Welfare Reform: Few States Are Likely To Use the Simplified Food Stamp
Program (Letter Report, 01/29/99, GAO/RCED-99-43).

Pursuant to a congressional request, GAO provided information on the
impact of welfare reform on the Food Stamp Program, focusing on: (1) the
number of states that have adopted or are planning to adopt the
Simplified Food Stamp Program; (2) the concerns that may be preventing
other states from adopting the simplified program; and (3) the impacts
that the adoption of the simplified programs may have on households'
eligibility and benefits.

GAO noted that: (1) GAO's July 1998 survey indicated that seven states
had implemented a limited, or mini, Simplified Food Stamp Program; (2)
of the 45 states that had not implemented the simplified program, 6 were
planning to do so; 30 indicated that they did not plan to do so; and the
9 remaining states were uncertain about their plans; (3) one of the six
states--Arkansas--was planning to adopt the simplified program, but
subsequently implemented a full, or more comprehensive, program that
establishes a uniform set of eligibility requirements for both food
stamp and Temporary Assistance for Needy Families (TANF) assistance; (4)
the states that had not implemented the simplified program cited several
concerns that discouraged them: (a) increasing caseworkers' burden by
creating a third set of eligibility criteria for a simplified program
that are different from those associated with the separately
administered TANF and the Food Stamp Program; (b) restricting the
options for designing a simplified program by requiring it to be cost
neutral; and (c) other Welfare Reform Act requirements that had a higher
priority; (5) the simplified program would have little or no impact on
either the number of households participating in the Food Stamp Program
or on the amount of their benefits, according to the majority of states
that have and have not implemented a simplified program; (6) the
simplified program has limited impact, according to one state, primarily
because a relatively small number of households participate in it
compared with the state's total food stamp population; and (7) according
to another state, since most TANF households also receive assistance
under the regular Food Stamp Program, there is little change in total
benefit costs as a result of the state's adoption of the simplified
program.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-99-43
     TITLE:  Welfare Reform: Few States Are Likely To Use the Simplified 
             Food Stamp Program
      DATE:  01/29/99
   SUBJECT:  Food relief programs
             Disadvantaged persons
             Eligibility determinations
             State-administered programs
             Welfare benefits
IDENTIFIER:  HHS Temporary Assistance for Needy Families Program
             Aid to Families with Dependent Children Program
             Arkansas
             USDA Thrifty Food Plan
             Medicaid Program
             Food Stamp Program
             AFDC
             
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Cover
================================================================ COVER


Report to the Ranking Minority Member, Subcommittee on Children and
Families, Committee on Health, Education, Labor and Pensions, U.S. 
Senate

January 1999

WELFARE REFORM - FEW STATES ARE
LIKELY TO USE THE SIMPLIFIED FOOD
STAMP PROGRAM

GAO/RCED-99-43

Welfare Reform

(150286)


Abbreviations
=============================================================== ABBREV

  FNS - Food and Nutrition Service
  GAO - General Accounting Office
  TANF - Temporary Assistance for Needy Families
  TEA - Transition Employment Assistance
  TEEM - Training, Education, Employment, and Management
  USDA - U.S.  Department of Agriculture

Letter
=============================================================== LETTER


B-281593

January 29, 1999

The Honorable Christopher J.  Dodd
Ranking Minority Member
Subcommittee on Children and Families
Committee on Health, Education,
 Labor and Pensions
United States Senate

Dear Senator Dodd: 

Over the years, state agencies have operated federal welfare programs
that have provided food stamps, cash assistance, and other benefits
to needy households.  Each program has its own set of regulations
that the states must follow to determine participant eligibility and
benefits.  Although these regulations provide extensive guidelines
for the workers who must implement them, they also create
determination processes that are expensive to conduct and are often
subject to error. 

In an effort to streamline program administration, the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996\1
--referred to in this report as the Welfare Reform Act--provided the
states\2 with the option of operating the Simplified Food Stamp
Program for households whose members are receiving Temporary
Assistance for Needy Families (TANF) assistance.\3 The simplified
program was designed specifically to be a vehicle for creating
conformity between TANF and the Food Stamp Program by merging the
programs' rules into a single set of requirements for individuals
receiving both types of assistance. 

The Welfare Reform Act also allows the states to implement a limited,
or "mini," simplified program in which only the food stamp work
requirement is replaced by TANF's work requirement, according to
officials from the U.S.  Department of Agriculture's (USDA) Food and
Nutrition Service (FNS).  By requiring food stamp participants to
comply with TANF's work requirement, the states may count the
combined value of TANF and food stamp benefits to determine if
participants are receiving assistance in an amount that is at least
equal to the minimum wage multiplied by the number of hours they must
work to receive their benefits, as required by federal law.\4

Since not all needy households receive both TANF and food stamps, the
states selecting the simplified program option will, in effect, be
operating three programs, according to both FNS and state officials. 
That is, they will continue to separately operate TANF, the regular
Food Stamp Program, and the simplified program.  Furthermore, to
whatever extent the states use the simplified program, they must
also, as required by the Welfare Reform Act, demonstrate that total
federal costs will not be more than the costs that would have been
incurred under the regular Food Stamp Program for the affected
participants in any fiscal year--that is, the program has to be cost
neutral. 

You asked us to study several issues concerning the impact of welfare
reform on the Food Stamp Program.  This report is the third in a
series responding to that request.\5 In this report, we (1) identify
the number of states that have adopted or are planning to adopt the
Simplified Food Stamp Program, (2) describe the concerns that may be
preventing other states from adopting the simplified program, and (3)
examine the impacts that the adoption of the simplified program may
have on households' eligibility and benefits. 

As part of our review, we mailed questionnaires in July 1998 to 53
state agencies that administer the Food Stamp Program and received
responses to our questionnaire from 52 (Iowa declined to participate
in our survey).  Appendix I contains a more detailed description of
our methodology.  Appendix II provides summary information on our
survey responses. 


--------------------
\1 P.L.  104-193, Aug.  22, 1996. 

\2 As treated in the Food Stamp Act of 1977, as amended, "states"
includes the 50 states, the District of Columbia, Guam, and the U.S. 
Virgin Islands. 

\3 Title I of the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 replaced Aid to Families With Dependent
Children (AFDC) with TANF. 

\4 Among other provisions, the Welfare Reform Act requires that, to
avoid financial penalties, the states must impose work requirements
for adults receiving federal welfare assistance.  In 1997, the U.S. 
Department of Labor ruled that welfare participants are not excluded
from the protection of the Fair Labor Standards Act of 1938, as
amended (29 U.S.C.  207).  Under the Fair Labor Standards Act, the
maximum number of hours that welfare participants can be required to
work to receive their benefit is calculated by dividing the value of
their benefit by the applicable minimum wage. 

\5 Our first report is entitled Food Stamp Program:  Characteristics
of Households Affected by Limit on the Shelter Deduction
(GAO/RCED-97-118, May 14, 1997).  Our second report is entitled
Welfare Reform:  State and Local Responses to Restricting Food Stamp
Benefits (GAO/RCED-98-41, Dec.  18, 1997). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Our July 1998 survey indicated that seven states had implemented a
limited, or "mini," Simplified Food Stamp Program.  Of the 45 states
that had not implemented the simplified program, 6 were planning to
do so; 30 indicated that they did not plan to do so; and the 9
remaining states were uncertain about their plans.  One of the six
states--Arkansas--was planning to adopt the simplified program and
subsequently implemented a "full," or more comprehensive, program
that establishes a uniform set of eligibility requirements for both
food stamp and TANF assistance. 

