Senate Committee on Agriculture, Nutrition, and Forestry
March 17, 1998
 

 Thank you for the invitation to testify today.  I am Robert Greenstein, executive director of the Center on Budget and Policy Priorities, a nonprofit organization that studies fiscal policy issues and social programs at both the federal and state levels, with emphasis on issues affecting low- and moderate-income families.  The Center does not represent interests or constituents.  It is a public policy organization funded almost entirely by foundations.

 In the late 1970s, I served as Administrator of the Food and Nutrition Service in the U.S. Department of Agriculture, while in 1994, I served as a member of the Bipartisan Commission on Entitlement and Tax Reform chaired by Senator Bob Kerrey and former Senator Jack Danforth.  I have worked on issues relating to the WIC program since 1974.
 

The Effectiveness of WIC

 The WIC program is unusual.  Although rigorous evaluations of social programs often find programs to have only modest effects, that is not true of WIC.  The research findings on the effectiveness of WIC are probably the strongest of those for any program the federal government operates.

 In the early 1990s, several senators asked the GAO to report on how much each dollar invested in several highly regarded programs for children produced in savings down the road.  The GAO reported back that the program for which positive cost-benefit impacts were clearest and strongest is WIC.

 The GAO reviewed all studies that had been conducted on WIC.  It concluded that WIC reduces low birthweight among pregnant women who participate in the program by one fourth, a very important finding since low birthweight is a leading cause of infant mortality and disability.  Even more striking, the GAO found that WIC reduces the incidence of very low birthweight by 44 percent.

 Children born at low birthweight require intensive care at the hospital, which is very costly and much of which is paid for by Medicaid.  The GAO estimated that each dollar the federal government spends on the prenatal component of WIC averts $3.50 in cost on federal and state Medicaid expenditures, expenditures by hospitals and private-sector payers, and expenditures for such costs as special education for disabled children.

 Also of note is a major study conducted during the Bush Administration by Mathematica Policy Research, under contract with USDA.  Mathematica carried out an extensive analysis of WIC and Medicaid data from five states.  It found that WIC reduced infant mortality in four of the five states and that every dollar spent on WIC for pregnant women resulted in Medicaid savings of $1.92 to $4.21.

 Other studies also have found important impacts of WIC.  Among the most significant is the National WIC Evaluation, a large, multi-year evaluation of WIC conducted during the Reagan Administration, under contract with USDA, by one of the nation's foremost researches in the field.  This study, the largest and most comprehensive evaluation ever conducted of WIC, found:

   WIC contributed to a reduction of one-fifth to one-third in the late fetal death rate.

   Women who participated in WIC had longer pregnancies leading to fewer premature births, a leading cause of infant mortality.  There was a 23 percent decrease in prematurity among white women with less than a high school education and a 15 percent decrease among black women with less than a high school education.

   WIC participation resulted in a significant increase in the number of women seeking prenatal care early in pregnancy and a significant drop in the proportion of women with too few prenatal visits to a health facility.  Early and adequate prenatal care is one of the major factors affecting the health of newborn infants.  Children participating in WIC also were better immunized and more likely to have a regular source of medical care.

   WIC participation also appears to lead to better cognitive performance.  Four and five year old children whose mothers participated in WIC during pregnancy had better vocabulary test scores.  Children who participated in WIC after their first birthdays had better digit memory test scores.

   Women enrolled in WIC consumed more iron, protein, calcium, and vitamin C.  WIC also improved the diets of infants by increasing the average intake of iron and vitamin C and the diets of older preschool children by increasing average consumption of iron, vitamin C, thiamine, and niacin.

   The greatest dietary benefits were among those people at highest risk: minority women with less education and children who are very poor, short, black, or in female-headed families.

 Also of importance are findings from the Centers for Disease Control and Prevention in Atlanta.  The work conducted at CDC indicates that WIC has a powerful effect in reducing child anemia.  Data released in the late 1980s from CDC's Pediatric Nutrition Surveillance showed a two-thirds reduction in childhood anemia over a 10-year period when WIC was expanding substantially.  The data also showed that low-income children not enrolled in WIC have a significantly higher prevalence of anemia than those who are enrolled.  In addition, studies by CDC researchers have found that anemia declines markedly among children after they begin to participate in WIC.  Findings such as these led the Journal of American Medical Association to publish an editorial calling attention to WIC's role in reducing anemia and lauding the WIC program.

