in Schools" on pages 103 -- 104
    and the proposal entitled, "Increase Purchases of Fruits and
    Vegetables for Nutrition Assistance Programs" on pages 168 - 169).

**FOOD STAMP PROGRAM:**

**Working Poor and Elderly**

***Recommendation In Brief***

Improve access to the working poor and elderly by excluding retirement
savings accounts when determining eligibility, allowing states the
option of reimbursing work-related expenses, eliminating the cap on the
dependent care deduction, excluding the value of Internal Revenue
Service (IRS) approved college savings plans from the resource limit
when determining eligibility, and excluding military combat pay. These
reforms are estimated to generate an additional \$1.38 billion over 10
years for participant benefits.

***Problem***

The working poor and elderly participate in the Food Stamp Program (FSP)
at a lower percentage rate than the general low-income population.
Several factors, including the complexity of the program and the fact
that the Food Stamp Act does not specifically address education savings
accounts, affect participation. Farm Bill Forums included
recommendations supporting improvements to assist these two populations
through policy simplification and expansion. For example, in discussing
the importance of improving program accessibility to vulnerable
populations, Julie from Florida said, "We need the process to be
simplified for administrators and for the recipients." And Jodi from New
York City added "We believe strongly in the importance of the food stamp
program as a crucial mechanism for providing access to essential
nutritional support for lower-income New Yorkers."

[]{.mark}

***Recommended Solution***

The Administration proposes improving access to the FSP for the elderly
and working poor by:

1.  *Encouraging savings for retirement* -- This recommendation would
    exclude all retirement accounts from resources when determining
    eligibility for the program. This not only will encourage
    individuals to save for their retirement and help families save for
    their children's future, even if they experience a temporary need
    for food stamps.

2.  *Strengthening the employment and training component by testing an
    expansion of the participant reimbursement for work-related
    expenses* -- Current rules provide employment and training (E & T)
    funding for unemployed households only; the rules do not provide
    employment and training funds to support employed households. To
    further strengthen the Program's role in supporting work and moving
    individuals and families to self-sufficiency, this proposal would
    authorize the Secretary to conduct a pilot test to allow a limited
    number of States the flexibility to reimburse (with matching 50
    percent Federal funds) work-related expenses for any household with
    earned income. The Secretary would be authorized to define the range
    of allowable job-related expenses such as uniforms, tools, and
    licensing (but not to include child care), and to place a limit on
    the time during which a working family may be eligible for
    reimbursement. The pilot would be conducted in no more than three
    States for a period not to exceed 3 years. The Federal share of
    newly reimbursed work-related expenses in the pilots shall not
    exceed \$3 million.

3.  *Eliminating the cap on the dependent care deduction* -- Current
    policy supports work or participation in work services by providing
    for limited deductions from the family's gross income associated
    with the cost of dependent care when determining food stamp
    eligibility and benefit amount: a cap of \$200 per month for
    children under 2 and \$175 for other dependent children is the
    current policy. These current caps have not been changed or adjusted
    for inflation since the provision was implemented in 1993. This
    proposal would simplify State administration and help working
    families with children.

4.  *Excluding the value of IRS approved college savings plans from the
    resource limit* -- This proposal would expand the plans eligible for
    exclusion from the resource limit when determining food stamp
    eligibility and would simplify administration for the States. Most
    significantly, it supports working poor, encourages focused savings
    for children's futures, and recognizes that households should not
    have to deplete college savings plans in order to get nutrition
    assistance. Current policy allows States to exclude college savings
    plans in accordance with their Temporary Assistance for Needy
    Families and Medicaid policies. Otherwise, the issue of account
    accessibility must be determined. This proposal simplifies a complex
    policy as requested by States while supporting low-income working
    families.

5.  *Excluding combat-related military pay --* Enhanced pay from
    military deployment can sometimes cause families receiving food
    stamps to no longer be eligible for this assistance. Military
    personnel receive supplements to their basic pay when they serve in
    combat. Such special pay includes combat or hazardous duty pay which
    could reduce a family's benefits or make them ineligible. This
    policy change recognizes this problem and would ensure that military
    families are not penalized for doing their civic duty. It supports
    the families of servicemen and servicewomen fighting overseas by
    ensuring that their families do not lose food stamps as a result of
    the additional deployment income. This proposal has been a part of
    the President's budget for several years and was first enacted in
    the 2005 Appropriations Act; this farm bill proposal would make this
    annual policy fix permanent.

***Background***

Authorized by the Food Stamp Act of 1977 (the Act), the Food Stamp
Program (FSP) is the cornerstone of the Nation's nutrition assistance
programs which serve 1 in 5 Americans. During fiscal year (FY) 2005, the
Program served approximately 26 million people in an average month with
a total annual benefit cost of approximately \$29 billion. The FSP
increases the purchasing power of low-income families and individuals by
providing electronic benefits redeemed for food in authorized stores.

The program operates in partnership with the States. The Federal
Government sets national program standards for eligibility and benefits,
funds all benefit costs and approximately half of State administrative
expenses, and has responsibility for monitoring and oversight of program
implementation, including authorization and enforcement measures
associated with the redemption of benefits at authorized retail stores.
State agencies, which interact directly with program participants, are
responsible for eligibility certification.