The states that had not implemented the simplified program cited
several concerns that discouraged them:  (1) increasing caseworkers'
burden by creating a third set of eligibility criteria for a
simplified program that are different from those associated with the
separately administered TANF and the Food Stamp Program; (2)
restricting the options for designing a simplified program by
requiring it to be cost neutral; and (3) other Welfare Reform Act
requirements that had a higher priority. 

The simplified program would have little or no impact on either the
number of households participating in the Food Stamp Program or on
the amount of their benefits, according to the majority of states
that have and have not implemented a simplified program.  The
simplified program has limited impact, according to one state,
primarily because a relatively small number of households participate
in it compared with the state's total food stamp population. 
According to another state, since most TANF households also receive
assistance under the regular Food Stamp Program, there is little
change in total benefit costs as a result of the state's adoption of
the simplified program. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The Welfare Reform Act gives the states the opportunity and authority
to streamline their operations by allowing them to experiment with
ways to standardize their eligibility and benefit requirements for
households participating in both TANF and the Food Stamp Program. 
Specifically, the act provided the states with the option of
operating the Simplified Food Stamp Program.  This program allows
them to establish eligibility and benefit levels on the basis of
household size and income, work requirements, and other criteria
established under TANF, food stamps, or a combination of both
programs--as long as federal costs are not increased in doing so. 


      THE TANF BLOCK GRANT
---------------------------------------------------------- Letter :2.1

The TANF block grant, administered by the U.S.  Department of Health
and Human Services, helped the states provide assistance to about 3.9
million needy families with children in fiscal year 1997.  Among
other things, the grant is intended to allow children to be cared for
in their own homes and to reduce welfare dependency by promoting job
preparation and work. 

The fixed amounts of the states' TANF grants under the Welfare Reform
Act are based on the amount of the grants they received in specified
fiscal years under prior law, adjusted for population increases under
certain circumstances.\6 For fiscal year 1997, the federal grants
available to the states totaled $16.7 billion and ranged from $21.8
million in Wyoming to over $3.7 billion in California.  With respect
to state funding, the Welfare Reform Act included a
"maintenance-of-effort" provision requiring the states to provide 75
to 80 percent of their historic level of funding.\7

Because of congressional concern that welfare had become a way of
life for some participants, a key purpose of the new law is to
promote work over welfare and self-reliance over dependency.  In
support of this goal, the law provides that the states must require
able-bodied participants to engage in work or work-related activities
and must impose a 5-year lifetime limit on federal assistance.  The
states must require adults in families receiving TANF assistance to
participate in work or work-related activities after receiving
assistance for 24 months, or sooner, as defined by the state.  If
recipients fail to participate as required, the states must at least
reduce the families' assistance and may opt to terminate it entirely. 

To avoid financial penalties, the states must ensure that a certain
specified minimum percentage of their beneficiaries are participating
in work or work-related activities each year.  These percentages are
referred to as "minimum mandated participation rates." To count
toward these mandated rates, adults in families receiving welfare
must participate for a certain minimum number of hours in work or a
work-related activity as prescribed in the Welfare Reform Act--such
as job readiness workshops; on-the-job training; and, under certain
circumstances, education.  The required number of hours of
participation and the percentage of a state's caseload that must
participate to meet mandated rates increase over time are shown in
table 1. 



                                Table 1
                
                Federal Law Sets Increasing Requirements
                for Work or Related Activities for One-
                     Parent and Two-Parent Families

                                         Fiscal year
                        ----------------------------------------------
                        1997    1998    1999    2000    2001    2002
----------------------  ------  ------  ------  ------  ------  ------
Minimum weekly average participation required (hours)
----------------------------------------------------------------------
One-parent families     20      20      25      30      30      30

Two-parent families\a   35      35      35      35      35      35


Minimum mandated participation rates (percentage of states' caseload)
----------------------------------------------------------------------
One-parent families     25%     30%     35%     40%     45%     50%

Two-parent families     75%     75%     90%     90%     90%     90%
----------------------------------------------------------------------
\a To receive federally funded child care assistance, two-parent
families must participate for a combined total of at least 55 hours a
week. 

Source:  42 U.S.C.  sec.  607. 

Instead of prescribing in detail how the states should structure
their TANF programs, the Welfare Reform Act authorizes the states to
use their block grants in any manner that is reasonably calculated to
accomplish the purposes of TANF.  For example, the states are allowed
to set forth their own criteria for defining who will be eligible and
what assistance and services will be available, provided they ensure
fair and equitable treatment.  The states may opt to deny assistance
altogether for noncitizens, drug felons, minor teen parents, or those
they determine are able to work.  The states may also choose when to
require adults to participate in work activities, what types of
activities are allowed, who should receive a participation waiver,
and whether to terminate grants to entire families for
noncompliance.\8


--------------------
\6 Under the Welfare Reform Act, the states' grants are based on the
greater of one of three options for determining the amount of their
grants:  (1) the average amount of grants received for fiscal years
1992, 1993, and 1994; (2) the amount of grants received for fiscal
year 1994 (with some adjustments for states with high expenditures
for emergency assistance in fiscal year 1995); or (3) a formula based
on grants received for fiscal year 1995. 

\7 Under the Welfare Reform Act, the states must have a certain
number of participants working or enrolled in work-related
activities.  The states that meet these mandated minimum
participation rates must provide at least 75 percent of their
historic level of funding; the states that fail to meet these rates
must provide at least 80 percent. 

\8 However, the act defines the types of activities that may count
toward the states' mandated participation rate, as well as the cases
that must be included in the calculation.  The act also stipulates
that if a one-parent family with a child under age 6 is unable to
obtain needed child care, the state may not sanction the family for
noncompliance with the work requirement and that failure to maintain
assistance to such families is grounds for a penalty of up to 5
percent of the state's grant. 


      THE FOOD STAMP PROGRAM
---------------------------------------------------------- Letter :2.2

The Food Stamp Program is the cornerstone of federal food assistance
programs.  It is an entitlement program that helped put food on the
table for about 8.3 million households each day during 1997 at a
federal cost of about $19.5 billion.  It provides low-income
households with paper coupons or electronic benefits that can be
redeemed for food in about 200,000 authorized stores across the
nation.  U.S.  citizens and some legal immigrants who are admitted
for permanent residency may qualify for food stamps.  Household
eligibility and benefit amounts are based on nationwide federal
criteria, including household size and income; eligibility is also
based on assets, housing costs, work requirements, and other factors. 
The program operates in the 50 states, the District of Columbia, Guam
and the U.S.  Virgin Islands.\9

FNS administers the program in cooperation with state agencies.  FNS
is responsible for approving state plans for operation and ensuring
that the states are administering the program in accordance with
regulations.  The program is administered at the local level by
either a state agency or a local welfare agency, depending on the
state.  Local office staff are responsible for determining
eligibility and the level of benefits issued to participating
households.  The federal government pays the full cost of benefits
and shares administrative costs with the states.  The federal cost to
administer the program was about $1.7 billion in fiscal year 1997,
and the average monthly household food stamp benefit was $169.\10

The Welfare Reform Act requires most able-bodied adult participants
receiving food stamps to work in return for their benefits. 
Able-bodied participants ages 18 to 50 with no dependent children may
receive food stamp benefits for only 3 months in every 36-month
period unless they are engaged in work or work programs.  Qualifying
work includes participating in a work program for a monthly average
of 20 hours or more a week.  Exclusions to the work requirement vary
by program.  For example, single parents with children under the age
of 6 may be exempted from the food stamp work requirement, while TANF
allows the states to exempt single parents with children under the
age of 1. 