 These results also led a panel of Fortune 100 CEOs to appear before the House Budget Committee in 1991 and call for full funding for WIC.  In their joint testimony, Robert Allen of AT&T, James Renier of Honeywell, Robert Winters of Prudential, John Clendenin of BellSouth, and William Woodside of Sky Chefs called WIC "The health care equivalent of a triple-A-rated investment."

 Finally, WIC also appears to have been successful in recent years in helping to increase breastfeeding rates among low-income women.  In 1989, under the leadership of this committee, Congress strengthened WIC by including provisions in the law setting aside funds for breastfeeding support and promotion.  The most recent data available on infant feeding practices indicate that more women on WIC now are breastfeeding their infants.  Specifically, the April 1997 issue of Pediatrics reported significant increases in breastfeeding between 1989 and 1995 among women who participated in WIC.  The article reported on increases in breastfeeding during this period and reported them to be greatest among women in several categories: those who were black; those younger than 25; those with low income; those with more than a grade-school education; those living in the Southeast; and those participating in WIC.  In addition, the percentage of WIC participants who initiated breastfeeding in the hospital in 1995 was the highest ever recorded.
 

The Current Status of WIC

 The WIC program serves between 7.4 million and 7.5 million low- income women, infants, and children.  A question often asked of WIC is what the "full funding" or "full participation" level is.  (The full participation level is the level at which all eligible women, infants, and children who apply are enrolled in WIC.  This is not the same as the number of people who are eligible for WIC, since in any program, not everyone who is eligible actually applies.)

 USDA estimates show that approximately nine million women, infants, and children meet the WIC eligibility criteria.  We also know there are a number of states in which some eligible individuals remain outside the program due to resource constraints and would enter the program if the state had the funds to serve more eligible people.  Since we do not know exactly how many people would participate if there were no resource constraints, we do not know precisely what the full participation level is.  It also should be noted, however, that some states do appear to be at the full funding level and cannot further expand participation.

 Carry-Over Funds

 Each year, about three to four percent of WIC funds are carried over to the following year.  The presence of these carry-over funds has led to some confusion.  Does this mean the program has more resources than it can use?

 Virtually every analyst familiar with the program agrees that the presence of these carry-over funds does not mean the program has more resources than it needs.  Rather, the presence of a small percentage of carry- over funds is a reflection of the program's financial and administrative structure.  Under this structure, it is simply impossible for most states to expend 100 percent of their grant funds in any given year.  Essentially, the WIC program is about three percent to four percent forward-funded and about 96 percent to 97 percent current-funded.  This is because of several basic program features.

   States cannot know their precise WIC expenditure levels for a fiscal year until several months after the fiscal year ends.  This is because a state cannot forecast with certainty exactly how many of the WIC vouchers it has issued will actually be used.  Not all WIC vouchers are transacted; for example, not all WIC participants purchase as much cereal as is allowed.  Nor can a state predict in advance the exact retail prices that stores will be charging for WIC foods in the last few months of the year.  The cost of a WIC food voucher equals the store price of the WIC food purchased with the voucher on the day that the WIC participant uses the voucher in the store.

  State WIC offices must be prudent managers of federal WIC funds.  They must avoid over-expenditures.  Since states cannot know until after the end of the fiscal year exactly how many WIC vouchers were redeemed and at exactly what retail prices, states must leave a margin of error to avoid overspending.  The result is that a small percentage of the funds made available to the state remain unused at the end of the fiscal year and are carried over to the following year.

    Actual WIC expenditures have always fallen modestly below the total level of funding available.  The presence of some WIC carry- over funds is inevitable.  Thus, the availability of carry-over funds at the end of a fiscal year does not indicate that the program is over-funded.  Even when WIC was a very small program, with millions of unserved eligible people, there was significant carry- over funding each year.

