that the States are carrying out some Federal responsibility here and that there should be a Federal contribution to offset some of the cost of the functions that are being performed on behalf of the Federal Government. But we ought not increase this to the point where it becomes a disincentive to administrative efficiency.

I may have missed some of the points I should have covered, Mr. Chairman, but I believe that is essentially my statement on the items. Senator ALLEN. Secretary Yeutter, I want to commend you on your added responsibilities and assignment at the Department, and to commend you for your ability, expertise, dedication, and knowledge in your role as Assistant Secretary of Agriculture. You always come up with the facts and lay them on the table with your recommendations. You always make a very important contribution to the committee's deliberations. Certainly today has not been a departure from that policy.

One question occurs to me: Would the shift over to cash in lieu of commodities facilitate the possible changeover from the carrying out of these responsibilities from the Department of Agriculture to the Department of HEW as recommended by the President in one of his reorganization plans?

Mr. YEUTTER. To some degree it would, Senator Allen, although to clarify that point I would hope that we would maintain the section 32, surplus removal authorities within the Department of Agriculture and not transfer those authorities. That would mean if a commodity procurement program were to continue and all these programs were placed within the Department of Health, Education, and Welfare, coordination would be more difficult with the purchasing being done in USDA and distribution being done in the Department of Health, Education, and Welfare, whereas if there were a cash program that coordination would be much simpler.

Obviously, it would simply be a transfer of dollars and that is a lot easier to handle under cash than it is under commodities. Even under a cash system we would want to retain the authority and the right to respond to surplus removal problems within the Department of Agriculture. We do not believe that that function ought to be transferred to the Department of HEW.

Senator ALLEN. Under the President's reorganization plan would it be transferred?

Mr. YEUTTER. No. To the best of my knowledge we are still developing the legislation that will be proposed on the transfer issue, so that is not yet finalized. To the best of my knowledge, those authorities in section 32, section 6, and section 416, would all be retained within the Department of Agriculture. Certainly, a cash system would be preferable to a commodity system if that turns out to be the case.

Senator ALLEN. I believe, and I feel the members of the committee and the Congress believe, that the Department of Agriculture is doing an excellent job in this area. Speaking for myself, I would hate to see this responsibility transferred from the Department of Agriculture. I would like to inquire about the success you have had in assembling commodities for distribution, in the current fiscal year as well as the long-range plans for the coming fiscal year. What success have you had in these areas?

Mr. YEUTTER. Taking the current fiscal year first, Mr. Chairman, we have had reasonably good success, at least in terms of quantities and dollars expended, due primarily to the section 4(a) authority which permitted us to buy at market rather than having to buy under surplus removal authority only. Had we not had the additional authority we would have had a difficult time.

Even with the broadened authority under section 4, as I indicated earlier, we had some extreme difficulties in certain cases. It does little good to have the authority if nobody will bid on your contracts. So, authority or no authority, we had some instances where we could get nobody induced to bid. That means in terms of variety we did not do especially well this past fiscal year.

We got the dollar value out and we got the 7 cent commission as part of that dollar value out, but we weren't able to provide schools the kind of variety that we needed, even that we would have liked to have provided, even with the broadened authority. The same thing applied to the needy family program.

Moving into the coming fiscal year, we have a little different situation in that the needy family program is phasing out, as you know. Senator ALLEN. Are you anticipating an extension of that authority?

Mr. YEUTTER. Do you mean extension of the purchase authority? Senator ALLEN. Yes. Are you planning for an anticipated extension?

Mr. YEUTTER. At the moment we are making plans in anticipation that that authority will expire on June 30. The question then becomes whether we can effectively meet the remaining needs of the needy family program in the absence of that authority. The question comes as to how to respond to the school needs in the absence of that authority. With respect to schools it is a different concern in that, as you know, the legislation applicable to distribution to schools provides that if we are unable to provide commodities that are budgeted, we simply provide the cash later in the year and the schools can then expend the cash.

