(l^ HEALTHY MEALS FOR HEALTHY
fw AMERICANS ACT OF 1 994
\Vi (Commodity Letter of Credit— CLOQ
i 4. AG 8/1:103-74
fealthy Heals for Healthy Anericans... ____^
JIING
BEFORE THE
SUBCOMMITTEE ON DEPARTMENT OPERATIONS
AND NUTRITION
OF THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRD CONGRESS
SECOND SESSION
ON
H.R. 8
JUNE 9, 1994
Serial No. 103-74
Printed for the use of the Committee on Agriculture
U.S. GOVERNMENT PRINTING OFFICE
82-893 WASHINGTON : 1994
For sale by the U.S. Government Printing Office
Superintendent of Documents. Congressional Sales Office, Washington. DC 20402
ISBN 0-16-045870-6
on or\o /-\ r\ a t
HEALTHY MEALS FOR HEALTHY
AMERICANS ACT OF 1994
(Commodity Letter of Credit— CLOQ
iT 4. AG 8/1:103-74
-lealthy Heals for Healthy Anericans. . . DT1,T/^,
BEFORE THE
SUBCOMMITTEE ON DEPARTMENT OPERATIONS
AND NUTRITION
OF THE
COMMITTEE ON AGRICULTURE
HOUSE OP REPRESENTATIVES
ONE HUNDRED THIRD CONGRESS
SECOND SESSION
ON
rl.R. 8
JUNE 9, 1994
Serial No. 103-74
Printed for the use of the Committee on Agriculture
U.S. GOVERNMENT PRINTING OFFICE
82-893 WASHINGTON : 1994
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-045870-6
COMMITTEE ON AGRICULTURE
E (KIKA) de
GEORGE E. BROWN, Jr., California,
Vice Chairman
CHARLIE ROSE, North Carolina
DAN GLICKMAN, Kansas
CHARLES W. STENHOLM, Texas
HAROLD L. VOLKMER, Missouri
TIMOTHY J. PENNY, Minnesota
TIM JOHNSON, South Dakota
BILL SARPALIUS, Texas
JILL L. LONG, Indiana
GARY A. CONDIT, California
COLLIN C. PETERSON, Minnesota
CALVIN M. DOOLEY, California
EVA M. CLAYTON, North Carolina
DAVID MINGE, Minnesota
EARL F. HILLIARD, Alabama
JAY INSLEE, Washington
THOMAS J. BARLOW III, Kentucky
EARL POMEROY, North Dakota
TIM HOLDEN, Pennsylvania
CYNTHIA A. McKINNEY, Georgia
SCOTTY BAESLER, Kentucky
KAREN L. THURMAN, Florida
SANFORD D. BISHOP, Jr., Georgia
BENNIE G. THOMPSON, Mississippi
SAM FARR, California
PAT WILLIAMS, Montana
BLANCHE M. LAMBERT, Arkansas
LA GARZA, Texas, Chairman
PAT ROBERTS, Kansas,
Ranking Minority Member
BILL EMERSON, Missouri
STEVE GUNDERSON, Wisconsin
TOM LEWIS, Florida
ROBERT F. (BOB) SMITH, Oregon
LARRY COMBEST, Texas
WAYNE ALLARD, Colorado
BILL BARRETT, Nebraska
JIM NUSSLE, Iowa
JOHN A. BOEHNER, Ohio
THOMAS W. EWING, Illinois
JOHN T. DOOLITTLE, California
JACK KINGSTON, Georgia
BOB GOODLATTE, Virginia
JAY DICKEY, Arkansas
RICHARD W. POMBO, California
CHARLES T. CANADY, Florida
NICK SMITH, Michigan
TERRY EVERETT, Alabama
FRANK D. LUCAS, Oklahoma
Professional Staff
Dianne Powell, Staff Director
Vernie Hubert, Chief Counsel and Legislative Director
Gary R. Mitchell, Minority Staff Director
James A. Davis, Press Secretary
Subcommittee on Department Operations and Nutrition
CHARLES W.
GEORGE E. BROWN, Jr., California,
Vice Chairman
BILL SARPALIUS, Texas
CALVIN M. DOOLEY, California
JAY INSLEE, Washington
DAN GLICKMAN, Kansas
CYNTHIA A. McKINNEY, Georgia
SANFORD D. BISHOP, Jr., Georgia
HAROLD L. VOLKMER, Missouri
EVA M. CLAYTON, North Carolina
TIM HOLDEN, Pennsylvania
CHARLIE ROSE, North Carolina
SAM FARR, California
TIM JOHNSON, South Dakota
EARL POMEROY, North Dakota
BLANCHE M. LAMBERT, Arkansas
STENHOLM, Texas, Chairman
ROBERT F. (BOB) SMITH, Oregon
BILL EMERSON, Missouri
STEVE GUNDERSON, Wisconsin
WAYNE ALLARD, Colorado
BILL BARRETT, Nebraska
JOHN A. BOEHNER, Ohio
THOMAS W. EWING, Illinois
JACK KINGSTON, Georgia
CHARLES T. CANADY, Florida
(ID
CONTENTS
Page
Stenholm, Hon. Charles W., a Representative in Congress from the State
of Texas, opening statement 1
Response to written question 25
Witnesses
Goodling, Hon. William F., a Representative in Congress from the State
of Pennsylvania 3
Prepared statement 52
Haas, Ellen, Assistant Secretary, Food and Consumer Services, U.S. Depart-
ment of Agriculture 12
Prepared statement 63
Letter of June 27, 1994 27
Holstein, Pat, director, food service, Lexington School District 3, Batesburg,
SC 41
Prepared statement 82
Hurt, Marilyn A., chair, public policy and legislative committee, American
School Food Service Association 35
Prepared statement 72
Miller, Catherine, president, American Commodity Distribution Association ... 37
Prepared statement 77
Pasco, Richard, vice president, government affairs, National Pork Producers
Council, on behalf of the Commodity Distribution Coalition 44
Prepared statement 86
Submitted Material
American Association of Classified School Employees, statement 93
Johnson, Elizabeth K., manager, food policy, National Cattlemen's Associa-
tion, statement 99
Jones, Jean Yavis, Specialist, Food and Agriculture Policy, Environment and
National Resources Division, Congressional Research Service, Library of
Congress, subject "Commodity donations to child nutrition programs" 101
(III)
HEALTHY MEALS FOR HEALTHY AMERICANS
ACT OF 1994
THURSDAY, JUNE 9, 1994
House of Representatives,
Subcommittee on Department
Operations and Nutrition,
Committee on Agriculture,
Washington, DC.
The subcommittee met, pursuant to call, at 2 p.m., in room 1300,
Longworth House Office Building, Hon. Charles W. Stenholm
(chairman of the subcommittee) presiding.
Present: Representatives Sarpalius, Dooley, Inslee, Volkmer,
Fair, Pomeroy, Gunderson, Ewing, and Canady.
Staff present: Julia M. Paradis, assistant counsel; Jan Rovecamp,
clerk; Anita R. Brown and Lynn Gallagher.
OPENING STATEMENT OF HON. CHARLES W. STENHOLM, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
Mr. Stenholm. The subcommittee will come to order.
Good afternoon, and welcome to this hearing on certain provi-
sions of H.R. 8 which are of great interest to this subcommittee. As
you all know, the Healthy Meals for Healthy Americans Act of
1994 was recently reported out of the Committee on Education and
Labor. It has been sequentially referred to the Committee on Agri-
culture. This important legislation will reauthorize the national
school lunch program and the child nutrition programs.
I commend Chairman Ford and subcommittee Chairman Dale
Kildee, and the other Members on the Committee of Education and
Labor for their hard work in crafting a bill, during a time of ex-
ceedingly scarce resources, that maintains and improves these vital
nutrition programs.
This afternoon we will review several provisions in the bill that
would expand the commodity letter of credit, or CLOC, provisions
of the national School Lunch Act and make the CLOC demonstra-
tion projects permanent. For those not familiar with the CLOC
projects, let me take a minute to explain them.
Over 15,000 school districts participate in USDA's national
school lunch program. These school districts receive cash subsidies
and agricultural commodities purchased by USDA under price sup-
port and surplus removal programs. Schools are entitled under the
national School Lunch Act to receive commodities equal in value to
14 cents per meal. These commodities are called "entitlement com-
modities." Additional commodities are distributed to schools when
(l)
such commodities are available. These commodities are called
"bonus commodities."
In 1980, the Congress enacted legislation which required USDA
to implement a 3-year demonstration project to test the feasibility
of replacing donated entitlement commodities with additional cash
payments or commodity letters of credit.
Twenty-nine school districts receive checks equivalent to the
value of the USDA entitlement commodities that they would other-
wise receive, and another 26 school districts receive commodity let-
ters of credit, instead of the entitlement commodities that they
would otherwise receive, to purchase specific commodities or prod-
ucts containing those commodities from local sources within a des-
ignated time period.
The authority for these demonstration projects has three times
been extended and will expire at the end of this fiscal year. H.R.
8, as reported by the Committee on Education and Labor, provides
three CLOC provisions. The first would make permanent the cur-
rent cash and CLOC demonstration sites.
The second provision would authorize one statewide CLOC dem-
onstration program in a State where 80 percent or more of the
school districts participating in the school lunch program elect to
participate in the statewide CLOC program.
The third provision would authorize the Secretary of Agriculture
to provide to schools a commodity letter of credit in an amount
equal to 10 percent of their commodity entitlement to be used to
purchase fresh fruits and vegetables.
The U.S. Department of Agriculture and agricultural commod-
ities producers have informed us that they oppose continuation and
expansion of the use of CLOC's. We look forward to hearing from
them this morning, or this afternoon.
We also look forward to hearing from Congressman Goodling,
who has long been a strong supporter of the CLOC provisions of
H.R. 8. And we are fortunate to have with us the food service direc-
tor from a CLOC site in South Carolina, and her testimony will de-
scribe for us how the CLOC system works for her school.
We have asked our witnesses to discuss not only the CLOC pro-
visions of H.R. 8, but also how well the CLOC mechanism achieves
the dual goals of the commodity distribution program in the na-
tional school lunch program. Those goals are to provide nutritious
food to the schools and to help stabilize agricultural markets. We
are equally interested in learning how well the commodity distribu-
tion program achieves these two goals.
As we try to resolve this controversial issue, let me make clear
my commitment to working with USDA, schools, and agricultural
producers in making the commodity distribution program as user
friendly for school food service directors as possible. Those of us at
the Committee on Agriculture obviously want this program to work
well for the agricultural community. But, we are equally committed
to making this program work well for schools.
I understand that significant improvements have been made in
the commodity distribution program since the Commodity Distribu-
tion Reform Act of 1987. If additional reforms are needed, I want
to know about them. And I will work to see that they are imple-
mented. Just as we are concerned that CLOC does not meet the
goal of stabilizing agricultural markets, we are also concerned if
the commodity distribution program does not meet the needs of
schools.
I hope that schools will feel free to discuss with the subcommit-
tee at any time any concerns they might have with the commodity
distribution program. I look forward to the testimony of our wit-
nesses on this important issue, and thank each you for taking time
to be with us today.
[H.R. 8 is held in the committee files.]
Mr. Stenholm. I call our first witness, the Honorable William F.
Goodling, a Member of Congress from Pennsylvania. Bill, welcome.
STATEMENT OF HON. WILLIAM F. GOODLING, A REPRESENTA-
TIVE IN CONGRESS FROM THE STATE OF PENNSYLVANIA
Mr. Goodling. Thank you, Mr. Chairman.
I would like to say that I will go a little more in depth than I
normally would in testimony because I think it is an issue that we
all need to know, if we are going to do what you just said in your
opening remarks, work to make sure that these programs work for
all people.
I preface that by saying that some years ago, I was coming from
Carlisle back to York and I stopped at Peters' Orchard. Mr. Peters
came out and said, you have to stop this CLOC — because he was
brainwashed from people in Washington — boy, we can't have that.
About 3 months later, I came by and bought a few more things
from him and he came out and he said, you know what just hap-
pened? Bermudian Springs just canceled our apple order because
they got a shipment in from Washington State. And I said, Mr. Pe-
ters, that is what I was trying to tell you before. We can remove
surpluses early on and leave the Department of Agriculture in total
control through CLOC.
I want to say up front that it is not my intention to try to replace
the current commodity distribution program. I understand the im-
portance of the program and I understand how important it was in
the past when we had a lot of surplus commodities. Fortunately,
some of the programs are now working, that you instituted, and so,
in many situations those commodities are not out there.
As many of you are aware, I was reared on a farm and I have
a great deal of respect for our Nation's farm community. I rep-
resent a district which depends heavily on agriculture, and I am
proud to say that the district I represented was represented by my
father who was a member of the Agriculture Committee here in DC
for many years.
However, as a former principal, teacher, school board president,
superintendent of schools, I also know firsthand the importance of
proper nutrition to a child's performance in school, and, as a result,
I strongly believe we need to ensure that there is a proper balance
between our need to remove surplus commodities from the market-
place and our need to provide schoolchildren with healthy, nutri-
tious meals which they will eat. Therefore, we need to ensure that
the current commodity system is well-received by the schools and
that the commodities which are provided to schools are acceptable
to the participating children.
As you probably are aware, at the present time only 46 percent —
I repeat, only 46 percent of paying children participate in the na-
tional school lunch program. To me, this is an indication that the
meals currently offered under the national school lunch program
must be improved so that they appeal to a larger number of chil-
dren. Part of the improvement in meals must be an improvement
in the types of commodities provided to the schools. For example,
students who have not been exposed to salmon, figs, dates, and so
on, may not eat them no matter how nutritious they are or how
they are used by the school food service personnel. Children tend
to consume what they have been exposed to in their homes and
many children have not had experience with some of the commod-
ities offered through the commodity distribution system.
I do recognize that efforts have been made over the past years
to improve the current commodity distribution system and to ad-
dress the problems which were behind the development of the origi-
nal cash/CLOC that Mr. Ford and I pushed for many years.
Let me indicate here, Mr. Chairman, that I also think that it was
our effort that helped to improve the commodity distribution pro-
gram. For 10 years before that, I sat in committee and listened to
all of these school food service people testify with the most horren-
dous stories you ever wanted to hear. We were always promised
that the commodity distribution system would be improved. How-
ever, those same people who testified also were pretty well brain-
washed and they said, but we can't do anything differently because
if you put cash or CLOC out there and they don't get appropriated,
then all of a sudden we won't have anything.
Well, you can't have it both ways. So I have to believe that the
CLOC/cash effort had something to do with your efforts to improve
the commodity distribution program.
I am here today, however, even though many of those earlier
problems continue to exist, in a spirit of cooperation. I would like
to see the current commodity program improved to the point where
we do not need the cash/CLOC alternative. And I am willing to
work with you toward such an end.
In the meantime, however, I would like to acquire your support
for the cash/CLOC provisions contained in H.R. 8.
First and foremost, there is the provision making the current
cash/CLOC sites permanent. As you will recall, cash/CLOC was de-
veloped at a time when there was a great deal of dissatisfaction
with the commodity distribution system. Some of those problems
included: High storage and transportation costs; receipt of commod-
ities which were in poor condition; arrived at the wrong time of the
school year; did not fit into the menu or meet the tastes of stu-
dents; and receipt of commodities which were in a form that re-
quired a lot of processing.
Under the commodity letter of credit — CLOC — I also say that the
Department has the best of both worlds. The school districts are
provided with commodity letters of credit which they use to buy
foods that contain specific types of commodities which the U.S. De-
partment of Agriculture distributes under the regular commodity
distribution program. They hold the key as to what it is these peo-
ple can buy locally with their commodity letter of credit. In other
words, those school districts participating in CLOC purchase locally
and in the form they prefer, the same commodities which USDA is
providing to schools through the commodity distribution program.
Now you have heard many times the argument will be, "Well, if
you don't keep a strong commodity distribution program, then we
can't distribute our commodities." I always laugh about that be-
cause here is Kansas spread all over the West, and they get cash,
but they also get their bonus commodities and have no problems
whatsoever distributing their bonus commodities all over the State
of Kansas.
Participants in the cash/CLOC program have the option of drop-
ping out of these alternative projects at any time. However, none
of the sites is currently interested in returning to the current sys-
tem until such time as their original concerns have been addressed.
They are not set up to participate in the current system and do not
have the storage space to accommodate the commodities they
would receive. Yet, every 2 to 4 years, they face the uncertainty of
what the next year will bring and the problem of incurring costs
related to returning to the current commodity distribution system.
Mr. Chairman, according to the participants in the cash/CLOC
option, there are numerous benefits to the option: First, the re-
moval of thousands of pounds of meat, vegetables, and fruits from
the marketplace at their convenience without any additional cost to
the taxpayer is one of the pluses of CLOC.
Second, a variety of menus, including those low in fat content —
and you are going to hear that over and over and over again from
Ms. Haas if she is not here today, she has been here before you
before, I am sure, because she has been before our committee — and
they can plan these without the interruption of unexpected com-
modity deliveries; the conversion of administrative cost savings to
additional menu options; ability to purchase commodities in a form
most preferable to children, including the ability to purchase the
commodities which reflect the regional, cultural, and religious food
preferences of students and that cuts down on plate waste.
Third, the increased ability to cut fat from the menu and serve
fresh fruits and vegetables.
Fourth, decreased reliance on canned fruits and vegetables.
Fifth, more effective operation of school kitchens due to the elimi-
nation of the necessity of dealing with commodity deliveries and
the time necessary to transport them from school to school; the
ability to serve a more diverse menu to students; the ability to sup-
port locally owned companies and State agriculture; increased stu-
dent participation; the ability of the district to control the type of
products they buy and delivery times during the year; reduced need
for large dry storage and freezer space; the ability to limit in-
creases in the cost of the school lunch and breakfast programs; and
the ability to receive adequate supplies of commodities to serve all
students and to purchase commodities which do not require special
processing or are labor intensive. This is just a small list of those
that we have received from people participating in the program.
I have actually heard from a large number of school food service
directors who are interested in becoming a cash/CLOC site. But at
this point, Mr. Chairman, I am not seeking an expansion of the
cash/CLOC sites. Rather, I just want to provide the current cash/
CLOC sites with peace of mind and assure them that they may
continue to operate alternative programs until such time as they
decide to drop out. In the meantime, I would like to work with you
to improve the current commodity program to the point where cur-
rent cash/CLOC sites would be more than willing to return to the
current system.
I am also interested in allowing all schools to use CLOC to in-
crease the number of fresh fruits and vegetables in the school meal
program and have included such a provision in H.R. 8.
Part of our effort to improve the nutritional content of the school
lunch and breakfast program will be to support the Department of
Agriculture's efforts to increase fresh fruits and vegetables served
to children participating in the school lunch program.
During hearings held by USDA prior to the development of their
new nutrition objectives for schools, they heard from witnesses who
requested an increase in fresh fruits and vegetables in the school
meal programs and requested increased purchasing flexibility for
local school food service authorities. In my view, the commodity let-
ter of credit will provide us with the best possible mechanism to
accomplish this goal until USDA is able to do so through the cur-
rent system and in a manner acceptable to schools. Through the
CLOC program, schools will be able to purchase fruits and vegeta-
bles locally, thus ensuring that they are fresh and in quantities
most easily utilized by the school food service personnel.
I would like to provide you with a few examples of why we cur-
rently need an alternative mechanism to increase fresh fruits and
vegetables in school lunch programs.
One school district was recently informed that their bonus com-
modities— fresh apples, pears, and grapefruits — would arrive at the
distributors the week before spring break. This would not have
happened had the school been able to purchase those commodities
with CLOC. The prospect of spoilage was great under these cir-
cumstances.
A school in California received fresh oranges, of which more than
50 percent had to be discarded due to molding.
A school district in Pennsylvania received cases of fresh pears, 40
pounds per case, and found that there was not one usable whole
fruit in any of the cases. This same school also received potatoes
which were unusable but for which they had to pay a delivery fee
and then dispose of them. And they still had them charged against
their allocation.
A school district in Nevada shared with me their experience with
fresh tomatoes under the current commodity system. In summary,
to use the amount of tomatoes this particular district was allocated
would have required them to serve one-half cup of fresh tomatoes
to every child every day for a 2- week period. Since this was not ac-
ceptable, they could not accept the tomatoes.
A school district in Pennsylvania received a shipment of apples
in 1994 which had no taste and most of which were discarded by
students. If we want to improve the nutrition quality of school
meals, we have to serve items students will eat.
I would like to point out that the legislation on fruits and vegeta-
bles is optional. Schools do not have to participate. In addition, the
provision in H.R. 8 only allows schools to use 10 percent of the 14
cents per meal in entitlement commodities to purchase fresh fruits
and vegetables. Since approximately 20 percent of the 14 cents per
meal is in the form of fruits and vegetables, this would only permit
schools to use one-half of the normal amount for fresh, allowing for
the receipt of additional fruits and vegetables in cans or in frozen
form.
Also, it would not be my intention that schools use a fresh fruit
and vegetable CLOC to replace funds they are already spending on
such commodities. Rather, the goal of the provision is to increase
the amount of fresh fruits and vegetables in the school lunch pro-
gram. This option would also be administered through the current
State commodity distribution system.
Finally, Mr. Chairman, H.R. 8 provides for a one-State CLOC
demonstration to answer for once and for all the question of wheth-
er or not CLOC can effectively remove commodities from the mar-
ketplace at a rate comparable to the current commodity distribu-
tion system. For years, we have heard, over and over again, this
criticism that the project is not large enough to provide the Depart-
ment with the definitive information as to the effectiveness of
CLOC. Yet, that same kind of resistance that goes back to the year
1492. The provision of H.R. 8 would only take effect if a State was
able to obtain approval of 80 percent of local school food service au-
thorities to undertake the demonstration project. It would be oper-
ated by the commodity distribution entity within the State and
would only be in effect for the authorization period of H.R. 8.
Mr. Chairman, I understand the Department of Agriculture is
opposed to any provisions dealing with the inclusion of cash/CLOC
in H.R. 8. And I would be disappointed if they weren't because
every one in the past has been opposed and every one in the future
will be opposed.
However, one of their arguments that their purchasing power is
greater may not be legitimate in some instances. I have heard from
school districts in some parts of the United States that while
USDA may purchase commodities at lower prices, they end up cost-
ing more once they have been processed into usable form — and
often have higher fat content than commodities purchased directly
from vendors.
Examples provided by the Michigan School Food Service Associa-
tion included breaded chicken nuggets, which were found to be 8
grams higher in fat content when purchased through the commod-
ity warehouse than through a vendor. And the Michigan School
Food Service Association has found that breakfast egg biscuits and
fruit pies cost more when purchased through the commodity ware-
house than through a vendor. Breakfast egg biscuits cost 33 cents
when purchased through the warehouse and 23 cents if they are
purchased from a vendor. Fruit pies cost 19 cents each when pur-
chased through a warehouse and 16 cents when purchased through
a vendor.
From Pennsylvania, I received the following examples: The end
cost of chicken nuggets using USDA commodities was $1.83 per
pound, while the cost from a vendor was $1.68 per pound. The cost
of turkey roll using USDA commodities was $1.42 per pound, while
the cost from a vendor was $1.37. The cost of wafer steak using
USDA commodities was $2.05 per pound, while the cost from a
vendor was $1.62 per pound. And finally the cost of hamburger pat-
8
ties was $1.90 per pound, while the cost from a vendor was $1.40.
In times when schools are closely watching their budgets, this cer-
tainly is another area which must be addressed in any commodity
reform proposal, because we have to keep them in the national
school lunch program. If they opt out, then, with the exception of
a couple of States, you don't have to feed free and reduced priced
meals, so the children get nothing at home and nothing at school.
In conclusion, Mr. Chairman — I guess I can skip this part be-
cause I was going to say there was a representative from the de-
partment of agriculture of Pennsylvania that was going to testify,
probably against, but I got a call from the Governor's office saying
that he was not down here testifying for the department of agri-
culture in Pennsylvania and they wanted to make sure that I un-
derstood that. And I understand since, maybe, they pulled him. I
hope it doesn't jeopardize his job in any way, shape, or form be-
cause I had nothing to do with it whatsoever.