   Because WIC cannot operate without carry-over funds, WIC is effectively three percent to four percent forward-funded and 96 percent to 97 percent current-funded.  There are many federal programs, most notably education programs, that are forward- funded by much more than three percent to four percent.  The forward-funding of these programs does not indicate these programs have excess funding.

 The presence of these WIC carry-over funds has drawn significant attention in recent years, especially from the Appropriations Committees.  The Appropriations committees have sought modifications in the program to reduce the amount of carry-over funds and increase the proportion of funds expended in the year for which they are provided.

 The concerns of the appropriators can best be explained through an example.  Suppose only 95 percent of WIC funds available for a fiscal year can be spent that year and the other five percent is carried forward.  If that is the case, then in order to serve a given number of WIC participants — such as 7.5 million participants — the appropriations level must be set high enough so there are sufficient funds to serve this many participants after the unavailability of five percent of the newly appropriated funds is taken into account.  If the level of carry-over funds can be squeezed down from five percent to three percent and more of the coming year's appropriation will be expended in that year, then a somewhat smaller WIC appropriation level will be needed for the coming year to serve the same number of participants.

 Reducing carry-over funding also has another advantage.  It means that at any given funding level, more eligible women, infants, and children will be served.  Suppose Congress provides a set amount of money for WIC for a fiscal year.  The greater the proportion of that money that is expended in that year, the greater will be the number of people in need who receive WIC benefits that year.

 With this background, I would like to proceed to discuss some of the proposals now before you as you prepare to reauthorize WIC.
 

Reauthorization Issues

 I would like to divide this discussion of reauthorization issues into three parts: 1) recommendations to extend certain provisions of the WIC statute or to codify certain WIC provisions included in recent agriculture appropriations acts; 2) comments on several recommendations pertaining to rules governing the use of WIC funds; and 3) comments on several USDA proposals relating to program integrity.

 Extending or Codifying Existing Provisions

 For the last two years, the agriculture appropriations act has required states to award WIC infant formula cost containment contracts to the company that offers the lowest net price (i.e., the lowest price net of the rebate), unless a state can show that another approach will yield greater savings.  This is an important provision that ensures free-market competition will work and produce the largest savings for the taxpayers and the WIC program.  The Administration's reauthorization bill proposes to codify this provision in the authorization statute.  We strongly endorse that proposal.

 Second, a provision that was enacted in 1994 requires that USDA reserve for certain high priority purposes the first $10 million in unspent nutrition services and program administration funds it recovers from states each year.  Specifically, this money is reserved primarily for grants to states to modernize and improve their WIC financial management and information systems.  The Administration recommends extending this provision.  We concur.  We believe this is quite important.

 Last year, a dispute developed in Congress over how much supplemental funding WIC needed to avoid caseload reductions.  The dispute stemmed in part from the fact that it often takes a number of months before reliable information on a state's monthly WIC costs and caseload level become available.  As a program that provides a monthly benefit to 7.5 million people, WIC needs strengthened management information systems.  More timely financial data also can help states manage their programs better financially, enabling them to expend more of their grant funds and reducing the amount of carry-over funds.

 We would recommend that the Committee consider raising this $10 million level slightly.  The $10 million figure was set in 1994.  Due to inflation, $10 million dollars in 1994 bought more than $10 million will purchase in 1999 or 2003.  CBO data indicate that $10 million in 1994 would be equivalent to $11.5 million in 1999 and about $13 million in 2003.  Hence, we would recommend raising this level to about $12 million.  I would note that the National Association of WIC Directors also has spoken of the need for added funding to strengthen management information systems.

 Finally, the FY 1998 agricultural appropriations act contains a provision relating to carry-over money that should be codified in the authorizing statute.  The Administration's bill also contains this recommendation.

 The provision in question assures that WIC food funds which a state does not use in a fiscal year are recovered by USDA in the following year and reallocated to states that can use them.  Without this provision, some states could retain a portion of unspent food funds year after year and receive excessive funding year after year.

 As noted, some states are already at full funding levels while other have significant numbers of unserved eligible women and children.  Suppose a state at full funding has received more funding than it can use.  If the state is allowed to retain funds it can't use into the next fiscal year, it may underspend its grant year after year, with some or all of the funds it receives in excess of its need remaining in the state and flowing forward from one year to the next.  The state will effectively have a float of funds that is never actually used to serve women, infants, and children, even though there are other states that continue to have unmet needs.

