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104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     104-651
_______________________________________________________________________


 
                WELFARE AND MEDICAID REFORM ACT OF 1996

                               ----------                              

                              R E P O R T

                                 of the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                              to accompany

                               H.R. 3734

 A BILL TO PROVIDE FOR RECONCILIATION PURSUANT TO SECTION 201(a)(1) OF 
      THE CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 1997

                             together with

               MINORITY, ADDITIONAL, AND DISSENTING VIEWS

                                     



 June 27, 1996.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed



                 WELFARE AND MEDICAID REFORM ACT OF 1996



104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     104-651
_______________________________________________________________________


                WELFARE AND MEDICAID REFORM ACT OF 1996

                               __________

                              R E P O R T

                                 of the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                              to accompany

                               H.R. 3734

 A BILL TO PROVIDE FOR RECONCILIATION PURSUANT TO SECTION 201(a)(1) OF 
      THE CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 1997

                             together with

               MINORITY, ADDITIONAL, AND DISSENTING VIEWS




 June 27, 1996.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed


                        COMMITTEE ON THE BUDGET

  JOHN R. KASICH, Ohio, Chairman
MARTIN OLAV SABO, Minnesota,         DAVID L. HOBSON, Ohio,
  Ranking Minority Member              Speaker's Designee
CHARLES W. STENHOLM, Texas           ROBERT S. WALKER, Pennsylvania,
LOUISE McINTOSH SLAUGHTER,             Vice Chairman
  New York                           JIM KOLBE, Arizona
WILLIAM J. COYNE, Pennsylvania       CHRISTOPHER SHAYS, Connecticut
ALAN B. MOLLOHAN, West Virginia      WALLY HERGER, California
JERRY F. COSTELLO, Illinois          JIM BUNNING, Kentucky
PATSY T. MINK, Hawaii                LAMAR S. SMITH, Texas
BILL ORTON, Utah                     WAYNE ALLARD, Colorado
EARL POMEROY, North Dakota           DAN MILLER, Florida
GLEN BROWDER, Alabama                RICK LAZIO, New York
LYNN C. WOOLSEY, California          BOB FRANKS, New Jersey
JOHN W. OLVER, Massachusetts         NICK SMITH, Michigan
LUCILLE ROYBAL-ALLARD, California    BOB INGLIS, South Carolina
CARRIE P. MEEK, Florida              MARTIN R. HOKE, Ohio
LYNN N. RIVERS, Michigan             SUSAN MOLINARI, New York
LLOYD DOGGETT, Texas                 JIM NUSSLE, Iowa
SANDER M. LEVIN, Michigan            STEVE LARGENT, Oklahoma
BENNIE G. THOMPSON, Mississippi      SUE MYRICK, North Carolina
                                     SAM BROWNBACK, Kansas
                                     JOHN SHADEGG, Arizona
                                     GEORGE P. RADANOVICH, California
                                     CHARLES F. BASS, New Hampshire
                                     MARK W. NEUMANN, Wisconsin

                           Professional Staff

  Richard E. May, Staff Director
 Eileen M. Baumgartner, Minority 
          Staff Director


                            C O N T E N T S

                              ----------                              
Introduction.....................................................     3
Title I--Committee on Agriculture:
    Legislative Language.........................................    13
    Report Language..............................................    59
Title II--Committee on Commerce:
    Legislative Language.........................................   189
    Report Language..............................................   323
Title III--Committee on Economic and Educational Opportunities:
    Legislative Language.........................................   751
    Report Language..............................................   815
Title IV--Committee on Ways and Means:
    Legislative Language.........................................  1085
    Report Language..............................................  1321
Miscellaneous House Report Requirements..........................  1939
    Cost Estimate of the Congressional Budget Office.............  1940
Minority, Additional, and Dissenting Views:
    Committee on Agriculture.....................................  2015
    Committee on Commerce........................................  2018
    Committee on Economic and Educational Opportunities..........  2025
    Committee on Ways and Means..................................  2035
    Committee on the Budget......................................  2049


                                                                       
104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     104-651
_______________________________________________________________________



   PROVIDING FOR RECONCILIATION PURSUANT TO SECTION 201(A)(1) OF THE 
        CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 1997

_______________________________________________________________________


 June 27, 1996.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

             Mr. Kasich, from the Committee on the Budget,

                        submitted the following

                              R E P O R T

                             together with

               MINORITY, ADDITIONAL, AND DISSENTING VIEWS

                        [To accompany H.R. 3734]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Budget, to whom reconciliation 
recommendations were submitted pursuant to section 201(a)(1) of 
House Concurrent Resolution 178, the concurrent resolution on 
the budget for fiscal year 1997, having considered the same, 
report the bill without recommendation.

                                  (1)
                     A HELPING HAND, NOT A HANDOUT

      INTRODUCTION TO THE WELFARE AND MEDICAID REFORM ACT OF 1996
                                ------                                

    This legislation incorporates two of the most important 
reforms being undertaken by the 104th Congress: reforming the 
Nation's failed welfare system and restructuring the Federal/
State Medicaid program. The committees of jurisdiction have 
submitted extensive report language explaining their respective 
portions of the legislation. This introduction, by the 
Committee on the Budget, describes the broad policy goals of 
the reforms.

                           Reforming Welfare

    There is little doubt that the current welfare system is a 
failure. It traps recipients in a cycle of dependency. It 
undermines the values of work and family that form the 
foundation of America's communities. Most devastating of all, 
it fails the Nation's children.
    These are the pathologies that the welfare reform 
incorporated in this reconciliation measure is intended to 
cure.
    The reform proposal saves families by promoting work, 
discouraging illegitimacy, and strengthening child support 
enforcement. It converts welfare into a helping hand, rather 
than a handout, by limiting lifetime welfare benefits. It halts 
payments to people who should not be on welfare. It grants 
maximum State flexibility to show true compassion by helping 
those in need achieve the freedom of self-reliance.
    Opponents of such genuine reforms have tried to argue that 
the current system allows for State flexibility by providing 
waivers from Federal requirements. We reject this alternative--
it only maintains a system in which States must beg Washington 
for permission to innovate for the benefit of their 
populations. This is not real reform. Only fundamental reform 
of welfare can correct the damage to families and children that 
the current system has caused.

                THE CURRENT WELFARE SYSTEM IS A FAILURE

    Consider the following facts about today's welfare system:

  - Since 1960, all levels of government have spent $5.4 
        trillion (in constant 1992 dollars) on programs to end 
        poverty. Yet the poverty rate has held stubbornly at 
        between 12 percent and 15 percent of the population.

  - Total spending on antipoverty programs has risen from $24.4 
        billion in 1960 to an estimated $397.1 billion in 1995.

  - While poverty has failed to decline, enrollment in Aid to 
        Families With Dependent Children [AFDC], the principal 
        welfare program, has increased fivefold. At the same 
        time, illegitimacy has increased 400 percent, the 
        number of single-parent families has increased 238 
        percent, and violent crime has risen 560 percent. All 
        these pathologies are linked to the current structure 
        of welfare itself.

    The welfare system contradicts fundamental American values 
that ought to be encouraged and rewarded: work, family, 
personal responsibility, and self-sufficiency. Instead, the 
system subsidizes dysfunctional behavior.
    According to a recent Cato Institute study, the total 
package of public benefits for low-income persons is, in many 
cases, substantially more generous than working. Cato notes 
that welfare pays more than the starting salary for a teacher 
in 9 States; more than the average salary for a secretary in 29 
States; more than an $8 per hour job in 40 States; and more 
than the entry level salary for a computer programmer in the 
most generous States. Furthermore, only 20 percent of those 
receiving welfare benefits today are covered by any kind of 
work requirement, and still fewer work.
    As welfare discourages work, it encourages long-term 
dependency. According to research done for the Urban Institute, 
90 percent of those currently receiving welfare will eventually 
spend more than 2 years on the rolls, and 76 percent will 
receive welfare for more than 5 years. Thus welfare punishes 
its intended beneficiaries, isolating them from the economic 
and social mainstream.
    The failures of welfare also represent a major factor in 
America's crime wave. High rates of welfare dependency 
correlate with high crime rates among young men. Indeed, a lack 
of married parents--a condition promoted by the current welfare 
system--contributes more to the crime rate than do race or 
poverty: A major 1988 study of 11,000 individuals found that 
``the percentage of single-parent households with children 
between the ages of 12 to 20 is significantly associated with 
rates of violent crime and burglary.''
    In addition, the welfare system empowers bureaucrats rather 
than the poor. Washington spends roughly $150 billion a year on 
about 75 means-tested programs that the public thinks of as 
``welfare.'' But much of this spending has been absorbed by an 
expanding bureaucracy for delivering social services that eats 
up a disproportionate amount of the funds available for 
fighting poverty.

                   THE CURRENT SYSTEM FAILS CHILDREN

    The greatest tragedy of the welfare system is how it harms 
the Nation's children. By promoting illegitimacy, the system 
breeds a variety of other pathologies scarring children in ways 
that can affect their entire lives.
    First, welfare-encouraged illegitimacy leads to increased 
risks of behavioral and emotional problems during childhood. 
The National Health Interview Survey of Child Health has 
confirmed that children born out of wedlock have more emotional 
and behavioral problems than children in intact families. These 
problems include antisocial behavior, hyperactivity, 
disobedience, greater peer conflict, and dependency.
    Second, welfare-encouraged out-of-wedlock childbearing 
increases the probability of teen sexual activity and future 
welfare dependency. According to the National Longitudinal 
Survey of Youth, teenagers whose mothers have never married are 
two-and-a-half times more likely to be sexually active. 
Research done for the Department of Health and Human Services 
shows that children born out of wedlock are three times more 
likely to become dependent on welfare than are other children. 
An analysis by June E. O'Neill, Director of the Congressional 
Budget Office [CBO], concluded that a 50-percent increase in 
the monthly value of AFDC and food stamp benefits led to a 43-
percent increase in the number of out-of-wedlock births.
    Third, the receipt of welfare income has negative effects 
on young boys with respect to their long-term employment and 
earnings capacity. According to a University of Michigan study, 
the more welfare income received by the boy's family while he 
was growing up, the lower are his earnings as an adult.

                  BENEFITS OF THE WELFARE REFORM PLAN

    The welfare reform incorporated in this reconciliation bill 
saves families and promotes work. CBO estimates that under this 
proposal, 1.3 million families on welfare will be working in 
fiscal year 2002. That is 30 percent more welfare recipients 
gaining the benefits of work experience than CBO estimates 
would be working under the administration's proposal.
    Under the congressional plan, welfare is, for the first 
time, converted to a work program. The proposal requires one 
member of every family on welfare to be working within 2 years. 
Lifetime welfare benefits are limited to 5 years (though 
exemptions for special hardship may be applied to as many as 20 
percent of families if necessary). The plan also fulfills the 
request of the Nation's Governors for $4 billion in additional 
child care funding, resulting in $3 billion more than current 
law to assist welfare recipients in obtaining the child care 
they need to leave welfare and move into the work force. In 
addition, a $1-billion performance bonus fund makes additional 
moneys available to States that are successful in moving 
welfare recipients off welfare rolls and into productive work.
    The proposal also discourages out-of-wedlock childbearing. 
It allows States to cap benefits for those on welfare, ending 
bonuses for families on welfare who have additional children 
they cannot support. States that reduce out-of-wedlock births 
without increasing abortions are rewarded with further cash 
grants. Any teenager who gives birth out of wedlock is required 
to live with an adult and remain in school to continue 
receiving welfare benefits.
    At the same time, child support enforcement is 
significantly strengthened to ensure that absent noncustodial 
parents provide financial support for their children. Uniform 
State tracking procedures are established to catch deadbeat 
parents. Stronger measures are taken to establish paternity in 
cases of out-of-wedlock births.
    The proposal cuts through the bureaucratic maze that the 
Washington-centered welfare regime has created. The plan gives 
States the freedom to innovate in developing income support 
programs for welfare families that encourage personal 
responsibility and move welfare recipients into the work force. 
[By contrast, the President's welfare plan would continue 
requiring States to seek Federal approval for such 
innovations.] Furthermore, States are permitted to harmonize 
cash welfare assistance and food stamps, so that one set of 
rules can be used for families applying for both programs. This 
eliminates bureaucratic duplication while providing one-stop 
service to program participants.
    The plan also combats substance abuse by allowing States to 
sanction welfare recipients who test positive for illicit drug 
use.
    The congressional welfare reform strategy ends the role of 
welfare as an immigration magnet and goes significantly farther 
than the President's proposals in discouraging welfare-based 
immigration. Under the congressional plan, families that 
sponsor immigrant relatives will be legally required to provide 
for the economic well-being of the members they bring to the 
United States. The reform also would exclude aliens who are not 
veterans of the U.S. military from receiving food stamps or 
Supplemental Security Income [SSI] benefits until they have 
obtained U.S. citizenship, or until they have worked and paid 
Social Security taxes for at least 40 quarters. This approach 
is significantly more forceful than the President's proposal, 
which still allows aliens who have never worked in the United 
States to obtain these welfare benefits if their U.S. citizen 
sponsors are low-income as well.

                      THE SHORTCOMINGS OF WAIVERS

    Those who advocate the Federal waiver process as an 
alternative to fundamental welfare reform overlook the basic 
flaw in this approach: The process leaves unchallenged the 
notion that Federal bureaucrats in Washington should have the 
last say in any decision involving the design of programs 
intended to attack poverty. Waivers, which can be revoked, keep 
the power in Washington; they cannot substitute for 
fundamental, systemic changes that empower States and local 
communities to make their own decisions about how to address 
the needs of their populations. In virtually every case in 
which waivers have been granted, States have been required to 
modify their original programs to obtain Federal approval for 
the waiver. Thus, welfare recipients are denied the full 
benefit of the innovations that States are seeking to initiate. 
In addition, few waivers have been granted statewide, and most 
of them have involved relatively noncontroversial items such as 
requiring teenage mothers to attend school or remain in their 
parents' homes as a condition of receiving benefits.
    The administration's treatment of Wisconsin's waiver 
requests is illuminating. For all of the administration's 
claims that it is reforming welfare through waivers, it remains 
to be seen if the administration will actually accept a 
statewide time limit on welfare benefits such as those the 
State of Wisconsin has requested. Some White House policymakers 
already are backtracking on the President's promise to grant 
Wisconsin the waiver to implement a statewide time limit, and 
so far the administration has resisted giving this kind of 
sweeping statewide waiver in a major substantive policy area.
    Waivers themselves are treated not as welfare reform 
measures, but as social science ``experiments.'' The waiver 
process requires States to maintain ``control'' groups--
recipients who are kept in the existing system so they can be 
compared with those experiencing the reform. This approach only 
serves the social engineers while denying some portion of a 
State's welfare population an escape from a system that is 
already known to have failed.
    Also, because waivers are considered experimental, they 
have time limits; they expire after a period of several years, 
putting the State at risk that a future administration will 
choose not to renew the waiver, forcing the State to abandon 
their policy changes and revert to the old system.

               OHIO'S EXPERIENCE WITH THE WAIVER PROCESS

    On March 14, 1996, the administration announced its 
approval of the State of Ohio's request for waivers from 
Federal law needed to implement Ohio's welfare reform 
legislation passed last year. It took the administration 7 
months to process the waiver. Nevertheless, Ohio's Governor 
Voinovich was pleased to finally receive a decision from 
Washington, and, on the whole, he and other State officials 
were pleased that most of their plan survived intact. But the 
administration rejected four parts of the Ohio plan, or 
requested substantive changes that essentially gutted certain 
provisions. The administration:

  - Watered down Ohio's 36-month time limit on AFDC eligibility 
        for participants in the AFDC JOBS program, essentially 
        removing application of the limit to persons unable to 
        find work after making good faith efforts to do so.

  - Denied the State's request to block increases in food stamp 
        benefits for persons whose AFDC benefits were reduced 
        as a sanction for failure to comply with conditions of 
        the new Ohio program.

  - Denied the State's request that persons found guilty of 
        welfare fraud could have their Medicaid benefits 
        revoked. The provision applied only to adults in the 
        household; children's benefits would have continued.

  - Limited the State's ability to expand its subsidized jobs 
        program, even though it contained safeguards against 
        eliminating currently existing jobs.

    In addition to these changes, the Department of Health and 
Human Services [HHS] prohibited the State from implementing the 
reforms in five counties, which would serve as a ``control'' 
group.

                         Restructuring Medicaid

             SHIFTING POWER AND INFLUENCE OUT OF WASHINGTON

    Like the welfare reform strategy embraced in this 
legislation, the restructuring of Medicaid focuses on shifting 
greater control and responsibility to the States. It proceeds 
from the premise that allowing States to design their own 
programs will make each State better able to address the unique 
needs of its population. The congressional plan eliminates the 
current Federal Medicaid law and then adds back any guarantees 
and guidelines needed to assure appropriate coverage. This 
represents a key difference with the administration's approach. 
The President would retain the current Federal Medicaid law 
(Title XIX of the Social Security Act) and almost all of its 
regulations. Thus the President would keep the power and 
influence in Washington.
    The congressional plan also recognizes that current 
Medicaid costs--driven by the structure of the Federal-State 
program itself--are unsustainable. Medicaid spending has 
exploded: It has grown an average of 19.1 percent annually 
between 1990 and 1994, and is currently projected to increase 
by roughly 10 percent a year through 2002 if left unreformed.
    The growth of Medicaid spending also has put extraordinary 
pressure on State budgets. In 1987, Medicaid represented about 
10.2 percent of all State expenditures; by 1994, it had 
increased to about 19.4 percent of all State expenditures. 
Thus, over a 7-year interval, State Medicaid spending had 
nearly doubled as a percent of total State spending. This 
growth has drained State funds from other critical needs, 
causing a decline in the proportion of State funds for 
elementary and secondary education, higher education, welfare, 
and transportation.
    Medicaid cost pressure results from Federal 
micromanagement, complex bureaucratic requirements, outdated 
delivery systems, federally mandated expansions in eligibility, 
and waste, fraud, and abuse in the program. Additional cost 
pressure also comes from practices in the States, because 
Medicaid requires the Federal Government to pay its 
preestablished share of whatever the States spend. This 
encourages States to spend more so they can get more. The House 
Medicaid reform strategy encourages States instead to establish 
efficient and effective programs.

                       PROVIDING ADEQUATE FUNDING

    Under the congressional Medicaid reform, funding would 
increase each year, from $95.7 billion in fiscal year 1996 to 
$136.5 billion in fiscal year 2002--a 43-percent increase. 
Outlays over the next 6 years will equal $731 billion, a 58-
percent increase from the $463 billion over the previous 6 
years. Medicaid spending per recipient would grow from $2,600 
in fiscal year 1996 to $3,170 in fiscal year 2002. The plan 
allows States to provide health care for an individual whose 
income does not exceed 275 percent of the Federal poverty 
level. [The poverty level for a family of four is $15,600 for 
1996. The 275-percent level would be $42,900.] States will 
continue to match the Federal Medicaid dollars to receive 
Federal funds.

                    ENSURING GUARANTEES OF COVERAGE

    To assure that the most vulnerable populations will receive 
coverage, the plan contains coverage guarantees for the 
following populations:

  - Pregnant women and children under age 6 whose families' 
        incomes are below 133 percent of poverty.

  - Children age 6 to 12 whose families' incomes are below 100 
        percent of poverty and phase in children up to age 18.

  - Disabled individuals who meet specified income and resource 
        standards.

  - Elderly individuals who meet SSI income and resource 
        standards.

    The legislation also contains other, less restrictive, 
measures such as a requirement that each State continue to 
spend at least 90 percent of what it had been spending on 
mandatory services for three broad groups of eligibles: low-
income families, low-income elderly, and low-income disabled.

  PROTECTING NURSING HOME RESIDENTS, THEIR SPOUSES, AND THEIR FAMILIES

    The plan maintains the Federal nursing home protections 
enacted in 1987. It also contains measures to ensure that the 
spouse of a nursing home resident will not have to impoverish 
himself or herself to ensure Medicaid nursing home benefits for 
an institutionalized spouse. Finally, the plan prohibits States 
from requiring an adult child of an institutionalized parent to 
contribute to the cost of the nursing facility and other long-
term care services covered under the State plan. Contributions 
by the adult children must be voluntary.

                PROVIDING A FAIRER DISTRIBUTION OF FUNDS

    The current formula distributes Medicaid funds using State 
per-capita income only. Per-capita income is used as a measure 
of both the State's need and its fiscal capacity. It is a good 
measure of neither.
    The congressional Medicaid restructuring plan employs a new 
formula, developed by the General Accounting Office [GAO]. The 
formula derives from three factors:

  - A 3-year rolling average of the number of residents in 
        poverty in each State.

  - A ``case mix index'' reflecting the severity of a State's 
        Medicaid caseload--such as what percentage of Medicaid 
        recipients are elderly as opposed to mothers and 
        children, who are less expensive to care for.

  - A health care input cost index, which measures wages paid 
        by hospitals in the State.

    The formula also uses the U.S. average spending per person 
in poverty (the same value for all States) and the current 
Federal/State matching rate (which varies by State from 50 
percent to 80 percent).

                          SPENDING COMPARISONS

    Comparisons with historical data, and with the President's 
proposal, show that the congressional restructuring plan 
successfully reforms Medicaid and protects vulnerable 
populations at lower costs than those projected under current 
law or in the administration's plan [see tables 1 and 2].
    For example, the congressional plan slows the growth of 
Medicaid to an average of 6.1 percent a year over the next 6 
years, compared with the 9.7-percent-a-year projected by the 
Congressional Budget Office [CBO] if no reforms are undertaken. 
Overall, the plan would spend $731 billion for Medicaid over 
the next 6 years, saving $72 billion from the $803 billion that 
CBO projects will be spent in an unreformed program. 
Nevertheless, the congressional plan allows for 58 percent more 
funds over the next 6 years than the $463 billion spent in the 
past 6 years.
    In contrast, the administration plan calls for a spending 
growth rate averaging 7.2 percent a year over the next 6 years. 
The President's plan would spend $749 billion over 6 years, an 
increase of 62 percent from the past 6 years. The 
administration's savings total $54 billion through 2002.

                                      TABLE 1.--PROJECTED MEDICAID SPENDING                                     
                                            [In billions of dollars]                                            
----------------------------------------------------------------------------------------------------------------
                                                           1996    1997    1998    1999    2000    2001    2002 
----------------------------------------------------------------------------------------------------------------
CBO.....................................................    95.7   105.1   115.4   126.4   138.2   151.5   166.4
                                                                                                                
(6)(7-Year Increase 1996-2002: 74 Percent)                                                                      
----------------------------------------------------------------------------------------------------------------
Administration..........................................    95.7   106.6   113.6   120.7   128.4   135.4   144.9
                                                                                                                
(6)(7-Year Increase 1996-2002: 51 Percent)                                                                      
----------------------------------------------------------------------------------------------------------------
Congressional Medicaid Reform...........................    95.7   105.6   113.9   119.0   124.7   130.9   137.3
                                                                                                                
(6)(7-Year Increase 1996-2002: 43 Percent)                                                                      
----------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office.                                                                            


                                    TABLE 2.--PROJECTED MEDICAID GROWTH RATES                                   
                                        [Percentage growth, year by year]                                       
----------------------------------------------------------------------------------------------------------------
                                                                   1997    1998    1999    2000    2001    2002 
----------------------------------------------------------------------------------------------------------------
CBO.............................................................     9.8     9.8     9.5     9.3     9.7     9.9
                                                                                                                
(5)(Average Growth Over 6 Years: 9.7 Percent a Year)                                                            
----------------------------------------------------------------------------------------------------------------
Administration..................................................    11.4     6.6     6.2     6.4     5.4     7.0
                                                                                                                
(5)(Average Growth Over 6 Years: 7.2 Percent a Year)                                                            
----------------------------------------------------------------------------------------------------------------
Congressional Medicaid Reform...................................    10.3     7.9     4.5     4.8     5.0     4.9
                                                                                                                
(5)(Average Growth Over 6 Years: 6.1 Percent a Year)                                                            
----------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office.                                                                            

                        A Word About the Process

    The Welfare and Medicaid Reform Act of 1996 represents the 
first installment of a three-part reconciliation process 
envisioned in the conference report on House Concurrent 
Resolution 178, the budget resolution for fiscal year 1997.
    The budget resolution envisions an ambitious agenda of 
reforms to reduce the size and scope of the Federal Government 
and to provide tax relief for working American families. Under 
the most common practice, a major portion of these reforms 
would be pursued through a single, omnibus reconciliation bill. 
But such legislation can become so unwieldy and complex that 
Members may have difficulty grasping its entire content. The 
House-Senate conferees on an omnibus reconciliation bill can 
number in the hundreds. Finally, a President may be inclined to 
veto such legislation, even if he supports parts of it, because 
he opposes other portions. Thus, the all-or-nothing character 
of an omnibus bill can force the rejection of even those 
measures favored by both Congress and the President. More 
important, the Nation's citizens may sacrifice the benefits of 
legislative reforms that would have been enacted in a different 
combination.
    The three-part reconciliation process called for by 
H.Con.Res. 178 seeks to overcome these hurdles by breaking down 
reconciliation into a more orderly process comprising more 
manageable pieces. The Welfare and Medicaid Reform Act of 1996 
is the first of these. The process permits Congress to follow 
this bill later in the summer with a Medicare preservation plan 
and a package of tax relief and miscellaneous direct spending 
reforms.
    As designed in the budget resolution conference report, the 
multi-reconciliation process provides maximum flexibility to 
achieve the changes in spending and the tax relief assumed in 
the budget. For example, any of the spending or revenue changes 
assumed in the first reconciliation bill could--if the first 
bill were not enacted--be achieved in the third bill. Moreover, 
the reconciled committees are permitted to exceed the savings 
assumed in each of the reconciliation bills.
    Nevertheless, the process still requires reconciled 
committees ultimately to meet their targets, whether 
incrementally, through the separate reconciliation bills, or 
solely through the third bill.
                   TITLE I--COMMITTEE ON AGRICULTURE

SEC. 1001. SHORT TITLE.

    This title may be cited as the ``Food Stamp Reform and 
Commodity Distribution Act of 1996''.

SEC. 1002. TABLE OF CONTENTS.

    The table of contents of this title is as follows:

             TITLE I--FOOD STAMPS AND COMMODITY DISTRIBUTION

Sec. 1001. Short title.
Sec. 1002. Table of contents.

                     Subtitle A--Food Stamp Program

Sec. 1011. Definition of certification period.
Sec. 1012. Definition of coupon.
Sec. 1013. Treatment of children living at home.
Sec. 1014. Optional additional criteria for separate household 
          determinations.
Sec. 1015. Adjustment of thrifty food plan.
Sec. 1016. Definition of homeless individual.
Sec. 1017. State option for eligibility standards.
Sec. 1018. Earnings of students.
Sec. 1019. Energy assistance.
Sec. 1020. Deductions from income.
Sec. 1021. Vehicle allowance.
Sec. 1022. Vendor payments for transitional housing counted as income.
Sec. 1023. Doubled penalties for violating food stamp program 
          requirements.
Sec. 1024. Disqualification of convicted individuals.
Sec. 1025. Disqualification.
Sec. 1026. Caretaker exemption.
Sec. 1027. Employment and training.
Sec. 1028. Comparable treatment for disqualification.
Sec. 1029. Disqualification for receipt of multiple food stamp benefits.
Sec. 1030. Disqualification of fleeing felons.
Sec. 1031. Cooperation with child support agencies.
Sec. 1032. Disqualification relating to child support arrears.
Sec. 1033. Work requirement.
Sec. 1034. Encourage electronic benefit transfer systems.
Sec. 1035. Value of minimum allotment.
Sec. 1036. Benefits on recertification.
Sec. 1037. Optional combined allotment for expedited households.
Sec. 1038. Failure to comply with other means-tested public assistance 
          programs.
Sec. 1039. Allotments for households residing in centers.
Sec. 1040. Condition precedent for approval of retail food stores and 
          wholesale food concerns.
Sec. 1041. Authority to establish authorization periods.
Sec. 1042. Information for verifying eligibility for authorization.
Sec. 1043. Waiting period for stores that fail to meet authorization 
          criteria.
Sec. 1044. Operation of food stamp offices.
Sec. 1045. State employee and training standards.
Sec. 1046. Exchange of law enforcement information.
Sec. 1047. Expedited coupon service.
Sec. 1048. Withdrawing fair hearing requests.
Sec. 1049. Income, eligibility, and immigration status verification 
          systems.
Sec. 1050. Disqualification of retailers who intentionally submit 
          falsified applications.
Sec. 1051. Disqualification of retailers who are disqualified under the 
          WIC program.
Sec. 1052. Collection of overissuances.
Sec. 1053. Authority to suspend stores violating program requirements 
          pending administrative and judicial review.
Sec. 1054. Expanded criminal forfeiture for violations.
Sec. 1055. Limitation of Federal match.
Sec. 1056. Standards for administration.
Sec. 1057. Work supplementation or support program.
Sec. 1058. Waiver authority.
Sec. 1059. Response to waivers.
Sec. 1060. Employment initiatives program.
Sec. 1061. Reauthorization.
Sec. 1062. Simplified food stamp program.
Sec. 1063. State food assistance block grant.
Sec. 1064. A study of the use of food stamps to purchase vitamins and 
          minerals.
Sec. 1065. Investigations.
Sec. 1066. Food stamp eligibility.
Sec. 1067. Report by the Secretary.
Sec. 1068. Deficit reduction.

               Subtitle B--Commodity Distribution Programs

Sec. 1071. Emergency food assistance program.
Sec. 1072. Food bank demonstration project.
Sec. 1073. Hunger prevention programs.
Sec. 1074. Report on entitlement commodity processing.

             Subtitle C--Electronic Benefit Transfer Systems

Sec. 1091. Provisions to encourage electronic benefit transfer systems.

    

                     Subtitle A--Food Stamp Program

SEC. 1011. DEFINITION OF CERTIFICATION PERIOD.

    Section 3(c) of the Food Stamp Act of 1977 (7 U.S.C. 
2012(c)) is amended by striking ``Except as provided'' and all 
that follows and inserting the following: ``The certification 
period shall not exceed 12 months, except that the 
certification period may be up to 24 months if all adult 
household members are elderly or disabled. A State agency shall 
have at least 1 contact with each certified household every 12 
months.''.

SEC. 1012. DEFINITION OF COUPON.

    Section 3(d) of the Food Stamp Act of 1977 (7 U.S.C. 
2012(d)) is amended by striking ``or type of certificate'' and 
inserting ``type of certificate, authorization card, cash or 
check issued in lieu of a coupon, or an access device, 
including an electronic benefit transfer card or personal 
identification number,''.

SEC. 1013. TREATMENT OF CHILDREN LIVING AT HOME.

    The second sentence of section 3(i) of the Food Stamp Act 
of 1977 (7 U.S.C. 2012(i)) is amended by striking ``(who are 
not themselves parents living with their children or married 
and living with their spouses)''.

SEC. 1014. OPTIONAL ADDITIONAL CRITERIA FOR SEPARATE HOUSEHOLD 
                    DETERMINATIONS.

    Section 3(i) of the Food Stamp Act of 1977 (7 U.S.C. 
2012(i)) is amended by inserting after the third sentence the 
following: ``Notwithstanding the preceding sentences, a State 
may establish criteria that prescribe when individuals who live 
together, and who would be allowed to participate as separate 
households under the preceding sentences, shall be considered a 
single household, without regard to the common purchase of food 
and preparation of meals.''.

SEC. 1015. ADJUSTMENT OF THRIFTY FOOD PLAN.

    The second sentence of section 3(o) of the Food Stamp Act 
of 1977 (7 U.S.C. 2012(o)) is amended--
            (1) by striking ``shall (1) make'' and inserting 
        the following: ``shall--
            ``(1) make'';
            (2) by striking ``scale, (2) make'' and inserting 
        ``scale;
            ``(2) make'';
            (3) by striking ``Alaska, (3) make'' and inserting 
        the following: ``Alaska;
            ``(3) make''; and
            (4) by striking ``Columbia, (4) through'' and all 
        that follows through the end of the subsection and 
        inserting the following: ``Columbia; and
            ``(4) on October 1, 1996, and each October 1 
        thereafter, adjust the cost of the diet to reflect the 
        cost of the diet, in the preceding June, and round the 
        result to the nearest lower dollar increment for each 
        household size, except that on October 1, 1996, the 
        Secretary may not reduce the cost of the diet in effect 
        on September 30, 1996.''.

SEC. 1016. DEFINITION OF HOMELESS INDIVIDUAL.

    Section 3(s)(2)(C) of the Food Stamp Act of 1977 (7 U.S.C. 
2012(s)(2)(C)) is amended by inserting ``for not more than 90 
days'' after ``temporary accommodation''.

SEC. 1017. STATE OPTION FOR ELIGIBILITY STANDARDS.

    Section 5(b) of the Food Stamp Act of 1977 (7 U.S.C. 
2014(d)) is amended by striking ``(b) The Secretary'' and 
inserting the following:
    ``(b) Eligibility Standards.--Except as otherwise provided 
in this Act, the Secretary''.

SEC. 1018. EARNINGS OF STUDENTS.

    Section 5(d)(7) of the Food Stamp Act of 1977 (7 U.S.C. 
2014(d)(7)) is amended by striking ``21'' and inserting ``19''.

SEC. 1019. ENERGY ASSISTANCE.

    (a) In General.--Section 5(d) of the Food Stamp Act of 1977 
(7 U.S.C. 2014(d)) is amended by striking paragraph (11) and 
inserting the following: ``(11) a 1-time payment or allowance 
made under a Federal or State law for the costs of 
weatherization or emergency repair or replacement of an unsafe 
or inoperative furnace or other heating or cooling device,''.
    (b) Conforming Amendments.--
            (1) Section 5(k) of the Act (7 U.S.C. 2014(k)) is 
        amended--
                    (A) in paragraph (1)--
                            (i) in subparagraph (A), by 
                        striking ``plan for aid to families 
                        with dependent children approved'' and 
                        inserting ``program funded''; and
                            (ii) in subparagraph (B), by 
                        striking ``, not including energy or 
                        utility-cost assistance,'';
                    (B) in paragraph (2), by striking 
                subparagraph (C) and inserting the following:
            ``(C) a payment or allowance described in 
        subsection (d)(11);''; and
                    (C) by adding at the end the following:
            ``(4) Third party energy assistance payments.--
                    ``(A) Energy assistance payments.--For 
                purposes of subsection (d)(1), a payment made 
                under a Federal or State law to provide energy 
                assistance to a household shall be considered 
                money payable directly to the household.
                    ``(B) Energy assistance expenses.--For 
                purposes of subsection (e)(7), an expense paid 
                on behalf of a household under a Federal or 
                State law to provide energy assistance shall be 
                considered an out-of-pocket expense incurred 
                and paid by the household.''.
            (2) Section 2605(f) of the Low-Income Home Energy 
        Assistance Act of 1981 (42 U.S.C. 8624(f)) is amended--
                    (A) by striking ``(f)(1) Notwithstanding'' 
                and inserting ``(f) Notwithstanding'';
                    (B) in paragraph (1), by striking ``food 
                stamps,''; and
                    (C) by striking paragraph (2).

