May 22, 1979
Page 12292
SUBSIDIZED MILK PROGRAMS
Mr. BELLMON. Mr. President, I will be offering an amendment to S. 292, the WIC authorization bill, which is expected to be considered in the next few days. My amendment will eliminate the Federal subsidy for milk served to children who already have access to subsidized milk as part of the school lunch or school breakfast programs.
Last week, the chairman of the Senate Budget Committee (Senator MUSKIE) and I joined in a "Dear Colleague" letter which explained the special milk program amendment (No. 196) as well as another amendment that I am offering on the summer food service program (No. 197) .
I have just received a letter from Secretary of Agriculture, Bob Bergland, which specifically addresses many concerns raised by the dairy industry regarding the effect of my amendment on their incomes and on the availability of milk to children in affected schools.
These materials explain in great detail why the amendments should be adopted as well as demonstrate the minimum impact on child nutrition that these reforms will have.
I ask that this material be printed in the RECORD.
The material follows:
U.S. SENATE,
Washington, D.C.,
May 18, 1979.
DEAR COLLEAGUE: We will be offering two amendments to the Special Supplemental Food Program Authorization Bill (S. 292). These amendments will (1) eliminate unnecessary expenditures resulting from duplication between the Special Milk Program and other Federal school feeding programs (Amendment No. 196), and (2) curb fraud and abuse in the Summer Food Service Program (Amendment No. 197).
Both of these reforms were included in the larger package of legislative changes in child nutrition programs, submitted by the President in March of this year. Both were recommended by Senator McGovern's Nutrition Subcommittee, which held two days of hearings on the President's proposals, and incorporated into the Senate Agriculture Committee's March 15 report to the Budget Committee. The Senate Appropriations Committee also recommended these reforms in its report to the Budget Committee. The Special Milk amendment is expected to save $118 million in FY 1980 and the Summer Food Service amendment is estimated to reduce costs by about $37 million.
The Senate version of the First Concurrent Budget Resolution for FY 1980 assumed a $300 million savings from legislative changes in child nutrition programs. S. 292, as it would be changed by my two amendments, would achieve about two-thirds of these savings. The House went even further this week by assuming the full savings proposed by the President — $500 million — in their version of the budget resolution.
We cannot emphasize too strongly that these amendments are not massive cut-backs in food assistance to needy children. Indeed, included in the two amendments are program changes that will help assure needy children of Federal nutritional assistance of which they may be deprived under current law.
The $155 million savings in these amendments will be accomplished through elimination of fraud, abuse and program duplication.
Other parts of the Administration's child nutrition proposals appear to be meritorious. These other proposals, however, involve larger policy issues and philosophical judgments and we believe they can best be addressed through careful committee consideration.
We urge you to closely examine the attached analysis which explains the two amendments. Should your staff have questions on them, please call Stephen Kohashi (4-0335) or Dick Woods (4-6002) of Senator Bellmon's staff, or Rob Fersh (4-0564) of Senator Muskie's staff.
Sincerely,
EDMUND MUSKIE,
Chairman.
HENRY BELLMON,
Ranking Minority Member.
AMENDMENT No. 196 TO S. 292: SPECIAL MILK PROGRAM
This amendment limits participation in the Special Milk Program to public and private schools and child care institutions that do not participate in programs providing meal service with milk under the National School Lunch Act and the Child Nutrition Act of 1966 and to summer camps.
The Federal government currently subsidizes the cost of milk served in schools to children, regardless of ability to pay; whether or not milk is being made available to these children as part of the school lunch or breakfast programs. In some schools, this means that Federally subsidized milk is provided to children up to three or four times a day.
To eliminate this duplication of benefits, the amendment will restrict the Special Milk Program to those schools and institutions that do not already have Federally subsidized meal service programs.
It is expected that the price of milk at affected schools will simply rise by the rate of the subsidy — about eight cents in FY 1980. The average price of milk will be about 15 cents and at that level, it is estimated that 62 percent of the children will still purchase milk. This figure includes children who will switch over to the regular meal services programs which include milk.