 That would produce undesirable results.  A smaller proportion of total WIC funds would actually be used, since some funds would float forward from one year to the next without being used.  And since a smaller portion of the available funds would be used, fewer women, infants, and children would be served.  In addition, the unused amounts carried forward at the end of each fiscal year would be larger, precisely the outcome the Appropriations Committees seek to avoid.

 A provision in the FY 1998 agriculture appropriations bill addresses this problem, and as noted, the Department essentially purposes to codify that provision in the authorizing statute.  The provision in question assures that all unspent food funds are recovered and reallocated, thereby making sure available funds are used to the fullest extent possible and are appropriately matched to state needs.  This approach also produces some reduction in the level of funds carried forward from one year to the next.

 I would note that the Department's version of this proposal contains a new provision that is not part of the FY 1998 appropriations act and that would be of significant benefit to states.  The Department would allow states to retain and carry forward a somewhat larger amount of unspent nutrition services and program administration funds, as distinguished from food funds, to the extent that a state needs not-yet-expended NSA funds for the development of a WIC Electronic Benefit Transfer system.  The Department's proposal appears to represent a sound approach to these matters.

 Cost Containment Conversion Proposal

 A proposal has been made by the National Association of WIC Directors to alter the circumstances under which part of the savings from infant formula rebates can be converted from food grant funds to nutrition services and administration money.  We agree with NAWD that there are some problems in this area that need to be addressed.  We believe, however, that the NAWD proposal would create new problems and that there are other ways to address this matter.

 Rebate funds allow states to serve more participants.  Serving more participants entails incurring more NSA costs.  Hence, some rebate funds need to go for nutrition services and administration.  Everyone agrees on that.

 Congress addressed this issue in reauthorization legislation in the late 1980s.  The provision Congress enacted then is largely working well, although one aspect of it has some glitches that need to be addressed.  Under the provision that the Committees, USDA, and the states jointly fashioned in the late 1980s, USDA looks each year at each state's average WIC food costs per person after rebates are taken into account.  USDA divides the state's per- person WIC food cost into the state's total WIC food grant.  The result is the estimated number of WIC participants the state can serve after rebate savings are factored in.  USDA gives the state an NSA grant per participant for this number of participants.

 This means that the NSA grants which states receive each year already provide states with substantial NSA funds to cover the costs of serving the additional participants whom rebate savings allow them to cover.  As explained below, there are some problems that occur in the first year or so after a state receives a new infant formula contract that allows it to increase its rebate savings.  Nevertheless, looking at rebate savings as a whole (as distinguished from the small portion of rebate savings that stem from increased rebates under new contracts), states do receive full NSA funding for the vast bulk of the participants whom rebates enable them to serve.

 A little history is in order here.  From WIC's creation in 1974 until 1988, no more than 20 percent of WIC funds went for NSA grants to states.  In the late 1980s, Congress dropped the 20 percent ceiling and moved to the approach just described of awarding each state an amount of NSA funds sufficient to cover the number of participants the state is estimated to be able to serve, taking rebate savings into account.  Congress made this change specifically to allow states to secure more NSA funds to serve these additional participants.  As a result of this change, the proportion of federal WIC funds going to nutrition services and administration is now about 26 percent, up from 20 percent a decade or so ago.  This provision of law, under which each state's NSA grant reflects the number of participants a state can serve with its regular grant plus its rebate savings, is essentially an "automatic conversion" provision.  It works.

 As noted, however, there is one glitch.  Suppose a state receives a new cost containment contract during a year that increases its rebate savings.  These increased savings will not have been reflected in the calculations USDA did at the start of the year to estimate how many people the state can serve and, hence, the level of the state's NSA grant.  In these circumstances, USDA allows the state to convert some of its increased rebate savings to NSA funds during the fiscal year to the extent the state plans to add new participants that year with these increased savings.  Some states worry, however, that if they convert funds in this manner but the number of additional participants who ultimately enroll that year falls below the state's estimate of the number of participants that would be added, the state will have committed an infraction — it will have converted funds that, at the end of the year, USDA rules it should not have converted because its participation level did not rise sufficiently to justify the added NSA expenditures.  Some states argue that the risk of converting funds and then having the conversion partially disallowed at the end of the fiscal year inhibits them from converting food funds to NSA funds if they secure a new cost containment contract that produces increased rebate savings.  (After a year or so, this problem essentially disappears, since the state's annual NSA grant is adjusted upward, as a result of USDA's annual calculations, to reflect the fact that the increased rebate savings enable the state to serve more participants.)