Outreach to underserved populations and program integrity have been a
primary focus for the Administration. At the same time that there has
been an increase in participation, program integrity has also improved.
In FY 2005, the FSP reached the highest level of payment accuracy in its
history of 94.16 percent. The Food Stamp Program has a Quality Control
System that uses a statistically valid sample of State cases to
determine the accuracy of food stamp benefits and establish a national
error rate. The Program has also seen progress in the area of
trafficking (exchanging benefits intended for food purchases for cash),
with a recent GAO report stating that trafficking has been reduced to 1
cent of every benefit dollar, down from almost 4 cents.

The purpose of the FSP is to increase the nutritional levels of
low-income households who qualify based on criteria associated with
income, assets, and household composition. To qualify for benefits the
applicant's gross income must be less than 130 percent of poverty (e.g.,
\$2043 per month for a family of four in 2005), and 100 percent after
allowable deductions. The maximum monthly food stamp allotment (\$499
for a family of four in 2005) is based on the cost of the Thrifty Food
Plan, a low-cost nutritious model food plan. The Program also provides
nutrition education designed to help low-income individuals choose
healthy foods and active lifestyles.

**FOOD STAMP PROGRAM:**

**Streamlining & Modernizing Proposals**

***Recommendation in Brief***

Support modernization efforts of States to streamline, simplify, and
improve administration of the Food Stamp Program (FSP). Revise the name
of the food stamp program and de-obligate food stamp coupons to reflect
that benefits are now provided electronically. Protect recipients from
reimbursing States for overissuances that result from widespread
systematic errors.

***Problem***

Many States are implementing or considering efforts to modernize and
streamline their eligibility systems and business designs to improve FSP
administration. In addition, many States are going to need to update or
modernize their computer and data management systems as today's systems
are becoming outdated. Current requirements in the FSP limit States'
ability to modernize and streamline their programs.

In June of 2004, electronic benefit transfer (EBT) was implemented
nationwide with food stamp participants accessing nutrition assistance
through debit card technology; yet coupons are still used in rare cases,
complicating financial transactions for retailers and banks. Paper food
stamp coupons are a remnant of the past, yet a small amount of these
coupons linger. Changes are needed to de-obligate the use of paper food
stamp coupons and change the name of the program to more accurately
reflect its purpose as a national food assistance program.

***Recommended Solution***

The Administration proposes improved administration of the food stamp
program by:

1.  *Recommending a name change---the Food and Nutrition Program.* State
    agencies administering the Food Stamp Program have been asking the
    Department for years to consider a name change that is more
    descriptive of the current Program. Stamps, later replaced by
    coupons, have not been used for decades and the name does not
    reflect the Program's mission of reducing hunger and improving
    nutrition among low-income people. Further, nationwide
    implementation of EBT as a benefit delivery mechanism has made food
    stamps and the Program name outdated. Finally, some stakeholders
    suggest that the name is a barrier to participation because of
    stigma, especially among the elderly. FNS began gathering public
    comments on a new name in June 2004. While there is no consensus on
    a new name, the vast majority of the comments supported a name
    change with certain words commonly included in the
    suggestions---food and nutrition.

2.  *De-obligating food stamp coupons as legal tender.* Electronic
    Benefit Transfer (EBT) has been in place nationwide for two years.
    Fewer and fewer coupons are being redeemed per month; in December
    2005 coupon redemptions accounted for less than .001% of total
    benefit redemptions. De-obligating coupons reflects the current
    technological realities of the Program.

3.  *Prohibiting States from establishing and collecting claims from
    recipients for State agency caused overissuances resulting from
    widespread systemic errors. Require states to repay the Federal
    government for overissued benefits.* As States have moved to replace
    outdated computer systems, there have been situations where time and
    budget have driven implementation of systems before they have been
    thoroughly tested. As a result, computer systems have generated
    overissuances because of design flaws; in some cases, the courts
    have become involved (e.g. Colorado) and judges have ordered States
    not to collect overissuances from recipients when the overissuance
    was an agency error (computer generated) and not a client error.
    However, current Federal law requires States to establish and
    collect claims from recipients. This proposal would recognize the
    unique situation of systemic errors caused by State agencies in the
    establishment and collection of over-issuances while still holding
    States responsible for the error.

***Background***

Authorized by the Food Stamp Act of 1977 (the Act), the Food Stamp
Program (FSP) is the cornerstone of the Nation's nutrition assistance
programs which serve 1 in 5 Americans. During fiscal year (FY) 2005, the
Program served approximately 26 million people in an average month with
a total annual benefit cost of approximately \$29 billion. The FSP
increases the purchasing power of low-income families and individuals by
providing electronic benefits redeemed for food in authorized stores.

The program operates in partnership with the States. The Federal
Government sets national program standards for eligibility and benefits,
funds all benefit costs and approximately half of State administrative
expenses, and has responsibility for monitoring and oversight of program
implementation, including authorization and enforcement measures
associated with the redemption of benefits at authorized retail stores.
State agencies interact directly with program participants, are
responsible for eligibility certification.