--------------------
\9 In Puerto Rico, the Food Stamp Program was replaced in 1982 by a
block grant program.  The Commonwealth of the Northern Marianas
Islands and American Samoa in the Pacific also operate under block
grants. 

\10 Benefit amounts are higher for Alaska, Hawaii, Guam, and the U.S. 
Virgin Islands, reflecting higher food prices in those areas. 


      THE SIMPLIFIED FOOD STAMP
      PROGRAM
---------------------------------------------------------- Letter :2.3

The Simplified Food Stamp Program allows the states to determine
eligibility and benefits under one set of program criteria for
families receiving assistance from both the Food Stamp Program and
TANF.  Under the simplified program, the states can merge their TANF
and food stamp rules into a single set of eligibility and benefit
requirements and control the extent to which the program's rules are
merged.  Some states, for example, may elect to implement a "full"
simplified program in which an extensive set of TANF
requirements--such as income and asset limits--are adopted to
determine eligibility.  Other states may adopt a more limited, or
"mini," simplified program--incorporating only TANF's work
requirement into their simplified program.  With a mini program, the
states can administratively combine the value of their TANF and food
stamp benefits in calculating whether participants are being provided
with benefit amounts that are at least equal to the minimum
wage--currently $5.15 an hour--multiplied by the number of hours they
are required to work.  (App.  III describes in more detail how the
adoption of a simplified program helps the states to comply with the
requirement to provide the minimum wage.)

The Welfare Reform Act requires the states to retain several features
of the regular Food Stamp Program, such as issuance procedures and
the use of the Thrifty Food Plan\11 as the basis of benefits in their
simplified program.  The states must also obtain FNS' approval to
implement a simplified program.\12 To establish a program, the states
must demonstrate that their simplified program will not cost the
federal government more than the Food Stamp Program would have cost
for the affected participants in any fiscal year--that is, the
program has to be cost neutral.  The simplified program's
cost-neutrality requirement is more restrictive than the
cost-neutrality requirement approved for some welfare reform
demonstration projects, which have allowed states to calculate cost
neutrality over several years. 


--------------------
\11 A low-cost model diet plan that is based on the National Academy
of Sciences' Recommended Dietary Allowances and on the food choices
of low-income households. 

\12 Households in which all members receive TANF are automatically
eligible to participate in a simplified program, while households
with one or more, but not all, members who receive TANF may
participate with FNS' approval. 


   FEW STATES HAVE IMPLEMENTED THE
   SIMPLIFIED PROGRAM
------------------------------------------------------------ Letter :3

In response to our July 1998 survey, seven states--Arizona, Delaware,
Georgia, Idaho, Mississippi, New Jersey, and New York--reported that
they had implemented a simplified program.  Each of these states
implemented a mini simplified program.  Six states--Arkansas,
Florida, Illinois, Maine, North Carolina, and South
Carolina--indicated that they were planning to implement the
simplified program.  Since July, one of these states--Arkansas--has
implemented it--bringing the total number of states with simplified
programs to eight and reducing the number of states planning to
implement the program to five.  Appendix IV presents the status of
each state's implementation as of July 1998. 

Unlike the seven states that had implemented a mini simplified
program, Arkansas adopted a more extensive simplified program, using
a number of TANF requirements to determine eligibility and benefits. 
For example, under the regular food stamp rules, the portion of the
fair market value of a household vehicle that exceeds $4,650 is
counted toward the household's resource limit.\13 However, Arkansas'
simplified program uses a state-defined TANF rule that exempts the
total value of the vehicle from the resource limit.  Arkansas'
primary goal in adopting the simplified program is to create a
"one-stop" process for approving TANF and food stamp benefits,
thereby eliminating separate participant interviews, forms, and
reporting requirements for each program.  The state expects that
caseworkers will then be able to spend more time helping program
participants find employment.  (App.  V describes the Arkansas
program in more detail.)

According to the survey responses, of the five remaining states
(excluding Arkansas) planning to implement a simplified program, all
but Florida plan to adopt it within the next year.  Florida was
uncertain about when it would adopt a simplified program. 

Figure 1 identifies the eight states (including Arkansas) that have
implemented a simplified program and the five states that are
planning to implement a program. 

   Figure 1:  States that Have
   Implemented or Plan to
   Implement a Simplified Program

   (See figure in printed
   edition.)

Source:  GAO's July 1998 survey and FNS' data. 

Thirty states are not planning to implement the simplified program,
and 9 states--California, Colorado, Connecticut, Massachusetts, New
Hampshire, Pennsylvania, Rhode Island, Utah, and the U.S.  Virgin
Islands--reported that they are uncertain about whether they will
implement the simplified program. 


--------------------
\13 Federal law set a maximum resource limit of $2,000 for most
households.  Households with at least one member age 60 or older may
have up to $3,000 in resources.  Certain resources are not counted,
such as a home and lot. 


   VARIOUS CONCERNS HAVE
   DISCOURAGED STATES FROM
   ADOPTING THE PROGRAM
------------------------------------------------------------ Letter :4

Thirty five of the 45 states that had not implemented a simplified
program indicated that, as currently structured, the simplified
program was hardly or not at all helpful in achieving a more
efficient and streamlined operation.  Nine states indicated that the
program was somewhat or moderately helpful, and one state did not
indicate whether it was helpful or not.  As figure 2 shows, the
states that have not implemented a simplified program cited a number
of concerns that have discouraged its adoption. 

   Figure 2:  Major Concerns That
   Discouraged States From
   Implementing the Simplified
   Program

   (See figure in printed
   edition.)

Source:  GAO's July 1998 survey. 

The most frequently cited concern for 34 of the states that had not
implemented a simplified program was increasing caseworker burden
because of an additional set of program criteria.  The additional
criteria would be produced by the states' merging of TANF and food
stamp provisions under their simplified program.  For example, under
the simplified program, a state may replace the regular food stamp
provision exempting single parents with children under age 6 from
work with a TANF provision exempting single parents with children
under age 1.  Such changes can produce a distinct set of simplified
program work requirements not found in either TANF or the regular
Food Stamp Program. 

The next most frequently cited concern for 28 of the states was that
the program's cost-neutral provision restricted the states' options
for simplifying the program.  That is, a simplified program that
incorporates eligibility or benefit determination criteria that
result in higher food stamp benefit costs must be offset by other
program features that reduces benefit costs to what they would have
been under the regular Food Stamp Program--in effect, requiring the
states to make program design trade-offs to achieve cost neutrality. 

Finally, the third most frequently cited factor discouraging program
implementation for 24 of the states was that other Welfare Reform Act
requirements had a higher priority.  For example, the Welfare Reform
Act required the states to submit their TANF plans for federal
approval and begin implementing the program by July 1, 1997.  In
contrast, the states were under no deadline or requirement to develop
and implement a simplified program. 

Some of the other frequently cited concerns that discouraged states
from implementing the program included the states' difficulties in
aligning food stamp requirements with TANF, the absence of state
automation to support program implementation, and the potential
increase in the states' food stamp error rates, which would result in
financial penalties.  (App.  VI discusses our review of North Dakota,
which had obtained FNS' approval to implement a full simplified
program and subsequently decided against it for many of the same
concerns cited by other states.)