 What should be done about this matter?  We should start by recognizing that the basic principle Congress established in 1989 remains the right one — food grant funds should be converted to NSA funds to the extent — but only to the extent — that more NSA funds are needed to support more participants.  In our view, the basic flaw in the NAWD proposal is that it allows states to convert rebate funds to NSA funds even if they do not serve additional participants.

 We have not seen specific details of the proposal.  But we are concerned about an approach that would allow states already at full funding that receive an increase in their rebate savings to get a windfall of NSA dollars although they have no ability to add more participants.  We also are concerned that the proportion of federal WIC funds that go for purposes other than providing WIC foods to people in need would rise; correspondingly, the proportion of WIC funds used to provide WIC foods to women, infants, and children would decline.  If that occurred, it would likely make WIC somewhat less efficient in improving maternal and child health.  (Another issue is that the proposal would be inequitable to states like Mississippi and Vermont that do not receive rebates because they purchase formula directly from manufacturers.  They would have no rebates to convert to NSA funds.)

 What is needed is a way to address the legitimate problem that NAWD and a number of states have identified without going in the direction of the NAWD proposal.  The heart of the problem is that states that have recently received a new contract increasing their rebates feel they bear too high a risk if they convert funds.  If these states overestimate the number of additional participants they can serve in the first year or two of the new contract and consequently convert too much of the new rebate savings to NSA funds, they can be charged with unallowable expenditures of federal dollars.  We can and should reduce that risk to states.  There are ways to do so, and largely to hold states harmless if they fall short of a reasonable participation goal.

 We believe USDA should explore specific alternatives to accomplish this goal.  We have begun work ourselves to try to fashion such a middle-ground alternative.  There are a number of technical issues involved, and we do not have a specific proposal today.  We hope to have one in coming weeks.

 The bottom line here is that: 1) the current "automatic conversion" system works well over time; 2) but there can be problems in the first year or two after a state receives a new contract that increases its savings; 3) proposals under which states could convert a fixed percentage of rebate savings to NSA funds pose the risk of converting more than is needed to support increases in WIC participation (with the result that the total number of women, infants, and children served in WIC might have to be reduced unless Congress increased the WIC appropriation); and 4) there are equitable and less costly ways to address states' legitimate concerns.

 The one other NAWD proposal about which we would like to comment is a proposal to allow states to carry forward three percent of unspent food funds into the following year without those funds being recovered by USDA and reallocated among the states.  We disagree with this proposal.

 The proposal would move the program in the opposite direction from that chartered by the Appropriations Committees when they wrote a provision into the FY 1998 agriculture appropriations bill that effectively requires all unspent food funds to be recovered and reallocated.  By allowing states to retain three percent of their food grants if unspent, this proposal would increase the carry-over balances.  This proposal also is directly contrary to USDA's recommendations.

 In our view, this proposal would cause some misallocation of resources.  A state that is already at full funding and is receiving more WIC funds that it can use would get to keep a three percent float from year to year.  At the same time, states with considerable unmet need would receive smaller amounts of reallocated funds, since fewer unspent funds could be recovered by USDA and reallocated to states that need them.  The proportion of federal WIC funds actually expended each year to serve women and children would decline, while the amount of funds left unspent and carried over from year to year would rise.  We believe the Committee should follow the Administration's recommendations and the approach the Appropriations Committees have charted in this area.

 Administration Proposals

 Finally, we would like to comment briefly on several Administration proposals dealing with program integrity.  Strengthening program integrity is important and measures should be taken in this regard.  In so doing, Congress and the Administration need to make sure integrity measures are efficient — that is, that they don't require large new administrative expenditures out of proportion to the improvements they can produce — and that such measures do not impede eligible women and children, especially those in working poor families, from participating in WIC.