Outreach to underserved populations and program integrity have been a
primary focus for the Administration. At the same time that there has
been an increase in participation, program integrity has also improved.
In FY 2005, the FSP reached the highest level of payment accuracy in its
history of 94.16 percent. The Food Stamp Program has a Quality Control
System that uses a statistically valid sample of State cases to
determine the accuracy of food stamp benefits and establish a national
error rate. The Program has also seen progress in the area of
trafficking (exchanging benefits intended for food purchases for cash),
with a recent GAO report stating that trafficking has been reduced to 1
cent of every benefit dollar, down from almost 4 cents.

The purpose of the FSP is to increase the nutritional levels of
low-income households who qualify based on criteria associated with
income, assets, and household composition. To qualify for benefits the
applicant's gross income must be less than 130 percent of poverty (e.g.,
\$2043 per month for a family of four in 2005), and 100 percent after
allowable deductions. The maximum monthly food stamp allotment (\$499
for a family of four in 2005) is based on the cost of the Thrifty Food
Plan, a low-cost nutritious model food plan. The Program also provides
nutrition education designed to help low-income individuals choose
healthy foods and active lifestyles.

**IMPROVE FOOD STAMP PROGRAM INTEGRITY**

***Recommendation in Brief***

Strengthen provisions to further improve program integrity by limiting
categorical eligibility to those that receive only Temporary Assistance
for Needy Families (TANF) cash benefits. Allow flexibility in the
assessment of retailer fines in certain circumstances. Allow the
Secretary, in certain egregious trafficking cases, to seize and transfer
funds to the Treasury; prohibit the exchange of food purchased with food
stamp benefits for cash. Authorize USDA to charge State agencies five
percent of administrative costs if the State is more than fifty percent
above the national negative error rate for two consecutive years. Remove
the new investment option for States sanctioned for improper payments
for three consecutive years.

***Problem***

In June, 2004, the Food Stamp Program (FSP) transitioned from coupons to
nationwide implementation of electronic benefit transfer (EBT) to issue
food stamp benefits. EBT works like a debit card; participants have
their benefits loaded onto the card each month and access those benefits
through the purchase of eligible foods at authorized retail stores. A
recent GAO report credits the technology for a reduction in trafficking
(exchanging benefits for cash) to around one cent of every benefit
dollar. Despite this important, positive trend, new strategies to commit
fraudulent activities undermine the advantages of the electronic
issuance system. Further policy changes as well as quality control
system improvements would help ensure continued progress in the area of
payment accuracy and proper use of nutrition assistance benefits.

Additionally, current law allows certain individuals not otherwise
eligible for food stamp benefits to receive them through categorical
eligibility. For example, certain states allow a person who is eligible
to receive TANF in-kind services such as job training to receive food
stamp benefits even though under separate food stamp eligibility
criteria he/she would not be eligible. Providing benefits to those
individuals not otherwise eligible for food stamp benefits limits
resources available to those eligible individuals that need it most.

***Recommended Solution***

The Administration proposes improved program integrity by:

1.  *Limiting categorical eligibility to only cash TANF or SSI
    assistance.* This proposal ensures that those individuals eligible
    for the program receive the benefits through an equitable
    determination of FSP eligibility while eliminating categorical
    eligibility for those who would otherwise not be eligible to receive
    benefits.

2.  *Allowing assessment of fines for certain retailer violations.* USDA
    often receives requests from stores and their supporters, including
    public officials, requesting alternative penalties based on specific
    conditions and circumstances, but current law does not provide any
    flexibility related to certain retailer violations. For example, if
    a store clerk accepts food stamp benefits for the purchase of a
    non-food item without the owner's knowledge and in violation of food
    stamp rules and the store's policy, the store owner must be
    disqualified from accepting food stamps in accordance with current
    law. Regardless of the fact that the owner may have been an
    authorized retailer for 30 years without any previous violation,
    action has been taken by the owner to correct the problem, and there
    are few opportunities for participants to shop elsewhere,
    disqualification is required. At the same time, in an egregious
    trafficking situation, the maximum disqualification can be imposed,
    but no additional penalties such as assessment of fines are allowed.
    In other words, under current law, USDA does not have the necessary
    flexibility to assess fines in lieu of disqualification or to assign
    appropriate disqualification timeframes, or to impose additional
    fines beyond the maximum disqualification. Instead, current law
    specifies minimum and maximum disqualification timeframes without
    opportunity to assess appropriate penalties in cases where
    particular circumstances might be considered.

3.  *Allowing the Secretary, in certain egregious trafficking cases, to
    seize and transfer to the Treasury food stamp funds prior to
    retailer's settlement in cases where expedited disqualification is
    warranted.* Current law allows retailers to continue their
    fraudulent activities while enforcement actions are taking place
    even if those violations are particularly egregious. By allowing the
    Secretary to seize and transfer food stamp funds to the Treasury in
    the most egregious cases, trafficking retailers are hurt more
    quickly where it matters---in their pocketbooks. This proposal
    increases effectiveness by immediately stopping the flow of funds
    that allow retailers to continue to finance their fraudulent
    activities.

