Food assistance

Food Assistance

Nearly 40 million Americans, over 16 percent of the population, received food assistance in 1989. The programs are designed to improve the nutrition of low-income people and other target groups, such as infants and the elderly, and to provide an outlet for surplus agricultural commodities. Types of food assistance include food stamps, vouchers, food packages, or cash.

Federal food assistance began in the 1930's as an outgrowth of the Great Depression. In 1969, the Food and Nutrition Service was established to administer the programs. In that year, the Government spent $1.1 billion on food assistance programs. By 1980, the total was $14.2 billion (table 1). Federal food assistance totaled $21.8 billion in fiscal 1989--nearly twice as much as payments to farmers through the various commodity price support programs.

The creation of another food assistance program, expansion of existing programs, and changes in the economy caused program expenditures to escalate in the 1980's. The Temporary Emergency Food Assistance Program (TEFAP) was created in 1982. During the same time, the Special Supplemental Food Program for Women, Infants, and Children (WIC) more than doubled in size in response to increased congressional and public support.

Events in the general economy contributed to higher program costs in two ways. Annual upward adjustments of program benefits were made because food prices increased 46 percent during the 1980's. Participation in food assistance programs, particularly the Food Stamp Program (excluding Puerto Rico), expanded as the 1981-82 recession created substantial unemployment. However, lower unemployment associated with an improved economy led to decreased food stamp participation between 1983 and 1989.

Food assistance program regulations and eligibility requirements are specified in the Food Stamp Act of 1977, the Child Nutrition Act of 1966, and other legislation. However, the 1985 Food Security Act and other authorizing legislation expire this year and the USDA and others are studying the effects of the legislation to see what lessons can be applied in the 1990's under a new food and agriculture law.

Family Nutrition Programs

The family nutrition programs are the Food Stamp Program, the Nutrition Assistance Program for Puerto Rico, and the Food Distribution Program on Indian Reservations (Needy Family Program). The Food Stamp Program is the largest of these, serving an average of over 18.7 million people monthly in fiscal 1989, up from 18.6 million a year earlier. Program costs totaled $12.9 billion, compared to $12.3 billion in 1988.

The Food Stamp Program was started in 1961 and became fully operational by 1964. Coupons issued monthly to eligible low-income households can be redeemed for foods at retail stores. Eligibility is determined by income and asset limits and certain nonfinancial requirements.

The Hunger Prevention Act of 1988 mandated the most recent changes in the Food Stamp Program. The act simplified the application forms for food stamps and permanently authorized rules which ease eligibility for the homeless. The act also provided for a three-stage increase in food stamp allotments from 100 to 103 percent of the Thrifty Food Plan (TFP) by fiscal 1991. The TFP is a recommended group of foods, called a market basket, which provides a nutritious diet at a low cost.

On a typical day, an estimated 1 out of 13 Americans participates in the Food Stamp Program. On an annual basis, about one of eight Americans receives food stamps.

In July 1982, Puerto Rico's Food Stamp Program was replaced by the Nutrition Assistance Program. Puerto Rice received $912 million in 1989 under this block grant program which covered the cost of food assistance provided to recipients in cash and half of the administrative costs.

The Food Distribution Program on Indian Reservations operates as an alternative to the Food Stamp Program for families living on or near Indian reservations. Under the program, recipients receive food packages, including canned meats, fruits and vegetables, and dairy products.

Child Nutrition Programs

USDA operates five child nutrition programs in cooperation with State and local governments--the National School Lunch, School Breakfast, Child Care Food, Special Milk, and Summer Food Service. The Federal Government spent $5.2 billion (including the value of donated commodities) on these programs in fiscal 1989, a 3-percent gain over 1988.

Despite these increases, expenditures on child nutrition programs have not risen as fast as other food assistance programs over the last decade. The child nutrition programs' share of total expenditures for food assistance programs fell from 28 percent in fiscal 1977 to 24 percent in fiscal 1989. Shrinking school enrollments slowed the growth of the National School Lunch Program and accounted for some of the decline. The major portion, however, was due to administrative efforts to target program benefits to the most needy.