 The Administration offers four proposals here.  The most significant is a proposal to require documentation of income for all applicants (except those who show they participate in another means-tested program that has its own income documentation requirements).  Placing such a requirement in the law would represent a significant change.  No other school food or child nutrition program has such a documentation requirement.

 Our sense is that a documentation requirement would improve WIC program integrity without greatly increasing administrative costs and burdens.  We support this recommendation.  We also support USDA proposals to tighten up on vendors who have been found to have violated WIC or food stamp program rules.

 We do have some concern, however, regarding some of the details of two other USDA proposals.  One would require mothers to bring all WIC children and infants with them on each WIC certification and recertification visit.  This makes sense at the initial certification.  But we are concerned it could work a hardship on some single working mothers if each time their children are recertified, they have to leave work in the middle of the day, travel to one or more day care settings to collect their children, travel to the WIC clinic and possibly wait to be seen, travel back to the day care institutions, and then return to work.  Such a requirement may be unnecessary where the children are receiving health care from an agency other than the local WIC agency (or have recently been examined by the local WIC agency).  We need to be careful to encourage mothers to work and not to place obstacles in their path.

 Accordingly, we believe local WIC agencies should be entrusted with some flexibility here, especially with regard to working mothers whose children receive health care at some facility other than the local WIC agency.  The parents should be required to bring all children to the initial WIC certification.  But the local authorities should be allowed some flexibility to waive this requirement for recertification visits (as distinguished from the initial certification), in cases where they judge this would cause hardship and is unnecessary both for program integrity and for ensuring that children are receiving ongoing health care (such as in cases involving a working parent for whom this is not feasible and whose children receive health care from a doctor or other health agency).  Clinics with weekend or evening hours for working families would generally not need to grant such waivers.

 We also have some concerns about the proposal to require USDA to issue regulations setting forth verification requirements that state and local WIC agencies must follow.  Unlike documentation, income verification can be costly and labor-intensive.  There is no evidence at this time indicating it is needed in WIC.

 The one study on the extent to which WIC participants have income over the program's income limits found the percentage participating in error to be small, well below, for example, the percentage in the school lunch program.  Moreover, the study found that of those who were not eligible, many consisted of mothers and children who were fully eligible when they were certified for WIC but whose family income level rose above the WIC income limit sometime before the end of their WIC certification period.  These individuals would be removed from WIC at recertification, but they were technically ineligible during the final month or few months of their certification period, after their income climbed.  I mention this because income verification, which would occur at certification, would have no effect on this problem.

 USDA is now conducting a new study to determine the extent to which participants have incomes over the limit (the one existing study was conducted about 10 years ago) and what the factors that caused them to be certified for WIC are.  The results are due in 1999.  At the present time, verification requirements — which could entail large administrative costs and burdens — seem premature.

 To some extent, the Administration's proposal recognizes this.  It calls for regulations in this area rather than mandating a specific approach in statute.  But we would make two comments on this proposal.  First, the statute already affords USDA regulatory authority in this area, a new provision really isn't essential.  Second, if Congress wants to include such a provision, it should authorize USDA to issue regulations imposing verification requirements on state and local agencies rather than requiring USDA to do so.

 Suppose the study to be completed next year finds there is not a need for verification requirements on top of the documentation requirement USDA has proposed?  Suppose the findings indicate the combined effect of both types of requirements would be to place too heavy an administrative burden and excessive administrative costs on state and local agencies?  Should USDA still be required to issue such rules?

 The GAO has noted that information from the new study should help policymakers determine what changes are needed.  The GAO refrained even from proposing a documentation requirement until the study is completed and its results are known.  Authorizing rather than mandating verification requirements would give USDA the full regulatory authority it needs without prejudging the appropriate course of action before the evidence is available.
 

Conclusion

 The WIC program is one of the most effective government programs.  This Committee should take pride in the role it has placed, on a bipartisan basis, in nurturing, improving, and supporting this program over the years.  Those of us who follow this program look forward to the Committee continuing that tradition in this year's reauthorization process.