4.  *Prohibiting the exchange of food purchased with food stamp benefits
    for cash by making it an intentional program violation on the part
    of recipients.* Recently, USDA has received an increasing number of
    reports of food stamp recipients exchanging food purchased with food
    stamp benefits for cash. For example, a recipient purchases a large
    number of soft drinks and then sells them at a discount outside the
    store. In a recent incident, multiple recipients were purchasing
    baby formula with food stamp benefits at one store and selling the
    formula to another store. While contrary to the intent of the
    Program, such actions are not currently identified in the Food Stamp
    Act of 1977 as an action that leads to disqualification.

5.  *Charging State agencies 5 percent of administrative costs if the
    State is more than 50% above the national negative error rate for
    two consecutive years.* A negative error occurs when an applicant
    for benefits is inappropriately terminated, suspended, or denied
    food stamps. While the active error rate (overpayment or
    underpayment to food stamp recipient) has potential liabilities
    associated with being above the national average, there is currently
    no sanction associated with the negative error rate. Both the active
    and negative error rates do have associated high performance bonuses
    based on excellent administration of the program. The negative error
    rate has been rising over the last couple of years; this provision
    indicates the importance of proper administration of the program.
    This proposal would require States to pay the associated sanction
    when their negative error rate is 50% above the national average for
    two consecutive years.

6.  *Removing the new investment option for those States sanctioned for
    improper payments for 3 consecutive years --* This proposal
    emphasizes the importance of State accountability and expected
    results associated with improper payments while still maintaining
    the three consecutive years as the measure for having to pay the
    liability associated with the improper payments. Specifically, this
    proposal would require States pay their "at risk" amount for the
    second year as well the entire third year liability amount. A
    state's \"at risk\" amount is defined as a portion of its improper
    payments liability. This at risk liability is placed in abeyance and
    may be forgiven if the State improves program payment accuracy in
    accordance with a written agreement between the State and USDA by
    the third year. These funds can also be changed from \"at risk\" and
    invested in new state improvements in program administration (the
    so-called investment option). These new investments are State-only
    dollars and are not eligible for federal matching funds. This
    proposal would strengthen the penalties associated with improper
    payments by requiring the States pay their liabilities without the
    option of new investment of year two at risk dollars when their
    improper payments rates are above the formula prescribed in law for
    errors three years in a row.

***Background***

Authorized by the Food Stamp Act of 1977 (the Act), the Food Stamp
Program (FSP) is the cornerstone of the Nation's nutrition assistance
programs which serve 1 in 5 Americans. During fiscal year (FY) 2005, the
Program served approximately 26 million people in an average month with
a total annual benefit cost of approximately \$29 billion. The FSP
increases the purchasing power of low-income families and individuals by
providing electronic benefits redeemed for food in authorized stores.

The program operates in partnership with the States. The Federal
Government sets national program standards for eligibility and benefits,
funds all benefit costs and approximately half of State administrative
expenses, and has responsibility for monitoring and oversight of program
implementation, including authorization and enforcement measures
associated with the redemption of benefits at authorized retail stores.
State agencies interact directly with program participants, are
responsible for eligibility certification.

Outreach to underserved populations and program integrity have been a
primary focus for the Administration. At the same time that there has
been an increase in participation, program integrity has also improved.
In FY 2005, the FSP reached the highest level of payment accuracy in its
history of 94.16 percent. The Food Stamp Program has a Quality Control
System that uses a statistically valid sample of State cases to
determine the accuracy of food stamp benefits and establish a national
error rate. The Program has also seen progress in the area of
trafficking (exchanging benefits intended for food purchases for cash),
with a recent GAO report stating that trafficking has been reduced to 1
cent of every benefit dollar, down from almost 4 cents.

The purpose of the FSP is to increase the nutritional levels of
low-income households who qualify based on criteria associated with
income, assets, and household composition. To qualify for benefits the
applicant's gross income must be less than 130 percent of poverty (e.g.,
\$2043 per month for a family of four in 2005), and 100 percent after
allowable deductions. The maximum monthly food stamp allotment (\$499
for a family of four in 2005) is based on the cost of the Thrifty Food
Plan, a low-cost nutritious model food plan. The Program also provides
nutrition education designed to help low-income individuals choose
healthy foods and active lifestyles.

**FOOD STAMP PROGRAM:**

**IMPROVING HEALTH THROUGH NUTRITION EDUCATION**

***Recommendation in brief***

Strengthen efforts to integrate nutrition education into the Food Stamp
Program (FSP) by recognizing that nutrition education is a component of
the program and investing \$100 million to establish a competitive
grants program targeted at developing and testing solutions to the
rising rates of obesity.

***Problem***

Obesity and overweight are conditions that have reached epidemic
proportions in this country. According to research, low-income
individuals are particularly at risk. The outcomes of obesity and
overweight are numerous and include multiple health risks such as
diabetes, heart disease, and cancer.