Overall milk consumption is expected to drop by only two-tenths of one percent of current United States production, and affect the price of milk by one half if one percent — about six cents of the current $11.90 per hundred-weight price.
Despite the $118 million reduction in the Special Milk Program, total USDA food assistance programs expenditures for dairy products will rise in FY 1980 by an estimated $83 million and total almost $2 billion.
Subsection "(C) " of the amendment restores the mandatory requirement that free milk be made available to needy children in schools that participate in the program. Congress amended the Child Nutrition Act last year and inadvertently made this free milk optional to participating schools. This will assure needy children access to free milk in participating schools that don't otherwise make subsidized or free milk available as part of a balanced meal.
The last subsection of the amendment is a technical update of the reimbursement formula for the program and has no programmatic effect.
The overall cost savings estimated for the amendment is $118 million. Without these changes, special milk program costs in FY 1980 are estimated to be $150 million.
AMENDMENT No. 197 To S. 292: SUMMER FOOD SERVICE
This amendment would eliminate as eligible sponsors of summer food programs private nonprofit organizations that either serve 500 meals or more per day or who serve meals at more than three sites, and who obtain their meals from a food service management company. This will curb widespread fraud and abuse in the program that has been documented by the General Accounting Office and the Department of Agriculture's Office of Inspector General.
Sponsors who serve migrant children, as well as private nonprofit schools, including colleges and universities, would continue to be eligible as sponsors.
Particular difficulty has been encountered in maintaining adequate controls over large private nonprofit sponsors that contract with private food vendors. These sponsors have been the source of most of the program fraud and abuse that has plagued the summer program and has resulted in the misallocation of Federal funds.
It is anticipated that some needy children will be affected by this change in eligibility of sponsors. However, in order to ameliorate the effects of the change on eligible children, the amendment requires active outreach efforts by States.
Two other provisions of the amendment require that up to two percent of the funds expended for the program in any State will be used for State audits and makes a matter of law the current administrative requirements that private non-profit institutions have their programs audited prior to final payment.
The last provision of the amendment provides a minimum grant of $30,000 to each State for administration of the program. This will lessen the growing trend of States to turn the program over to direct Federal administration, and will also provide the States resources to do a better job of running the program.
USDA estimates that the amendment will save $37 million in FY 1980. The additional audit and administrative provisions will add about $3.5 to $4.0 million to the program cost. Without this amendment, FY 1980 costs are estimated at $135.8 million.
DEPARTMENT OF AGRICULTURE,
Washington, D.C.,
May 21, 1979.
Hon. HENRY BELLMON,
U.S. Senate,
Washington, D.C.
DEAR SENATOR BELLMON: This responds to your recent letter concerning the Administration's proposal to limit the Special Milk Program (SMP) to schools and other outlets which have no other Federally subsidized meal program. It should be noted that all of USDA's Child Nutrition Programs contain specific food requirements which include milk as a beverage. Thus, no child will be denied access to free or subsidized meals, which include milk, as a result of our proposed change.
Shortly after the 1980 Budget was released, the Department prepared a brief paper which discusses the rationale for our proposed change in the SMP and presents relevant information about the program in response to questions received from GAO, Congressional staff and other interested persons. I have enclosed a copy of that paper for your information. Also enclosed is a copy of the Special Milk Program Evaluation and a brief fact sheet.
Enclosed with your letter was a letter that you had received from the National Milk Producers Federation (NMPF) and a copy of testimony they delivered before the Subcommittee on Elementary, Secondary and Vocational Education of the House Committee on Education and Labor. The enclosed paper responds to many of their points; however, we would like to add several additional points in response to their letter and testimony.