As I indicated earlier, I want the system to help both school chil-
dren and the agricultural community. However, as you can see,
there are some problems that we have to work on. And I think the
CLOC amendments that we have for you are good amendments.
Let me just mention one comment from a school food service di-
rector from the State of Washington. The question must be asked
that if continued improvement is made by emulating the private
sector distribution system, why duplicate the efforts via the public
sector? Allowing local school districts the opportunity to participate
in the CLOC program allows for faster, fresher, and local pur-
chases to be made using existing channels of providing food to our
children.
In an era of increasing public scrutiny into the doings of our Fed-
eral and State bureaucracies, this type of cost reduction would be
well received. And I have two people here, Mr. Chairman, that if
you want any input directly from those who are involved in the
programs, I would like them to stand.
If you have any questions that you would like to ask, they are
responsible for some pretty large programs at the present time and
are operating under the suggestions that Mr. Ford and I have
made over the years.
Thank you. I am sorry I took so long.
[The prepared statement of Mr. Goodling appears at the conclu-
sion of the hearing.]
Mr. Stenholm. Thank you very much, Bill, for your testimony.
I have just a few questions that I would like to ask you to kind
of clarify in my own mind some points.
I am never opposed to trying something new or different and
when CLOC was tried in 1980 it was an experiment to see if we
could do a better job of feeding kids, is the way I would put it. We
have tried it. If it is working, then the natural supposition would
be why not convert the entire program over to CLOC? If it is a de-
sirable program, and it is the direction that we ought to go, why
limit it to 29 or 26 schools? Why not all 15,000? That is a legiti-
mate question I think to be asked.
And then you have to start asking some other questions, and it
is my understanding that the cost of administering CLOC in these
demonstration projects is a little bit higher than the commodity
distribution program. And it is also — and I want you to clarify this,
because you stated in your testimony that in some cases the prod-
ucts end up being more expensive through USDA purchasing pro-
grams than where individuals are able to use the benefits of the
CLOC or individual purchase. But it is my understanding that in
the overwhelming majority of cases, USDA can buy products much
cheaper and therefore it is true that in some instances it would be
cheaper to do it in a manner that you have suggested and you be-
lieve. But in most instances across the board for 15,000 schools, it
would not be cheaper.
For example, it seems to me in Pennsylvania, that if there was
a bumper apple crop, that USDA could come in and benefit your
apple producers by buying larger volumes than perhaps the school
districts of the immediate area of the apple growers in Pennsylva-
nia. I think that the record will show that that has been true. Com-
ment on that, if you would, Bill.
Mr. Goodling. Let me start with the first comment that you
made. You have to keep in mind, and I am sure that you do, that
change is painful. Change is painful for anybody. And as I indi-
cated in my testimony, even though all of the school food service
people would sit there — and Mr. Matz would be there with them
to encourage them — and would complain, complain, complain, at
the end, they would not want to change because they are fearful
of change.
They think, well, somehow or other if you are in the appropria-
tion business you are going to cut us off and then we don't get any-
thing. Then all of a sudden you had few commodities to send them
and they realized maybe that was not a legitimate argument.
Also, you have to understand that in the State of Pennsylvania
at one time, for instance, the head of the school food service's hus-
band was also running the commodity distribution program in
Pennsylvania, and they both had a reason why they would want to
continue the current system, I would think.
Cost. You have to look at the end of this whole process when you
talk about cost. If you send us in cheap fruit that is already spoiled
or you send it at a time that we can't use it, there is a cost at-
tached. We used to get turkey after turkey after turkey at the end
of May. Great. We didn't have any freezer to freeze this stuff. We
had to find and pay for a place to freeze it and then we had to
bring it out and have it processed. So you have to look at the end
of that line. You can't just say, well, we can purchase it in a mass
purchase in Washington. However, look at the cost to the school
district to send it out to be reprocessed, to have it stored, and the
waste that is involved, and the amount that is thrown away. So
when you look at the end picture, I think you get a different pic-
ture.
I mentioned many different products that they were able to pur-
chase, just a sampling. Apples in Pennsylvania, I was glad you
brought that up because that has changed I admit to the better.
But, as a superintendent I also had to unload these commodities
that came because, of course, the truck driver was union and they
were not about to unload them. I was not about to call my mainte-
nance staff from some school district in order to unload them. And
so I would unload them and nothing made me more angry than un-
10
loading box after box of Washington State apples at the same time
we had the largest apple producing area. We are No. 1, 2, and 4
in the State of Pennsylvania in the 19th Congressional District. We
can supply all the apples and all the peaches and all the cherries
that anybody needs in Pennsylvania without the competition from
Virginia and a few of the other States.
So, I think just look at the cost at the end, not just at the cost
of what they will give you, and say, well, we can purchase it for
so-and-so. Is it used? Is it usable? Must you reprocess it? Must you
store it? How much is thrown away at the end of that session?
And again, let me just remind you that only 40-some percent of
paying customers participate in the national school lunch program.
That has to tell us something. And we don't want that to decrease.
We want that to increase, because I always have to fight my side
of the aisle every time this reauthorization comes because they
want to cut out any reimbursement, quote, to the paying customer.
Well, then you have destroyed the national school lunch program
and you have no place to distribute — well, you do, you have senior
citizen centers and so on.
Mr. STENHOLM. I wish I would have had a superintendent like
you when I was teaching vo-ag because, every time we had com-
modities to unload, it became the ag teacher's responsibility, not
the superintendent.
Mr. Goodling. In my time, I couldn't afford the ag teachers. The
poorly paid superintendent did it because it got unloaded at the su-
perintendent's building.
Mr. Stenholm. Just another observation, then I will recognize
the others for questions. But to those that you mentioned are con-
cerned about ending the appropriation, I think that is more than
just a passing concern because it wasn't so long ago that we had
revenue sharing and then it became apparent that we did not have
revenue to share.
And I think the school lunchroom personnel and others are very
perceptive in their concerns about a permanent CLOC for all
15,000 and what might happen versus a new and improved and
even better commodity distribution program. I think that is a valid
concern, one that can be debated on either side of it, but I think
it is something that needs to be kept in the back of our minds.
Mr. Goodling. Well, let me respond to that. I agree, and as I
said in my testimony, I am not working toward 15,000 CLOC's. I
am working for permanent now until we get the whole commodity
distribution system set up in such a manner that there is no need
and no necessity for these kind of programs.
Mr. Stenholm. Mr. Gunderson.
Mr. Gunderson. Thank you, Mr. Chairman.
Mr. Goodling may have already answered this question, but on
page 8 of your testimony, you say a school district in Pennsylvania
received a shipment of apples which had no taste, then were dis-
carded by the students.
Do you know if those were Pennsylvania apples?
Mr. Goodling. No, unfortunately the apples had been shipped
in. It is better than it once was. They used to all come from Wash-
ington State and places of that nature. They now do it a little clos-
11
er like Virginia and so on, but they, unfortunately, were not Good-
ling apples, and
Mr. Gunderson. They weren't Wisconsin apples either?
Mr. GOODLING. They were tasteless. I will say, no, they weren't
Wisconsin apples, just to kind of secure your support.
Mr. Gunderson. We grow apples in my district, sir. We also
produce cheese.
Mr. Goodling. You also produce a lot of milk.
Mr. Gunderson. The serious question I have is that you have
two provisions, you have two major provisions in CLOC. One of
those is the permanent extension of the CLOC sites as they exist
today and the other is the statewide pilot project. I hear some peo-
ple suggest that the compromise is that we agree to the permanent
extension of the sites but that we do not do a statewide demonstra-
tion.
How would you respond to that proposal?
Mr. Goodling. One of the major reasons for the statewide dem-
onstration was to get beyond this argument that we always hear
from the people who oppose it that we don't really have enough in-
volved to really tell how well it works or doesn't work, and I
thought this is one way during this 5-year period or whatever the
reauthorization is to find out whether it can work on a statewide
basis.
Mr. Gunderson. Do you think a State like Pennsylvania would
attempt that?
Mr. Goodling. I would imagine that there are probably 80 per-
cent in the State of Pennsylvania that would want to move in that
direction.
Mr. Gunderson. Thank you.
Thank you, Mr. Chairman.
Mr. Goodling. But I didn't put it in there to be self-serving.
Mr. Gunderson. Do you believe that there is at least one State
or more that would like to do a pilot project in this area?
Mr. Goodling. I do believe, and I don't believe Marshall could
convince them not to do it.
Mr. Gunderson. He is on your right, second row back.
Mr. Goodling. But he gets paid well, he can take it.
Mr. Stenholm. Mr. Fair.
Mr. Farr. Thank you, Mr. Chairman.
I came in a little bit late and didn't hear all of the testimony,
but one of the things that I was very interested in is whether any
analysis has been done. Do we have any report on the cost of this
program? If we are going to consider cutbacks or elimination of in-
creases, do we really know what the lunch program is costing?
We are appropriating a total of $5 billion in this arena — not the
lunch program, but the CLOC program, and I am not sure, I have
never seen any figures on what the percentage of the total amount
we are talking about is.
Mr. Goodling. To do the CLOC and the cash?
Mr. Farr. Yes.
Mr. Goodling. You are going to hear from the Department that
it is more costly to do CLOC than it is to do their normal program.
What I pointed out to the chairman is what you have to consider
is the end product. Is it more costly if you consider the waste? Is
12
it more costly if you consider the reprocessing? Is it more costly if
you consider the storage expense to the local district and to the
State?
You have to take all that into consideration or you really don't
have a good answer to your question. But I think the testimony you
will hear will be based simply on apples and oranges rather than
the end product.
Mr. Farr. I have been very supportive of the local school dis-
tricts. I think what we are beginning to see, it has taken a long
time, but if you look at what we are trying to do in welfare reform,
in crime reform, we are looking at the totality of the family and
the community and trying to instead of just serve those as tradi-
tional categories where if you fit into a category, you qualify, trying
to bring some real holistic approach to the environment which cre-
ates these needs — nutrition, health care, safety in the community
and so on.
I think that the more flexible tools that you allow a local commu-
nity to have, as long as they are communicating with other Federal
entities, that we will really get to the heart of this solution rather
than just trying to resolve the problem from a standpoint that we
have excess commodities here that we have to distribute somehow.
So I am very supportive of the ability for this local, sort of local
control. It allows, I think, a greater flexibility and I think, in the
long run, that flexibility is going to enhance problem solving.
Mr. Goodling. That is, I think CLOC does both. It gives the De-
partment the right to determine what it is and they do it locally,
and I think that is what makes it a good program.
Mr. Farr. I agree.
Mr. Stenholm. We have 4 minutes to go vote, Mr. Goodling and
Mr. Farr. So Bill, thank you very much. We appreciate your inter-
est and dedication to this issue.
Mr. Goodling. Thank you for the indulgence.
Mr. Stenholm. We look forward to working with you.
Mr. GOODLING. I think you understand I feel very strongly about
this issue.
Mr. Stenholm. I sort of gathered that, Bill.
We call the next witness, the Honorable Ellen Haas, Assistant
Secretary for Food and Consumer Services.
STATEMENT OF ELLEN HAAS, ASSISTANT SECRETARY, FOOD
AND CONSUMER SERVICES, U.S. DEPARTMENT OF AGRI-
CULTURE, ACCOMPANIED BY KENNETH C. CLAYTON, ACT-
ING DEPUTY ASSISTANT SECRETARY, MARKETING AND IN-
SPECTION SERVICE; GEORGE A. BRALEY, ASSOCIATE ADMIN-
ISTRATOR, FOOD AND NUTRITION SERVICE; AND VICKI J.
HICKS, ASSISTANT DEPUTY ADMINISTRATOR, COMMODITY
OPERATIONS, AGRICULTURAL STABHJZATION AND CON-
SERVATION SERVICE
Ms. Haas. Thank you very much, Mr. Chairman. If I can, I
would like to summarize my statement and include it in the record.
Mr. Sarpalius [assuming chair]. Without objection.
Ms. Haas. We are delighted to be here today to discuss USDA's
vision for the future of the Nation's school meal programs and how
13
the commodity programs play an important role in advancing our
goals for healthy school meals.
Just yesterday, the Department announced a comprehensive, in-
tegrated four-point framework for action to fundamentally update
and continuously improve our school meals. Central to this initia-
tive is maintaining the integrity of the commodity program, while
making needed improvements. Our school meals initiative has one
simple goal: Healthy children.
President Harry Truman established the national school lunch
program back in 1946 in response to young men who wanted to be
soldiers during World War II, but were not able to get in because
they suffered from malnutrition. The program was defined then as
"a measure of national security, to safeguard the health and well-
being of the Nation's children and to encourage the domestic con-
sumption of nutritious agricultural commodities." The mandate has
not changed, but the science of nutrition has. Our programs have
absolutely not kept up.
With our school meals initiative for healthy children, we are up-
dating the nutrition standards in our school meals program to meet
health objectives. Our four-point program includes proposed regu-
latory changes and departmental actions which Secretary Espy an-
nounced yesterday.
The first ingredient in our recipe for change is eating for health.
The nutrition standards will be updated to include the dietary
guidelines for Americans by the year 1998. However, it is impor-
tant to note that schools will be able, once we have a final rule,
to make those updates of nutrition standards to meet the dietary
guidelines, and we expect the majority of the schools will do that.
The second ingredient is: Making food choices. We will introduce
new ways to appeal to children's taste and promote their health.
If the food doesn't taste good, if it doesn't look good, kids aren't
going to eat it. And it is not going to do them any good. So we need
to embark on a major nutrition education initiative as well as
training and technical assistance.
Our third ingredient is: Maximizing resources. That means we
need to marshal our available resources and strengthen partner-
ships with State and local cooperators. This is the example we will
use — the bounty of American agriculture — and we will improve the
nutritional profile of commodities, working together with our part-
ners in AMS and ASCS.
The fourth component is: Managing for the future. We will re-
duce paperwork burdens by using technology, streamlining admin-
istrative procedures, and emphasizing flexibility.
Hearing Congressman Fair a moment ago talking about inte-
grated holistic approaches, that is exactly the kind of approach that
we are taking in this initiative. We are using all of the components
to get to our goal of healthy children.
In the national school lunch program, federally donated commod-
ities represent about 20 percent of the foods that are purchased.
Every day in every school we serve across the country we are pro-
viding commodities when we serve 25 million students in more
than 92,000 schools. That is a cooperative effort between the pro-
ducer, USDA, and school food authorities.
82-893 0-94-2
14
As we change our school meals to promote the health of children,
the integrity and continued improvement of our commodity pro-
grams is central to achieving our goals. The Department, therefore,
feels that the reauthorization or expansion of CLOC and the dem-
onstration projects that have been ongoing is unnecessary at this
time, not just because it costs less to maintain the commodity pro-
gram, but most importantly because we are improving the commod-
ity program in order for it to meet the health needs of children
while supporting agriculture.
Through our school meals initiative for healthy children, we have
taken important steps to improve the commodities. I would like to
share those with you. Working together with the agencies that I
have talked about — the Agricultural Marketing Service and the Ag-
ricultural Stabilization and Conservation Service — who are joining
me here today, we have recently formed a commodity improvement
council.
The council will promote the health of schoolchildren by improv-
ing the nutritional profile of USDA commodity offerings, while
maintaining the Department's mandated support of domestic agri-
cultural commodities and producers. The council will also enhance
coordination among the three agencies within USDA responsible
for obtaining and using these commodities. We are committed to a
systematic, comprehensive review of current commodity product
specifications.
This is a time of continuous improvement, and it is important
that we meet our dual objectives. Also, by encouraging regional and
seasonal purchases, we will promote local agricultural production
and forge new links with local farmers.
And I am especially pleased to say that, as part of our new
healthy meals initiative, we will be providing nutrition labeling on
our commodities and institutional packages that go to schools. This
information will provide needed tools for food service personnel as
they plan more healthful menus.
Beyond those specifics proposed in our School Meals Initiative for
Healthy Children, the Department has already taken a whole se-
ries of steps to improve the nutritional profile. For example, bulk
ground beef is currently available with an average fat content of
19 percent. That is compared with the commercially available prod-
uct which averages about 30 percent fat. Ground beef patties with
a fat content of 10 percent are also being offered to schools.
As this committee knows, Mr. Chairman, last year the Depart-
ment doubled the amount of fresh fruits and vegetables offered to
schools along with increasing the variety available. Let me say that
the children are loving that.
Just today, I joined Secretary Shalala and Secretary Riley at a
school here in Washington, DC, and when you ask the kids what
their favorite food is after pizza, they will name you every fruit and
vegetable that they want on the menu. And, there is a lot of enthu-
siasm for the changes that we are making.
Currently, the Department is testing low-fat mozzarella cheese
with a 7 and 10 percent fat content as compared with a 20 and 25
percent fat in regular mozzarella. That is going to make a big dif-
ference in the pizzas that we are serving so that they are healthy
pizzas with the lower fat cheese. Reduced fat salad dressing is an-
15
other example of how we are testing new ways of reducing the fat
in our commodities, and preliminary results are being analyzed.
Using the Department's purchasing power, we believe that we
can encourage the market to develop new products that will pro-
vide healthier food to schools. New products can be available soon-
er, and potentially at lower cost to consumers because of the De-
partment's buying power.
In the letter that the chairman sent to the Department, it was
requested that we explain our views on the commodity letter of
credit provisions of H.R. 8. These provisions extend and greatly ex-
pand the program.
Because of the many improvements that we have made and are
continuing to make in the commodities program and the commod-
ities that are made available to schools, there is no reason to ex-
tend the CLOC program. Indeed, it is important that we preserve
the integrity of these commodity programs. I think it is important,
too, to recognize that it is because of this continuous improvement
of the commodities program that it is central to why we are oppos-
ing the CLOC expansion.
The CLOC pilot program began in response to complaints in the
1970's that the commodity system was not keeping pace with the
needs of the school lunch program. CLOC funds were diverted from
the funds available under section 32.
One of the primary goals of the 1949 act and section 32 commod-
ity programs is to support the price of agricultural commodities by
means of price support operations and removal of surplus commod-
ities. The positive market effect of these commodity programs is
most important to retain. The original CLOC evaluation dem-
onstrated that the food value of the commodities offered by the De-
partment was worth 2 to 3 cents more per meal than the food pur-
chased locally with CLOC funds, in part because schools purchased
more highly processed items with their CLOC vouchers.
Also very important to the Department is the domestic origin of
food purchases, a central guiding principle of these commodity pur-
chase programs. When USD A supports the price of U.S. agricul-
tural commodities under its price support and surplus removal op-
erations, it acquires commodities directly from American producers
and processors and can ensure that the end product is a domestic
agricultural product. Both GAO and USDA found there is no assur-
ance in the CLOC program.
We have run the CLOC pilot projects for nearly 14 years in 25
of the nearly 20,000 school districts in the United States. During
that time, we have conducted two evaluations of the system, and
the pilot programs have been extended six times through legisla-
tive action. The Department has spent in excess of $8 million to ad-
minister and evaluate the projects in that time.
H.R. 8, which was recently reported by the House Committee on
Education and Labor, provides for permanent reauthorization of
the CLOC pilot/demonstration projects. We see no additional infor-
mation being gained from the current pilot systems, and believe
that extending them will continue the administrative costs borne
by USDA to administer the projects without any additional benefits
to our agricultural producers.
16
Second, H.R. 8, as reported, would add a statewide demonstra-
tion project in a State where at least 80 percent of the school food
authorities agree to participate. A statewide demonstration has not
been attempted previously, but implications for State administra-
tion have been addressed in previous studies.
It is unlikely that a one-State study would be effective at yield-
ing results that could be extrapolated for nationwide policy rec-
ommendations. In addition, start-up and implementation costs
would be considerable, and funding for these costs are not specifi-
cally authorized by the bill.
Finally, H.R. 8 allows all schools to use CLOC for 10 percent of
their entitlement commodities for the purchase of fresh produce.
This provision would allow for a nationwide optional CLOC system
that would be a substantial disruption to the current administra-
tion of the commodity programs, and it is not clear that the provi-
sion would accomplish its goal.
The amount of funds proposed to be set aside for new CLOC's
amounts to about 2 percent of total food acquisitions. The most re-
cent data on this topic indicates that fresh produce acquisitions
amount to about 4 percent of all food served. If school food authori-
ties are given such a letter of credit at the beginning of the school
year to purchase any fresh fruit or vegetables, the letters of credit
would likely displace local funds used to purchase fresh foods rath-
er than increasing fresh offerings.
The paperwork to administer such a system would be substan-
tial. At the same time, a nationwide optional CLOC system would
produce substantial disruption and administrative complications
and paperwork. Dual systems of administration would be needed,
but it would not be possible to determine with any certainty how
much food the Department should buy, and how much would be
purchased through CLOC.
In conclusion, I believe that, through all our efforts, the Depart-
ment is better suited than school systems to align the twin objec-
tives of promoting nutrition and market stabilization.
Finally, let me say that we now face a historic challenge to im-
prove our school meals program. The Department under Secretary
Espy's leadership is responding to that challenge with our School
Meals Initiative for Healthy Children. As we make these changes,
we must also take our commodity programs into the next century.
By preserving the viability of our commodity programs, we have
the opportunity to promote the health of children and simulta-
neously benefit the American farmer. We are committed to doing
both.
I thank you very much, and would be happy to take your ques-
tions.
[The prepared statement of Ms. Haas appears at the conclusion
of the hearing.]
Mr. STENHOLM [resuming chair]. Thank you very much.
Ellen, you have talked already to the additional cost to the tax-
payer regarding a CLOC and a CLOC option, et cetera. I want to
direct my questions to what the criticisms are.
You heard Mr. Goodling talking about the fresh fruits arriving
in an inedible fashion. When we hear the other testimony before
this subcommittee, we will hear complaints that USDA-provided
17
cheese often stubbornly resists melting. It must be Wisconsin
cheese. Members in Portland, Oregon, refuse USDA pasta outright
because it is not of sufficient quality to be cooked and chilled.
USDA often sends commodities which are inappropriate for school-
children.
In addition to the poor quality of many USDA commodities, some
items are more expensive than similar items available locally. I
know you are interested in increasing the amounts of fruits and
vegetables in our diets, as we are. We keep hearing about the com-
plaints about it.
My question here is: Any suggestions as to how we can do a bet-
ter job?
Ms. Haas. Well, you are right, Mr. Chairman, we do share the
objective of healthier children through meeting the dietary guide-
lines, and by that, it means that we need to have kids eating more
fresh fruits and vegetables. One of the mechanisms that we think
is going to be very useful within the Department is to get the three
agencies together to really deal with the commodity program and
how we can improve it.
There have been isolated criticisms, and I think we have acted
on a lot of those criticisms in the past and are continuing to about
the problems. We intend to stay on top of that because, if we keep
the commodity program as a viable part of the changes that we are
making, then we want to make sure that the product we are pro-
viding to the schools is of the utmost quality, and I think that the
changes that we are making in lowering the fat in cheeses and
other dairy products and beef products and encouraging more fresh
fruits and vegetables all go toward that end.
Mr. Stenholm. I am going to insert a statement in the record
from the National Cattlemen's Association highly supportive of the
commodity distribution program and pointing out at this point in
time, with low beef prices, this is an excellent time for USDA to
be buying larger volumes of beef. This would be supportive of the
cattle industry while at the same time providing the beef for the
remainder of the school year or portions thereof.
Through the commodity program, you can buy this when it is
cheap which benefits all of the parties. We hear a lot of support
for this program for that reason. But none of us want to provide
commodities that are inedible. That doesn't make sense. I have
shared this with you and I will share it for the record.
[The prepared statement of Ms. Johnson appears at the conclu-
sion of the hearing.]
Mr. Stenholm. My local school superintendent here several
years ago came to me and said, "We really appreciate the commod-
ity program, we really appreciate the vegetable oils that you have
been sending us, but you sent us so much, the only thing we could
do with it was coat our parking lot."
Well, these are the kind of horror stories that we have heard in
the past, but we are doing a better job today, no question about
that, and we must do an even better job.