Thirty-four of the states that had not implemented a simplified
program suggested ways to improve the program to make its adoption
more attractive to the states.  Suggestions included extending the
simplified program to all food stamp households, eliminating or
relaxing the cost-neutrality requirement, and providing a moratorium
on the financial penalties associated with increased food stamp error
rates.  The states' suggestions are summarized in appendix VII. 


   MOST STATES REPORT THAT THE
   SIMPLIFIED FOOD STAMP PROGRAM
   WOULD HAVE LITTLE IMPACT ON
   FOOD STAMP PARTICIPATION AND
   BENEFITS
------------------------------------------------------------ Letter :5

Most states did not expect the simplified program to affect the level
of participation in the Food Stamp Program or the benefits provided. 
As figure 3 shows, according to 6 of the 7 states that had
implemented a mini simplified program and 32 of the states that had
not implemented a simplified program, the program would have little
or no impact on the number of households receiving food stamps. 

   Figure 3:  Impacts of the
   Simplified Program on the
   Number of Households Receiving
   Food Stamps

   (See figure in printed
   edition.)

Source:  GAO's July 1998 survey. 

Similarly, as figure 4 shows, the 7 states that had implemented a
mini simplified program and 24 of the states that had not implemented
a simplified program reported that the program would have little or
no impact on the benefit amounts received by participants. 

   Figure 4:  Impacts of the
   Simplified Program on Average
   Household Food Stamp Benefits
   Amounts

   (See figure in printed
   edition.)

Source:  GAO's July 1998 survey. 

According to Georgia's food stamp director, the simplified program
has had minimal impact on participation or benefit levels because
most of the state's TANF households are already receiving food
stamps.  Food stamp officials in Idaho told us that the minimal
impact on food stamp participation and benefit levels in their state
is due to the relatively small number of households that participate
in the simplified program compared with the state's total food stamp
population. 

The states also assessed other impacts that would occur as a result
of the implementation of a simplified program.  For example, 35
states indicated that there would be little or no change in their
TANF or Medicaid costs resulting from implementation of the
simplified program, whereas 24 states reported that their food stamp
administrative costs would increase.  (See fig.  5.)

   Figure 5:  Other Impacts of the
   Simplified Program

   (See figure in printed
   edition.)

Source:  GAO's July 1998 survey. 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

Although the Welfare Reform Act was, in part, intended to simplify
the administration of welfare assistance, this goal is not being
achieved with the simplified program.  Most states have not
implemented the simplified program, and, under current legislation,
few states are likely to take full advantage of this option.  While
the legislation seems to offer the states a great degree of
flexibility in designing a simplified program, its restrictive
cost-neutrality provision, potential to increase caseworkers' burden,
and difficulties in aligning strict food stamp rules with different
state-developed TANF regulations, leave the states with little
incentive for adopting the program.  If the simplified program's
authorizing legislation remains unchanged, the program will continue
to be of little value to the states--with the exception of the
flexibility it gives them to combine the value of their TANF and food
stamp benefits in order to meet the minimum wage requirements for
workfare participants. 


   MATTERS FOR CONGRESSIONAL
   CONSIDERATION
------------------------------------------------------------ Letter :7

To fulfill the Simplified Food Stamp Program's potential, the
Congress may wish to consider working with USDA to develop
modifications to the legislation that established the program in
order to address the implementation concerns discussed in this
report.  Among other things, the Congress could consider providing
the states with more flexibility in meeting the simplified program's
cost-neutrality requirement by, for example, allowing a longer period
of time to measure cost neutrality, instead of annually as is
required by the current legislation.  The Congress could also examine
the feasibility of granting the states a grace period in which
increased error rates attributed to the implementation of the
simplified program are exempted from financial penalties. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :8

We provided USDA with a copy of a draft of this report for review and
comment.  We met with officials from the Food and Nutrition Service,
including the Director of Grants Management and the Chief of Food
Stamp Program Design, who generally agreed with the facts presented
in this report.  The Food and Nutrition Service had two overall
comments.  First, the barriers to implementing the program cited by
the states as being of most concern, such as it's cost neutral
provision, are imposed by the program's authorizing legislation, not
by the Food and Nutrition Service or the Food Stamp Program.  Second,
it will be difficult to identify legislative changes that balance the
states' desire for more flexibility with the Congress's concern for
cost containment and the Food Stamp Program mission of ensuring the
nutritional security for low-income families.  We agree that the
barriers of most concern to the states originate in the program's
authorizing legislation and that legislative actions effectively
satisfying both state and congressional concerns may be difficult to
develop.  Nonetheless, we continue to believe that the actions we
identified as matters for congressional consideration, such as
granting the states a grace period from financial penalties due to
increased error rates, offer the promise of making the program more
useful to the states without necessarily increasing federal costs. 
In addition to its two overall comments, the Food and Nutrition
Service suggested technical clarifications to the report, which we
incorporated as appropriate. 


---------------------------------------------------------- Letter :8.1

As arranged with your office, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 30 days after the date of this letter.  At that time, we will
send copies of this report to the Senate Committee on Agriculture,
Nutrition, and Forestry; the House Committee on Agriculture; other
interested congressional committees; and the Secretary of
Agriculture.  We will also make copies available to others upon
request. 

Please contact me at (202) 512-5138 if you or your staff have any
questions about this report.  Major contributors to this report are
listed in appendix VIII. 

Sincerely yours,

Robert E.  Robertson
Associate Director, Food and
 Agriculture Issues


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I

In October 1996, the Ranking Minority Member, Subcommittee on
Children and Families, Senate Committee on Labor and Human Resources
(now known as the Committee on Health, Education, Labor and
Pensions), asked us to study several issues concerning the impact of
welfare reform on the Food Stamp Program.  This report addresses the
status and impact of the states' implementation of the Simplified
Food Stamp Program.  Specifically, we (1) identify the number of
states that have adopted or are planning to adopt the Simplified Food
Stamp Program, (2) describe the concerns that may be preventing other
states from adopting the simplified program, and (3) examine the
impacts that the adoption of the simplified program may have on
households' eligibility and benefits. 

To address the first objective, we mailed a national survey in July
1998 to 53 state agencies that administer the Food Stamp Program.\1
To encourage their responses to our survey, we used follow-up
mailings and telephone calls.  We received survey responses from 52
of the 53 states, a response rate of 98 percent.  (Iowa declined to
participate in our survey.)

To address the second and third objectives, we collected pertinent
studies, reports, and program literature on the welfare reform
changes contained in the 1996 Welfare Reform Act.  Our survey also
collected information on the actual or anticipated changes in the
number of participating food stamp households and officials' views on
whether benefit levels were expected to increase or decrease as a
result of the simplified program.  We also collected information on
the problems or concerns that the states perceive may result from
adopting the simplified program.  In addition, we interviewed
officials at the headquarters of the U.S.  Department of
Agriculture's (USDA) Food and Nutrition Service (FNS) and at all of
its seven regional offices to collect information on the effect of
the simplified program on household participation and benefit levels. 
We interviewed food stamp officials in the eight states that have
adopted the simplified program:  Arizona, Arkansas, Delaware,
Georgia, Idaho, Mississippi, New Jersey, and New York.  We also
interviewed food stamp officials in North Dakota--the only state that
has decided against implementing the simplified program after
receiving program approval from FNS--to obtain information on their
assessment process for the adoption of the simplified program. 

We performed our work from April through December 1998 in accordance
with generally accepted government auditing standards.  We did not,
however, independently verify the accuracy of the state food stamp
directors' responses to our questionnaire. 



