THE WHITE HOUSE
Office of the Press Secretary
Accompanying Report of the
National Performance Review
Office of the Vice President
Washington, DC
September 1993
This accompanying report, prepared by the staff of the National Performance Review (NPR), laid the groundwork for the recommendations in the NPR report "From Red Tape to Results: Creating a Government that Works Better and Costs Less," released on September 7, 1993. This report is based on the best information available at that time. The specific recommendations within these reports have been and will continue to be given priority as part of the FY95 Budget, legislative proposals, or other Administration initiatives, as appropriate.
Executive Summary 1
Recommendations and Actions
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USDA01: End the Wool and Mohair Subsidy 5
USDA02: Eliminate Federal Support for Honey 7
USDA03: Reorganize the Department of Agriculture to Better Accomplish its Mission, Streamline its Field Structure, and Improve Service to its Customers 11
USDA04: Implement a Consolidated Farm Management Plan 15
USDA05: Administer the Employment and Training Requirement for Food Stamp Recipients More Effectively and Efficiently 19
USDA06: Encourage Better Food Package Management Practices and Facilitate Multi-State Contracts for Infant Food and Formula Cost Containment in the WIC Program 23
USDA07: Deliver Food Stamp Benefits Via Electronic Benefits Transfer to Improve Service to Customers While Remaining Cost-Effective 27
Agency Reinvention Activities 29
Summary of Fiscal Impact 33
Appendix
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Accompanying Reports of the
National Performance Review 37
AFDC Aid to Families with Dependent Children
AMS Agricultural Marketing Service
APHIS Animal and Plant Health Inspection Service
ASCS Agricultural Stabilization and Conservation Service
CBO Congressional Budget Office
CCC Commodity Credit Corporation
EBT Electronic Benefits Transfer
FCIC Federal Crop Insurance Company
FmHA Farmers Home Administration
FNS Food and Nutrition Service
FSA Farm Services Agency
FSP Food Stamp Program
FTE Full-Time Equivalent
GAO General Accounting Office
IT Information Technology
JTPA Job Training Partnership Act
NPR National Performance Review
NPRT National Performance Review Team
OEP Office of Environmental Policy
OMB Office of Management and Budget
SCS Soil Conservation Service
USDA U.S. Department of Agriculture
USFS U.S. Forest Service
WIC Special Supplemental Food Program for Women, Infants and
Children
The U.S. Department of Agriculture (USDA) is the fourth largest agency in the federal government. As a private enterprise, the department would rank ahead of IBM and just behind Ford Motor Company.
Most of the department's 110,000 employees work outside Washington, D.C., in regional, state, or county offices. However, the USDA "family" extends beyond its federal work force and includes 31,000 county extension agents in 3,500 offices, supported in part with federal funds, as well as 273,000 volunteers and 21,900 additional state and county employees.
In 1862, President Lincoln created USDA to develop the best seeds and send information to farmers. While the number of farms and farmers has declined in this century, USDA's mission has grown and become more complex. During the Great Depression, USDA's responsibilities were expanded to stabilize farm income; to conserve soil, water, and other natural resources; and to ensure the availability and quality of food and fiber products. During the 1960s, USDA was assigned responsibility for food and nutrition programs to ensure that the most needy would not go hungry. These additional responsibilities spawned new agencies, which were often added to the existing structure, rather than integrated with it. Today, USDA continues to be organized along the lines established in the 1930s--a localized presence for addressing a range of national problems and for delivering services to farmers and other rural citizens.
The National Performance Review's (NPR) recommendations for USDA reflect the four reinvention principles. USDA can do much to improve its services at less cost to the taxpayer, by eliminating obsolete programs and restructuring others.
NPR also supports the department's effort to streamline its field operations, especially county level offices. By defining and articulating its broader mission, especially its roles in rural economic development, natural resource conservation, and food safety and nutrition, and by organizing its program agencies, USDA will serve all its customers better, including America's farmers.
USDA has an opportunity to simplify environmental regulations for farm land management, and NPR recommends consolidating competing requirements into a single comprehensive plan for each farm. Additionally, NPR recommends redirecting funds from an ineffective training program for food stamp recipients and empowering recipients to participate in programs with proven results.
USDA can replace cumbersome administrative procedures with more efficient market incentives. The Special Supplemental Food Program for Women, Infants and Children (WIC) can be harnessed to the marketplace to stretch the taxpayer's dollar by increasing competition among infant formula vendors and manufacturers of other items in the WIC food package. Finally, NPR recommends that USDA use Electronic Benefits Transfer technology as the primary means of distributing food stamp benefits.
A report on the status of USDA internal reinvention efforts is also provided, including a summary of future steps to be taken. If accepted, the recommendations would reduce the deficit by over $2.6 billion in six years, improve the structure of the department and the ability of its workforce to meet contemporary requirements, and improve services to the primary recipients of USDA programs.
During World War II and the Korean conflict, the United States imported half the wool required for military uniforms. Determined to reduce dependence on foreign fibers and to insulate American producers from foreign competition, Congress declared wool a strategic material and enacted the National Wool Act in 1954. The Act was designed to increase domestic production of wool by providing direct payments to farmers based on a percentage of their market sales. In other words, the more wool farmers produced, the more federal funding they received.
Wool was removed from the Pentagon's strategic materials list in 1960. However, the Act remains in effect today, and wool program subsidies will cost an estimated $923 million over the 1994-98 period.1 About one-third of the payments will go to ranchers who raise Angora goats for mohair.(2) Although mohair never had strategic value, it was included in the 1954 Act as an offshoot of the wool industry. About 80 percent of domestic mohair is now produced for export markets.