SEC. 1020. DEDUCTIONS FROM INCOME.

    (a) In General.--Section 5 of the Food Stamp Act of 1977 (7 
U.S.C. 2014) is amended by striking subsection (e) and 
inserting the following:
    ``(e) Deductions From Income.--
            ``(1) Standard deduction.--The Secretary shall 
        allow a standard deduction for each household in the 48 
        contiguous States and the District of Columbia, Alaska, 
        Hawaii, Guam, and the Virgin Islands of the United 
        States of $134, $229, $189, $269, and $118, 
        respectively.
            ``(2) Earned income deduction.--
                    ``(A) Definition of earned income.--In this 
                paragraph, the term `earned income' does not 
                include income excluded by subsection (d) or 
                any portion of income earned under a work 
                supplementation or support program, as defined 
                under section 16(b), that is attributable to 
                public assistance.
                    ``(B) Deduction.--Except as provided in 
                subparagraph (C), a household with earned 
                income shall be allowed a deduction of 20 
                percent of all earned income to compensate for 
                taxes, other mandatory deductions from salary, 
                and work expenses.
                    ``(C) Exception.--The deduction described 
                in subparagraph (B) shall not be allowed with 
                respect to determining an overissuance due to 
                the failure of a household to report earned 
                income in a timely manner.
            ``(3) Dependent care deduction.--
                    ``(A) In general.--A household shall be 
                entitled, with respect to expenses (other than 
                excluded expenses described in subparagraph 
                (B)) for dependent care, to a dependent care 
                deduction, the maximum allowable level of which 
                shall be $200 per month for each dependent 
                child under 2 years of age and $175 per month 
                for each other dependent, for the actual cost 
                of payments necessary for the care of a 
                dependent if the care enables a household 
                member to accept or continue employment, or 
                training or education that is preparatory for 
                employment.
                    ``(B) Excluded expenses.--The excluded 
                expenses referred to in subparagraph (A) are--
                            ``(i) expenses paid on behalf of 
                        the household by a third party;
                            ``(ii) amounts made available and 
                        excluded for the expenses referred to 
                        in subparagraph (A) under subsection 
                        (d)(3); and
                            ``(iii) expenses that are paid 
                        under section 6(d)(4).
            ``(4) Deduction for child support payments.--
                    ``(A) In general.--A household shall be 
                entitled to a deduction for child support 
                payments made by a household member to or for 
                an individual who is not a member of the 
                household if the household member is legally 
                obligated to make the payments.
                    ``(B) Methods for determining amount.--The 
                Secretary may prescribe by regulation the 
                methods, including calculation on a 
                retrospective basis, that a State agency shall 
                use to determine the amount of the deduction 
                for child support payments.
            ``(5) Homeless shelter allowance.--A State agency 
        may develop a standard homeless shelter allowance, 
        which shall not exceed $143 per month, for such 
        expenses as may reasonably be expected to be incurred 
        by households in which all members are homeless 
        individuals but are not receiving free shelter 
        throughout the month. A State agency that develops the 
        allowance may use the allowance in determining 
        eligibility and allotments for the households, except 
        that the State agency may prohibit the use of the 
        allowance for households with extremely low shelter 
        costs.
            ``(6) Excess medical expense deduction.--
                    ``(A) In general.--A household containing 
                an elderly or disabled member shall be 
                entitled, with respect to expenses other than 
                expenses paid on behalf of the household by a 
                third party, to an excess medical expense 
                deduction for the portion of the actual costs 
                of allowable medical expenses, incurred by the 
                elderly or disabled member, exclusive of 
                special diets, that exceeds $35 per month.
                    ``(B) Method of claiming deduction.--
                            ``(i) In general.--A State agency 
                        shall offer an eligible household under 
                        subparagraph (A) a method of claiming a 
                        deduction for recurring medical 
                        expenses that are initially verified 
                        under the excess medical expense 
                        deduction in lieu of submitting 
                        information or verification on actual 
                        expenses on a monthly basis.
                            ``(ii) Method.--The method 
                        described in clause (i) shall--
                                    ``(I) be designed to 
                                minimize the burden for the 
                                eligible elderly or disabled 
                                household member choosing to 
                                deduct the recurrent medical 
                                expenses of the member pursuant 
                                to the method;
                                    ``(II) rely on reasonable 
                                estimates of the expected 
                                medical expenses of the member 
                                for the certification period 
                                (including changes that can be 
                                reasonably anticipated based on 
                                available information about the 
                                medical condition of the 
                                member, public or private 
                                medical insurance coverage, and 
                                the current verified medical 
                                expenses incurred by the 
                                member); and
                                    ``(III) not require further 
                                reporting or verification of a 
                                change in medical expenses if 
                                such a change has been 
                                anticipated for the 
                                certification period.
            ``(7) Excess shelter expense deduction.--
                    ``(A) In general.--A household shall be 
                entitled, with respect to expenses other than 
                expenses paid on behalf of the household by a 
                third party, to an excess shelter expense 
                deduction to the extent that the monthly amount 
                expended by a household for shelter exceeds an 
                amount equal to 50 percent of monthly household 
                income after all other applicable deductions 
                have been allowed.
                    ``(B) Maximum amount of deduction.--In the 
                case of a household that does not contain an 
                elderly or disabled individual, the excess 
                shelter expense deduction shall not exceed--
                            ``(i) in the 48 contiguous States 
                        and the District of Columbia, $247 per 
                        month; and
                            ``(ii) in Alaska, Hawaii, Guam, and 
                        the Virgin Islands of the United 
                        States, $429, $353, $300, and $182 per 
                        month, respectively.
                    ``(C) Standard utility allowance.--
                            ``(i) In general.--In computing the 
                        excess shelter expense deduction, a 
                        State agency may use a standard utility 
                        allowance in accordance with 
                        regulations promulgated by the 
                        Secretary, except that a State agency 
                        may use an allowance that does not 
                        fluctuate within a year to reflect 
                        seasonal variations.
                            ``(ii) Restrictions on heating and 
                        cooling expenses.--An allowance for a 
                        heating or cooling expense may not be 
                        used in the case of a household that--
                                    ``(I) does not incur a 
                                heating or cooling expense, as 
                                the case may be;
                                    ``(II) does incur a heating 
                                or cooling expense but is 
                                located in a public housing 
                                unit that has central utility 
                                meters and charges households, 
                                with regard to the expense, 
                                only for excess utility costs; 
                                or
                                    ``(III) shares the expense 
                                with, and lives with, another 
                                individual not participating in 
                                the food stamp program, another 
                                household participating in the 
                                food stamp program, or both, 
                                unless the allowance is 
                                prorated between the household 
                                and the other individual, 
                                household, or both.
                            ``(iii) Mandatory allowance.--
                                    ``(I) In general.--A State 
                                agency may make the use of a 
                                standard utility allowance 
                                mandatory for all households 
                                with qualifying utility costs 
                                if--
                                            ``(aa) the State 
                                        agency has developed 1 
                                        or more standards that 
                                        include the cost of 
                                        heating and cooling and 
                                        1 or more standards 
                                        that do not include the 
                                        cost of heating and 
                                        cooling; and
                                            ``(bb) the 
                                        Secretary finds that 
                                        the standards will not 
                                        result in an increased 
                                        cost to the Secretary.
                                    ``(II) Household 
                                election.--A State agency that 
                                has not made the use of a 
                                standard utility allowance 
                                mandatory under subclause (I) 
                                shall allow a household to 
                                switch, at the end of a 
                                certification period, between 
                                the standard utility allowance 
                                and a deduction based on the 
                                actual utility costs of the 
                                household.
                            ``(iv) Availability of allowance to 
                        recipients of energy assistance.--
                                    ``(I) In general.--Subject 
                                to subclause (II), if a State 
                                agency elects to use a standard 
                                utility allowance that reflects 
                                heating or cooling costs, the 
                                standard utility allowance 
                                shall be made available to 
                                households receiving a payment, 
                                or on behalf of which a payment 
                                is made, under the Low-Income 
                                Home Energy Assistance Act of 
                                1981 (42 U.S.C. 8621 et seq.) 
                                or other similar energy 
                                assistance program, if the 
                                household still incurs out-of-
                                pocket heating or cooling 
                                expenses in excess of any 
                                assistance paid on behalf of 
                                the household to an energy 
                                provider.
                                    ``(II) Separate 
                                allowance.--A State agency may 
                                use a separate standard utility 
                                allowance for households on 
                                behalf of which a payment 
                                described in subclause (I) is 
                                made, but may not be required 
                                to do so.
                                    ``(III) States not electing 
                                to use separate allowance.--A 
                                State agency that does not 
                                elect to use a separate 
                                allowance but makes a single 
                                standard utility allowance 
                                available to households 
                                incurring heating or cooling 
                                expenses (other than a 
                                household described in 
                                subclause (I) or (II) of 
                                subparagraph (C)(ii)) may not 
                                be required to reduce the 
                                allowance due to the provision 
                                (directly or indirectly) of 
                                assistance under the Low-Income 
                                Home Energy Assistance Act of 
                                1981 (42 U.S.C. 8621 et seq.).
                                    ``(IV) Proration of 
                                assistance.--For the purpose of 
                                the food stamp program, 
                                assistance provided under the 
                                Low-Income Home Energy 
                                Assistance Act of 1981 (42 
                                U.S.C. 8621 et seq.) shall be 
                                considered to be prorated over 
                                the entire heating or cooling 
                                season for which the assistance 
                                was provided.''.
    (b) Conforming Amendment.--Section 11(e)(3) of the Act (7 
U.S.C. 2020(e)(3)) is amended by striking ``Under rules 
prescribed'' and all that follows through ``verifies higher 
expenses;''.

SEC. 1021. VEHICLE ALLOWANCE.

    Section 5(g) of the Food Stamp Act of 1977 (7 U.S.C. 
2014(g)) is amended by striking paragraph (2) and inserting the 
following:
            ``(2) Included assets.--
                    ``(A) In general.--Subject to the other 
                provisions of this paragraph, the Secretary 
                shall, in prescribing inclusions in, and 
                exclusions from, financial resources, follow 
                the regulations in force as of June 1, 1982 
                (other than those relating to licensed vehicles 
                and inaccessible resources).
                    ``(B) Additional included assets.--The 
                Secretary shall include in financial 
                resources--
                            ``(i) any boat, snowmobile, or 
                        airplane used for recreational 
                        purposes;
                            ``(ii) any vacation home;
                            ``(iii) any mobile home used 
                        primarily for vacation purposes;
                            ``(iv) subject to subparagraph (C), 
                        any licensed vehicle that is used for 
                        household transportation or to obtain 
                        or continue employment to the extent 
                        that the fair market value of the 
                        vehicle exceeds $4,600; and
                            ``(v) any savings or retirement 
                        account (including an individual 
                        account), regardless of whether there 
                        is a penalty for early withdrawal.
                    ``(C) Excluded vehicles.--A vehicle (and 
                any other property, real or personal, to the 
                extent the property is directly related to the 
                maintenance or use of the vehicle) shall not be 
                included in financial resources under this 
                paragraph if the vehicle is--
                            ``(i) used to produce earned 
                        income;
                            ``(ii) necessary for the 
                        transportation of a physically disabled 
                        household member; or
                            ``(iii) depended on by a household 
                        to carry fuel for heating or water for 
                        home use and provides the primary 
                        source of fuel or water, respectively, 
                        for the household.''.

SEC. 1022. VENDOR PAYMENTS FOR TRANSITIONAL HOUSING COUNTED AS INCOME.

    Section 5(k)(2) of the Food Stamp Act of 1977 (7 U.S.C. 
2014(k)(2)) is amended--
            (1) by striking subparagraph (F); and
            (2) by redesignating subparagraphs (G) and (H) as 
        subparagraphs (F) and (G), respectively.

SEC. 1023. DOUBLED PENALTIES FOR VIOLATING FOOD STAMP PROGRAM 
                    REQUIREMENTS.

    Section 6(b)(1) of the Food Stamp Act of 1977 (7 U.S.C. 
2015(b)(1)) is amended--
            (1) in clause (i), by striking ``six months'' and 
        inserting ``1 year''; and
            (2) in clause (ii), by striking ``1 year'' and 
        inserting ``2 years''.

SEC. 1024. DISQUALIFICATION OF CONVICTED INDIVIDUALS.

    Section 6(b)(1)(iii) of the Food Stamp Act of 1977 (7 
U.S.C. 2015(b)(1)(iii)) is amended--
            (1) in subclause (II), by striking ``or'' at the 
        end;
            (2) in subclause (III), by striking the period at 
        the end and inserting ``; or''; and
            (3) by inserting after subclause (III) the 
        following:
                    ``(IV) a conviction of an offense under 
                subsection (b) or (c) of section 15 involving 
                an item covered by subsection (b) or (c) of 
                section 15 having a value of $500 or more.''.

SEC. 1025. DISQUALIFICATION.

    (a) In General.--Section 6(d) of the Food Stamp Act of 1977 
(7 U.S.C. 2015(d)) is amended by striking ``(d)(1) Unless 
otherwise exempted by the provisions'' and all that follows 
through the end of paragraph (1) and inserting the following:
    ``(d) Conditions of Participation.--
            ``(1) Work requirements.--
                    ``(A) In general.--No physically and 
                mentally fit individual over the age of 15 and 
                under the age of 60 shall be eligible to 
                participate in the food stamp program if the 
                individual--
                            ``(i) refuses, at the time of 
                        application and every 12 months 
                        thereafter, to register for employment 
                        in a manner prescribed by the 
                        Secretary;
                            ``(ii) refuses without good cause 
                        to participate in an employment and 
                        training program under paragraph (4), 
                        to the extent required by the State 
                        agency;
                            ``(iii) refuses without good cause 
                        to accept an offer of employment, at a 
                        site or plant not subject to a strike 
                        or lockout at the time of the refusal, 
                        at a wage not less than the higher of--
                                    ``(I) the applicable 
                                Federal or State minimum wage; 
                                or
                                    ``(II) 80 percent of the 
                                wage that would have governed 
                                had the minimum hourly rate 
                                under section 6(a)(1) of the 
                                Fair Labor Standards Act of 
                                1938 (29 U.S.C. 206(a)(1)) been 
                                applicable to the offer of 
                                employment;
                            ``(iv) refuses without good cause 
                        to provide a State agency with 
                        sufficient information to allow the 
                        State agency to determine the 
                        employment status or the job 
                        availability of the individual;
                            ``(v) voluntarily and without good 
                        cause--
                                    ``(I) quits a job; or
                                    ``(II) reduces work effort 
                                and, after the reduction, the 
                                individual is working less than 
                                30 hours per week; or
                            ``(vi) fails to comply with section 
                        20.
                    ``(B) Household ineligibility.--If an 
                individual who is the head of a household 
                becomes ineligible to participate in the food 
                stamp program under subparagraph (A), the 
                household shall, at the option of the State 
                agency, become ineligible to participate in the 
                food stamp program for a period, determined by 
                the State agency, that does not exceed the 
                lesser of--
                            ``(i) the duration of the 
                        ineligibility of the individual 
                        determined under subparagraph (C); or
                            ``(ii) 180 days.
                    ``(C) Duration of ineligibility.--
                            ``(i) First violation.--The first 
                        time that an individual becomes 
                        ineligible to participate in the food 
                        stamp program under subparagraph (A), 
                        the individual shall remain ineligible 
                        until the later of--
                                    ``(I) the date the 
                                individual becomes eligible 
                                under subparagraph (A);
                                    ``(II) the date that is 1 
                                month after the date the 
                                individual became ineligible; 
                                or
                                    ``(III) a date determined 
                                by the State agency that is not 
                                later than 3 months after the 
                                date the individual became 
                                ineligible.
                            ``(ii) Second violation.--The 
                        second time that an individual becomes 
                        ineligible to participate in the food 
                        stamp program under subparagraph (A), 
                        the individual shall remain ineligible 
                        until the later of--
                                    ``(I) the date the 
                                individual becomes eligible 
                                under subparagraph (A);
                                    ``(II) the date that is 3 
                                months after the date the 
                                individual became ineligible; 
                                or
                                    ``(III) a date determined 
                                by the State agency that is not 
                                later than 6 months after the 
                                date the individual became 
                                ineligible.
                            ``(iii) Third or subsequent 
                        violation.--The third or subsequent 
                        time that an individual becomes 
                        ineligible to participate in the food 
                        stamp program under subparagraph (A), 
                        the individual shall remain ineligible 
                        until the later of--
                                    ``(I) the date the 
                                individual becomes eligible 
                                under subparagraph (A);
                                    ``(II) the date that is 6 
                                months after the date the 
                                individual became ineligible;
                                    ``(III) a date determined 
                                by the State agency; or
                                    ``(IV) at the option of the 
                                State agency, permanently.
                    ``(D) Administration.--
                            ``(i) Good cause.--The Secretary 
                        shall determine the meaning of good 
                        cause for the purpose of this 
                        paragraph.
                            ``(ii) Voluntary quit.--The 
                        Secretary shall determine the meaning 
                        of voluntarily quitting and reducing 
                        work effort for the purpose of this 
                        paragraph.
                            ``(iii) Determination by state 
                        agency.--
                                    ``(I) In general.--Subject 
                                to subclause (II) and clauses 
                                (i) and (ii), a State agency 
                                shall determine--
                                            ``(aa) the meaning 
                                        of any term in 
                                        subparagraph (A);
                                            ``(bb) the 
                                        procedures for 
                                        determining whether an 
                                        individual is in 
                                        compliance with a 
                                        requirement under 
                                        subparagraph (A); and
                                            ``(cc) whether an 
                                        individual is in 
                                        compliance with a 
                                        requirement under 
                                        subparagraph (A).
                                    ``(II) Not less 
                                restrictive.--A State agency 
                                may not determine a meaning, 
                                procedure, or determination 
                                under subclause (I) to be less 
                                restrictive than a comparable 
                                meaning, procedure, or 
                                determination under a State 
                                program funded under part A of 
                                title IV of the Social Security 
                                Act (42 U.S.C. 601 et seq.).
                            ``(iv) Strike against the 
                        government.--For the purpose of 
                        subparagraph (A)(v), an employee of the 
                        Federal Government, a State, or a 
                        political subdivision of a State, who 
                        is dismissed for participating in a 
                        strike against the Federal Government, 
                        the State, or the political subdivision 
                        of the State shall be considered to 
                        have voluntarily quit without good 
                        cause.
                            ``(v) Selecting a head of 
                        household.--
                                    ``(I) In general.--For the 
                                purpose of this paragraph, the 
                                State agency shall allow the 
                                household to select any adult 
                                parent of a child in the 
                                household as the head of the 
                                household if all adult 
                                household members making 
                                application under the food 
                                stamp program agree to the 
                                selection.
                                    ``(II) Time for making 
                                designation.--A household may 
                                designate the head of the 
                                household under subclause (I) 
                                each time the household is 
                                certified for participation in 
                                the food stamp program, but may 
                                not change the designation 
                                during a certification period 
                                unless there is a change in the 
                                composition of the household.
                            ``(vi) Change in head of 
                        household.--If the head of a household 
                        leaves the household during a period in 
                        which the household is ineligible to 
                        participate in the food stamp program 
                        under subparagraph (B)--
                                    ``(I) the household shall, 
                                if otherwise eligible, become 
                                eligible to participate in the 
                                food stamp program; and
                                    ``(II) if the head of the 
                                household becomes the head of 
                                another household, the 
                                household that becomes headed 
                                by the individual shall become 
                                ineligible to participate in 
                                the food stamp program for the 
                                remaining period of 
                                ineligibility.''.
    (b) Conforming Amendment.--
            (1) The second sentence of section 17(b)(2) of the 
        Act (7 U.S.C. 2026(b)(2)) is amended by striking 
        ``6(d)(1)(i)'' and inserting ``6(d)(1)(A)(i)''.
            (2) Section 20 of the Act (7 U.S.C. 2029) is 
        amended by striking subsection (f) and inserting the 
        following:
    ``(f) Disqualification.--An individual or a household may 
become ineligible under section 6(d)(1) to participate in the 
food stamp program for failing to comply with this section.''.

SEC. 1026. CARETAKER EXEMPTION.

    Section 6(d)(2) of the Food Stamp Act of 1977 (7 U.S.C. 
2015(d)(2)) is amended by striking subparagraph (B) and 
inserting the following: ``(B) a parent or other member of a 
household with responsibility for the care of (i) a dependent 
child under the age of 6 or any lower age designated by the 
State agency that is not under the age of 1, or (ii) an 
incapacitated person;''.

SEC. 1027. EMPLOYMENT AND TRAINING.

    (a) In General.--Section 6(d)(4) of the Food Stamp Act of 
1977 (7 U.S.C. 2015(d)(4)) is amended--
            (1) in subparagraph (A)--
                    (A) by striking ``Not later than April 1, 
                1987, each'' and inserting ``Each'';
                    (B) by inserting ``work,'' after ``skills, 
                training,''; and
                    (C) by adding at the end the following: 
                ``Each component of an employment and training 
                program carried out under this paragraph shall 
                be delivered through a statewide workforce 
                development system, unless the component is not 
                available locally through the statewide 
                workforce development system.'';
            (2) in subparagraph (B)--
                    (A) in the matter preceding clause (i), by 
                striking the colon at the end and inserting the 
                following: ``, except that the State agency 
                shall retain the option to apply employment 
                requirements prescribed under this subparagraph 
                to a program applicant at the time of 
                application:'';
                    (B) in clause (i), by striking ``with terms 
                and conditions'' and all that follows through 
                ``time of application''; and
                    (C) in clause (iv)--
                            (i) by striking subclauses (I) and 
                        (II); and
                            (ii) by redesignating subclauses 
                        (III) and (IV) as subclauses (I) and 
                        (II), respectively;
            (3) in subparagraph (D)--
                    (A) in clause (i), by striking ``to which 
                the application'' and all that follows through 
                ``30 days or less'';
                    (B) in clause (ii), by striking ``but with 
                respect'' and all that follows through ``child 
                care''; and
                    (C) in clause (iii), by striking ``, on the 
                basis of'' and all that follows through 
                ``clause (ii)'' and inserting ``the exemption 
                continues to be valid'';
            (4) in subparagraph (E), by striking the third 
        sentence;
            (5) in subparagraph (G)--
                    (A) by striking ``(G)(i) The State'' and 
                inserting ``(G) The State''; and
                    (B) by striking clause (ii);
            (6) in subparagraph (H), by striking ``(H)(i) The 
        Secretary'' and all that follows through ``(ii) Federal 
        funds'' and inserting ``(H) Federal funds'';
            (7) in subparagraph (I)(i)(II), by striking ``, or 
        was in operation,'' and all that follows through 
        ``Social Security Act'' and inserting the following: 
        ``), except that no such payment or reimbursement shall 
        exceed the applicable local market rate'';
            (8)(A) by striking subparagraphs (K) and (L) and 
        inserting the following:
                    ``(K) Limitation on funding.--
                Notwithstanding any other provision of this 
                paragraph, the amount of funds a State agency 
                uses to carry out this paragraph (including 
                under subparagraph (I)) for participants who 
                are receiving benefits under a State program 
                funded under part A of title IV of the Social 
                Security Act (42 U.S.C. 601 et seq.) shall not 
                exceed the amount of funds the State agency 
                used in fiscal year 1995 to carry out this 
                paragraph for participants who were receiving 
                benefits in fiscal year 1995 under a State 
                program funded under part A of title IV of the 
                Act (42 U.S.C. 601 et seq.).''; and
            (B) by redesignating subparagraphs (M) and (N) as 
        subparagraphs (L) and (M), respectively; and
            (9) in subparagraph (L), as redesignated by 
        paragraph (8)(B)--
                    (A) by striking ``(L)(i) The Secretary'' 
                and inserting ``(L) The Secretary''; and
                    (B) by striking clause (ii).
    (b) Funding.--Section 16(h) of the Act (7 U.S.C. 2025(h)) 
is amended by striking ``(h)(1)(A) The Secretary'' and all that 
follows through the end of paragraph (1) and inserting the 
following:
    ``(h) Funding of Employment and Training Programs.--
            ``(1) In general.--
                    ``(A) Amounts.--To carry out employment and 
                training programs, the Secretary shall reserve 
                for allocation to State agencies from funds 
                made available for each fiscal year under 
                section 18(a)(1) the amount of--
                            ``(i) for fiscal year 1996, 
                        $75,000,000;
                            ``(ii) for fiscal year 1997, 
                        $79,000,000;
                            ``(iii) for fiscal year 1998, 
                        $81,000,000;
                            ``(iv) for fiscal year 1999, 
                        $84,000,000;
                            ``(v) for fiscal year 2000, 
                        $86,000,000;
                            ``(vi) for fiscal year 2001, 
                        $88,000,000; and
                            ``(vii) for fiscal year 2002, 
                        $90,000,000.
                    ``(B) Allocation.--The Secretary shall 
                allocate the amounts reserved under 
                subparagraph (A) among the State agencies using 
                a reasonable formula (as determined by the 
                Secretary) that gives consideration to the 
                population in each State affected by section 
                6(o).
                    ``(C) Reallocation.--
                            ``(i) Notification.--A State agency 
                        shall promptly notify the Secretary if 
                        the State agency determines that the 
                        State agency will not expend all of the 
                        funds allocated to the State agency 
                        under subparagraph (B).
                            ``(ii) Reallocation.--On 
                        notification under clause (i), the 
                        Secretary shall reallocate the funds 
                        that the State agency will not expend 
                        as the Secretary considers appropriate 
                        and equitable.
                    ``(D) Minimum allocation.--Notwithstanding 
                subparagraphs (A) through (C), the Secretary 
                shall ensure that each State agency operating 
                an employment and training program shall 
                receive not less than $50,000 in each fiscal 
                year.''.
    (c) Additional Matching Funds.--Section 16(h)(2) of the Act 
(7 U.S.C. 2025(h)(2)) is amended by inserting before the period 
at the end the following: ``, including the costs for case 
management and casework to facilitate the transition from 
economic dependency to self-sufficiency through work''.
    (d) Reports.--Section 16(h) of the Act (7 U.S.C. 2025(h)) 
is amended--
            (1) in paragraph (5)--
                    (A) by striking ``(5)(A) The Secretary'' 
                and inserting ``(5) The Secretary''; and
                    (B) by striking subparagraph (B); and
            (2) by striking paragraph (6).

SEC. 1028. COMPARABLE TREATMENT FOR DISQUALIFICATION.

    (a) In General.--Section 6 of the Food Stamp Act of 1977 (7 
U.S.C. 2015) is amended by adding at the end the following:
    ``(i) Comparable Treatment for Disqualification.--
            ``(1) In general.--If a disqualification is imposed 
        on a member of a household for a failure of the member 
        to perform an action required under a Federal, State, 
        or local law relating to a means-tested public 
        assistance program, the State agency may impose the 
        same disqualification on the member of the household 
        under the food stamp program.
            ``(2) Rules and procedures.--If a disqualification 
        is imposed under paragraph (1) for a failure of an 
        individual to perform an action required under part A 
        of title IV of the Social Security Act (42 U.S.C. 601 
        et seq.), the State agency may use the rules and 
        procedures that apply under part A of title IV of the 
        Act to impose the same disqualification under the food 
        stamp program.
            ``(3) Application after disqualification period.--A 
        member of a household disqualified under paragraph (1) 
        may, after the disqualification period has expired, 
        apply for benefits under this Act and shall be treated 
        as a new applicant, except that a prior 
        disqualification under subsection (d) shall be 
        considered in determining eligibility.''.
    (b) State Plan Provisions.--Section 11(e) of the Act (7 
U.S.C. 2020(e)) is amended--
            (1) in paragraph (24), by striking ``and'' at the 
        end;
            (2) in paragraph (25), by striking the period at 
        the end and inserting a semicolon; and
            (3) by adding at the end the following:
            ``(26) the guidelines the State agency uses in 
        carrying out section 6(i); and''.
    (c) Conforming Amendment.--Section 6(d)(2)(A) of the Act (7 
U.S.C. 2015(d)(2)(A)) is amended by striking ``that is 
comparable to a requirement of paragraph (1)''.

SEC. 1029. DISQUALIFICATION FOR RECEIPT OF MULTIPLE FOOD STAMP 
                    BENEFITS.

    Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as 
amended by section 1028, is amended by adding at the end the 
following:
    ``(j) Disqualification for Receipt of Multiple Food Stamp 
Benefits.--An individual shall be ineligible to participate in 
the food stamp program as a member of any household for a 10-
year period if the individual is found by a State agency to 
have made, or is convicted in a Federal or State court of 
having made, a fraudulent statement or representation with 
respect to the identity or place of residence of the individual 
in order to receive multiple benefits simultaneously under the 
food stamp program.''.

SEC. 1030. DISQUALIFICATION OF FLEEING FELONS.

    Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as 
amended by sections 1028 and 1029, is amended by adding at the 
end the following:
    ``(k) Disqualification of Fleeing Felons.--No member of a 
household who is otherwise eligible to participate in the food 
stamp program shall be eligible to participate in the program 
as a member of that or any other household during any period 
during which the individual is--
            ``(1) fleeing to avoid prosecution, or custody or 
        confinement after conviction, under the law of the 
        place from which the individual is fleeing, for a 
        crime, or attempt to commit a crime, that is a felony 
        under the law of the place from which the individual is 
        fleeing or that, in the case of New Jersey, is a high 
        misdemeanor under the law of New Jersey; or
            ``(2) violating a condition of probation or parole 
        imposed under a Federal or State law.''.

SEC. 1031. COOPERATION WITH CHILD SUPPORT AGENCIES.

    Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as 
amended by sections 1028 through 1030, is amended by adding at 
the end the following:
    ``(l) Custodial Parent's Cooperation With Child Support 
Agencies.--
            ``(1) In general.--At the option of a State agency, 
        subject to paragraphs (2) and (3), no natural or 
        adoptive parent or other individual (collectively 
        referred to in this subsection as `the individual') who 
        is living with and exercising parental control over a 
        child under the age of 18 who has an absent parent 
        shall be eligible to participate in the food stamp 
        program unless the individual cooperates with the State 
        agency administering the program established under part 
        D of title IV of the Social Security Act (42 U.S.C. 651 
        et seq.)--
                    ``(A) in establishing the paternity of the 
                child (if the child is born out of wedlock); 
                and
                    ``(B) in obtaining support for--
                            ``(i) the child; or
                            ``(ii) the individual and the 
                        child.
            ``(2) Good cause for noncooperation.--Paragraph (1) 
        shall not apply to the individual if good cause is 
        found for refusing to cooperate, as determined by the 
        State agency in accordance with standards prescribed by 
        the Secretary in consultation with the Secretary of 
        Health and Human Services. The standards shall take 
        into consideration circumstances under which 
        cooperation may be against the best interests of the 
        child.
            ``(3) Fees.--Paragraph (1) shall not require the 
        payment of a fee or other cost for services provided 
        under part D of title IV of the Social Security Act (42 
        U.S.C. 651 et seq.).
    ``(m) Noncustodial Parent's Cooperation With Child Support 
Agencies.--
            ``(1) In general.--At the option of a State agency, 
        subject to paragraphs (2) and (3), a putative or 
        identified noncustodial parent of a child under the age 
        of 18 (referred to in this subsection as `the 
        individual') shall not be eligible to participate in 
        the food stamp program if the individual refuses to 
        cooperate with the State agency administering the 
        program established under part D of title IV of the 
        Social Security Act (42 U.S.C. 651 et seq.)--
                    ``(A) in establishing the paternity of the 
                child (if the child is born out of wedlock); 
                and
                    ``(B) in providing support for the child.
            ``(2) Refusal to cooperate.--
                    ``(A) Guidelines.--The Secretary, in 
                consultation with the Secretary of Health and 
                Human Services, shall develop guidelines on 
                what constitutes a refusal to cooperate under 
                paragraph (1).
                    ``(B) Procedures.--The State agency shall 
                develop procedures, using guidelines developed 
                under subparagraph (A), for determining whether 
                an individual is refusing to cooperate under 
                paragraph (1).
            ``(3) Fees.--Paragraph (1) shall not require the 
        payment of a fee or other cost for services provided 
        under part D of title IV of the Social Security Act (42 
        U.S.C. 651 et seq.).
            ``(4) Privacy.--The State agency shall provide 
        safeguards to restrict the use of information collected 
        by a State agency administering the program established 
        under part D of title IV of the Social Security Act (42 
        U.S.C. 651 et seq.) to purposes for which the 
        information is collected.''.

SEC. 1032. DISQUALIFICATION RELATING TO CHILD SUPPORT ARREARS.

    Section 6 of the Food Stamp Act of 1977 (7 U.S.C. 2015), as 
amended by sections 1028 through 1031, is amended by adding at 
the end the following:
    ``(n) Disqualification for Child Support Arrears.--
            ``(1) In general.--At the option of the State 
        agency, no individual shall be eligible to participate 
        in the food stamp program as a member of any household 
        during any month that the individual is delinquent in 
        any payment due under a court order for the support of 
        a child of the individual.
            ``(2) Exceptions.--Paragraph (1) shall not apply 
        if--
                    ``(A) a court is allowing the individual to 
                delay payment; or
                    ``(B) the individual is complying with a 
                payment plan approved by a court or the State 
                agency designated under part D of title IV of 
                the Social Security Act (42 U.S.C. 651 et seq.) 
                to provide support for the child of the 
                individual.''.

SEC. 1033. WORK REQUIREMENT.