(See figure in printed edition.)Appendix II

--------------------
\1 As treated in the Food Stamp Act of 1977, as amended, "states"
includes the 50 states, the District of Columbia, Guam, and the U.S. 
Virgin Islands. 


AGGREGATED RESPONSES TO OUR JULY
1998 MAIL SURVEY
=========================================================== Appendix I



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


USE OF THE SIMPLIFIED PROGRAM TO
COMPLY WITH MINIMUM WAGE
REQUIREMENTS
========================================================= Appendix III

The Department of Labor has determined that under the Fair Labor
Standards Act of 1938, as amended, welfare participants who are
required to work must receive benefits that are at least equal in
value to the minimum wage multiplied by the number of hours worked. 
Some states that provide low levels of assistance through Temporary
Assistance for Needy Families (TANF), such as Mississippi, have found
it difficult to require participants to work the hours mandated by
the Welfare Reform Act to receive benefits and remain in compliance
with the federal minimum wage restriction. 

For example, a Mississippi household consisting of a single parent
and two children received a TANF benefit of $120 in October 1997. 
The maximum hours that the state could require the parent to work
under the minimum wage restriction would have been a little more than
5 hours a week (the product of $120 divided by 4.3 average number of
weeks per month divided by the minimum wage of $5.15 equals 5.4
hours)--about 15 hours short of TANF's 20-hour weekly work
requirement in October 1997. 

According to the Mississippi food stamp director, the state addressed
this shortfall in work hours by adopting a "mini" simplified program
that allowed it to administratively combine the value of its monthly
TANF and food stamp benefits when calculating the maximum number of
hours that participating households can be required to work under the
minimum wage restriction.  In the above example, combining the $120
monthly TANF benefit with the maximum food stamp benefit--at that
time, $321 for a family of three-- brought the total value of the
household's October 1997 assistance to $441.  With the combined
benefit amount, the maximum number of hours allowed under the minimum
wage restriction increased from about 5 to 20 hours a week.  As a
result, Mississippi was able to meet TANF's fiscal year 1998 work
requirement for participants without exceeding the maximum number of
work hours allowed. 


STATUS OF STATES' IMPLEMENTATION
OF THE SIMPLIFIED FOOD STAMP
PROGRAM AS OF JULY 1998
========================================================== Appendix IV

                                                      Number of states
Status of implementation        States                       reporting
------------------------------  ------------------  ------------------
State has decided definitely    Alabama, Guam,                      16
 not to implement the program    Hawaii, Kentucky,
                                 Maryland,
                                 Minnesota,
                                 Missouri,
                                 Nebraska, Nevada,
                                 New Mexico, North
                                 Dakota, Oklahoma,
                                 Oregon, South
                                 Dakota,
                                 Tennessee, and
                                 Washington
State will probably not         Alaska, District                    14
 implement the program           of Columbia,
                                 Indiana, Kansas,
                                 Louisiana,
                                 Michigan,
                                 Montana, Ohio,
                                 Texas, Vermont,
                                 Virginia, West
                                 Virginia,
                                 Wisconsin, and
                                 Wyoming
State is uncertain if it will   California,                          9
 implement the program           Colorado,
                                 Connecticut,
                                 Massachusetts,
                                 New Hampshire,
                                 Pennsylvania,
                                 Rhode Island,
                                 Utah, and Virgin
                                 Islands
State has implemented a         Arizona, Delaware,                   7
 program                         Georgia, Idaho,
                                 Mississippi, New
                                 Jersey, and New
                                 York
State will probably implement   Florida, North                       3
 the program                     Carolina, and
                                 South Carolina
State will definitely           Arkansas, Illinois                   3
 implement the program           and Maine
Data not available              Iowa                                 1

----------------------------------------------------------------------

ARKANSAS IMPLEMENTS THE SIMPLIFIED
FOOD STAMP PROGRAM
=========================================================== Appendix V

Arkansas was the first state to obtain FNS' approval to implement a
simplified program that merges several Food Stamp Program and TANF
requirements.  Arkansas' goal in adopting a simplified program is to
streamline and simplify the process of applying for food stamp and
TANF benefits.  By implementing a "seamless" procedure for approving
the two benefits at the same time--a "one-stop" process--caseworkers
should save time in interviewing clients, completing forms, and
reporting requirements.  Caseworkers would use the additional
available time to help welfare recipients pursue employment
opportunities.  Reducing time in the clients' application process
would also help decrease the need to hire additional caseworkers to
meet the increased responsibilities resulting from implementing
welfare reform changes.  Arkansas serves about 100,000 households, or
1 percent of the nation's food stamp household population.  This
appendix describes the state's experiences in adopting a simplified
program. 


      INITIAL CHALLENGES IN
      OBTAINING APPROVAL FOR A
      SIMPLIFIED PROGRAM
------------------------------------------------------- Appendix V:0.1

In 1996, Arkansas began developing proposals for a simplified program
with the idea that it would implement the program at the same time as
TANF.\1 By March 1997, Arkansas had drafted a plan and contacted FNS
for guidance.  FNS provided contract assistance to help ensure that
the simplified plan was cost neutral, and subsequent analyses showed
that Arkansas stayed well within the cost-neutrality requirement. 
However, with regard to the process of aligning the regulations for
the Food Stamp Program and TANF to achieve a simplified program plan,
Arkansas' food stamp officials told us that the lack of FNS
regulations and detailed guidance resulted in a learn-as-you-go,
ad-hoc approval process that was full of uncertainties.  As a result,
Arkansas officials were not sure which proposed program changes FNS
would approve.  According to FNS officials, Arkansas submitted its
proposal for a Simplified Food Stamp Program for review and approval
in October 1997.  FNS officials stated that some of Arkansas'
proposed simplified plan provisions could not be approved because of
the strict statutory requirements of the Food Stamp Program or the
adverse impact of the proposed program changes on recipients'
benefits.  FNS officials said they took great care in reviewing and
approving the Arkansas plan because Arkansas' simplified program and
the modifications suggested by FNS officials would be instrumental in
shaping federal policies for the Simplified Food Stamp Program
nationwide.  FNS approved Arkansas' plan for pure-TANF households
(all household members are eligible to receive TANF assistance) in
February 1998.  According to agency officials, FNS approved Arkansas'
simplified program plan for mixed-TANF households (some, but not all,
household members are eligible to receive TANF assistance) in March
1998 after Arkansas modified the plan to reduce the amount of benefit
loss for these households and Arkansas implemented it in August 1998. 


--------------------
\1 Arkansas officials refer to their TANF program as the Transition
Employment Assistance (TEA) Program.  The TEA Program, which provides
assistance for up to 2 years, would help (1) economically needy
families become more responsible for their own support and less
dependent on public assistance and (2) recipients recognize their
employment possibilities and direct them to jobs. 


      DIFFICULTIES IN ALIGNING
      FOOD STAMP RULES AND
      PROCEDURES
------------------------------------------------------- Appendix V:0.2

Arkansas officials cited three major changes to the simplified
program that FNS either did not approve or only partially approved
because the strict statutory requirements for the Food Stamp Program
were difficult to align with TANF.  These proposed rules and
procedures would have greatly contributed to Arkansas' goal of
creating a "seamless" process to reduce application processing time. 
These changes were to (1) use an average dollar amount to determine
the shelter costs under a simplified program, (2) change Arkansas'
application process so that the approval of both TANF and food stamp
benefits could be given at the same time, and (3) change the
definition of households to exclude children born while the mother
was receiving TANF assistance.\2


--------------------
\2 While the federal law under TANF is silent on whether to prohibit
benefit increases for families on assistance when another child is
born (referred to as "family cap" provisions), many states have
adopted some type of family cap provision to discourage subsequent
births. 