In addition to mohair and shorn wool, the program also subsidizes live lambs on the assumption that their pelts will be processed after slaughter. The product is called "pulled wool" and will reap an estimated $132 million in federal benefits in 1994-98, absent action to eliminate or phase out the program.(3) The market for pulled wool, however, is so slight that the U.S. Department of Agriculture (USDA) no longer keeps statistics on it. As a result, federal payments for live lambs tend to subsidize their value as meat, not wool. In fact, for the 1990 marketing year, recipients of wool subsidies earned slightly over 60 percent of their income from meat. Shorn wool sales contributed only around 15 percent, with the rest (25 percent) coming from federal payments.(4)
About half the wool program's recipients receive payments of $100 or less (the average payment for this group is $44).(5) Most are hobbyists and do not rely on sheep for their livelihoods. The principal exceptions are several thousand Native American families who tend small flocks, averaging about 20 animals, and for whom payments of even less than $100 make up a significant portion of their overall income.(6)
At the other end of the payment spectrum are the top 1 percent of producers who capture almost half the wool subsidy. In fact, the top 0.3 percent of producers garner about one-fourth of the program's funds with payments that average $98,000.(7) The Omnibus Budget Reconciliation Act of 1993 will gradually reduce the maximum payments a person can receive under each of the wool and mohair provisions from the current 1993 level of $150,000 to $100,000 in 1995.
Although the program adds handsomely to large producers' incomes, its appeal has not been strong enough to prevent a dramatic decline in domestic wool production. According to the General Accounting Office, the amount of wool sheared has plummeted from 283 million pounds in 1955 to 89 million in 1988. The wool program has outlived its usefulness, and its continued implementation only exacerbates inequities in levels of public support between wealthy and marginal producers. In addition, it has failed to stimulate domestic production and acts as a lightning rod for public criticism of government spending.
Legislation should be enacted to eliminate federal support payments for wool and mohair.
The program has failed to spur domestic production of wool, but continues disproportionately to benefit the few largest producers. Furthermore, wool is no longer a strategic material as it was considered when the program was implemented.
Eliminating the program would save $923 million in budget outlays during the 1995-1999 period.
Budget Authority (BA) and Outlays (Dollars in Millions)
Fiscal Year
1994 1995 1996 1997 1998 1999 Total ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ BA 0.0 -190.0 -188.0 -183.0 -181.0 -181.0 -923.0
Outlays 0.0 -190.0 -188.0 -183.0 -181.0 -181.0 -923.0
Change
in FTEs 0 0 0 0 0 0 0
The federal government has supported honey production since 1950. The program was enacted after honey prices dropped following World War II because of reduced demand and excess inventories. During the war, the government declared beekeeping war-essential and encouraged heavy production.(1) Beeswax was used in place of petroleum to waterproof ammunition and other equipment, and honey replaced tightly rationed sugar.
When demand decreased after the war, beekeepers and honey packers found it difficult to cover costs, and the number of honeybee colonies began to decline.(2) Congress reacted by introducing price supports for honey in the Agricultural Act of 1949. The basic purpose of the legislation was to ensure that enough honeybees would be available for crop pollination. However, since receipts from honey and beeswax far exceeded revenue from pollination, Congress subsidized honey production at prices that would allow beekeepers to maintain viable operations. The program was to be in effect only until beekeepers could receive adequate pay for pollination services.(3)
The honey program allows beekeepers to obtain a federal loan using the honey they produce as collateral. The minimum support price is set in the statute but can be increased by the Secretary of Agriculture. Borrowers can repay the loan and redeem their collateral at either the support price or at a loan repayment rate determined by the Secretary using legislatively established guidelines, whichever is lower. They also may default on the loan and forfeit the honey used as collateral.
There are about 212,000 beekeepers in the United States, all of whom are eligible to participate in the program.(4) The U.S. Department of Agriculture (USDA) describes 200,000 of them as hobbyists, and another 10,000 as "sideliners," or part-time beekeepers. Commercial producers, those owning 300 or more colonies, number about 2,000 and produce about 60 percent of the honey extracted annually in the United States.
Only about 3,000 to 5,000 beekeepers participate in the USDA program, with just over three million colonies of bees. As with other agricultural commodity programs that base benefits on production, the largest beekeeping operations tend to receive the most federal support. About 10 percent of program participants receive over 50 percent of payments. Sideliners and hobbyists make little use of the program.
Critics of the honey program, including the General Accounting Office (GAO), claim price supports are no longer necessary to provide crop pollination services. According to GAO, producers of seed and fruit crops to which bee pollination is critical either pay beekeepers to place bee colonies near their crops or operate their own beekeeping enterprises. Unofficial estimates of beekeepers who do not participate in the honey program, but instead use their bees exclusively for pollination services, rival the number within the program. Crop producers indicate they believe honeybee pollination would still be cost-effective, even if the service price rose as a result of eliminating honey price supports.(5)
Critics also point out that commercial beekeepers who benefit most from the program emphasize honey production instead of pollination services. Since the program began, honey production has increased significantly in those states, such as North Dakota and South Dakota, where crops with abundant flowers are grown. These crops produce large amounts of nectar needed for honey production; however, they do not require pollination. At the same time, states in which honey production has declined, such as New York and Michigan, are significant producers of apples, cherries, and other fruits that need honeybee pollinators.(6)
The Omnibus Budget Reconciliation Act of 1993 will reduce federal subsidies for honey by reducing the support price and by tightening the limit on the payments which any one producer can receive. The payment limit will decline from $150,000 in 1993 to $50,000 in 1997.