1. In their letter, the NMPF states that elimination of the Special Milk Program means a 38 percent drop in milk consumption by school children. This is not true. The Special Milk Program study indicates that average milk consumption at school is only 11.6 percent lower in schools without the SMP that participate in the National School Lunch Program. The mean number of half-pints of milk consumed by students in schools with both the school lunch and milk programs is 1.03. For schools without the milk program, the comparable figure is .93 half pints.
2. On page 4 of the NMPF testimony, they indicate that the SMP has served as a stimulus to milk consumption. They base this statement on Special Milk Program study. What they fail to point out is that the same study indicated that the National School Lunch Program plays a substantially greater role in increasing milk consumption at school than does the Special Milk Program (page 30).
3. On page 4 of the NMPF testimony, they contend that less than 20 percent of Special Milk Program milk is served to low-income or paying children who are already receiving milk with lunch. In light of the study finding that 30 percent of SMP milk is consumed by students who eat Type A lunches, we disagree with their statement. Moreover, we do not agree that elimination of the SMP in schools with the National School Lunch and/or School Breakfast Program would be discriminatory since all children have equal access to these programs within the school.
4. On page 6 of the NMPF testimony, they discuss milk waste in various categories of schools. They do not mention that milk waste is lowest in schools that participate in only the Special Milk Program — the specific schools that we propose be allowed to continue participation. The specific lunch time milk waste level in SMP only schools is only 3.5% compared to 11.9% in schools with both the NSLP and SMP. Similarly, in schools with only the SMP, 88% of all cartons or glasses of milk served at lunchtime were completely consumed, compared to schools with both NSLP and SMP where only 73.7% of cartons or glasses of milk were completely consumed.
5. On page 6 of their testimony, the NMPF asserts that no Federal funds are allocated to schools to administer the SMP. While this may be technically true, it is somewhat misleading in that the combination of Federal reimbursement and children's payments for milk generally exceeds the price paid to the dairy for the milk, in order to absorb labor and other incidental costs of administering the SMP. Thus, the administrative costs of the SMP can be considered to be absorbed by either the Federal Government or by children paying for milk served through the program.
6. On page 9 of their testimony, the NMPF discusses the impact on farm income of the proposed change in the SMP. Their discussion of this point is particularly misleading. The SMP study shows that a la carte milk sales in schools dropping out of the SMP were only 38% below sales while they were in the SMP. Thus, it is not appropriate to assume a $220 million reduction in retail sales of Class I milk, since at least 62% of these sales would continue in the absence of the program.
In closing let me express my thanks for the opportunity to provide you with additional information about our proposal to reduce the size of the Special Milk Program by eliminating its overlap with our other child nutrition programs which provide milk as part of a complete meal. Please let me know if we can be of assistance in providing any further information for your use.
Sincerely,
BOB BERGLAND,
Secretary.
EFFECTS OF LIMITING SPECIAL MILK PROGRAM TO SCHOOLS AND OTHER OUTLETS WHICH HAVE NO OTHER FEDERALLY SUBSIDIZED MEAL PROGRAM
Cutbacks in the Special Milk Program (SMP) have been proposed by every President since Lyndon Johnson. In FY 1980, such a cutback would represent a saving of $110 million. The Senate has already assumed this saving in the First Concurrent Budget Resolution for 1980.
PROGRAM PARTICIPATION
62 percent of the milk consumed in the Special Milk Program would continue to be consumed by children at school in the absence of the program. Most of this milk consumption would come from students continuing to purchase milk at higher prices in the absence of Special Milk Program subsidies. The rest of the consumption would result from increased participation in either the National School Lunch Program or the School Breakfast Program.
In FY 1980 child nutrition programs will include an estimated $677 million in purchases of milk as part of regular meal service in these programs. Moreover, poor children can receive free milk as part of a free school meal, and near-poor children receive their entire lunch, including milk, at a reduced price of 10 cents, or at most 20 cents, per meal.
The average rate of reimbursement per half-pint of milk in 1980 is projected at 7.5 cents. The average charge to students per half pint is projected at approximately 8.0 cents. For schools excluded from the SMP in FY 1980, there would be a charge of approximately 15.5 cents per half pint instead of 8 cents.