In terms of total dollars, irrespective of whether or not this broadened authority is extended, the schools get the total dollar commitment to which they are entitled. That provision does not apply to the needy families. There is no way to cash out needy families. So, we have an obligation during the final few moments of the needy family program to make sure that we provide a nutritionally adequate variety of foods. This will be primarily Puerto Rico, which is going to gradually phase into food stamps for needy families, and a few other areas within the continental United States, but very, very few. Because these is such a small need for commodities in the needy family program, even in the absence of the broadened authority we will probably be able to come through all right, particularly if we buy some items for these programs before the expiration of this fiscal year and then can carry some of them on into the next fiscal year. These programs are getting much, much smaller. The needs are not as great. We may have some trouble on variety.

Senator ALLEN. Thank you, Mr. Secretary. My time has expired. As a matter of fact, it expired while you were answering the question.

Mr. YEUTTER. I apologize for the verbosity.

Senator ALLEN. We will use the rule that if a question has been asked within the 5-minute limit, the answer will be permitted.

Mr. YEUTTER. I will try to speed up the answer, Mr. Chairman. Senator ALLEN. Senator McGovern?

Senator McGoOVERN. I have already taken some time when I interrupted, Mr. Chairman. I take it the rule doesn't begin until now? Senator ALLEN. That is right.

Senator MCGOVERN. Mr. Secretary, I want to join with the chairman in commending you on your new responsibilities. Any differences we have over this principle has nothing to do with the regard that I have for you personally. I am very glad you are in the Department of Agriculture.

On the matter of the commitment in cash that you say you are willing to make, or the department is willing to make, in lieu of commodities, I thought the chairman touched on a very important matter, maybe by implication, that there is something about moving from a commodity program into a cash program or a voucher system which suggests more of a welfare program. Maybe this is a semantic problem, but it has been my observation around here for many years that it is more acceptable to the Congress and the public to assist the people on food and on nutrition, to provide commodities that are seen also as a means of stabilizing our agricultural economy, that we do better with programs of that kind than we do cash grants.

In fact, I can tell you from experience that offering cash grants can be a political disaster. We are really talking here not only about substance but about strategy. Maybe this is not a proper arena to talk about that, but I am worried about what happens to these programs that depended on commodities over the years once we get to the point where the debate then becomes not whether we are going to have commodities but how much money Congress is going to appropriate and how much money the Budget Bureau is going to request, or how much they are going to impound.

I worry about this whole transfer from commodities too, because of that built-in resistance to cash payments.

Mr. YEUTTER. I think that is a legitimate quasipolitical question. Senator McGovern. My answer to that would simply be I think all of us, in the Congress and in the administration, ought to have as our objective, as I indicated earlier, a maximum of nutrition and a minimum of dollars. If we can do a better job with cash than commodities, then we ought to have a cash system.

If we can do the better with commodities, then we ought to have a commodity system. I think we ought to look beyond the political considerations and try to do what is best for the recipients.

Senator McGOVERN. I think on that point a number of people who have been working in the field a long time have a very sharp disagreement with you, as to whether you are going to get the same amount of food if you give these school districts cash and give other programs cash, as they get through the commodities because of the reasons I outlined a while ago. You are from the State of Nebraska. Is that correct?

Mr. YEUTTER. That is right.

Senator MCGOVERN. The Department of Public Welfare director of Nebraska wrote on February 28:

There are those who believe cash rather than donated food is the most desirable, but in the long run is this a better choice for the School Lunch Program and the children that it feeds? During a time of inflation, the cash that would be received just does not go as far as we would like, as was demonstrated last year when money was received in place of donated food.

And then this important statement:

It has been estimated that the seven cents per meal now received in donated food would only purchase two cents worth of food if purchased by local school districts. The U.S. Department of Agriculture has a buying power that can not be achieved by these individual schools or even the individual states.

The president of the Red Cross testified recently and said:

If the Red Cross had purchased those same commodities meaning the ones they got from you, on the open market, the cost of Red Cross would have been at least twice what it cost the Federal Government to acquire the commodities in question.

I realize this is a matter of a difference of opinion, but when a man like the president of the Red Cross and the State public welfare director of Nebraska, and others, testified that they are going to lose if this commodity program is phased out and that they are not going to get the equivalent in cash, that worries me.