Market forces have overcome the original need for the program. Instead, a small number of commercial honey producers benefit from an unnecessary government subsidy for their product.
According to USDA, if the honey price support program is terminated, there will be a decline in the number of honeybee colonies available to provide pollination services, at higher cost, to fruit and vegetable producers. Production of these crops is generally concentrated in a few geographic areas, such as Florida and California, and USDA believes it is unlikely these areas contain a sufficient number of wild bees or honeybees managed by local beekeepers to provide adequate pollination.(7) However, there does not seem to be a clear connection between federal subsidies for beekeepers and effective pollination services. Commercial beekeeping is already heavily concentrated on honey production, and there are about as many beekeepers performing pollination activities outside the program as there are program participants (about three million colonies each). Eliminating the honey program is unlikely to radically alter either trend.
Eliminating the program will save about $15 million over the 1994- 1999 period.
Budget Authority (BA) and Outlays (Dollars in Millions)
Fiscal Year
1994 1995 1996 1997 1998 1999 Total
BA -7.0 -3.0 -2.0 -1.0 -1.0 -1.0 -15.0
Out
lays -7.0 -3.0 -2.0 -1.0 -1.0 -1.0 -15.0
Change
in FTEs 0 0 0 0 0 0 0
The U.S. Department of Agriculture (USDA) is responsible for the operation of 250 programs meeting important national needs in areas such as farm income, nutrition, food safety, and conservation. In recent years, significant criticism of USDA has appeared in the popular media. This criticism has focused on the fragmentation of the department's headquarters and field organizations, as well as the size of the department and its budget relative to farmers. Although some of the criticism is justified, it represents an oversimplification of the issues. The focus of USDA has shifted dramatically since the 1930s. Nutrition programs now account for 60 percent of USDA's budget outlays, forestry programs are managed by 35 percent of the USDA staff, and rural economic development programs involve large investments in rural enterprises that extend well beyond farming. Less than 30 percent of the department's annual outlays fall within the agriculture function of the federal budget.
The headquarters of the department is not effectively organized at either the subcabinet or agency levels to carry out the diverse mission of USDA. The Secretary of Agriculture is responsible for 43 agencies managing 250 programs. There is duplication of authority and responsibility among subcabinet officers and agencies. These problems are most severe in areas such as farm services, environmental programs, and rural development. The challenge to the Secretary of Agriculture is to articulate a comprehensive mission structure that encompasses the various interests of the department and to reorganize the agencies to provide cohesive direction for the department's programs.
Secretary Espy has moved aggressively to address these problems and coordinated his efforts with those of the National Performance Review (NPR). This paper presents a set of joint recommendations on behalf of the Secretary and NPR.
At the field level, USDA's county structure is symptomatic of its organizational problems and is in need of major overhaul.(1) USDA county-based agencies operate over 12,000 offices serving 3,158 counties in the nation, either directly with federal employees or indirectly through financial support for nonfederal employees. The General Accounting Office (GAO) estimated that closing the least efficient county offices would generate significant savings. GAO also recommended that additional criteria be developed to determine if a larger problem exists.(2)
USDA has undertaken a comprehensive approach to evaluate information regarding the various field installations of all its agencies.(3) The department reviewed county-based agencies--the Agricultural Stabilization and Conservation Service (ASCS), the Soil Conservation Service (SCS), and the Farmers Home Administration (FmHA)--as well as the Federal Crop Insurance Corporation (FCIC) against six criteria. This analysis was used to identify approximately 1,200 field offices as candidates for consolidation. Secretary Espy will make the department's state agency leadership responsible for ensuring that implementation of this analysis improves efficiency of offices and enhances customer service.
In addition to the county office structure there is an intermediate structure--state and area offices--that was established to provide direction and communication between the policy levels at headquarters and the service delivery units in the counties. This has evolved into an additional bureaucratic layer between policymakers and service providers. Non-county based agencies also have a wide variety of regional structures that add administrative layers. Current communication technologies obviate the need for many of these intermediate offices, and data exist to support consolidation of the field structures of agencies not based in counties.
Reducing the size of the field structure need not equate to a reduction in level of field service. USDA has been a leader in many applications of scientific advances and its research capacity is considered among the very best. The department will accelerate the development of technological applications to provide increased service to its customers.
The department's "Infoshare" project will bring fully integrated modern computer services to its county offices. The department's Food and Nutrition Service has been at the forefront of Electronic Benefit Transfer (EBT) technology since its inception and pioneered the current EBT pilot projects to provide food stamp benefits. Similar initiatives can be identified elsewhere within USDA. Additionally, ASCS has pilot tested automatic teller machines to allow producers to enter information and examine their records.
The department also has made significant advances in the adaptation of new technology (Global Positioning Systems and Geographic Information Systems) into its ongoing programs in land and resource management.(4) These advances should allow more effective program delivery while reducing the number of staff that would otherwise be required to map and monitor farmland and the national forests.
The overall effort should build on activities already underway and provide time to identify, pilot, and implement additional improvements.
2. The Secretary of Agriculture should submit legislation to implement the new organizational structure to enhance the delivery of USDA services.
At the headquarters level, the Secretary should propose a new mission-oriented structure designed to provide needed services in a more efficient and effective manner. The proposed structure would maintain the current number of under and assistant secretaries. However, the areas of responsibility would be modified to recognize changing needs in the department.