    (a) In General.--Section 6 of the Food Stamp Act of 1977 (7 
U.S.C. 2015), as amended by sections 1028 through 1032, is 
amended by adding at the end the following:
    ``(o) Work Requirement.--
            ``(1) Definition of work program.--In this 
        subsection, the term `work program' means--
                    ``(A) a program under the Job Training 
                Partnership Act (29 U.S.C. 1501 et seq.);
                    ``(B) a program under section 236 of the 
                Trade Act of 1974 (19 U.S.C. 2296); or
                    ``(C) a program of employment and training 
                operated or supervised by a State or political 
                subdivision of a State that meets standards 
                approved by the Governor of the State, 
                including a program under section 6(d)(4), 
                other than a job search program or a job search 
                training program.
            ``(2) Work requirement.--Subject to the other 
        provisions of this subsection, no individual shall be 
        eligible to participate in the food stamp program as a 
        member of any household if, during the preceding 12-
        month period, the individual received food stamp 
        benefits for not less than 4 months during which the 
        individual did not--
                    ``(A) work 20 hours or more per week, 
                averaged monthly; or
                    ``(B) participate in and comply with the 
                requirements of a work program for 20 hours or 
                more per week, as determined by the State 
                agency; or
                    ``(C) participate in a program under 
                section 20 or a comparable program established 
                by a State or political subdivision of a State.
            ``(3) Exception.--Paragraph (2) shall not apply to 
        an individual if the individual is--
                    ``(A) under 18 or over 50 years of age;
                    ``(B) medically certified as physically or 
                mentally unfit for employment;
                    ``(C) a parent or other member of a 
                household with responsibility for a dependent 
                child;
                    ``(D) otherwise exempt under section 
                6(d)(2); or
                    ``(E) a pregnant woman.
            ``(4) Waiver.--
                    ``(A) In general.--On the request of a 
                State agency, the Secretary may waive the 
                applicability of paragraph (2) to any group of 
                individuals in the State if the Secretary makes 
                a determination that the area in which the 
                individuals reside--
                            ``(i) has an unemployment rate of 
                        over 10 percent; or
                            ``(ii) does not have a sufficient 
                        number of jobs to provide employment 
                        for the individuals.
                    ``(B) Report.--The Secretary shall report 
                the basis for a waiver under subparagraph (A) 
                to the Committee on Agriculture of the House of 
                Representatives and the Committee on 
                Agriculture, Nutrition, and Forestry of the 
                Senate.
            ``(5) Subsequent eligibility.--
                    ``(A) In general.--Paragraph (2) shall 
                cease to apply to an individual if, during a 
                30-day period, the individual--
                            ``(i) works 80 or more hours;
                            ``(ii) participates in and complies 
                        with the requirements of a work program 
                        for 80 or more hours, as determined by 
                        a State agency; or
                            ``(iii) participates in a program 
                        under section 20 or a comparable 
                        program established by a State or 
                        political subdivision of a State.
                    ``(B) Limitation.--During the subsequent 
                12-month period, the individual shall be 
                eligible to participate in the food stamp 
                program for not more than 4 months during which 
                the individual does not--
                            ``(i) work 20 hours or more per 
                        week, averaged monthly;
                            ``(ii) participate in and comply 
                        with the requirements of a work program 
                        for 20 hours or more per week, as 
                        determined by the State agency; or
                            ``(iii) participate in a program 
                        under section 20 or a comparable 
                        program established by a State or 
                        political subdivision of a State.''.
    (b) Transition Provision.--Prior to 1 year after the date 
of enactment of this Act, the term ``preceding 12-month 
period'' in section 6(o) of the Food Stamp Act of 1977, as 
amended by subsection (a), means the preceding period that 
begins on the date of enactment of this Act.

SEC. 1034. ENCOURAGE ELECTRONIC BENEFIT TRANSFER SYSTEMS.

    (a) In General.--Section 7(i) of the Food Stamp Act of 1977 
(7 U.S.C. 2016(i)) is amended--
            (1) by striking paragraph (1) and inserting the 
        following:
            ``(1) Electronic benefit transfers.--
                    ``(A) Implementation.--Each State agency 
                shall implement an electronic benefit transfer 
                system in which household benefits determined 
                under section 8(a) or 26 are issued from and 
                stored in a central databank before October 1, 
                2002, unless the Secretary provides a waiver 
                for a State agency that faces unusual barriers 
                to implementing an electronic benefit transfer 
                system.
                    ``(B) Timely implementation.--State 
                agencies are encouraged to implement an 
                electronic benefit transfer system under 
                subparagraph (A) as soon as practicable.
                    ``(C) State flexibility.--Subject to 
                paragraph (2), a State agency may procure and 
                implement an electronic benefit transfer system 
                under the terms, conditions, and design that 
                the State agency considers appropriate.
                    ``(D) Operation.--An electronic benefit 
                transfer system should take into account 
                generally accepted standard operating rules 
                based on--
                            ``(i) commercial electronic funds 
                        transfer technology;
                            ``(ii) the need to permit 
                        interstate operation and law 
                        enforcement monitoring; and
                            ``(iii) the need to permit 
                        monitoring and investigations by 
                        authorized law enforcement agencies.'';
            (2) in paragraph (2)--
                    (A) by striking ``effective no later than 
                April 1, 1992,'';
                    (B) in subparagraph (A)--
                            (i) by striking ``, in any 1 
                        year,''; and
                            (ii) by striking ``on-line'';
                    (C) by striking subparagraph (D) and 
                inserting the following:
            ``(D)(i) measures to maximize the security of a 
        system using the most recent technology available that 
        the State agency considers appropriate and cost 
        effective and which may include personal identification 
        numbers, photographic identification on electronic 
        benefit transfer cards, and other measures to protect 
        against fraud and abuse; and
            ``(ii) effective not later than 2 years after the 
        effective date of this clause, to the extent 
        practicable, measures that permit a system to 
        differentiate items of food that may be acquired with 
        an allotment from items of food that may not be 
        acquired with an allotment.'';
                    (D) in subparagraph (G), by striking 
                ``and'' at the end;
                    (E) in subparagraph (H), by striking the 
                period at the end and inserting ``; and''; and
                    (F) by adding at the end the following:
            ``(I) procurement standards.''; and
            (3) by adding at the end the following:
            ``(7) Replacement of benefits.--Regulations issued 
        by the Secretary regarding the replacement of benefits 
        and liability for replacement of benefits under an 
        electronic benefit transfer system shall be similar to 
        the regulations in effect for a paper food stamp 
        issuance system.
            ``(8) Replacement card fee.--A State agency may 
        collect a charge for replacement of an electronic 
        benefit transfer card by reducing the monthly allotment 
        of the household receiving the replacement card.
            ``(9) Optional photographic identification.--
                    ``(A) In general.--A State agency may 
                require that an electronic benefit card contain 
                a photograph of 1 or more members of a 
                household.
                    ``(B) Other authorized users.--If a State 
                agency requires a photograph on an electronic 
                benefit card under subparagraph (A), the State 
                agency shall establish procedures to ensure 
                that any other appropriate member of the 
                household or any authorized representative of 
                the household may utilize the card.
            ``(10) Application of anti-tying restrictions to 
        electronic benefit transfer systems.--
                    ``(A) In general.--A company shall not sell 
                or provide electronic benefit transfer 
                services, or fix or vary the consideration for 
                such services, on the condition or requirement 
                that the customer--
                            ``(i) obtain some additional point-
                        of-sale service from the company or any 
                        affiliate of the company; or
                            ``(ii) not obtain some additional 
                        point-of-sale service from a competitor 
                        of the company or competitor of any 
                        affiliate of the company.
                    ``(B) Definitions.--In this paragraph--
                            ``(i) Affiliate.--The term 
                        `affiliate' shall have the same meaning 
                        as in section 2(k) of the Bank Holding 
                        Company Act.
                            ``(ii) Company.--The term `company' 
                        shall have the same meaning as in 
                        section 106(a) of the Bank Holding 
                        Company Act Amendments of 1970, but 
                        shall not include a bank, bank holding 
                        company, or any subsidiary of a bank 
                        holding company.
                            ``(iii) Electronic benefit transfer 
                        service.--The term `electronic benefit 
                        transfer service' means the processing 
                        of electronic transfers of household 
                        benefits determined under section 8(a) 
                        or 26 where the benefits are--
                                    ``(I) issued from and 
                                stored in a central databank;
                                    ``(II) electronically 
                                accessed by household members 
                                at the point of sale; and
                                    ``(III) provided by a 
                                Federal or state government.
                            ``(iv) Point-of-sale service.--The 
                        term `point-of-sale service' means any 
                        product or service related to the 
                        electronic authorization and processing 
                        of payments for merchandise at a retail 
                        food store, including but not limited 
                        to credit or debit card services, 
                        automated teller machines, point-of-
                        sale terminals, or access to on-line 
                        systems.
                    ``(C) Consultation with the federal reserve 
                board.--Before promulgating regulations or 
                interpretations of regulations to carry out 
                this paragraph, the Secretary shall consult 
                with the Board of Governors of the Federal 
                Reserve System.''.
    (b) Sense of Congress.--It is the sense of Congress that a 
State that operates an electronic benefit transfer system under 
the Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.) should 
operate the system in a manner that is compatible with 
electronic benefit transfer systems operated by other States.

SEC. 1035. VALUE OF MINIMUM ALLOTMENT.

    The proviso in section 8(a) of the Food Stamp Act of 1977 
(7 U.S.C. 2017(a)) is amended by striking ``, and shall be 
adjusted'' and all that follows through ``$5''.

SEC. 1036. BENEFITS ON RECERTIFICATION.

    Section 8(c)(2)(B) of the Food Stamp Act of 1977 (7 U.S.C. 
2017(c)(2)(B)) is amended by striking ``of more than one 
month''.

SEC. 1037. OPTIONAL COMBINED ALLOTMENT FOR EXPEDITED HOUSEHOLDS.

    Section 8(c) of the Food Stamp Act of 1977 (7 U.S.C. 
2017(c)) is amended by striking paragraph (3) and inserting the 
following:
            ``(3) Optional combined allotment for expedited 
        households.--A State agency may provide to an eligible 
        household applying after the 15th day of a month, in 
        lieu of the initial allotment of the household and the 
        regular allotment of the household for the following 
        month, an allotment that is equal to the total amount 
        of the initial allotment and the first regular 
        allotment. The allotment shall be provided in 
        accordance with section 11(e)(3) in the case of a 
        household that is not entitled to expedited service and 
        in accordance with paragraphs (3) and (9) of section 
        11(e) in the case of a household that is entitled to 
        expedited service.''.

SEC. 1038. FAILURE TO COMPLY WITH OTHER MEANS-TESTED PUBLIC ASSISTANCE 
                    PROGRAMS.

    Section 8 of the Food Stamp Act of 1977 (7 U.S.C. 2017) is 
amended by striking subsection (d) and inserting the following:
    ``(d) Reduction of Public Assistance Benefits.--
            ``(1) In general.--If the benefits of a household 
        are reduced under a Federal, State, or local law 
        relating to a means-tested public assistance program 
        for the failure of a member of the household to perform 
        an action required under the law or program, for the 
        duration of the reduction--
                    ``(A) the household may not receive an 
                increased allotment as the result of a decrease 
                in the income of the household to the extent 
                that the decrease is the result of the 
                reduction; and
                    ``(B) the State agency may reduce the 
                allotment of the household by not more than 25 
                percent.
            ``(2) Rules and procedures.--If the allotment of a 
        household is reduced under this subsection for a 
        failure to perform an action required under part A of 
        title IV of the Social Security Act (42 U.S.C. 601 et 
        seq.), the State agency may use the rules and 
        procedures that apply under part A of title IV of the 
        Act to reduce the allotment under the food stamp 
        program.''.

SEC. 1039. ALLOTMENTS FOR HOUSEHOLDS RESIDING IN CENTERS.

    Section 8 of the Food Stamp Act of 1977 (7 U.S.C. 2017) is 
amended by adding at the end the following:
    ``(f) Allotments for Households Residing in Centers.--
            ``(1) In general.--In the case of an individual who 
        resides in a center for the purpose of a drug or 
        alcoholic treatment program described in the last 
        sentence of section 3(i), a State agency may provide an 
        allotment for the individual to--
                    ``(A) the center as an authorized 
                representative of the individual for a period 
                that is less than 1 month; and
                    ``(B) the individual, if the individual 
                leaves the center.
            ``(2) Direct payment.--A State agency may require 
        an individual referred to in paragraph (1) to designate 
        the center in which the individual resides as the 
        authorized representative of the individual for the 
        purpose of receiving an allotment.''.

SEC. 1040. CONDITION PRECEDENT FOR APPROVAL OF RETAIL FOOD STORES AND 
                    WHOLESALE FOOD CONCERNS.

    Section 9(a)(1) of the Food Stamp Act of 1977 (7 U.S.C. 
2018(a)(1)) is amended by adding at the end the following: ``No 
retail food store or wholesale food concern of a type 
determined by the Secretary, based on factors that include 
size, location, and type of items sold, shall be approved to be 
authorized or reauthorized for participation in the food stamp 
program unless an authorized employee of the Department of 
Agriculture, a designee of the Secretary, or, if practicable, 
an official of the State or local government designated by the 
Secretary has visited the store or concern for the purpose of 
determining whether the store or concern should be approved or 
reauthorized, as appropriate.''.

SEC. 1041. AUTHORITY TO ESTABLISH AUTHORIZATION PERIODS.

    Section 9(a) of the Food Stamp Act of 1977 (7 U.S.C. 
2018(a)) is amended by adding at the end the following:
            ``(3) Authorization periods.--The Secretary shall 
        establish specific time periods during which 
        authorization to accept and redeem coupons, or to 
        redeem benefits through an electronic benefit transfer 
        system, shall be valid under the food stamp program.''.

SEC. 1042. INFORMATION FOR VERIFYING ELIGIBILITY FOR AUTHORIZATION.

    Section 9(c) of the Food Stamp Act of 1977 (7 U.S.C. 
2018(c)) is amended--
            (1) in the first sentence, by inserting ``, which 
        may include relevant income and sales tax filing 
        documents,'' after ``submit information''; and
            (2) by inserting after the first sentence the 
        following: ``The regulations may require retail food 
        stores and wholesale food concerns to provide written 
        authorization for the Secretary to verify all relevant 
        tax filings with appropriate agencies and to obtain 
        corroborating documentation from other sources so that 
        the accuracy of information provided by the stores and 
        concerns may be verified.''.

SEC. 1043. WAITING PERIOD FOR STORES THAT FAIL TO MEET AUTHORIZATION 
                    CRITERIA.

    Section 9(d) of the Food Stamp Act of 1977 (7 U.S.C. 
2018(d)) is amended by adding at the end the following: ``A 
retail food store or wholesale food concern that is denied 
approval to accept and redeem coupons because the store or 
concern does not meet criteria for approval established by the 
Secretary may not, for at least 6 months, submit a new 
application to participate in the program. The Secretary may 
establish a longer time period under the preceding sentence, 
including permanent disqualification, that reflects the 
severity of the basis of the denial.''.

SEC. 1044. OPERATION OF FOOD STAMP OFFICES.

    Section 11 of the Food Stamp Act of 1977 (7 U.S.C. 2020), 
as amended by sections 1020(b) and 1028(b), is amended--
            (1) in subsection (e)--
                    (A) by striking paragraph (2) and inserting 
                the following:
            ``(2)(A) that the State agency shall establish 
        procedures governing the operation of food stamp 
        offices that the State agency determines best serve 
        households in the State, including households with 
        special needs, such as households with elderly or 
        disabled members, households in rural areas with low-
        income members, homeless individuals, households 
        residing on reservations, and households in areas in 
        which a substantial number of members of low-income 
        households speak a language other than English;
            ``(B) that in carrying out subparagraph (A), a 
        State agency--
                    ``(i) shall provide timely, accurate, and 
                fair service to applicants for, and 
                participants in, the food stamp program;
                    ``(ii) shall develop an application 
                containing the information necessary to comply 
                with this Act;
                    ``(iii) shall permit an applicant household 
                to apply to participate in the program on the 
                same day that the household first contacts a 
                food stamp office in person during office 
                hours;
                    ``(iv) shall consider an application that 
                contains the name, address, and signature of 
                the applicant to be filed on the date the 
                applicant submits the application;
                    ``(v) shall require that an adult 
                representative of each applicant household 
                certify in writing, under penalty of perjury, 
                that--
                            ``(I) the information contained in 
                        the application is true; and
                            ``(II) all members of the household 
                        are citizens or are aliens eligible to 
                        receive food stamps under section 6(f);
                    ``(vi) shall provide a method of certifying 
                and issuing coupons to eligible homeless 
                individuals, to ensure that participation in 
                the food stamp program is limited to eligible 
                households; and
                    ``(vii) may establish operating procedures 
                that vary for local food stamp offices to 
                reflect regional and local differences within 
                the State;
            ``(C) that nothing in this Act shall prohibit the 
        use of signatures provided and maintained 
        electronically, storage of records using automated 
        retrieval systems only, or any other feature of a State 
        agency's application system that does not rely 
        exclusively on the collection and retention of paper 
        applications or other records;
            ``(D) that the signature of any adult under this 
        paragraph shall be considered sufficient to comply with 
        any provision of Federal law requiring a household 
        member to sign an application or statement;'';
                    (B) in paragraph (3), as amended by section 
                1020(b)--
                            (i) by striking ``shall--'' and all 
                        that follows through ``provide each'' 
                        and inserting ``shall provide each''; 
                        and
                            (ii) by striking ``(B) assist'' and 
                        all that follows through 
                        ``representative of the State 
                        agency;'';
                    (C) by striking paragraphs (14) and (25);
                    (D)(i) by redesignating paragraphs (15) 
                through (24) as paragraphs (14) through (23), 
                respectively; and
                    (ii) by redesignating paragraph (26), as 
                added by section 1028(b), as paragraph (24); 
                and
            (2) in subsection (i)--
                    (A) by striking ``(i) Notwithstanding'' and 
                all that follows through ``(2)'' and inserting 
                the following:
    ``(i) Application and Denial Procedures.--
            ``(1) Application procedures.--Notwithstanding any 
        other provision of law,''; and
                    (B) by striking ``; (3) households'' and 
                all that follows through ``title IV of the 
                Social Security Act. No'' and inserting a 
                period and the following:
            ``(2) Denial and termination.--Other than in a case 
        of disqualification as a penalty for failure to comply 
        with a public assistance program rule or regulation, 
        no''.

SEC. 1045. STATE EMPLOYEE AND TRAINING STANDARDS.

    Section 11(e)(6) of the Food Stamp Act of 1977 (7 U.S.C. 
2020(e)(6)) is amended--
            (1) by striking ``that (A) the'' and inserting 
        ``that--
                    ``(A) the'';
            (2) by striking ``Act; (B) the'' and inserting 
        ``Act; and
                    ``(B) the'';
            (3) in subparagraph (B), by striking ``United 
        States Civil Service Commission'' and inserting 
        ``Office of Personnel Management''; and
            (4) by striking subparagraphs (C) through (E).

SEC. 1046. EXCHANGE OF LAW ENFORCEMENT INFORMATION.

    Section 11(e)(8) of the Food Stamp Act of 1977 (7 U.S.C. 
2020(e)(8)) is amended--
            (1) by striking ``that (A) such'' and inserting the 
        following: ``that--
                    ``(A) the'';
            (2) by striking ``law, (B) notwithstanding'' and 
        inserting the following: ``law;
                    ``(B) notwithstanding'';
            (3) by striking ``Act, and (C) such'' and inserting 
        the following: ``Act;
                    ``(C) the''; and
            (4) by adding at the end the following:
                    ``(D) notwithstanding any other provision 
                of law, the address, social security number, 
                and, if available, photograph of any member of 
                a household shall be made available, on 
                request, to any Federal, State, or local law 
                enforcement officer if the officer furnishes 
                the State agency with the name of the member 
                and notifies the agency that--
                            ``(i) the member--
                                    ``(I) is fleeing to avoid 
                                prosecution, or custody or 
                                confinement after conviction, 
                                for a crime (or attempt to 
                                commit a crime) that, under the 
                                law of the place the member is 
                                fleeing, is a felony (or, in 
                                the case of New Jersey, a high 
                                misdemeanor), or is violating a 
                                condition of probation or 
                                parole imposed under Federal or 
                                State law; or
                                    ``(II) has information that 
                                is necessary for the officer to 
                                conduct an official duty 
                                related to subclause (I);
                            ``(ii) locating or apprehending the 
                        member is an official duty; and
                            ``(iii) the request is being made 
                        in the proper exercise of an official 
                        duty; and
                    ``(E) the safeguards shall not prevent 
                compliance with paragraph (16);''.

SEC. 1047. EXPEDITED COUPON SERVICE.

    Section 11(e)(9) of the Food Stamp Act of 1977 (7 U.S.C. 
2020(e)(9)) is amended--
            (1) in subparagraph (A)--
                    (A) by striking ``five days'' and inserting 
                ``7 days''; and
                    (B) by inserting ``and'' at the end;
            (2) by striking subparagraphs (B) and (C);
            (3) by redesignating subparagraph (D) as 
        subparagraph (B); and
            (4) in subparagraph (B), as redesignated by 
        paragraph (3), by striking ``, (B), or (C)''.

SEC. 1048. WITHDRAWING FAIR HEARING REQUESTS.

    Section 11(e)(10) of the Food Stamp Act of 1977 (7 U.S.C. 
2020(e)(10)) is amended by inserting before the semicolon at 
the end a period and the following: ``At the option of a State, 
at any time prior to a fair hearing determination under this 
paragraph, a household may withdraw, orally or in writing, a 
request by the household for the fair hearing. If the 
withdrawal request is an oral request, the State agency shall 
provide a written notice to the household confirming the 
withdrawal request and providing the household with an 
opportunity to request a hearing''.

SEC. 1049. INCOME, ELIGIBILITY, AND IMMIGRATION STATUS VERIFICATION 
                    SYSTEMS.

    Section 11 of the Food Stamp Act of 1977 (7 U.S.C. 2020) is 
amended--
            (1) in subsection (e)(18), as redesignated by 
        section 1044(1)(D)--
                    (A) by striking ``that information is'' and 
                inserting ``at the option of the State agency, 
                that information may be''; and
                    (B) by striking ``shall be requested'' and 
                inserting ``may be requested''; and
            (2) by adding at the end the following:
    ``(p) State Verification Option.--Notwithstanding any other 
provision of law, in carrying out the food stamp program, a 
State agency shall not be required to use an income and 
eligibility or an immigration status verification system 
established under section 1137 of the Social Security Act (42 
U.S.C. 1320b-7).''.

SEC. 1050. DISQUALIFICATION OF RETAILERS WHO INTENTIONALLY SUBMIT 
                    FALSIFIED APPLICATIONS.

    Section 12(b) of the Food Stamp Act of 1977 (7 U.S.C. 
2021(b)) is amended--
            (1) in paragraph (2), by striking ``and'' at the 
        end;
            (2) in paragraph (3), by striking the period at the 
        end and inserting ``; and''; and
            (3) by adding at the end the following:
            ``(4) for a reasonable period of time to be 
        determined by the Secretary, including permanent 
        disqualification, on the knowing submission of an 
        application for the approval or reauthorization to 
        accept and redeem coupons that contains false 
        information about a substantive matter that was a part 
        of the application.''.

SEC. 1051. DISQUALIFICATION OF RETAILERS WHO ARE DISQUALIFIED UNDER THE 
                    WIC PROGRAM.

    Section 12 of the Food Stamp Act of 1977 (7 U.S.C. 2021) is 
amended by adding at the end the following:
    ``(g) Disqualification of Retailers Who Are Disqualified 
Under the WIC Program.--
            ``(1) In general.--The Secretary shall issue 
        regulations providing criteria for the disqualification 
        under this Act of an approved retail food store and a 
        wholesale food concern that is disqualified from 
        accepting benefits under the special supplemental 
        nutrition program for women, infants, and children 
        established under section 17 of the Child Nutrition Act 
        of 1966 (7 U.S.C. 1786).
            ``(2) Terms.--A disqualification under paragraph 
        (1)--
                    ``(A) shall be for the same length of time 
                as the disqualification from the program 
                referred to in paragraph (1);
                    ``(B) may begin at a later date than the 
                disqualification from the program referred to 
                in paragraph (1); and
                    ``(C) notwithstanding section 14, shall not 
                be subject to judicial or administrative 
                review.''.

SEC. 1052. COLLECTION OF OVERISSUANCES.

    (a) Collection of Overissuances.--Section 13 of the Food 
Stamp Act of 1977 (7 U.S.C. 2022) is amended--
            (1) by striking subsection (b) and inserting the 
        following:
    ``(b) Collection of Overissuances.--
            ``(1) In general.--Except as otherwise provided in 
        this subsection, a State agency shall collect any 
        overissuance of coupons issued to a household by--
                    ``(A) reducing the allotment of the 
                household;
                    ``(B) withholding amounts from unemployment 
                compensation from a member of the household 
                under subsection (c);
                    ``(C) recovering from Federal pay or a 
                Federal income tax refund under subsection (d); 
                or
                    ``(D) any other means.
            ``(2) Cost effectiveness.--Paragraph (1) shall not 
        apply if the State agency demonstrates to the 
        satisfaction of the Secretary that all of the means 
        referred to in paragraph (1) are not cost effective.
            ``(3) Maximum reduction absent fraud.--If a 
        household received an overissuance of coupons without 
        any member of the household being found ineligible to 
        participate in the program under section 6(b)(1) and a 
        State agency elects to reduce the allotment of the 
        household under paragraph (1)(A), the State agency 
        shall not reduce the monthly allotment of the household 
        under paragraph (1)(A) by an amount in excess of the 
        greater of--
                    ``(A) 10 percent of the monthly allotment 
                of the household; or
                    ``(B) $10.
            ``(4) Procedures.--A State agency shall collect an 
        overissuance of coupons issued to a household under 
        paragraph (1) in accordance with the requirements 
        established by the State agency for providing notice, 
        electing a means of payment, and establishing a time 
        schedule for payment.''; and
            (2) in subsection (d)--
                    (A) by striking ``as determined under 
                subsection (b) and except for claims arising 
                from an error of the State agency,'' and 
                inserting ``, as determined under subsection 
                (b)(1),''; and
                    (B) by inserting before the period at the 
                end the following: ``or a Federal income tax 
                refund as authorized by section 3720A of title 
                31, United States Code''.
    (b) Conforming Amendments.--Section 11(e)(8) of the Act (7 
U.S.C. 2020(e)(8)) is amended--
            (1) by striking ``and excluding claims'' and all 
        that follows through ``such section''; and
            (2) by inserting before the semicolon at the end 
        the following: ``or a Federal income tax refund as 
        authorized by section 3720A of title 31, United States 
        Code''.
    (c) Retention Rate.--Section 16(a) of the Act (7 U.S.C. 
2025(a)) is amended by striking ``25 percent during the period 
beginning October 1, 1990'' and all that follows through 
``error of a State agency'' and inserting the following: ``25 
percent of the overissuances collected by the State agency 
under section 13, except those overissuances arising from an 
error of the State agency''.

SEC. 1053. AUTHORITY TO SUSPEND STORES VIOLATING PROGRAM REQUIREMENTS 
                    PENDING ADMINISTRATIVE AND JUDICIAL REVIEW.

    Section 14(a) of the Food Stamp Act of 1977 (7 U.S.C. 
2023(a)) is amended--
            (1) by redesignating the first through seventeenth 
        sentences as paragraphs (1) through (17), respectively; 
        and
            (2) by adding at the end the following:
            ``(18) Suspension of stores pending review.--
        Notwithstanding any other provision of this subsection, 
        any permanent disqualification of a retail food store 
        or wholesale food concern under paragraph (3) or (4) of 
        section 12(b) shall be effective from the date of 
        receipt of the notice of disqualification. If the 
        disqualification is reversed through administrative or 
        judicial review, the Secretary shall not be liable for 
        the value of any sales lost during the disqualification 
        period.''.

SEC. 1054. EXPANDED CRIMINAL FORFEITURE FOR VIOLATIONS.

    (a) Forfeiture of Items Exchanged in Food Stamp 
Trafficking.--The first sentence of section 15(g) of the Food 
Stamp Act of 1977 (7 U.S.C. 2024(g)) is amended by striking 
``or intended to be furnished''.
    (b) Criminal Forfeiture.--Section 15 of the Act (7 U.S.C. 
2024) is amended by adding at the end the following:
    ``(h) Criminal Forfeiture.--
            ``(1) In general.--In imposing a sentence on a 
        person convicted of an offense in violation of 
        subsection (b) or (c), a court shall order, in addition 
        to any other sentence imposed under this subsection, 
        that the person forfeit to the United States all 
        property described in paragraph (2).
            ``(2) Property subject to forfeiture.--All 
        property, real and personal, used in a transaction or 
        attempted transaction, to commit, or to facilitate the 
        commission of, a violation (other than a misdemeanor) 
        of subsection (b) or (c), or proceeds traceable to a 
        violation of subsection (b) or (c), shall be subject to 
        forfeiture to the United States under paragraph (1).
            ``(3) Interest of owner.--No interest in property 
        shall be forfeited under this subsection as the result 
        of any act or omission established by the owner of the 
        interest to have been committed or omitted without the 
        knowledge or consent of the owner.
            ``(4) Proceeds.--The proceeds from any sale of 
        forfeited property and any monies forfeited under this 
        subsection shall be used--
                    ``(A) first, to reimburse the Department of 
                Justice for the costs incurred by the 
                Department to initiate and complete the 
                forfeiture proceeding;
                    ``(B) second, to reimburse the Department 
                of Agriculture Office of Inspector General for 
                any costs the Office incurred in the law 
                enforcement effort resulting in the forfeiture;
                    ``(C) third, to reimburse any Federal or 
                State law enforcement agency for any costs 
                incurred in the law enforcement effort 
                resulting in the forfeiture; and
                    ``(D) fourth, by the Secretary to carry out 
                the approval, reauthorization, and compliance 
                investigations of retail stores and wholesale 
                food concerns under section 9.''.

SEC. 1055. LIMITATION OF FEDERAL MATCH.

    Section 16(a)(4) of the Food Stamp Act of 1977 (7 U.S.C. 
2025(a)(4)) is amended by inserting after the comma at the end 
the following: ``but not including recruitment activities,''.

SEC. 1056. STANDARDS FOR ADMINISTRATION.

    (a) In General.--Section 16 of the Food Stamp Act of 1977 
(7 U.S.C. 2025) is amended by striking subsection (b).
    (b) Conforming Amendments.--
            (1) The first sentence of section 11(g) of the Act 
        (7 U.S.C. 2020(g)) is amended by striking ``the 
        Secretary's standards for the efficient and effective 
        administration of the program established under section 
        16(b)(1) or''.
            (2) Section 16(c)(1)(B) of the Act (7 U.S.C. 
        2025(c)(1)(B)) is amended by striking ``pursuant to 
        subsection (b)''.

SEC. 1057. WORK SUPPLEMENTATION OR SUPPORT PROGRAM.

    Section 16 of the Food Stamp Act of 1977 (7 U.S.C. 2025), 
as amended by section 1056(a), is amended by inserting after 
subsection (a) the following:
    ``(b) Work Supplementation or Support Program.--
            ``(1) Definition of work supplementation or support 
        program.--In this subsection, the term `work 
        supplementation or support program' means a program 
        under which, as determined by the Secretary, public 
        assistance (including any benefits provided under a 
        program established by the State and the food stamp 
        program) is provided to an employer to be used for 
        hiring and employing a public assistance recipient who 
        was not employed by the employer at the time the public 
        assistance recipient entered the program.
            ``(2) Program.--A State agency may elect to use an 
        amount equal to the allotment that would otherwise be 
        issued to a household under the food stamp program, but 
        for the operation of this subsection, for the purpose 
        of subsidizing or supporting a job under a work 
        supplementation or support program established by the 
        State.
            ``(3) Procedure.--If a State agency makes an 
        election under paragraph (2) and identifies each 
        household that participates in the food stamp program 
        that contains an individual who is participating in the 
        work supplementation or support program--
                    ``(A) the Secretary shall pay to the State 
                agency an amount equal to the value of the 
                allotment that the household would be eligible 
                to receive but for the operation of this 
                subsection;
                    ``(B) the State agency shall expend the 
                amount received under subparagraph (A) in 
                accordance with the work supplementation or 
                support program in lieu of providing the 
                allotment that the household would receive but 
                for the operation of this subsection;
                    ``(C) for purposes of--
                            ``(i) sections 5 and 8(a), the 
                        amount received under this subsection 
                        shall be excluded from household income 
                        and resources; and
                            ``(ii) section 8(b), the amount 
                        received under this subsection shall be 
                        considered to be the value of an 
                        allotment provided to the household; 
                        and
                    ``(D) the household shall not receive an 
                allotment from the State agency for the period 
                during which the member continues to 
                participate in the work supplementation or 
                support program.
            ``(4) Other work requirements.--No individual shall 
        be excused, by reason of the fact that a State has a 
        work supplementation or support program, from any work 
        requirement under section 6(d), except during the 
        periods in which the individual is employed under the 
        work supplementation or support program.
            ``(5) Length of participation.--A State agency 
        shall provide a description of how the public 
        assistance recipients in the program shall, within a 
        specific period of time, be moved from supplemented or 
        supported employment to employment that is not 
        supplemented or supported.
            ``(6) Displacement.--A work supplementation or 
        support program shall not displace the employment of 
        individuals who are not supplemented or supported.''.

SEC. 1058. WAIVER AUTHORITY.

    Section 17(b)(1) of the Food Stamp Act of 1977 (7 U.S.C. 
2026(b)(1)) is amended--
            (1) by redesignating subparagraph (B) as 
        subparagraph (C); and
            (2) in subparagraph (A)--
                    (A) by striking the second sentence; and
                    (B) by striking ``benefits to eligible 
                households, including'' and inserting the 
                following: ``benefits to eligible households, 
                and may waive any requirement of this Act to 
                the extent necessary for the project to be 
                conducted.
                    ``(B) Project requirements.--
                            ``(i) Program goal.--The Secretary 
                        may not conduct a project under 
                        subparagraph (A) unless the project is 
                        consistent with the goal of the food 
                        stamp program of providing food 
                        assistance to raise levels of nutrition 
                        among low-income individuals.
                            ``(ii) Permissible projects.--The 
                        Secretary may conduct a project under 
                        subparagraph (A) to--
                                    ``(I) improve program 
                                administration;
                                    ``(II) increase the self-
                                sufficiency of food stamp 
                                recipients;
                                    ``(III) test innovative 
                                welfare reform strategies; and
                                    ``(IV) allow greater 
                                conformity with the rules of 
                                other programs than would be 
                                allowed but for this paragraph.
                            ``(iii) Impermissible projects.--
                        The Secretary may not conduct a project 
                        under subparagraph (A) that--
                                    ``(I) involves the payment 
                                of the value of an allotment in 
                                the form of cash, unless the 
                                project was approved prior to 
                                the date of enactment of this 
                                subparagraph;
                                    ``(II) substantially 
                                transfers funds made available 
                                under this Act to services or 
                                benefits provided primarily 
                                through another public 
                                assistance program; or
                                    ``(III) is not limited to a 
                                specific time period.
                            ``(iv) Additional included 
                        projects.--Pilot or experimental 
                        projects may include''.

SEC. 1059. RESPONSE TO WAIVERS.

    Section 17(b)(1) of the Food Stamp Act of 1977 (7 U.S.C. 
2026(b)(1)), as amended by section 1058, is amended by adding 
at the end the following:
                    ``(D) Response to waivers.--
                            ``(i) Response.--Not later than 60 
                        days after the date of receiving a 
                        request for a waiver under subparagraph 
                        (A), the Secretary shall provide a 
                        response that--
                                    ``(I) approves the waiver 
                                request;
                                    ``(II) denies the waiver 
                                request and explains any 
                                modification needed for 
                                approval of the waiver request;
                                    ``(III) denies the waiver 
                                request and explains the 
                                grounds for the denial; or
                                    ``(IV) requests 
                                clarification of the waiver 
                                request.
                            ``(ii) Failure to respond.--If the 
                        Secretary does not provide a response 
                        in accordance with clause (i), the 
                        waiver shall be considered approved, 
                        unless the approval is specifically 
                        prohibited by this Act.
                            ``(iii) Notice of denial.--On 
                        denial of a waiver request under clause 
                        (i)(III), the Secretary shall provide a 
                        copy of the waiver request and a 
                        description of the reasons for the 
                        denial to the Committee on Agriculture 
                        of the House of Representatives and the 
                        Committee on Agriculture, Nutrition, 
                        and Forestry of the Senate.''.