IMPACT ON DAIRY INDUSTRY
The maximum volume of milk which would no longer be used in schools as a result of this change is 285 million pounds. A 285 million pound reduction represents about 0.2 percent of total milk production. A decrease of this magnitude would be expected to lower farm milk prices by about 1/2 of 1 percent, or about $.06 cwt.
Any minimal price impact should be offset by the expansion in the Special Supplemental Feeding Program for Women, Infants and Children (WIC) . The 1980 budget calls for a $200 million increase in WIC funding over 1979 levels. Well over half of the WIC foods are directly related to the dairy industry (i.e. milk and cheese).
The total value of milk used in USDA Child Nutrition and WIC programs in 1980 will be $1,063.9 million, over $4.5 million greater than 1979 usage.
Food Stamp Program participants spend 13.8 percent of their total food expenditures on dairy products. In 1978, dairy expenditures by program participants were an estimated $713 million. Such dairy purchases are projected to increase by at least $174 million, to $887 million in 1979.
Milk prices have been running well above support levels, and are likely to remain above support levels during most of FY 1980. Thus, the Special Milk Program change should not result in major additional purchases by the Commodity Credit Corporation (CCC). However, the estimated CCC cost of purchasing all 285 million pounds of milk is $30-35 million (compared to estimated savings of $110 million in the Special Milk Program).
Milk and dairy support through FNS programs
Child Nutrition Programs and WIC
The chart below compares the amount and value of milk which will be used in the Child Nutrition and WIC Programs during fiscal year 1979 with the value of milk that will be used in fiscal year 1980. The 1980 projections assume reduced levels of Special Milk and Summer Food Service Program operations.
[Table omitted]
Special Milk Program — Fiscal Year 1980 Budget
The President's Budget for fiscal year 1980 calls for limiting the Special Milk Program to schools and other outlets which have no other Federally subsidized meal program. A number of questions concerning the impact of such a change on both program participants and the dairy industry have been asked by GAO, Congressional Staff and other interested persons and groups. The purpose of this paper is to answer as many of these questions as possible.
BACKGROUND
All of USDA's Child Nutrition Programs contain specific food requirements which include milk as a beverage. Thus, under the proposal in the budget, all children who currently have milk available to them at meal time will still have milk available through the other Child Nutrition Programs.
The most comprehensive survey of the Special Milk Program was conducted by the Department in 1975. Data from that survey were used extensively in the assessment of the impact of the proposed program changes discussed below. The study addressed only schools, but since approximately 98 percent of SMP milk is served in schools, the data may be considered representative of the entire program.
PROGRAM PARTICIPATION BY SCHOOLS AND CHILDREN
As of October 1978, there were 83,403 schools and Residential Child Care Institutions (RCCI's) participating in the Special Milk Program (SMP). During the fiscal year 1978, a total of 1,966.6 million half-pints of milk were served in schools and RCCI's under the SMP. Current estimates for fiscal 1979 indicate that about 1,900 million half -pints will be served, while the budget anticipates that only 395 million half-pints will be served in fiscal 1980.
The following table presents the program participation status of schools, with corresponding enrollment figures, as of January 1975.
[Table omitted]
The figures for SMP only schools were derived by subtracting the number of NSLP schools with the SMP from the tote number of SMP schools. This assumes that all SMP schools with the SMP also participate in the NLSP. This assumption is supported by preliminary findings from the school breakfast program survey.
Schools that participated only in the SMP (and would still be eligible to participate after enactment of the legislative change advocated in the budget) represented just over 10 percent of all SMP school as of January 1975. In terms of school enrollment, those SMP only schools represent just under 6.7 percent of total enrollment in SMP schools. There is no evidence that the profile of schools participating in the various child nutrition programs has changed substantially since 1975, with the exception of some growth in the School Breakfast Program. It appears that virtually all of this growth has occurred in schools already offering the SMP and NSLP.