Ms. Haas. One of the problems, Congressman Stenholm, has
been how many of the school food service personnel could be helped
to learn how to use commodities in ways that taste good and ap-
18
peal to children. For that reason, central to our whole initiative is
nutrition education training and technical assistance.
We have encouraged farmers and chefs and others to come into
the program so that we can find creative ways and creative recipes
to use commodities in a way that children enjoy and their parents
approve what they are eating. I think that this is all central to the
changing vision we have for this program. I think we are trying to
give it much more vitality and bringing it into the 21st century.
Mr. Stenholm. No other questions at this time.
Mr. Gunderson.
Mr. Gunderson. Madam Secretary, I want a clarification. Did
you call these people who make school lunches chefs?
Ms. Haas. No, I did not. I said we are assisting food service per-
sonnel and providing training in how to use commodities.
Mr. Gunderson. You said bringing in the chefs.
Ms. Haas. Bringing in chefs to help them. What we are doing,
Congressman Gunderson, is trying to have a training program so
that we can help schools provide healthier menus and food that
tastes good and looks good. We are bringing in chefs to help in that
undertaking.
Mr. Gunderson. The reason I brought that up is my ongoing ar-
gument that we are so concerned about what goes into these school
lunches that we forget the fact that 55 percent of our students
today don't participate in the school lunch program, and I don't
hear anybody ever complaining about that fact.
That bothers me greatly because, until we get meals that kids
like to eat, it doesn't matter how good, quote, unquote, the meal
is health wise, if they decide to consume a doughnut and a can of
Coke instead.
Ms. Haas. I couldn't agree with you more.
Mr. Gunderson. But we need some help on that because you
should make that point No. 1 of your four points.
Ms. Haas. Well, it is No. 2. If food doesn't taste good and look
good, kids aren't going to eat it. So taste is an important compo-
nent of our whole initiative as well as nutrition education which
really is combining all of these messages to kids in a way that they
understand.
Mr. Gunderson. What if we had a dual agenda, one which was,
quote, unquote, to improve the health status of the school lunch
but, second, to increase participation by 5 percent a year?
Ms. Haas. That is the goal.
Mr. Gunderson. I have never seen it anywhere.
Ms. HAAS. Well, you are hearing it from me today.
Mr. Gunderson. Good. I have another question.
About 2 weeks ago, I wrote the Secretary. As you know, we have
experienced in the last 2 months the third largest drop in milk
prices in history, and one of the steps we were able to take under
then-Secretary Madigan when this occurred in 1980 was that the
Department of Agriculture agreed to make advance purchases of
the dairy commodities for the upcoming school year. It would be ex-
tremely helpful to the dairy industry if we could get a similar com-
mitment and action from this administration.
Do you have any idea what the status of that request is?
19
Ms. Haas. It is under review, and certainly we understand the
situation both in dairy prices and beef prices, and we are looking
at those purchases very closely.
Mr. Gunderson. When do you think we can anticipate a re-
sponse?
Ms. Haas. We will try and be as prompt as we possibly can.
Mr. Gunderson. Like tomorrow? Next week?
Ms. Haas. It is under review and certainly we understand the
sensitivity of timing.
Mr. Gunderson. I would encourage you strongly, as soon as pos-
sible, to get us some help on that, very frankly.
Ms. Haas. Sure.
Mr. Gunderson. Let me focus on the dietary guidelines that are
announced. The first question in reference to the dietary guidelines
is whether or not USDA will eliminate the meal pattern that re-
quires schools to offer children a serving of meat, two servings of
fruits or vegetables and one serving of bread and milk.
Ms. Haas. As parts of our initiative in the proposed regulations
that will be published in the Federal Register tomorrow, we are re-
placing the current meal pattern which has been very rigid and
very restrictive and had problems for certain foods like yogurt
which didn't fit anywhere in the meal pattern, replacing that with
a new menu system and an assisted menu system that would give
us the kind of flexibility for schools to meet the dietary guidelines.
It is easy to use, it is easy to understand, and it is something that
is going to help all of us make the changes that we need for
healthier children.
Mr. Gunderson. Have you any analysis at this point in time of
what the impact of the new meal plan or dietary guidelines will be
on various commodities such as meat, such as cheese, et cetera?
Ms. Haas. As a part of the overall commercial market, the school
lunch program represents an infinitesimal part. It is not to say it
is not important. It is about 1 or 2 percent for both dairy and beef
products of the overall commercial market. That in itself is impor-
tant.
If we were to make the changes to meet the dietary guidelines,
you have to recognize that the schools would then have the flexibil-
ity. We are not going to mandate what kind of meal they have in
that school on a given day, so the schools have great variety.
When you were voting, I mentioned the example of pizza. You
could serve pizza with cheese on one day that is quite high in fat
and another day you might have skim mozzarella cheese, and that
would meet the dietary guidelines. You would still be using cheese
and you would still be meeting the dietary guidelines.
So the price differential there in any kind of economic impact
would have a range. It could be zero, and this was in our impact
statement that was done for the proposed rule. It could be any-
where from zero to about 7 cents per hundredweight for dairy.
Mr. Gunderson. We could have a 70 cent per hundredweight?
Ms. Haas. Seven.
Mr. Gunderson. A 7 cent per hundredweight decrease?
Ms. Haas. It could if it was very extreme. The point is most like-
ly the market has already responded because the market is provid-
20
ing low fat products, so there should be minimal if any kind of
price impact.
Mr. Gunderson. Will we be required or will it be necessary for
us to get a CBO cost estimate of what the impact of these regula-
tions would be? Here is why I ask the question because, as you re-
call, over in Education and Labor when we were discussing the
food-milk components, the reasons that the advocates could not
have an overall elimination of whole milk is it would have cost the
program $100 million and they couldn't come up with $100 million
to pay for that.
If we were to provide CBO with your new dietary guidelines or
the regulations tomorrow and they were to look at that, what is
your estimate of what they would project would be the cost of the
school lunch program on, say, the meat, cheese, dairy products, et
cetera?
Ms. Haas. The important thing is that there is such a range be-
cause, as we were talking earlier when you were talking about
taste, preparation is also very important. If you are reducing fat,
if you move away from deep fat frying and you move to roasting,
you are cutting a lot of the fat, so there is no displacement.
The regulations currently don't require a regulatory change,
don't require a CBO analysis, but the careful analysis that we did
as the impact statement behind it showed that there would be very
minimal impact at all on price or displacement.
Mr. Gunderson. I understand you don't have to get a CBO anal-
ysis to move regulation.
Ms. Haas. Right.
Mr. Gunderson. I am asking the question, if we take those regu-
lations and ask CBO to recalculate the baseline accordingly, what
is the impact of those regulations on the overall cost of the school
lunch program?
Ms. Haas. That was also done in the analysis of the prepared
rule, and there was no cost increase in the school lunch program.
Mr. Braley. Mr. Gunderson, we compared the meals that are
currently served, typical school lunches that are served now and
made minimal modifications to those menus to make them meet
the dietary guidelines and to see what the impact would be on food
costs.
The analysis we did indicated that menus which would look very
similar to ones today could be served in the future to meet the die-
tary guidelines and not increase the cost, the food cost to local food
service operators. The other thing we didn't do is an in-depth anal-
ysis beyond food costs, but the labor costs and other costs didn't ap-
pear to be shifted by this change either. So we were comfortable
that the new menus can be served within the current reimburse-
ment scheme.
Mr. Gunderson. I don't know that we are communicating here.
In the sense that the reality of eliminating the whole milk was not
that you increased the cost of school lunch, for example. The reality
of eliminating the whole milk provision would have been that the
cost of the dairy program would have gone up $100 million, and
under the PAYGO requirements of the budget, we then would have
had to come up with the money elsewhere to pay for that. That is
my question.
21
Under your new dietary guidelines, is there a projected impact
on other commodity programs that we are going to have to come
up with the money for?
Ms. Haas. No. Also, I would like to go back to the point because
you and I have had this discussion before about the whole milk re-
quirement that really, in going to a new menu system, in taking
a nutrient approach, we are getting away from the good food/bad
food approach that has been in the past. We are also going to a va-
riety of foods so that you are not singling out any food as having
any kind of inherent problems.
So I think that this move is consistent with the approach that
you have also talked about in the past and one where we could
reach the dual objectives without any increased financial exposure
to any of the affected interests.
Mr. Gunderson. I think of my home school district, a smalltown
farm district where, frankly, I have to tell you, those farm boys
drink a lot of whole milk. Let's assume that that school lunch pro-
gram has a regular amount of calories from fat that meet your
guidelines but every young boy in high school who goes through
takes two cartons of whole milk.
Now, are they in violation of your new guidelines?
Ms. Haas. No. If that is a school district in Wisconsin, in north-
west Wisconsin, that milk is important and whole milk is very pop-
ular. They probably have the ability, then, to adjust that menu to
reduce the fat in other places, so in other words — or add the fiber
in other places.
They would not be in violation because the bottom
Mr. Gunderson. What if the dietician creates an overall menu
in the attempt to meet your guidelines on the assumption that the
average student will, say, have 1 percent chocolate milk, yet in the
process of actually eating that school lunch, most of the guys on the
high school football team go and take two or three cartons of whole
milk.
Now, the dietician at the school, the cooks had nothing to do with
that, they developed a menu that met your guidelines. However, in
reality, all of those kids had obviously a much higher fat content
in milk. Is that school in violation? Would they have to make other
adjustments in their school lunch in order to comply with normal
habitual use of whole milk?
Ms. Haas. Well, the bottom line is what counts. It is the average
of milk that is actually consumed, so what we are looking at in
compliance of this program are the production records, the records
of food that is used, and the actual consumption. It is done over
1 week. It is not just done over a day, so it is compliance of dietary
guidelines over 1 week as well.
So your example is difficult because it is out of context of what
else is being eaten by those children in that school, and what is so
important is the bottom line. The responsibility of the school would
be to have food over 1 week that meets 30 percent of calories from
fat, 10 percent from saturated fat, and you take the average of the
food that is actually consumed by children.
Mr. Gunderson. Let me look at the regulation, because I think
we have an intent that I think is acceptable. We may have an im-
pact that you find unacceptable that may be an impact created to-
22
tally by the choice of the student. I have to tell you, if this turns
more kids off to school lunch, then we have a problem.
Ms. Haas. No, I think the opposite is what is going to happen.
Two things: One, I would be happy to sit down with you — we have
a 90-day comment period — and come in and work it all the way
through because the intent is the same. That is why we have this
long comment period, but I would be happy to do that with you.
I don't think that you get into that position. I see the changes
that we are making as an opportunity of expanding the market, of
expanding participation because having such a small percentage of
children today participating shows that the program needed to be
improved, and that is what we are doing. And part of the reason
is we need to improve the health of the program and the taste, and
all of those things so that kids enjoy it.
Mr. GUNDERSON. One final question. I have used way beyond the
time. Would you seek to have the CLOC provisions in H.R. 8 re-
moved in the Senate?
Ms. Haas. Whether we are seeking it is a difficult word, Con-
gressman Gunderson. We have a position today where we are op-
posed, and I see no reason for that position to change.
Mr. Gunderson. I was just trying to detect the temperature of
that opposition because I am one of the few Members who are on
both Education and Labor and Ag. I am trying to save my life in
both committees.
Ms. Haas. I didn't help you very much, did I?
Mr. Gunderson. No. Thank you.
Mr. Sarpalius [assuming chair]. Ellen, let me ask a couple of
questions. We have had several discussions about new technologies
that are available and also places that are located across country.
I have invited you to one in my district where they can freeze dry
fresh food and have the ability to store fresh vegetables for long pe-
riods of time in processing and in large packages that are available
for large meals for schools.
Ms. Haas. Right.
Mr. SARPALIUS. Can you bring me up to date on where we are
on that.
Ms. Haas. I wish I could do that better, and I do want to come
down to visit the food bank and the different experiences that we
talked about. I am not aware of what kind of improvements on the
technology that we have made in this program, so I would like to
get back to you about that, if I may.
Mr. Sarpalius. I really see this as a great opportunity to provide
good nutritional meals, not only to school districts, and the tech-
nology is there and the capability is there. For an example, in this
one particular facility that can provide enough meals they claim for
about 70 percent of the people that are on food stamps, and instead
of providing stamps, providing balanced meals.
Ms. Haas. I think that there have been tremendous advances in
food technology that really should help us, and part of the prin-
ciples in our healthy meals initiative is to use that technology to
make it work for the program. So I would like to explore further
and come visit maybe sometime this summer.
23
Mr. SARPALIUS. We would love to have you. I think you will real-
ly be impressed, and I can really see an opportunity there for
school districts.
Another question. What is being done to, I guess you could say,
remove candy machines and things like that in schools to encour-
age kids to eat their lunches before they eat a candy bar?
Ms. HAAS. Right. That issue is one that has a history to it. Back
in the late seventies, the Department of Agriculture tried to pro-
hibit the use of vending machines in schools. The Department was
sued and lost. The decision said that the Department did not have
the authority except during the lunch hour and in the cafeteria.
As you know or probably know, in the Senate bill on Child Nutri-
tion Reauthorization, there are provisions that basically clarify that
existing authority, and Senator Leahy has been very outspoken
about the problems that are incurred because of those vending ma-
chines.
I do believe, though, with the changes that we are making and
the emphasis on taste and the healthy meals that will be available
in school, that there is going to be a whole lot less interest in those
vending machines.
Mr. Sarpalius. That was the next question I was going to ask.
Your second goal in here is to — it says we will introduce new ways
to appeal to children's taste. How do you appeal to children's taste
from a meal versus a candy bar?
Ms. Haas. You can create a motivational approach. For example,
we are going to undertake a nutrition education campaign where
kids working in their classrooms learn about the relationship of
diet and health and how foods taste. Some schools are even having
tasting clubs now.
I have visited schools and talked with kids and asked them about
fresh fruits and vegetables. Carrot sticks and celery sticks are all
fun things for the little ones to eat. I think what you need to do
is to have that kind of nutrition education effort that uses media —
doesn't just do it through a paper brochure and teachers preaching
to kids — but it makes it fun. We are also trying to provide food to
children in a way that really looks appealing as well.
And that is why we are doing the training and technical assist-
ance to help us get there. It is a hard job to do, but we are rolling
up our sleeves and doing it.
Mr. Sarpalius. At one time, you and I had a discussion where
you said that you were looking at some type of incentives to en-
courage schools to have their own school gardens to teach kids ei-
ther growing their own tomatoes or lettuce or whatever, carrots to
try to, one, teach them the value of agriculture and also having
fresh food for the school.
Where are you at on that?
Ms. Haas. Well, we are progressing slowly. Now that we have
the initiative announced, we are going to be expanding our efforts
in that area. I was in a school in the inner city of Chicago in
Cabrini-Green, and the principal did have a little garden where the
children were learning how food grows.
Many of those kids had really never been out to see a farm,
never knew about where food came from. That is the way, starting
from the seed, that children can learn about food, learn about its
24
relationship to their health. I believe it really helps their self-es-
teem as well. So that is the kind of initiatives that we are going
to be undertaking with our nutrition education effort.
Thank you.
Mr. Stenholm [resuming chair]. A couple of final questions. In
your testimony you stated that commodities donated to schools rep-
resent almost 20 percent of all of the food purchased by schools, yet
Congressional Research Service has determined of the total school
lunch support, commodities have fallen from 19.3 percent in 1980
to 12.2 percent in 1993. Cash support has increased by 74 percent,
commodities by 0.1 percent.
Can you explain the discrepancies between your 20 percent and
the CRS's 12.2 percent?
Ms. Haas. Everything that I have seen indicates somewhere be-
tween 17 and 20 percent. So I don't know where CRS got its num-
bers, but I would be happy to go back and check and find out why
that inconsistency.
Mr. Stenholm. I would like very much for you to do that. We
will give you the CRS numbers and we would like for the two of
you to resolve your differences.
Ms. Haas. Sure, be happy to do that.
[The information follows:]
25
Response to Mr. Stenholm's question on discrepancies between
CRS's and USDA's figures for the percent of food purchased by
schools which Federal commodities donations represent:
CRS's 12.2 percent figure is the ratio of the dollar value
of commodities donated to schools compared to the total
Federal cash payments to schools through the National School
Lunch and School Breakfast Programs.
The figure of 20 percent that USDA has been using describes
a different relationship; it represents the proportion of
total school food acquisitions that is supplied to schools
by USDA in the form of entitlement or bonus commodities.
The two figures are not comparable because the USDA analysis
only considers food costs. Not all cash payments are used
for local school food purchases. It is important to note
that USDA cash subsidies are not intended solely to offset
food costs but also other costs associated with preparing
meals: labor, supplies and overhead, etc.
26
Mr. Stenholm. I know I don't need to urge you to improve the
nutritional value of the school lunches.
Ms. Haas. You are right.
Mr. Stenholm. But I do want to urge you to spend some time
on looking on how to improve the distribution of the commodities
because, if we overemphasize the nutritional side and
underemphasize the things that are important to producers and to
the preparers of our school lunches, we are going to miss the big
target.
And I know you know that, but we have to improve the aspects
of the commodity distribution program or we are going to lose it,
and I sincerely urge the folks that believe that CLOC and cash dis-
tribution are the best way to go to look at the whole picture, not
just the short-term picture which you have in your testimony indi-
cated support for that, and we have heard others — we will hear
from others today that will be doing the same thing.
I put the letter of the National Cattlemen into the record. Steve
mentioned the dairy side of it. There are golden opportunities to
utilize taxpayer moneys to buy foods for all people cheaper at dif-
ferent times, and that is what the commodity program is all about.
It is a way for a win-win.
And many times in the past, we have seen that we wait too long
for some reasons, and I hope that you will spend some time in the
next few days looking at purchasing, using the best judgments of
your department on when to purchase and how much and looking
ahead just as Mr. Gunderson mentioned to you on the dairy and
I mentioned to you in the area of beef.
There are some golden buy opportunities if you are buying. That
is what the commodity program is all about.
We also, and I submit for the record immediately prior to the Na-
tional Cattlemen's Association, the testimony of the American As-
sociation of Classified School Employees who have several ques-
tions about the commodity program. I mentioned just a few of the
questions, but I would like for you to respond in writing for the
record and to the subcommittee to the valid questions that they ask
concerning the manner in which the foods are distributed.
They have some very valid concerns and I know we both agree
that there can be some improvements and I know you are working
on it, but perhaps there are some areas that we have missed thus
far, so we will submit those to you so that you might respond to
these people — at least one-third of this group are associated with
school food services. These are the people that I particularly want
to listen to when it comes time for school lunches and lunchroom
and commodities and nutrition programs, et cetera.
So with that, I have no further questions for you today. We ap-
preciate your testimony and appreciate the cooperative way in
which we have been able to work together. Look forward to it in
the future.
Ms. Haas. Thank you very much.
[The information follows:]
27
'"M 2 7 1994
Honorable Charles Stenholm
Chairman
House Agriculture Subcommittee
on Department Operations and Nutrition
U.S. House of Representatives
1211 Longworth House Office Building
Washington, D.C. 20515-4317
Dear Mr. Chairman:
Per your request, the Department is submitting the enclosed
response to various issues raised by the American Association of
Classified School Employees concerning the National School Lunch
commodity distribution program. The Association presented these
issues in written testimony submitted to your subcommittee during
the June 9, 1994, hearing on cash and commodity letter of credit
alternatives to the commodity program. A copy of the testimony
is included with our response for reference.
For your information, the Administrator of the Food and
Nutrition Service, Mr. William Ludwig, recently met with the
leadership of the Association and reviewed many of the same
concerns outlined in their testimony. At that meeting, as well
as in their testimony, the Association noted that its membership
generally supports the commodity program. Their concerns related
to efforts to distribute fresh produce through the commodity
program, and, to a lesser extent, the logistics of the actual
delivery of products to schools.
We would point out that many of the Association's concerns
are the result of generally isolated events and are not, by and
large, indicative of the commodity program as a whole. Any
enterprise, public or private, that purchases and distributes
more than $700 million worth of product to more than 92,000
schools nationwide and processes thousands of delivery orders
annually will inevitably experience occasional problems. We
continue to learn from these incidents, though, and are committed
to total customer satisfaction. We continue to improve our
program in response to concerns like those raised by the
Association, and are aggressively exploring ways to reduce even
further the number of problems schools occasionally encounter.
The Department firmly believes that our commodity program
provides exceptional value to schools at a time when schools
everywhere are experiencing significant budgetary pressures. We
are also proud of the strong link the commodity program forges
between the American farmer and important school nutrition
programs.
28
Honorable Charles Stenholm
If you have any questions about our response to the
Association's specific concerns, please do not hesitate to
contact me at your earliest convenience.
Sincerely,
Assistant Secretary for
Food and Consumer Services
Enclosures
cc: Eugene Moos, Under Secretary
Patricia Jensen, Acting Asst. Secretary
Bill Ludwig
USDA:FNS:SNP:RON VOGEL:kjj : 305-2054 : 6/16/94
DOC: J: STENHOLM. RV
29
The following is a response prepared by the Food and Nutrition
Service (FNS) to the Testimony of the American Association of
Classified School Employees Before the House Agriculture
Subcommittee on Department Operations and Nutrition, June 9,
1994.
USDA Allotments Are Often of Questionable Quality
o A School food service professional from Cuter-Orosi Unified,
California, reports that a DSDA shipment of green beans
arrived damaged and contained maggots.
USDA did not receive a complaint from the Cuter-Orosi
Unified School District alleging that maggots were found in
green beans. However, USDA was recently informed by another
school district in California that maggots were found in
several damaged cases of green beans. FNS was not advised
of this situation until several months after the incident
allegedly happened. This claim was investigated by FNS and
the Agricultural Marketing Service and the allegation
concerning maggots was not substantiated. The green beans
were replaced. It is very rare, if not unusual, for USDA to
receive complaints of this nature. Continuous modifications
and improvements are made in the complaint system to help
ensure that all complaints are provided to USDA in a timely
manner.
o USDA-provided cheese often stubbornly resists melting.
Occasionally, the Cheddar cheese is pink.
In School Year (SY) 1994, USDA received several complaints
on the meltability of process cheese. USDA quickly
investigated the problem and learned that the problem
occurred because the vendors had not met the meltability
requirements required in this product's specifications. As
a result, the vendors replaced the process cheese. In SY
1994, USDA received two complaints on the meltability of
cheddar cheese. USDA advised the recipients that cheddar
cheese generally melts rather poorly and is used in cooking
for flavor and process cheese should be ordered when cheese
is needed for cooking that requires cheese to melt easily.
We have not received any complaints on cheddar cheese being
pink. In SY 1994, USDA distributed over 53.9 million pounds
of process, cheddar and mozzarella cheeses to schools at a
value of over $70.6 million and only 11 complaints were
received on these three products from schools.
82-893 0-94-3
30
Members in Portland, Oregon, refuse USDA pasta outright
because it is not of sufficient quality to be cooked and
chilled. Another member in California reports that their
spaghetti dissolves into mush when boiled.
Several years ago, problems were reported with the texture
of the spaghetti after cooking. The problem was found to be
that durum flour was used in some of the products.
Specifications were changed to require the use of semolina
flour. Since this time the number of complaints USDA has
received on spaghetti and other pasta products have been
very few. Problems reported on texture have been found to
be the result of over cooking.
Poorly processed produce causes difficulties. Tibard,
Oregon, received 7 5 cases of tomatoes not sorted by
ripeness. In addition, no information was provided to
properly ripen these tomatoes. About 15% of the order,
which was huge to begin with, eventually spoiled. A
district in California received blueberries which still had
stems, causing a scramble to clean the fruit so that it
could be used in muffins.
Several members reported that overripe fruit arrives which,
while actually fine inside, appears so shrivelled that
children will not eat the produce.
Offering perishable product is a challenge whether it is
purchased by USDA or in the commercial market, and problems
do occur. However, States in consultation with schools make
the decision on quantities to order. USDA disseminates
information, such as fact sheets and specifications to
schools via States. This guidance includes information on
the proper handling, storage, and distribution of fresh
products in a timely manner.
