You will note that in 1968, the Federal Government's support was mostly in the form of commodities—47 percent of the total. But over the years, we are putting in more and more cash. And so, now those commodities make up only 18 percent of the total Federal support.

The above chart is, of course, a further analysis of the first two. This shows the local purchases, which shows that the amount purchased locally has gone from a figure of some $0.9 billion to $1.7 billion.

Now, we have made every effort, and I would like to emphasize this, to keep our cooperators in State administering agencies completely tuned in to these changing conditions, and to work closely with them in managing that change. Our goal has been to keep them informed of developments as they take place, so they can get word out promptly to schools and other local agencies.

At the same time we have sought to learn as much as possible about the effects these changes are having on State and local child nutrition activities.

Beginning early in December, we held a series of five regional meetings with all 50 State directors of Commodity Distribution Programs. I personally took part in three of those sessions where we covered the commodity situation in full and open dialogue.

Then, starting early this year, we held a similar series of regional conferences with State Directors of Child Nutrition Programs, which we are completing this week, and where we again discussed food distribution trends openly and thoroughly.

I attended three of those conferences, meeting with 35 State directors and their deputies at those sessions.

Beyond that, at our suggestion and invitation, representatives of the American School Food Service Association met with FNS staff and Assistant Secretary Yeutter to explore more fully how the phase-in of all cash assistance can be accomplished.

Again, just a week ago in Chicago, the Assistant Secretary held an in-depth question and answer session with 10 State Child Nutrition Directors in which the commodity situation was again thoroughly explored.

USDA Seering To Establish Guidelines

Through all these contacts, we have sought input from our cooperators and school food service professionals in the establishment of a set of guidelines for managing this period of change. They are based on full appreciation by us of all that has been done in the past through commodity distribution, and recognition that such a good and longstanding program could not—and should not—be phased out abruptly.

Rather, we think it is more appropriate that we plan and budget for a commodity "phase-down" year. We will plan a gradual reduction to reach the goal, over the next 14 to 16 months. And we have set June 30, 1975, as the target date for completion. That is the foundation of our guidelines.

Another guideline—We recognize, and want to include, the other identifiable costs that raise the "equivalency" figure above the level of 7-cents a meal. These are principally Federal administrative costs.

A third guideline—We would retain the principle of performance funding.

A fourth guideline—We would retain the "escalator" feature, that was built in to reimbursement rates by Public Law 93-150.

A fifth guideline—We would provide funds on the basis of nonmatching by the States.

A sixth guideline—There should be flexibility in the way the funds are provided so that the States are assured of having their full options for whatever they may choose to do regarding the maintenance or establishment of a procurement program in their States, including the very attractive option that some States might cooperate on a regional basis in the procurement of commodities.

Such systems would be potentially more responsive to the needs of schools, freed of the "surplus removal" constraints that Federal programs have been under. We in the Department of Agriculture would of course be ready to lend whatever technical assistance we can to the development of State and regional procurement systems.

Our seventh, and our final guideline, is a very important one to us and to the States—We want to maintain the integrity of the child nutrition programs, by channeling the funds we provide into putting food "on the plate."

Funds Exclusive For Child Nutrition Programs

In other words, our funds will be targeted exclusively for use in the child nutrition programs, and there will be no way that they can be diverted to other uses—like buying uniforms for the band, or whatever—as valuable and desirable as such other causes might be. Our funds are child nutrition funds, and we will keep them that way.

Over the next few months, we will be filling in the specifics of a plan drawn according to these guidelines. A similar plan will be followed for child-care institutions, where the need arises. We will, of course, continue our discussions with state leaders and school food service professionals. And we will, of course, keep this committee fully informed of our progress.

In the event that surpluses should develop in the future, the Department would plan to rely on alternative methods of dealing with those surpluses. Under review and study is the possibility of a standby voucher system that would use the commercial system for procurement and distribution.

In total, the thrust toward providing cash or the means to buy food, rather than distributing the commodities themselves helps to assure the local flexibility. In our view, the opportunity for local initiative is nourished better this way than by commodities and the constraints that must accompany them. This, then, is our approach. We believe it is sound and workable.

Thank you very much.

Senator Mcgovern. Thank you, Mr. Hekman.

I have several questions; on the question of participation; and, also, on the proposal to phase out the commodity program.

I am puzzled with your statement that the number of participants in the School Lunch Program has gone up by approximately 1 million.

Did I hear you correctly on that? Perhaps I misunderstood your statement.

Mr. Herman. I think, Mr. Chairman, you did misunderstand.

I stated that the program is available now to a million more children than a year ago, and that is due to the fact that I think some better than a thousand schools entered the program also under our efforts to bring in all schools.

