(2) Effective March 1, 1960, the maximum authorized rates of reimbursement shall be three and one-half cents per half pint for schools that serve Type A lunches under the National School Lunch Program. For other schools and for child-care institutions that offer milk to children as a separately priced item the maximum authorized rate of reimbursement shall be two and one-half cents per half pint.

(3) Less-than-maximum rates of reimbursement shall be assigned, or assigned rates shall be adjusted, if circumstances indicate such action is advisable. § 502.218 [Deletion]

Section 502.218 Operations pending issuance of regulations is deleted.

(Sec. 4, 62 Stat. 1070; 15 U.S.C. 714b. Interpret or apply 72 Stat. 276, 73 Stat. 363; 7 U.S.C. 1446 note)

Effective date. These amendments shall become effective upon publication in the FEDERAL REGISTER.

NOVEMBER 5, 1959.

TRUE D. MORSE,
Acting Secretary.

[F.R. Doc. 59-9578; Filed Nov. 10, 1959; 8:50 a.m.]

Mr. JOHNSON. I was very disturbed to hear of the coming cut in the reimbursement rate, and when I returned to Washington in late November, I immediately looked into the reasons behind the USDA's announcement. I learned that the children's milk program has grown to the point where the $81 million authorized for fiscal 1960 will not cover the expanded program at the present reimbursement rate. order to enable the current reimbursement rate to be continued, it is estimated that the authorization for the program will have to be raised to $85 million for fiscal 1960 and to $90 million for fiscal 1961. During the 6 years the children's milk program has been in operation, it has amply demonstrated its worth. In the past fiscal year, some 2.2 billion half pints of milk were consumed by children under the program. The number of participating schools, child-care institutions, and summer camps climbed to an all-time high of more than 81,500 during the same period. This figure is better than 5,000 higher than the 1958 total of participating organizations.

Preliminary reports indicate that the program is continuing to expand during the current school year. For instance, the State of Utah needs 26 percent more money to carry on its expanded children's milk program this year than was needed last year.

However, as successful as the program has been, it still reaches barely one-half of our Nation's schoolchildren. Nutritionists agree that milk is nature's most nearly perfect food. I feel it is vitally important for the children of our country to have a sufficient amount of wholesome, nutritious milk.

This can hardly be accomplished unless sufficient funds are made available so the children's milk program can keep pace with rising school enrollment as well as encouraging additional schools to join this worthwhile program. For a school which is thinking of taking part in the program, nothing could be more discouraging than the fear that the funds for the program might run out in the middle of the school year or the fear that the reimbursement rate to the schools might be sliced.

If the announced cut in the Federal reimbursement rate to schools is allowed to go through, naturally the price of school milk will go

up. And if the students have to pay more for the milk, there will be a decrease in milk consumption in the schools, particularly among children from low-income families. These are the youngsters who need the milk the most, because they very likely are not getting enough milk at home.

The direct relationship between the price the children pay for the milk and the amount they drink has been proven by studies conducted by the U.S. Department of Agriculture. I would like to quote from a USDA news story entitled "Special Milk Program Continues To Increase Children's Milk Consumption." It was released to the press on January 5, 1960, and the paragraph on the correlation between milk prices and consumption reads as follows:

Schools, nursery schools, settlement houses, summer camps and other childcare institutions have found that children want to drink more milk. The more opportunities found to serve milk at additional times during the day, the more milk the youngsters will drink. The opportunity to make milk available to them at a special price-lower than they would ordinarily pay-through operation of the special milk program has resulted in substantial extra sales and increased consumption by children.

The actual administration of the children's milk program by the Department of Agriculture has been excellent. Administrative procedures have been worked out to encourage broad participation by schools, summer camps, and child-care institutions.

Last year, however, Department of Agriculture policymakers tried to hold back the program. To use their own words, they wanted to "stabilize the program" by keeping expenditures at the level of $75 million a year.

Such action would not result in a stabilization of the program. Rather, it would mean a gradual diminishing of the program, since the number of schools and the number of schoolchildren continue to increase. Any program such as the children's milk program cannot stand still. It either advances or it starts downhill.