All of the foods USDA makes available are inspected for
quality and wholesomeness prior to being distributed to
State agencies. Unfortunately, in a few instances foods,
such as the blueberries, arrive at their destination in an
unacceptable condition. In instances in which the condition
of a product is questionable, immediate action is taken to
address the problem. Procedures have been established to
replace products that arrive in an unacceptable condition.
USDA did not receive any blueberry complaints from the State
of California in SY 1994. Several fresh orange complaints
were received. Most of the complaints received on fresh
oranges were from States (California, Arizona, Texas) which
required fumigation. This resulted in the fresh oranges
remaining on the truck for an additional period of time
which contributed to the spotted and shriveled outside
31
appearance of the fruit. In other cases, where vendor
liability was determined the product was replaced by the
vendor.
USDA often sends commodities which are inappropriate for
school children. Oregon received cases of canned salmon,
not a popular item among grade-schoolers and teenagers, and
other districts have received so much figs, almonds, and
dates that it took years to use them.
Much emphasis is placed on purchasing products most desired
by schools and that will be acceptable to children. School
districts inform their State Distributing Agencies (DAs) on
the commodities they would prefer and those which are most
acceptable to children. State DAs, in turn, make this
information available to USDA which is used to assist with
determining the products to purchase. Canned salmon, figs,
almonds and date pieces have been provided to States as
bonus products. Bonus products are provided to schools over
and above the amounts that USDA is required to give schools
in their entitlement. It is strictly States' and schools'
option whether to accept bonus products'. Also, States and
schools determine the quantities they can use without waste.
However, it should be noted that the acceptability of some
foods is a result of local and regional preferences. While
all parts of the country may not find the foods mentioned
desirable, we have received a number of letters in support
of these very same foods. In the final analysis, States and
schools do not have to accept bonus products if they don't
desire them or cannot use them.
In addition to the poor quality of many USDA commodities,
some items are more expensive than similar items available
locally. Lansing, Michigan, School District notes that
vendors can beat USDA's price in items such as breakfast egg
biscuits, fruit pies, and tortilla chips and match the price
on chicken nuggets. In the example from Lansing, USDA's
chicken nuggets have almost twice the fat of nuggets
provided through vendors.
USDA does not offer and make available breakfast egg
biscuits, fruit pies, and tortilla chips to schools under
the National School Lunch Program. We understand that
Lansing, Michigan purchases these products through a State
processing contract. USDA provides a low fat, low skin, all
meat chicken nugget to schools which is superior to most
commercially available nuggets (no non-meat fillers, added
water, etc. ) .
32
o Northview Public Schools, of Grand Rapids, Michigan, could
only use about 63% of its allocated commodity food dollars
this year. Northview' s Food Service Director explained that
fruit and vegetables "often (arrive) in an unusable state."
The Food Service Director for Bay City Public Schools, Bay
City, Michigan, noted that this district's actual use of its
budgeted entitlement has been steadily declining since 1988
and currently stands at less than half of this year's
$131,428 budgeted entitlement.
Currently, USDA offers over 8 5 commodities to schools.
Hence, USDA provides a healthy array of commodities to
schools and offers acceptable variety of commodities with a
reduced amount of fat, salt and sugar. Additionally, USDA
continues to incorporate new products as improvements are
made in these areas. As products are considered, they are
evaluated for user acceptability. Changes and improvements
in products offered include:
o Increasing the quantity of fresh products purchased.
o Expanding the variety of poultry products, including
frozen ground turkey and turkey burgers with an average
fat content of 11 percent.
o Increasing the variety of whole grain products.
o Offering reduced-fat cheddar cheese.
o Lowering the fat in our beef and pork products.
We understand from the Midwest Regional Office that
Northview Public Schools and Bay City Public Schools have
used 83 and 67 percent respectively of their SY 1994
entitlement. These percentages will increase when final
tabulations have been made. Most schools nationwide use all
of their entitlement.
The Current System Needs More Flexibility
o An order of tomatoes was delivered to the Marysville,
California School District during Spring Break; no one was
there to handle the order.
States were informed of the various shipping periods when
bonus tomatoes could be delivered, and they selected the
shipping period when the product was to be delivered to the
school district. Additionally, as required in the contract,
33
vendors must notify the State prior to delivering tomatoes
or any product. If vendors are early or late with
deliveries, states can refuse to accept the product. In
most instances products are delivered on time without
problems.
In Portland, Oregon, a huge order of tomatoes was received
that food service workers could not possibly hope to use
before the produce rotted.
States and schools make the decisions on the quantities of
each product to order and have options regarding delivery
periods. One offering of tomatoes included four weekly
offerings between March 30 and April 23, 1994; another
offering included the 4 weeks between May 14 through June
10, 1994. In addition, if a full truck load of tomatoes is
too large for one school district, States can elect to split
the truck and have the product dropped at several sites.
Again, in many cases tomatoes are a bonus product, and
States and schools share the responsibility to order the
quantity they can use.
Portland is also receiving a "disproportionate" amount of a
single commodity as its offered product: butter. This does
not make any sense when trying to reduce the amount of fat
in school meals.
Butter is made available as a bonus commodity upon request
by schools. These bonus commodities (extra foods) are
offered to schools above and beyond their entitlement, and
the decisions whether to order and in what quantities are
left strictly to States and schools.
DSDA "ships at their convenience" in the words of one
member, and it is often difficult to plan meals around
unknown foodstuffs arriving at an unknown time.
States are apprised of the various shipping periods when
each product can be delivered, and States select their
desired shipping period. Occasionally, market availability
and weather conditions do affect a delivery date. However,
a notice of delivery document is provided to States prior to
the product arriving. This document provides pertinent
information on the product that will be delivered including
the shipping period.
34
o Deliveries have been regularly left at curbside. USDA
personnel have sometimes failed to notify recipients,
resulting in a delivery which arrives when school workers
have already gone home. The food is thus left overnight.
Trucking firms used by USDA must obtain a signed receipt to
receive payment for delivering the product. Most deliveries
to schools are made by the State Agency rather than USDA.
USDA normally ships products directly to State warehouses.
In any case, the Department is unaware of any situation in
any State in which deliveries are regularly left at
curbside.
o A member from California told us that the standard shipment
size (1,000-1,500 cases) is too large to process in a timely
manner.
All USDA products are shipped to States in truck load
quantities. However, if a truck load is too large for one
school district, States can elect to split the truck and
have the product dropped off at several sites.
CLOC is Clearly a success
o CLOC pilot programs have been in operation for nearly 14
years and has been extended six times through legislative
action. The Department has conducted two evaluations of the
demonstration and spent over $8 million to administer and
evaluate the projects.
The initial evaluation concluded that CLOCs provided
flexibility to food service operations, but that this
resulted in the purchase of more highly processed products
and a reduced level of support for some commodities. More
processed commodities included chicken, turkey and vegetable
products. If implemented nationwide the report concluded
that there would be farm level reductions in beef (0.3
percent), chicken (0.2 percent), pears (2.4 percent) and
sweet potatoes (1.4 percent). Increased use was projected
for field corn (0.1 percent) and palm, cottonseed and
cassava (for oil; no percents given).
The second evaluation of a modified CLOC program was
narrowly focused on market removal, timing of purchases, and
domestic origin of purchased products. While it found that
a number of the market removal and timing issues had
improved, questions remained about the ability of CLOCs to
obtain an equivalent market impact to direct donations. It
also found that CLOC cannot ensure purchases of domestic
origin, which is major concern to the Department in a
program that is designed to provide support to buy domestic
agricultural markets.
35
Mr. Stenholm. I would like to combine both of the last two pan-
els. I apologize. We are going to have several more votes, and I be-
lieve it will expedite your schedules and all if we will ask panel 3
and panel 4 to come to the table at this time.
Our next witness will be Ms. Marilyn A. Hurt, chair of the legis-
lative committee, American School Food Service Association.
STATEMENT OF MARILYN A. HURT, CHAIR, PUBLIC POLICY
AND LEGISLAITVE COMMITTEE, AMERICAN SCHOOL FOOD
SERVICE ASSOCIATION
Ms. Hurt. Thank you, Mr. Chairman. I am delighted to rep-
resent the American School Food Service Association here today. I
am Marilyn Hurt, the supervisor of school nutrition programs for
LaCrosse, Wisconsin, and chair of ASFSA's public policy and legis-
lative committee.
The commodity distribution program has been a part of the
school lunch program since the beginning. Indeed, USDA was dis-
tributing commodities to school food programs prior to the enact-
ment of the National School Lunch Act in 1946.
The USDA CLOC pilot program, as you know, continues today as
a result of several congressional extensions in the pilot program.
Throughout this entire period, ASFSA continued to support, and
supports today, the USDA commodity distribution program.
About 20 percent of the Federal support for the national school
lunch program is in the form of USDA commodities. The commod-
ities are an important part of our programs. In addition to the 14
cents that we receive in entitlement commodities, we receive bonus
commodities when they are available. During the mid-1980's, when
our program suffered drastic budget cuts, we relied heavily on the
bonus commodities to reduce our food costs and provide economic
stability to our programs.
In addition to the economic support provided by the commodity
distribution program, commodities have been a part of the histori-
cal roots of the school lunch program, one of the stated purposes
of the program, and a part of the political base of the school lunch
program.
Some might argue that from an agricultural perspective, the im-
portance of the school lunch program is greater today than it was
in earlier years.
As you know, a number of ag organizations wrote to President
Clinton in March of 1994 urging his support for an increase in com-
modity purchases for domestic distribution. Their thesis was that
under GATT, domestic agricultural price supports will be lowered.
However, GATT allows the United States, and all other parties to
the treaty, to continue to support domestic agriculture through the
purchase and distribution of domestically produced commodities.
One of the specific CLOC provisions in H.R. 8, a new idea, would
be to allow schools to use 10 percent of their commodity entitle-
ment for CLOC's for fresh fruits and vegetables. ASFSA is commit-
ted to the dietary guidelines and has endorsed all three versions,
including the one released in 1990, which for the first time applied
to children.
We are concerned, however, about this provision because it tells
us how to achieve the goal rather than focusing on the goal itself.
36
This provision could provide more paperwork to a program that al-
ready has too much. The administrative costs for this very small
provision would not be a wise use of these limited resources.
One of our major concerns with CLOC is the administrative com-
plexity. Currently, the CLOC pilot programs are administered by
the Virginia Polytechnic Institute, which has been able to provide
all of the pilots with significant personal attention. That kind of
hands-on assistance would not be available if there were thousands
of CLOC's. One of the major goals of H.R. 8 is to lower administra-
tive burdens and costs suffered by our programs. The Education
and Labor Committee included many strong provisions to reduce
paperwork and increase flexibility in H.R. 8. We fear that the fruit
and vegetable CLOC provision could go in the opposite direction.
It is equally important to point out that those schools which have
experimented with the CLOC pilot have, by and large, been satis-
fied with the program. Indeed, some CLOC sites are more than sat-
isfied. They believe that CLOC is far superior to the commodity
program. Under CLOC, commodities do not have to be stored and
schools don't have to worry about whether USD A will deliver the
commodities on time.
We also appreciate the fact that the members of the House Edu-
cation and Labor Committee, who are strong and committed allies
of our programs, feel that CLOC would work better from a local
school perspective.
In many ways, Mr. Chairman, the CLOC issue represents a con-
flict between two important, yet different, policy objectives. ASFSA
will almost always support giving local school food service adminis-
trators greater flexibility and more options so that we might decide
for ourselves how best to run our programs.
In the area of CLOC and commodities, however, the goal of local
flexibility comes up against the national policy objective of helping
domestic agriculture. If the Congress were to terminate the com-
modity distribution program in favor of either cash or CLOC, it
would be a fair question to ask whether the school lunch and
breakfast programs should remain in the Department of Agri-
culture. It is not my intention to answer that question today, but
rather to recognize the larger policy implications of terminating the
commodity distribution program.
If we are going to sever our link with agriculture, we should also
ask whether or not we should move beyond CLOC and go straight
to cash. Since 1981, when the CLOC pilots started, we have seen
Federal support for the school lunch programs slashed and the reg-
ulatory burden increased. If Congress were to decide that the
school lunch program was no longer important as an ag program,
then perhaps we should not impose the administrative burden of
running the CLOC program, and should just give the school dis-
tricts cash.
We have been talking about CLOC and cash and commodity re-
form for more than a decade. We actively supported the Commodity
Distribution Reform Act of 1987, which improved the commodity
program. The commodity program is far superior today to what it
was in the 1980's.
Our association supports the national policy objective of helping
domestic agriculture and believes we can work with Congress and
37
USDA to continue to improve the commodity program in ways that
will benefit both agriculture and the Nation's children.
[The prepared statement of Ms. Hurt appears at the conclusion
of the hearing.]
Mr. Stenholm. Next, Ms. Catherine Miller, president of the
American Commodity Distribution Association.
STATEMENT OF CATHERINE MILLER, PRESIDENT, AMERICAN
COMMODITY DISTRD3UTION ASSOCIATION
Ms. Miller. Good afternoon, Mr. Chairman. My name is Cath-
erine Miller, and I am the president of the American Commodity
Distribution Association. I am also the chief of the New York State
Bureau of Government Donated Foods which distributes federally
donated commodities through eight of the Department of Agri-
culture's food distribution programs. I appreciate the opportunity to
testify before the committee on the commodity letter of credit provi-
sions of H.R. 8, the child nutrition reauthorization bill.
ACDA is a nonprofit professional association whose members in-
clude State and territory commodity distribution agencies, agricul-
tural organizations, food processors, warehouses, food banks, com-
mercial distributors and transportation companies, recipient agen-
cies and individuals. We work closely with our members, the De-
partment of Agriculture, allied organizations, and various hunger
relief and advocacy groups to improve the commodity distribution
program and consistently meet the needs of the recipients as they
change.
Mr. Chairman, ACDA's position on the CLOC program is simple.
We oppose any extension or expansion of the CLOC program, and
we oppose the CLOC provisions included in H.R. 8. It is our opin-
ion that the current CLOC pilot projects should return to the com-
modity distribution program when the authority for these pilots ex-
pires later this year.
The CLOC provisions of H.R. 8 would permanently reauthorize
the existing cash and CLOC pilot projects, establish one statewide
CLOC pilot if requested by 80 percent of the schools, and allow
schools to receive 10 percent of their commodity entitlement as a
CLOC for fresh fruits and vegetables.
Our opposition to these provisions does not mean that we do not
support the goal of increasing the use of fruits and vegetables in
the school lunch program. On the contrary, we strongly support
that goal. We simply believe that a specialized CLOC for fresh
fruits and vegetables is neither the most effective nor the most effi-
cient means of achieving this goal.
The CLOC pilots characterize what we hear all too often about
Government programs, especially agricultural programs: That a
pilot program is nearly impossible to eliminate after it is initiated.
I won't go into the history of the projects and the pilots because
that has already been discussed by at least two or three of our
other witnesses this afternoon, and I don't see any point taking up
the time to do that.
We do feel the commodity distribution program is better suited
to meet the needs of schools and American agriculture than the
CLOC program. We believe the commodity distribution program
has the unique ability to spend and reap a benefit from the same
38
dollar twice, something that is very hard to do today, once when
it purchases commodities and a second time when these commod-
ities are donated to schools and other outlets.
Last month, ACDA and 16 other agricultural groups wrote to
Secretary Espy outlining our concerns about the fate of the CLOC
program. This letter outlined the basis of ACDA's opposition to the
CLOC program which is very similar to USDA's rationale for op-
posing this program.
We are pleased that Secretary Espy has taken a position oppos-
ing the CLOC pilots as did his predecessor, Secretary Madigan.
The Department's official opposition to the CLOC pilots was in-
cluded in its analysis of H.R. 8 which was sent to the House Edu-
cation and Labor Committee on May 16.
I would like to summarize briefly our reasons for opposing the
CLOC program and the CLOC provisions of H.R. 8. First, the com-
modity distribution program purchases products at the lowest pos-
sible price and in such large quantities that it provides economies
of scale the CLOC program simply cannot offer. Coupled with the
Department's massive buying power, these purchases guarantee
that Federal money is spent as economically as possible. CLOC
purchases, being at the consumer end of the market, are more cost-
ly, and cannot possibly match USDA's buying power, even when
made by large school districts.
Second, the Department's purchases have a significant stabiliz-
ing effect on the agricultural market. Any expansion of the CLOC
program would hinder not only the Department's ability to provide
nutritious products to the child nutrition programs, but also its
ability to stabilize agricultural markets.
Further, the commodity distribution program will be of even
more importance to American agriculture after implementing legis-
lation for the General Agreement on Tariffs and Trade is passed.
GATT would restrict the Department's ability to support American
agriculture and protect the market from unavoidable price fluctua-
tions. However, GATT specifically exempts green box programs
from being defined as trade barriers.
Green box programs include several domestic food assistance pro-
grams served by the commodity distribution program, such as the
emergency food assistance program. Indeed, funding levels for
these programs should be reviewed and possibly increased if Con-
gress wants to maintain the Department's ability to stabilize mar-
kets in a manner that is acceptable under GATT.
Third, rural areas and small school districts would be at an eco-
nomic disadvantage by using CLOC. The commodity distribution
program provides products and services at equal cost to school dis-
tricts regardless of size and location. Small, rural school districts
in every State receive products at the same value as the larger
cities in that State. Under CLOC, larger cities would benefit from
lower transportation costs and leveraged buying power, while the
smaller districts would be forced to pay much more for comparable
services.
Despite its reputation as an urban State, New York has many
rural areas and some are so small and remote that schools have
difficulty identifying vendors to serve them. Providing such dis-
39
tricts with a CLOC would be of no benefit, and would only serve
to increase their frustration.
Fourth, the CLOC program is an additional administrative ex-
pense for the school lunch program. The current CLOC pilots rely
on the duplicitous administrative structure that diminishes the
funds of the school lunch program as a whole. The Department es-
timates that expanding the CLOC program would incur additional
costs.
If a statewide CLOC is created, as proposed by H.R. 8, the De-
partment estimates the program would cost up to $2 million to op-
erate. This expense would be an unnecessary drain on the Depart-
ment's resources, and is money that could be better spent else-
where. As we continually try to reduce costly administrative bur-
dens, this is a step in the wrong direction.
Fifth, the school lunch program is the backbone of the commodity
distribution program. If the CLOC program is expanded and more
schools use a CLOC option, the infrastructure provided by the com-
modity distribution program would be weakened significantly. If
this does happen, we need to ask ourselves: What will happen to
the smaller programs served by the commodity distribution pro-
gram?
TEFAP, the soup kitchens and food banks program, the food dis-
tribution program for Indian reservations, and the Department's
disaster assistance efforts would be weakened by the expansion of
the CLOC program. Disaster assistance is a perfect example. As we
have learned in recent years, commodities in storage at recipient
agencies or in warehouses for schools are often the first response
to natural disasters.
Sixth, the commodity distribution program can guarantee that
the purchased commodities are domestically produced, but the
CLOC program cannot make a similar guarantee. Although CLOC
purchases are required to follow the same domestic content policy,
attempts to assure domestic content are burdensome, costly, and
uncertain.
In a time when we are attempting to reduce the paperwork bur-
den on schools, the CLOC program would simply provide another
avenue for reviews, verifications, and undue emphasis on the ad-
ministrative aspects of the program to the detriment of the real
focus — feeding hungry children.
In 1987, Congress passed the Commodity Distribution Reform
Act and WIC amendments of 1987. This law brought about monu-
mental improvements in the program, both by USDA and by State
distributing agents like myself. One significant improvement was
in the area of quality.
Commodities purchased by USDA have shown significant im-
provement in recent years in terms of their nutritional qualities.
Fat, sodium, and sugar are routinely reviewed, and our schools find
that USDA commodities can form the basis for sound nutritional
meals for children.
Many schools have told me it is not possible for them to purchase
the same quality that the Department provides, and their costs
would be higher even when purchasing products of lesser quality.
Today, foods purchased by USDA are universally recognized as
being the best money can buy. Not only has the nutritional profile
40
and variety of products improved, but new packaging better meets
the needs of recipient agencies and the delivery system has become
more timely and responsive.
Another major improvement was the creation of a National Advi-
sory Council for Commodity Distribution. The advisory council
brought together representatives of all groups served by the pro-
gram to continuously identify additional areas where services can
be improved. As a result of the advisory committee's initiatives, re-
cipients, especially school districts, are more than satisfied with the
operation of the current program.
Mr. Chairman, ACDA believes that the commodity distribution
program is the most economical system for providing schools with
the nutritious products they need.
In recent years, the cooperative effort between the Department
and the agricultural community has improved the distribution pro-
gram and its products to better meet the demands of recipients.
These changes have helped and will continue to help the program
meet its traditional goals of providing nutritional assistance to
schools and support of American agriculture, two goals the CLOC
program can never hope to realize.
The Commodity Distribution Program still works, and there is no
question it will continue to evolve and improve its services, even
with the implementation of the dietary guidelines that were an-
nounced yesterday. The dietary guidelines are an important part of
the Department's mission, and ACDA, ASFSA, and many other
groups support these guidelines.
Some would argue that the commodity distribution program is
incapable of meeting these goals, but that simply is not true. The
commodity distribution program has proven it is capable of chang-
ing to meet the evolving needs of its recipients, and it is well suited
to deliver products that adhere to the dietary guidelines. The com-
modity distribution program can and will meet any challenge that
the implementation of these guidelines may present.
Thank you again for the opportunity to testify. I would be de-
lighted to answer any questions you might have.
[The prepared statement of Ms. Miller appears at the conclusion
of the hearing.]
Mr. Stenholm. Next we will hear from Ms. Pat Holstein, food
service director, Lexington School District.
Mr. Farr. Mr. Chairman, may I ask a question? We are all sort
of going back and forth between votes, just make a quick comment?
Mr. Stenholm. Make it quick.
Mr. FARR. Thank you. I want to just say I really agree that the
USDA can coordinate the twin objectives of both distributing food
and dealing with the market surpluses. My opinion, the CLOC pro-
gram would only cover about 10 percent of the goods received by
schools from USDA.
The question I want to know is how much does the administra-
tion of the CLOC program cost USDA per year and if the CLOC
does interfere with the ability of USDA to remove market surpluses
effectively, do we have any data on to what extent it interferes and
lastly if H.R. 8 were implemented as it now stands, what percent-
age of the food received by the schools from the USDA would go
through the CLOC system?
41
Could you get answers to those questions for me and send them
to my office?
Mr. Stenholm. I believe that question should have been asked
of Ms. Haas and the previous panel. We will get answers in writing
for those questions for you from the previous witness.
Mr. Farr. Thank you. I appreciate that.
Mr. Stenholm. In fact, they were written in some of the written
testimony you have, you have some of the answers to the cost in
Ms. Haas' question.
Mr. Farr. I will look to that. The bell rang before I got to answer
my question.
Mr. Stenholm. Good.
Proceed, Ms. Holstein.
STATEMENT OF PAT HOLSTEIN, DIRECTOR, FOOD SERVICE,
LEXINGTON SCHOOL DISTRICT 3, BATESBURG, SC
Ms. Holstein. Thank you. Mr. Chairman, members of the com-
mittee, my name is Pat Holstein and for the past 15 years, I have
been food service director of Lexington School District 3 in
Batesburg-Leesville, South Carolina. This is located near the center
of the State, about 35 miles south of Columbia, the State capital.
It is a very rural area, and as far as agriculture goes, the main
money crop is peaches.
Lexington District 3 is a very small school district with only
2,400 students and four schools. We feed an average of 1,850 stu-
dent lunches each day and 725 eat breakfast. We serve 4- and 5-
year-old kindergarteners as well as grades 1 through 12.
Fifteen years ago, commodities came in without a schedule that
I could ever determine. They simply arrived, and the cafeterias had
to find some way to store them. Then the cafeteria manager had
to find some way to prepare them so the kids would eat them. Most
of these commodities were in a form that was very labor intensive,
and the thing that really concerned me about commodities was the
attitude the cafeteria workers had. They felt they were free, they
were very careless in the use of them, they wasted them, and com-
plained constantly about them. They never thought of them as cost-
ing money.