         SHELTER COSTS
----------------------------------------------------- Appendix V:0.2.1

To determine whether a household's net monthly income qualifies for
the Food Stamp Program, a shelter expense deduction is included in
the calculation.  Under program regulations, a household is entitled
to a deduction equal to its shelter costs (such as rent, mortgage
payments, utility bills, property taxes, and insurance).  Also, under
the regular Food Stamp Program, a household without elderly or
disabled members receives a deduction for the portion of shelter
expenses exceeding 50 percent of net income, not to exceed the capped
amount.  Households containing elderly or disabled members are
entitled to subtract the full value of their shelter costs when those
costs exceed 50 percent of their adjusted income.  In fiscal year
1996, the limit on the excess shelter expense deduction for a
household without elderly or disabled members was generally $247. 

Arkansas' proposed simplified program would have changed how shelter
costs are considered in determining food stamp benefits. 
Specifically, Arkansas would have applied a county's average shelter
costs to both pure- and mixed-TANF households.  Arkansas wanted to
use the average shelter cost because, in keeping with the goal of
creating a "seamless" process, each county could then be assigned a
standard shelter cost. 

However, using each county's average shelter costs in calculating
simplified program benefits would have reduced the food stamp
benefits, particularly for the mixed-TANF households, especially
those containing elderly or disabled members, according to an FNS
contractor's analysis.\3 While benefit amounts for pure-TANF
households would increase an average of less than 1 percent, benefits
for mixed-TANF households would decrease an average of more than 8
percent.  Furthermore, approximately one-half of all the mixed-TANF
households participating in the simplified program would lose
benefits, and about one-third of the households would lose more than
20 percent.  FNS said that such a level of reduction in benefits
compromised the program's nutritional support for a significant
number of mixed-TANF households, most of which contain elderly or
disabled members, who are particularly vulnerable to nutritional
loss. 

FNS would not approve any policy changes that would have a negative
effect on food stamp benefits.  Consequently, FNS instructed Arkansas
to modify its simplified program and consider changes in the
calculation of shelter expenses on the basis of standardized and
actual expenses for each county.  Arkansas modified its simplified
program to allow mixed-TANF household recipients to choose between
the standard shelter costs and the household's actual shelter costs. 
However, Arkansas also kept the average benefit calculation. 

FNS commented that the simplified program's authorizing legislation
requires FNS to approve implementation plans for pure-TANF households
so long as these plans comply with the law.  Using the simplified
program authority, FNS established a single criterion for approving
mixed-TANF households, and that criterion does not prohibit, but only
limits, the amount that benefits can be reduced for these households. 
According to FNS, as long as a state's plan for mixed-TANF households
does not reduce benefits beyond specific thresholds and meets the
statutory requirements, FNS will approve any state's plan.  FNS
officials stated that they offered their services to work with
Arkansas officials in developing several appropriate alternative ways
to consider shelter costs in determining benefits in the simplified
program.  The use of actual expenses was only one of several
suggestions made by FNS to limit the amount of benefit loss. 


--------------------
\3 Results For Arkansas' Simplified Food Stamp Program Plan 1,
Mathematica Policy Research, Inc., Sept.  15, 1997. 


         APPLICATION PROCESSING
----------------------------------------------------- Appendix V:0.2.2

Arkansas had proposed approving the applications for TANF and food
stamp benefits at the same time.  In effect, any household submitting
an application to participate in TANF would be automatically
submitting an application to participate in food stamps.  FNS
officials did not approve this program change because, under the
Welfare Reform Act, the recipient has to be eligible for TANF
assistance before being eligible for benefits under the simplified
program.  Consequently, Arkansas officials changed the simplified
program rules to certify applicants' eligibility for food stamp
benefits after the TANF application is approved.  If an applicant is
not approved for TANF assistance within 30 days, the applicant is
approved to receive benefits under the regular Food Stamp Program
rules, if otherwise eligible.  The TANF application form was revised
to include information needed to determine eligibility for the
regular Food Stamp Program.  Once the applicant completed all the
necessary paperwork and was subsequently approved for TANF
assistance, the Arkansas caseworker would then convert the
applicant's regular food stamp eligibility to the simplified program. 

This application procedure causes the caseworker to take extra time
to process an application for food stamp benefits under the regular
Food Stamp Program rules.  Moreover, moving applicants back and forth
between the regular Food Stamp Program and the simplified program can
cause confusion and give the caseworkers an additional workload
burden. 

FNS commented that it approved the Arkansas plan for joint
application filing, and the only restrictions on joint application
processing pertain to situations in which the state is not able to
approve the TANF application within 30 days.  If TANF cannot be
approved within 30 days, the food stamp application must be processed
using regular Food Stamp Program procedures.  This procedure ensures
that food stamp benefits are not delayed while the state is making
its determination regarding TANF. 


         HOUSEHOLD COMPOSITION
----------------------------------------------------- Appendix V:0.2.3

Arkansas had proposed changing the food stamp definition of
households to exclude children born while the mother was receiving
TANF assistance.  FNS advised Arkansas that the definition of a
household\4 under the food stamp regulations could not be altered. 
Children ineligible for TANF assistance because of the family cap
provision would still be included as household members for simplified
program benefits.  FNS advised Arkansas that it must use the regular
food stamp regulations governing household composition in determining
whether a household is eligible to participate in the simplified
program.  In addition, the households affected by the family cap
provision must have their food stamp benefits determined under the
regular Food Stamp Program.\5 Arkansas revised its simplified program
to allow households with children ineligible for TANF assistance
solely because of the family cap provision to participate in the
simplified program. 

The change in the definition of a household can cause that household
to move between the simplified program and the regular Food Stamp
Program.  Once a household becomes ineligible for TANF assistance,
the household's eligibility for food stamps under the regular Food
Stamp Program must be determined.  FNS understood the administrative
difficulties in switching households between the simplified program
and the regular Food Stamp Program when TANF benefits are suspended
for a short period of time.  FNS notified Arkansas that it would be
appropriate to allow a household to retain its simplified program
status for a period of time--but no longer than 4 months.  Households
that are suspended from TANF for longer than 4 months must have their
benefits redetermined under the regular Food Stamp Program. 

FNS commented that the simplified program plan Arkansas submitted did
not request an alteration in household composition because of
children subject to the family cap.  It stated that these households
would participate in the simplified program and would have their food
stamp benefit amounts adjusted.  Furthermore, FNS officials stated
that because the Arkansas plan includes households with children
subject to the family cap, benefits for these households are
determined using the simplified program procedures. 


--------------------
\4 In general, individuals who live in a residential unit and
purchase and prepare food together constitute a household. 

\5 According to Arkansas officials, households affected by the family
cap provision will not be considered categorically eligible for
benefits through the Simplified Food Stamp Program but must meet the
gross income and resource limits of the regular Food Stamp Program. 


      ARKANSAS SIMPLIFIED PLAN
      ADOPTS TANF RULES
------------------------------------------------------- Appendix V:0.3

In spite of some of the difficulties, Arkansas still implemented a
version of a simplified program.  The Arkansas' simplified program
adopted TANF's processing standards and rules to the extent possible,
including the following: 

  -- No medical costs are allowed under the simplified program
     because TANF recipients are covered by Medicaid.  Under the
     regular Food Stamp Program, medical deductions of costs incurred
     over $35 are available to households that contain elderly and
     disabled members. 