At headquarters, the new structure would recognize the farm income, exports, rural economic development, nutrition, food safety, and conservation mission areas of the department. The department would be divided into six key areas: Commodity Programs and Trade; Rural Development; Nutrition Programs; Conservation; Food Quality; and Research, Education, and Economics. As part of this process, the number of individual USDA agencies will be reduced from 43 to 30. Administrative services will be consolidated from 14 administrative support staffs to six administrative units.
At the field level, the new USDA plan would restructure and streamline the field level offices beginning with those currently operated by ASCS, FmHA, and SCS, to improve services to customers and reduce government expenditures. The new field structure would focus on service delivery through collocated USDA Service Centers. USDA customers and agencies would benefit from the consolidation of separate USDA agencies under one roof. This type of consolidation, referred to as "one-stop shopping," has proven to be a very effective way to deliver programs, as evidenced by the recent USDA response to the floods in the Midwest. Additionally, other USDA field structures should be reorganized consistent with the agency headquarters reorganization. This initial implementation would begin in fiscal year 1994 and lead to a fundamental restructuring of the department's headquarters and field programs and offices.
3. The USDA should review its regional, state, and area office structure; eliminate those elements no longer appropriate; and extend the restructuring to the "non-county based" agencies of the department.
For the U.S. Forest Service, this could mean reducing the number of regional offices and restructuring or combining national forests and ranger districts. In addition, the department should invest in the acquisition of new technology to replace the labor-intensive practices of the past. This should include broad-scale implementation of Geographic Information System and Global Positioning System technology to include acquisition of required data and systems for data sharing among the department's various agencies.
The primary purpose of these reorganization actions is to equip the USDA to serve the public better. Additionally, when fully implemented, these actions will produce significant budget savings.
After the reorganization is fully implemented, total headquarters staffing will be reduced by about 8 percent, producing annual savings of $73 million. Additional headquarter economies include communications, publications, travel, and office space, which are expected to yield annual savings in the range of $40 million. Greater savings will also result from reorganizing field, area, and state offices.
Budget Authority (BA) and Outlays (Dollars in Millions)
Fiscal Year
1994 1995 1996 1997 1998 1999 Total
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
BA -36.5 -160.6 -238.5 -351.0 -443.5 -443.5 -1,673.6
Out
lay -35.9 -158.1 -231.9 -345.8 -436.9 -436.9 -1,645.5
Change
in
FTEs -1,296 -3,398 -4,375 -5,939 -7,503 -7,503 -7,503
A bewildering array of laws, regulations, and interagency jurisdictions frustrates farmers' efforts to comply with existing environmental and conservation laws and regulations. In pesticide application alone, three federal agencies--Department of Agriculture (USDA), Environmental Protection Agency (EPA), and the Food and Drug Administration--exercise jurisdiction.
The difficulties are compounded for farmers participating in USDA's commodity support and conservation programs. As the price of admission, participants are required to carry out specific environmental and conservation activities planned by USDA. However, as they attempt to comply with various federal programs and some state programs as well, farmers are often confronted with a number of different plans, some of which contain conflicting methods and goals.(1) Successful implementation of each USDA plan does not necessarily satisfy all federal interests. In one case, a farmer won approval from USDA to build a levee. Later he was told by the Army Corps of Engineers, EPA, and the Fish and Wildlife Service to stop construction due to potential destruction to wetlands.(2)
On August 24, 1993, the White House announced comprehensive wetlands policy reforms to simplify the process of identifying wetlands and to provide farmers a simpler method for following federal requirements for wetland conservation. The plan will establish a new, efficient, money- and time-saving administrative appeal process so that farmers and other landowners can seek review of permit decisions without going to court. It will also continue use by all agencies of the 1987 wetlands delineation manual pending completion of a National Academy of Sciences study, expected in 1994, and will impose deadlines and provide additional guidance so that permitting decisions will be made in a timely and more predictable fashion.
In addition, the plan will increase emphasis on state, tribal, and local government roles, as well as voluntary wetlands protection and restoration programs with landowners. It will also reduce duplication and inconsistency for farmers by designating the Soil Conservation Service (SCS) as the lead agency for wetlands determinations on agricultural lands. Furthermore, the plan will withdraw a proposed rule that would have left critical Alaskan wetlands unprotected.
Farmers can be further aided by efforts to simplify compliance with USDA conservation requirements by creating a single plan for each farm. The proposal would consolidate various USDA plans into a single authority administered by the SCS whenever a new plan is required by USDA. The consolidated plan relieves the farmer from dealing with multiple management plans for one farm.
Comprehensive plans, governing all aspects of a producer's farm operations, would go beyond a consolidated plan involving only USDArequired actions. Comprehensive plans would cover conservation of other federal and nonfederal entities. These comprehensive plans would enable SCS to address a farm's conservation requirements as an integrated ecosystem, rather than focusing on isolated fragments of its environment. Neither the Office of Environmental Policy's (OEP's) efforts nor any recent legislative actions fully respond to the complex environmental and conservation concerns associated with agriculture. OEP has not included pesticide use in its water quality task force, and legislative efforts have not dealt with the questions of quality assurance, burden of proof (for compliance), liability for environmental damage, and the ability of SCS to successfully administer the single farm plan concept. Efforts to resolve disputes among federal agencies and to simplify regulations and requirements for farmers will markedly improve the quality of the federal government's service to the agricultural sector, as well as improve environmental quality.
USDA should phase in the development of the consolidated plans and assist producers in the development of comprehensive, site-specific farm management plans. As a part of the quality assurance mechanism, a partnership between the USDA, EPA, the Corps of Engineers, and the Fish and Wildlife Service should be formed to review a representative sample of the comprehen-sive farm management plans per year. The partnership should identify issues most in need of monitoring, such as water quality. The guidance should be issued by March 1995.