When I was asked by South Carolina's commodity chief at the
time, Mr. Ramon Aycock, to take part in this cash/CLOC study, I
felt it would be a wonderful challenge and might help the food
service program financially. I knew the cafeteria workers would
think of CLOC food then as real food and be more careful in its
use. I was right on both counts.
The CLOC money is sent quarterly, as most of you know. In
other words, instead of having that 14 cents a meal tied up in stor-
age, the district has up-front money to buy food as USDA does, but
in a form usable right then. For instance, instead of whole turkeys,
turkey rolls or roasts, the district buys a lot of ground turkey. It
is cheap, it is in a usable form, and it is low in fat.
Several years ago, I was teaching a Red Cross course called Bet-
ter Eating for Better Health to the cafeteria managers. This course
was all about cutting the fat, sugar, and salt in the diet. As a re-
sult of this 6-week class, we began to change our recipes to reflect
these new ideas.
42
Without saying one thing to the students or teachers, we did a
few simple things. We reduced the sugar by one-third in foods and
began offering more fresh fruits as desserts. We reduced the salt
in foods and removed salt shakers from tables. We began using
more fresh and frozen vegetables.
When USDA came out with the latest food pyramid and sug-
gested keeping the fat to 30 percent of the calories in our lunch
menus, we were already doing this in our cafeterias.
Approximately 15 percent of the money spent on food in our cafe-
terias now is for fresh fruits and vegetables. With the CLOC's re-
ceived, we can buy fresh, frozen, or canned foods, and the favorite
vegetable in our schools is broccoli, cooked or fresh.
Children eat at school what they are used to eating at home, so
we try to educate the parents in nutrition as well as the children
by publishing menus in the local and State newspaper. These
menus have been analyzed by some software called NutriKids
which has all the USDA recipes and products and the nutritional
data on them. Monthly menus are sent home with each child. I
might say, I received one of those NET grants, and that is how I
bought this NutriKids.
Now, what does all this have to do with CLOC? One, the food,
both CLOC and purchased, is bid. And when I bid it, I specify it
has to be produced in the United States. The CLOC food gives me
more buying power. The food costs for our district have not in-
creased in several years, which keeps our paid lunch price at $1
and $1.15, and 50 cents for breakfast.
To have commodities shipped from the warehouse to a cafeteria
costs $1.75 a case or bag. With the food I bid, this is included in
the cost. When this $1.75 is added to the cost of the commodity,
my price is almost always as cheap or cheaper.
Two, financially, we stay in the black. We are able to buy equip-
ment and keep our cafeterias attractive.
Three, we are meeting those dietary guidelines.
Four, we have a high participation in breakfast and lunch be-
cause we can offer foods the kids will eat.
Five, our food inventory is kept at a reasonable level. At the end
of the year, we do not have a large food inventory to worry about
like we did when we had commodities. Even with all the improve-
ments made in commodities, these commodities still come in at the
very end of the school year and have to be stored.
When Hurricane Hugo visited our State a few years ago, we
thought our area of the State would be affected. If it had been,
there was enough food available in our cafeterias to feed 2,000
lunches and 1,000 breakfasts every day, which would have almost
fed Batesburg-Leesville. We could have done this for 7 days. If we
would have had commodities, there would not have been enough in
the freezer, cooler, and store room to do this because that food
would not have been easy to prepare.
Yes, we continue to get bonus commodities, but every year they
dwindle. Eight years ago, I think my bonus commodities were
maybe $12,000. This year, they were $6,100. Yes, I understand
from other food service directors that commodities have improved
in the way they are packaged and in acceptability, and I think you
might thank these cash/CLOC pilot programs for that^ because we
43
have more or less been a thorn in your side, but maybe you needed
that.
If we are capable of buying over 90 percent of the food — and from
my figures, I came up with 10 percent for the commodities plus the
bonus — why can't we buy 100 percent? I reproduced some charts
showing you how our expenses were in our district. As you can tell,
I was taking a computer program and this was one of my projects
for the program.
It is important to keep the cash/CLOC option in H.R. 8 even
though it is included in H.R. 4221. This pilot program deserves to
be permanently authorized. It is an improved program and de-
serves special consideration. It is a wonderful way for a State to
make comparisons on food costs and acceptability of school lunches
and breakfasts of CLOC schools as compared to commodity schools.
Now listed below are several more reasons for permanently author-
izing the cash/CLOC program.
One, the continuation of the program requires no additional
funding.
Two, CLOC has had one of the greatest impacts on school lunch
service programs, particularly with increased participation, more
flexibility, improved nutritional awareness, and provides the chil-
dren with acceptable meals with a minimum of waste. The need for
food to come in different forms has been tremendous. Our children
receive the benefits.
Three, the CLOC program must spend their vouchers at the
same time the USDA is making their purchases. This relieves sur-
pluses of specific farm products and meets price support goals. Po-
litical ties can be far more reaching when we purchase locally since
we affect more farmers and industries than when USDA purchases
the food. The CLOC program still meets the farm support objec-
tives and works much better for schools.
Four, since we bid, we had competitive prices on our CLOC pur-
chases, and they were delivered at the same time as our groceries
without additional expense. We were able to coordinate deliveries
with menus, thereby giving us security in planning. This saved on
warehousing and storage.
Five, in some cases, we were able to serve foods purchased with
CLOC funds before commodity schools were notified they were
going to receive it. This has been proven.
Our concerns, yours and mine, have to be for the good of the pro-
gram. The study has proven, without a doubt, that CLOC is a via-
ble alternative to the present commodity system. Please allow us
the option of CLOC and extend that option nationwide.
We are deeply grateful for your support for child nutrition pro-
grams, and please consider the positive effects of the CLOC pro-
gram. We have tremendous respect for the Agriculture Committee
and trust you will consider what is best for the national school
lunch and breakfast program. The ease of the CLOC program and
adaptability to our needs warrant a hearty stamp of approval.
Thank you.
[The prepared statement of Ms. Holstein appears at the conclu-
sion of the hearing.]
Mr. Stenholm. Thank you very much.
44
Let me ask you, do your schedules permit you to stay? I have a
vote and we have to take a little break here. Do your schedules
permit you to wait?
We will stand in recess for approximately 10 minutes.
[Recess taken.]
Mr. Stenholm. The subcommittee will again come to order. We
will hear from our next witness, Mr. Rick Pasco, vice president of
government affairs, National Pork Producers Council.
Welcome.
STATEMENT OF RICHARD PASCO, VICE PRESIDENT, GOVERN-
MENT AFFAmS, NATIONAL PORK PRODUCERS COUNCIL, ON
BEHALF OF THE COMMODITY DISTRIBUTION COALITION
Mr. PASCO. Thank you. I am presenting today's testimony on be-
half of the Commodity Distribution Coalition. This coalition is an
informal group of agricultural associations that are strongly sup-
portive of the Department of Agriculture's commodity distribution
programs, which serve the dual purposes of providing the best pos-
sible nutrition for our Nation's schoolchildren and of helping sta-
bilize U.S. agricultural commodity markets.
Mr. Chairman, I would like to ask that my written statement be
made part of the official hearing record. I also wish to add two or-
ganizations to the list of those signing on this testimony. Those two
organizations are Western States Meat Association and the Apricot
Producers of California.
Mr. Stenholm. Without objection.
Mr. PASCO. We appreciate this opportunity to testify on the com-
modity letter of credit provisions contained in H.R. 8. We have
great concerns about how the extension or expansion of the CLOC
program would affect the future viability of the USDA's commodity
distribution programs. Our coalition, which is representative of the
agricultural community, is opposed to the continuation of the
CLOC program. We believe that the CLOC provisions of H.R. 8
threaten the long-term operational effectiveness of the overall com-
modity distribution system.
USDA's ability to stabilize agricultural markets through large
volume purchases of commodities would be seriously compromised
without the assistance of a significant commodity distribution pro-
gram.
The commodity program will be even more significant now that
the Uruguay Round of the GATT is completed. With the successful
conclusion of the Uruguay Round, the United States will face both
a reduction in tariff receipts and a phase-down of direct price sup-
ports. Reductions in import tariff receipts that are used to finance
USDA commodity purchases and provide direct funding to schools
will also affect the overall Federal Government assistance available
for our Nation's food assistance programs. Any phase-down of price
supports and loss of tariffs will also make it more difficult for the
United States to support agricultural production.
It is also important to note that commodity purchases by the
USDA only represent about 20 percent or less of the food acquired
for the school lunch program. This leaves considerable flexibility to
school districts which can continue to use the vast majority of
funds that are remaining for other purposes, including labor costs
45
and purchases of food locally. The various USDA commodity dis-
tribution programs give the Secretary of Agriculture an extremely
effective tool that he can use in providing assistance to America's
agricultural producers.
One of the major goals of our agricultural policy has been to sta-
bilize the "boom or bust" swings in the farm economy. When mar-
kets are soft in a given commodity, the Secretary can help boost
market prices by purchasing the commodity that is experiencing
depressed prices. For many commodities such as pork, beef, turkey,
chicken, eggs, peaches, apples, cherries and many others, the com-
modity distribution program represents the only significant pro-
gram available to the Secretary of Agriculture as a market stabiliz-
ing mechanism.
USDA commodity programs have not only played a special role
in the development of agricultural policy, but have played an im-
portant role in the development of this Nation's nutrition pro-
grams. The commodities provided for in the school lunch meals, for
example, have played a key role in meeting the recommended nu-
tritional needs of children while keeping costs down.
In recent years, the USDA and the agricultural community have
worked together to improve the distribution program and the nutri-
tional profile of products to meet the needs of recipients. By build-
ing on these improvements, the program will be able to meet the
changing needs of its recipients and simultaneously support Amer-
ican agriculture.
After a number of reauthorizations by Congress and years of on-
going review, it is clear that the commodity program now in place
works better than the CLOC/cash alternative. The more-than-a-
decade-long study has yielded no compelling evidence sufficient to
warrant Congress to again extend and even expand the number of
CLOC sites. Congressional termination of the CLOC program is
long overdue.
We strongly support the USDA's position opposing all provisions
in H.R. 8 that make permanent the existing pilot projects that op-
erate CLOC systems or expand the number of CLOC sites. As stat-
ed by the USDA, it is in the best interests of agricultural produc-
ers, administrators of commodity distribution systems, and the re-
cipients of USDA's domestic commodity programs to retain the tra-
ditional commodity programs.
Commodity letters of credit or even cash given directly to schools,
by themselves, cannot match the buying power of a single Federal
Department in making large volume purchases of commodities. In
addition, the USDA's commodity program assures the domestic ori-
gin of the foods purchased, which is clearly a critical feature of the
program.
We have serious concerns about the long-term implications of
section 110 of H.R. 8. If a whole State can opt out of the commodity
distribution program, the Secretary of Agriculture's ability to have
a positive impact on the market price of a particular commodity
will be reduced over time as the size of the USDA purchases
shrink.
Moreover, as the volume of commodities purchased is reduced,
the effectiveness of the commodity distribution network in provid-
82-893 0-94-4
46
ing the commodities to food assistance programs outside of the
school feeding program is jeopardized.
We urge this committee to reject the provisions of H.R. 8 that
further expand the number of CLOC sites. It is time to recognize
the CLOC program has been sufficiently reviewed after a decade
of experimentation. We believe the day has come for Congress to
put an end to this program.
In times of serious budgetary constraints, the Federal Govern-
ment can no longer afford the luxury of paying the administrative
costs of dual programs that serve the same purpose. Once and for
all, we must choose the commodity program over the CLOC pro-
gram. There is not sufficient justification for Congress to again ex-
tend the CLOC program one more time and continue to administer
overlapping programs.
[The prepared statement of Mr. Pasco appears at the conclusion
of the hearing.]
Mr. Stenholm. Thank you, each of you, very much for your testi-
mony today.
Two or three questions that I wanted to ask of this panel.
Ms. Hurt, you stated some concerns about the dietary guidelines.
The one released in 1990? Or were you talking about the proposed
rule that was released for comment yesterday by the Department?
Ms. HURT. I indicated that our association has supported the die-
tary guidelines over the years through the three different editions
that have been released and the most recent edition was released
in 1990. I was not referring to yesterday's.
Mr. Stenholm. So when you are talking about the provision tell-
ing you how to achieve the goal, it is my understanding that pro-
posal out for comment now is going to try to steer away from tell-
ing you how to do it; just state the goals and let the individual
school lunchroom providers make those determinations with cer-
tain flexibility.
Ms. Hurt. I have not yet read the regulations, and we hope that
it does improve our flexibility. We are concerned about the
weighting of different food items. We are wondering if, in fact, that
will reduce the variety of products that we offer. And one of the di-
etary guidelines is to increase the variety of foods offered and
consumed. So we hope that the regulations meet the dietary guide-
lines in that area, also.
Mr. Stenholm. My own purpose in bringing that up, the purpose
of this hearing today is on the commodity programs and improving
in those areas. We intend to hold oversight hearings, probably in
late July or early August, during the comment period regarding the
dietary guidelines, and also hopefully continue improvement in the
manner in which the commodity programs are working. So we in-
tend to provide some additional oversight in that area working
with all groups to see that we accomplish what each of you want
accomplished.
I must say Ms. Holstein, I appreciate your testimony and your
commitment to CLOC. You obviously believe it to be working be-
cause it has demonstrated to be working for you. You undoubtedly
have listened to the allegations that it is fairly costly compared to
CLOC. There are also allegations that we don't take into consider-
47
ation all of the costs, et cetera and these are things that we need
to continue to look at.
But, I must tell you that it is the intent of this chairman, and
I believe I speak for this subcommittee, to work to make the dis-
tribution program work better so you will want back in. That is my
goal. Because I truly fear that if we go CLOC for everyone, that
you will not be as supportive and happy with the program in the
long term as you would be if we do a better job on the distribution
of commodities so that you would want back in and not want to be
a part of CLOC.
And that is what I hope with today's hearing and some addi-
tional work along these lines that we will accomplish. Because
when I mentioned a moment ago that if we do CLOC for everyone,
then all of a sudden it is a cash distribution program, and then I
don't know of any real reason to continue the cash program, the
support thereof, in light of tight budgets.
I mean we had revenue sharing for cities. A wonderful program,
worked extremely well. It was one of the most efficient programs
that we could possibly have, but we eliminated it for one reason
and that was because we didn't have revenue to share. And the
same, I am afraid, will move in the school lunchroom from a Fed-
eral perspective because most Members of Congress that I am
aware of believe that education is a State and local issue and the
Federal involvement should be minimal.
And one of the reasons why the commodity program has worked
so well for all parties is that there has been a joint benefit. Produc-
ers as well as consumers have jointly benefited. And it is a kind
of goal that I have as chairman of this subcommittee to keep work-
ing to bring consumers and producers together.
Far too often the middleman gets involved in this and the
consumer and the producer do not benefit. And so I think it is ex-
tremely important that we work to improve the manner in which
the commodity program works, particularly as Mr. Pasco testified
as to GATT and what we have already seen where we are moving
more and more to market-oriented programs.
And when we start doing that, there is going to be a dramatic
effect on feeding programs, and the commodities are very impor-
tant to most of our school lunchrooms.
We have weaknesses in the program, and even though we have
improved it since 1987, I think there is a lot more improvement
that can be made if we just put our shoulders to the wheel and de-
cide that is what we want to do.
I am worried, though, when we start having divisions of opinion,
and some urging making permanent a temporary, experimental
project that has not — well, you say it has worked beautifully. If it
has worked beautifully, then why shouldn't we do it for everybody?
Ms. Holstein. It would suit me.
Mr. Stenholm. It would suit you? But it doesn't suit everybody
else?
Ms. Holstein. That is right.
Mr. Stenholm. That is what makes this country such a great
country, isn't it? We can have differences of opinion.
What is your reaction? How would you respond to my generalized
statement that I just made?
48
In all honesty, if CLOC is working, and in all fairness I have not
seen evidence that it is working so well that I would be enthusias-
tic in putting it into every single school district, nor did Mr. Good-
ling, which indicates to me that there may be some weaknesses to
the program. Do you see any or are you here totally in support of
CLOC? And you have already stated, but I just want to have you
say it again, you would like to see CLOC for everyone; for your
school district and you believe it will be good for other school dis-
tricts in your State and be good for the Nation if we CLOC'ed ev-
erything?
Ms. HOLSTEIN. It has worked for me, because I have had a per-
sonal interest in it and I wanted it to work. I still think it was just
an option that was out there as an option. It has done a whole lot
of good in that we have changed a lot of commodities. Commodities
have gotten better. I think there are some commodities we should
never support, since you asked me.
I see no need to support pineapple since it is very hard to find
any produced in the United States. I find it very hard to support
the prune industry when we have such a hard time getting rid of
them.
There are some crops I have never quite seen the need to sup-
port, and I have an agricultural background myself. I was raised
on a farm. I think the big thing to begin with was to get rid of the
surplus products, and you have always done a very good job of it.
I could see us, as I said, as having a CLOC site maybe in every
State to sort of counterbalance and see where changes might be
made and sort of keep USDA on their toes, but I would not know
how to answer that because I have been out there sort of by myself
doing this.
There have been so few doing it. How do I know how it would
work for everybody? Everybody may not bid their food like I do.
But it would certainly work for small districts because it comes in
with regular food. Does that answer your question or confuse you?
Mr. Stenholm. Yes, ma'am, that answered it and one of the key
things that you said, it worked for you because you wanted it to
work. And that is not a bad philosophy for Government; that if we
want the commodity program to work, we need to work at making
it work and if you don't want it to work, it is not going to work.
And far too often that is what we end up doing. We don't want
them to work or we are not willing to do, as apparently you have
done with your school district. You put in the necessary time and
effort to make it work and apparently you are doing a very good
job. The fundamental question for all of us, though, will it work
equally well for all?
And that is where I have a fundamental problem. And I would
answer my own question saying I don't believe that it would for the
reasons that I have tried to state. But that does not mean nec-
essarily that it would not.
Ms. HOLSTEIN. But if you are going to buy, as I said, like 90 per-
cent of your food, I really don't see why you couldn't go ahead and
buy the other 10 percent, if you had letters of credit and specifi-
cally say you have to spend this much for beef and you have to
prove that you bought this beef or this turkey or whatever, you are
49
still spending it on beef or turkey. You are still getting it off the
market.
Mr. Stenholm. You believe you can buy it as cheap as USDA
can buy it?
Ms. Holstein. I do.
Mr. Stenholm. You do. Day in and day out?
Ms. Holstein. Yes.
Mr. Stenholm. The rest of the folks ought to be taking a look
at you. You ought to write a book because you have something
going for you that the rest of us could use.
Ms. Holstein. Would you like my specs?
Mr. Stenholm. Ms. Hurt, and Ms. Miller, any specific sugges-
tions additional to what you have stated in the record or maybe re-
emphasizing your statements as to how we can make the commod-
ity program work better so Ms. Holstein would want in it and not
out?
Ms. Hurt. Yes, Mr. Chairman. First, I want to say that I dis-
agree with Ms. Holstein in her statement that some commodities
shouldn't be commodities. I think that those are nutritious foods
and when they come into our schools then we are challenged to use
them. And take prunes, for example. They are high in fiber. They
are very nutritious, and so we are challenged to use them.
I think we receive asparagus, for example. I don't know if I ever
would have put asparagus on the menu had it not come in as a
commodity, but it came in and it was beautiful and we served it
and the kids like it. We are now bidding asparagus. I think it
brings foods in that we might not have thought about using. I
think that the program can be improved.
I talked to people in other States who are still complaining about
distribution problems. Wisconsin has a very good program, and
that is probably one of the reasons that I feel so strongly about it.
However, I think we should look more carefully in the area of fresh
fruits and vegetables.
Maybe that is not the place for fresh fruits and vegetables in the
commodity program. We need to be shown how to use more fresh
fruits and vegetables. We need regulations that allow salad bars,
for example. Currently 3'ou have to do your point of surface at the
end of the line and you don't have the room for all the fresh fruits
and vegetables that you would like for kids, so we need to look at
the regulations that in fact prevent us from doing that kind of
thing and then allow us to buy our fresh fruits and vegetables off
of our local market if we want, but keep the commodity program,
unless they are going to be able to do distributions once a week.
Produce is very sensitive to time and temperature and needs to
be handled carefully and different produce needs to be handled dif-
ferently. So maybe that is not the place for it.
I also think that we need to be able to get products when we
need them. For example, every school I bet in this country has a
Thanksgiving meal in November and yet we get the turkeys in De-
cember. That just seems logical. Why is it we can't get turkeys de-
livered so that they can be offered for that Thanksgiving meal?
So those are the kinds of things we need to be looking at improv-
ing. And we believe that continuous improvement is the way to go.
50
It has come a long way, but we would like to see it continue to im-
prove.
Mr. STENHOLM. I was afraid for a moment you are going to say
that you had found a way to put prunes on asparagus and make
kids eat them and I was going to ask you a question about that,
but I am glad that was not the direction you were going.
Ms. Miller. I would like to say that ACDA also believes that
there are improvements that continue to be made and need to con-
tinue to be made to make the commodity distribution program all
that it can be. Certainly the timing of purchases and deliveries is
an area where USDA has made some improvements, but we need
to have more improvements made.
I agree with Ms. Hurt that perhaps the commodity distribution
program is not the place for a full array of fresh fruits and vegeta-
bles. There are some that work fairly well like apples and pears
and potatoes that have a relatively long shelf life but things with
a 7-day shelf life, perhaps, that is not the place to be purchasing
them.
When the commodity distribution program purchases 20 percent
of the food used by schools, perhaps it should be concentrating on
the things that every school uses like hamburgers, turkey, chicken,
canned peaches, canned pears, the frozen and canned vegetables.
And maybe a wide variety of fresh fruits and vegetables is not the
place for that 20 percent of the money to be spent. But we would
be happy to work with you and with the Department of Agriculture
to provide you with a list of improvements we would like to see
made and to continue to work to make sure they are implemented.
Mr. STENHOLM. The final question, Ms. Holstein. If you were to
be put in charge of the commodity program to make it work, what
are the first one or two things you would do?
Ms. Holstein. I would probably change some of the pack size,
and they have changed some of the pack size. I can remember
when everything was in 50 pound bags and the ladies had to be
able to lift 50 pounds to be able to work for the food service be-
cause that is what that bag weighed.
As she said, stay away from the fresh stuff. You can't transport
that around the country. Like peaches. Here I am in peach country.
There is no way that we can ship them up to you all in a week
and you have fresh peaches. We certainty couldn't ship them across
the United States. Stick to the things that they do best like turkeys
that are boneless, chicken that is boneless, but put it in a form that
is not a 40 pound lump.
I mean, let's put that chicken, like I buy it, a drumstick that is
going to provide an ounce-and-a-half of protein for that child; a
thigh, that will provide 2 ounces, and I don't have to worry about
all those wings and backs and stuff. Buy first quality stuff. I am
not sure sometimes some of that stuff I used to get was first qual-
ity, not when I had worms in the corn and they said if there is only
one worm in the can, they said that is OK.
Mr. Stenholm. A little higher protein.
Ms. Holstein. Yes, that is what they said. And I don't know.
This is going to happen any time that you buy canned stuff because
I have gotten stuff from a wholesaler and it would have a bug, but
all you had to do is turn the can over and give them the number
51
and say let me tell you what you did and he replaces it with an
apology. You don't get that with the commodity foods.
The bonus foods have almost dried up, if I am not mistaken, be-
cause mine are almost down to nothing. And I don't see supporting
pineapple when we don't grow any pineapple except for a little bit
in Hawaii. I would get foods that we do have a surplus of, that we
can use, and that are low in fat.
Mr. Stenholm. I would appreciate it if each of you in the next
5 days, since this hearing record will remain open for 5 to 7 days,
if you think of anything else, these kinds of suggestions, put your-
self in charge of the program, how would you do it? What would
you do? How would you run it? And furnish those for this sub-
committee. We intend to play a much more major role in the over-
sight of these programs and to be a partner with USDA in seeing
that this works for your benefit, because you are out there on the
firing lines.