In January 1975, 45 percent of all SMP schools made milk available only once per day; 96 percent of these schools which offered milk only once per day offered it at lunch time. Based on these percentages, it appears that virtually all schools currently participating in the SMP offer milk at lunch time. The remaining 55 percent of schools are distributed as follows: 27 percent offer milk twice per day; 24 percent offer milk three times per day; and 4 percent offer milk four or more times per day. There is no reason to believe that these percentages have changed substantially since January 1975.
Of all milk consumed in the SMP as of January 1975, 43 percent was reported to be consumed by students who eat bag lunches. Based on current program levels, this 43 percent amounts to an annual level of 845.6 million half-pints.
On a daily basis, assuming 180 school days per year, approximately 470 million half pints of milk are served to students eating bag lunches.
At the time of the SMP Survey, 86 percent of all SMP milk served in schools was served at lunch time. Assuming that this percentage has remained relatively constant since 1975, and given projected budget level of $142 million for fiscal 1979, savings, if the SMP were limited to non-lunch time, would be approximately $93.7 million (if such a change had been implemented prior to the beginning of fiscal 1979). Savings in fiscal 1980 would be slightly greater because of increases in reimbursement levels due to inflation. However, to the extent that schools might increase milk service during non-lunch periods, savings would be reduced.
The average rate of reimbursement per half-pint of milk is projected to be 7.540 in fiscal 1980. In January 1974 the average price charged to students was 5.75¢/half-pint. In January 1975 the average price was 6.07¢/ half-pint. If the, same annual percentage rate of increase in price is projected (i.e. 5 6% per year) through to January 1980, the average can be projected at approximately 8.0 cents. By adding the average reimbursement rate to the 8 cent charge, a price of approximately 15.5 cents may be projected for schools excluded from the SMP in fiscal 1980.
IMPACT ON DAIRY INDUSTRY AND PRICE SUPPORT ACTIVITIES
The decrease in program size in terms of half-pints of milk served to children between fiscal 1979 and 80 is projected to be 1,505 million (from 1,900 million to 395 million). Thus, the program is projected to be approximately 21% of its current level. The 1,505 million half-pints represents just over 750 million pounds of fluid milk. This amount of milk represents approximately 1.34% of total fluid consumption in the United States. In terms of total milk production (including manufacturing uses) 750 million pounds represents less than 0.6 percent of total production.
Data from the Special Milk Program Survey suggest that 62 percent of the milk consumed in the Special Milk Program would continue to be consumed by children at school in the absence of the program. Most of the "replacement milk" would result from students continuing to purchase milk at higher prices in the absence of SMP subsidies, with a smaller portion of the "replacement" coming from increased participation in either the NSLP or SBP. There are no existing data which give any indication of the extent to which children might increase milk consumption at home or bring milk from home in the absence of the SMP. Thus, existing data suggest that the maximum volume of milk which would no longer be used in schools as a result of this change in the SMP is 285 million pounds (38% X 750=285 million lbs.)
A 285 million pound reduction in milk usage in schools represents slightly more than 0.2 percent of total milk production. A decrease of this magnitude would be expected to lower farm milk prices by about one-half of one percent or about $.06/cwt. Milk prices in January 1979 were about 86¢ above price support and have been running about 50¢ above support levels since July.
Milk prices during the fiscal year 1980 period are currently projected to remain above price support levels. Thus, the SMP change should not result in major additional purchases by the Commodity Credit Corporation (CCC).
It is perhaps more appropriate to consider the impact of the SMP reduction not by itself, but in light of anticipated increases in the Special Supplemental Food Program (WIC). The 1980 budget calls for a $200 million increase in WIC funding over 1979 levels. Well over half of the WIC foods are directly related to the dairy industry (i.e. milk and cheese). It seems reasonable that most, if not all, of the decrease in dairy prices resulting from the SMP reduction will be offset by increases in WIC Program levels.