2. The consolidated farm management plan should seek to coordinate with programs administered by other federal agencies and states, in order to create an integrated comprehensive farm management plan. The plan, however, should not override or supersede requirements of other programs.
In addition, compliance with the comprehensive farm management plan does not guarantee full compliance with federal regulations, but eventually USDA should incorporate as many federal standards into the plans as possible. Finally, while USDA should work to incorporate state requirements to create the comprehensive farm management plan, compliance with this comprehensive plan cannot guarantee compliance with state regulations. Also, updates of the plans in response to subsequent changes in nonfederal requirements should not be the responsibility of USDA.
These recommendations will clarify federal jurisdiction over agricultural, environmental, and conservation planning. Furthermore, a consolidated farm management plan will provide better customer service to farmers and encourage greater participation in voluntary conservation programs.
This recommendation is revenue neutral when phased in.
Food stamp recipients are required by law to register for work and training. They are exempt from this requirement, however, if they are under 18, older than 59, disabled, taking care of dependent children under six or incapacitated adults, or working at least 30 hours per week. Failure to register for work or training can result in disqualification from the Food Stamp Program (FSP), administered by the U.S. Department of Agriculture (USDA). To comply with this requirement, recipients can attend an employment and training program sponsored by FSP or other qualified entity.
Out of 13 million food stamp recipients, about 3.5 to 4.5 million are required to register annually for work and training. By statute, FSP must place at least 10 percent of the non-exempt registrants into a work-training program. Job search and job search training are the predominant components of the employment and training programs.
Total fiscal year 1993 employment and training costs are approximately $245 million, including state matching costs. Federal costs for the program total about $160 million; $75 million of this represents a federal grant for basic operating and administrative costs, distributed to each state by a formula. The remaining $85 million in federal funds is directed to 50 percent matching of administrative or operating costs above the state's portion of the formula-determined share of the $75 million, and to reimburse participants for transportation and dependent care expenses.
Although a primary goal of the FSP is moving food stamp recipients from welfare to work, 1988 USDA research found that the employment and training program administered by the FSP did not increase participants' earnings. As a result, 1988 USDA evaluations concluded that these programs were not effective.
Currently, there are no data on how many participants are actually placed in jobs as a result of this program. Of all the persons that enter the FSP, half leave the program in six months or less and twothirds leave within one year. Over one-third of recipients who stop receiving food stamps begin receiving them again within one year.(1)
Although many short-term food stamp recipients return to work within three to six months after becoming eligible for benefits, the FSP employment and training program has had no discernible effect on participants' aggregate earnings, probability of finding work, amount of time worked, or average wages.(2) Recipients may have participated in the employment and training program, but they likely would have found gainful employment without the benefit of the program. The program's failure undercuts the goals of the Food Stamp Act work requirements.
Employment and training programs that appear to be more effective than FSP programs are those that are operated by or administered jointly with entities such as Job Training Partnership Act (JTPA) programs, local education, state employment services, and community action agencies.(3) In 1988, these made up over half of food stamp employment and training efforts.
An example of one such program is the $3 billion JTPA program, which applies a case-management approach to job training. This program spends roughly $2,000 to $3,000 per person and provides help before, during, and after food stamp use. It has had a positive impact on employment rates of participants. The JTPA program already is open to individuals eligible for food stamps. Many states use it to fulfill the requirements of the FSP employment and training program. The JOBS program, for recipients of Aid to Families with Dependent Children (AFDC), unlike the FSP employment and training program, targets individuals likely to stay on the AFDC rolls for long periods of time.
Legislation should be enacted to amend the Food Stamp Act to strengthen the work and training requirement and require food stamp recipients to participate in more effective employment and training programs.
States should no longer be required to operate a separate employment and training program. The needs of these recipients could be better served if this requirement were met by referring them to, and requiring them to participate in, other job training programs. This in no way diminishes the food stamp program work requirement. A separate organization to administer food stamp employment and training requirements is not needed. Eliminating it will save the $160 million federal funding currently directed to this program. These funds will then be available for other work training programs. Those recipients truly in need of job training will participate in programs better able to serve their needs as they move from welfare to work.
The Special Supplemental Food Program for Women, Infants and Children (WIC) was established in 1972 to improve the health of at-risk, lowincome pregnant women, new mothers, infants, and children under age five by providing them supplemental foods, nutrition and health education, and health screening. Administered by the Food and Nutrition Service (FNS) of the U.S. Department of Agriculture (USDA), the program awards grants to state health departments or state health and welfare agencies to provide nutrition services.
The WIC program is successful and cost-effective with regard to prenatal WIC services. A 1992 General Accounting Office (GAO) study estimated that the savings that accrue over 18 years from providing prenatal WIC services to those infants born in 1990 would yield a return of $3.50 for each federal dollar invested.(1) (There are no cost/benefit studies available for children age two through four assisted under the program).
This success has led to strong congressional bipartisan support for the WIC program. Funding for the program has increased from $900 million in fiscal year 1981 to $2.86 billion in fiscal year 1993; participation also has increased from 2.1 million to an expected monthly average of 5.8 million participants during this same period. The program, however, does not reach all those eligible for it. In 1991, the Congressional Budget Office estimated that 8.4 million women, infants, and children were eligible to participate in the WIC program, although available funding allowed only 4.7 million to be served.(2)
The fiscal year 1993 program is expected to serve about 67 percent of all those eligible. Although the administration has proposed to fully fund the program by the end of fiscal year 1996, cost-containment efforts in the WIC program remain critical because they currently provide the opportunity to serve hundreds of thousands of participants who otherwise could not participate and benefit from WIC. Enhancing and extending cost-containment efforts can lower WIC costs and serve more participants with limited funds.