At this table, there are the folks distributing, there are the folks
that are using it on a daily basis, and there are the folks that are
producing it. And I repeat, if we do not maintain a cooperative atti-
tude and a partnership between producers and consumers, both are
going to lose eventually. And that is the goal that we have.
We thank you very much for taking time, for your testimony and
for your participation today. We look forward to working with you.
This being the last panel, we will stand adjourned.
[Whereupon, at 4:30 p.m., the subcommittee was adjourned, to
reconvene subject to the call of the Chair.]
[Material submitted for inclusion in the record follows:]
52
Testimony of
THE HONORABLE BILL GOODLING
before the
Subcommittee on
Committee on Agriculture
June 9, 1994
Mr. Chairman, Members of the Subcommittee, I am pleased for
the opportunity to appear before you today to discuss the
provisions in H.R. 8, the Healthy Meals for Healthy Americans
Act, which deal with the Commodity Letter of Credit (CLOC)
alternative to the current commodity system.
I want, however, to say up front that it is definitely not
my intention to try to replace the current commodity distribution
program. I understand the importance of this program to the
agriculture community. As many of you are aware, I was reared on
a farm and have a great deal of respect for our nation's farm
community. In addition, I represent a district which depends
heavily on agriculture. Finally, I am proud of the fact that my
father, who represented the 19th Congressional District before
me, served on the Committee on Agriculture for 7 years.
However, as a former principal, teacher, school board
president and superintendent of schools, I also know firsthand
the importance of proper nutrition to a child's performance in
school. As a result, I strongly believe we need to insure there
53
is a proper balance between our need to remove surplus
commodities from the marketplace and our need to provide school
children with healthy, nutritious meals which they will eat.
Therefore, we need to insure the current commodity system is
well-received by schools and that the commodities which are
provided to schools are acceptable to participating children.
As you are probably aware, at the present time only 46
percent of "paying children" participate in the National School
Lunch Program. To me, this is an indication that the meals
currently offered under the National School Lunch Program must be
improved so that they appeal to a larger number of children.
Part of the improvement in meals must be an improvement in the
types of commodities provided to schools. For example, students
who have not been exposed to salmon, figs and dates may not eat
them no matter how nutritious they are or how they are used by
school food service personnel. Children tend to consume what
they have been exposed to in their homes and many children have
not had experience with some of the commodities offered through
the commodity distribution system.
I do recognize that efforts have been made over the past
years to improve the current commodity distribution system and to
address the problems which were behind the development of the
original cash/CLOC pilot. I commend you on your initiatives in
this regard. Unfortunately, problems still exist -- problems
which have generated additional support for CLOC .
54
I am here today, however, in a spirit of cooperation. I
would like to see the current commodity program improved to the
point where we do not need the cash/CLOC alternative and I am
willing to work with you towards such an end.
In the meantime, however, I would like to acquire your
support for the cash/CLOC provisions contained in H.R. 8.
First, and foremost, there is the provision making the
current cash/CLOC sites permanent. As you will recall, Cash/CLOC
was developed at a time when there was a great deal of
dissatisfaction with the commodity distribution system. Some of
the major problems included: high storage and transportation
costs, receipt of commodities which were in poor condition and
did not fit into the menu or meet the tastes of students, and
commodities received were in a form which required a lot of
processing.
Under the Commodity Letter of Credit alternative, school
districts are provided with commodity letters of credit which
they use to buy foods that contain specific types of commodities
which the USDA distributes under the regular commodity
distribution program. In other words, those school districts
participating in CLOC purchase locally and in the form they
prefer, the same commodities which the USDA is providing to
schools through the Commodity Distribution program. Under the
cash option, school districts receive cash in lieu of
commodities .
55
Participants in the cash/CLOC program have the option of
dropping out of these alternative projects at any time. However,
none of the sites is currently interested in returning to the
current system until such time as their original concerns have
been addressed. They are not set up to participate in the
current system and do not have the storage space to accommodate
the commodities they would receive. Yet, every two to four
years, they face the uncertainty of what the next year will bring
and the problem of incurring costs related to returning to the
current commodity distribution system.
Mr. Chairman, according to participants in the cash/CLOC
option, the benefits of the program which are behind their desire
to continue to use these alternatives, include:
1) the removal of thousands of pounds of meat, vegetables
and fruits from the marketplace at their convenience without any
additional cost to the taxpayer;
2) a variety of menus, including those low in fat content,
can be planned without the interruption of unexpected commodity
deliveries ;
3) the conversion of administrative cost savings to
additional menu options;
4) the ability to purchase commodities in a form most
preferable to children -- including the ability to purchase
commodities which reflect the regional, cultural and religious
food preferences of students -- that cuts down on plate waste;
56
5) the increased ability to cut fat from the menu and serve
fresh fruits and vegetables;
6) decreased reliance on canned fruits and vegetables;
7) more efficient operation of school kitchens due to
elimination of the necessity of dealing with commodity deliveries
and the time necessary to transport them from school to school;
8) the ability to serve a more diverse menu to students
because they are not trying to use up allotments of commodities
received under the regular commodity distribution system;
9) the ability to support locally owned-companies and state
agriculture;
10) increased student participation;
11) the ability of the district to control the type of
products they buy and delivery times during the year;
12) reduced need for large dry storage and freezer space;
13) the ability to limit increases in the cost of the
school lunch and breakfast programs; and,
14) the ability to receive adequate supplies of commodities
to serve all students and to purchase commodities which do not
require special processing or are labor intensive.
Perhaps this list can be used as an initial starting point
from which we can work together to improve the current commodity
distribution program.
57
Mr. Chairman, I have actually heard from a large number of
school food service directors who are interested in becoming a
cash/CLOC site.
At this point, however, I am not seeking an expansion of
cash/CLOC sites. Rather, I just want to provide the current
cash/CLOC sites with peace of mind and assure them that they may
continue to operate alternative programs until such time as they
decide to drop out. In the meantime, I would like to work with
you to improve the current commodity program to the point where
current cash/CLOC sites would be more than willing to return to
the current system.
I am also interested in allowing all schools to use CLOC to
increase the number of fresh fruits and vegetables in the school
meal program and have included such a provision in H.R. 8.
Part of our effort to improve the nutritional content of the
School Lunch and Breakfast Program will be to support the
Department of Agriculture's efforts to increase fresh fruits and
vegetables served to children participating in the School Lunch
Program. During hearings held by USDA prior to the development
of their new nutrition objectives for schools, they heard from
witnesses who requested an increase in fresh fruits and
vegetables in the school meal programs and requested increased
purchasing flexibility for local school food service authorities.
In my view, the Commodity Letter of Credit (CLOC) will provide us
with the best possible mechanism to accomplish this goal until
USDA is able to do so through the current system and in a manner
58
acceptable to schools. Through the CLOC program, schools will be
able to purchase fruits and vegetables locally, thus insuring
they are fresh and in quantities most easily utilized by school
food service personnel .
I would like at this time, to provide you with a few
examples of why we currently need an alternative mechanism to
increase fresh fruits and vegetables in school lunch programs:
1. One school district was recently informed that their
bonus commodities -- fresh apples, pears and grapefruits -- would
arrive at the distributors the week before spring break. This
would not have happened had the school purchased these
commodities with a CLOC. The prospect of spoilage was great
under these circumstances.
2. A school in California received fresh oranges, of which
more than 50 percent had to be discarded due to molding.
3 . A school district in Pennsylvania received cases of
fresh pears (40 lbs per case) and found that there was not one
usable whole fruit in the case. This same school also received
potatoes which were unusable but for which they had to pay a
delivery fee and then dispose of them -- and still had them
charged against their allocation.
4. A school district in Nevada shared with me their
experience with fresh tomatoes under the current commodity
system. In summary, to use the amount of tomatoes this
particular district was allocated would have required them to
serve one-half cup of fresh tomatoes to every child every day for
59
a two-week period. Since this was not acceptable and they could
not accept part of what was offered, they decided not to accept
the product at all.
5. A school district in Pennsylvania received a shipment of
apples in 1994 which had no taste and most of which were
discarded by students. If we want to improve the nutrition
quality of school meals, we have to serve items students will
eat .
These are but a few of the examples I have received from
school districts with respect to problems with the current
commodity system and the distribution of fresh fruits and
vegetables .
I would like to point out, however, that the legislation is
optional and schools do not have to participate. In addition,
the provision in H.R. 8 only allows schools to use 10 percent of
the 14 cents per meal in entitlement commodities to purchase
fresh fruits and vegetables. Since approximately 20 percent of
the 14 cents per meal is in the form of fruits and vegetables,
this would only permit schools to use one-half of the normal
amount for fresh, allowing for the receipt of additional fruits
and vegetables in canned or frozen form.
Also, it would not be my intention that schools use a fresh
fruit and vegetable CLOC to replace funds they are already
spending on such commodities. Rather, the goal of the provision
is to increase the amount of fresh fruits and vegetables in the
60
school lunch program. This option would also be administered
through the current state commodity distribution system.
Finally, Mr. Chairman, H.R. 8 provides for a one-state CLOC
demonstration to answer for once and for all the question of
whether or not CLOC can effectively remove commodities from the
marketplace at a rate comparable to the current commodity
distribution system. For years, we have heard the criticism that
the current project is not large enough to provide us with
definitive information as to the effectiveness of CLOC. Yet,
there has been opposition to expanding the current demonstration
project to include additional sites. This provision of H.R. 8
would only take effect if a state was able to obtain approval of
80 percent of local school food service authorities to undertake
the demonstration project. It would be operated by the commodity
distribution entity within the state and would only be in effect
for the authorization period of H.R. 8.
Mr. Chairman, I understand the Department of Agriculture is
opposed to any provisions dealing with the inclusion of cash/CLOC
in H.R. 8. However, one of their arguments, that their
purchasing power is greater, may not be legitimate in some
instances. I have heard from school districts in some parts of
the United States that while USDA may purchase commodities at
lower prices, they end up costing more once they have been
processed into usable form -- and often have higher fat content
than commodities purchased directly from vendors. Examples
provided by the Michigan School Food Service Association include
61
breaded chicken nuggets, which were found to be 8 grams higher in
fat content when purchased through the commodity warehouse than
through a vendor. In addition, the Michigan School Food Service
Association has found that breakfast egg biscuits and fruit pies
cost more when purchased through the commodity warehouse than
through a vendor. Breakfast egg biscuits cost 33 cents each when
purchased through the warehouse and 23 cents each when purchased
from a vendor. Fruit pies cost 19 cents each when purchased
through a warehouse and 16 cents when purchased through a vendor.
From Pennsylvania, I received the following examples. The end
cost of chicken nuggets using USDA commodities was $1.83 per
pound, while the cost from a vendor was $1.68 per pound. The
cost of turkey roll using USDA commodities was $1.42 per pound,
while the cost from a vendor was $1.37. The cost of wafer steak
using USDA commodities was $2.05 per pound, while the cost from a
vendor was $1.62 and, finally, the cost of hamburger patties was
$1.90 per pound while the cost from a vendor was $1.40. In times
when schools are closely watching their budgets, this certainly
is another area which must be addressed in any commodity reform
proposal .
Mr. Chairman, I understand that Barry Shutt from the
Pennsylvania Department of Agriculture, Bureau of Donated Food,
is going to testify later concerning their views on the CLOC
provisions in H.R. 8. I would like to point out that in the
audience we have representatives from the Pennsylvania School
Food Service Association. Their views may differ somewhat from
10
62
Mr. Shutt's and you may want to ask them how they feel about the
current commodity distribution system so you have a clear picture
of how both the beneficiaries of the system feel about its
effectiveness .
As I indicated earlier, I want the system to help both
school children and the agriculture community. However, as you
can see there are problems which have the effect of turning
recipients away from the current commodity distribution program.
When this happens, we all lose.
The CLOC amendments contained in H.R. 8 will help address
these problems in the short term and I assure you I will work
with you over the next few years to improve the current system so
that each and every school participating in the national school
lunch system is more than willing to participate.
I thank you again for allowing me to testify before your
Committee and look forward to working with you in the future.
11
63
TESTIMONY OF ELLEN HAAS
ASSISTANT SECRETARY
FOOD AND CONSUMER SERVICES
U.S. DEPARTMENT OF AGRICULTURE
BEFORE THE SUBCOMMITTEE ON DEPARTMENT OPERATIONS
AND NUTRITION
COMMITTEE ON AGRICULTURE
U.S. HOUSE OF REPRESENTATIVES
JUNE 9, 1994
I am delighted today to be here to discuss USDA's vision for the future of the
nation's school meal programs and how the commodity programs play an important role in
advancing our goals for healthy school meals.
This week, the Department announced a comprehensive, integrated four-point
framework for action to fundamentally update and continuously improve school meals.
Central to this initiative is maintaining the integrity of the commodity program, while making
needed improvements.
Our School Meals Initiative has one simple goal: healthier children.
President Harry S. Truman established the National School Lunch Program in 1946 in
response to the young men who wanted to be soldiers during World War II, but suffered
from malnutrition. The program was defined then as "a measure of national security, to
safeguard the health and well-being of the Nation's children and to encourage the domestic
consumption of nutritious agricultural commodities."
64
The mandate has not changed, but the science of nutrition has.
And our programs have not kept up.
With our School Meals Initiative for Healthy Children, we are updating the nutrition
standards in our school meal programs to meet health objectives. Our four-point plan
includes regulatory changes and departmental actions:
1. EATING FOR HEALTH: Nutrition standards will be updated to include the
Dietary Guidelines for Americans by the 1998 school year,
2. MAKING FOOD CHOICES: We will introduce new ways to appeal to
children's taste and promote their health, through nutrition education, training
and technical assistance,
3. MAXIMIZING RESOURCES: By marshalling available resources and
strengthening partnerships with state and local cooperators, USDA will
improve the nutritional profile of commodities,
4. MANAGING FOR THE FUTURE: We will reduce paperwork burdens by
using technology, streamlining administrative procedures, and emphasizing
flexibility.
65
Mr. Chairman, updating the nutrition standards for school meals is our national health
responsibility. Moreover, our proposed changes to the National School Lunch and School
Breakfast Programs reinforce President Clinton's priorities for health care reform and
government reinvention.
In the National School Lunch Program (NSLP), federally donated commodities
obtained through the operation of the price support provisions of title II of the Agricultural
Act of 1949 (the 1949 Act) and through the surplus removal provision of section 32 of the
Act of August 24, 1935 (section 3 and section 6(a)) of the National School Lunch Act
(NSLA) represent almost 20 percent of the food purchased. The meal served to more than
25 million students in more than 92,000 schools each day is the result of a cooperative effort
between the farmer/producer, USD A, and school food authorities.
As we change our school meals to promote the health of children, the integrity and
continued improvement of our commodity programs is central to achieving our goals. The
Department, therefore, feels that the reauthorization or expansion of cash in lieu of
commodity demonstration (CLOC) demonstration project is unnecessary.
Through our School Meals Initiative for Healthy Children, we are taking several
important steps to improve the commodities obtained through the commodity purchases.
66
Working together, Food and Nutrition Service (FNS), Agriculture Marketing Service
(AMS), and Agriculture Stabilization and Conservation Service (ASCS) are part of a recently
formed USDA Commodity Improvement Council. The Council will promote the health of
school children by improving the nutritional profile of USDA commodity offerings, while
maintaining the Department's mandated support of domestic agricultural commodities and
producers under the 1949 Act and Section 32. The Council will enhance coordination among
the three agencies within USDA responsible for obtaining and using these commodities. The
Department is committed to a systematic, comprehensive review of current commodity
product specifications.
By encouraging regional and seasonal purchases, we will promote local agriculture
production, and forge new links with local farmers.
And I am especially pleased to say that, as part of our new initiative, USDA will
provide nutrition labeling on food including our commodity products and institutional
packages, that go to schools. This information will provide needed information for food
service professionals as they plan more healthful menus.
Beyond those specifics proposed in our School Meals Initiative for Healthy Children,
the Department has already taken steps to improve the nutritional profile of selected
commodities offered to schools.
67
We are particularly proud of the reductions we are achieving in fat and sodium. For
example, bulk ground beef is currently available with an average fat content of 19 percent --
as compared with the commercially available product which averages around 30 percent fat.
Ground beef patties with a fat content of 10 percent are also being offered to schools. For
example, the variety of poultry products has been expanded and now includes frozen ground
turkey, turkey sausage, and turkey burgers with an average fat content of 1 1 percent, and
low-fat, low-skin all-meat chicken nuggets and chicken patties.
And as this committee knows, Mr. Chairman, last year the Department doubled the
amount of fresh fruits and vegetables offered to schools along with increasing the variety
available.
Currently, the Department is testing low-fat mozzarella cheese with a 7 and 10
percent fat content as compared with a 20 and 25 percent fat in regular mozzarella.
Reduced-fat cheddar cheese with a fat content 40 percent lower than regular cheddar is being
tested in Indiana schools. Reduced-fat salad dressing has also been tested, and preliminary
results are being analyzed.
Using the Department's purchasing power, we believe that we can encourage the
market to develop new products that will provide healthier food to schools. New products
can be available sooner, and potentially at lower cost to consumers, because of the
Department's buying power.
68
Mr. Chairman, in your invitation to me you asked about our views on the Commodity
Letter of Credit provisions of H.R. 8. These provisions extend and may greatly expand the
Commodity Letter of Credit Pilot Program.
As I said earlier, I firmly believe that because of the many improvements that we
have made — and are continuing to make - in the commodities made available to schools
under section 32 and the 1949 Act, there is no reason to extend CLOC/Cash. Indeed, it is
important that we preserve the integrity of these programs.
The CLOC pilot program began in response to complaints in the 1970's that the
commodity system was not keeping pace with the needs of the school lunch program. CLOC
funds were diverted from the funds available under section 32 and the NSLA.
One of the primary goals of the 1949 Act and section 32 commodity programs is to
support the price of U.S. agriculture commodities by means of price support operations and
removal of surplus commodities. The positive market effect of these commodity programs is
most important to retain. The original CLOC evaluation demonstrated that the food value of
the commodities offered by the Department was worth two to three percent more than food
purchased locally with CLOC funds, in part because schools purchased more highly
processed items with their CLOC vouchers.
69
The market impact of agricultural price support and surplus removal programs is
likely to be more pronounced where the quantity of product removed from the market
represents a substantial portion of the total market for that commodity.
Also, very important to the Department is the domestic origin of food purchases, a
central guiding principle of these commodity purchase programs. When USDA supports the
price of U.S. agricultural commodities under its price support and surplus removal
operations, it acquires commodities directly from American producers and processors and
can ensure that the end product is a domestic agricultural product. Both GAO and USDA
found that there is no such assurance that end products are domestic in the CLOC program.
The Department has run the CLOC Pilot programs for nearly 14 years in 25 of the
nearly 20,000 school districts in the United States. During that time it has conducted two
evaluations of the system, and the pilot projects have been extended 6 times through
legislative action. The Department has spent over $8 million to administer and evaluate the
projects in that time.
H.R. 8, the Healthy Meals for Healthy Americans Act of 1994, which was recently
reported by the House Committee on Education and Labor, provides for permanent
authorization of the CLOC pilot/demonstration projects. The Department sees no additional
information being gained from the current pilot systems, and believes that extending them
70
will continue the administrative costs borne by USDA to administer the projects without any
additional benefit to our agriculture producers or school partners.
Secondly, H.R. 8, as reported, would add a statewide demonstration project in a State
where at least 80 percent of the School Food Authorities agree to participate. A statewide
demonstration has not been attempted previously, but implications for state administration
have been addressed in previous studies. It is unlikely that a one-state study would be
effective at yielding results that could be extrapolated for nationwide policy
recommendations. In addition, start-up and implementation costs would be considerable, and
funding for these costs are not specifically authorized by the bill.
Finally, H.R. 8 allows all schools to use CLOC for 10 percent of their entitlement
commodities for the purchase of fresh produce. This provision would allow for a nationwide
optional CLOC system that would be a substantial disruption to the current administration of
the commodity programs, and it is not clear that the provision would accomplish its goal of
assisting schools to increase the offerings of fresh produce in their meal programs.
The amount of funds proposed to be set aside for new CLOC's amounts to about 2
percent of total food acquisitions. The most recent data on this topic indicates that fresh
produce acquisitions amount to about 4 percent of all food served. If school food authorities
are given such a letter of credit at the beginning of the school year to purchase any fresh
71
fruits and/or vegetables, the letters of credit would likely displace local funds used to
purchase fresh foods rather than increasing fresh offerings.
The paperwork to administer such a system would be substantial. At the same time a
nationwide optional CLOC system would produce substantial disruption and administrative
complications and paperwork. Dual systems of administration would be needed, but it would
not be possible to determine with any certainty how much food the Department should buy,
and how much would be purchased through CLOCs.
In short, I believe that, through all of our efforts, the Department is better-suited than
school systems to align the twin objectives of promoting nutrition and market stabilization.
In closing, Mr. Chairman, let me say that we face a historic challenge to improve our
school meals program, and we are responding to that challenge with our School Meals
Initiative for Healthy Children. As we make these changes, we must also take our
commodity programs into the next century. By preserving the viability of our commodity
programs, we have the opportunity to promote the health of children, and simultaneously
benefit the American farmer. Under Secretary Espy's leadership, we are committed to doing
both.
I will be pleased to answer any questions you or members of the Subcommittee might
have.
72
Testimony of the
American School Food Service Association
before the
Committee on Agriculture
U.S. House of Representatives
June 9, 1994
Mr. Chairman, Members of the Committee, I am delighted to represent the American School
Food Service Association here today. I am Marilyn Hurt, supervisor of school nutrition programs for
LaCrosse, Wise, and chair of ASFSA's Public Policy and Legislative Committee.
The Commodity Distribution Program has been a part of the school lunch program since the
beginning. Indeed, USDA was distributing commodities to school food programs prior to the
enactment of the National School Lunch Act in 1946.
On March 8, 1980 Congressman Bill Ford and Congressman Bill Goodling introduced H.R.
6841 to provide for the issuance of commodity letters of credit (CLOC) in lieu of the purchase and
distribution of USDA commodities. This was the first "CLOC" legislation and it was referred jointly
to the Committees on Education and Labor and Agriculture. The Committee on Education and Labor
rejected H.R. 6841 on a tie vote. Out of deference to that vote, however, later that same year, on
December 2, 1980 the Congress appropriated $1,975 million to conduct a three year pilot project in
60 school districts to test all cash assistance and the commodity letter of credit program.
The USDA CLOC pilot program continues today as a result of several congressional
extensions in the pilot program.- Throughout this entire period of time-the American School Food
Service Association continued to support, and supports today, the USDA Commodity Distribution
Program.
1
73
Approximately 20 percent of the federal support for the National School Lunch Program is in
the form of USDA commodities. The commodities are an important contribution to the economic
well being of local school lunch and breakfast programs throughout the country. In addition to the 14
cents per meal in entitlement commodities we receive bonus commodities, when they are available.
During the mid 1980's, when our program suffered drastic budget cuts, we relied heavily on ample
bonus commodities to reduce our food costs and provide economic stability to our programs.
In addition to the economic support provided by the Commodity Distribution Program,
commodities have been a part of the historical roots of the school lunch program, one of the stated
purposes of the program, and a part of the political base of the school lunch program. Section 2 of
the National School Lunch Act, the declaration of policy section, provides that "it is the policy of
Congress, as a measure of national security, to safeguard the health and well being of the nation's
children and to encourage the domestic consumption of nutritious agriculture commodities — "
(emphasis added). It is interesting to note that in the 48 year history of the National School Lunch
Act, the statute has been amended numerous times. Section 2, however, has never been amended and
the stated policy of the school lunch program remains today as it was enacted on June 4, 1946.
Some might argue that from an agricultural perspective, the importance of the school lunch
program is greater today than it was in earlier years. As you know, a number of agricultural
organizations wrote to President Clinton on March 14, 1994 urging his support for an increase in
commodity purchases for domestic distribution. Their thesis was that under GATT, domestic
agriculture price supports will-be lowered. -However, GATT allows-the-Dnited States (and all other
parties to the treaty) to continue to support domestic agriculture through the purchase and distribution
of domestically produced commodities.