SEC. 1060. EMPLOYMENT INITIATIVES PROGRAM.

    Section 17 of the Food Stamp Act of 1977 (7 U.S.C. 2026) is 
amended by striking subsection (d) and inserting the following:
    ``(d) Employment Initiatives Program.--
            ``(1) Election to participate.--
                    ``(A) In general.--Subject to the other 
                provisions of this subsection, a State may 
                elect to carry out an employment initiatives 
                program under this subsection.
                    ``(B) Requirement.--A State shall be 
                eligible to carry out an employment initiatives 
                program under this subsection only if not less 
                than 50 percent of the households that received 
                food stamp benefits during the summer of 1993 
                also received benefits under a State program 
                funded under part A of title IV of the Social 
                Security Act (42 U.S.C. 601 et seq.) during the 
                summer of 1993.
            ``(2) Procedure.--
                    ``(A) In general.--A State that has elected 
                to carry out an employment initiatives program 
                under paragraph (1) may use amounts equal to 
                the food stamp allotments that would otherwise 
                be issued to a household under the food stamp 
                program, but for the operation of this 
                subsection, to provide cash benefits in lieu of 
                the food stamp allotments to the household if 
                the household is eligible under paragraph (3).
                    ``(B) Payment.--The Secretary shall pay to 
                each State that has elected to carry out an 
                employment initiatives program under paragraph 
                (1) an amount equal to the value of the 
                allotment that each household would be eligible 
                to receive under this Act but for the operation 
                of this subsection.
                    ``(C) Other provisions.--For purposes of 
                the food stamp program (other than this 
                subsection)--
                            ``(i) cash assistance under this 
                        subsection shall be considered to be an 
                        allotment; and
                            ``(ii) each household receiving 
                        cash benefits under this subsection 
                        shall not receive any other food stamp 
                        benefit for the period for which the 
                        cash assistance is provided.
                    ``(D) Additional payments.--Each State that 
                has elected to carry out an employment 
                initiatives program under paragraph (1) shall--
                            ``(i) increase the cash benefits 
                        provided to each household under this 
                        subsection to compensate for any State 
                        or local sales tax that may be 
                        collected on purchases of food by any 
                        household receiving cash benefits under 
                        this subsection, unless the Secretary 
                        determines on the basis of information 
                        provided by the State that the increase 
                        is unnecessary on the basis of the 
                        limited nature of the items subject to 
                        the State or local sales tax; and
                            ``(ii) pay the cost of any increase 
                        in cash benefits required by clause 
                        (i).
            ``(3) Eligibility.--A household shall be eligible 
        to receive cash benefits under paragraph (2) if an 
        adult member of the household--
                    ``(A) has worked in unsubsidized employment 
                for not less than the preceding 90 days;
                    ``(B) has earned not less than $350 per 
                month from the employment referred to in 
                subparagraph (A) for not less than the 
                preceding 90 days;
                    ``(C)(i) is receiving benefits under a 
                State program funded under part A of title IV 
                of the Social Security Act (42 U.S.C. 601 et 
                seq.); or
                    ``(ii) was receiving benefits under a State 
                program funded under part A of title IV of the 
                Social Security Act (42 U.S.C. 601 et seq.) at 
                the time the member first received cash 
                benefits under this subsection and is no longer 
                eligible for the State program because of 
                earned income;
                    ``(D) is continuing to earn not less than 
                $350 per month from the employment referred to 
                in subparagraph (A); and
                    ``(E) elects to receive cash benefits in 
                lieu of food stamp benefits under this 
                subsection.
            ``(4) Evaluation.--A State that operates a program 
        under this subsection for 2 years shall provide to the 
        Secretary a written evaluation of the impact of cash 
        assistance under this subsection. The State agency, 
        with the concurrence of the Secretary, shall determine 
        the content of the evaluation.''.

SEC. 1061. REAUTHORIZATION.

    The first sentence of section 18(a)(1) of the Food Stamp 
Act of 1977 (7 U.S.C. 2027(a)(1)) is amended by striking ``1991 
through 1997'' and inserting ``1996 through 2002''.

SEC. 1062. SIMPLIFIED FOOD STAMP PROGRAM.

    (a) In General.--The Food Stamp Act of 1977 (7 U.S.C. 2011 
et seq.) is amended by adding at the end the following:

``SEC. 26. SIMPLIFIED FOOD STAMP PROGRAM.

    ``(a) Definition of Federal Costs.--In this section, the 
term `Federal costs' does not include any Federal costs 
incurred under section 17.
    ``(b) Election.--Subject to subsection (d), a State may 
elect to carry out a Simplified Food Stamp Program (referred to 
in this section as a `Program'), statewide or in a political 
subdivision of the State, in accordance with this section.
    ``(c) Operation of Program.--If a State elects to carry out 
a Program, within the State or a political subdivision of the 
State--
            ``(1) a household in which all members receive 
        assistance under a State program funded under part A of 
        title IV of the Social Security Act (42 U.S.C. 601 et 
        seq.) shall automatically be eligible to participate in 
        the Program; and
            ``(2) subject to subsection (f), benefits under the 
        Program shall be determined under rules and procedures 
        established by the State under--
                    ``(A) a State program funded under part A 
                of title IV of the Social Security Act (42 
                U.S.C. 601 et seq.);
                    ``(B) the food stamp program (other than 
                section 27); or
                    ``(C) a combination of a State program 
                funded under part A of title IV of the Social 
                Security Act (42 U.S.C. 601 et seq.) and the 
                food stamp program (other than section 27).
    ``(d) Approval of Program.--
            ``(1) State plan.--A State agency may not operate a 
        Program unless the Secretary approves a State plan for 
        the operation of the Program under paragraph (2).
            ``(2) Approval of plan.--The Secretary shall 
        approve any State plan to carry out a Program if the 
        Secretary determines that the plan--
                    ``(A) complies with this section; and
                    ``(B) contains sufficient documentation 
                that the plan will not increase Federal costs 
                for any fiscal year.
    ``(e) Increased Federal Costs.--
            ``(1) Determination.--During each fiscal year and 
        not later than 90 days after the end of each fiscal 
        year, the Secretary shall determine whether a Program 
        being carried out by a State agency is increasing 
        Federal costs under this Act above the Federal costs 
        incurred under the food stamp program in operation in 
        the State or political subdivision of the State for the 
        fiscal year prior to the implementation of the Program, 
        adjusted for any changes in--
                    ``(A) participation;
                    ``(B) the income of participants in the 
                food stamp program that is not attributable to 
                public assistance; and
                    ``(C) the thrifty food plan under section 
                3(o).
            ``(2) Notification.--If the Secretary determines 
        that the Program has increased Federal costs under this 
        Act for any fiscal year or any portion of any fiscal 
        year, the Secretary shall notify the State not later 
        than 30 days after the Secretary makes the 
        determination under paragraph (1).
            ``(3) Enforcement.--
                    ``(A) Corrective action.--Not later than 90 
                days after the date of a notification under 
                paragraph (2), the State shall submit a plan 
                for approval by the Secretary for prompt 
                corrective action that is designed to prevent 
                the Program from increasing Federal costs under 
                this Act.
                    ``(B) Termination.--If the State does not 
                submit a plan under subparagraph (A) or carry 
                out a plan approved by the Secretary, the 
                Secretary shall terminate the approval of the 
                State agency operating the Program and the 
                State agency shall be ineligible to operate a 
                future Program.
    ``(f) Rules and Procedures.--
            ``(1) In general.--In operating a Program, a State 
        or political subdivision of a State may follow the 
        rules and procedures established by the State or 
        political subdivision under a State program funded 
        under part A of title IV of the Social Security Act (42 
        U.S.C. 601 et seq.) or under the food stamp program.
            ``(2) Standardized deductions.--In operating a 
        Program, a State or political subdivision of a State 
        may standardize the deductions provided under section 
        5(e). In developing the standardized deduction, the 
        State shall consider the work expenses, dependent care 
        costs, and shelter costs of participating households.
            ``(3) Requirements.--In operating a Program, a 
        State or political subdivision shall comply with the 
        requirements of--
                    ``(A) subsections (a) through (g) of 
                section 7;
                    ``(B) section 8(a) (except that the income 
                of a household may be determined under a State 
                program funded under part A of title IV of the 
                Social Security Act (42 U.S.C. 601 et seq.));
                    ``(C) subsection (b) and (d) of section 8;
                    ``(D) subsections (a), (c), (d), and (n) of 
                section 11;
                    ``(E) paragraphs (8), (12), (16), (18), 
                (20), (24), and (25) of section 11(e);
                    ``(F) section 11(e)(10) (or a comparable 
                requirement established by the State under a 
                State program funded under part A of title IV 
                of the Social Security Act (42 U.S.C. 601 et 
                seq.)); and
                    ``(G) section 16.
            ``(4) Limitation on eligibility.--Notwithstanding 
        any other provision of this section, a household may 
        not receive benefits under this section as a result of 
        the eligibility of the household under a State program 
        funded under part A of title IV of the Social Security 
        Act (42 U.S.C. 601 et seq.), unless the Secretary 
        determines that any household with income above 130 
        percent of the poverty guidelines is not eligible for 
        the program.''.
    (b) State Plan Provisions.--Section 11(e) of the Act (7 
U.S.C. 2020(e)), as amended by sections 1020(b), 1028(b), and 
1044, is amended by adding at the end the following:
            ``(25) if a State elects to carry out a Simplified 
        Food Stamp Program under section 26, the plans of the 
        State agency for operating the program, including--
                    ``(A) the rules and procedures to be 
                followed by the State agency to determine food 
                stamp benefits;
                    ``(B) how the State agency will address the 
                needs of households that experience high 
                shelter costs in relation to the incomes of the 
                households; and
                    ``(C) a description of the method by which 
                the State agency will carry out a quality 
                control system under section 16(c).''.
    (c) Conforming Amendments.--
            (1) Section 8 of the Act (7 U.S.C. 2017), as 
        amended by section 1039, is amended--
                    (A) by striking subsection (e); and
                    (B) by redesignating subsection (f) as 
                subsection (e).
            (2) Section 17 of the Act (7 U.S.C. 2026) is 
        amended--
                    (A) by striking subsection (i); and
                    (B) by redesignating subsections (j) 
                through (l) as subsections (i) through (k), 
                respectively.

SEC. 1063. STATE FOOD ASSISTANCE BLOCK GRANT.

    (a) In General.--The Food Stamp Act of 1977 (7 U.S.C. 2011 
et seq.), as amended by section 1062, is amended by adding at 
the end the following:

``SEC. 27. STATE FOOD ASSISTANCE BLOCK GRANT.

    ``(a) Definitions.--In this section:
            ``(1) Food assistance.--The term `food assistance' 
        means assistance that may be used only to obtain food, 
        as defined in section 3(g).
            ``(2) State.--The term `State' means each of the 50 
        States, the District of Columbia, Guam, and the Virgin 
        Islands of the United States.
    ``(b) Establishment.--The Secretary shall establish a 
program to make grants to States in accordance with this 
section to provide--
            ``(1) food assistance to needy individuals and 
        families residing in the State; and
            ``(2) funds for administrative costs incurred in 
        providing the assistance.
    ``(c) Election.--
            ``(1) In general.--A State may annually elect to 
        participate in the program established under subsection 
        (b) if the State--
                    ``(A) has fully implemented an electronic 
                benefit transfer system that operates in the 
                entire State;
                    ``(B) has a payment error rate under 
                section 16(c) that is not more than 6 percent 
                as announced most recently by the Secretary; or
                    ``(C) has a payment error rate in excess of 
                6 percent and agrees to contribute non-Federal 
                funds for the fiscal year of the grant, for 
                benefits and administration of the State's food 
                assistance program, the amount determined under 
                paragraph (2).
            ``(2) State mandatory contributions.--
                    ``(A) In general.--In the case of a State 
                that elects to participate in the program under 
                paragraph (1)(C), the State shall agree to 
                contribute, for a fiscal year, an amount equal 
                to--
                            ``(i) the benefits issued in the 
                        State; multiplied by
                            ``(ii) the payment error rate of 
                        the State; minus
                    ``(B)(i) the benefits issued in the State; 
                multiplied by
                    ``(ii) 6 percent.
                    ``(B) Determination.--Notwithstanding 
                sections 13 and 14, the calculation of the 
                contribution shall be based solely on the 
                determination of the Secretary of the payment 
                error rate.
                    ``(C) Data.--For purposes of implementing 
                subparagraph (A) for a fiscal year, the 
                Secretary shall use the data for the most 
                recent fiscal year available.
            ``(3) Election limitation.--
                    ``(A) Re-entering food stamp program.--A 
                State that elects to participate in the program 
                under paragraph (1) may in a subsequent year 
                decline to elect to participate in the program 
                and instead participate in the food stamp 
                program in accordance with the other sections 
                of this Act.
                    ``(B) Limitation.--Subsequent to re-
                entering the food stamp program under 
                subparagraph (A), the State shall only be 
                eligible to participate in the food stamp 
                program in accordance with the other sections 
                of this Act and shall not be eligible to elect 
                to participate in the program established under 
                subsection (b).
            ``(4) Program exclusive.--
                    ``(A) In general.--A State that is 
                participating in the program established under 
                subsection (b) shall not be subject to, or 
                receive any benefit under, this Act except as 
                provided in this section.
                    ``(B) Contract with federal government.--
                Nothing in this section shall prohibit a State 
                from contracting with the Federal Government 
                for the provision of services or materials 
                necessary to carry out a program under this 
                section.
    ``(d) Lead Agency.--A State desiring to receive a grant 
under this section shall designate, in an application submitted 
to the Secretary under subsection (e)(1), an appropriate State 
agency responsible for the administration of the program under 
this section as the lead agency.
    ``(e) Application and Plan.--
            ``(1) Application.--To be eligible to receive 
        assistance under this section, a State shall prepare 
        and submit to the Secretary an application at such 
        time, in such manner, and containing such information 
        as the Secretary shall by regulation require, 
        including--
                    ``(A) an assurance that the State will 
                comply with the requirements of this section;
                    ``(B) a State plan that meets the 
                requirements of paragraph (3); and
                    ``(C) an assurance that the State will 
                comply with the requirements of the State plan 
                under paragraph (3).
            ``(2) Annual plan.--The State plan contained in the 
        application under paragraph (1) shall be submitted for 
        approval annually.
            ``(3) Requirements of plan.--
                    ``(A) Lead agency.--The State plan shall 
                identify the lead agency.
                    ``(B) Use of block grant funds.--The State 
                plan shall provide that the State shall use the 
                amounts provided to the State for each fiscal 
                year under this section--
                            ``(i) to provide food assistance to 
                        needy individuals and families residing 
                        in the State, other than residents of 
                        institutions who are ineligible for 
                        food stamps under section 3(i); and
                            ``(ii) to pay administrative costs 
                        incurred in providing the assistance.
                    ``(C) Groups served.--The State plan shall 
                describe how and to what extent the program 
                will serve specific groups of individuals and 
                families and how the treatment will differ from 
                treatment under the food stamp program under 
                the other sections of this Act of the 
                individuals and families, including--
                            ``(i) elderly individuals and 
                        families;
                            ``(ii) migrants or seasonal 
                        farmworkers;
                            ``(iii) homeless individuals and 
                        families;
                            ``(iv) individuals and families who 
                        live in institutions eligible under 
                        section 3(i);
                            ``(v) individuals and families with 
                        earnings; and
                            ``(vi) members of Indian tribes or 
                        tribal organizations.
                    ``(D) Assistance for entire state.--The 
                State plan shall provide that benefits under 
                this section shall be available throughout the 
                entire State.
                    ``(E) Notice and hearings.--The State plan 
                shall provide that an individual or family who 
                applies for, or receives, assistance under this 
                section shall be provided with notice of, and 
                an opportunity for a hearing on, any action 
                under this section that adversely affects the 
                individual or family.
                    ``(F) Assessment of Needs.--The State plan 
                shall assess the food and nutrition needs of 
                needy persons residing in the State.
                    ``(G) Eligibility standards.--The State 
                plan shall describe the income, resource, and 
                other eligibility standards that are 
                established for the receipt of assistance under 
                this section.
                    ``(H) Disqualification of fleeing felons.--
                The State plan shall provide for the 
                disqualification of any individual who would be 
                disqualified from participating in the food 
                stamp program under section 6(k).
                    ``(I) Receiving benefits in more than 1 
                jurisdiction.--The State plan shall establish a 
                system for the exchange of information with 
                other States to verify the identity and receipt 
                of benefits by recipients.
                    ``(J) Privacy.--The State plan shall 
                provide for safeguarding and restricting the 
                use and disclosure of information about any 
                individual or family receiving assistance under 
                this section.
                    ``(K) Other information.--The State plan 
                shall contain such other information as may be 
                required by the Secretary.
            ``(4) Approval of application and plan.--The 
        Secretary shall approve an application and State plan 
        that satisfies the requirements of this section.
    ``(f) No Individual or Family Entitlement to Assistance.--
Nothing in this section--
            ``(1) entitles any individual or family to 
        assistance under this section; or
            ``(2) limits the right of a State to impose 
        additional limitations or conditions on assistance 
        under this section.
    ``(g) Benefits for Aliens.--
            ``(1) Eligibility.--No individual who is an alien 
        shall be eligible to receive benefits under a State 
        plan approved under subsection (e)(4) if the individual 
        is not eligible to participate in the food stamp 
        program due to the alien status of the individual.
            ``(2) Income.--The State plan shall provide that 
        the income of an alien shall be determined in 
        accordance with section 5(i).
    ``(h) Employment and Training.--
            ``(1) Work requirements.--No individual or 
        household shall be eligible to receive benefits under a 
        State plan funded under this section if the individual 
        or household is not eligible to participate in the food 
        stamp program under subsection (d) or (o) of section 6.
            ``(2) Work programs.--Each State shall implement an 
        employment and training program in accordance with the 
        terms and conditions of section 6(d)(4) for individuals 
        under the program and shall be eligible to receive 
        funding under section 16(h).
    ``(i) Enforcement.--
            ``(1) Review of compliance with state plan.--The 
        Secretary shall review and monitor State compliance 
        with this section and the State plan approved under 
        subsection (e)(4).
            ``(2) Noncompliance.--
                    ``(A) In general.--If the Secretary, after 
                reasonable notice to a State and opportunity 
                for a hearing, finds that--
                            ``(i) there has been a failure by 
                        the State to comply substantially with 
                        any provision or requirement set forth 
                        in the State plan approved under 
                        subsection (e)(4); or
                            ``(ii) in the operation of any 
                        program or activity for which 
                        assistance is provided under this 
                        section, there is a failure by the 
                        State to comply substantially with any 
                        provision of this section;
                the Secretary shall notify the State of the 
                finding and that no further grants will be made 
                to the State under this section (or, in the 
                case of noncompliance in the operation of a 
                program or activity, that no further grants to 
                the State will be made with respect to the 
                program or activity) until the Secretary is 
                satisfied that there is no longer any failure 
                to comply or that the noncompliance will be 
                promptly corrected.
                    ``(B) Other penalties.--In the case of a 
                finding of noncompliance made pursuant to 
                subparagraph (A), the Secretary may, in 
                addition to, or in lieu of, imposing the 
                penalties described in subparagraph (A), impose 
                other appropriate penalties, including 
                recoupment of money improperly expended for 
                purposes prohibited or not authorized by this 
                section and disqualification from the receipt 
                of financial assistance under this section.
                    ``(C) Notice.--The notice required under 
                subparagraph (A) shall include a specific 
                identification of any additional penalty being 
                imposed under subparagraph (B).
            ``(3) Issuance of regulations.--The Secretary shall 
        establish by regulation procedures for--
                    ``(A) receiving, processing, and 
                determining the validity of complaints made to 
                the Secretary concerning any failure of a State 
                to comply with the State plan or any 
                requirement of this section; and
                    ``(B) imposing penalties under this 
                section.
    ``(j) Grant.--
            ``(1) In general.--For each fiscal year, the 
        Secretary shall pay to a State that has an application 
        approved by the Secretary under subsection (e)(4) an 
        amount that is equal to the grant of the State under 
        subsection (m) for the fiscal year.
            ``(2) Method of Grant.--The Secretary shall make a 
        grant to a State for a fiscal year under this section 
        by issuing 1 or more letters of credit for the fiscal 
        year, with necessary adjustments on account of 
        overpayments or underpayments, as determined by the 
        Secretary.
            ``(3) Spending of grants by state.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a grant to a State determined 
                under subsection (m)(1) for a fiscal year may 
                be expended by the State only in the fiscal 
                year.
                    ``(B) Carryover.--The State may reserve up 
                to 10 percent of a grant determined under 
                subsection (m)(1) for a fiscal year to provide 
                assistance under this section in subsequent 
                fiscal years, except that the reserved funds 
                may not exceed 30 percent of the total grant 
                received under this section for a fiscal year.
            ``(4) Food assistance and administrative 
        expenditures.--In each fiscal year, not more than 6 
        percent of the Federal and State funds required to be 
        expended by a State under this section shall be used 
        for administrative expenses.
            ``(5) Provision of food assistance.--A State may 
        provide food assistance under this section in any 
        manner determined appropriate by the State, such as 
        electronic benefit transfer limited to food purchases, 
        coupons limited to food purchases, or direct provision 
        of commodities.
    ``(k) Quality Control.--Each State participating in the 
program established under this section shall maintain a system 
in accordance with, and shall be subject to section 16(c), 
including sanctions and eligibility for incentive payment under 
section 16(c), adjusted for State specific characteristics 
under regulations issued by the Secretary.
    ``(l) Nondiscrimination.--
            ``(1) In general.--The Secretary shall not provide 
        financial assistance for any program, project, or 
        activity under this section if any person with 
        responsibilities for the operation of the program, 
        project, or activity discriminates with respect to the 
        program, project, or activity because of race, 
        religion, color, national origin, sex, or disability.
            ``(2) Enforcement.--The powers, remedies, and 
        procedures set forth in title VI of the Civil Rights 
        Act of 1964 (42 U.S.C. 2000d et seq.) may be used by 
        the Secretary to enforce paragraph (1).
    ``(m) Grant Calculation.--
            ``(1) State grant.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), from the amounts made 
                available under section 18 for each fiscal 
                year, the Secretary shall provide a grant to 
                each State participating in the program 
                established under this section an amount that 
                is equal to the sum of--
                            ``(i) the greater of, as determined 
                        by the Secretary--
                                    ``(I) the total dollar 
                                value of all benefits issued 
                                under the food stamp program 
                                established under this Act by 
                                the State during fiscal year 
                                1994; or
                                    ``(II) the average per 
                                fiscal year of the total dollar 
                                value of all benefits issued 
                                under the food stamp program by 
                                the State during each of fiscal 
                                years 1992 through 1994; and
                            ``(ii) the greater of, as 
                        determined by the Secretary--
                                    ``(I) the total amount 
                                received by the State for 
                                administrative costs under 
                                section 16(a) (not including 
                                any adjustment under section 
                                16(c)) for fiscal year 1994; or
                                    ``(II) the average per 
                                fiscal year of the total amount 
                                received by the State for 
                                administrative costs under 
                                section 16(a) (not including 
                                any adjustment under section 
                                16(c)) for each of fiscal years 
                                1992 through 1994.
                    ``(B) Insufficient funds.--If the Secretary 
                finds that the total amount of grants to which 
                States would otherwise be entitled for a fiscal 
                year under subparagraph (A) will exceed the 
                amount of funds that will be made available to 
                provide the grants for the fiscal year, the 
                Secretary shall reduce the grants made to 
                States under this subsection, on a pro rata 
                basis, to the extent necessary.
            ``(2) Reduction.--The Secretary shall reduce the 
        grant of a State by the amount a State has agreed to 
        contribute under subsection (c)(1)(C).''.
    (b) Employment and Training Funding.--Section 16(h) of the 
Act (7 U.S.C. 2025(a)), as amended by section 1027(d)(2), is 
amended by adding at the end the following:
            ``(6) Block grant states.--Each State electing to 
        operate a program under section 27 shall--
                    ``(A) receive the greater of--
                            ``(i) the total dollar value of the 
                        funds received under paragraph (1) by 
                        the State during fiscal year 1994; or
                            ``(ii) the average per fiscal year 
                        of the total dollar value of all funds 
                        received under paragraph (1) by the 
                        State during each of fiscal years 1992 
                        through 1994; and
                    ``(B) be eligible to receive funds under 
                paragraph (2), within the limitations in 
                section 6(d)(4)(K).''.
    (c) Research On Optional State Food Assistance Block 
Grant.--Section 17 of the Act (7 U.S.C. 2026), as amended by 
section 1062(c)(2), is amended by adding at the end the 
following:
    ``(l) Research On Optional State Food Assistance Block 
Grant.--The Secretary may conduct research on the effects and 
costs of a State program carried out under section 27.''.

SEC. 1064. A STUDY OF THE USE OF FOOD STAMPS TO PURCHASE VITAMINS AND 
                    MINERALS.

    The Secretary of Agriculture shall, in consultation with 
the National Academy of Sciences and the Center for Disease 
Control and Prevention, conduct a study of the use of food 
stamps to purchase vitamins and minerals. The study shall 
include an analysis of scientific findings on the efficacy of 
and need for vitamins and minerals, including the adequacy of 
vitamin and mineral intake in low income populations, as shown 
by existing research and surveys, and the potential value of 
nutritional supplements in filling nutrient gaps that may exist 
in the population as a whole or in vulnerable subgroups in the 
U.S. population; the impact of nutritional improvements 
(including vitamin or mineral supplementation) on health status 
and health care costs for women of childbearing age, pregnant 
or lactating women, and the elderly; the cost of vitamin and 
mineral supplements commercially available; the purchasing 
habits of low income populations with regard to vitamins and 
minerals; the impact on the food purchases of low income 
households; and the economic impact on agricultural 
commodities. The Secretary shall report the results of the 
study to the Committee on Agriculture of the U.S. House of 
Representatives not later than December 15, 1996.''.

SEC. 1065. INVESTIGATIONS.

    Section 12(a) of the Food Stamp Act of 1977 (7 U.S.C. 
2021(a)) is amended by adding at the end the following:
``Regulations issued pursuant to this Act shall provide 
criteria for the finding of violations and the suspension or 
disqualification of a retail food store or wholesale food 
concern on the basis of evidence which may include, but is not 
limited to, facts established through on-site investigations, 
inconsistent redemption data or evidence obtained through 
transaction reports under electronic benefit transfer 
systems.''.

SEC. 1066. FOOD STAMP ELIGIBILITY.

    Section 6(f) of the Food Stamp Act of 1977 (7 U.S.C. 
2015(f)) is amended by striking the third sentence and 
inserting the following:
``The State agency shall, at its option, consider either all 
income and financial resources of the individual rendered 
ineligible to participate in the food stamp program under this 
subsection, or such income, less a pro rata share, and the 
financial resources of the ineligible individual, to determine 
the eligibility and the value of the allotment of the household 
of which such individual is a member.''.

SEC. 1067. REPORT BY THE SECRETARY.

    The Secretary of Agriculture may report to the Committee on 
Agriculture of the House of Representatives, not later than 
January 1, 2000, on the effect of the food stamp reforms in the 
Welfare and Medicaid Reform Act of 1996 and the ability of 
State and local governments to deal with people in poverty. The 
report must answer the question: ``Did people become more 
personally responsible and were work opportunities provided 
such that poverty in America is better managed?''.

SEC. 1068. DEFICIT REDUCTION.

    It is the sense of the Committee on Agriculture of the 
House of Representatives that reductions in outlays resulting 
from this title shall not be taken into account for purposes of 
section 552 of the Balanced Budget and Emergency Deficit 
Control Act of 1985.

              Subtitle B--Commodity Distribution Programs

SEC. 1071. EMERGENCY FOOD ASSISTANCE PROGRAM.

    (a) Definitions.--Section 201A of the Emergency Food 
Assistance Act of 1983 (Public Law 98-8; 7 U.S.C. 612c note) is 
amended to read as follows:

``SEC. 201A. DEFINITIONS.

    ``In this Act:
            ``(1) Additional commodities.--The term `additional 
        commodities' means commodities made available under 
        section 214 in addition to the commodities made 
        available under sections 202 and 203D.
            ``(2) Average monthly number of unemployed 
        persons.--The term `average monthly number of 
        unemployed persons' means the average monthly number of 
        unemployed persons in each State in the most recent 
        fiscal year for which information concerning the number 
        of unemployed persons is available, as determined by 
        the Bureau of Labor Statistics of the Department of 
        Labor.
            ``(3) Eligible recipient agency.--The term 
        `eligible recipient agency' means a public or nonprofit 
        organization--
                    ``(A) that administers--
                            ``(i) an emergency feeding 
                        organization;
                            ``(ii) a charitable institution 
                        (including a hospital and a retirement 
                        home, but excluding a penal 
                        institution) to the extent that the 
                        institution serves needy persons;
                            ``(iii) a summer camp for children, 
                        or a child nutrition program providing 
                        food service;
                            ``(iv) a nutrition project 
                        operating under the Older Americans Act 
                        of 1965 (42 U.S.C. 3001 et seq.), 
                        including a project that operates a 
                        congregate nutrition site and a project 
                        that provides home-delivered meals; or
                            ``(v) a disaster relief program;
                    ``(B) that has been designated by the 
                appropriate State agency, or by the Secretary; 
                and
                    ``(C) that has been approved by the 
                Secretary for participation in the program 
                established under this Act.
            ``(4) Emergency feeding organization.--The term 
        `emergency feeding organization' means a public or 
        nonprofit organization that administers activities and 
        projects (including the activities and projects of a 
        charitable institution, a food bank, a food pantry, a 
        hunger relief center, a soup kitchen, or a similar 
        public or private nonprofit eligible recipient agency) 
        providing nutrition assistance to relieve situations of 
        emergency and distress through the provision of food to 
        needy persons, including low-income and unemployed 
        persons.
            ``(5) Food bank.--The term `food bank' means a 
        public or charitable institution that maintains an 
        established operation involving the provision of food 
        or edible commodities, or the products of food or 
        edible commodities, to food pantries, soup kitchens, 
        hunger relief centers, or other food or feeding centers 
        that, as an integral part of their normal activities, 
        provide meals or food to feed needy persons on a 
        regular basis.
            ``(6) Food pantry.--The term `food pantry' means a 
        public or private nonprofit organization that 
        distributes food to low-income and unemployed 
        households, including food from sources other than the 
        Department of Agriculture, to relieve situations of 
        emergency and distress.
            ``(7) Poverty line.--The term `poverty line' has 
        the same meaning given the term in section 673(2) of 
        the Community Services Block Grant Act (42 U.S.C. 
        9902(2)).
            ``(8) Soup kitchen.--The term `soup kitchen' means 
        a public or charitable institution that, as an integral 
        part of the normal activities of the institution, 
        maintains an established feeding operation to provide 
        food to needy homeless persons on a regular basis.
            ``(9) Total value of additional commodities.--The 
        term `total value of additional commodities' means the 
        actual cost of all additional commodities made 
        available under section 214 that are paid by the 
        Secretary (including the distribution and processing 
        costs incurred by the Secretary).
            ``(10) Value of additional commodities allocated to 
        each state.--The term `value of additional commodities 
        allocated to each State' means the actual cost of 
        additional commodities made available under section 214 
        and allocated to each State that are paid by the 
        Secretary (including the distribution and processing 
        costs incurred by the Secretary).''.
    (b) State Plan.--Section 202A of the Act (7 U.S.C. 612c 
note) is amended to read as follows:

``SEC. 202A. STATE PLAN.

    ``(a) In General.--To receive commodities under this Act, a 
State shall submit a plan of operation and administration every 
4 years to the Secretary for approval. The plan may be amended 
at any time, with the approval of the Secretary.
    ``(b) Requirements.--Each plan shall--
            ``(1) designate the State agency responsible for 
        distributing the commodities received under this Act;
            ``(2) set forth a plan of operation and 
        administration to expeditiously distribute commodities 
        under this Act;
            ``(3) set forth the standards of eligibility for 
        recipient agencies; and
            ``(4) set forth the standards of eligibility for 
        individual or household recipients of commodities, 
        which shall require--
                    ``(A) individuals or households to be 
                comprised of needy persons; and
                    ``(B) individual or household members to be 
                residing in the geographic location served by 
                the distributing agency at the time of applying 
                for assistance.
    ``(c) State Advisory Board.--The Secretary shall encourage 
each State receiving commodities under this Act to establish a 
State advisory board consisting of representatives of all 
interested entities, both public and private, in the 
distribution of commodities received under this Act in the 
State.''.
    (c) Authorization of Appropriations for Administrative 
Funds.--Section 204(a)(1) of the Act (7 U.S.C. 612c note) is 
amended--
            (1) in the first sentence by striking ``for State 
        and local'' and all that follows through ``under this 
        title'' and inserting ``to pay for the direct and 
        indirect administrative costs of the State related to 
        the processing, transporting, and distributing to 
        eligible recipient agencies of commodities provided by 
        the Secretary under this Act and commodities secured 
        from other sources''; and
            (2) by striking the fourth sentence.
    (d) Delivery of Commodities.--Section 214 of the Act (7 
U.S.C. 612c note) is amended--
            (1) by striking subsections (a) through (e) and 
        (j);
            (2) by redesignating subsections (f) through (i) as 
        subsections (a) through (d), respectively;
            (3) in subsection (b), as redesignated by paragraph 
        (2)--
                    (A) in the first sentence, by striking 
                ``subsection (f) or subsection (j) if 
                applicable,'' and inserting ``subsection (a)''; 
                and
                    (B) in the second sentence, by striking 
                ``subsection (f)'' and inserting ``subsection 
                (a)'';
            (4) by striking subsection (c), as redesignated by 
        paragraph (2), and inserting the following:
    ``(c) Administration.--
            ``(1) In general.--Commodities made available for 
        each fiscal year under this section shall be delivered 
        at reasonable intervals to States based on the grants 
        calculated under subsection (a), or reallocated under 
        subsection (b), before December 31 of the following 
        fiscal year.
            ``(2) Entitlement.--Each State shall be entitled to 
        receive the value of additional commodities determined 
        under subsection (a).''; and
            (5) in subsection (d), as redesignated by paragraph 
        (2), by striking ``or reduce'' and all that follows 
        through ``each fiscal year''.
    (e) Technical Amendments.--The Act (7 U.S.C. 612c note) is 
amended--
            (1) in the first sentence of section 203B(a), by 
        striking ``203 and 203A of this Act'' and inserting 
        ``203A'';
            (2) in section 204(a), by striking ``title'' each 
        place it appears and inserting ``Act'';
            (3) in the first sentence of section 210(e), by 
        striking ``(except as otherwise provided for in section 
        214(j))''; and
            (4) by striking section 212.
    (f) Report on EFAP.--Section 1571 of the Food Security Act 
of 1985 (Public Law 99-198; 7 U.S.C. 612c note) is repealed.
    (g) Availability of Commodities Under the Food Stamp 
Program.--The Food Stamp Act of 1977 (7 U.S.C. 2011 et seq.), 
as amended by sections 1062 and 1063, is amended by adding at 
the end the following:

``SEC. 28. AVAILABILITY OF COMMODITIES FOR THE EMERGENCY FOOD 
                    ASSISTANCE PROGRAM.