Although nutrition education in the FSP has increased over the years,
many Farm Bill Forum participants called for program changes intended to
encourage healthier eating habits. For example, Inger, a registered
dietician, said, "The public needs an uncompromising commitment from
their government to advance nutrition knowledge and to help people apply
that knowledge to maintain and improve their health....." While Connie
from Massachusetts suggested "a better approach would be the development
of some sort of incentives to encourage Food Stamp recipients to
purchase healthy foods."

***Recommended Solution***

The Administration proposes improving the Food Stamp Program's role in
supporting positive nutrition and health outcomes for participants by:

1.  Adding language to the Food Stamp Act recognizing nutrition
    education as a component of the Program, reinforcing the importance
    of nutrition education.

2.  Establishing a "USDA Initiative to Address Obesity among Low Income
    Americans" \-- a five-year \$20 million per year competitive grant
    demonstration program to develop and test solutions to the rising
    problem of obesity. These efforts would include rigorous independent
    evaluations to identify effective approaches, such as incentives at
    point-of-sale for purchases of fruits and vegetables by food stamp
    participants, grants to connect food stamp shoppers with farmers
    markets, and integrated communication and education programs to
    promote healthy diets and physical activity. This grant program
    would sunset after five years.

***Background***

Authorized by the Food Stamp Act of 1977 (the Act), the Food Stamp
Program (FSP) is the cornerstone of the Nation's nutrition assistance
programs which serve 1 in 5 Americans. During fiscal year (FY) 2005, the
Program served approximately 26 million people in an average month with
a total annual benefit cost of approximately \$29 billion. The FSP
increases the purchasing power of low-income families and individuals by
providing electronic benefits redeemed for food in authorized stores.

The program operates in partnership with the States. The Federal
Government sets national program standards for eligibility and benefits,
funds all benefit costs and approximately half of State administrative
expenses, and has responsibility for monitoring and oversight of program
implementation, including authorization and enforcement measures
associated with the redemption of benefits at authorized retail stores.
State agencies interact directly with program participants, certify
eligibility, and issue benefits.

In FY 2005, the FSP reached the highest level of payment accuracy in its
history of 94.16 percent. The FSP has a Quality Control System that uses
a statistically valid sample of State cases to determine the accuracy of
food stamp benefits and establish a national error rate. The Program has
also seen progress in the area of trafficking (exchanging benefits
intended for food purchases for cash), with a recent GAO report stating
that trafficking has been reduced to 1 cent of every benefit dollar,
down from almost 4 cents.

The purpose of the FSP is designed to increase the nutritional levels of
low-income households who qualify based on criteria associated with
income, assets, and household composition. To qualify for benefits the
applicant's gross income must be less than 130 percent of poverty (e.g.,
\$2043 per month for a family of four in 2005), and 100 percent after
allowable deductions. The maximum monthly food stamp allotment (\$499
for a family of four in 2005) is based on the cost of the Thrifty Food
Plan, a low-cost nutritious model food plan.

The Program also funds state-provided nutrition education designed to
help low-income individuals choose healthy foods and active lifestyles.
The goal of Food Stamp Nutrition Education (FSNE) is to improve the
likelihood that FSP participants and applicants will make healthy
choices within a limited budget and choose active lifestyles consistent
with the current Dietary Guidelines for Americans and the Food Guide
Pyramid. States provide Food Stamp nutrition education plans to USDA for
approval that consider the specific needs of their low-income
population. USDA reimburses States 50 percent of the administrative
costs associated with nutrition education materials and activities.

**THE EMERGENCY FOOD ASSISTANCE PROGRAM (TEFAP)**

***Recommendation in Brief***

Make TEFAP State plans permanent and provide national uniform rules for
TEFAP contracts allowing greater competition for program participation
among local organizations, including faith-based organizations. Increase
the availability of fruits and vegetables through the TEFAP Program.

***Problem***

The requirement to file TEFAP State plans every four years is burdensome
for administering State agencies and is not consistent with the State
plan requirements for many other nutrition programs. For example, the
National School Lunch Program, Commodity Supplemental Food Program,
Summer Feeding Program, and After School Snack Program all require plan
updates only as warranted.

Additionally, TEFAP administering agencies are not required to use a
competitive solicitation process for selecting local organizations to
participate in TEFAP. As a result, many of the same organizations
continue to participate year after year unless administrative problems
occur. Failure to provide for a competitive solicitation process results
in a barrier to certain local organizations, including faith-based
organizations, that wish to participate in TEFAP. The lack of
competition may result in a less efficient and effective system to
distribute commodities within each State.

Until recently, TEFAP received large amounts of bonus donations of
fruits and vegetables. Since 2005, bonus donations, including fruit and
vegetable donations, have declined. As a result, TEFAP has not provided
emergency feeding organizations the quantity of fruits and vegetables
that sponsor organizations and its beneficiaries might expect. TEFAP can
be a source of foods for the low-income population, and providing a
stable and sufficient source of fruits and vegetables through TEFAP is
consistent with the direction of the 2005 Dietary Guidelines for
Americans.

***Recommended Solution***

The Administration proposes the following changes to the TEFAP program:

1.  *Make TEFAP State plans permanent, requiring States to submit
    revisions to the plan only when warranted by changes in the State.*
    This approach is consistent with State plan requirements for other
    commodity programs and the child nutrition programs.