74
One of the specific CLOC provisions in H.R. 8, a new idea, would be to allow schools to use
10 percent of their commodity entitlement for CLOCs for fresh fruits and vegetables. ASFSA is
committed to the Dietary Guidelines for Americans and has endorsed all three versions, including the
one released in 1990, which for the first time applied to children.
We are concerned however, about this provision because it tells us how to achieve the goal of
meeting the dietary guidelines rather than focus on the goal itself. This provision could bring more
paperwork to a program that has too much already. The administrative costs for this very small
provision would not be a wise use of our limited resources.
Indeed, one of our major concerns with CLOC is the administrative complexity. Currently,
the CLOC pilot programs are administered by Virginia Polytechnic Institute, which has been able to
provide all of the pilots with significant personal attention. That kind of hands-on assistance would
not be available if there were thousands of CLOCs, circulating around the country for different
products and with different delivery times. There is a potential that this could create additional
administrative costs.
One of the major goals of H.R. 8 is to lower the administrative burdens and costs suffered by
the school lunch and breakfast programs. The Education and Labor Committee included many strong
provisions to reduce paperwork and increase flexibility in H.R. 8. We fear that the fruit and
vegetable CLOC provision would go in the opposite direction.
75
It is equally very important to point out that those schools which have experimented with the
CLOC pilot have, by and large, been satisfied with the program. Indeed, some CLOC sites are more
than satisfied. They believe that CLOC is far superior to the commodity program. Under CLOC,
commodities do not have to be stored and schools don't have to worry about whether USDA will
deliver the commodities on time. We also appreciate and respect the fact that the Members of the
House Education and Labor Committee, who are strong and committed allies of the School Lunch and
Breakfast Programs, feel that CLOC would work better from a local school perspective.
In many ways, Mr. Chairman, the CLOC issue represents a conflict between two important,
yet different, policy objectives. ASFSA will almost always support giving local school food service
administrators greater flexibility and more options so that we might decide for ourselves how best to
run our local programs.
In the area of CLOC and commodities, however, the goal of local flexibility comes up against
the national policy objective of helping domestic agriculture. If the Congress were to terminate the
Commodity Distribution Program in favor of either cash or CLOC it would be a fair question to ask
whether the school lunch and breakfast programs should remain at the Department of Agriculture. It
is not my intention to answer that question today, but rather to recognize the larger policy
implications of terminating the Commodity Distribution Program.
Further, if we are going to sever our link with agriculture, we should also ask whether or not
we should move beyond CLOC and go straight -to cash. Since 1981 -when the CLOC pilots started,
we have seen federal support for the school lunch programs slashed and the regulatory burden
increased. If Congress were to decide that the school lunch program was no longer important as an
76
agricultural program, then perhaps we should not impose the administrative burden of running the
CLOC program, and should just give school districts cash.
Mr. Chairman, we have been talking about CLOC and cash and commodity reform for more
than a decade. We actively supported the Commodity Distribution Reform Act of 1987, which
improved the commodity program. The commodity program is far superior today to what it was in
the 80s.
Our Association supports the national policy objective of helping domestic agriculture and
believes we can work with Congress and USDA to continue to improve the commodity program in
ways that will benefit both agriculture and the nation's children.
I appreciate the opportunity to be here with you this afternoon. I will be delighted to answer
any questions that you may have.
77
Testimony of the
American Commodity Distribution Association
before the
House Committee on Agriculture
Subcommittee on Department Operations and Nutrition
June 9, 1994
Good afternoon, Mr. Chairman, my name is Catherine Miller, and
I am President of the American Commodity Distribution Association
(ADCA) . I am also Chief of the New York Bureau of Government
Donated Foods, which distributes federally donated commodities
through eight of the Department of Agriculture's food programs. I
appreciate the opportunity to testify before the Committee on the
Commodity Letter of Credit (CLOC) provisions of H.R. 8, the Child
Nutrition Reauthorization bill.
The American Commodity Distribution Association is a non-
profit professional association whose members include state and
territory commodity distribution agencies, agricultural
organizations, food processors, warehouses, food banks, commercial
distributors and transportation companies, recipient agencies, and
individuals. We work closely with our members, the Department of
Agriculture, allied organizations, and various hunger relief and
advocacy groups to improve the Commodity Distribution Program and
consistently meet the changing needs of its recipients.
Mr. Chairman, ACDA's position on the CLOC program is simple —
we oppose any extension or expansion of the CLOC program, and we
oppose the CLOC provisions included in H.R. 8. It is our opinion
that the current pilot projects should return to the Commodity
Distribution Program when the authority for these pilots expires
later this year.
The CLOC provisions of H.R. 8 would permanently reauthorize
the existing cash and CLOC pilot projects, establish one state-wide
CLOC pilot if requested by eighty percent of the schools, and allow
schools to receive ten percent of their commodity entitlement as a
CLOC for fresh fruits and vegetables. Our opposition to these
provisions does not mean that we do not support the goal of
increasing the use of fruits and vegetables in the School Lunch
Program. On the contrary, we support that goal. We simply believe
that a specialized CLOC for fresh fruits and vegetables is neither
the most effective nor the most efficient means of achieving this
goal.
The CLOC pilots characterize what we hear all too often about
government programs, especially agriculture programs: that a pilot
program is nearly impossible to eliminate after it is initiated.
As you know, the CLOC pilot projects were first commissioned by the
Fiscal Year 1981 Agriculture Appropriations bill, and have been
extended several times. The authority to operate these pilots will
78
expire this year unless it is extended again. We believe it is
time for the sun to set on these pilots.
The Commodity Distribution Program is better suited to meet
the needs of schools and American agriculture than the CLOC
program. The Commodity Distribution was established in 1935 to
serve a dual purpose: to provide nutritional assistance to children
and help provide market stability for the purchased commodities.
Because of this dual role, the Commodity Distribution Program has
the unique ability to spend and reap a benefit from the same dollar
twice. Once when it purchases commodities, and a second time when
these commodities are donated to schools and other outlets.
Last month, ACDA and sixteen other agricultural groups wrote
to Secretary Espy outlining our concerns about the fate of the CLOC
program. This letter outlined the basis of ACDA's opposition to
the CLOC program, which is very similar to USDA's rationale for
opposing this program.
We are pleased that Secretary Espy has taken a position
opposing the CLOC pilots as did his predecessor, Secretary Madigan.
The Department's official opposition to the CLOC pilots was
included in its analysis of H.R. 8, which was sent to the House
Education and Labor Committee on May 16.
I would like to summarize briefly our reasons for opposing the
CLOC program and the CLOC provisions of H.R. 8:
1. The Commodity Distribution Program purchases products at
the lowest possible price and in such large quantities that it
provides economies of scale the CLOC program simply cannot offer.
Coupled with the Department's massive buying power, these purchases
guarantee that federal money is spent as economically as possible.
CLOC purchases, being at the consumer end of the market, are more
costly, and cannot possibly match USDA's buying power, even when
made by large school districts.
2. The Department's purchases have a significant stabilizing
effect on the agricultural market. Any expansion of the CLOC
program would hinder not only the Department's ability to provide
nutritious products to the child nutrition programs, but also its
ability to stabilize agricultural markets.
Further, the Commodity Distribution Program will be of even
more importance to American agriculture after implementing
legislation for the General Agreement on Tariffs and Trade (GATT)
is passed. GATT would restrict the Department's ability to support
American agriculture and protect the market from unavoidable price
fluctuations. However, GATT specifically exempts "Green Box"
programs from being defined as trade barriers. "Green Box"
programs include several domestic food assistance programs served
by the Commodity Distribution Program, such as The Emergency Food
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79
Assistance Program (TEFAP) . Indeed, funding levels for these
programs should be reviewed and possibly increased if Congress
wants to maintain the Department's ability to stabilize markets in
a manner that is acceptable under GATT.
3. Rural areas and small schools districts would be at an
economic disadvantage by using CLOC. The Commodity Distribution
Program provides products and services at equal costs to school
districts regardless of size and location. Small rural school
districts in every state receive products at the same value as the
larger cities in the state. Under CLOC, larger cities would
benefit from lower transportation costs and leveraged buying power,
while the smaller districts would be forced to pay much more for
comparable services.
Despite its reputation as an urban state, New York has many
rural areas, and some are so small and remote that schools have
difficulty identifying vendors to serve them. Providing such
districts with a CLOC would be of no benefit, and would only serve
to increase their frustration.
4. The CLOC program is an additional administrative expense
for the School Lunch Program. The current CLOC pilots rely on a
duplicitous administrative structure that diminishes the funds of
the School Lunch Program as a whole. The Department estimates that
expanding the CLOC program would incur additional costs. If a
state wide CLOC is created, as proposed by H.R. 8, the Department
estimates the program would cost up to $2 million to operate. This
expense would be an unnecessary drain on the Department's
resources, and is money that could be better spent elsewhere. As
we continually try to reduce costly administrative burdens, this is
a step in the wrong direction.
5. The School Lunch Program is the backbone of the Commodity
Distribution Program. If the CLOC program is expanded and more
schools use a CLOC option, the infrastructure provided by the
Commodity Distribution Program would be weakened significantly. If
this does happen, we need to ask ourselves: What will happen to
the smaller programs served by the Commodity Distribution Program?
TEFAP, the Soup Kitchens and Food Banks program, the Food
Distribution Program for Indian Reservations, and the Department's
disaster assistance efforts would be weakened by the expansion of
the CLOC program. Disaster assistance is a perfect example. As we
have learned in recent years, commodities in storage at recipient
agencies or in warehouses for schools are often the first response
to natural disasters.
6. The Commodity Distribution Program can guarantee that the
purchased commodities are domestically produced, but the CLOC
program cannot make a similar guarantee. Although CLOC purchases
are required to follow the same domestic content policy, attempts
to assure domestic content are burdensome, costly, and uncertain.
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In a time when we are attempting to reduce the paperwork burden on
schools, the CLOC program would simply provide another avenue for
reviews, verifications, and undue emphasis on the administrative
aspects of the program to the detriment of the real focus, feeding
hungry children.
Program Improvements
In 1987, Congress passed the "Commodity Distribution Reform
Act and WIC Amendments of 1987", Public Law 100-237. This law
brought about monumental improvements in the program, both by USDA
and by state distributing agents, like myself. One significant
improvement was in the area of quality. Commodities purchased by
USDA have shown significant improvement in recent years in terms of
their nutritional qualities. Fat, sodium and sugar are routinely
reviewed, and our schools find that USDA commodities form the basis
for sound, nutritional meals for children. Many schools have told
me that it is not possible for them to purchase the same quality
that the Department provides, and their costs would be higher even
when purchasing products of lesser quality. Today, foods purchased
by USDA are universally recognized as being the best money can buy.
Not only has the nutritional profile and variety of products
improved, but new packaging better meets the needs of recipients
and the delivery system has become more timely and responsive.
Another major improvement was the creation of a National
Advisory Council on Commodity Distribution. The Advisory Council
brought together representatives of all groups served by the
program to continuously identify additional areas where services
can be improved. As a result of the Advisory Committee's
initiatives, recipients, especially school districts, are more than
satisfied with the operation of the current program.
Summary
Mr. Chairman, ACDA believes that the Commodity Distribution
Program is the most economical system for providing schools with
the nutritious products they need. In recent years, the
cooperative effort between the Department and the agricultural
community has improved the distribution program and its products to
better meet the demands of recipients. These changes have helped
and will continue to help the program meet its traditional goals of
providing nutritional assistance to schools and support of American
agriculture — two goals the CLOC program can never hope to
realize.
The Commodity Distribution Program still works, and there is
no question it will continue to evolve and improve its services,
even with the implementation of the Dietary Guidlines that were
announced yesterday. The Dietary Guidelines are an important part
of the Department's mission, and ACDA, ASFSA, and many other groups
support these Guidelines. Some would argue that the Commodity
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81
Distribution Program is incapable of meeting these goals, but that
simply is not true. The Commodity Distribution Program has proven
that it is capable of changing to meet the evolving needs of its
recipients, and is well suited to deliver products that adhere to
the dietary guidlines. The Commodity Distribution Program can and
will meet any challenge that the implementation of these guidelines
present.
Thank you again for the opportunity to testify. I would be
happy to answer any questions you may have.
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82
STATEMENT
OF
PAT HOLSTEIN
FOR THE
COMMITTEE ON AGRICULTURE
UNITED STATES HOUSE OF REPRESENTATIVES
ON CLOC
AN ALTERNATIVE TO COMMODITIES
JUNE 9, 1994
Mr. Chairman, Members of the Committee, my name is Pat
Holstein and for the past 15 years I have been Food Service
Director of Lexington School District 3 in Batesburg-
Leesville, SC. Batesburg-Leesville is located near the
center of the state about 35 miles south of Columbia, the
state capital. This is a rural area and as far as
agriculture goes, the main money crop is peaches. Lexington
District 3 is a small school district with only 2400
students and 4 schools. An average of 1850 students eat
lunch each day and 725 eat breakfast. We serve 4 and 5 year
old kindergarteners as well as grades 1-12.
Fifteen years ago commodities came in without a
schedule that I could determine. They simply arrived, and
the cafeterias had to find some way to store them. Then the
cafeteria manager had to find some way to prepare them so
the kids would eat them. Most of these commodities were in
a form that was very labor intensive. The thing that really
concerned me about commodities was the attitude the
cafeteria workers had. They felt they were "free", they
were very careless in the use of them, wasted them, and
complained constantly about them. They never thought of
them as "costing money."
When I was asked by South Carolina's commodity chief,
Ramon Aycock, at the time, to take part in the CASH\CLOC
Pilot Study, I felt it would be a wonderful challenge and
might help the food service program out financially. I knew
the cafeteria workers would think of CLOC food as "real"
food and be more careful in its use.
I was right on both counts . The CLOC money is sent
quarterly, as most of you know. In other words instead of
having that 14 cents a meal tied up in storage, the district
has up-front money to buy food as USDA does, but in a form
useable right then. For instance, instead of whoLe turkeys,
turkey rolls or roasts, the district buys a lot of ground
turkey. It's cheap, in a useable form, and low in fat.
Several years ago, I was teaching a Red Cross course
called "Better Eating For Better Health" to the cafeteria
managers. This course was all about cutting the fat, sugar,
and salt in the diet. As a result of this six week class,
we began to change our recipes to reflect these "new" ideas.
Without saying one thing to the students or teachers, we did
a few simple things.
1. Reduced the sugar by 1/3 in foods and began
offering more fresh fruits as desserts.
2 . Reduced the salt in foods and removed salt shakers
from tables .
3. Began using more fresh and frozen vegetables.
When USDA came out with the latest food pyramid and
suggested keeping the fat to 30% of the calories in our
lunch menus, we were already doing this in our cafeterias.
Approximately 15% of the money spent on food in our
cafeterias now is for fresh fruits and vegetables. With the
CLOCs received we can buy fresh, frozen, or canned foods.
The favorite vegetable in our schools is BROCCOLI--cooked or
fresh!
83
Children eat at school what they are used to eating at
home, so we try to educate the parents in nutrition as well
as the children by publishing menus in the local and State
Newspaper. These menus have been analyzed by some software
called Nutrikids, which has all the USDA recipes and
products and the nutritional data on them. Monthly menus
are sent home with each child.
What does all this have to do with CLOC?
1. The food, both CLOC and purchased is bid. The CLOC
food gives me more buying power. The food costs for our
district have not increased in several years, which keeps
our paid lunch price at $1.00 and $1.15 and $.50 for
breakfast. To have commodities shipped from the warehouse to
a cafeteria costs $1.75 a case or bag. With the food I bid,
this is included in the cost. When this $1.75 is added to
the cost of the commodity--my price is almost always as
cheap or cheaper.
2. Financially, Lexington District 3 Food Service stays
in the black. We're able to buy equipment and keep our
cafeterias attractive.
3. We are meeting the dietary guidelines.
4. We have a high participation in breakfast and lunch
because we can offer foods the kids will eat.
5. Our food inventory is kept at a reasonable level.
At the end of the year, we do not have a large food
inventory to worry about like we did when we had
commodities. Even with all the improvements made in
commodities, these commodities still come in at the very end
of the school year and have to be stored.
When Hurricane Hugo visited our state a few years ago,
we thought our area of the state would be affected. If it
had been, there was enough food available in our cafeterias
to feed 2000 lunches and 1000 breakfasts a day for 7 days.
With commodities there would have been a freezer, cooler and
storeroom full of food--but not in a form that could be
prepared easily.
Yes, we continue to get bonus commodities, but every
year they dwindle. Yes, I understand from other Food
Service directors that commodities have improved in the way
they are packaged and in acceptability. I think one "reason
for these improvements is the CASH\CLOC Pilot Program. I
realize we've been a thorn in your side at times, but maybe
USDA needed that I
If we are capable of buying over 90% of the food for
our cafeterias, why not buy 100%? Reproduced below are two
charts showing Lexington District 3's expenses and income
and the important part that CLOC plays .
84
Food Service 93 — 94
Q[i;<f?Q[ or Oto,,,i,.o0ili.o (0.5%)
ipsipSV (6i.n7„)
Student ^imclitu (paid and reduced) (
Student 3{lrealifast (paid mid
JVdult Jprealttaat (0.1%)
gi0..ll Jf....r1,eo (3.4%)
■ltd lutirli U.'i
J\f incellmteoiin (couutjt & state s
Food Service 93 — 94
S3oo.ooo.oa
£250.000.00
X200.00O.00
Snso.ooo.oo-
Snoo.ooo.oo
S50, 000.00
]£xi>euse*
So.ao
If ood QJ^C^Ct B*o 4£omntoditji ?£nutpineut <9ther!*{ermXltijti kt Ind Supplies
85
It is important to keep the CLOC/Cash option in H.R. 8,
even though it is included in H.R. 4221. This pilot program
deserves to be permanently authorized. It is an improved
program and deserves special consideration. It is a
wonderful way for a state to make comparisons on food costs
and acceptability of school lunches and breakfasts of CLOC
schools as compared to Commodity schools. Listed below are
several more reasons for permanent authorizing the CLOC/Cash
program.
1 . the continuation of the program reguires no
additional funding.
2 . CLOC has been one of the greatest impact on School
Food Service programs particularly with increased
participation, more flexibility, improved nutritional
awareness and provide children with acceptable meals with a
minimum waste. The need for food to come in different forms
has been tremendous. Our children receive the benefits.
3 . The CLOC program must spend their vouchers at the
same time the USDA is making their purchases -- this
relieves surpluses of specific farm products and meets price
support goals. Political ties can be far more reaching when
we purchase locally since we affect more farmers and
industries than when USDA purchases the food. CLOC program
still meets the farm support objectives and worked much
better for schools.
4. Since we bid, we had competitive prices on our CLOC
purchases and they were delivered at the same time as our
groceries without additional expense. We were able to
coordinate deliveries with menus, thereby giving us security
in planning. This saved on warehousing and storage.
5. In some cases we were able to serve foods purchased
with CLOC funds before commodity schools were notified they
were going to receive it. This has been prove.
Our concerns, yours and mine, have to be for the good
of the program. The study has proven, without a doubt, that
CLOC is a viable alternative to the present commodity
system. Please allow us the option of CLOC and extend that
option nationwide.
We are deeply grateful of your support for Child
Nutrition Programs. Please consider the positive effects of
the CLOC program. We have tremendous respect for the
Agriculture committee and trust you will consider what is
best for the National School Lunch Program.
The ease of the CLOC program and adaptability to our
needs warrant a hearty stamp of approval.
86
Commodity Distribution Coalition
Statement of the
COMMODITY DISTRIBUTION COALITION
Before the
Subcomlttee on Department Operations and Nutrition
of the
Committee on Agriculture
U.S. House of Representatives
on the
"Commodity Letter of Credit" provisions of H.R 8
June 9, 1994
Presented by:
Richard Pasco
Vice President of Government Affairs
National Pork Producers Council
Joel I
National Turkey Federation
(703)435-7208
i^lpjt CuSCQtDB
National Peanut Council
(703)838-9500
Judy Giflord
National Milk Producers Federation
(703) 243-6111
Beth Johnson
National Cattlemen's Association
(202) 347-0228
STEERING COMMITTEE
American Farm Bureau Federation
(202)484-3600
American Meat Institute
(703)841-2400
Olsson. Frank and Weeda. P.C.
(202)789-1212
Christine Nelson
United Egg Producers
(202) 842-2345
National Pork Producers Council
(202)554-3600
Allen Rlchsrd
National Farmers Union
(202)554-1600
Barbara Spsnglor
National Association of State
Departments of Agriculture
(202)296-8680
87
Mr. Chairman and Members of the Subcommittee:
My name is Richard Pasco, and I am presenting this testimony today on
behalf of the "Commodity Distribution Coalition." This coalition is an
informal group of agricultural associations that are strongly supportive of the
U.S. Department of Agriculture's commodity distribution programs, which
serves the dual purposes of providing the best possible nutrition for our
nation's school children and of helping stabilize U.S. agricultural commodity
markets.
We appreciate this opportunity to testify on the Commodity Letter of Credit
(CLOC) provisions contained in H.R. 8, a bill To amend the Child Nutrition
Act of 1966 and the National School Lunch Act." We have great concerns
about how the extension or expansion of the CLOC program would affect the
future viability of the USDA's commodity distribution programs.
Our coalition, which is representative of the agricultural community, is
opposed to the continuation of the CLOC program. When the authority for
the pilot sites testing the CLOC program and the cash alternative expire, the
sites should be returned to the commodity system. We believe that the
CLOC provisions of H.R. 8 threaten the long-term operational effectiveness of
the overall commodity distribution system.
Coupled with severe reductions in funding for commodity purchases under
The Emergency Food Assistance Program (TEFAP), the continuation or
expansion of the CLOC program would signal the beginning of the end for
this country's commodity distribution programs. USDA's ability to stabilize
agricultural markets through large volume purchases of commodities would
be seriously compromised without the assistance of a significant commodity
distribution program.
The commodity program will be even more significant now that the Uruguay
Round of the GATT is completed. With the successful conclusion of the
Uruguay Round, the United States will face both a reduction in tariff receipts
and a phase-down of direct price supports. Reductions in import tariff
receipts that are used to finance USDA commodity purchases and provide
direct funding to schools, will also effect the overall federal government
assistance available for our nation's food assistance programs. Any phase-
down of price supports and loss of tariffs will also make it more difficult for
the U.S. to support agricultural production.
It is also important to note that commodity purchases by the USDA only
represent about 20 percent of the food acquired for the School Lunch
Program. This leaves considerable flexibility to school districts which can
continue to use the vast majority of funds that are remaining for other
purposes, including labor costs and purchases of food locally.
88
Commodity Distribution Program
For nearly 60 years, USDA commodity distribution programs have provided
essential foods to numerous constituencies. These programs date back to
the enactment of P.L. 74-320, on August 24, 1935. Section 32 of this
statute provides that the Secretary of Agriculture may buy fruits, vegetables,
meat, fish, and poultry items under a surplus removal program for donation
to school food programs and other domestic food programs.
Section 416 of P.L. 83-480, enacted in 1954, gave the Secretary of
Agriculture additional authority to distribute to schools commodities
obtained through price support activities. Therefore, grains, dairy products,
vegetable oils, and peanut products are also available for distribution to
schools.
The statutory goal of the Section 32 commodity programs is to support U.S.
agriculture when markets are weak. Only 13 percent of Section 32 funds go
to directly support agricultural markets through the commodity program.
The rest is available as cash for the child nutrition programs.
Today, the central purchasing authority of USDA provides economical
commodities for the school lunch and breakfast programs, the soup
kitchens and food bank programs, the Food Distribution Program on Indian
Reservations, the Commodity Supplemental Food Program, and TEFAP.
The various USDA commodity distribution programs give the Secretary of
Agriculture an extremely effective tool that he can use in providing
assistance to America's agricultural producers. One of the major goals of our
agricultural policy has been to stabilize the "boom or bust" swings in the
farm economy. When markets are soft in a given commodity, the Secretary
can help boost market prices by purchasing the commodity that is
experiencing depressed prices. For many commodities, such as pork, beef,
turkey, chicken, eggs, peaches, apples, cherries and many others, the
commodity distribution program represents the only significant program
available to the Secretary of Agriculture as a market stabilizing mechanism.