    ``(a) Purchase of Commodities.--From amounts appropriated 
under this Act, for each of fiscal years 1997 through 2002, the 
Secretary shall purchase $300,000,000 of a variety of 
nutritious and useful commodities of the types that the 
Secretary has the authority to acquire through the Commodity 
Credit Corporation or under section 32 of the Act entitled `An 
Act to amend the Agricultural Adjustment Act, and for other 
purposes', approved August 24, 1935 (7 U.S.C. 612c), and 
distribute the commodities to States for distribution in 
accordance with section 214 of the Emergency Food Assistance 
Act of 1983 (Public Law 98-8; 7 U.S.C. 612c note).
    ``(b) Basis for Commodity Purchases.--In purchasing 
commodities under subsection (a), the Secretary shall, to the 
extent practicable and appropriate, make purchases based on--
            ``(1) agricultural market conditions;
            ``(2) preferences and needs of States and 
        distributing agencies; and
            ``(3) preferences of recipients.''.
    (h) Effective Date.--The amendments made by subsection (d) 
shall become effective on October 1, 1996.

SEC. 1072. FOOD BANK DEMONSTRATION PROJECT.

    Section 3 of the Charitable Assistance and Food Bank Act of 
1987 (Public Law 100-232; 7 U.S.C. 612c note) is repealed.

SEC. 1073. HUNGER PREVENTION PROGRAMS.

    The Hunger Prevention Act of 1988 (Public Law 100-435; 7 
U.S.C. 612c note) is amended--
            (1) by striking section 110;
            (2) by striking subtitle C of title II; and
            (3) by striking section 502.

SEC. 1074. REPORT ON ENTITLEMENT COMMODITY PROCESSING.

    Section 1773 of the Food, Agriculture, Conservation, and 
Trade Act of 1990 (Public Law 101-624; 7 U.S.C. 612c note) is 
amended by striking subsection (f).

            Subtitle C--Electronic Benefit Transfer Systems

SEC. 1091. PROVISIONS TO ENCOURAGE ELECTRONIC BENEFIT TRANSFER SYSTEMS.

    Section 904 of the Electronic Fund Transfer Act (15 U.S.C. 
1693b) is amended--
            (1) by striking ``(d) In the event'' and inserting 
        ``(d) Applicability to Service Providers Other Than 
        Certain Financial Institutions.--
            ``(1) In general.--In the event''; and
            (2) by adding at the end the following new 
        paragraph:
            ``(2) State and local government electronic benefit 
        transfer programs.--
                    ``(A) Exemption generally.--The 
                disclosures, protections, responsibilities, and 
                remedies established under this title, and any 
                regulation prescribed or order issued by the 
                Board in accordance with this title, shall not 
                apply to any electronic benefit transfer 
                program established under State or local law or 
                administered by a State or local government.
                    ``(B) Exception for direct deposit into 
                recipient's account.--Subparagraph (A) shall 
                not apply with respect to any electronic funds 
                transfer under an electronic benefit transfer 
                program for deposits directly into a consumer 
                account held by the recipient of the benefit.
                    ``(C) Rule of construction.--No provision 
                of this paragraph may be construed as--
                            ``(i) affecting or altering the 
                        protections otherwise applicable with 
                        respect to benefits established by 
                        Federal, State, or local law; or
                            ``(ii) otherwise superseding the 
                        application of any State or local law.
                    ``(D) Electronic benefit transfer program 
                defined.--For purposes of this paragraph, the 
                term `electronic benefit transfer program'--
                            ``(i) means a program under which a 
                        government agency distributes needs-
                        tested benefits by establishing 
                        accounts to be accessed by recipients 
                        electronically, such as through 
                        automated teller machines, or point-of-
                        sale terminals; and
                            ``(ii) does not include employment-
                        related payments, including salaries 
                        and pension, retirement, or 
                        unemployment benefits established by 
                        Federal, State, or local 
                        governments.''.
                   TITLE I--COMMITTEE ON AGRICULTURE

                     U.S. House of Representatives,
                                  Committee on Agriculture,
                                     Washington, DC, June 13, 1996.
Hon. John Kasich,
Chairman, Committee on the Budget, Cannon House Office Building, 
        Washington, DC.
    Dear Chairman Kasich: I am transmitting herewith the 
results of the Committee on Agriculture's consideration of 
recommendations with respect to the reconciliation bill for 
fiscal year 1997, provided for under H.Con.Res. 178, the 
Concurrent Resolution on the Budget--Fiscal Year 1997.
    The instructions to this committee contained in H.Con.Res. 
178, section 201(b)(1) from the Budget Committee (H. Rept. 104-
612) related to ``changes in laws within its [the Committee on 
Agriculture's] jurisdiction that provide direct spending,'' 
especially the Food Stamp Act of 1977 and commodity 
distribution programs and the enclosed recommendations comply 
with those instructions.
    A considerable number of hearings were held in 1995 and 
1996 with respect to welfare reform, and more particularly with 
respect to food stamp and commodity distribution program 
reforms within the jurisdiction of this committee. There were 
also innumerable discussions, briefings, et cetera among the 
members of the committee, representatives the U.S. Department 
of Agriculture, groups representing food stamp recipients, 
representatives of the National Governors Conference, retailers 
of food, religious and other charitable institutions, and other 
groups with an interest in the food stamp and commodity 
distribution programs.
    After H.R. 4, the ``Personal Responsibility Act of 1995'' 
was vetoed by the President January 9, 1996, work commenced on 
what was to become H.R. 3507, the ``Personal Responsibility and 
Work Opportunity Act.'' Title X and related food stamp and 
commodity distribution program provisions of H.R. 3507 are 
essentially the same as they were in H.R. 4 approved by the 
House of Representatives on December 21, 1995, by a vote of 245 
to 178--with one significant exception. The food stamp funding 
cap is eliminated in these recommendations as a concession to, 
and at the request of, the National Governor's Conference, the 
Clinton administration and the Secretary of Agriculture.
    The committee's recommendations contain reforms that meet 
its instructions set forth in H.Con.Res. 178 and in addition 
represent sound food stamp policy. The recommendations with 
respect to the reform of the Food Stamp Program retain the 
program as a Federal safety net; permit States to harmonize 
their assistance to families with dependent children (AFDC) and 
Food Stamp Programs; end all automatic spending increases, 
except for annual increase in food benefits; require able-
bodied persons without dependents to work, and in addition 
there are increased penalties for trafficking and fraud.
    The Staff of the Committee on Agriculture has reviewed the 
text of H.R. 3507 and has worked in cooperation with the other 
committee of jurisdiction in drafting language contained in 
H.R. 3507 as it relates to provisions within this committee's 
jurisdiction. The following provisions of H.R. 3507 have been 
identified as within the Committee on Agriculture's 
jurisdiction:

   TITLE I--BLOCK GRANTS FOR TEMPORARY ASSISTANCE FOR NEEDY FAMILIES

    Food stamp recipients who receive cash benefits under a 
program established by the State under the Temporary Assistance 
for Needy Families Block Grant (TANF) established in section 
103 may be issued food stamp benefits in accordance with the 
rules and procedures established by the State under TANF.
    Food stamp recipients who participate in the program 
established by the State under TANF will be required to meet 
the work requirements of the program established by the State 
under TANF.

                TITLE II--SUPPLEMENTARY SECURITY INCOME

    To the extent that the changes in this title affect 
eligibility of individuals for Supplemental Security Income, it 
affects the categorical eligibility of such individuals for the 
Food Stamp Program.

                        TITLE III--CHILD SUPPORT

    To the extent that provisions relating to the establishment 
of paternity affect the eligibility of persons receiving 
benefits under the program established by the State under TANF, 
food stamp recipients TANF could be affected.

      TITLE IV--RESTRICTING WELFARE AND PUBLIC BENEFITS FOR ALIENS

    Section 401 prohibits illegal aliens from receiving any 
Federal means-tested benefits, including food stamps.
    Section 403 prohibits legal aliens, with certain 
exceptions, from receiving food stamps;

                   TITLE IX--CHILD NUTRITION PROGRAMS

    To the extent that provisions relating to providing 
commodities under the Child Nutrition Programs could be 
affected.

                   TITLE XI--MISCELLANEOUS PROVISIONS

    Section 1105 allows States to consider the income and 
resources of an alien ineligible for food stamps when 
determining the eligibility of a household for food stamps.
    Section 1110 exempts State and local governments from 
liability under the Electronic Fund Transfer Act as it relates 
to the operation of electronic benefits transfer systems 
established by a State to issue benefits under the Food Stamp 
Program or any other programs.
    The Committee on Agriculture preserves its jurisdictional 
prerogatives as to such other provisions as further examination 
may disclose to be within its jurisdiction.
    During the markup of these recommendations, the ranking 
minority member, Congressman E (Kika) de la Garza, offered a 
substitute amendment that was for the most part the 
administration's food stamp proposal (not introduced in the 
House as a bill and S. 1841 in the Senate). A comparison of Mr. 
de la Garza's substitute with title X, et cetera, of H.R. 3507 
reflects that approximately 55 percent of the number of food 
stamp reforms in H.R. 3507 are identical to those in the 
substitute and 72 percent of the food stamp reforms in H.R. 
3507 are identical or similar to those in the substitute. The 
CBO preliminary cost estimate for reductions in food stamp and 
related spending for the substitute is $18.4 bill in whereas it 
is $23 billion for those in H.R. 3507.
    Several other amendments were offered during markup, some 
of which were adopted, others withdrawn, and several failed 
adoption.
    The committee's markup of H.R. 3507 commenced June 11 and 
was completed at 1:30 p.m., June 13, 1996.
    I am enclosing a hard copy of the committee's 
recommendations on title X and related provisions of H.R. 3507 
that achieve the budget reductions as contained in the 
instructions contained in H.Con.Res. 178 and as requested in 
your letter of June 12, 1996. There is also enclosed a hard 
copy of the Section-by-Section Analysis of the recommendations, 
as well as a Word Perfect 6.0 disk thereof. Final Congressional 
Budget Office cost estimates are not yet available and will be 
forwarded upon receipt but no later than June 17th. Minority 
views, if any; a hard copy of the Ramseyer; and the remainder 
of the contents of the report filed pursuant to Rule XI of the 
Rules of the House, including the Brief Explanation, Committee 
Consideration, the Purpose and Need, et cetera for the 
committee's recommendations will also be forwarded when 
available, but not later than Monday, June 17th.
            Sincerely,
                                             Pat Roberts, Chairman.

                                CONTENTS

                                                                   Page
Brief Explanation................................................    61
Purpose and Need.................................................    63
Section-by-Section Analysis of the Legislation...................    72
Committee Consideration..........................................    87
Rollcall Votes...................................................    99
Budget Act Compliance............................................   100
Inflationary Impact Statement....................................   101
Oversight Statement..............................................   101
Congressional Budget Office Estimate.............................   101
Changes in Existing Law..........................................   101

                           Brief Explanation

    The Food Stamp Reform and Commodity Distribution Act of 
1996, as amended by the House Committee on Agriculture, is 
designed to reform and simplify the Food Stamp Program and to 
improve the Commodity Distribution Programs of the Department 
of Agriculture, and for other purposes.

                     Subtitle A--Food Stamp Program

          (1) reauthorizes and reforms the Food Stamp Program;
          (2) allows States to harmonize Food Stamp Program 
        rules with those of the State Aid to Families with 
        Dependent Children program for those receiving benefits 
        from both programs;
          (3) provides for an annual increase in food stamp 
        benefits, based on 100 percent of the thrifty food 
        plan;
          (4) keeps certain income deductions at fiscal year 
        1996 levels;
          (5) keeps the threshold ($4,600) above which the fair 
        market value of vehicles is counted as an asset in 
        determining food stamp eligibility at the fiscal year 
        1996 level;
          (6) requires able-bodied individuals between the ages 
        of 18 and 50, with no dependents, to work at least 20 
        hours a week or participate in a State program for 4 
        months out of every 12 month period in order to 
        continue to receive food stamps;
          (7) allows States to use food stamps in work 
        supplementation or support programs where participants 
        have the opportunity to achieve practical work 
        experience;
          (8) increases penalties for trafficking and fraud;
          (9) provides that the same penalty for individuals 
        failing to comply with the rules of a State welfare 
        program would apply to food stamps;
          (10) encourages States to implement electronic 
        benefit transfer (EBT) systems;
          (11) provides States with the option to operate the 
        Food Stamp Program under a block grant if EBT operates 
        statewide, or if the rate of error is reduced to 
        acceptable levels, or if a State pays that part of the 
        food stamp errors over acceptable levels.

              Subtitle B--Commodity Distribution Programs

          (1) consolidates USDA commodity distribution programs 
        into one consolidated program, the emergency food 
        assistance program (TEFAP);
          (2) provides $300 million annually, beginning in 
        fiscal year 1997, to purchase, process, store, and 
        distribute commodities;
          (3) establishes guidelines for allocation of 
        commodities among States, supplementation of 
        commodities, and eligibility standards.
          (4) requires the Secretary of Agriculture to take 
        precautions to ensure that commodities made available 
        do not displace commercial sales.

            Subtitle C--Electronic Benefit Transfer Systems

          (1) Exempts EBT systems that provide for distribution 
        of means-tested benefits in States from the Regulation 
        E requirements.

                            Purpose and Need

                  A. REFORM OF THE FOOD STAMP PROGRAM

Food Stamp Program

    The Food Stamp Program began as pilot projects in 1961, by 
Presidential Executive Order under the authority to spend funds 
in order to support agriculture. In 1964, the administration 
proposed and Congress passed the Food Stamp Act. Eligibility 
standards were set by States, cities, and counties and they 
could choose to operate a Food Stamp Program or a food 
distribution program. As is the case now, the benefits were 
paid by the Federal Government. In 1971, uniform, national 
eligibility standards were set by Congress and the food stamp 
benefit was adjusted to reflect increases due to inflation. By 
1975, amendments to the Food Stamp Act were adopted requiring 
that if the Food Stamp Program was in operation in any place in 
a State, it must be offered statewide. By this time the food 
distribution program was all but phased out.
    In 1979, the Food Stamp Act of 1977 took effect, replacing 
the 1964 Act. The purchase requirement, through which 
participants had to pay a portion of their income, representing 
the expected contribution to their food costs, in order to 
receive a larger amount of food stamps, was eliminated. Because 
this action was determined to increase participation in the 
Food Stamp Program, Congress coupled this with restrictions on 
eligibility and benefits. The amount that could be spent on the 
Food Stamp Program was specifically limited through 
authorization ceilings. Nevertheless, the costs of the Food 
Stamp Program grew considerably. Congress acted to limit the 
growth through annual, rather than semi-annual inflation 
adjustments and established fiscal penalties for States with 
high rates of error. In 1981, the Food Stamp Program again was 
changed. Inflation adjustments were limited and the income 
eligibility standard was set at 130 percent of the poverty 
level. The growth of the program was slowed.
    In 1984 and 1985, previous limitations were restored and 
benefits were increased. Further, in 1988, a 3 percent addition 
to the maximum food stamp benefit was enacted and benefits were 
further increased. Since that time the costs of the Food Stamp 
Program have continued to grow, due both to changes in the law, 
specifically the Omnibus Budget Reconciliation Act of 1993, and 
as a result of the automatic adjustments in several of the food 
stamp deductions and in the thrifty food plan.

Food Stamp Program costs

------------------------------------------------------------------------
                                                        Average monthly 
               Year                    Spending (in      participation  
                                        billions)        (in millions)  
------------------------------------------------------------------------
1984..............................              $12.4               22.4
1985..............................               12.5               21.4
1986..............................               12.5               20.9
1987..............................               12.5               20.6
1988..............................               13.2               20.0
1989..............................               13.8               20.2
1990..............................               16.4               21.5
1991..............................               19.7               24.1
1992..............................               23.5               26.9
1993..............................               24.7               28.4
1994..............................               25.6               28.9
1995..............................               25.6               28.0
1996 \1\..........................               26.4               27.5
------------------------------------------------------------------------
\1\ Estimate.                                                           
                                                                        
Source: U.S. Department of Agriculture (includes benefits, State        
  administrative costs, and other program costs for the Food Stamp      
  Program and nutrition assistance to Puerto Rico and the Northern      
  Marianas).                                                            

Limiting automatic increases

    The committee believes it is time to limit the automatic 
increases built into the Food Stamp Program. Therefore, the 
committee has stopped the automatic indexing of the standard 
deduction, the excess shelter deduction, and the homeless 
shelter allowance. The committee has provided for an annual 
increase in the thrifty food plan, the basis of food stamp 
benefits, based on 100 percent of the thrifty food plan, rather 
than the 103 percent of the thrifty food plan now in place.
    Basic food stamp benefits are currently indexed each year 
to reflect the changes in the cost of the thrifty food plan. 
The annual increase in the thrifty food plan will continue to 
be automatically indexed, and will be set at 100 percent of the 
thrifty food plan.
    The food stamp standard deduction ($134 per month) will 
continue at the fiscal year 1996 level. The food stamp excess 
shelter deduction ($247 per month) will continue at the fiscal 
year 1996 level. The food stamp homeless shelter deduction, now 
set by regulation at $143 per month, will continue at the 
fiscal year 1996 level.
    The standard deduction was introduced in the 1977 Food 
Stamp Act and it was to be adjusted based on increases in the 
Consumer Price Index for nonfood items. It was established to 
take the place of itemized deductions. The current excess 
shelter deduction was also introduced in the 1977 Food Stamp 
Act (the earlier program included a shelter deduction that was 
more generous than that included in the 1977 Act). The 
deduction provides flexibility for families subject to varying 
weather conditions and for increased rents. Shelter expenses, 
including utilities, to the extent they exceed 50 percent of a 
family's net income, after all other deductions, can be 
deducted as a shelter cost, up to a maximum. The 1993 Budget 
Reconciliation Act increased this deduction and eliminated the 
ceiling after fiscal year 1996.
    Other deductions that are available to food stamp families 
include a deduction of 20 percent of earnings in recognition of 
taxes and work related expenses; dependent care expenses 
related to work or training up to $200 for children under the 
age of 2 years and $175 per month for all other dependents; 
medical expense deduction for elderly or disabled food stamp 
participants, to the extent medical expenses exceed $35 per 
month, per person; and for the elderly and disabled an 
unlimited excess shelter expenses deduction is allowed. These 
deductions are not changed in the committee bill.

Vehicle allowance

    The fair market value of vehicles is counted as an asset in 
determining food stamp eligibility, to the extent the value 
exceeds $4,600 (total assets cannot exceed $2,000 or $3,000 for 
elderly persons). The $4,600 threshold is scheduled to rise to 
$5,000 in October 1996, and then be indexed for inflation. 
Also, the value of vehicles used to transport a food stamp 
household's fuel or water, if that is the primary source of 
fuel or water, is not counted in determining the total assets 
of a household. The October 1996, increase, and the indexing of 
the threshold are repealed.
    The Omnibus Budget Reconciliation Act of 1993 expanded and 
indexed the fair market value of vehicles that can be owned by 
food stamp participants. The committee believes this is another 
example of indexing in the Food Stamp Program that can result 
in uncontrolled cost escalation.
    Current food stamp law provides that certain vehicles are 
not counted at all in calculating eligibility for food stamp 
benefits. These vehicles include those used to produce income; 
necessary for long distance travel for migrant and seasonal 
workers; used for subsistence hunting or fishing; or needed for 
a physically disabled person. The fair market value of other 
vehicles is calculated and to the extent that value exceeds 
$4,600, the amount over $4,600 is attributed toward the 
resource limit of $2,000. Therefore a family could have a 
vehicle with a fair market value of $6,600, if there are no 
other liquid assets, and still retain eligibility for food 
stamps. Additionally, if a family has more than one vehicle, 
each valued under $4,600, eligibility for food stamps will not 
be affected.

Simplified Food Stamp Program

    The committee has determined that the Food Stamp Program 
will remain at the Federal level. Reform of the Aid to Families 
with Dependent Children (AFDC) program and other welfare 
programs will constitute significant changes in the provision 
of welfare. Until States have completed the transition to the 
reformed programs, food stamps should remain a Federal program, 
reformed, but still available to persons in need of food.
    The committee believes it is essential to provide States 
with the ability to harmonize their new welfare program with 
the Food Stamp Program and has therefore provided States with 
considerable latitude to accomplish this task. Over the past 
several years many efforts have been made to allow States this 
option. Demonstration projects have been authorized, with some 
more successful than others. The 1981 Food Stamp and Commodity 
Distribution Amendments and the 1990 farm bill authorized 
demonstration projects to test various forms of a simplified 
process to determine eligibility and benefits for AFDC and food 
stamps.
    The 1981 Simplified Application Demonstration Projects 
tested how different levels of standardization and 
simplification affect benefits, administrative costs, and 
errors in the Food Stamp Program. The demonstration projects 
centered on food stamp participants who also receive AFDC, 
Supplemental Security Income (SSI), and/or Medicaid. These 
simplified programs operated in Illinois, California, and 
Oklahoma. In Illinois, program simplification entailed 
assigning food stamp benefits to AFDC households based on 
standard benefit tables under which all households within 
certain categories receive the same food stamp allotment. Three 
other demonstration sites adopted more limited forms of 
simplification. San Diego and Fresno Counties in California 
used AFDC income definitions for the Food Stamp Program. 
Oklahoma standardized the gross income level used to calculate 
food stamp benefits for households at the maximum AFDC payment 
for the households plus the household's ``$30 plus \1/3\'' AFDC 
earned income disregard. The demonstration projects authorized 
by the 1990 farm bill were not implemented. Three other States 
have implemented projects with similar characteristics, 
Alabama, Minnesota, and Washington.
    The 1990 farm bill also established a Welfare 
Simplification and Coordination Advisory Committee. The members 
of that advisory committee were experts in the fields of public 
assistance programs, including food stamps, AFDC, medical 
assistance and housing programs and had demonstrated expertise 
in evaluating the operation of these programs and the 
interaction of these programs with one another. Representatives 
of State and local administrators and recipients were included 
as well. In June 1993, the advisory committee issued its report 
and recommended the replacement of the ``numerous programs that 
currently serve the needy with one, family-focused, client-
oriented, comprehensive program.''
    The committee believes it is time to provide States with 
the option of harmonizing their new AFDC program with the Food 
Stamp Program for those participants receiving assistance from 
both programs. The Food Stamp Program is reformed to make it 
possible for States to harmonize the eligibility and benefit 
determination standards for the new program and food stamps. 
States will have the option to establish one set of benefit 
rules for families applying for the new program and for food 
stamps. Penalties applied by the State program rules for work 
and program compliance will not result in an increase in food 
stamp benefits. States will be able to choose to apply the same 
penalties to food stamp benefits as are applied to other State 
welfare programs work and compliance requirements.
    States will be able to define and count income and expenses 
for food stamp benefit purposes in the same way they do in 
their State program. They will be able to simplify rules, 
provide standard benefits varied by household size, area of 
residence, or other factors. The same procedural rules can be 
used for the State program and for food stamps (reporting of 
income, changes in household circumstances, verification 
standards) as long as a State provides notice of changes in 
benefits and a fair hearing process.
    The committee intends that USDA can refuse to approve a 
State food stamp simplification plan only if it is judged to 
increase Federal food stamp costs or fails to include adequate 
notice and fair hearing rights and certain other provisions of 
current food stamp law.
    The Federal Government operates a multitude of assistance 
programs which are under the jurisdiction of different Federal 
agencies and in some cases different State and local agencies. 
For major income and food assistance programs, this lack of 
coordination and resolution of the differences among programs 
is troublesome. The committee considers the simplified Food 
Stamp Program a first step in the process of coordination. 
Further steps will be considered as the States continue the 
process of implementing reform of the overall welfare system.

Work requirements and program options in the Food Stamp Program

    The committee believes that able-bodied participants with 
no dependents, between the ages of 18 and 50 years, must be 
required work or be in a training program. These persons will 
be ineligible for food stamps after 4 months, out of a 12 month 
period, unless they are employed at least 20 hours per week in 
a job; are in a training program for at least 20 hours per 
week, or participate in workfare.
    The committee intends that, for 20 hours per week, able-
bodied persons between the ages of 18 and 50, with no 
dependents, should be working; be in a program under the Job 
Training Partnership Act; be in a program under the Trade 
Adjustment Act; or be in a program of employment and training 
that meets the standards set by the Governor. These persons may 
also meet the work requirement by participating in workfare 
programs.
    The committee understands that there may be instances in 
which high unemployment rates in all or part of a State or 
other specified circumstances may limit the jobs available for 
able-bodied food stamp participants between 18 and 50 years 
with no dependents. Therefore the Secretary, upon request from 
a State, is provided with the authority to waive job 
requirements in these circumstances or if unemployment rates 
are above 10 percent. The committee intends that the Secretary, 
in exercising this authority, will provide the Agriculture 
Committees of the House of Representatives and the Senate with 
the rationale for such a decision.
    The committee has provided States with new money (food 
stamp benefits) to give employers who would, in turn, pay it, 
in lieu of food coupons, to food stamp recipients to 
participate in work supplementation or support programs. Such 
programs include those in which public assistance benefits, 
including food stamps, are provided to employers who hire 
public assistance recipients. The benefits pay part of the 
wages. These programs must meet standards set by the Secretary. 
Several States, including Oregon and Mississippi, have 
indicated interest in these types of work programs. The 
committee expects that the Secretary will keep the committee 
informed at regular intervals as to the progress of these work 
supplementation or support programs.

Food Stamp Program integrity

    The incidence of fraud and the resulting losses to the Food 
Stamp Program are steadily increasing as the number of Food 
Stamp Program participants and the total value of benefits 
received increase. In fiscal year 1996, it is estimated that 
the Food Stamp Program will cost over $26 billion and food 
stamp benefits will be issued to a monthly average of more than 
27 million recipients.
    Fraud occurs in the Food Stamp Program in three different 
ways. The first method of fraud is in the certification and 
issuance of benefits. USDA estimates that $1.8 billion in food 
stamp benefits were overissued to recipients in fiscal year 
1994. Of this total, about $414 million was issued to 
recipients as a result of fraud. The rest was the result of 
unintentional recipient error and caseworker error.
    Recipient fraud varies from the intentional under-reporting 
of income or inflation of household expenses to elaborate 
schemes involving the creation of false documents and 
fictitious identities. The committee heard testimony describing 
a recent incident in the State of Washington in which two State 
welfare caseworkers and a refugee counselor were engaged in a 
scheme to fraudulently obtain social security and food stamp 
benefits for at least 300 refugees. The false food stamp 
applications were prompted by the refugee counselor and the 
caseworkers, who took kickbacks from the refugees in return for 
their being certified to receive benefits.
    The second method of fraud is street trafficking in food 
stamp coupons. Street trafficking involves a person who sells, 
purchases, or barters food stamps for cash or other nonfood 
items. In many communities, food stamps have become a second 
currency. The committee heard reports and witnessed undercover 
video footage of food stamps being traded for cash, drugs, 
guns, and a stolen car.
    The committee also heard reports that it was not uncommon 
for food stamp traffickers to be a part of other criminal 
enterprises, such as theft and fencing rings or drug 
trafficking operations. In Smithfield, North Carolina, OIG 
agents and other law enforcement officers successfully 
penetrated an organized drug trafficking ring that was 
transporting large quantities of ``crack'' cocaine from Florida 
to Smithfield. During the investigation, OIG documented members 
of the gang exchanging cocaine on numerous occasions for over 
$23,000 in food stamps. In Los Angeles, an undercover OIG agent 
contacted a street trafficker who agreed to buy $30,000 in food 
stamps from the agent. A subsequent search of the trafficker's 
residence and automobile uncovered an additional $82,000 in 
food stamps that had been improperly acquired from recipients.
    The third method of fraud is retail food store and 
wholesale food concern trafficking. USDA is responsible for 
authorizing retail food stores and wholesale food concerns to 
redeem food stamps. Currently, over 207,000 retail food stores 
and wholesale food concerns are authorized to redeem food 
stamps. Each year, about 30,000 new entities apply for 
authorization. Also, each year about 30,000 entities are 
disqualified or become ineligible to redeem food stamps. 
Approximately 77 percent of all food stamps are redeemed by 
supermarkets which comprise only about 15 percent of all 
authorized entities. USDA has found that most retail 
trafficking occurs in smaller food stores and in other retail 
entities whose business is not primarily food sales. During 
fiscal year 1994, USDA compliance investigators reviewed 4,300 
entities authorized to redeem food stamps. Of these entities, 
1,300 were found to have committed violations serious enough to 
warrant sanctions, including 902 entities which were 
trafficking in food stamps.
    While neither USDA, OIG, nor GAO can provide an estimate 
with any certainty as to the amount of food stamp trafficking 
that occurs each year, trafficking in food stamps is believed 
by OIG to exceed $1 billion each year. Clearly, the number of 
trafficking investigations involving multi-million dollar food 
stamp trafficking operations and the organization with which 
such operations are operating is on the rise. The committee 
heard testimony of a case in Brooklyn, New York, in which 
investigators found an individual who had obtained 
authorization to redeem food stamps from USDA for a fictitious 
retail store. In a 22-month period, this fictitious store 
illegally accepted more than $40 million in food stamps from 
over 600 restaurants, retail stores, and other businesses. In 1 
month alone, this fictitious store illegally redeemed over $4.7 
million in food stamps, nearly 5 percent of all food stamps 
redeemed that month in New York City.
    Electronic benefit transfer systems (EBT) systems have the 
potential to reduce but not eliminate trafficking and fraud in 
the Food Stamp Program. EBT has the potential to severely 
curtail street trafficking because such systems can only be 
used in conjunction with an authorized point-of-sale terminal 
at an authorized retail food store or wholesale food concern. 
EBT, however, is still susceptible to trafficking and fraud by 
retail food stores and wholesale food concerns. The committee 
heard testimony from OIG detailing a trafficking operation 
using EBT in Baltimore, Maryland, in which two small retailers 
at an indoor market trafficked over $1.2 million in food stamp 
benefits. EBT data, however, assists investigators in detecting 
traffickers and provides evidence assisting in their 
prosecution. Additionally, EBT provides investigators with 
detailed records identifying recipients who traffic in food 
stamps and assists in prosecuting or disqualifying these 
individuals.
    To combat recipient fraud, the committee believes that the 
disqualification periods for recipients for intentional program 
violations should be increased from 6 months to 1 year for the 
first offense and increased from 1 year to 2 years for the 
second offense. To combat recipient trafficking, the committee 
believes that recipients who are convicted of trafficking food 
stamps with a value of over $500 should be permanently 
disqualified from the program. Additionally, the committee 
believes that States should be required to participate in the 
Federal Tax Refund Offset Program to collect outstanding food 
stamp claims. Also, existing authority for States to collect 
overissued food stamp benefits is greatly expanded.
    To combat trafficking by retail food stores and wholesale 
food concerns, the committee believes that USDA, or an agent of 
USDA, should visit each retail food store or wholesale food 
concern, or may elicit the assistance of State or local agency 
before granting authorization to redeem food stamps. The 
committee believes that initial authorization should be for a 
limited period and that retail food stores and wholesale food 
concerns should be prohibited from submitting a new application 
for 6 months after a denial of an application for authorization 
to redeem food stamps. The committee believes that where an 
authorized retail food store or wholesale food concern is 
permanently disqualified, such disqualification should be 
effective from the date of receipt of the notice of 
disqualification pending any administrative or judicial review. 
The committee also believes that a retail food store or 
wholesale food concern disqualified from the Special 
Supplemental Food Program for Women, Infants, and Children also 
should be disqualified from the Food Stamp Program during such 
disqualifications. Finally, the committee believes that all 
property used to traffic in food stamps and proceeds traceable 
to any property used to traffic in food stamps should be 
subject to criminal forfeiture.

                   B. COMMODITY DISTRIBUTION PROGRAMS

    Two commodity distribution programs are consolidated to 
provide for greater program efficiency and the amount of money 
provided for the new consolidated program is increased so that 
food will continue to be provided to needy families. Commodity 
distribution programs provide help directly to families at the 
local level through churches, soup kitchens and food banks. 
Other community organizations that provide help through the 
donation of food include battered women's shelters, homeless 
shelters and food pantries. The food provided through commodity 
distribution programs is often matched and exceeded by 
contributions from private sector sources, such as grocery 
stores, food processors and manufacturers, and farmers.
    USDA currently operates several commodity distribution 
programs, two of which are consolidated into one program, 
thereby establishing one administrative structure. The 
essential nature of the programs is maintained. Persons and 
organizations operating food banks, soup kitchens, and other 
similar operations will continue to receive Federal commodities 
and administrative funds. The purpose of the consolidated 
program is to provide wholesome food for needy people and to 
assist farmers through the donation of federally purchased and 
donated commodities. This program will provide wholesome, 
nutritious food to needy families in temporary need due to 
emergencies or natural disasters or as a supplement to other 
programs.
    The following programs are consolidated to provide food for 
distribution to needy individuals and families:
     The Emergency Food Assistance Program (TEFAP)--State and 
local emergency feeding organizations receive federally donated 
commodities (some purchased and some surplus commodities) and 
administrative funding. Assistance varies with the availability 
of commodities but all States operate TEFAP. TEFAP began in 
December 1981. Congress authorized the program in 1983 and it 
is currently authorized through 2002.
    The Soup Kitchen and Food Bank Program.--This program 
provides for the purchase and distribution of commodities to 
soup kitchens and food banks, with priority given to those 
organizations providing meals for homeless people. It was 
initiated in the 1988 Hunger Prevention Act. The 1990 Farm Bill 
reauthorized this program at an authorized level of $32 million 
for 1991 and $40 million for the following years.
    Other programs proving commodity assistance to needy 
persons and families include:
    Assistance for summer camps and charitable institutions.--
The Secretary of Agriculture has the discretion to provide 
commodities to charitable institutions and summer camps. 
Surplus commodities are provided when no other outlet is 
available. The types of organizations receiving commodities are 
churches, orphanages, correctional institutions, homes for 
elderly and hospitals. Only nonprofit, tax-exempt organizations 
and correctional facilities that offer rehabilitation services 
are eligible.
    Commodity Supplemental Food Program (CSFP).--CSFP began in 
1968 as a program for supplemental food for women, infants, and 
children. In 1981 it was expanded to include elderly persons. 
Foods are purchased directly by USDA are distributed through 
State and local agencies. Approximately 400,000 people are 
provided benefits, half elderly and half women, infants and 
children. This program operates in 20 States with a total of 60 
CSFP sites.
    Commodity distribution programs serve several purposes. 
They provide food assistance directly to children, the elderly, 
the needy, the homeless and women and children at nutrition 
risk. They help farmers by providing the bounty of nutritious 
food to others in need. They also enable the Federal Government 
to dispose of commodity holdings that might otherwise be 
wasted.
    The committee believes that commodity distribution programs 
are essential and are the first line of defense so that 
communities can help families in immediate need without the 
bureaucratic red tape required by other food assistance 
programs. Therefore the committee requires that the Secretary 
annually purchase $300 million of commodities to distribute 
through the consolidated commodity distribution program (TEFAP) 
beginning in fiscal year 1997.