Infant formula is the single most expensive item in the WIC food package, with prices rising much faster in recent years than the prices of other WIC-covered items. During the 1980s, some states distributing food through retail stores implemented infant formula cost-containment efforts. These efforts required infant formula manufacturers to compete for selection as the single source of infant formula products used by a state WIC program; all WIC program participants from that state were required to purchase only a specific brand of infant formula. Contracts were awarded to the manufacturer offering the highest rebate to a state.
In 1988, Congress mandated that all WIC state agencies implement some form of infant formula cost containment. In 1989, Congress added the requirement that states use competitive bidding in their costcontainment efforts. An estimated $600 million was saved in fiscal year 1991 through cost-containment efforts. These savings were redirected to serve additional participants.
Although experts agree breastfeeding provides a healthier and more economical means of feeding an infant, as recently as 1987, less than 40 percent of early postpartum WIC mothers were breastfeeding. The Surgeon General advises that breastfeeding is the healthiest way for a mother to nurture her infant and has set a goal of reaching a 75 percent rate for breastfeeding. The WIC program seeks to encourage breastfeeding by providing an expanded food package to mothers who elect to breastfeed.
Infant and adult cereals offer the next logical items from the WIC package to consider for rebate cost-containment targeting. There is little variety in infant cereals, and most are manufactured by three major corporations. Seven states have entered into agreements for rebates with infant cereal manufacturers. For example, New York currently is receiving a 76-cent rebate on each box of infant cereal purchased under the WIC program.
Although the savings potential from these efforts remains somewhat less than the savings achieved from infant formula (the price of infant formula increased nearly 11 percent per year over the last decade while other items in the WIC food package have not increased at this rate), a federal effort will enhance the opportunity to achieve savings. Additional areas for cost savings could include (a) foods appropriate for older children, such as dry cereal, where brand name and generic products compete for market share, and (b) routine specification and selection of economical food package sizes and brands. Significant savings could be achieved, for example, by buying least-cost brands and milk by the gallon or half-gallon rather than in quarts.
If the WIC program is fully funded, as has been proposed, the pressure for states to keep costs down will be reduced; however, it will fall to the federal government to ensure that the focus on costcontainment efforts is not lost.
FNS should actively solicit states to develop and test new approaches to containing costs for each of the major food items in the WIC packages. One possible approach would be through a competitive grant announcement. FNS should disseminate information about initiating contracts for items other than infant formula. FNS should also serve as a broker or facilitator for multi-state contracting efforts for rebates on items such as infant cereal or juice. FNS's authority to direct a portion of administrative funds toward testing new costcontainment strategies offers an immediate vehicle for funding these efforts. This testing should be included in fiscal 1995 budget plans.
About 75 percent of WIC funds are spent on food. Savings could be achieved through a combination of federally mandated cost containment measures, cooperative or shared contracts, as well as food package size and brand name management. Some states are already exploring other cost-containment approaches. Also, the Secretary of Agriculture has authority under current law to purchase and distribute WIC foods at the request of state agencies.
Additionally, FNS should develop a semiformal channel of communication with the Federal Trade Commission to provide an "early alert" system for trends reflecting bid-rigging in connection with WIC contract bidding.
2. USDA should expand its role in disseminating "best practices" information to states interested in pursuing multi-state costcontainment efforts.
Many states have been successful, without federal oversight, in developing multi-state consortia to achieve economies of scale in awarding contracts to infant formula manufacturers. Other states and Indian reservations may find the experiences and information from their counterparts in other parts of the country useful in pursuing their efforts. A more aggressive federal role in this area will ensure that interested parties receive thorough, accurate information quickly. FNS should develop "best practices" materials to distribute to WIC agencies and update them regularly.
3. USDA should continue and expand its educational efforts to promote breastfeeding.
Funding for breastfeeding promotion has increased in recent years. FNS should consider entering into agreements with advocacy groups such as La Leche League or the Ad Council to expand its promotion of breastfeeding to low-income mothers, emphasizing the health and nutritional advantages afforded breastfed children. The right of a WIC mother to choose how to feed her baby must be balanced against the public's interest in promoting the long-term health and wellbeing of children and holding down unnecessary expenditures on formula and health care. Health experts agree that healthy mothers who can, should breastfeed their infants.
These recommendations would serve to hold down costs of the WIC program, as well as emphasize the nutritional well-being of program participants. They will help USDA meet the President's goal of fully funding WIC sooner than expected. In addition, they will help to reduce the long-term costs associated with full funding.
In the short run, savings in the WIC program free up resources to serve a greater number of eligible participants; in the long run, savings reduce the cost of achieving the President's goal of full funding. USDA should establish an ambitious goal of roughly $100 million per year in savings to be achieved through aggressive cost containment efforts in foods other than infant formula. This equates to roughly a 5 percent saving on foods other than infant formula. However, given the development work needed to obtain such savings, it would be premature to count on them when developing near-term funding levels for WIC. Therefore, no fiscal impact is claimed.
The overall issue of Electronic Benefits Transfer (EBT) is addressed in the National Performance Review (NPR) Accompanying Report Reengineering Through Information Technology. This recommendation supports that report. The U.S. Department of Agriculture (USDA) Food and Nutrition Service (FNS) has been at the forefront of EBT development since the early 1980s, and EBT has the potential to improve substantially the delivery of food stamp benefits to recipients.