2.  *Require States to use a competitive selection process for selecting
    local organizations and re-compete grants at least once every three
    years.* Requiring States to use the competitive solicitation process
    for selecting local organizations with which they enter into
    contracts for TEFAP would help to ensure that the most efficient and
    effective system is used to distribute commodities within the State
    and would likely result in potential recipient agencies lowering
    their charges for services to food pantries and soup kitchens in
    order to secure the contract with the State agency. A competitive
    process also will remove barriers to the participation of local
    organizations, including faith based organizations.

3.  *Increase the amount of fruits and vegetables made available to
    TEFAP beneficiaries.* The Department's proposed increase in fruit
    and vegetable purchases under Section 32 (see paper entitled,
    "Increasing Purchases of Fruit and Vegetables for Nutrition
    Assistance Programs" on pages 168-169), would result in a sufficient
    and on-going stream of fruits and vegetables available to the
    low-income recipients of TEFAP, thus bringing their diet more in
    line with the recommendations of the Dietary Guidelines.

***Background***

The TEFAP Program helps supplement the diets of low-income Americans,
including elderly individuals, by providing participants with emergency
food and nutrition assistance at no cost to the recipient. The program
provides food aid in all 50 States.

USDA makes commodity foods available to State agencies for distribution
to local organizations, which make the food available to eligible
individuals for household consumption, or prepare and serve meals in
congregate settings. Over 50 types of food were made available in FY
2006, including canned and dried fruits, canned vegetables, meat,
poultry, fish, and pasta.

To be considered eligible for TEFAP, recipients of food for home use
must meet income eligibility criteria set by the State agency.
Recipients of prepared meals at congregate sites are not subject to an
income test.

Authorized by the Food Stamp Act of 1977 and the Emergency Food
Assistance Act of 1983, TEFAP operates as a Federal-State partnership.
The Federal government provides commodities and administrative funds to
State agencies. In addition to the commodities purchased with TEFAP
appropriations, commodities purchased under agricultural support
programs are made available to States for distribution through TEFAP.
State agencies are responsible for establishing a distribution system
and for allocating the resources within the State. In order to
participate, State agencies must submit a State plan every four years.
The State agencies provide food to local agencies that they select,
usually food banks, which in turn distribute the food to soup kitchens
and food pantries that serve the public.

In FY 2006, Congress appropriated \$189.5 million for TEFAP. Of the
total appropriation, \$140 million was made available to purchase food
and \$49.5 million was provided for administrative support to State and
local agencies.

**FOOD DISTRIBUTION PROGRAM ON INDIAN RESERVATIONS (FDPIR)**

*Recommendation in Brief*

Increase funding by \$27 million over 10 years to better reflect the
actual administrative costs of the Food Distribution Program on Indian
Reservations (FDPIR) and provide a structured method for allocating
administrative funds among the Indian Tribal Organizations (ITO). Align
nutrition assistance program disqualification policies to ensure that
those barred from participation in FDPIR for intentional program
violations are also disqualified from participation in the food stamp
program.

***Problem***

The current allocation of FDPIR administrative funding does not
correlate with participation levels. As a result, ITOs with higher FDPIR
participation levels may not receive administrative funds proportionate
to the number of persons served.

Individuals who are disqualified from FDPIR for intentional violations
may be eligible for the FSP, which provides comparable benefits to
participants.

***Recommended Solution***

The Administration proposes revising the current FDPIR formula to
provide a structured and equitable method for allocating administrative
funds among ITOs and States participating in FDPIR. Additionally, an
increase in funding is proposed for FDPIR administrative costs to better
reflect the actual participation rates in FDPIR. This proposal is
consistent with the recommendations from a FDPIR work group charged with
identifying plans to reduce regional disparities in the administrative
funding provided per participant. Re-allocating funds based primarily on
program participation has wide support. An estimated \$26 million
increase over 10 years in the level of FDPIR funding for administrative
costs would ensure that any change to the current funding formula would
allow all states or ITOs to continue their current allotments or receive
a modest increase depending on their level of participation.

This proposal would ensure a more consistent level of service across
FDPIR programs and would improve program access, promote healthy eating,
and enhance program integrity. Currently, some tribes are better capable
of serving their participants because they benefit from the historical
inequity in the distribution of existing administrative resources. Many
ITOs cannot provide a wide variety of foods or readily serve eligible
participants because they lack funds needed to buy and maintain
expensive equipment and other items. For example, some programs do not
offer fruits, vegetables and meats because they lack the ability to
properly store them, and their participants are not receiving as
nutritious a food package as they could be. Some programs cannot serve
homebound or individuals living in remote areas because they do not have
reliable delivery equipment. FDPIR was designed to serve participants
who may be located in areas where access to stores is difficult so it is
important to be able to effectively transport foods. Food safety also is
a concern; programs that cannot maintain adequate storage facilities
risk providing spoiled or damaged foods to participants.

Additionally, the Administration proposes expanding the list of Food
Stamp Program (FSP) disqualifications to include persons disqualified
from FDPIR for intentional program violations. This proposal will
support program integrity by ensuring disqualified individuals cannot
participate in either program.