The Schooll Breakfast and Child Care Food Programs increased relative to the National School Lunch Programs. Over 3.8 million children participated in the School Breakfast Program in 1989, 1.4 million more than when the program was permanently authorized in 1974. Participation in the School Breakfast Program peaked in 1981 at 3.8 million then fell in 1982 to 3.3 million. In succeeding years, the program grew modestly until it reached its high point again in 1989. Federal costs for the School Breakfast Program were $511.6 million in fiscal 1989, about one-eight as much as the National School Luch Program.

The Child Care Food Program grew faster in the 1980's than all other child nutrition programs. Participating sites peaked at 141,150 and the average number of participants grew from 660,000 in 1980 to 1.4 million recipients in 1989. The Child Care Food Program provides commodity assistance and cash to non-profit child care centers and family day care homes. Given the increasing need for child care, the constituency for this program likely will continue to grow and receive greater attention from Federal authorities.

The Special Milk and Summer Food Service Programs are small, and Federal outlays have been modest. Federal costs for the Special Milk Program have averaged between $15 and $19 million annually since 1982. Expenditures for the Summer Food Service Program increased from $87.1 million in 1982 to $193.8 million in 1989.

WIC and the Commodity Supplemental Food Program

The WIC program is designed to improve the nutritional status of low-income, nutritionally at-risk women, infants, and children up to age 5. The program grew quickly in the 1980's and now includes special provisions under the Hunger Prevention Act of 1988 to reach the homeless.

Launched in 1974, WIC provides supplemental nutrition, nutrition education, and access to health services. Participants receive vouchers that can be exchanged for monthly allotments of foods, such as infant formula, eggs, fruit juice, milk, cheese, and cereal.

A nonentitlement program (funding is allocated on the basis of a formula rather than solely on participation), WIC has grown rapidly. Its share of all Federal food assistance program outlays was 8.8 percent in fiscal 1989, compared with 3 percent in fiscal 1977. Total participation averaged 4.1 million in fiscal 1989, 21.5 percent higher than in fiscal 1980.

All States have negotiated contracts directly with infant formula manufacturers to accommodate more WIC recipients with existing funds and to offset high infant formula prices. Some States have negotiated rebates of as much as 70 percent of the retail price, although manufacturers are currently offering much lower rebates. Rebate contracts have enabled those States to provide benefits to a greater number of people.

The Commodity Supplemental Food Program (CSFP), begun in 1969, initially targeted a population similar to that of WIC. In 1989, however, over one-third of its 248,000 participants were low-income elderly. The CSFP provides supplemental food assistance, but unlike WIC's voucher system, commodities are purchased by USDA and shipped to State and local agencies for distribution to participants.

Food Distribution Programs

Food distribution programs historically have been associated with surplus commodities obtained through farm price support programs. Spending for the Temporary Emergency Food Assistance Program (TEFAP), the Nutrition Program for the Elderly, and Commodity Distribution to Charitable Institutions--the three major food distribution programs--peaked at $1.5 billion in fiscal 1984. By 1989, food distribution program expenditures declined to $736.1 million, primarily because some Government surpluses were depleted. TEFAP, the largest of the food distribution programs, accounts for most of this fluctuation.

TEFAP distributes surplus butter, honey, cornmeal, and flour from Government holdings. In the past, cheese, rice, and nonfat dry milk were also distributed. Provisions of the Hunger Prevention Act of 1988 earmarked the distribution of some TEFAP commodities to soup kitchens and food banks. The Act authorized $120 million annually from 1988 to 1990 to purchase commodities in the open market for distribution through TEFAP.

Under the Nutrition Program for the Elderly (NPE), USDA provides food and funds in lieu of commodities to the U.S. Department of Health and Human Services, which administers programs to provide meals to the elderly, either at centers or delivered to their homes. In fiscal 1989, USDA supplied $144.6 million in cash and commodities to provide meals for nearly 1 million elderly persons.

USDA, through the Commodity Distribution to Charitable Institutions Program, provides surplus commodities to eligible charitable institutions not covered by other USDA programs. USDA donated $130.5 million worth of commodities in fiscal 1989 to charitable institutions such as orphanages, summer camps, and nursing homes.