           C. ELECTRONIC BENEFIT TRANSFER (EBT) ENCOURAGEMENT

    The committee believes that EBT systems, in which food 
stamp benefits are provided through a debit card system instead 
of coupons, is the preferred choice of delivering food 
benefits. The Inspector General of USDA, in his testimony of 
February 1, 1995, before the committee, made it clear that EBT 
systems, while not eliminating trafficking in food stamps, were 
superior to coupons and a tool that can be used in tracking 
down persons abusing the Food Stamp Program.
    For more than 10 years USDA, at the direction of Congress, 
has been investigating the feasibility, cost-effectiveness, and 
general impact of using an electronic benefit transfer (EBT) 
system to issue food stamp benefits. Paper coupons are replaced 
and recipients use a debit-like card at the grocery store 
check-out. Counties in several States, including Pennsylvania, 
Minnesota, New Mexico, and New Jersey have implemented EBT and 
Maryland, Texas, Utah, and South Carolina have EBT systems 
statewide.
    USDA has found that EBT administrative costs are lower than 
coupon issuance costs; that food stamp benefit loss and 
trafficking are reduced; grocery store costs are reduced; food 
stamp participants prefer EBT; and financial institutions also 
prefer EBT and their costs are reduced.
    Law enforcement officials have spoken in favor of EBT 
because it provides an electronic trail of abuses in the 
program. Trafficking is not eliminated under an EBT system; 
however, incidental street trafficking is reduced considerably.
    The committee bill encourages States to go forward with EBT 
and allows them to design their own program, under the 
standards of USDA.
    The committee is concerned that because of the standards 
adopted by the Federal Reserve Board in 1994 governing its 
Regulation E, and which become effective in March of 1997, 
States are receiving conflicting messages on implementation of 
EBT systems for the Food Stamp Program. The committee stresses 
its encouragement of the advancement of EBT systems and is 
concerned that the increased liability and higher 
administrative costs under the Federal Reserve Board's 1994 
decision may retard progress. Therefore Regulation E will not 
apply to means-tested programs, including the Food Stamp 
Program.
    To further encourage adoption of EBT systems, once a State 
has implemented EBT on a statewide basis, that State will have 
the option of operating a Food Stamp Program under a block 
grant. Food stamp EBT benefits will be redeemable only for 
food.

                           Section-by-Section

                     Subtitle A--Food Stamp Program

Section 1001. Short title

    This title is cited as the Food Stamp Reform and Commodity 
Distribution Act of 1996.

Section 1011. Definition of a certification period

    Food stamp certification periods cannot exceed 12 months. 
States are allowed to establish certification periods of up to 
24 months for households with members that are elderly or 
disabled. States must have at least one contact with the 
household every 12 months.

Section 1012. Definition of coupon

    The definition of a ``coupon'' is revised to include 
authorization cards, cash, or checks issued in lieu of coupons 
and ``access devices'' for electronic benefit transfer systems. 
This expands the types of items to which trafficking penalties 
apply.

Section 1013. Treatment of children living at home

    Parents and their children 21 years of age or younger 
living together (current law), including children who are 
parents living with their children and children who are married 
and living with their spouses, must apply for food stamps as a 
single household.

Section 1014. Optional additional criteria for separate household 
        determinations

    States are allowed to set criteria that prescribe when 
individuals living together, and otherwise would be allowed to 
apply for food stamps as a separate household, must apply as a 
single household.

Section 1015. Adjustment of thrifty food plan

    The maximum monthly food stamp benefits are set at 100 
percent of the cost of the thrifty food plan, effective October 
1, 1996, and adjusted annually, as under existing law. The 
October 1, 1996, adjustment will not reduce maximum benefit 
levels.

Section 1016. Definition of homeless individual

    Persons whose primary residence is a temporary 
accommodation in the home of another may only be considered 
homeless if the accommodation is for no more than 90 days.

Section 1017. State option for eligibility standards

    States are allowed, as provided in other sections of this 
Act, to set nonuniform standards of food stamp eligibility.

Section 1018. Earnings of students

    The earnings of an elementary/secondary student must be 
counted as income for food stamp purposes once the student is 
20 years or older.

Section 1019. Energy assistance

    State and local energy assistance payments will be 
considered as income in the Food Stamp Program. A one-time 
payment under a Federal or State law for the costs of 
weatherization or emergency repair of heating or cooling 
devices will not be considered as income. Benefits paid under 
the low income home energy assistance program (LIHEAP) and HUD 
utility allowances will be considered as income. Payments made 
by LIHEAP or any other energy assistance program counted as 
income, whether paid directly or indirectly, are considered an 
out-of-pocket expense and the household may receive a shelter 
expense deduction for utility costs.

Section 1020. Deductions from income

    The standard deduction will continue at the fiscal year 
1996 level ($134/month for the 48 States and the District of 
Columbia, $229 for Alaska, $189 for Hawaii, $269 for Guam, and 
$118 for the Virgin Islands).
    An earned income deduction will not be allowed for any 
income not reported in a timely manner (the deduction is not 
allowed in determining the amount of any overissued food stamp 
benefits) and will be denied for the public assistance portion 
of income earned under a work supplementation/support program.
    The homeless shelter allowance is set at the October 1995 
level of $143/month. This allowance must be used in 
establishing homeless households' excess shelter expense 
deduction when they do not receive free shelter throughout the 
month. States may prohibit use of the allowance for households 
with extremely low shelter costs.
    The excess shelter deduction is set at the October 1995 
level ($247/month for the 48 States and the District of 
Columbia, $429 for Alaska, $353 for Hawaii, $300 for Guam, and 
$182 for the Virgin Islands).

Section 1021. Vehicle allowance

    The threshold above which the fair market value of a 
vehicle is counted as an asset for determining eligibility for 
the Food Stamp Program is set at $4,600.

Section 1022. Vendor payments for transitional housing counted as 
        income

    Payments from regular welfare benefits made on behalf of 
households in transitional housing are no longer disregarded as 
income.

Section 1023. Doubled penalties for violating Food Stamp Program 
        requirements

    The disqualification penalty for the first intentional 
violation of program requirements in increased to 1 year. The 
disqualification penalty for the second intentional violation 
(and the first violation involving trading of a controlled 
substance) is increased to 2 years.

Section 1024. Disqualification of convicted individuals

    Persons convicted of trafficking in food stamp benefits, 
where the benefits trafficked have a value of $500 or more, are 
permanently disqualified from the Food Stamp Program.

Section 1025. Disqualification

    This section adds to the current rules governing 
disqualification for violation of work and employment/training 
requirements. Existing provisions for disqualification (job 
refusal and failure to participate in an employment/training 
program) are expanded to make ineligible (1) individuals 
refusing without good cause to provide sufficient information 
to allow a determination of employment status or job 
availability; (2) all individuals who voluntarily and without 
good cause quit a job; and (3) individuals who voluntarily and 
without good cause reduce their work effort and, after the 
reduction, are working less than 30 hours per week.
    If any individual who is the head of the household is 
disqualified under a work rule, the entire household, at the 
option of a State, will be ineligible for the lesser of the 
duration of the individual's ineligibility or 180 days.
    New mandatory minimum work disqualification periods are 
set. For the first violation, individuals will be ineligible 
until the later of the date the work rules are fulfilled, for 1 
month, or a period to be determined by the State but not to 
exceed 3 months. For the second violation, individuals will be 
ineligible until the later of the date they fulfill the work 
rules, for 3 months, or a period to be determined by the State 
but not to exceed 6 months. For the third or subsequent 
violation, individuals will be ineligible until the later of 
the date they fulfill work rules, for 6 months, or a date 
determined by the State, or permanently at the option of the 
State. The same disqualification periods apply to those failing 
to meet any workfare requirements.
    The Secretary is responsible for determining the definition 
of good cause, voluntary quit, and reduction of work effort. 
States will determine the definition of other terms and the 
procedures for making compliance decisions; however, they 
cannot be less restrictive than a comparable definition or 
procedure under the State's AFDC program. States must include a 
description of the standards and procedures in their State 
plans.

Section 1026. Caretaker exemption

    Parents or other household members with responsibility for 
the care of a dependent child under the age of 1 are exempt 
from food stamp work rules, at State option.

Section 1027. Employment and training

    The requirements for State-operated employment/training 
programs are revised as follows:
          (1) work experience is added to the purpose of 
        employment/training programs;
          (2) each component of an employment/training program 
        must be delivered through a ``statewide work-force 
        development system,'' unless it is not available 
        locally;
          (3) States may apply all work rules to food stamp 
        applicants, not only job search rules;
          (4) specific rules governing job search components 
        are removed;
          (5) eliminates provisions for components related to 
        work experience requiring that they be in public 
        service work and use food stamp recipients' prior 
        training and experience;
          (6) eliminates specific Federal rules regarding 
        States' authority to exempt categories and individuals 
        from employment/training rules;
          (7) eliminates the requirement to serve volunteers in 
        employment/training programs;
          (8) eliminates the rule for ``conciliation 
        procedures'' for resolution of disputes involving 
        participation in the employment/training program;
          (9) limits funding provided by the Food Stamp Program 
        for services to AFDC recipients to the amount used by a 
        State in fiscal year 1995; and
          (10) eliminates Federal performance standards.
    The Secretary is required to reserve, from Food Stamp 
Program funding, the following amounts for employment/training 
programs:

                        [In millions of dollars]

Fiscal year:
    1997..........................................................    79
    1998..........................................................    81
    1999..........................................................    84
    2000..........................................................    86
    2001..........................................................    88
    2002..........................................................    90

     Allocations are to be based on a reasonable formula, 
determined by the Secretary, giving consideration to the 
States' share of the populations affected by the work 
requirements. Minimum State allocations are set at $50,000.

Section 1028. Comparable treatment for disqualification

    Individuals disqualified for failure to perform an action 
required under a federal, State, or local means-tested public 
assistance program are also disqualified from food stamps, at 
the State's option. States may use AFDC rules and procedures to 
impose the same disqualification for food stamps. Individuals 
disqualified from food stamps due to failure to perform a 
required action under another means-tested public assistance 
program may apply for food stamps after the disqualification 
period has expired; however, a prior disqualification period 
under food stamp work rules must be considered in determining 
eligibility. States must include the guidelines used to carry 
out these food stamp disqualification provisions in their State 
plans.

Section 1029. Disqualification for receipt of multiple food stamp 
        benefits

    Individuals found to have fraudulently misrepresented their 
place of residence or identity in order to receive multiple 
food stamp benefits are disqualified from the Food Stamp 
Program for 10 years.

Section 1030. Disqualification of fleeing felons

    Individuals, while they are (1) fleeing to avoid 
prosecution or custody after a conviction for a felony (or an 
attempt) or (2) violating a condition of parole under Federal 
or State law, are disqualified from participation in the Food 
Stamp Program.

Section 1031. Cooperation with child support agencies

    States are allowed to disqualify custodial parents of 
children under the age of 18 years who have an absent parent, 
unless the custodial parent cooperates with the State in 
establishing the child's paternity and obtaining support for 
the child. Cooperation is not required if the State finds there 
is good cause for failure to cooperate. Fees and other costs 
for services can not be changed.
    States are allowed to disqualify putative or noncustodial 
parents of children under the age of 18 years if they refuse to 
cooperate with the State in establishing the child's paternity 
and providing support for the child. The Secretary of 
Agriculture and the Secretary of HHS will develop guidelines 
for what constitutes a refusal to cooperate and States will 
develop procedures to determine whether there is a refusal to 
cooperate. Fees and other costs for services can not be 
charged. States are required to provide safeguards to restrict 
the use of information collected by the State to the purposes 
for which it was collected.

Section 1032. Disqualification relating to child support arrears

    States may disqualify individuals under a court child 
support order during any period in which the individual has an 
unpaid liability, unless the court is allowing delayed 
payments.

Section 1033. Work requirement

    Able-bodied persons between 18 years and 50 years who have 
no children or are not responsible for the care of others are 
ineligible if, during the prior 12-month period, they received 
food stamps for 4 months or more while not working 20 hours per 
week or more; or participating in a work program (such as the 
Jobs Training Partnership Act, the Trade Adjustment Assistance 
Act, or employment and training programs operated or supervised 
by a State meeting standards approved by the Governor, but not 
including job search or job search training programs) for at 
least 20 hours per week, or participating in a workfare 
program.
    The disqualification ceases to apply if, during any 30-day 
period, an individual works 80 hours or more; participates in 
and complies with a work program for at least 80 hours; or 
participates in a workfare program. In the subsequent 12-month 
period, an individual is eligible for food stamps for up to 4 
months while not working for at least 20 hours per week; 
participating in a work program for at least 20 hours per week; 
or participating in a workfare program.
    Upon a State request, the Secretary is allowed to waive 
application of this work requirement for some or all 
individuals in part or all of a State if the Secretary 
determines that the area unemployment rate is over 10 percent 
or if there are insufficient jobs to provide employment for 
those subject to this requirement. The Secretary is required to 
report to the Agriculture Committees on all waivers granted.

Section 1034. Encourage electronic benefit transfer systems

    States are encouraged to implement an electronic benefit 
transfer (EBT) system as soon as practicable. States are 
required to implement EBT before October 1, 2002, unless the 
Secretary waives the requirement because a State faces unusual 
barriers to implementation. Subject to Federal standards, 
States are allowed to procure and implement an EBT system under 
terms, conditions, and designs that they consider appropriate. 
A requirement for Federal procurement standards is added. EBT 
standards must follow generally accepted standard operating 
rules based on commercial technology; permit interstate 
operation; and permit monitoring and investigations by 
authorized law enforcement officials.
    Regulations regarding replacement of benefits under an EBT 
system must be similar to those in effect for a paper-based 
food stamp issuance system.
    EBT systems must be cost neutral; include measures to 
maximize the security of the EBT system; and include provisions 
allowing EBT systems to differentiate among food items, to the 
extent practicable.
    States may charge food stamp participants for the cost of 
replacing a lost or stolen EBT card and may collect the charge 
by reducing the participant's food stamp benefit. States may 
require that EBT cards contain a photograph of one or more 
household members. If States require such a photograph, the 
States must establish procedures to ensure that other 
appropriate members of the food stamp household and authorized 
representatives may use the EBT card.
    The anti-tying restrictions of the Bank Holding Company Act 
Amendments of 1970 will apply to electronic benefit transfer 
(EBT) services offered by nonbanks. Banks providing EBT 
services are subject to the anti-tying restrictions of section 
106 of the Bank Holding Company Act Amendments of 1970. Bank 
holding companies and their subsidiaries that are not banks 
also are subject to the restrictions contained in section 106 
pursuant to regulations promulgated by the Federal Reserve 
Board. This provision extends these restrictions to nonbanks 
that provide EBT services.

Section 1035. Value of minimum allotment

    The minimum monthly allotment for 1- and 2-person 
households continues to be set at $10.

Section 1036. Benefits on recertification

    Food stamp participants who do not complete all the 
requirements for eligibility recertification in the last month 
of their certification periods, but were then determined 
eligible after their certification periods had expired, will 
receive reduced benefits in the first month of their new 
certification periods (i.e., their benefits will be prorated to 
the date they met the requirements and were again judged 
eligible). The 1-month ``grace period'' to fulfill eligibility 
recertification requirements during which benefits would not be 
subject to a prorata reduction is eliminated.

Section 1037. Optional combined allotment for expedited households

    States may provide food stamp households, applying after 
the 15th of the month, an allotment that is an aggregate of the 
initial (pro-rated) benefit and the first regular monthly 
allotment. This provision applies to both regular and expedited 
service applications.

Section 1038. Failure to comply with other means-tested public 
        assistance Programs

    Food stamp benefits may not be increased when benefits 
received through federal, State, or local means-tested public 
assistance programs are reduced due to a failure to perform a 
required action. States may also reduce the food stamp 
household benefit by an amount up to 25 percent. If the food 
stamp benefit is reduced due to a failure to perform an action 
required under the State's AFDC program, the State may use the 
rules of that program to reduce the food stamp benefit.

Section 1039. Allotments for households residing in centers

    States are allowed to divide monthly food stamp benefits 
between the participant who was a resident of a drug or alcohol 
treatment center and then leaves the center and the drug or 
alcohol treatment center. States may require residents of these 
centers to designate the centers as authorized representatives.

Section 1040. Condition precedent for approval of retail food stores 
        and wholesale food concerns

    Retail food stores and wholesale food concerns can not be 
approved for participation in the Food Stamp Program unless a 
visit is made to the store by an appropriate person. The types 
of stores included in this requirement will be determined by 
the Secretary based on factors that include size, location, and 
type of items sold.

Section 1041. Authority to establish authorization periods

    The Secretary is required to establish specific time 
periods during which retail food stores or a wholesale food 
concerns' authorization to accept and redeem food stamp 
benefits (or EBT) will be valid.

Section 1042. Information for verifying eligibility for authorization

    The Secretary is allowed to require that food retailers and 
wholesalers seeking approval must submit relevant income and 
sales tax filing documents. Also, the Secretary is allowed to 
issue regulations requiring food retailers and wholesalers to 
provide written authorization to the Secretary to verify tax 
filings and to obtain corroborating documentation from other 
sources in order to verify the accuracy of the information 
provided by food retailers and wholesalers.

Section 1043. Waiting period for stores that fail to meet authorization 
        criteria

    Retail food stores and wholesale food concerns that fail to 
be approved for participation in the Food Stamp Program will 
not be allowed to submit a new application for 6 months. The 
Secretary may establish longer waiting periods, including 
permanent disqualification, that reflect the severity of the 
basis for denial.

Section 1044. Operation of food stamp offices

    The requirements for States' plans for operation of the 
Food Stamp Program are replaced as follows: A State must (1) 
establish procedures governing operation of the food stamp 
offices that it determines best serves households in the State, 
including those with special needs; (2) provide timely, 
accurate, and fair service to applicants and participants; (3) 
allow applicants to apply and participate on the same day they 
first contact the food stamp office during office hours; (4) 
consider an application filed on the day the applicant submits 
an application that contains the applicant's name, address, and 
signature; (5) require applicants to certify in writing as to 
the truth of information on the application; (6) stipulate that 
the signature of a single adult is sufficient; (7) have methods 
for certifying homeless households; and (8) ensure that 
electronic storage of information is allowed.
    States may establish operating procedures that vary for 
local food stamp offices to reflect regional and local 
differences.
    States may disqualify food stamp participants based on 
another public assistance program's rules for disqualification 
for failure to comply with those rules.

Section 1045. State employee and training standards

    Existing provisions for merit system standards are 
retained. A technical change to reflect the current Federal 
agency is made.

Section 1046. Exchange of law enforcement information

    States must make available to law enforcement officials the 
address, social security number, and (when available) the 
photograph of a food stamp recipient if the law enforcement 
official furnishes the recipient's name and notifies the agency 
that the individuals if fleeing to avoid prosecution or custody 
for a felony crime (or attempt); that the location or 
apprehension of the individual in within the official's duties; 
and the request is within the proper exercise of official 
duties. The requested information must be related to the 
apprehension of a felon or parolee.

Section 1047. Expedited coupon service

    The period in which expedited food stamp benefits must be 
provided is increased to 7 (from 5) calendar days.

Section 1048. Withdrawing fair hearing requests

    States may allow food stamp households to withdraw fair 
hearing requests either orally or in writing.

Section 1049. Income, eligibility, and immigration status verification 
        systems

    The use of income and eligibility and immigration status 
verification systems established under the Social Security Act 
is made optional with the States.

Section 1050. Disqualification of retailers who intentionally submit 
        falsified applications

    The Secretary may disqualify retail food stores or 
wholesale food concerns, including permanent disqualification, 
when the store or concern knowingly submits false information 
on the application.

Section 1051. Disqualification of retailers who are disqualified under 
        the WIC Program

    The Secretary is required to issue regulations providing 
criteria for disqualifying retail food stores and wholesale 
food concerns from participation in the Food Stamp Program once 
they are disqualified from the WIC program. This food stamp 
disqualification is not subject to food stamp rules regarding 
judicial or administrative review.

Section 1052. Collection of overissuances

    Existing overissuance collection rules are replaced. States 
must collect any overissuance of food stamp benefits by 
reducing future benefits, withholding unemployment 
compensation, recovering from Federal pay or income tax 
refunds, or any other means, unless the Secretary demonstrates 
that all of the means are not cost effective. Benefit 
reductions are limited to 10 percent of the monthly benefit or 
$10 per month.
    States may retain 25 percent of overissuances collected 
(other than those caused by a State agency error).

Section 1053. Authority to suspend stores violating program 
        requirements pending administrative and judicial review

    Permanent disqualification of a store or wholesale food 
concern will be effective from the date the notice of 
disqualification is received. If the disqualification is 
reversed through administrative or judicial review, the 
Secretary is not liable for the value of lost sales during the 
disqualification period.

Section 1054. Expanded criminal forfeiture for violations

    This section establishes criminal forfeiture rules. Courts 
are required, in imposing sentences on those convicted of 
trafficking in food stamps to order that the person forfeit 
property to the United States. Property subject to forfeiture 
includes all property used in the transaction to commit a 
trafficking violation. Proceeds traceable to the violation are 
subject to forfeiture. An owner's property interest is not 
subject to forfeiture if the owner establishes that the 
violation was committed without the owner's knowledge or 
consent.
    The proceeds from any sale of forfeited property and any 
money forfeited will be used to reimburse the Justice 
Department, to reimburse the Agriculture Department's Office of 
Inspector General, to reimburse Federal or State law 
enforcement agencies and to be provided to the Secretary to 
carry out approval of stores, reauthorizations of stores and 
compliance activities.

Section 1055. Limitation of Federal match

    Federal reimbursement to States for informational 
(outreach) activities is not available for ``recruitment 
activities.''

Section 1056. Standards for administration

    The requirement that the Secretary establish standards for 
efficient and effective administration of the Food Stamp 
Program is eliminated.

Section 1057. Work supplementation or support program

    States are allowed to operate a work supplementation or 
support program, under which public assistance benefits, 
including food stamps, are provided to employers who hire 
recipients and then are used to pay part of their wages. Work 
supplementation or support programs must meet standards set by 
the Secretary. The food stamp portion cannot be considered 
income for other purposes and the household of the work 
supplementation participants cannot receive regular food stamps 
while the household member is in such a work program. States 
must describe how food stamp participants will be moved into 
jobs that are not supplemented or supported within a specific 
time frame and the program is available for new employees only.
    States must describe work supplementation or support 
programs in their State plans of operation.

Section 1058. Waiver authority

    Existing waiver authority is revised and authority is 
provided to the Secretary to conduct pilot or experimental 
projects and waive the Food Stamp Act as long as projects are 
consistent with the goals of the program and provides food for 
needy families. The Secretary is permitted to conduct projects 
that will improve administration of the program; increase self-
sufficiency of food stamp participants; test innovative welfare 
reform strategies; or allow greater conformity among public 
assistance programs.
    The Secretary may not conduct additional projects that 
involve issuing food stamp benefits in the form of cash; 
substantially transfer program benefits to other public 
assistance programs; or conduct projects not limited to 
specific time periods.

Section 1059. Response to waivers

    Not later that 60 days after receipt of a request for a 
waiver so that a State may conduct a demonstration project, the 
Secretary must either approve the request; deny the request and 
explain any modifications needed for approval; deny the request 
and explain the grounds for denial; or ask for clarification of 
the request. If the Secretary does not respond within 60 days, 
the waiver is considered approved. Denials of waiver requests 
and the basis for the denial must be provided by the Secretary 
to the House and Senate Agriculture Committees.

Section 1060. Employment Initiatives Program

    States may operate private sector employment initiatives 
under which food stamp benefits may be paid in cash to certain 
households. States are eligible to operate this initiative if 
not less than 50 percent of the households in the State that 
received food stamps in the summer of 1993 also received AFDC 
benefits and if the State agrees to increase benefits, at the 
States' expense, to compensate for State or local sales taxes 
on food. Households are eligible to receive cash in lieu of 
food stamps if an adult member selects this option and (1) has 
worked in a nonsubsidized job for not less than the 90 
preceding days; (2) has earned not less than $350 a month from 
that employment; (3) is eligible to receive AFDC (or was 
eligible when the cash payments were first received but is no 
longer eligible because of earned income); and (4) is 
continuing to earn not less than $350 a month from the 
employment.
    States operating a private sector employment initiative 
program for 2 years must provide a written evaluation of the 
impact of cash assistance to the Secretary.

Section 1061. Reauthorization

    The Food Stamp Program is reauthorized through fiscal year 
2002.

Section 1062. Simplified Food Stamp Program

    States may elect to carry out a simplified Food Stamp 
Program in all or part of a State for households in which all 
members receive AFDC. States may operate the simplified Food 
Stamp Program using the rules of the States' AFDC program, the 
Food Stamp Program, or a combination of both programs. States 
must, at a minimum, comply with the following Food Stamp 
Program rules:
      (1) requirements governing issuance procedures;
      (2) the requirement that benefits be calculated by 
subtracting 30 percent of a household's income (as determined 
by State established, not federal, rules under the simplified 
program option) from the maximum food stamp benefit;
      (3) the bar against counting food stamp benefits as 
income or resources in other programs;
      (4) the requirements that State agencies assume 
responsibility for eligibility certification and issuance of 
benefits and keep records for inspection and audit;
      (5) the bar against discrimination by reason or race, 
sex, religious creed, national origin, or politics;
      (6) requirements related to submission and approval of 
plans of operation and administration of the Food Stamp Program 
on Indian reservations;
      (7) limits on the use and disclosure of information about 
food stamp households;
      (8) requirements for notice to and fair hearings for 
aggrieved households (or comparable requirements established by 
the State under its AFDC program);
      (9) requirements for submission of reports and other 
information required by the Secretary;
      (10) the requirement to report illegal aliens to the 
Immigration and Naturalization Service;
      (11) requirements for use of certain Federal and State 
data sources in verifying food stamp participants' eligibility;
      (12) requirements to take measures to ensure that 
households are not receiving duplicate benefits: and
      (13) requirements for the provision of social security 
numbers as a condition of eligibility and for their use by 
State agencies.
    States are allowed to standardize food stamp deductions and 
must not increase food stamp benefits when other public 
assistance benefits are decreased.
    States electing to operate a simplified Food Stamp Program 
must include in their State plans the rules and procedures to 
be followed in determining benefits under the option; how they 
will address the needs of households with high shelter costs; 
and a description of the method by which States will carry out 
its quality control obligations.

Section 1063. State Food Assistance Block Grant

    States that meet one of three conditions may elect to 
receive an annual block grant to operate a food assistance 
program for needy persons in lieu of the Food Stamp Program. 
Eligible States may opt for a block grant at any time, but, if 
the State chooses to withdraw from the block grant or is 
disqualified, it may not again opt for a block grant. Eligible 
States include:
          (1) those that have fully implemented a statewide 
        electronic benefit transfer (EBT) system;
          (2) those for which the dollar value of erroneous 
        benefit and eligibility determinations (overpayments, 
        payments to ineligibles, and underpayments) in the Food 
        Stamp Program or their food assistance block grant 
        program is 6 percent of benefits issued or less (a 
        ``payment error rate'' of 6 percent or less); and
          (3) those with a payment error rate higher than 6 
        percent that agree to contribute, from nonfederal 
        sources, a dollar amount equal to the difference 
        between their payment error rate and a 6 percent rate 
        to pay for benefits and administration of their food 
        assistance block grant program. A State's payment error 
        rate for block grant purposes is the most recent rate 
        available, as determined by the Secretary.
    States electing a block grant are provided an annual grant 
equal to:
          (1) the greater of the fiscal year 1994 amount 
        received as food stamp benefits or the 1992-1994 
        average received as food stamp benefits, and
          (2) the greater of the fiscal year 1994 Federal share 
        of administrative costs or the 1992-1994 average 
        received as the Federal share of administrative costs.
    However, grants to States with payment error rates above 6 
percent would be reduced by the amount they are required to 
contribute (the dollar amount equal to the difference between 
their payment error rate and a 6 percent rate). In general, 
block grant payments must be expended in the fiscal year for 
which they were distributed; but, States may reserve up to 10 
percent per year, up to a total of 30 percent of the block 
grant. If total allotments for a fiscal year exceed the amount 
of funds available to provide them, the Secretary is required 
to reduce allotments on a pro-rata basis as necessary. Grant 
payments will be made by issuing letters of credit.
    Block grant funding may only be used for food assistance 
and administrative costs related to its provision and, in each 
fiscal year, not more than 6 percent of total funds expended 
(including State funds required to be spent) may be used for 
administrative costs.
    Each participating block grant State is required to 
maintain a food stamp quality control program to measure 
erroneous benefit and eligibility determinations, and block 
grant States will continue to be subject to the Food Stamp 
Program's quality control system (including eligibility for 
incentive payments and imposition of fiscal sanctions for high 
payment error rates). Each participating State is required to 
implement an employment and training program under Food Stamp 
Act terms and conditions and is eligible to receive Federal 
funding for employment and training activities (in addition to 
the food stamp block grant amount).
    In order to receive a block grant, a State must annually 
submit a State plan for approval by the Secretary. The State 
plan must:
          (1) identify a lead administering agency;
          (2) describe how and to what extent the State's 
        program serves specific groups (e.g., the elderly, 
        migrant and seasonal farm workers, the homeless, those 
        with earnings, and Indians) and how the treatment 
        differs from their treatment under the Food Stamp 
        Program;
          (3) provide that benefits are available statewide;
          (4) provide for notice and an opportunity for a 
        hearing to those adversely affected;
          (5) assess the food and nutrition needs of needy 
        person in the State;
          (6) describe the State's eligibility standards for 
        assistance under the block grant;
          (7) establish a system for exchanging information 
        with other States to verify participants' identity and 
        the possible receipt of benefits in another State;
          (8) providing for safeguarding and restricting the 
        use and disclosure of information about participants; 
        and
          (9) other information required by the Secretary.
          Eligibility for assistance under the block grant is 
        determined by the State, and there is not individual 
        entitlement to assistance. However, certain Federal 
        rules apply:
          (1) aliens who are not eligible under the Food Stamp 
        Program are not eligible for block grant aid;
          (2) persons and households who are ineligible under 
        the Food Stamp Program's work rules are not eligible 
        for block grant aid;
          (3) disqualification of fleeing felons; and
          (4) disqualification for child support arrears.
    If the Secretary finds that there has been a failure to 
comply with provisions of the block grant or the State's 
approved plan or finds that, in the operation of any program or 
activity for which assistance is provided, there is a failure 
by the State to comply substantially with block grant 
provisions, the Secretary must withhold funding, as 
appropriate, until satisfied there is no longer a failure to 
comply or that the noncompliance will be promptly corrected. In 
additional the Secretary may impose other appropriate 
penalties, including recoupment of improperly spent money and 
disqualification from the block grant. States must be provided 
notice and an opportunity for a hearing in this process.
    The Secretary is authorized to conduct research on the 
effects and costs of a State food assistance block grant.

Section 1064. A study of the use of food stamps to purchase vitamins 
        and minerals

    The Secretary is required, in consultation with the 
National Academy of Sciences and the Center for Disease Control 
and Prevention, to conduct a study of the use of food stamps to 
purchase vitamins and minerals.
    The Secretary is encouraged to conduct a study on whether 
some food items now eligible for purchase with food stamps 
should be eliminated from that eligibility.

Section 1065. Investigations

    Regulations issued by the Secretary concerning civil money 
penalties and disqualification of retail food stores and 
wholesale food concerns must include criteria to support 
findings of food stamp violations on the basis of evidence that 
may include on-site investigations, redemption data, and 
transaction reports from electronic benefit transfer (EBT) 
systems.

Section 1066. Food stamp eligibility

    States are permitted to include either all of an ineligible 
alien's income and resources in the income and resources of the 
household of which the alien is a member or the income, less a 
pro rata share, and the resources of the ineligible alien, to 
determine the value of the allotment of the household of which 
the individual is a member.

Section 1067. Report by the Secretary

    The Secretary may prepare a report on the effect of the 
Food Stamp Program reforms of the Personal Responsibility and 
Work Opportunity Act of 1996. If prepared, the report will be 
submitted to the Committee on Agriculture of the House of 
Representatives not later than January 1, 2000.

Section 1068. Deficit reduction

    This section expresses the sense of the Committee on 
Agriculture that reductions in outlays resulting from this 
title will not be taken into account for purposes of Section 
552 of the Balanced Budget and Emergency Deficit Control Act of 
1985.

              SUBTITLE B--COMMODITY DISTRIBUTION PROGRAMS

Section 1071. Emergency Food Assistance Program

    The emergency food assistance program (TEFAP) and the soup 
kitchen/food bank program (Section 110 of the Hunger Prevention 
Act of 1988) are combined into TEFAP. Definitions applicable to 
the soup kitchen/food bank program are incorporated into TEFAP.
    States are required to submit a State plan of operation 
every 4 years. State plans must include:
          (1) designation of the State agency responsible for 
        distribution of TEFAP commodities;
          (2) a plan of operation and administration to 
        distribute TEFAP commodities;
          (3) a description of the standards of eligibility for 
        recipient agencies; and
          (4) a description of the standards of eligibility for 
        individual or household recipients of commodities. 
        Individuals and household recipients must be comprised 
        of needy persons and must live in the geographic area 
        served by the recipient agencies.
    States are encouraged to set up an advisory board on which 
persons, from public and private entities, interested in 
commodity distribution programs, are invited to participate.
    Beginning October 1, 1996, funds ($300 million per year), 
from amounts appropriated under the Food Stamp Act, to purchase 
a variety of nutritious and useful commodities for distribution 
to States in accordance with TEFAP rules, are authorized 
through fiscal year 2002.

Section 1072. Food bank demonstration project

    This section repeals the expired authority to carry out 
food bank demonstration projects.

Section 1073. Hunger prevention programs

    This section repeals the authority for a separate soup 
kitchen/food bank program and other expired authority for 
evaluation and demonstration projects.

Section 1074. Report on entitlement commodity processing

    This section deletes the expired authority requiring a 
report on commodity processing.

            SUBTITLE C--ELECTRONIC BENEFIT TRANSFER SYSTEMS

Section 1091. Provisions to encourage electronic benefit transfer 
        systems

    Electronic benefit transfer (EBT) programs (distributing 
needs-tested benefits) established under State or local law or 
administered by a State or local government are exempt from 
Regulation E requirements.

                        Committee Consideration

                              I--Hearings

    The Committee on Agriculture met on February 1, 1995. 
Agriculture Committee Chairman Pat Roberts stated that the 
purpose of the hearing was to review enforcement efforts in the 
Food Stamp Program and that this must be accomplished prior to 
considering welfare reform.