The Food Stamp Program (FSP) works through the state agencies, which issue food stamps, in the form of coupons, to eligible recipients. The recipients use the food stamps like cash to purchase food at FNS authorized retail stores. The retail stores deposit the food stamps at banks, which credit the store accounts for their value. The banks send the redeemed food stamps to a Federal Reserve Bank, which credits the bank's account, bills the U.S. Treasury for the value of the food coupons, and destroys them.
This involved process (printing and distributing food coupons and oversight and monitoring of state, food outlet, and financial institution operations) is costly (1992 costs were estimated at $145 million) and labor intensive, and presents abundant opportunities for abuse. In fiscal year 1990, more than $500 million in unredeemed coupons, which represent a contingent liability, were written off by the Treasury.
The USDA Inspector General has, in the past, identified several areas associated with the FSP as high-risk or material weakness vulnerabilities, such as food stamp coupon illegal trafficking and food stamp coupon deposit and bank reconciliation.
The EBT card holds the potential to address these issues and may also improve the nutritional intake of recipients by ensuring that food stamp benefits are used only for their intended purpose. EBT uses technology and commercial infrastructure such as point-of-sale devices and on-line data transmission networks to serve FSP recipients. EBT is operating statewide in Maryland and in test locations in six other states; another 26 states are in various stages of planning. EBT pilots have received a positive response from recipients, state agencies, grocers, and banks.
The major impediments to nationwide expansion of EBT are the unknown cost-benefit impact to the federal government and who bears the cost- -the states, federal government, beneficiaries, merchants, banks, or processors. Additional concerns involve Regulation E, a proposed Federal Reserve Board regulation which would make federal-state governments liable for the replacement of recipient benefits associated with an EBT card reported lost or stolen, without regard to recipient responsibilities. The cost of this regulation, coupled with the potential increase in benefit fraud, could represent a major deterrent to expansion of EBT. Another unresolved issue involves the question of who benefits from the "float" on these funds--the federal government, the states, or financial institutions.
USDA's Food and Nutrition Service should participate in an interagency task force reporting to the Vice President to accelerate implementation of EBT.
The most convenient means for food stamp delivery would involve integrating food stamp benefits and other entitlement programs such as Aid to Families with Dependent Children and direct federal benefits into one EBT card. An interagency task force would facilitate this integration. This group should address the limitations that cost neutrality places on EBT expansion, particularly with respect to the food stamp program, and how much it would cost the federal government to remove them.
EBT, as a means of delivering food stamp benefits, holds the potential to improve service to recipients, improve their nutritional intake, reduce the paperwork burden for retailers and banks, and deter certain types of food stamp fraud and trafficking.
The fiscal implications of this proposal are addressed in the EBT recommendation of the NPR Accompanying Report Reengineering Through Information Technology.
After President Clinton's March 3, 1993, announcement to launch an effort to reinvent the federal government, the U.S. Department of Agriculture (USDA) moved quickly to institute an internal review. Secretary Espy launched the USDA National Performance Review Team (NPRT) to lead the department's issue development and problem diagnosis process for reinventing USDA. The NPRT is made up of over 25 USDA employees from a variety of backgrounds and USDA agencies.
The Secretary challenged the team to expose policies that impede employee innovation and productivity. The team carried out its task through a participatory process characterized by a variety of initiatives to generate employee contributions to this reinvention effort. Over 1,500 USDA employees made recommendations through open forums sponsored by the team. The team analyzed over 8,000 responses to questionnaires that solicited comments and suggestions for improvements from employees and trade and consumer groups.
To further develop opportunities for reinvention, the team collected data from internal and external reviews, reviewed agency success stories, and evaluated ideas from past seminars and conferences. Team members participated in a summit on "Reinventing Government" convened by Vice President Gore that provided an opportunity to share ideas with cutting-edge businesses, state and local governments, and experts in organization and management who know how to make "reinvention" work. Team members solicited input from other federal agencies and organizations such as the World Bank, foreign embassies, and land grant universities.
Team members have worked with USDA agencies to identify unique projects, called reinvention laboratories, to promote change and serve as models for others to follow. These labs are focused on forming a partnership between USDA customers and USDA agencies to improve service delivery. For example, the Infoshare Lab will improve delivery through reengineering farm service, conservation, and rural development agencies' business processes, and integrating their computer information systems. The Forest Service Lab will implement changes agencywide in organizational culture by eliminating administrative barriers and delegating more authorities to the operational level. The Extension Service Lab will improve information and educational technology by aligning the Extension Service's organizational culture and structure with available technology. Interactive information and educational linkages with citizens will be tested through Interactive Citizen Participation Centers.
Since the inception of this project, the Secretary worked personally with the team. There was a high level of interaction between the Secretary and NPRT through briefings and a constant sharing of ideas. The Secretary's support for the role and accomplishments of the NPRT have been presented in his conferences, speeches, and staff meetings. To spread his commitment to employees, the Secretary held a USDA town meeting with Vice President Gore.
It is clear that major action to reform and revitalize USDA is necessary. For this reason, the administration is proposing specific steps to reform both the headquarters structure and the field structure of the department. At the headquarters level, a new structure will be implemented that recognizes the six key mission areas of the department: commodity programs and trade; rural development; nutrition programs; conservation; food quality; and research, education, and economics. As part of this process, individual USDA agencies will be reduced from 43 to 30. Administrative Services will be reduced through consolidation from 14 administrative support staffs into six administrative units. When fully implemented, it is anticipated that total USDA headquarters staffing will be reduced by about 7 percent, producing annual savings of $45 million. Additional headquarters' savings in a variety of areas--including communications, publications, travel, and office space--are expected to yield annual savings in the range of $40 million.