USDA commodity programs have not only played a special role in the
development of agricultural policy, but have played an important role in the
development of this nation's nutrition programs. The commodities
provided for the school lunch meals, for example, have played a key role in
meeting the recommended nutritional needs of children, while keeping
costs down.
-3-
89
In recent years, the USDA and the agricultural community have worked
together to improve the distribution program and the nutritional profile of
products to meet the demands of recipients. By building on these
improvements, the program will be able to meet the changing needs of its
recipients and simultaneously support American agriculture.
Commodity Letter of Credit
Originally established in the FY 1981 Appropriations Act for Agriculture,
Rural Development and Related Agencies, the CLOC and Cash systems were
created in the form of pilot sites, so they could be evaluated as an alternative
to the commodity donation system in the National School Lunch Program.
The initial demonstration project mandated a three-year study of the CLOC
and Cash alternatives.
After a number of reauthorizations by Congress and years of on-going review,
it is clear that the commodity program now in place works better than the
CLOC /Cash alternative. The more than a decade long study has yielded no
compelling evidence sufficient to warrant Congress to again extend and even
expand the number of CLOC sites. Congressional termination of the CLOC
program is long overdue.
We strongly support the USDA's position opposing all provisions in H.R. 8
that make permanent the existing pilot projects that operate Cash in Lieu of
Commodities or CLOC systems or expand the number of CLOC sites. As
stated by the USDA "it is in the best interests of agricultural producers,
administrators of commodity distribution systems, and recipients of the
USDA's domestic commodity programs to retain the traditional commodity
programs."
Commodity Letters of Credit, or even cash given directly to schools, by
themselves, cannot match the buying power of a single federal department
(i.e. the USDA) in making large volume purchases of commodities. CLOC
purchases are made at the consumer end of the food pipeline and purchases
by the USDA are made at or near the producer end.
In addition. USDA's commodity program assures the domestic origin of
foods purchased, which is clearly a critical feature of the program. This
assurance is not possible when products are purchased at the retail level,
because current labeling requirements are not specific enough to provide
local purchasers with this information.
90
We have serious concerns about the long-term implications of Section 1 10 of
H.R. 8. If a whole state can opt out of the commodity distribution program,
the Secretary of Agriculture's ability to have a positive impact on the market
price of a particular commodity will be reduced over time, as the size of
USDA purchases shrink. Moreover, as the volume of commodities
purchased is reduced, the effectiveness of the commodity distribution
network in providing commodities to food assistance programs outside of
the school feeding program is jeopardized.
National School Lunch Program
The National School Lunch Program is one of the greatest beneficiaries of
the Commodity Distribution Program, with approximately 25 million school
children having access to commodities through this system. Altogether the
USDA provides nearly $5 billion in cash and commodities to about 92,000
schools nationwide.
As previously mentioned, the commodities provided for school lunch meals
have played a significant role in meeting the recommended nutritional
needs of children. We believe that agricultural producers are natural
partners with schools in providing nutritious foods for consumption. In that
vein, we are dedicated to the continued improvement in the quality and
variety of the products we make available for use in schools.
Negotiated Rulemaking
Section 103 of H.R. 8 also would require the Department of Agriculture to
use the negotiated rulemaking process before publishing any proposed
regulations addressing the nutrition requirements of the National School
Lunch and Breakfast Programs. We believe USDA has done an excellent job
in reaching out to seek comments from individuals and organizations
through regional forums that were held around the country.
Members of our coalition, however, have differing positions on the need for
negotiated rulemaking provisions of the bill. Some believe that use of the
Negotiated Rulemaking Act of 1990 would complement the effort to date, by
providing an opportunity for affected organizations to sit down and discuss
the specific points of new nutrition regulations, in order to obtain a
consensus based proposed rule.
Regardless of the approach to rulemaking, we all commend USDA for
undertaking the important initiative to reexamine the nutrition
requirements of the school nutrition programs in light of recent scientific
advances in this area.
-5-
91
The Emergency Food Assistance Program
Although not relevant to H.R. 8, we also want the Committee to know our
concern about budget cuts for The Emergency Food Assistance Program
(TEFAP). TEFAP is one of the commodity distribution programs that was
originally created to serve the dual purpose of eliminating farm surpluses
and providing nutritional assistance to needy Americans. TEFAP continues
to meet these goals, and has become an indispensible component in our
nation's fight against hunger.
TEFAP is the "last line of defense" for hungry Americans. It is a reliable
source of important commodities which enable food banks across the
country to increase the nutritious value of food packages and reach out to
those who fall between the gaps of other federal food assistance programs.
With minimal federal support, TEFAP is able to accomplish an essential
service through its public/private partnership and enormous volunteer
support.
Not only is TEFAP a crucial part of our nation's hunger efforts — it also plays
a vital role in disaster relief. When natural disasters occur, TEFAP
commodities are immediately available for those in need. Food stamps are
worthless when grocery stores are destroyed or transportation becomes
nearly impossible. The TEFAP network is essential to a quick and
coordinated relief response. From Hurricanes Hugo and Andrew, to the
Midwest floods, to the San Francisco and Los Angeles earthquakes, TEFAP
has provided food to victims of natural disasters that would not have been
otherwise available.
We believe a functional TEFAP initiative together with an overall healthy
commodity distribution system are vital components in our efforts to
maintain a strong and competitive agricultural sector.
Conclusion
We believe that any extension or expansion of the CLOC program is a step in
the wrong direction. Therefore, we urge this committee to reject the
provisions of H.R. 8 that further expand the number of CLOC sites.
It is time to recognize that the CLOC program has been sufficiently reviewed
after a decade of experimentation. We believe the day has come for
Congress to put an end to this program. In times of serious budgetary
constraints, the federal government can no longer afford the luxury of paying
the administrative cost of dual programs that serve the same purpose.
92
Once and for all. we must choose the commodity program over the CLOC
program. There is not sufficient justification for Congress to again extend
the CLOC program one more time, and continue to administer overlapping
programs.
American Farm Bureau Federation
American Meat Institute
American Sheep Industry Association
California Canning Peach Association
California Cling Peach Advisory Board
Canned Fruit Promotion Service
National Association of State Departments of Agriculture
National Broiler Council
National Cattlemen's Association
National Council of Farmer Cooperatives
National Farmers Union
National Grange
National Milk Producers Federation
National Pork Producers Council
National Turkey Federation
Pacific Coast Canned Pear Service
United Egg Association
United Egg Producers
-7-
93
Testimony of the
American Association of
Classified School Employees
Before the
House Agriculture Subcommittee on
Department Operations and Nutrition
June 9, 1994
The American Association of Classified School Employees (AACSE)
thanks the Committee for the opportunity to submit testimony for the
record regarding the Commodity Letters of Credit (CLOC) program. We
hope that our perspective on CLOC, and the problems CLOC was meant
to address, will be helpful to the Committee.
The AACSE is an independent union which exclusively represents
classified school employees. Classified workers are the people who
provide the vital services that are essential to the operation of the
nation's schools such as bus drivers, maintenance personnel, and teacher
aides. Approximately one-third of our 250,000 members are associated
with school food services.
We appreciate that the U.S. Department of Agriculture (USD A) has
a difficult job and administers numerous large programs which are aimed
at agribusiness and farmers, the primary responsibility of the USDA.
Participation in the school lunch program understandably seems at times
to be an afterthought for the Department.
However, classified employees have a primary responsibility to the
welfare of school children and the orderly operations of the nation's
schools. We therefore would ask the Congress to examine ways in which
the current system is short-changing America's children and to adopt
solutions such as H.R. 4221 by Congressman Bill Goodling and Congress-
man Bill Ford, the leadership of the Education and Labor Committee.
Our experience with the USDA has been mixed. Our affiliates
generally like the program (particularly with more stable items than
fresh produce such as flour, canned products, dry beans, and butter) but
have reported problems in USDA's fresh commodity program, primarily
the delivery of barely edible produce delivered in unrealistic quantities.
94
As the Committee knows, school meals provide some children with
the best or only opportunity for nutritious food during a day. The link
between solid nutrition and the ability to learn is not seriously disputed,
and it is imperative that children receive every advantage we can
provide them to perform in school. To reach those children already most
at risk from the other effects of poverty, school food service workers need
access to appropriate ingredients. Such access would also help us provide
healthy, competitive alternatives to junk food for the benefit of the entire
school population.
It is in everyone's interest to make the USDA programs that deal
with children and nutrition function to the best of their ability. It is
with the understanding that USDA has enormous responsibilities
mentioned previously that we offer our experiences with the programs
that affect us directly.
USDA allotments are often of questionable quality. The
current USDA delivery system is inadequate to meet the needs of the
nation's children. Having recently emphasized the need for more fruit
and vegetables in the diet, especially among the young, USDA continues
to defend a system which is unable to further that goal.
Allotments are usually delivered six times per school year.
Assuming the goods actually arrive in a usable state, it is unrealistic to
believe that fresh produce can be prevented from spoiling for 30-45 days.
Our members, and other food service workers across the country,
have reported numerous problems with the condition of USDA foods:
• A school food service professional from Cuter-Orosi Unified,
California, reports that a USDA shipment of green beans arrived
damaged and contained maggots.
• USDA-provided cheese often stubbornly resists melting. Occasion-
ally, the cheddar cheese is pink.
• Members in Portland, Oregon, refuse USDA pasta outright because
it is not of sufficient quality to be cooked and chilled. Another
95
member in California reports that their spaghetti dissolves into
mush when it is boiled.
• Poorly processed produce causes difficulties. Tigard, Oregon,
received 75 cases of tomatoes which were not sorted by ripeness.
In addition, no information was provided to properly ripen these
tomatoes. About 15% of the order, which was huge to begin with,
eventually spoiled. A district in California received blueberries
which still had stems, causing a scramble to clean the fruit so that
it could be used in muffins.
• Several members reported that overripe fruit arrives which, while
actually fine inside, appears so shrivelled that children will not eat
the produce.
• USDA often sends commodities which are inappropriate for school
children. Oregon received cases of canned salmon, not a popular
item among grade-schoolers and teenagers, and other districts have
received so much figs, almonds, and dates that it took years to use
them.
• In addition to the poor quality of many USDA commodities, some
items are more expensive than similar items available locally.
Lansing, Michigan, School District notes that vendors can beat
USDA's price in items such as breakfast egg biscuits, fruit pies,
and tortilla chips and match the price on chicken nuggets. In the
example from Lansing, USDA's chicken nuggets have almost twice
the fat of nuggets provided through vendors.
• Northview Public Schools, of Grand Rapids, Michigan, could only
use about 63% of its allocated commodity food dollars this year.
Northview's Food Service Director explained that fruit and
vegetables "often (arrive) in an unusable state." The Food Service
Director for Bay City Public Schools, Bay City, Michigan, noted
that this district's actual use of its budgeted entitlement has been
steadily declining since 1988 and currently stands at less than half
of this year's $131,428 budgeted entitlement.
96
It is ironic that the very agency pressing for better nutrition for
children through fresh produce -- and is willing to spend hundreds of
thousands of dollars converting a food graph from a pyramid to a
diamond shape -- is wedded to a commodity system that is completely
unsuited to accomplishing its own higher goal of improved nutrition
through more fresh fruit and vegetables.
The current system needs more flexibility. The current system
would benefit from the flexibility provided by CLOC in a number of
areas. The involvement of State agencies is unnecessary and counterpro-
ductive, and CLOC can help the entire system become more efficient.
The following problems have been observed by our members:
• An order of tomatoes was delivered to the Marysville, California
School District during Spring Break; no one was there to handle
the order.
• In Portland, Oregon, a huge order of tomatoes was received that
food service workers could not possibly hope to use before the
produce rotted.
• Portland is also receiving a "disproportionate" amount of a single
commodity as its offered product: butter. This does not make any
sense when trying to reduce the amount of fat in school meals.
• USDA "ships at their convenience," in the words of one member,
and it is often difficult to plan meals around unknown foodstuffs
arriving at an unknown time.
• Deliveries have been regularly left at curbside. USDA personnel
have sometimes failed to notify recipients, resulting in a delivery
which arrives when school workers have already gone home. The
food is thus left out overnight.
• A member from California told us that the standard shipment size
(1,000-1,500 cases) is too large to process in a timely manner.
97
The current distribution pattern routes commodities through State
agencies, adding a useless level of bureaucracy between commodity
producers and local users of the goods. Attaching a superfluous
middleman to the process adds costs that sap already depleted school
budgets. Commodities are generally stockpiled and shipped every four
to six weeks to school districts, adding warehousing and transportation
costs compared to having the consuming school district purchase food
itself. The delivery system increases costs while decreasing freshness
and quality of the produce.
In addition, the system has subtle pressures to accept a commodity
shipment "as is." A particular district receives no benefit from turning
down a shipment; the district is neither credited nor offered a replace-
ment. Under the current system, it makes sense for Tigard, Oregon, to
accept all 75 cases of tomatoes and let 15% rot rather than pass along a
portion to several of the approximately 180 of Oregon's 200 school
districts which received none of the tomatoes. The Tigard district had no
idea at the time of acceptance what the product ripeness or overall
quality would be. Of course, occasionally a product is too terrible to
accept, regardless of the financial impact on the school. Also in Oregon,
102 cases of turkey sausage was refused because of its unappetizing dull
red color and taste.
Giving school districts more control over commodity purchases
through CLOC would allow an orderly flow of fresh produce into school
meals; likely produce savings to partially offset the sometimes higher
total costs of buying fresh foodstuffs; and allow States to shift personnel
from a redundant function in the commodity delivery system to new jobs.
Current CLOC pilot program users have expressed no
interest in returning to the old system. In the best traditions of the
marketplace, the strongest endorsement for an expansion of CLOC is the
apparent satisfaction of those involved in the pilot. Under any fair
reading of the term "pilot," the test of CLOC must be viewed as a success
and should be brought to every State in the nation, if not every school
district that wants it.
98
Given USDA's continuing and unbending opposition to CLOC, it
seems implausible that USDA will ever consider the pilot successful
(even though USDA is charged with performing exactly that analysis).
There appears to be nothing but satisfaction with CLOC from those who
actually prepare school lunches and, aside from some timely misinforma-
tion about H.R. 4421, generally positive views towards that legislation
as well.
One group, representing commodities distributors in a large and
rural State, claimed that H.R. 4421 would force all commodity recipients
to use 10% of their commodity entitlement in the form of a cash CLOC
for fresh fruit and vegetables, which this group claimed was impossible
because of the State's climate. This group is receiving bad advice, for the
legislation is clear that the 10% cash CLOC is an option, not a mandate.
Indeed, the whole point of CLOC is more flexibility, not less.
CLOC is clearly a success. We are confident that the vast majority
of CLOC pilot districts are satisfied with the program, and we believe it
is more than time to expand this valuable program through H.R. 4421
and other means.
CLOC begins to address these problems. All CLOC supporters
ask is the ability to buy what is needed when it is needed.
These chronic problems with quality and delivery lead us to believe
that CLOC would be a welcome addition to the tools available for school
food service workers to obtain fresh ingredients in a timely fashion.
Local control improves the freshness of ingredients and the nutritional
value of the meals provided to the children. Inappropriate items such as
canned salmon and figs would not be used. Huge orders would not be
routed to a few districts to rot. Delivery and planning menus could be
managed more efficiently through controlled and reasonable purchases
of commodities.
We thank the Committee for its consideration and ask it to please
expand the CLOC program for the good of America's school children.
99
-^— NATIONAL CATTLEMEN'S ASSOCIATION
1301 Pennsylvania Avenue, NW . Suite 300. Washington, DC. 20004-1701 . (202) 347-0228. FAX (202) 638-0607
llititfumfn:
5420 South Quebec St—t . P.O. Box 3*69 . UnoHwocd. Colormdo 80 I 55 . (303)694-0305 . PAX (303) 694-2851
Testimony
on behalf of the
NATIONAL CATTLEMEN'S ASSOCIATION
in regard to
Commodity Letter of Credit Provisions of H.R. 8
submitted to
Subcommittee on Department Operations and Nutrition
of the
Committee on Agriculture
U.S. House of Representatives
submitted by
Elizabeth K. Johnson, M.S., R.D.
Manager, Food Policy
National Cattlemen's Association
June 9, 1994
The National Cattlemen's Association is the national spokesman for all segments of the
beef cattle industry -- including cattle breeders, producers, and feeders. The NCA
represents approximately 230,000 cattlemen. Membership includes individual members as
well as 46 affiliated state cattle associations and 29 national breed association.
100
The Commodity Distribution Program is a tremendous benefit to USDA's food
assistance programs as well as American agriculture. A situation is occurring right now in
the beef industry that exemplifies these benefits. Beef tonnage is at a high level and will
remain so throughout the summer. Beef production is the largest since 1986, and recent
weekly beef supplies have averaged 50 to 55 million pounds more than during March
1994. Cattle prices fell dramatically during mid-May.
One important means of stabilizing the market and moving the increased supplies
through the marketing system is the Commodity Distribution Program. The beef industry
is asking USDA's Agriculture Marketing Service to take advantage of abundant beef
supplies and make its beef purchases now for the federal school lunch program. Such a
purchase will provide USDA program recipients with a good value for the dollars. It will
also help a depressed beef industry by moving more product at a critical time.
Additionally, it will help the many other agricultural industries and individuals which
depend on the beef industry for business activity. Every dollar of cattle sales generates an
additional $5 to $6 of business activity in the farm supply, food and other businesses.
Although this particular example is with the beef industry, the Commodity
Distribution Program aids all commodities in a similar manner. An expansion of the
Commodity Letter of Credit program would greatly decrease the ability of the USDA to
purchase beef both in a timely manner to take advantage of low prices and in the quantity
necessary to assist in market stabilization. USDA program recipients, including school
lunch participants, get less product for their hard earned money.
The National Cattlemen's Association supports the continuation of the Commodity
Distribution Program. The National Cattlemen's Association does not. support the
Commodity Letter of Credit Program for the reasons outlined in the testimony from the
Commodity Distribution Coalition.
101
CRS
Congressional Research Service • The Library of Congress • Washington, D.C. 20540-7000
June 9, 1994
TO : House Agriculture Cofnmittee
Attention: Julie Paradis and Lynn Gallagher
FROM : Jean Yavis Jone^
Specialist in FooWtfncKAgrlculture Policy
Environment andHNatural Resources Division
SUBJECT : Commodity donations to child nutrition programs
This responds to your request for information on the level of Federal
commodity donations to child nutrition programs and on trends in commodity
support relative to total child nutrition and school lunch program funding.
In FY1993, the Federal government provided a total of $710 million worth
of commodities to child nutrition programs. Most of this assistance ($618
million or 87% of the total) was provided under the legislative mandate that a
set value of assistance be provided for each lunch served under the school lunch,
child and adult care food, and summer food programs. These are so-called
"entitlement commodities." The remaining commodity assistance ($90.2 million)
was provided as "bonus," that is, from perishable stocks acquired by the USDA
for farm support reasons that would be wasted or spoiled if not distributed.
Additionally, $2.4 million in administrative funds were used in FY1993 to help
the USDA administer alternative commodity systems (e.g. commodity letters of
credit, or CLOC).
Most commodity assistance goes to the national school lunch program,
which is the largest of the child nutrition programs. In FY1993, the USDA
reports that this program received $574.3 million worth of commodity
entitlement assistance. This represented 93% of all commodity entitlement
assistance provided to child nutrition programs.
In FY1993, $14.7 million (or 2.5%) of the entitlement commodity assistance
provided to the school lunch program was provided in the form of cash or
commodity letters of credit in lieu of USDA commodities. This form of non-
commodity support went for school lunch programs in the State of Kansas ($6.9
million) and for the cash/CLOC project areas authorized to operate alternative
commodity systems under the current law ($7.8 million).
Overall, the proportion of child nutrition program assistance provided by
the commodity entitlement has fallen since 1981 when Congress enacted
substantial program reductions in child nutrition programs, and prior to the
BOSTON PUBLIC LIBRARY
102
CRS2 3 9999 05018 589 9
enactment of the current Cash/CLOC pilot project. ' In FY1981, the value of
entitlement commodities for child nutrition programs totalled $632 million, and
represented 16.5% of total Federal child nutrition program support. In FY1993,
the value of entitlement commodities for child nutrition programs totalled $618
million, or 8.4% of total Federal aid to child nutrition. This includes the value
of commodity assistance provided through cash/CLOC commodity alternatives.
If the value of this alternative assistance is deducted from the commodity
entitlement, the value of commodity entitlement assistance provided in the form
of USDA commodities falls to $576.5 million, and represents only 7.9% of total
Federal aid to child nutrition.
The program most affected by changes in commodity entitlement
reimbursements is the national school lunch program. In FY1981, an estimated
$569 million worth of commodities were provided to this program under the
entitlement authority. This represented 19.3% of the total cash and commodity
support mandated for the school lunch program in that year ($2.9 billion). This
contrasts with FY1993 when commodity entitlement assistance for the school
lunch program ($574.3 million) represented only 12.2% of the total Federal
support mandated for the school lunch program ($4.7 billion).
Most of the decline in the proportion of commodity support for child
nutrition programs can be explained by the fact that in the 1981 budget
reduction law the Congress approved a substantially larger cutback in the per
meal reimbursement for commodities than in the cash reimbursements for
meals.2 Moreover, in recent years the index used to determine automatic
inflation adjustments of the commodity reimbursement rate has grown at a
slower pace than the index used to make inflation adjustments for cash
reimbursements. And, finally, program participation declines following the 1981
legislative cutbacks in child nutrition were greatest among non-poor, or so-called
"paying students." Since the commodity program does not vary payment rates
by a child's family income, the increased proportion lower income participants
(whose meals receive substantially higher cash subsidies than non-poor children)
has meant that Federal funding growth has been greater for the cash part of the
child nutrition programs than for the commodity part.
1 Omnibus Budget Reconciliation Act of 1981
2 It should be noted that following the 1980 and 1981 budget law reductions
in commodity assistance, there was a substantial increase in USDA donations
of "bonus" commodities. This was due in large part to enormous CCC holdings
and the need to dispose of huge inventories to prevent waste. Between 1980 and
1987, the average per meal "bonus" donation for child nutrition programs rose
from 2.5 cents to 11.2 cents per meal. This more than made up for the
entitlement cutbacks and thus schools did not feel their impact as greatly as
otherwise might have been the case. With the decline in CCC holdings
beginning in FY1988, however, bonus aid began to drop back closer to the 1980
level: 9.2 cents per meal in FY1988, 8.1 cents in FY1989, 2.7 cents in 1990, 2
cents in FY1991, 3 cents in FY1992, and 2.7 cents in FY1993.
103
CRS-3
School Lunch Program: Cash and Commodity Support
Selected Years FY1980 - 1993
($ values in millions)
FY
Total School
Lunch
Support
Cash
Grants
i
Commodity
Support
(mandated)
a/
Commodity
% of total b/
1980
$2,939.3
$2,370.5
$568.8
19.3%
1985
3,123.8
2,659.7
464.1
14.8
1986
3,134.9
2,681.0
453.9
14.4
1987
3,447.6
3,000.8
446.8
12.9
1988
3,413.0
2,935.0
478.0
14.0
1989
3,510.7
3,004.9
505.8
14.4
1990
3,759.9
3,230.0
529.9
14.0
1991
4,109.3
3,553.2
556.1
13.5
1992
4,437.6
3,870.1
567.5
12.7
1993
4,704.2
4,129.9
574.3
12.2
%
Change
since '80
+ 60%
+ 74%
+ .1%
not
relevant
a/ Includes the value of cash in lieu of commodities and CLOC. Since FY1985
cash/CLOC values have totalled in the range of $11.6 million to $14.7 million
annually for the Kansas and cash/CLOC projects.
b/ Represents the proportion of total Federal support provided to the school
lunch program, not the proportion of food value provided by commodities.
o
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