***Background***

FDPIR provides commodity foods to low-income American Indian and
non-Indian households that reside on a reservation, and in other
approved areas. There are 257 tribes receiving benefits through 98
Indian Tribal Organizations (ITO) and 5 State agencies.

Each month, participating households receive a food package (generally
by pick-up at a designated site or home delivery) to help them maintain
a nutritionally balanced diet. Commodities are distributed to eligible
households from warehouse facilities located on reservations. In some
cases, trucks are dispatched from the warehouse to serve households in
remote locations on or near reservations. Eligible households may choose
from over 50 types of food, including meats and fish, fruit, vegetables,
grain and oil products, and a range of prepared foods. Participants also
receive information about nutrition, food storage, sanitary food
preparation methods, and suggestions for recipes using donated food.

Eligible individuals are part of a household residing on a participating
reservation and meet income and resource eligibility criteria. FDPIR
eligibility criteria are similar to those used for the FSP, but differ
in that the monthly benefit level is not based on a sliding income
scale---the amount of food an eligible household receives each month
under FDPIR is based exclusively on the size of the household.

Authorized by the Food Stamp Act of 1977 and the Agriculture and
Consumer Protection Act of 1973, FDPIR is operated as a partnership
between USDA and participating ITOs and State agencies. Congress
originally established FDPIR as an alternative to the FSP for households
residing in remote areas of reservations where FSP-authorized food
stores were not readily accessible. In areas where both FDPIR and the
FSP are available, households may not participate simultaneously in both
programs, although households may switch from one program to the other.

The Federal government pays 100 percent of the cost of commodities
distributed through the Program, along with cash payments to
distributing agencies to assist them in meeting the program's
administrative expenses, such as local warehousing and transportation of
commodities, utilities, salaries, and equipment. The current methodology
for allocating administrative funds is based on historical precedent and
results in some regions and ITOs receiving administrative funding well
above or below the national per participant average. For FY 2006,
Congress appropriated \$79,500,000 for FDPIR, which was sufficient to
provide nutrition assistance to an average of 101,000 persons per month.

**senior farmers' market nutrition program (SFMNP)**

***Recommendation in Brief***

Exclude the value of the Senior Farmers' Market Nutrition Program
(SFMNP) benefits when determining eligibility for any Federal or State
means-tested programs. Prohibit States from participating in the SFMNP
if state or local sales tax is collected within the State on food
purchased with SFMNP benefits.

***Problem***

The value of the SFMNP benefit must currently be counted as income for
eligibility determination in other means tested programs. This
requirement is inconsistent with all other USDA nutrition assistance
programs, which have specific statutory authority to exclude the value
of nutrition assistance benefits when determining eligibility for
federal or state means tested programs. The 2002 farm bill authorized
the SFMNP for fiscal year (FY) 2003 through FY 2007 and provided funding
at \$15 million for each of those years. This legislation gave USDA the
authority to develop regulations for the operation and administration of
the SFMNP. However, it provided no statutory authority to exclude SFMNP
benefits from other programs' eligibility requirements. Also, SFMNP
benefits are not consistent with the benefits in other Federal nutrition
programs because the food purchased with SFMNP benefits is not exempt
from state and local sales tax.

***Recommended Solution***

The Administration proposes establishing the statutory authority to:

1.  e*xclude the value of the SFMNP benefits when determining
    eligibility for any federal or state means-tested program*. This
    recommendation would ensure that the value of the benefits provided
    to eligible recipients could not be considered as income in the
    process of determining eligibility for any other Federal or State
    program, such as Food Stamps, TANF, Energy Assistance, and Housing
    Assistance. In FY 2005, the average annual SFMNP benefit per
    recipient was \$33*;* and

2.  *prohibit States from participating in the Senior Farmers' Market
    Nutrition Program if state or local sales tax is collected within
    that state on food purchased with SFMNP benefits.* This
    recommendation would align the state and local tax status of Senior
    Farmers' Market benefits with other federal nutrition assistance
    programs.

***Background***

The SFMNP provides low-income seniors with coupons that can be exchanged
for eligible fresh, nutritious, unprepared, locally-grown fruits,
vegetables, and herbs at farmers' markets, roadside stands, and
community supported agriculture (CSA). The Program is designed to (a)
improve the diets of low-income seniors and (b) increase the consumption
of agricultural commodities by expanding, developing, or aiding in the
development and expansion of domestic farmers' markets, roadside stands,
and CSA.

Benefits to seniors generally do not exceed \$50 per growing season.
Seniors who are at least 60 years old and who have household incomes of
not more than 185 percent of the federal poverty income guidelines are
the targeted recipients of the SFMNP.

Authorized by the 2002 farm bill, the SFMNP is operated as a
Federal-State partnership. The program operates in limited areas of
participating States. The Federal government provides funds to
participating States, which support the SFMNP benefit provided to
seniors and, starting January 2007, State administrative costs.

In FY 2006, 46 states and federally recognized tribal governments
operated the program. In 2005, the program provided coupons to 752,699
low-income seniors for products available from 14,668 farmers at 2,663
farmers markets as well as 2,000 roadside stands and 237 CSA markets.