  -- No dependent care costs are allowed under the simplified program
     because the state pays child care costs for TANF recipients. 
     Under the regular Food Stamp Program, households with dependents
     receive a deduction up to $200 for expenses involved in caring
     for children and other dependents while household members work,
     seek employment, or attend school. 

  -- Countable income and resources will be determined by TANF rules,
     which limit resources to $3,000 for households.  The regular
     Food Stamp Program permits up to $2,000 in countable assets for
     most households.  Countable assets include cash; assets that can
     easily be converted to cash, such as money in checking or
     savings accounts, savings certificates, stocks or bonds; and
     lump-sum payments and nonliquid resources.  Furthermore, TANF
     allows resource exemptions, such as the total value of one motor
     vehicle, while the Food Stamp Program exempts the fair market
     value up to $4,650. 

  -- Households will be certified as eligible for assistance under
     the simplified program for up to 12 months, and benefits can be
     automatically extended.  The regular Food Stamp Program
     certification period is also up to 12 months in Arkansas, but at
     the end of the period applicants must reapply for benefits,
     according to Arkansas officials.  This certification period
     varies across the states and averages about 10 months. 


      BENEFITS AND EXPECTATIONS
      FOR THE SIMPLIFIED PROGRAM
------------------------------------------------------- Appendix V:0.4

Arkansas invested a small amount of resources to develop its
simplified program.  The program serves approximately 10 percent of
the state's food stamp households.  Arkansas officials stated that,
although it is too early to determine whether the simplified program
will meet its goals, some of the program's potential benefits may
include the following: 

  -- Eligible TANF households will not have to apply for food stamps. 

  -- Households receiving food stamps through the simplified program
     will have no change in reporting requirements, other than the
     TANF program requirements. 

  -- County caseworkers will not be required to process a separate
     set of income and eligibility verification system reports
     generated through the Food Stamp Program. 

  -- Households participating in the simplified program will not be
     subject to quarterly reporting. 

  -- The state's administrative costs will be cut because workers
     will no longer have to process two applications and report
     changes and will therefore be free to assist households in
     obtaining employment. 

Arkansas officials believe that they should be able to make their
informal assessment of the simplified program in January 1999. 


NORTH DAKOTA DECIDES NOT TO
IMPLEMENT A SIMPLIFIED PROGRAM
========================================================== Appendix VI

After investing significant resources to simplify program
administration, North Dakota officials, believing that the obstacles
to implementation were insurmountable, decided not to implement the
Simplified Food Stamp Program.  North Dakota serves only about 16,000
households, or about two-tenths of a percent of the nation's food
stamp households.  This case study describes North Dakota's
experience in attempting to implement a simplified program and become
more administratively efficient in providing public assistance to its
clients. 


      EFFORTS TOWARD
      SIMPLIFICATION
------------------------------------------------------ Appendix VI:0.1

In 1993, North Dakota officials, in anticipation of welfare reform,
developed a conceptual plan for program simplification with the
ultimate goal of getting people off welfare.  North Dakota planned to
develop a single cash benefit program based on family size that would
replace assistance programs such as food stamps, Aid to Families with
Dependent Children (AFDC), and Low Income Energy Assistance.\1 Under
this cash benefit program, eligibility determinations would be made
with one set of rules for TANF, food stamps, and energy assistance,
and benefits would be provided as a lump sum "cash out payment."
North Dakota also planned to develop a comprehensive system to meet
essential training, education, and employment needs of persons
receiving public assistance.  The conceptual welfare reform plan
resulted in a comprehensive program and an automated management
system--referred to as Training, Education, Employment, and
Management (TEEM)--which determines individuals' eligibility for
public assistance and the level of benefits they should receive. 

During 1996, the state planned to initiate a TEEM demonstration
project.  However, the Food Stamp Program was suspended from the
demonstration project because FNS did not approve the policy changes
requested by the state as a part of its Food Stamp Program and TANF
merger.  During this period, the Welfare Reform Act, containing the
Simplified Food Stamp Program, was enacted.  State officials believed
that the simplified program provisions would allow their TEEM effort
to obtain greater uniformity between the food stamps and TANF
programs.  Although the act disallowed a cash benefit for food
stamps, North Dakota officials believed that the simplified program's
provisions would afford greater opportunities for implementing major
policy changes, including the opportunity to provide a "single lump
sum benefit." In addition, the proposed TEEM demonstration project
would have been limited to operating in only 10 North Dakota
counties, whereas the simplified program would operate statewide. 
Ultimately, however, North Dakota decided not to implement a
simplified program and is proceeding in its efforts to establish TEEM
without the Food Stamp Program. 


--------------------
\1 The Low Income Energy Assistance Program is a block grant,
administered by the U.S.  Department of Health and Human Services in
conjunction with the states.  It provides eligible households with
assistance for home heating and cooling, energy crisis, and
weatherization. 


      OBSTACLES ENCOUNTERED BY
      NORTH DAKOTA
------------------------------------------------------ Appendix VI:0.2

North Dakota officials told us that they encountered a number of
obstacles when working towards approval of a simplified program. 
Overall, they said the lack of federal regulations contributed to
uncertainty regarding the type of program changes that could be
achieved under the simplified program.  The development of the
program was a learn-as-you-go process, and although numerous concerns
were resolved, new ones surfaced.  State officials said that these
roadblocks were a continuing source of frustration and created an
environment of uncertainty and vagueness as to what simplified policy
changes could be achieved under the simplified program legislation. 
Some of the major obstacles North Dakota faced are discussed below. 


         INCREASED CASEWORKER
         BURDEN
---------------------------------------------------- Appendix VI:0.2.1

According to North Dakota officials, caseworkers' burden would
increase as a result of implementing the simplified program.  In
addition to the TANF and regular Food Stamp Program, the simplified
program creates an additional set of regulations and procedures--in
essence creating a whole new program.  This new program would
comprise a mixture of TANF and Food Stamp Program regulations. 
Generally, caseworkers determine welfare benefits by applying
multiple program regulations and procedures, including those for food
stamps, TANF and Low Income Energy Assistance.  According to state
officials, with all the changes occurring in welfare reform in
general, and TANF and TEEM in particular, the addition of a new set
of program regulations and procedures would increased the complexity
of the process to determine eligibility for welfare assistance. 
North Dakota caseworkers are located in small rural counties, and
depending on the location, would have different degrees of experience
and responsibilities.  Some caseworkers manage all aspects of their
county offices, some are also secretaries, and some are newly hired,
long-term, and seasonal employees.  Because many caseworkers do not
administer these programs full-time and do not routinely determine
eligibility for welfare assistance, North Dakota officials believe
that these caseworkers are not as familiar with current welfare
regulations as are full-time caseworkers.  Thus, to add an additional
set of program regulations and procedures would increase caseworkers'
burden. 


         INCREASED ERROR RATES
---------------------------------------------------- Appendix VI:0.2.2

North Dakota, like other states, is required by FNS to conduct
quality control reviews of its food stamp cases to identify and
measure any erroneous food stamp issuances.  Using the results of the
review, the state determines an error rate that is the percentage of
benefits either issued to ineligible households or issued in improper
amounts (under- or over-payments) to eligible households.  This error
rate is reported to FNS. 