Domestic Food Programs in the 1990's

Food assistance policy for the 1990's must balance the conflicting forces of budget constraints and meeting the nutritional requirements of needy persons. Program growth and expenditures have been limited by budget constraints which resulted in the development of tighter program eligibility requirements and the creation of new program management systems. Regulatory and legislative changes mandated in the Omnibus Budget Reconciliation Act of 1981 (P.L. 97-35), the Agriculture and Food Act of 1981 (P.L. 97-98), and the Omnibus Budget Reconciliation Act of 1982 (P.L. 97-253) were partly responsible for lowering the growth rate of real (adjusted for inflation) program expenditures, particularly in the National School Lunch and Food Stamp programs. Although actual expenditures for all food assistance programs have continued to increase, real spending has declined since 1983 (figure 1). The number of participants in the Food Stamp Program, National School Lunch Program, School Breakfast Program, and WIC, however, has remained practically unchanged.

On the other hand, attempts to increase food consumption of low-income people have expanded the scope of some existing programs and created new ones. The increased funding of both the Child and Adult Care Food Program and WIC, the creation of TEFAP, and the rise in food stamp participation, from about 50 percent of eligible households in the mid-1970's to about 67 percent today, reflect efforts to expand food assistance programs. More recently, this goal is reflected in the gradual increase in food stamp benefits mandated in the Hunger Prevention Act of 1988, with future increases a possibility.

Current reform proposals include making WIC an entitlement program, replacing food stamp coupons with electronic debit cards, and increasing the frequency of food stamp benefit adjustments for inflation. However, with existing budget limitations, additional expenditures on some programs may come at the expense of others.

Changing WIC to an entitlement program would broaden the coverage to individuals who are eligible under program guidelines but do not receive benefits because of limited funding. Providing debit cards, a device used in some pilot studies, rather than food stamps may reduce administrative program costs but could possibly increase food retailers' operating costs. Program benefits are currently adjusted annually for food price inflation. More frequent adjustments could reduce the lags between changes in food prices and program benefits.

Most food assistance programs provide in-kind transfers, such as stamps, vouchers, or commodities, rather than direct cash assistance. In-kind programs are able to provide specific food benefits to target groups deemed to have specific nutritional needs. Pilot programs designed to measure the impact of a cash-only Food Stamp Program are currently under way in selected sites in the United States.

The intensity of the debate on food assistance policy options will depend upon the public perception of the extent of "hunger" in the United States. Hunger is frequently defined in two ways. The first defines hunger in terms of malnutrition with measures such as anemia, low birth weight, and infant mortality. Hunger is also defined as a lack of "food security," a condition in which there is not access at all times to adequate food from normal food channels. This definition leads to a broader concept of hunger.

The Hunger Prevention Act of 1988 provides greater funding for food assistance programs and signals heightened congressional concern over hunger and malnutrition. The funding level and scope of domestic food assistance programs will remain volatile issues, generating significant public debate. As Congress considers the 1990 food and farm legislation, additional spending on food assistance will be weighed against other pressing domestic issues such as medical care, housing, drug abuse prevention, and job training.

U.S. Overseas Food Aid

The United States provides a wide array of commodities through its food aid programs, ranging from bulk, unprocessed commodities to food easily used in relief camps. In fiscal years 1986-88, grains comprised almost 55 percent of the value of all food aid shipments (figure 2). Much of it was wheat, followed by rice, corn, and sorghum. Blended products comprised about 20 percent of total U.S. food aid. These products, which can be more readily used or consumed by food aid recipients, include flour, bulgur wheat (cracked wheat), and cereal mixtures containing such ingredients as corn meal, soy flour, and nonfat dry milk.