**PROMOTING HEALTHFUL DIETS IN SCHOOLS**

***Recommendations in Brief***

Support school efforts to provide meals based on the most recent Dietary
Guidelines for Americans. Invest \$6 million in mandatory funding to
conduct a survey of foods purchased by school food authorities with
Federal cash assistance once every 5 years. Provide \$500 million of new
mandatory funding over ten years for the purchase of additional fresh
fruits and vegetables for use in the National School Lunch and Breakfast
Programs. Increase Section 32 spending on fruits and vegetables by
\$2.75 billion over 10 years.

***Problem***

Obesity rates among school-age children continue to rise and schools can
play a greater role in promoting healthful diets and regular physical
activity. The 2005 Dietary Guidelines for Americans recommend even
higher whole grain, low-fat dairy, and fruit and vegetable consumption
levels for most Americans. Yet only one in five Americans consumes the
recommended amount of fruit each day, and children under age 18
generally consume 50 percent or less of the recommended level for fruits
and vegetables. Increased intakes of fruits, vegetables, whole grains,
and fat-free or low-fat milk and milk products are likely to have
important health benefits for most Americans, including school children.

Schools use their cash assistance to purchase the large majority
(approximately 80 percent) of the food for school meals, but no current
data are available to know what foods are being purchased. Without good
information about the foods schools are purchasing, it is difficult for
USDA to provide technical assistance to help schools select healthful
items that contribute to the goals of the most recent Dietary
Guidelines.

***Recommended Solution***

The Administration proposes the following program modifications to
support school efforts to offer meals based on the most recent Dietary
Guidelines for Americans:

1.  *Conduct a survey of foods purchased by school food authorities with
    Federal cash assistance once every 5 years*. The most recent data on
    school food purchases are a decade old. These data would help USDA
    efforts to 1) provide guidance and technical assistance to school
    food professionals in the implementation of new rules intended to
    conform school meal patterns to the most recent Dietary Guidelines
    for Americans; 2) better manage the types and varieties of
    commodities procured by the Department on behalf of schools; and 3)
    assess the economic impact of school food purchases on various
    commodity sectors.

2.  *Provide an additional \$50 million annually for the purchase of
    fruits and vegetables for school meals.* These funds would represent
    a net increase in the total purchase of fruits and vegetables for
    the National School Lunch Program over levels available under any
    other authority. At the Secretary\'s discretion, a portion of the
    new funds should be allowed to be transferred to Department of
    Defense (DOD) for the purchase of additional fresh fruits and
    vegetables. 

3.  *Increase the overall Section 32 fruit and vegetable purchase
    minimum to \$2.75 billion over 10 years.*

Programs and policies that improve children's access to fruits and
vegetables support USDA's goal to promote dietary patterns that reflect
the Dietary Guidelines for Americans and the MyPyramid for Kids. The
consumption of fruits and vegetables contribute to a good diet and will
serve to ameliorate the obesity rates among Americans.

***Background***

The National School Lunch Program (NSLP) provides USDA commodities and
cash assistance to States for lunches served to students during lunch
periods at school and for snacks served to children participating in
after school care programs. States are reimbursed for the number of
lunches and snacks served to children in participating schools that meet
program requirements. In FY 2005, an average of 30 million children
received program meals each school day of which about 59 percent are
served free or at a reduced price.

Schools use USDA's cash assistance to purchase the foods served in
school meals and to pay for direct and indirect allowable costs, such as
labor. In addition to cash reimbursements, schools are entitled by law
to receive commodity foods, called "entitlement" foods, at a value of
16.75 cents for each meal served in FY 2006-2007. Schools can receive
"bonus" commodities when they are available from surplus agricultural
stocks. USDA provides schools with USDA commodities to complement the
purchased foods. Approximately 80 percent of the foods served are
purchased directly by school districts and the remaining 20 percent are
provided in the form of entitlement foods to schools by USDA. All foods,
whether purchased commercially or provided by USDA, contribute to school
meals that must meet specific nutritional standards.

The Richard B. Russell National School Lunch Act (Act) requires
participating schools to serve meals that are consistent with the goals
of the most recent Dietary Guidelines for Americans and that provide, on
the average over a week, 1/3 of the daily recommended dietary allowance.
Administering State agencies and school districts provide on-going
oversight of the school meals to ensure that every meal meets the
nutrition standards set forth in regulations and statute. USDA is in the
process of developing a proposed regulation to better align school meal
requirements with the 2005 Dietary Guidelines for Americans. While
school meals must meet the Federal nutrition requirements, decisions
about what specific foods to serve and how they are prepared are made by
local school food authorities.

In an ongoing effort to increase the consumption of fruits and
vegetables, the 2002 farm bill directed USDA to use at least \$200
million of the total funds available to USDA to purchase commodities for
the NSLP toward the purchase of fruits and vegetables. USDA must spend
at least \$50 million of the \$200 million to make fresh fruits and
vegetables available to schools. Since 1995, USDA has contracted with
the DOD, which purchases and delivers perishable fruits and vegetables
for the NSLP.