February 1, 1995

    The first witness was Roger Viadero, the Inspector General 
of the U.S. Department of Agriculture (USDA). Inspector General 
Viadero testified on the efforts of his office to investigate 
food stamp and electronic benefit transfer (EBT) trafficking 
and laundering operations in nonauthorized grocery stores, 
restaurants, and liquor stores. Video tapes of investigations 
in which officials of the Office of the Inspector General 
participated were shown to the committee.
    The Inspector General also made recommendations for 
legislative and regulatory changes which he believed would 
enhance the integrity of the current Food Stamp Program. These 
recommendations included changing retailer eligibility 
criteria; submission of various tax or license forms to assure 
the retail food store is actually in operation; adding a 1-year 
waiting period for retailers prior to authorization; requiring 
a store visit by USDA's Food and Consumer Services (FCS) staff 
prior to authorization; charging stores a licensing fee; 
authorizing the forfeiture of proceeds in felony food stamp 
fraud; and suspension and permanent program disqualification 
for retailers who traffic in food stamps.
    Congressman Ron Wyden, from Oregon, provided his 
recommendations for correcting existing abuses and systemic 
weaknesses in the Food Stamp Program. Mr. Wyden advocated 
reform of the current system and cautioned against efforts to 
send this program to the States in the form of a block grant. 
He suggested that the committee take a look at newly developed 
and emerging electronic technologies including biometric 
identification cards. He also expressed his support for program 
consolidation efforts.
    Mr. Robert Rasor, representing the U.S. Secret Service, 
summarized the investigations and research performed by the 
Financial Crimes Division of the Secret Service relating to 
fraud and abuse in the Food Stamp Program. He reported that the 
Secret Service found very little evidence of counterfeiting in 
the program in the course of its investigations, but in its 
undercover investigations found the system to be quite 
vulnerable to other forms of abuse and fraud, such as 
embezzlement, recipient fraud, fraud by authorized retailers 
and trafficking in discounted food stamps by external parties. 
Mr. Rasor stressed the importance of incorporating new 
technologies in the form of EBT to minimize existing and future 
abuses to the Food Stamp Program.
    The Subcommittee on Department Operations, Nutrition, and 
Foreign Agriculture met on February 7, 8, 9, and 14, 1995 to 
receive testimony on reforming the present welfare system. 
Subcommittee Chairman Bill Emerson expressed his desire to hear 
ideas on reforming the present welfare maintenance system from 
a wide variety of people.

February 7, 1995

    Ms. Jane L. Ross, Director, Income Securities Issues, 
Health, Education, and Human Services, General Accounting 
Office (GAO) testified regarding the status of Federal means 
tested welfare programs. She reported that nearly 80 means-
tested programs that compose the welfare system accounted for 
about 15 percent of Federal spending in fiscal year 1992. 
Federal welfare spending has risen from $39 billion in 1975 to 
nearly $208 billion in 1992. According to GAO's figures, growth 
in five major entitlement programs has driven this expansion. 
Aid to Families with Dependent Children (AFDC), food stamps, 
Medicaid, Supplemental Security Income (SSI) and two major 
housing programs resulting in a 106 percent increase in 
inflation adjusted dollars over this time period.
    The GAO's work has shown that these means tested programs 
can be costly and difficult to administer. They sometimes 
overlap one another or are so narrowly focused that they create 
gaps in services. The task of applying for benefits is arduous 
and complex. Furthermore, they have found that technology to 
run the programs is not being effectively developed and used, 
and that many of these programs are inherently vulnerable to 
fraud, waste, and abuse. Finally, despite many years of 
experience with these programs, very little is known about how 
well they are working and whether the programs are meeting the 
purposes stated in the various acts.

February 8, 1995

    Congressman Michael N. Castle, from Delaware, urged the 
subcommittee to consider the Delaware Model of ``one stop 
shopping'' as it reforms the Nation's welfare delivery system. 
He described Delaware's model as an innovative and 
comprehensive delivery system. The system consists of 
approximately 160 different welfare programs and serves, 
through its service centers, over 600,000 individuals annually. 
This agency has the mission of promoting access to health and 
human services, addressing and communicating the communities 
service needs, and providing access to support services. 
Congressman Castle cited the overlap in programs that result in 
a patchwork welfare system that restricts the effectiveness and 
efficiency with which the programs can be carried out.
    Mr. Thomas P. Eichler, Secretary of the Delaware Department 
of Services for Children, Youth, and Their Families, spoke on 
the Welfare Simplification and Coordination Advisory Committee 
authorized by Congress in the 1990 farm bill. Charged with 
examining policies and procedures of the food stamp, AFDC, 
medical assistance and housing assistance programs, the 
advisory committee made a series of recommendations for reform. 
The advisory committee recommended eliminating current programs 
and moving to one comprehensive program with the goal of moving 
participants toward self-sufficiency. Primary elements of the 
new program they recommended included (1) a single point of 
client entry, (2) common rules and definitions for 
participation, (3) a single means test for eligibility, and (4) 
a public and private partnership to provide coordinated 
services.
    The Honorable Ellen Haas, USDA Under Secretary for Food, 
Nutrition, and Consumer Services, spoke on the state of 16 food 
and nutrition programs for which she is responsible. She 
reiterated the administration's position that nutrition 
programs for the needy are in the national interest and reform 
of these programs should ensure access to a healthy, nutritious 
diet and promote health. She insisted further that block 
granting these programs would eliminate the ``automatic 
adjuster'' currently in place and possibly force States to 
provide less assistance in times of economic downturn.
    Ms. Haas' recommendations for change included (1) nutrition 
security, (2) program integrity, (3) modernizing benefits 
delivery systems, (4) expanding State flexibility, (5) 
preserving economic responsiveness, and (6) promoting personal 
responsibility.
    The Honorable Mary Jo Bane, Health and Human Services (HHS) 
Assistant Secretary for Children and Families, testified in 
support of the administration's 1994 welfare reform proposal. 
Her presentation covered three major issues; (1) the proper 
balance between national objectives and State flexibility; (2) 
the conversion of AFDC and the Food Stamp Program to block 
grants or capped discretionary programs; and (3) national 
requirements or accountability standards governing a reformed 
welfare system. Ms. Bane recommended that in order to ensure 
greater State flexibility final reform should (1) achieve the 
objectives of work, responsibility and accountability; (2) 
ensure stability in funding over time; (3) cushion State and 
individuals against economic cycles; and (4) preserve the basic 
family protections for needy Americans, particularly children.
    Sister Augusta Hamel, the Executive Assistant to the 
President of Second Harvest National Network of Food Banks, the 
largest domestic hunger relief organization in the United 
States, reviewed the role of such organizations and the 
importance of the Federal contribution to this network. Sister 
Hamel spoke of the need for private sector participation in 
dealing with the hunger problem in this country, but also 
stressed that Federal participation has been critical to the 
success of these efforts and must continue. While reform is 
necessary, she stated that private resources are already pushed 
to the limit and some reform proposals may be asking more of 
the charitable sector than they can possibly deliver.
    On behalf of other organizations similar to Second Harvest, 
Sister Hamel suggested that rather than block granting the 
programs to the States, as proposed, commodity distribution 
programs should be consolidated and integrated. The programs 
include the emergency food assistance program (TEFAP), 
commodity supplemental food program (CSFP), soup kitchens and 
food banks program (SKFB), and the charitable institutions and 
summer camps program (CIP) into a single program: the American 
Commodity Hunger Relief Program (ACHR).
    Reverend Monseigneur Roger P. Morin, Executive Director, 
Department of Community Services, Archdiocese of New Orleans 
spoke in his capacity as Executive Director of the Department 
of Community Services in the Archdiocese of New Orleans. He 
advocated the retention of CSFP. He expressed the view that the 
tremendous purchasing power of the USDA combined with the cost 
effectiveness and efficiency of the volunteer distribution 
system give the taxpayer the highest return. Reverend William 
T. Cunningham, Director, of Focus Hope, another CSFP program 
operating in Detroit, Michigan, expressed support for 
preserving the CSFP because the program targets the Nation's 
most vulnerable populations, the very young and the very old. 
CSFP in Detroit was described as a program that provides a 
monthly selection of foods specifically tailored to the 
nutritional needs of the populations served; purchases foods at 
one-half to one-sixth the cost of equivalent goods in retail 
stores; involves the entire community in the problems of hunger 
and poverty; and links job training, child care and other 
critical services for low-income families.
    Ms. Zoe Slagle, the Food Distribution Coordinator with the 
Michigan Department of Education testified on behalf of her 
Department and the American Commodity Distribution Association 
(ACDA). She advocated the preservation of the commodity 
distribution programs and reiterated the claims made by others, 
that while food and nutrition programs should be further 
streamlined for efficiency and effectiveness, Federal programs 
still represent the highest return to the taxpayer because of 
the tremendous buying power of the Federal Government.

February 9, 1995

    The Honorable John Engler, Governor of Michigan, advocated 
placing food and nutrition programs into a single block grant 
to the States. He further maintained that because States know 
the needs of their people, they should be given the authority 
to plan and administer welfare programs that encourage and 
assist people into productive jobs and off of government 
assistance. In his experience, Federal programs have had the 
opposite effect of encouraging recipients not to work. When the 
State of Michigan has sanctioned individuals who do not work by 
reducing their AFDC benefits, their food stamp allowances have 
gone up.
    Ms. Carol Anderson, Director of the Economic Support 
Services Section in the Georgia Division of Family and Children 
Services, discussed recent innovations and policy changes 
relating to the delivery of assistance benefits. Through the 
use of waivers from HHS and USDA, Ms. Anderson and others in 
her division have streamlined program access and have created 
``one-stop shopping'' for six State and Federal programs. She 
addressed the new ``Work First'' strategy in which eligibility 
staff are trained to assess participants strengths and 
weaknesses in obtaining employment; contracts for self-
sufficiency that map our steps to economic independence; 
expedited child support services that are used to direct 
applicants from welfare to independence; and specialized job 
developers that are hired to work directly with employers.
    Ms. Anderson said that while a block grant is attractive, 
reduced funding levels in current proposals gave her cause for 
concern. However, if States knew what block granting would 
bring in terms of funding and if they knew that block granting 
would also bring increased flexibility, there could be more 
opportunities to create better programs.
    Mr. John Petraborg, Deputy Commissioner of the Minnesota 
Department of Human Services testified before the subcommittee 
regarding welfare reform efforts underway in Minnesota. Its 
simplification and streamlining efforts feature the concepts of 
``Work Pays'' which allows families to keep part of their AFDC 
payments; an enforced social contract-requiring AFDC 
participants to develop a plan of employment and self-support; 
and a program that combines and simplifies the AFDC and Food 
Stamp Programs.
    Ms. Sammie Lynn Puett, Vice President for Public Services 
at the Continuing Education, and University Relations of the 
University of Tennessee, testified of the work of the Welfare 
Simplification and Coordination Advisory Commission created by 
Congress in 1990. She reviewed the objectives of the advisory 
committee and the problems that remain for welfare reformers. 
The advisory committee concluded that the numerous and 
overlapping programs at both the State and Federal level should 
be replaced by a single, one family-focused, client-oriented, 
comprehensive program.
    Ms. Joyce Walsh, of the Larue County Health Center in 
Hodgenville, Kentucky discussed her observations and 
experiences as a local Special Supplemental Program for Women, 
Infants, and Children (WIC) program coordinator. She stated 
that WIC has achieved its original objectives of reducing 
infant mortality and morbidity. She advocated the retention of 
WIC and also suggested combining the administration of WIC and 
the Food Stamp Program. Ms. Walsh suggested that food 
prescriptions for the Food Stamp Program, similar to those 
found in WIC, be developed. She stated that this would improve 
the nutritional status of needy families and could be done at a 
reduced cost.

February 14, 1995

    Congressman Tony Hall, from Ohio, testified in opposition 
to block grants to the States for AFDC, the Food Stamp Program, 
WIC, and other nutrition programs. He said that under block 
grants food assistance would not be automatically increased in 
time of recession and that allocations to the States may be 
miscalculated. He stated State flexibility could be increased, 
fraud reduced, and the costs of the various programs reduced 
without block granting these programs.
    Congressman Ron Wyden, from Oregon discussed his 
recommendations for reducing fraud, waste and abuse in the Food 
Stamp Program. He made three specific recommendations: (1) 
implementation of asset forfeiture laws similar to forfeiture 
provisions under anti-drug trafficking statutes, (2) submission 
of verifiable business license by authorized food stamp 
retailers, and (3) possible imposition of a certification fee 
on retailers to pay for the enforcement of anti-fraud efforts 
of this certification process.
    Mr. Robert Rector, Senior Policy Analyst for Welfare and 
Family Issues at The Heritage Foundation summarized the 
historical objectives, growth, and social and actual costs of 
the welfare system from 1930 to the present. He stated that 
welfare spending is now nine times greater than when President 
Lyndon Johnson launched the War on Poverty. In 1964, welfare 
spending absorbed 1.23 percent of Gross Domestic Product (GDP) 
and by 1993, spending had risen to 5.1 percent of GDP. Mr. 
Rector described three objectives for welfare spending: (1) 
sustain living standards through cash and noncash transfers, 
(2) promote self-sufficiency, and (3) aid economically 
distressed communities. He maintained the U.S. society can no 
longer tolerate or afford open-ended growth in welfare 
spending. His recommendations included phasing out welfare 
entitlements and sending the programs to the States in the form 
of a block grant.
    Ms. Anna Kondratas, Senior Fellow at the Hudson Institute, 
testified on the issue of welfare reform that would discourage 
illegitimacy, promote productivity, and preserve the family 
unit. She expressed the view that the current welfare system is 
seriously flawed and called for scrapping it entirely and 
replacing it with a system that gives more flexibility to the 
States to operate and even change AFDC. This reform should, in 
her view, be done gradually, preserving and combining programs 
that have proven successful. She also expressed support for 
devolution in the federalism debate, but cautioned that State 
and local bureaucracies are still bureaucracies, and many of 
them are no more efficient than Federal ones.
    Mr. Mark Greenberg, of the Center for Law and Social Policy 
testified on the issue of welfare reform as it relates to Food 
Stamp Program reform. He made four principal points: (1) the 
Food Stamp Program has a different purpose, structure, and 
serves a much broader population than the AFDC program; (2) 
block-granting food stamps would seriously undercut the 
program's basic purpose; (3) block-granting the AFDC-related 
portion of food stamps raises additional difficulties; and (4) 
in light of imminent changes in AFDC, the Food Stamp Program's 
role as safety net becomes even more crucial.
    Mr. Robert Greenstein, the Executive Director of the Center 
on Budget and Policy Priorities expressed the view that while 
welfare reform must take place, block grants are ill conceived 
and will jeopardize existing programs and harm those they are 
intended to help. Mr. Greenstein made recommendations for 
increasing flexibility and controlling costs without resorting 
to block grants. States, he said, should be allowed (1) to 
align food stamp employment and training programs with work 
activities for AFDC recipients; (2) to modify rules determining 
income and resources; (3) additional flexibility to simplify or 
standardize procedures for determining food stamp benefit 
levels of AFDC families; (4) to convert food stamp benefits to 
wage subsidies for employees; (5) to have impediments to EBT 
systems removed; and (6) to remove dozens of unnecessary and 
prescriptive State requirements.
    Mr. Robert J. Fersh, President of the Food Research and 
Action Center, discussed the treatment of current participants 
in the food assistance programs and sought assurances that the 
new nutrition programs will meet the objectives of the current 
system. He also addressed the issue of national consensus on 
hunger and malnutrition prevention, minimum nutrition 
requirements for all 50 States, the Food Stamp Programs' 
responsiveness in times of economic change; and advantages of 
maintaining a national Food Stamp Program.
    Mr. Timothy M. Hammonds, President and CEO of the Food 
Marketing Institute recommended changes that would lead to, 
reduction of fraud and abuse, enhancement of the dignity of the 
programs, and reduction of both public and private 
administrative costs. He recommended that current food 
assistance coupons not be issued in cash, but that EBT systems 
be implemented as quickly as possible, that national uniformity 
in the food assistance program should be a goal, and licensing 
requirements for participating retailers should not be 
restrictive. The Honorable John R. Block, National-American 
Wholesale Grocers' Association (NAWGA) and former Secretary of 
Agriculture, expressed support for efforts aimed at block 
granting welfare programs to the States. He opposed proposals 
which cash out the Food Stamp Program to the States and instead 
expressed support for maintaining the food stamp coupon/EBT 
delivery system.
    Mr. William C. Ferriera, President of the Apricot Producers 
of California and representing the Commodity Distribution 
Coalition, encouraged reform of programs but not discontinuance 
of Federal food assistance programs. He endorsed the 
consolidation plan as proposed by Second Harvest; recommended a 
complete review of program administration and technology 
utilization; encouraged making the commodity support component 
of Federal food assistance programs available to other 
programs; advocated preserving nutrition standards for school 
meal programs; and recommended that U.S. agriculture 
commodities be purchased for domestic food assistance programs.
    Reverend Robert A. Sirico of the Acton Institute for the 
Study of Religion and Liberty discussed his belief that the 
Federal Government has almost entirely usurped the traditional 
role of religious institutions and charity. He advocated 
reforming the current welfare system by taking the function of 
charity from the government and returning it to the family and 
churches who understand the most basic needs of people. 
Reverend Frederick Kammer, the President of the Catholic 
Charities USA, cautioned against cashing out or block granting 
food stamps. He stated that the Food Stamp Program is the place 
of last resort for the poorest and most desperate. Churches and 
charities, he said, are incapable of handling the present 
hunger problems.
    Ms. Virginia White, of the Kansas Food Bank Warehouse, 
Inc., advocated keeping the Food Stamp Program and other food 
programs in their current form and suggested that Members seek 
the support of Governors for a plan that would provide a food 
insurance safety net. Ms. Jasmine Gunthorpe of Baltimore, 
Maryland described her personal difficulties living and 
functioning within the current AFDC system. She works in a 
nine-month, part-time-minimum wage, contractual position. If 
her work exceeds AFDC income levels, she loses AFDC benefits 
for that period, requiring her to reapply for AFDC benefits for 
the 3 months she is not working. She expressed frustration at 
having different social workers who estimate benefits, 
calculate wages, assess food stamp needs, and who help with 
child care. She recommended reforms that provide for basic 
needs for children; reduction in poverty not just a reduction 
of individuals from the welfare roles; and efforts to bring 
people into the mainstream of life. Mr. D. Michael Hancock of 
the Farmworker Justice Fund stated that in the event that food 
and nutrition programs are block granted to the States, States 
should be directed to ensure inclusion of farm workers in these 
programs. He also called for educating farm workers on food and 
nutrition programs and for bilingual program counselors.

May 10, 1995

    The Subcommittee on Department Operations, Nutrition, and 
Foreign Agriculture held a hearing on the Food Stamp Program 
and electronic benefit transfer (EBT) systems. The chairman of 
the subcommittee, Bill Emerson, stated that during the 1995 
debate on welfare reform questions arose concerning EBT and the 
actions of the Department of the Treasury that may limit the 
flexibility of States to establish EBT systems. Therefore the 
subcommittee scheduled a hearing to receive testimony from 
administration officials and others interested in the use of 
EBT systems in the Food Stamp Program.
    The witnesses included representatives from the Department 
of the Treasury and the EBT Task Force who described the 
administrations's goals in implementing EBT. Representatives 
from the Missouri Department of Social Services and the 
Maryland Department of Human Resources testified about their 
States' experience with EBT systems. Persons representing 
organizations that assist States in the design of EBT systems 
and other groups also testified. These witnesses represented 
the Unysis Corporation, Applied Systems Institute and the Hull 
House of Chicago, Illinois.
    Representatives from retail food stores and organizations 
interested in EBT services in food stores testified about the 
operation of EBT and the effect on persons using food benefits 
and the types of food purchased.

June 8, 1995

    The Subcommittee on Department Operations, Nutrition, and 
Foreign Agriculture held a hearing on the Food Stamp Program 
and the administration's proposal included in the ``Guidance of 
the Administration'' for the Farm Bill. The chairman of the 
subcommittee, Bill Emerson, stated that while the committee had 
acted on reform of the Food Stamp Program earlier in the year, 
he intended to work with the administration and take their 
proposals into consideration.
    The witnesses at the hearing included the Honorable Eni F. 
H. Faleomavaega, from American Samoa. Mr. Faleomavaega 
testified in support of the modified Food Stamp Program in 
American Samoa. The Honorable Ellen Haas, Under Secretary for 
Food, Nutrition, and Consumer Services, described the 
administration's proposal for the Food Stamp Program to provide 
State flexibility, reduce food stamp regulations, improve the 
integrity of the program, and enhance child support enforcement 
programs.
    Other witnesses included representatives of organizations 
providing self-help services in communities, such as America 
the Beautiful, Sustainable Food Center, and the Society of St. 
Andrew.

July 25, 1995

    The Subcommittee on Department Operations, Nutrition, and 
Foreign Agriculture held a hearing on the Food Stamp Program 
and a bill (H.R. 236) introduced by the chairman of the 
subcommittee, Bill Emerson concerning the use of food stamps to 
purchase vitamins and minerals. Chairman Emerson stated that he 
introduced H.R. 236 because he believes that persons receiving 
food stamps should have the option to use their benefits to 
purchase vitamins and minerals. The Honorable William J. 
Martini and the Honorable Donald Payne testified in support of 
H.R. 236.
    The Deputy Administrator of the Food Stamp Program and the 
Director of USDA's Center for Nutrition Policy and Promotion 
expressed reservations about H.R. 236.
    Other witnesses offering testimony on the subject of the 
use of food stamps to purchase vitamins and minerals included 
representatives from the Council for Responsible Nutrition, the 
Department of Food Science of Rutgers University, University of 
Texas Medical Branch, Food Research and Action Center, and 
United Fresh Fruit and Vegetable Association.

                           II--Full Committee

    The Committee on Agriculture met, pursuant to notice, on 
June 11, 1996, a quorum being present, to consider Title X and 
other related provisions of H.R. 3507 for its Recommendations 
to the Budget Committee as provided in the Budget Resolution 
Instructions contained in H.Con.Res. 178 with respect to the 
Reconciliation Bill for Fiscal Year 1997 to be introduced by 
the Budget Committee.
    The chairman called the meeting to order at 1:40 p.m. and 
made a statement noting that H.R. 3507 was essentially the same 
bill that was approved by the House on December 21, 1996, by a 
vote of 245 yeas to 178 with one significant exception. The 
food stamp funding cap had been eliminated as a concession to 
and at the request of the National Governor's Association, the 
Clinton administration, and the Secretary of Agriculture.
    Ranking Minority Member de la Garza was recognized for a 
statement, as were Mr. Emerson and Mr. LaHood.
    The chairman laid before the committee his recommendations 
proposed for Title X and related provisions of H.R. 3507 and 
then asked Counsel to give a brief summary.
    Thereafter, the chairman offered a technical, correcting 
and conforming amendment to Title X of H.R. 3507. The amendment 
was adopted by a voice vote.
    Mr. Emerson was then recognized to offer and explain an 
amendment which would expand the definition of food eligible 
for purchase with food stamp coupons to include vitamins and 
minerals for home consumption. Discussion occurred on the 
amendment.
     Mr. Condit was recognized to offer an amendment to the 
Emerson amendment which would require USDA to conduct a study 
on the anticipated impact of the purchase of vitamins and 
minerals with food stamps by recipients in the Food Stamp 
Program and report to the committee by December 15, 1996. 
Discussion occurred and Mr. Emerson noted that he was 
constrained to accept Mr. Condit's amendment. Mr. Volkmer noted 
that in the report accompanying H.R. 3603, the Agriculture, 
Rural Development, Food and Drug Administration, and Related 
Agencies Appropriations Bill, 1997, there was language which he 
believed prohibited USDA from conducting any studies within the 
food stamp, child nutrition, and WIC programs during fiscal 
year 1997. The amendment was adopted by a voice vote.
    Mr. Smith was then recognized to offer and explain an 
amendment concerning the definition of food under the Food 
Stamp Act of 1977 and those certain foods that would be 
ineligible for purchase with food stamps under his amendment. 
Discussion occurred, and Mr. Emerson requested that Mr. Smith 
withdraw his amendment so that hearings could be held on the 
issue. Mr. Smith then requested by unanimous consent that 
report language be included which would encourage USDA to 
conduct a study on whether or not some items now considered 
eligible as food for purchase under the Food Stamp Act of 1977 
should be eliminated from that eligibility. Acting Chairman 
Gunderson pointed out that report language could encourage USDA 
to take certain actions, but that it could not mandate USDA to 
do so. Without objection, the report language to that effect 
was adopted and the amendment was withdrawn.
    Mr. LaHood was recognized to offer and explain an amendment 
concerning the application of anti-tying restrictions to 
nonbank electronic benefit transfer (EBT) systems service 
providers that is similar to a law that applies to banks. Mr. 
LaHood explained that the amendment is intended to maintain 
competition among EBT service providers of electronic benefit 
transfer systems and financial services. Discussion occurred, 
and by a voice vote, the amendment was adopted.
    Ms. Clayton was then recognized to offer and explain an 
amendment which would require that the number of hours required 
for work and training for able-bodied 18 to 50 year old persons 
with no dependents must be determined by dividing the amount of 
food stamp benefits by the minimum wage. Lengthy discussion 
occurred.
    During the proceedings, the committee recessed at 
approximately 4:10 p.m. so Members could respond to votes on 
the House Floor. The chairman returned at 4:45 p.m. and 
announced that the House was now considering H.R. 3603, the 
Agriculture, Rural Development, Food and Drug Administration, 
and Related Agencies Appropriations Bill, 1997, and that the 
committee would recess, to reconvene subject to the call of the 
Chair and that the Clayton amendment would be the pending 
matter of business at that time.
    On June 13, 1996 at 10:00 a.m. the committee reconvened to 
finish the consideration of Title X of H.R. 3507. The pending 
business from the business meeting of June 11, 1996 was the 
Clayton amendment as noted above. Chairman Roberts said that it 
was his understanding that an agreement had been reached on a 
modified amendment, and without objection, the pending Clayton 
amendment was withdrawn.
    Ms. Clayton was recognized to offer and then explain a 
similar but modified amendment that would clarify in the 
definition of ``work program'' the term ``program of employment 
or training.'' Ms. Clayton noted that questions had been raised 
as to the use of the conjunction ``or'' in the term ``a program 
of employment or training'' and the requirement of a subsequent 
paragraph to participate in 20 hours per week in a work 
program. The question was whether such 20 hours applied to a 
work activity as well as training program.
    Mr. Gunderson said that he had not had an opportunity to 
review the revised amendment and that he was concerned about 
how the amendment would be consistent with the actions taken by 
the House Committee on Economic and Educational Opportunities 
on June 12, 1996. The amendment was then passed over to give 
Mr. Gunderson and other members an opportunity to review it 
carefully.
    Ms. Clayton was then recognized to offer and explain an 
amendment which would change the language in the text of the 
chairman's recommendation from 4 months to 6 months the amount 
of time that an able-bodied 18 to 50 year old person, with no 
dependents, could receive food stamp benefits before being 
required to comply with certain work requirements. Discussion 
occurred with Chairman Roberts noting that the CBO had 
estimated that the amendment would reduce the savings in the 
chairman's recommendations by $885 million and he asked Ms. 
Clayton if she would like to withdraw her amendment. Ms. 
Clayton requested a vote, and by a voice vote the amendment was 
not adopted.
    Mr. Gunderson was then recognized to discuss the Clayton 
modified amendment noted above which would clarify the 
definition of ``work program'' as a program of employment and 
training. Mr. Gunderson expressed concern that some States may 
be proceeding on two tracks as they consider work and training 
programs, one for food stamp recipients and one for AFDC 
recipients, and he suggested that consolidation of these 
programs is a worthy goal. Discussion occurred and by a voice 
vote the Clayton amendment to clarify the definition ``work 
program'' was adopted that substituted the words ``a program of 
employment and training.''
    Mr. de la Garza was recognized to offer and explain a 
substitute amendment to Title X of H.R. 3507. Discussion 
occurred with Chairman Roberts noting that 55 percent of the 
food stamp reforms in H.R. 3507 are identical to those in the 
administration's bill offered by the Ranking Minority member in 
his amendment and that 72 percent of the food stamp reforms in 
H.R. 3507 are either identical or similar to those in the 
administration's bill so that there is bipartisan support for 
many reforms.
    The chairman described provisions that are significantly 
different between H.R. 3507 and the de la Garza substitute 
amendment. He also noted provisions that are included in H.R. 
3507 but not in the substitute amendment.
    The chairman noted for the record that in H.R. 3507, but 
not in the substitute, existing waiver authority is revised and 
authority is provided to the Secretary to conduct pilot or 
experimental projects and waive certain requirements of the 
Food Stamp Act as long as such waivers for alternatives are 
consistent with the goals of the program and provides food for 
needy families. Chairman Roberts also stated that the de la 
Garza Substitute saved $18.4 billion, while the savings for 
H.R. 3507 are $23 billion which would meet the committee's 
obligation under the Budget Resolution instructions.
    Lengthy discussion occurred with Mr. Baldacci asking the 
administration representatives and staff what would happen to 
States that had already been granted waivers and what would 
happen in the future if the Food Stamp Act were amended as 
recommended in the text under consideration.
    Mrs. Thurman indicated that she wanted to work with the 
committee on two issues: the ``able-bodied'' work requirement 
program relating to 18-50 year old persons and the vehicle 
allowance provisions. Chairman Roberts suggested that the de la 
Garza Substitute would be considered first and then the 
committee would consider other amendments on these issues.
    After considerable discussion, the de la Garza Substitute, 
by a voice vote, was not adopted.
    Mr. Pomeroy was then recognized to offer and explain an 
amendment which would retain a provision in current law that 
provides that there would be no cap on the excess shelter 
deduction beginning on January 1, 1997. H.R. 3507 would 
maintain current cap on shelter deduction after December 31, 
1996. He raised the problems that arise in colder climates such 
as North Dakota. Discussion occurred and the chairman noted 
that the Congressional Budget Office estimated that the 
amendment would cost $4 billion and that Mr. Pomeroy offered no 
off-setting costs and that he (the chairman) reluctantly must 
oppose the amendment. By a voice vote, the amendment was not 
adopted. Mr. Pomeroy requested a rollcall vote. By a recorded 
vote of 22 nays and 18 yeas, the Pomeroy amendment was not 
adopted. See Rollcall Vote No. 1.
    Mrs. Thurman was then recognized to offer and explain an 
amendment on behalf of herself and Mrs. Clayton which would 
require annual indexing of the vehicle allowance from a base of 
$4,600 for households with a working member or a member 
actively looking for work beginning October 1, 1996. Discussion 
occurred, and it was noted that the cost of the amendment had 
been roughly estimated by CBO to be $350 million. Mr. Smith 
offered a verbal amendment to the Thurman amendment which would 
make the annual indexing of the vehicle allowance discretionary 
and dependent upon enactment of State law.
    Mr. Volkmer raised the question of a point of order that no 
one had seen the Smith amendment to the Thurman amendment and 
that it was not in writing, and the amendment was laid aside to 
give staff and others a chance to discuss and review the Smith 
amendment.
    Mr. Condit was then recognized to offer and explain an 
amendment which would clarify that evidence adduced by USDA 
could be used to support a finding of food stamp violations by 
stores. Such evidence could come from on-site investigations, 
redemption data and transaction reports from electronic benefit 
transfer systems. Mr. Condit also noted that the amendment was 
proposed by USDA and was not contained in H.R. 3507. Chairman 
Roberts stated that although he thought the amendment was 
duplicative of permanent law that he had no opposition to the 
amendment. By a voice vote, the Condit amendment was adopted.
    Mr. Stenholm was then recognized to offer and explain an 
amendment to H.R. 3507 that would dedicate all savings from the 
bill to deficit reduction. Chairman Roberts requested that Mr. 
Stenholm withdraw his amendment as it was susceptible to a 
point of order as a nongermane amendment outside the 
jurisdiction of the Committee on Agriculture. Without 
objection, Mr. Stenholm withdrew his amendment.
    Mr. Stenholm was also recognized to offer and explain an 
amendment which was a sense of the committee to the effect that 
reductions in outlays resulting from the committee's 
recommendations to this title to be used for deficit reduction. 
By a voice vote, the Stenholm amendment was adopted.
     Discussion occurred about the conference process in 1995 
regarding the Deficit Reduction Act of 1995.
    Mr. Smith was then recognized to withdraw his verbal 
amendment to the Thurman-Clayton amendment concerning the 
indexing of the vehicle allowance. Further discussion occurred 
on the amendment and Mrs. Thurman requested a rollcall vote. By 
a recorded vote of 21 nays and 20 yeas, the amendment was not 
adopted. See Rollcall Vote #2.
    Mr. Farr was then recognized to offer and explain an 
amendment which would mandate the Secretary of Agriculture and 
the Secretary of Health and Human Services to report on the 
effect of the Personal Responsibility and Work Opportunity Act 
and the ability of State and local government to deal with 
people in poverty. Chairman Roberts pointed out language in the 
report to accompany H.R. 3603, the Agriculture, Rural 
Development, Food and Drug Administration and Related Agencies 
Appropriations Bill of 1997 which prohibits USDA from 
conducting any studies within the food stamp, child nutrition, 
and WIC programs during fiscal year 1997. The chairman also 
stated that the Secretary of Health and Human Services was not 
under the jurisdiction of the Committee on Agriculture. 
Chairman Roberts offered a verbal amendment to make the 
amendment discretionary and apply it only to the Secretary of 
Agriculture and the recommendations in H.R. 3507, Title X and 
related provisions. Without objection, the Roberts amendment to 
the Farr amendment was accepted and by a voice vote the Farr 
amendment was adopted.
    Mr. Gunderson then moved that Title X and its related 
provisions to food stamps contained in H.R. 3507, as amended, 
be submitted to the Budget Committee for its inclusion in the 
Reconciliation package to be reported to the House by the 
Budget Committee in response to the instructions to this 
committee contained in H.Con.Res. 178. By a voice vote the 
motion was accepted.
    Chairman Roberts indicated that a letter had been sent to 
Mr. de la Garza enclosing a copy of a letter from Budget 
Committee Chairman Kasich advising that Minority Views could be 
submitted to the Budget Committee as late as Monday, June 17.
    Without objection, staff was given permission to make any 
necessary technical, syntactical, clarifying, or conforming 
changes as are appropriate without changing the substance of 
the legislation.
    The meeting adjourned, subject to the call of the Chair.