Vegetable oils, used for cooking or as ingredients in other foods, comprised slightly more than 15 percent of the total value. Soybean oil made up the largest share of donated vegetable oils. Dairy products, largely nonfat dry milk, comprised a little less than 10 percent of the fiscal 1986-88 total value. Miscellaneous commodities included cotton, tallow, and other products. The commodity composition of U.S. food aid in fiscal 1986-88 was only slightly different from 10 years earlier. The share of grains, blended products (mainly cereal), and miscellaneous commodities showed a small decline, while vegetable oils and dairy products increased. Dairy's share increased largely because more types of products were donated than just nonfat dry milk. In fiscal 1986-88, anhydrous milk fat, butter, and cheese were also provided. The major change among the miscellaneous commodities was that tobacco was no longer provided by fiscal 1986-88, while soybeans were.

In fiscal 1986-88, Asian countries received slightly more than one-quarter of the total U.S. food aid, compared to 53 percent in fiscal 1976-78 (figure 3). African countries received almost half of the total in 1986-88 and Egypt alone accounted for more than 15 percent. In fiscal 1976-78, all African countries received only about 30 percent of U.S. food aid. The share of U.S. food aid shipped to Latin America grew from 9 percent in fiscal 1976-78 to 26 percent in fiscal 1986-88, reflecting unsteady growth in per capita grain production and higher debt burdens there.

The distribution of U.S. food aid shifted, in part, to reflect changes in the agricultural situation in developing countries since the mid-1970's. In general, food production per capita has not improved in Africa as much as in other regions.

How the U.S. Provides Food Aid

The United States provides food aid abroad through two main channels. Commodities are donated through P.L. 480, also known as the Food for Peace Program, to help meet the needs of hungry individuals and to help developing countries. The Section 416 program involves overseas donations of surplus commodities owned by USDA's Commodity Credit Corporation (CCC).

Food is distributed through three P.L. 480 programs. Under Title I, the Government provides long-term, low-interest credit for the sale of U.S. agricultural commodities to designated countries. Local currencies, generated by the sale of the aid commodities, are programmed by the recipient government and the United States for jointly agreed self-help measures such as increasing farm production and improving storage, transportation, and distribution of farm products in the recipient country. The Food Security Act of 1985 reinstated Title I sales of U.S. farm products for local currency to generate economic growth through the recipient's private sector.

P.L. 480 Title II provides donated U.S. agricultural commodities to alleviate famine, provide disaster relief, combat malnutrition, and encourage economic and community development. These donations are distributed through recipient governments, private voluntary organizations, and the World Food Program. Under the Food for Development Program (Title III), a Title I loan may be forgiven if the local currency generated from Title I commodity sales is used to finance specified development purposes.

Funding for the P.L. 480 program peaked at about $2.2 billion in fiscal 1985 during the African famine. Since the Food Security Act of 1985 was enacted, P.L. 480 programming has remained relatively stable after declining from the 1985 peak to $1.5 billion in fiscal 1987-90. P.L. 480 has accounted for 5 percent or less of the value of total U.S. agricultural exports since fiscal 1974. Volumes shipped have declined from about 8.5 million tons in fiscal 1985 to about 6 million tons in fiscal 1988. This compares to peak shipment volume of more than 19 million tons in fiscal 1962.

The Section 416(b) program provides donations from surplus CCC stocks, which at times may include dairy products, wheat, flour, other grains, and soybeans. Shipments depend on the availability of surplus CCC stocks. The value of shipments reached $279 million in fiscal years 1985 and 1988. Volumes have ranged from 153,000 tons in fiscal 1984 to 2.1 million tons in fiscal 1988. For fiscal 1990, only corn, sorghum, and frozen butter are available under Section 416.

Over the years, the channels through which U.S. food aid has been distributed have changed slightly. In fiscal, 1976-78, Title I/III shipments accounted for 70 percent of the total. In fiscal 1986-88, such shipments comprised close to 65 percent. Title II's share dropped from 30 percent to 25 percent. The declines mainly were due to the growth in Section 416 shipments, which started in fiscal 1983 and accounted for about 10 percent of total shipments during fiscal 1986-88. [Tabular Data Omitted] [Figures 1 to 3 Omitted]

J. William Levedahl and Masao Matsumoto are agricultural economists with the Food Marketing and Consumption Economics Branch, Commodity Economics Division, and Mark Smith is an agricultural economist with the Commodity Trade Analysis Branch, Commodity Economics Division.

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