At the field level, the new USDA plan will restructure and streamline the field level offices beginning with those currently operated by the Agricultural Stabilization and Conservation Service, Farmers Home Administration, and Soil Conservation Service to focus both on improving services to clients and reducing government expenditures.
The new field structure will focus on delivery of services through collocated USDA Service Centers. As evidenced by the recent USDA response to floods in the Midwest, there is considerable benefit for both USDA customers and USDA agencies by consolidating agencies under one roof. It has been proven that "one-stop shopping" is an effective way to deliver program services.
In addition to the department level reforms, USDA is developing some specific program initiatives designed to reinvent the way it serves USDA customers.
The department is developing a new farm income strategy designed to increase demand for agriculture products by reinventing foreign market development, export, and trade programs/policies and development of new uses for agricultural products. USDA will also provide protection from excessive risk by reforming the crop insurance program and making it a primary vehicle for farm disaster risk protection. In addition, long-term prospects for farm income growth will be further enhanced by maintaining balanced commodity programs.
The department's rural development strategy will provide the infrastructure that is essential for the economic revitalization of rural communities. The strategy will be specified in an annual report to Congress as required by the Rural Development Policy Act of 1980.
Nutrition initiatives are being developed to improve the nutrition options for the poor and to provide Electronic Benefit Transfer nationwide for the Food Stamp Program.
The department is developing a comprehensive program for conservation including programs for soil and water conservation and responsible forest service management.
Initiatives have been developed to address public concerns about microbiological contamination of meat and poultry products and pesticide residues in fruits and vegetables.
Under the Secretary's proposal, research and education functions conducted by four separate agencies will be merged into one, the Agricultural Research and Education Service (ARES). These agencies are the Agricultural Research Services (ARS), the Cooperative State Research Service (CSRS), the Extension Service (ES), and the National Agricultural Library (NAL). The proposal would create a streamlined, coordinated, and consolidated organization that would be more responsive and accountable to the needs and concerns of the public and Congress than the existing structure. Administrative and management support would be provided by a single staff. A 12 percent reduction in staff over five years is projected.
Change in Budget Authority by Fiscal Year
(Dollars in Millions)
Rec. 1994 1995 1996 1997 1998 1999 Tot Change
in FTEs ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ USDA01: 0 -190.0 -188.0 -183.0 -181.0 -181.0 -923.0 0
USDA02: -7.0 -3.0 -2.0 -1.0 -1.0 -1.0 -15.0 0
USDA03:-36.5 -160.6 -238.5 -351.0 -443.5 -443.5 -1,673.6 -7,503
USDA04: cbe cbe cbe cbe cbe cbe cbe cbe
USDA05: 0 0 0 0 0 0 0 0
USDA06: 0 0 0 0 0 0 0 0
USDA07: cbe cbe cbe cbe cbe cbe cbe cbe ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Total -43.5 -353.6 -428.5 -535.0 -625.5 -625.5 -2,611.6 -7,503
cbe = Cannot be estimated (due to data limitations or uncertainties about implementation timelines).
(Dollars in Millions)
Rec. 1994 1995 1996 1997 1998 1999 Total ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
USDA01: 0 -190.0 -188.0 -183.0 -181.0 -181.0 -923.0
USDA02: -7.0 -3.0 -2.0 -1.0 -1.0 -1.0 -15.0
USDA03: -35.9 -158.1 -231.9 -345.8 -436.9 -436.9 -1,645.5
USDA04: cbe cbe cbe cbe cbe cbe cbe
USDA05: 0 0 0 0 0 0 0
USDA06: 0 0 0 0 0 0 0
USDA07: cbe cbe cbe cbe cbe cbe cbe ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Total -42.9 -351.1 -421.9 -529.8 -618.9 -618.9 -2,583.5
cbe = Cannot be estimated (due to data limitations or uncertainties about implementation timelines).
Governmental Systems
Changing Internal Culture Abbr. ************************* **** Creating Quality Leadership and Management QUAL Streamlining Management Control SMC Transforming Organizational Structures ORG Improving Customer Service ICS
Mission-Driven, Results-Oriented Budgeting BGT
Improving Financial Management FM
Reinventing Human Resource Management HRM
Reinventing Federal Procurement PROC
Reinventing Support Services SUP
Reengineering Through Information Technology IT
Rethinking Program Design DES
Strengthening the Partnership in
Intergovernmental Service Delivery FSL
Reinventing Environmental Management ENV
Improving Regulatory Systems REG
Agencies and Departments Abbr. ************************ ***** Agency for International Development AID Department of Agriculture USDA Department of Commerce DOC Department of Defense DOD Department of Education ED Department of Energy DOE Environmental Protection Agency EPA Executive Office of the President EOP Federal Emergency Management Agency FEMA General Services Administration GSA Department of Health and Human Services HHS Department of Housing and Urban Development HUD Intelligence Community INTEL Department of the Interior DOI Department of Justice DOJ Department of Labor DOL National Aeronautics and Space Administration NASA
National Science Foundation/Office
of Science and Technology Policy NSF
Office of Personnel Management OPM
Small Business Administration SBA
Department of State/ U.S. Information Agency DOS
Department of Transportation DOT
Department of the Treasury/
Resolution Trust Corporation TRE
Department of Veterans Affairs DVA