When hearings were held before this subcommittee on January 24, 1956, on a proposal to increase the authorization for the program, Í recall that Roy Lennartson, then Deputy Administrator of the USDA's Food Distribution Division, testified in favor of the fund increase. He noted that the President had reported in his farm message to Congress that this program to increase fluid-milk consumption by schoolchildren had met with gratifying success-both as a means of contributing to better health habits and as a means of expanding present and future farm markets. The President also recommended the children's milk program be extended and enlarged.

I find the administration's 1956 views on the children's milk program more realistic and forward looking than its 1959 views on the subject. On March 17, 1958, Mr. Clarence L. Miller stated before our committee:

In a period where it is highly essential that every possible economy be made in Federal expenditures, we feel that a $75 million level for this program is adequate.

Instead of being satisfied with reaching a little over half of our schoolchildren with this milk program, we should be looking for ways and means of extending its benefits to more and more schools and child-care institutions.

On the opening day of the 2d session of the 86th Congress, I introduced a bill which would increase the amount of Commodity Credit Corporation funds that can be used for the children's milk program from $81 million to $85 million for fiscal 1960, and from $85 million to $90 million for fiscal 1961.

The first witness that we have this morning is Mr. Clarence L. Miller, Assistant Secretary of the Department of Agriculture.

Will you please come forward, Mr. Miller, together with those accompanying you?

Mr. MILLER. Thank you, Mr. Chairman.

Mr. JOHNSON. Will you identify yourself and those with you for the record?

Mr. MILLER. Mr. Chairman, I have with me at the table Mr. Roy W. Lennartson, Deputy Administrator for Marketing Services of the Agricultural Marketing Administration; Mr. Martin D. Garber, Director, Food Distribution Division, Agricultural Marketing Service; Mr. Howard P. Davis, Deputy Director, Food Distribution Division, Agricultural Marketing Service, and Mr. Nathan Koenig, special assistant to the Administrator, Agricultural Marketing Service.

We have a prepared statement, and when I have finished reading the prepared statement I would like to make some further remarks with respect to the bills.

Mr. JOHNSON. Do I understand you correctly that you would like first to finish your complete statement before questions?

Mr. MILLER. Yes, if you please.

Mr. JOHNSON. Very well, you may proceed.

STATEMENT OF CLARENCE L. MILLER, ASSISTANT SECRETARY OF AGRICULTURE; ACCOMPANIED BY ROY W. LENNARTSON, DEPUTY ADMINISTRATOR FOR MARKETING SERVICES; MARTIN D. GARBER, DIRECTOR, FOOD DISTRIBUTION DIVISION; HOWARD P. DAVIS, DEPUTY DIRECTOR, FOOD DISTRIBUTION DIVISION, AGRICULTURAL MARKETING SERVICE; AND NATHAN KOENIG, SPECIAL ASSISTANT TO THE ADMINISTRATOR, AGRICULTURAL MARKETING SERVICE, U.S. DEPARTMENT OF AGRICULTURE Mr. MILLER. Mr. Chairman and members of the committee, we in the Department of Agriculture appreciate this opportunity to discuss the special milk program and to comment on the several bills before this subcommittee to increase the amount of Commodity Credit Corporation funds available for the program in 1960 and 1961.

This has been a successful program, providing more adequate supplies of milk to children and broadening markets for the dairy industry.

Last year, over 81,000 schools, child-care institutions and summer camps were in the program and participating children consumed nearly 2.2 billion half pints of milk. That volume represents a little over 2 percent of annual fluid milk consumption.

Program costs, including administrative costs, were $74.9 million in 1959. Expenditures for reimbursement purposes totaled $74.3 million in 1959, about 12 percent higher than in 1958.

While the program has been of real benefit to institutions and camps, schools represented by far the largest outlet, with over 78,000 in the program in 1959. We estimate that the program is now available to better than three out of every four children enrolled in school. We feel this is an exceptionally good record because there are always schools which, for one reason or another, do not elect to participate in a Federal program. Moreover, many small schools located in remote areas do not have access to a regular supply of fluid milk, or the supply is sufficient only to meet school lunch needs, or they do not have facilities to handle extra milk.

Not all children drink milk at school when it is available. Our estimates indicate that about 22 million children were drinking milk at school last year, either as part of the school lunch or at other times during the school day. These milk drinkers represented about 54 percent of school enrollment in 1959.