Dropoff In Paying Student Participation

Senator Mcgovern. Well, now what do you cite as the actual participation situation?

Where are we, now, as against where we were a year ago in terms of actual participating students?

The last figures I saw were in October. They showed a drop of half a million participants in the paying student category. Does that coincide with your information, or are we out of date?

Mr. Herman. No.

I have some figures with me, Mr. Chairman, and I will be glad to read those off. And if you would like them for other years, I can supply them.

First of all, the way I understand your question, it would be the percent of free lunches to total lunches. The percentage of free meals in January of 1972 was 30.3 percent.

That moved up a year later to 32.7 percent. Then in December of last year, it was 34.9 percent. And our preliminary figure for January indicates 35.1 percent.

Senator Mcgovern. What I am trying to find out is whether, in fact, we have had a falloff in the number of children participating. I am not talking about the percentages, although that is important. But it is my impression that we have had a falloff of several hundred thousand. Our figures were half a million in the number of paying students who were participating in this program, and that we have had an increase in the number who are participating on free- or reducedprice lunches.

Is that statement correct?

Mr. Herman. Yes, Mr. Chairman.

The figures that I read to you would bear that out, because the percentage of children—and I can give you the total participation, too—but the percentage of children that are getting meals free, or at reduced price, has been going up, and the percentage of paid has been going down.

Now, that is due to a number of factors. One of them is, of course, the very substantial change also mandated by the Congress relative to the figure at which a free lunch is available, a family income figure.

First, as you remember, the guideline was the so-called OEO Poverty Guideline, and now they can go 25 percent above that, and another 25 percent above that for reduced price, and still another 25 percent for a year even above that.

So it figures 175 percent for reduced-price lunches above the poverty guideline.

In other words, the program for free and reduced-price lunches has been made through these efforts, much more attractive and my testimony bears that out.

Reasons For Reduced Participation

Senator Mcgovern. But isn't it a fact that the real substantial reason for the dropoff of a half a million paying children participating in the School Lunch Program is that the lunches cost more? That the rise in cost of school lunches means that the number of youngsters have dropped out that otherwise would have continued.

We haven't increased the number of children participating in the reduced- or free-lunch program by the same amount as we have reduced the number in the paying.

What has happened to those youngsters? They are not in the program at all, are they?

Mr. Herman. Our figures don't bear that out.

Senator Mcgovern. I thought they did.

That is what I am trying to find out. I am trying to find out, specifically, how many participants you estimate we have lost. Have we lost a half a million children from the paying School Lunch Program in the last year?

We received those figures from the Department of Agriculture.

Mr. Herman. Mr. Boling?

Senator Mcgovern. What is so puzzling about this, Mr. Hekman?

You say that a million more children have now been made eligible for the program under the new guidelines.

Mr. Herman. Pardon me. I didn't say that, Mr. Chairman.

Senator Mcgovern. All right, then. A million more eligible under new schools that are participating?

Mr. Herman. Right.

Senator Mcgovern. Now, if that is true—I don't know whether it is a half a million, or several hundred thousand, or whatever it is— but, what is responsible for the dropout of those children who were participating and were paying for school lunches?

Certainly they haven't all been picked up in the free- or reducedprice lunch program, have they?

Mr. Boling, would you care to respond to that?

Mr. Boling. Yes, sir.

Mr. Chairman, we have two different issues here.

Number one is that in January of last year, of the total percentage of eligible children, we were reaching 79.6 percent of the eligible children for free- and reduced-priced meals.

Now, this year we are reaching 87.5 percent of those children. So we have this basic eligibility.

Senator Mcgovern. What do you mean you are reaching them?

Mr. Boling. As far as participation in this program.

Senator Mcgovern. These are children who were actually getting a school lunch?

Mr. Boling. Yes, sir.

I am quite proud of this. I think our school lunch people have done an excellent job in reaching children that are eligible for free- and reduced-priced meals. As the Chairman remembers, this has been an evolution of the last couple of years. I think we have an enviable record here in reaching these children.

Paying Participants Dropped By 500,000

Now, there is no question that we are losing paying children, and the figures are generally correct, 4- or 500,000 drop in paid participation. Some of these are moving into the free- and reduced-price category.

Obviously, as income drops or as unemployment rises, or as we bring in more schools, you know, that make these free- and reducedprice meals available to more children.

Nevertheless, we cannot deny that there are a number of pressures on the National School Lunch Program. One is a number of changing practices in the community, such as work-study programs. I saw some figures recently where about 4 percent of the children are away from their schools at lunch time working in a work-study program.

When you have unit scheduling, for example, where the scheduling of classes practically schedules out the School Lunch Program.

We have some great problems like this. But the major effect, and we hope that it is temporary, is the overall uncertainty in the economy.