North Dakota officials stated that the addition of the simplified
program would definitely increase the state's food stamp error rates
because of the additional burden it would place on the caseworkers. 
North Dakota's error rate was 11.03 percent in fiscal year 1997,
which exceeded the national average of 9.88 percent.  This higher
error rate resulted in a sanction of $38,978.  North Dakota officials
informed us that many of the mistakes were caused by seasonal
workers.  Other errors resulted from households' fluctuating earned
income, changes in welfare reform processes, and other local
circumstances. 

Considering the state's high error rate, and the fact that the
simplified program would add an additional set of program regulations
and procedures, North Dakota officials believed that implementation
of the simplified program would contribute to caseworkers' burden and
could result in even a higher error rate.  If the error rate
increased by as much as 1 percent over the fiscal year 1997 rate,
North Dakota would have incurred a corresponding increase in the
sanction liability of $97,260, or an increase of 350 percent. 


         AMBIGUITY OF SIMPLIFIED
         FOOD STAMP LEGISLATION
---------------------------------------------------- Appendix VI:0.2.3

According to North Dakota officials, the Simplified Food Stamp
Program as outlined in the Welfare Reform Act is not simple.  While
the act's provisions establishing the simplified program appear to
allow the states the flexibility to make almost any type of program
change, the Food Stamp Program is restrictive and some of its
statutory provisions cannot be changed.  In this regard, state
officials told us that the Food Stamp Program differs from TANF and
the Low Income Energy Assistance Program, which are block grants and
therefore provide the state with flexibility in changing program
operations.  For example, state and FNS officials could not agree on
the time period beneficiaries would have for notifying program
officials of any significant changes in income earnings according to
North Dakota officials.  That time period varies between TANF and the
Food Stamp Program--for TANF, it is 10 days, and for food stamps, it
is up to 2 months.  According to state officials, they could not
agree with FNS officials because the time period allowed under the
Food Stamp regulations could not be changed. 

FNS commented that it approved for the simplified plan the TANF
requirement for reporting changes.  According to FNS officials, since
the Food Stamp Act places no restrictions on the states with respect
to changes in reporting requirements, the states may use their TANF
rules, food stamp rules, or a combination of the two. 


         STRICT FOOD STAMP RULES
         ARE HARD TO ALIGN
---------------------------------------------------- Appendix VI:0.2.4

Two major reforms that North Dakota officials sought to initiate
under the simplified program were not approved by FNS.  FNS officials
stated that these changes would alter the fundamental concepts of the
Food Stamp Program.  The two major policy reforms were (1) redefining
household composition and (2) proposing a single benefit calculation
for TANF, Food Stamps, and the Low Income Energy Assistance programs. 
According to FNS officials, approval of the changes for household
composition and benefit calculations would alter the Food Stamp
Program's most fundamental features by eliminating the national
nutrition safety net for low-income households.  In addition, the
approval of these two policy changes would reduce food stamp benefits
for the elderly and disabled recipients who share living quarters
with a TANF recipient.  FNS officials stated that North Dakota's
proposal would replace the Food Stamp Program with essentially a
state program, which the Congress elected not to do under welfare
reform.  When FNS did not approve this change, North Dakota abandoned
its simplified food stamp proposal because the simplified program
would not achieve the TEEM goals of providing a single lump sum
benefit.  FNS officials commented that North Dakota was aware even
before submitting its simplified program proposal that FNS would not
approve the major points of its plan, because these proposals had
been previously denied in a demonstration project proposal for North
Dakota's TEEM effort.  According to FNS officials, FNS advised North
Dakota that the two proposals could not be approved under the
simplified program because they violated the Food Stamp Act. 
However, North Dakota continued to seek these program changes as a
part of its simplified program proposal. 


         CONCERNS ABOUT COST
         NEUTRALITY IN THE FUTURE
---------------------------------------------------- Appendix VI:0.2.5

Although North Dakota's simplified program proposal was cost neutral
initially, state officials told us they feared that the program would
not be cost neutral in future years.  They were concerned about
federal and/or state policy changes that could take place over time
and that could have a negative impact on cost neutrality.  Under such
conditions, the state might no longer meet the cost-neutral
requirement.  Under the Welfare Reform Act, if FNS determines that a
state's program has increased federal costs for any year (or portion
of a year), it must notify the state within 30 days.  Within 90 days,
the state must then submit, for FNS' approval, a corrective action
plan designed to prevent its simplified program from increasing
federal food stamp costs.  If the state does not submit or carry out
a plan, its simplified program will be terminated, and according to
the act, the state will be ineligible to operate a simplified program
in the future.  In the opinion of North Dakota officials, if the
cost-neutrality provision was extended beyond 1 year, there would be
a greater opportunity to achieve the goal. 


      DECISION TO ABANDON
      IMPLEMENTATION
------------------------------------------------------ Appendix VI:0.3

In April 1998, shortly before receiving FNS' final approval, North
Dakota officials decided to abandon the implementation of the
simplified program.  According to state officials, it became obvious
that the program--revised from its original proposal in order to
obtain FNS approval--would not meet the needs of North Dakota's TEEM
effort.  FNS officials stated that these changes were necessary to
meet the Food Stamp Act' s requirements.  State officials believed
that its 5-year welfare reform effort, including the approximately 1-
year effort to develop a simplified program, had wasted hundreds of
hours of staff time.  Since North Dakota did not achieve its goal,
the expenditure of valuable personnel resources that could have been
put to more productive use represent a great loss to the state,
according to state officials. 


SUMMARY OF SUGGESTED CHANGES TO
THE SIMPLIFIED PROGRAM
========================================================= Appendix VII

                                States making         Number of states
Suggested change                suggestion           making suggestion
------------------------------  ------------------  ------------------
Extend the simplified program   California,                         12
 to all food stamp households    District of
                                 Columbia, Hawaii,
                                 Kansas, Maine,
                                 Minnesota,
                                 Nevada, Texas,
                                 Virginia,
                                 Wisconsin, West
                                 Virginia, and
                                 Wyoming
Change rules (i.e., remove      Alaska, Alabama,                    11
 restrictions; allow states to   California,
 use same financial penalties    Illinois,
 across programs; base           Indiana,
 benefits on income only)        Maryland,
                                 Michigan,
                                 Missouri, North
                                 Dakota,
                                 Pennsylvania, and
                                 South Carolina
Eliminate or relax the cost-    Alabama,                            10
 neutrality requirement          California,
                                 Connecticut,
                                 Maryland,
                                 Minnesota, New
                                 Hampshire, Rhode
                                 Island, South
                                 Dakota,
                                 Tennessee, and
                                 Utah
Grant categorical food stamp    Alaska and                           2
 eligibility for TANF            Michigan
 participants
Provide funding for             Nebraska and                         2
 implementation costs            Tennessee
Allow an increase in food       California and                       2
 stamp benefits                  Utah
Allow mixed-TANF households to  Arkansas and South                   2
 participate under same rules    Dakota
 as pure-TANF households
Provide moratorium on quality   Tennessee                            1
 control errors
----------------------------------------------------------------------

MAJOR CONTRIBUTORS TO THIS REPORT
======================================================== Appendix VIII


   RESOURCES, COMMUNITY, AND
   ECONOMIC DEVELOPMENT DIVISION,
   WASHINGTON, D.C. 
------------------------------------------------------ Appendix VIII:1

Patricia A.  Gleason, Assistant Director
Peter M.  Bramble, Jr., Evaluator-in-Charge
Jacqueline A.  Cook, Senior Evaluator
Melissa M.  Francis, Evaluator
Carolyn M.  Boyce, Senior Social Science Analyst
Carol Herrnstadt Shulman, Senior Communications Analyst


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