This milk program was originally established as part of the dairy price support program in the Agricultural Act of 1954 and was authorized to run for a 2-year period, through June of 1956. It was then extended through 1958 and, subsequently, an authorization was passed making $75 million of CCC funds available for each of the fiscal years 1959 through 1961.

In April of last year the authorization for 1959 was increased to $78 million by the Congress in order to assure enough funds to continue the program without change for the entire school year. Subsequently, the authorization was increased to $81 million for 1960 and to $84 million for 1961. When these increases were being considered by the Congress, the Department took the position that the time had arrived to stabilize the use of CCC funds for this activity. Our position took into account the improvement in the overall dairy situation and our belief that any increase in the fund authorization would only pave the way for further increases in subsequent years. We also felt that if the extra nutritional value of milk, rather than price support, was to be the basis for a further expansion in the program, the additional funds should come from State and local sources rather than the Federal Treasury.

The increased authorizations provided for an 8 percent expansion in fiscal year 1960 expenditures under the special milk program and an additional 4 percent in 1961. In contrast, a 12 percent expansion had occurred last year and a 10 percent expansion in 1958. These facts raised a serious question as to whether the 1960 authorization would provide sufficient funds for a full year's operations unless reimbursement rates were reduced. Another 10 percent expansion could put reimbursement expenditures at near $82 million, compared with the $80.3 million available after taking out the reserve for administrative expenses.

In addition, because of the difficulty of accurately forecasting expenditures (the funds must be divided among 88 separate accounts), it is necessary to have a $2 million to $3 million reserve to give States advance assurances that funds will prove to be adequate to last out the entire school year and finance June operations in summer camps. For example, even though reimbursement payments last year were a little less than $75 million, in late February States were estimating their needs at almost $78 million and were preparing to adjust their programs in line with the indicated deficit. It was this situation

which led the Congress to increase the 1959 authorization to $78 million.

With the definite indication that program expansion would outrun available funds in both 1960 and 1961, on November 3, 1959, the Department notified State school officials that the 4- and 3-cent reimbursement rates would be reduced to 32 and 22 cents on March 1, 1960, giving States adequate time to inform schools of the change. This action put us in a position to: (1) Assure all States in advance that funds would be sufficient to cover all obligations; (2) provide an equitable distribution of funds among the States, taking into account the need to provide all schools and children an equal opportunity to participate, which means that actual program expansion will be greater in some States than in others; and (3) anticipate and provide for further program expansion in 1961.

We have just completed an analysis of operations through November. It indicates that if the March reduction had not been announced, the estimated annual needs for reimbursement and administrative expense would have been about $82 million, compared with the $81 million available.

In any program of this type the time inevitably arrives when a decision must be made to introduce some degree of financial stability into the program. From the standpoint of the original price support purpose of the special milk program and the generally favorable current position of the dairy industry, now appears to be an opportune time to adjust the program so as to begin to level off the Federal contribution. Most certainly, we would be strongly opposed to any action to put the present program on a permanent basis.

In 1954, when the program was first included as an additional method of price support, holdings of dairy products in Government hands reached an all-time high of 12 billion pounds. The situation today is far different. Prices received by farmers so far during this marketing year have averaged above the support level and surplus purchases have been at a relatively low level. It is estimated that cash receipts to milk producers from marketings during 1960 will be the highest on record and supplies and commercial use of milk more nearly in balance than in several years. In other words, we have gone far in working our way out of the very serious surplus situation which led to the inauguration of the special milk program.

Because of these highly favorable developments and the greatly improved situation in the dairy industry, we in the Department of Agriculture still hold to the general position that the use of CCC funds for the special milk program should be stabilized. However, we recognize the operating difficulties in changing rates of reimbursement under the program, especially during the middle of the year, and also that there would be some year-to-year growth because of increasing school enrollments. In announcing last November that the reimbursement rates under the program would be reduced by one-half cent, we wanted to give as much advance notice as possible so that the schools would have time in which to make necessary adjustments and we also felt that Congress might want to review the program before the new rates went into effect March 1.

Mr. JOHNSON. There is just one question I want to ask you, Mr. Miller, before you add to your prepared statement.

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