Mr. YEUTTER. I have seen similar letters, Senator McGovern. I would suggest to you and to the other members of the subcommittee that you challenge those who write in that vein to provide the figures to support their claims. They are just not accurate if the same cost items are compared in both cases.

Senator MCGOVERN. I say in all sincerity that that is simply not true. Those kinds of comparisons are absolutely invalid.

We discussed this earlier, so we are being a little bit repetitious. The point still remains that purchases at the local level will not be made on the "open market." They are going to be made from wholesalers and distributors, so we shouldn't compare the cost at retail with the cost to the Federal Government.

The bid prices to the Federal Government do not include all the overhead that goes into these prices. When one brings them togther, I am convinced that they will come together. I think it is a legitimate question but I don't think those people ought to make those kinds of statements unless they can support them and I don't think they can support them.

Senator ALLEN. Senator Bellmon?

Senator BELLMON. Mr. Secretary, I remember very vividly some of the hearings before Senator McGovern's Committee on Nutrition and Human Needs and the criticism leveled by some of our witnesses against the quality of foods that USDA provided at that time. Mr. YEUTTER. We are hearing just the opposite today.

Senator BELLMON. That is what is kind of surprising. We had witnesses that brought in rusty, leaky tin cans and moldy cheese and made it appear that this was the kind of food that the USDA was putting out. Would this be a problem if you undertook another largescale commodity distribution program?

Mr. YEUTTER. Senator Bellmon, I would like to say that I think that question was sensationalized at that time. In my judgment,

USDA has been providing quality foods all along. The quality has been getting better as time has passed. It is improved, to at least some degree, today over what it was 5 or 10 years ago. I would never be convinced that the quality of the food has been inadequate at any time in this program.

As I indicated to Senator McGovern earlier, and I say again to you, Senator Bellmon, I think the quality is good on the commercial market, too. I think irrespective of whether the schools obtain it from commercial sources as they do now for 80 percent of their supply, or obtain it from us as they do now for 20 percent of their supply, those kinds, by and large, in 99.9 percent of the cases, are going to be quality food.

Senator BELLMON. Would it mean establishing a USDA warehouse system in every State? I am not quite clear how we do this. Formerly, as I understood it, much of the commodities were being warehoused by county commissioners. In our State they were providing the warehousing and refrigeration. How would you go about this?

Mr. YEUTTER. There are various arrangements and it varies from State to State. Many States have warehousing facilities and many local units, local schools, have warehousing. Obviously, local schools would continue to maintain their warehousing because that is the user point and they will always have to have them.

Senator BELLMON. But they would have to be delivered there? Mr. YEUTTER. That is right. If a State decided to simply pass the cash all the way down to the local school district, then the existing warehousing that is maintained by the State could be eliminated. That is a cost over and above the Federal overhead that could likewise be eliminated if we went to a cash system. If, on the other hand, the State decided that it wanted to maintain its own procurement program for the local school district, then obviously it would have to maintain its warehousing or else provide for distribution directly to those local school districts.

I guess the summary answer to your question, Senator Bellmon, is if we move to a cash system we should be able to achieve some savings in warehousing and transportation costs, rather substantial savings in warehousing and transportation costs, nationwide.

Senator BELLMON. What we are talking about here is a second, almost independent, food distribution system. There is no thought that the Government is going to take over the grocery stores, as far as I know.

Mr. YEUTTER. No, sir.

Senator BELLMON. So everyone will be getting their food out of that kind of a distribution system.

Mr. YEUTTER. Yes, sir, the commercial system.

Senator BELLMON. If the Government took over the grocery stores, could they do it cheaper, 29 cents a pound for hot dogs, do you suppose?

Mr. YEUTTER. In my judgment, Senator Bellmon, there would be no chance that the Government could do it cheaper. In my judgment, costs would clearly rise if the Government took over the grocery

stores.

Senator BELLMON. Mr. Chairman, that is all I had.
Senator ALLEN. Senator Clark?