                             Rollcall Votes

    In compliance with clause 2(l)(2)(B) of rule XI of the 
House of Representatives, the committee sets forth the record 
of the following rollcall votes taken with respect to 
consideration of the recommendations regarding the 
Reconciliation Bill for Fiscal Year 1997:

                             Rollcall No. 1

    Summary: To retain a provision in current law which 
provides that there would no longer be a cap on the excess 
shelter deduction after December 31, 1996,
    Offered by: Mr. Pomeroy.
    Results: Failed by a rollcall vote: 18 yeas/22 nays.
    Yeas: Cong. de la Garza, Cong. Brown, Cong. Stenholm, Cong. 
Volkmer, Cong. Johnson, Cong. Dooley, Cong. Clayton, Cong. 
Minge, Cong. Hilliard, Cong. Pomeroy, Cong. Holden, Cong. 
Baesler, Cong. Thurman, Cong. Bishop, Cong. Thompson, Cong. 
Farr, Cong. Pastor, and Cong. Baldacci.
    Nays: Cong. Gunderson, Cong. Allard, Cong. Barrett, Cong. 
Ewing, Cong. Doolittle, Cong. Goodlatte, Cong. Pombo, Cong. 
Canady, Cong. Smith, Cong. Everett, Cong. Lucas, Cong. Lewis, 
Cong. Baker, Cong. Crapo, Cong. Calvert, Cong. Chenoweth, Cong. 
Hostettler, Cong. Bryant, Cong. Latham, Cong. Cooley, Cong. 
LaHood, and Cong. Roberts, Chairman.
    Not Voting: Cong. Emerson, Cong. Combest, Cong. Boehner, 
Cong. Foley, Cong. Chambliss, Cong. Rose, Cong. Condit, and 
Cong. Peterson.

                             Rollcall No. 2

    Summary: To require annual indexing of the vehicle 
allowance for households with a working member or a member 
actively looking for work.
    Offered By: Mrs. Thurman and Mrs. Clayton.
    Results: Failed by a rollcall vote: 20 yeas/21 nays.
    Yeas: Cong. Cooley, Cong. de la Garza, Cong. Brown, Cong. 
Stenholm, Cong. Volkmer, Cong. Johnson, Cong. Condit, Cong. 
Peterson, Cong. Dooley, Cong. Minge, Cong. Hilliard, Cong. 
Pomeroy, Cong. Holden, Cong. Baesler, Cong. Thurman, Cong. 
Bishop, Cong. Thompson, Cong. Farr, Cong. Pastor, and Cong. 
Baldacci.
    Nays: Cong. Gunderson, Cong. Allard, Cong. Barrett, Cong. 
Ewing, Cong. Goodlatte, Cong. Pombo, Cong. Canady, Cong. Smith, 
Cong. Everett, Cong. Lucas, Cong. Lewis Cong. Baker, Cong. 
Crapo, Cong. Calvert, Cong. Chenoweth, Cong. Hostettler, Cong. 
Bryant, Cong. Latham, Cong. Chambliss, Cong. LaHood, and Cong. 
Roberts, Chairman.
    Not voting: Cong. Emerson, Cong. Combest, Cong. Boehner, 
Cong. Doolittle, Cong. Foley, Cong. Rose, and Cong. Clayton.

          Budget Act Compliance (Section 308 and Section 403)

    The provisions of clause 2(l)(3)(B) of Rule XI of the Rules 
of the House of Representatives and section 308(a) of the 
Congressional Budget Act of 1974 (relating to estimates of new 
budget authority, new spending authority, or new credit 
authority, or increased or decreased revenues or tax 
expenditures) are not considered applicable. The estimate and 
comparison required to be prepared by the Director of the 
Congressional Budget Office under clause 2(l)(C)(3) of Rule XI 
of the Rules of the House of Representatives and section 403 of 
the Congressional Budget Act of 1974 is as follows: [See 
consolidated Congressional Budget Office Cost Estimate on page 
1931.]

                     Inflationary Impact Statement

    Pursuant to clause 2(l)(4) of Rule XI of the Rules of the 
House of Representatives, the committee estimates that 
enactment of the chairman's recommendations of the Committee on 
Agriculture with respect to the reconciliation bill for fiscal 
year 1997 will have no inflationary impact on the national 
economy.

                          Oversight Statement

    No summary of oversight findings and recommendations made 
by the Committee on Government Reform and Oversight under 
clause 2(l)(3)(D) of Rule XI of the Rules of the House of 
Representatives was available to the committee with reference 
to the subject matter specifically addressed by the chairman's 
recommendations of the Committee on Agriculture with respect to 
the reconciliation bill for fiscal year 1997.
    No specific oversight activities other than the hearings 
detailed in this report were conducted by the committee within 
the definition of clause 2(b)(1) of Rule X of the Rules of the 
House of Representatives.

                  Congressional Budget Office Estimate

    Pursuant to clause 2(l)(3)(C) of rule XI of the Rules of 
the House of Representatives, the following is the cost 
estimate provided by the Congressional Budget Office pursuant 
to section 403 of the Congressional Budget Act of 1974. [See 
consolidated Congressional Budget Office Cost Estimate on page 
1940.]

    Changes in Existing Law Made by Title I of the Bill, as Reported

    In compliance with clause 3 of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

                         FOOD STAMP ACT OF 1977

          * * * * * * *

                              DEFINITIONS

    Sec. 3. As used in this Act, the term:
    (a)  * * *
          * * * * * * *
    (c) ``Certification period'' means the period for which 
households shall be eligible to receive authorization cards. 
[Except as provided in section 6(c)(1)(C), for those households 
that are required to submit periodic reports under section 
6(c)(1) of this Act, the certification period shall be at least 
six months but no longer than twelve months except that the 
foregoing limits on the certification period may, with the 
approval of the Secretary, be waived by a State agency for 
certain categories of households where such waiver will improve 
the administration of the program. For households that are not 
required to submit periodic reports, the certification period 
shall be determined as follows:
            [(1) In the case of a household all of whose 
        members are included in a federally aided public 
        assistance or general assistance grant, the period 
        shall coincide with the period of such grant.
            [(2) In the case of all other households, the 
        period shall be not less than three months: Provided, 
        That such period may be up to twelve months for any 
        household consisting entirely of unemployable or 
        elderly or primarily self-employed persons, or as short 
        as circumstances require for those households as to 
        which there is a substantial likelihood of frequent 
        changes in income or household status, and for any 
        household on initial certification, as determined by 
        the Secretary. The maximum limit of twelve months for 
        such period under the foregoing proviso may be waived 
        by the Secretary where such waiver will improve the 
        administration of the program.] The certification 
        period shall not exceed 12 months, except that the 
        certification period may be up to 24 months if all 
        adult household members are elderly or disabled. A 
        State agency shall have at least 1 contact with each 
        certified household every 12 months.
    (d) ``Coupon'' means any coupon, stamp, [or type of 
certificate] type of certificate, authorization card, cash or 
check issued in lieu of a coupon, or an access device, 
including an electronic benefit transfer card or personal 
identification number, issued pursuant to the provisions of 
this Act.
          * * * * * * *
    (i) ``Household'' means (1) an individual who lives alone 
or who, while living with others, customarily purchases food 
and prepares meals for home consumption separate and apart from 
the others, or (2) a group of individuals who live together and 
customarily purchase food and prepare meals together for home 
consumption. Spouses who live together, parents and their 
children 21 years of age or younger [(who are not themselves 
parents living with their children or married and living with 
their spouses)] who live together, and children (excluding 
foster children) under 18 years of age who live with and are 
under the parental control of a person other than their parent 
together with the person exercising parental control shall be 
treated as a group of individuals who customarily purchase and 
prepare meals together for home consumption even if they do not 
do so. Notwithstanding the preceding sentences, an individual 
who lives with others, who is sixty years of age or older, and 
who is unable to purchase food and prepare meals because such 
individual suffers, as certified by a licensed physician, from 
a disability which would be considered a permanent disability 
under section 221(i) of the Social Security Act (42 U.S.C. 
421(i)) or from a severe, permanent, and disabling physical or 
mental infirmity which is not symptomatic of a disease shall be 
considered, together with any of the others who is the spouse 
of such individual, an individual household, without regard to 
the purchase of food and preparation of meals, if the income 
(as determined under section 5(d)) of the others, excluding the 
spouse, does not exceed the poverty line, as described in 
section 5(c)(1), by more than 65 per centum. Notwithstanding 
the preceding sentences, a State may establish criteria that 
prescribe when individuals who live together, and who would be 
allowed to participate as separate households under the 
preceding sentences, shall be considered a single household, 
without regard to the common purchase of food and preparation 
of meals. In no event shall any individual or group of 
individuals constitute a household if they reside in an 
institution or boarding house, or else live with others and pay 
compensation to the others for meals. For the purposes of this 
subsection, residents of federally subsidized housing for the 
elderly, disabled or blind recipients of benefits under title 
I, II, X, XIV, or XVI of the Social Security Act, or are 
individuals described in paragraphs (2) through (7) of 
subsection (r), who are residents in a public or private 
nonprofit group living arrangement that serves no more than 
sixteen residents and is certified by the appropriate State 
agency or agencies under regulations issued under section 
1616(e) of the Social Security Act or under standards 
determined by the Secretary to be comparable to standards 
implemented by appropriate State agencies under such section, 
temporary residents of public or private nonprofit shelters for 
battered women and children, residents of public or private 
nonprofit shelters for individuals who do not reside in 
permanent dwellings or have no fixed mailing addresses, who are 
otherwise eligible for coupons, and narcotics addicts or 
alcoholics, together with their children, who live under the 
supervision of a private nonprofit institution, or a publicly 
operated community mental health center, for the purpose of 
regular participation in a drug or alcoholic treatment program 
shall not be considered residents of institutions and shall be 
considered individual households.
          * * * * * * *
    (o) ``Thrifty food plan'' means the diet required to feed a 
family of four persons consisting of a man and a woman twenty 
through fifty, a child six through eight, and a child nine 
through eleven years of age, determined in accordance with the 
Secretary's calculations. The cost of such diet shall be the 
basis for uniform allotments for all households regardless of 
their actual composition, except that the Secretary [shall (1) 
make] shall--
            (1) make household-size adjustments (based on the 
        unrounded cost of such diet) taking into account 
        economies of [scale, (2) make] scale;
            (2) make cost adjustments in the thrifty food plan 
        for Hawaii and the urban and rural parts of Alaska to 
        reflect the cost of food in Hawaii and urban and rural 
        [Alaska, (3) make] Alaska;
            (3) make cost adjustments in the separate thrifty 
        food plans for Guam, and the Virgin Islands of the 
        United States to reflect the cost of food in those 
        States, but not to exceed the cost of food in the fifty 
        States and the District of [Columbia, (4) through 
        January 1, 1980, adjust the cost of such diet every 
        January 1 and July 1 to the nearest dollar increment to 
        reflect changes in the cost of the thrifty food plan 
        for the six months ending the preceding September 30 
        and March 31, respectively, (5) on January 1, 1981, 
        adjust the cost of such diet to the nearest dollar 
        increment to reflect changes in the cost of the thrifty 
        food plan for the twelve months ending the preceding 
        September 30, (6) on October 1, 1982, adjust the cost 
        of such diet to reflect changes in the cost of the 
        thrifty food plan for the twenty-one months ending June 
        30, 1982, reduce the cost of such diet by 1 percent, 
        and round the result to the nearest lower dollar 
        increment for each household size, (7) on October 1, 
        1983, and October 1, 1984, adjust the cost of such diet 
        to reflect changes in the cost of the thrifty food plan 
        for the twelve months ending the preceding June 30, 
        reduce the cost of such diet by 1 per centum, and round 
        the result to the nearest lower dollar increment for 
        each household size, (8) on October 1, 1985, and each 
        October 1 thereafter through October 1, 1987, adjust 
        the cost of such diet to reflect changes in the cost of 
        the thrifty food plan for the twelve months ending the 
        preceding June 30 and round the result to the nearest 
        lower dollar increment for each household size, (9) on 
        October 1, 1988, adjust the cost of such diet to 
        reflect 100.65 percent of the cost of the thrifty food 
        plan in the preceding June, and round the result to the 
        nearest lower dollar increment for each household size, 
        (10) on October 1, 1989, adjust the cost of such diet 
        to reflect 102.05 percent of the cost, in the preceding 
        June (without regard to the adjustment made under 
        clause (9)), of the then most recent thrifty food plan 
        as determined by the Secretary or the cost of the 
        thrifty food plan in effect on the date of enactment of 
        the Hunger Prevention Act of 1988, whichever is 
        greater, and round the result to the nearest lower 
        dollar increment for each household size, and (11) on 
        October 1, 1990, and each October 1 thereafter, adjust 
        the cost of such diet to reflect 103 percent of the 
        cost, in the preceding June (without regard to any 
        previous adjustment made under clause (9), (10), or 
        this clause), of the then most recent thrifty food plan 
        as determined by the Secretary or the cost of the 
        thrifty food plan in effect on the date of enactment of 
        the Hunger Prevention Act of 1988, whichever is 
        greater, and round the result to the nearest lower 
        dollar increment for each household size, except that 
        on October 1, 1992, and (in the case of households 
        residing in Alaska) on October 1, 1994, the Secretary 
        may not reduce the cost of such diet.] Columbia; and
            (4) on October 1, 1996, and each October 1 
        thereafter, adjust the cost of the diet to reflect the 
        cost of the diet, in the preceding June, and round the 
        result to the nearest lower dollar increment for each 
        household size, except that on October 1, 1996, the 
        Secretary may not reduce the cost of the diet in effect 
        on September 30, 1996.
          * * * * * * *
    (s) ``Homeless individual'' means--
            (1) an individual who lacks a fixed and regular 
        nighttime residence; or
            (2) an individual who has a primary nighttime 
        residence that is--
                    (A) a supervised publicly or privately 
                operated shelter (including a welfare hotel or 
                congregate shelter) designed to provide 
                temporary living accommodations;
                    (B) an institution that provides a 
                temporary residence for individuals intended to 
                be institutionalized;
                    (C) a temporary accommodation for not more 
                than 90 days in the residence of another 
                individual; or
                    (D) a public or private place not designed 
                for, or ordinarily used as, a regular sleeping 
                accommodation for human beings.
          * * * * * * *

                          ELIGIBLE HOUSEHOLDS

    Sec. 5. (a)  * * *
    [(b) The Secretary]
    (b) Eligibility Standards.--Except as otherwise provided in 
this Act, the Secretary shall establish uniform national 
standards of eligibility (other than the income standards for 
Alaska, Hawaii, Guam, and the Virgin Islands of the United 
States established in accordance with subsections (c) and (e) 
of this section) for participation by households in the food 
stamp program in accordance with the provisions of this 
section. No plan of operation submitted by a State agency shall 
be approved unless the standards of eligibility meet those 
established by the Secretary, and no State agency shall impose 
any other standards of eligibility as a condition for 
participating in the program.
          * * * * * * *
    (d) Household income for purposes of the food stamp program 
shall include all income from whatever source excluding only 
(1) any gain or benefit which is not in the form of money 
payable directly to a household (notwithstanding its conversion 
in whole or in part to direct payments to households pursuant 
to any demonstration project carried out or authorized under 
Federal law including demonstration projects created by the 
waiver of provisions of Federal law), except as provided in 
subsection (k), (2) any income in the certification period 
which is received too infrequently or irregularly to be 
reasonably anticipated, but not in excess of $30 in a quarter, 
subject to modification by the Secretary in light of subsection 
(f), (3) all educational loans on which payment is deferred, 
grants, scholarships, fellowships, veterans' educational 
benefits, and the like (A) awarded to a household member 
enrolled at a recognized institution of post-secondary 
education, at a school for the handicapped, in a vocational 
education program, or in a program that provides for completion 
of a secondary school diploma or obtaining the equivalent 
thereof, (B) to the extent that they do not exceed the amount 
used for or made available as an allowance determined by such 
school, institution, program, or other grantor, for tuition and 
mandatory fees (including the rental or purchase of any 
equipment, materials, and supplies related to the pursuit of 
the course of study involved), books, supplies, transportation, 
and other miscellaneous personal expenses (other than living 
expenses), of the student incidental to attending such school, 
institution, or program, and (C) to the extent loans include 
any origination fees and insurance premiums, (4) all loans 
other than educational loans on which repayment is deferred, 
(5) reimbursements which do not exceed expenses actually 
incurred and which do not represent a gain or benefit to the 
household and any allowance a State agency provides no more 
frequently than annually to families with children on the 
occasion of those children's entering or returning to school or 
child care for the purpose of obtaining school clothes (except 
that no such allowance shall be excluded if the State agency 
reduces monthly assistance to families with dependent children 
under part A of title IV of the Social Security Act (42 U.S.C. 
601 et seq.) in the month for which the allowance is provided): 
Provided, That no portion of benefits provided under title IV-A 
of the Social Security Act, to the extent it is attributable to 
an adjustment for work-related or child care expenses (except 
for payments or reimbursements for such expenses made under an 
employment, education, or training program initiated under such 
title after the date of enactment of the Hunger Prevention Act 
of 1988, and no portion of any educational loan on which 
payment is deferred, grant, scholarship, fellowship, veterans' 
benefits, and the like that are provided for living expenses, 
shall be considered such reimbursement, (6) moneys received and 
used for the care and maintenance of a third-party beneficiary 
who is not a household member, (7) income earned by a child who 
is a member of the household, who is an elementary or secondary 
school student, and who is [21] 19 years of age or younger, (8) 
moneys received in the form of nonrecurring lump-sum payments, 
including, but not limited to, income tax refunds, rebates, or 
credits, cash donations based on need that are received from 
one or more private nonprofit charitable organizations, but not 
in excess of $300 in the aggregate in a quarter, retroactive 
lump-sum social security or railroad retirement pension 
payments and retroactive lump-sum insurance settlements: 
Provided, That such payments shall be counted as resources, 
unless specifically excluded by other laws, (9) the cost of 
producing self-employed income, but household income that 
otherwise is included under this subsection shall be reduced by 
the extent that the cost of producing self-employment income 
exceeds the income derived from self-employment as a farmer, 
(10) any income that any other Federal law specifically 
excludes from consideration as income for purposes of 
determining eligibility for the food stamp program except as 
otherwise provided in subsection (k) of this section, [(11) any 
payments or allowances made for the purpose of providing energy 
assistance (A) under any Federal law, or (B) under any State or 
local laws, designated by the State or local legislative body 
authorizing such payments or allowances as energy assistance, 
and determined by the Secretary to be calculated as if provided 
by the State or local government involved on a seasonal basis 
for an aggregate period not to exceed six months in any year 
even if such payments or allowances (including tax credits) are 
not provided on a seasonal basis because it would be 
administratively infeasible or impracticable to do so,] (11) a 
1-time payment or allowance made under a Federal or State law 
for the costs of weatherization or emergency repair or 
replacement of an unsafe or inoperative furnace or other 
heating or cooling device, (12) through September 30 of any 
fiscal year, any increase in income attributable to a cost-of-
living adjustment made on or after July 1 of such fiscal year 
under title II or XVI of the Social Security Act (42 U.S.C. 401 
et seq.), section 3(a)(1) of the Railroad Retirement Act of 
1974 (45 U.S.C. 231b(a)(1)), or section 3112 of title 38, 
United States Code, if the household was certified as eligible 
to participate in the food stamp program or received an 
allotment in the month immediately preceding the first month in 
which the adjustment was effective, (13) at the option of a 
State agency and subject to subsection (m), child support 
payments that are excluded under section 402(a)(8)(A)(vi) of 
the Social Security Act (42 U.S.C. 602(a)(8)(A)(vi)), (14) any 
payment made to the household under section 3507 of the 
Internal Revenue Code of 1986 (relating to advance payment of 
earned income credit), (15) any payment made to the household 
under section 6(d)(4)(I) for work related expenses or for 
dependent care, and (16) any amounts necessary for the 
fulfillment of a plan for achieving self-support of a household 
member as provided under subparagraph (A)(iii) or (B)(iv) of 
section 1612(b)(4) of the Social Security Act (42 U.S.C. 
1382a(b)(4)).
    [(e) In computing household income for purposes of 
determining eligibility and benefit levels for households 
containing an elderly or disabled member and determining 
benefit levels only for all other households, the Secretary 
shall allow a standard deduction of $85 a month for each 
household, except that households in Alaska, Hawaii, Guam, and 
the Virgin Islands of the United States shall be allowed a 
standard deduction of $145, $120, $170, and $75, respectively. 
Such standard deductions shall be adjusted (1) on October 1, 
1983, to the nearest lower dollar increment to reflect changes 
in the Consumer Price Index for all urban consumers published 
by the Bureau of Labor Statistics, for items other than food 
and the homeowners' costs and maintenance and repair component 
of shelter costs, as appropriately adjusted by the Bureau of 
Labor Statistics after consultation with the Secretary, for the 
fifteen months ending the preceding March 31, (2) on October 1, 
1984, to the nearest lower dollar increment to reflect such 
changes for the fifteen months ending the preceding June 30, 
(3) on October 1, 1985, and October 1, 1986, to the nearest 
lower dollar increment to reflect such changes for the twelve 
months ending the preceding June 30, and (4) on October 1, 
1987, and each October 1 thereafter, to the nearest lower 
dollar increment to reflect changes in the Consumer Price Index 
for all urban consumers published by the Bureau of Labor 
Statistics, for items other than food, for the twelve months 
ending the preceding June 30. All households with earned income 
shall be allowed an additional deduction of 20 per centum of 
all earned income (other than that excluded by subsection (d) 
of this section), to compensate for taxes, other mandatory 
deductions from salary, and work expenses, except that such 
additional deduction shall not be allowed with respect to 
earned income that a household willfully or fraudulently fails 
(as proven in a proceeding provided for in section 6(b)) to 
report in a timely manner. Households, other than those 
households containing an elderly or disabled member, shall also 
be entitled, with respect to expenses other than expenses paid 
on behalf of the household by a third party, amounts made 
available and excluded for the expenses under subsection 
(d)(3), and expenses that are paid under section 6(d)(4)(I) for 
dependent care, to (1) a dependent care deduction, the maximum 
allowable level of which shall be $200 a month for each 
dependent child under 2 years of age and $175 a month for each 
other dependent, for the actual cost of payments necessary for 
the care of a dependent when such care enables a household 
member to accept or continue employment, or training or 
education which is preparatory for employment and (2) an excess 
shelter expense deduction to the extent that the monthly amount 
expended by a household for shelter exceeds an amount equal to 
50 per centum of monthly household income after all other 
applicable deductions have been allowed. In the 15-month period 
ending September 30, 1995, such excess shelter expense 
deduction shall not exceed $231 a month in the 48 contiguous 
States and the District of Columbia, and shall not exceed, in 
Alaska, Hawaii, Guam, and the Virgin Islands of the United 
States, $402, $330, $280, and $171 a month, respectively. In 
the 15-month period ending December 31, 1996, such excess 
shelter expense deduction shall not exceed $247 a month in the 
48 contiguous States and the District of Columbia, and shall 
not exceed, in Alaska, Hawaii, Guam, and the Virgin Islands of 
the United States, $429, $353, $300, and $182 a month, 
respectively. In computing the excess shelter expense 
deduction, a State agency may use a standard utility allowance 
in accordance with regulations promulgated by the Secretary, 
except that a State agency may use an allowance which does not 
fluctuate within a year to reflect seasonal variations. An 
allowance for a heating or cooling expense may not be used for 
a household that does not incur a heating or cooling expense, 
as the case may be, or does incur a heating or cooling expense 
but is located in a public housing unit which has central 
utility meters and charges households, with regard to such 
expense, only for excess utility costs. No such allowance may 
be used for a household that shares such expense with, and 
lives with, another individual not participating in the food 
stamp program, another household participating in the food 
stamp program, or both, unless the allowance is prorated 
between the household and the other individual, household, or 
both. If a State agency elects to use a standard utility 
allowance that reflects heating or cooling costs, it shall be 
made available to households receiving a payment, or on behalf 
of which a payment is made, under the Low-Income Home Energy 
Assistance Act of 1981 (42 U.S.C. 8621 et seq.) or other 
similar energy assistance program, provided that the household 
still incurs out-of-pocket heating or cooling expenses. A State 
agency may use a separate standard utility allowance for 
households on behalf of which such payment is made, but may not 
be required to do so. A State agency not electing to use a 
separate allowance, and making a single standard utility 
allowance available to households incurring heating or cooling 
expenses (other than households described in the sixth sentence 
of this subsection) may not be required to reduce such 
allowance due to the provision (direct or indirect) of 
assistance under the Low-Income Home Energy Assistance Act of 
1981. For purposes of the food stamp program, assistance 
provided under the Low-Income Home Energy Assistance Act of 
1981 shall be considered to be prorated over the entire heating 
or cooling season for which it was provided. A State agency 
shall allow a household to switch between any standard utility 
allowance and a deduction based on its actual utility costs at 
the end of any certification period and up to one additional 
time during each twelve-month period. Households containing an 
elderly or disabled member shall also be entitled, with respect 
to expenses other than expenses paid on behalf of the household 
by a third party, to--
            [(A) an excess medical expense deduction for that 
        portion of the actual cost of allowable medical 
        expenses, incurred by elderly or disabled members, 
        exclusive of special diets, that exceed $35 a month;
            [(B) a dependent care deduction, the maximum 
        allowable level of which shall be the same as that 
        contained in clause (1) of the fourth sentence of this 
        subsection, for the actual cost of payments necessary 
        for the care of a dependent, regardless of the 
        dependent's age, when such care enables a household 
        member to accept or continue employment, or training or 
        education that is preparatory for employment; and
            [(C) an excess shelter expense deduction to the 
        extent that the monthly amount expended by a household 
        for shelter exceeds an amount equal to 50 per centum of 
        monthly household income after all other applicable 
        deductions have been allowed.
State agencies shall offer eligible households a method of 
claiming a deduction for recurring medical expenses that are 
initially verified under the excess medical expense deduction 
provided for in subparagraph (A), in lieu of submitting 
information or verification on actual expenses on a monthly 
basis. The method described in the preceding sentence shall be 
designed to minimize the administrative burden for eligible 
elderly and disabled household members choosing to deduct their 
recurrent medical expenses pursuant to such method, shall rely 
on reasonable estimates of the member's expected medical 
expenses for the certification period (including changes that 
can be reasonably anticipated based on available information 
about the member's medical condition, public or private medical 
insurance coverage, and the current verified medical expenses 
incurred by the member), and shall not require further 
reporting or verification of a change in medical expenses if 
such a change has been anticipated for the certification 
period. Before determining the excess shelter expense 
deduction, all households shall be entitled to a deduction for 
child support payments made by a household member to or for an 
individual who is not a member of the household if such 
household member was legally obligated to make such payments, 
except that the Secretary is authorized to prescribe by 
regulation the methods, including calculation on a 
retrospective basis, that State agencies shall use to determine 
the amount of the deduction for child support payments.]
    (e) Deductions From Income.--
            (1) Standard deduction.--The Secretary shall allow 
        a standard deduction for each household in the 48 
        contiguous States and the District of Columbia, Alaska, 
        Hawaii, Guam, and the Virgin Islands of the United 
        States of $134, $229, $189, $269, and $118, 
        respectively.
            (2) Earned income deduction.--
                    (A) Definition of earned income.--In this 
                paragraph, the term ``earned income'' does not 
                include income excluded by subsection (d) or 
                any portion of income earned under a work 
                supplementation or support program, as defined 
                under section 16(b), that is attributable to 
                public assistance.
                    (B) Deduction.--Except as provided in 
                subparagraph (C), a household with earned 
                income shall be allowed a deduction of 20 
                percent of all earned income to compensate for 
                taxes, other mandatory deductions from salary, 
                and work expenses.
                    (C) Exception.--The deduction described in 
                subparagraph (B) shall not be allowed with 
                respect to determining an overissuance due to 
                the failure of a household to report earned 
                income in a timely manner.
            (3) Dependent care deduction.--
                    (A) In general.--A household shall be 
                entitled, with respect to expenses (other than 
                excluded expenses described in subparagraph 
                (B)) for dependent care, to a dependent care 
                deduction, the maximum allowable level of which 
                shall be $200 per month for each dependent 
                child under 2 years of age and $175 per month 
                for each other dependent, for the actual cost 
                of payments necessary for the care of a 
                dependent if the care enables a household 
                member to accept or continue employment, or 
                training or education that is preparatory for 
                employment.
                    (B) Excluded expenses.--The excluded 
                expenses referred to in subparagraph (A) are--
                            (i) expenses paid on behalf of the 
                        household by a third party;
                            (ii) amounts made available and 
                        excluded for the expenses referred to 
                        in subparagraph (A) under subsection 
                        (d)(3); and
                            (iii) expenses that are paid under 
                        section 6(d)(4).
            (4) Deduction for child support payments.--
                    (A) In general.--A household shall be 
                entitled to a deduction for child support 
                payments made by a household member to or for 
                an individual who is not a member of the 
                household if the household member is legally 
                obligated to make the payments.
                    (B) Methods for determining amount.--The 
                Secretary may prescribe by regulation the 
                methods, including calculation on a 
                retrospective basis, that a State agency shall 
                use to determine the amount of the deduction 
                for child support payments.
            (5) Homeless shelter allowance.--A State agency may 
        develop a standard homeless shelter allowance, which 
        shall not exceed $143 per month, for such expenses as 
        may reasonably be expected to be incurred by households 
        in which all members are homeless individuals but are 
        not receiving free shelter throughout the month. A 
        State agency that develops the allowance may use the 
        allowance in determining eligibility and allotments for 
        the households, except that the State agency may 
        prohibit the use of the allowance for households with 
        extremely low shelter costs.
            (6) Excess medical expense deduction.--
                    (A) In general.--A household containing an 
                elderly or disabled member shall be entitled, 
                with respect to expenses other than expenses 
                paid on behalf of the household by a third 
                party, to an excess medical expense deduction 
                for the portion of the actual costs of 
                allowable medical expenses, incurred by the 
                elderly or disabled member, exclusive of 
                special diets, that exceeds $35 per month.
                    (B) Method of claiming deduction.--
                            (i) In general.--A State agency 
                        shall offer an eligible household under 
                        subparagraph (A) a method of claiming a 
                        deduction for recurring medical 
                        expenses that are initially verified 
                        under the excess medical expense 
                        deduction in lieu of submitting 
                        information or verification on actual 
                        expenses on a monthly basis.
                            (ii) Method.--The method described 
                        in clause (i) shall--
                                    (I) be designed to minimize 
                                the burden for the eligible 
                                elderly or disabled household 
                                member choosing to deduct the 
                                recurrent medical expenses of 
                                the member pursuant to the 
                                method;
                                    (II) rely on reasonable 
                                estimates of the expected 
                                medical expenses of the member 
                                for the certification period 
                                (including changes that can be 
                                reasonably anticipated based on 
                                available information about the 
                                medical condition of the 
                                member, public or private 
                                medical insurance coverage, and 
                                the current verified medical 
                                expenses incurred by the 
                                member); and
                                    (III) not require further 
                                reporting or verification of a 
                                change in medical expenses if 
                                such a change has been 
                                anticipated for the 
                                certification period.
            (7) Excess shelter expense deduction.--
                    (A) In general.--A household shall be 
                entitled, with respect to expenses other than 
                expenses paid on behalf of the household by a 
                third party, to an excess shelter expense 
                deduction to the extent that the monthly amount 
                expended by a household for shelter exceeds an 
                amount equal to 50 percent of monthly household 
                income after all other applicable deductions 
                have been allowed.
                    (B) Maximum amount of deduction.--In the 
                case of a household that does not contain an 
                elderly or disabled individual, the excess 
                shelter expense deduction shall not exceed--
                            (i) in the 48 contiguous States and 
                        the District of Columbia, $247 per 
                        month; and
                            (ii) in Alaska, Hawaii, Guam, and 
                        the Virgin Islands of the United 
                        States, $429, $353, $300, and $182 per 
                        month, respectively.
                    (C) Standard utility allowance.--
                            (i) In general.--In computing the 
                        excess shelter expense deduction, a 
                        State agency may use a standard utility 
                        allowance in accordance with 
                        regulations promulgated by the 
                        Secretary, except that a State agency 
                        may use an allowance that does not 
                        fluctuate within a year to reflect 
                        seasonal variations.
                            (ii) Restrictions on heating and 
                        cooling expenses.--An allowance for a 
                        heating or cooling expense may not be 
                        used in the case of a household that--
                                    (I) does not incur a 
                                heating or cooling expense, as 
                                the case may be;
                                    (II) does incur a heating 
                                or cooling expense but is 
                                located in a public housing 
                                unit that has central utility 
                                meters and charges households, 
                                with regard to the expense, 
                                only for excess utility costs; 
                                or
                                    (III) shares the expense 
                                with, and lives with, another 
                                individual not participating in 
                                the food stamp program, another 
                                household participating in the 
                                food stamp program, or both, 
                                unless the allowance is 
                                prorated between the household 
                                and the other individual, 
                                household, or both.
                            (iii) Mandatory allowance.--
                                    (I) In general.--A State 
                                agency may make the use of a 
                                standard utility allowance 
                                mandatory for all households 
                                with qualifying utility costs 
                                if--
                                            (aa) the State 
                                        agency has developed 1 
                                        or more standards that 
                                        include the cost of 
                                        heating and cooling and 
                                        1 or more standards 
                                        that do not include the 
                                        cost of heating and 
                                        cooling; and
                                            (bb) the Secretary 
                                        finds that the 
                                        standards will not 
                                        result in an increased 
                                        cost to the Secretary.
                                    (II) Household election.--A 
                                State agency that has not made 
                                the use of a standard utility 
                                allowance mandatory under 
                                subclause (I) shall allow a 
                                household to switch, at the end 
                                of a certification period, 
                                between the standard utility 
                                allowance and a deduction based 
                                on the actual utility costs of 
                                the household.
                            (iv) Availability of allowance to 
                        recipients of energy assistance.--
                                    (I) In general.--Subject to 
                                subclause (II), if a State 
                                agency elects to use a standard 
                                utility allowance that reflects 
                                heating or cooling costs, the 
                                standard utility allowance 
                                shall be made available to 
                                households receiving a payment, 
                                or on behalf of which a payment 
                                is made, under the Low-Income 
                                Home Energy Assistance Act of 
                                1981 (42 U.S.C. 8621 et seq.) 
                                or other similar energy 
                                assistance program, if the 
                                household still incurs out-of-
                                pocket heating or cooling 
                                expenses in excess of any 
                                assistance paid on behalf of 
                                the household to an energy 
                                provider.
                                    (II) Separate allowance.--A 
                                State agency may use a separate 
                                standard utility allowance for 
                                households on behalf of which a 
                                payment described in subclause 
                                (I) is made, but may not be 
                                required to do so.
                                    (III) States not electing 
                                to use separate allowance.--A 
                                State agency that does not 
                                elect to use a separate 
                                allowance but makes a single 
                                standard utility allowance 
                                available to households 
                                incurring heating or cooling 
                                expenses (other than a 
                                household described in 
                                subclause (I) or (II) of 
                                subparagraph (C)(ii)) may not 
                                be required to reduce the 
                                allowance due to the provision 
                                (directly or indirectly) of 
                                assistance under the Low-Income 
                                Home Energy Assistance Act of 
                                1981 (42 U.S.C. 8621 et seq.).
                                    (IV) Proration of 
                                assistance.--For the purpose of 
                                the food stamp program, 
                                assistance provided under the 
                                Low-Income Home Energy 
                                Assistance Act of 1981 (42 
                                U.S.C. 8621 et seq.) shall be 
                                considered to be prorated over 
                                the entire heating or cooling 
                                season for which the assistance 
                                was provided.
          * * * * * * *
    (g)(1)  * * *
    [(2) The Secretary shall, in prescribing inclusions in, and 
exclusions from, financial resources, follow the regulations in 
force as of June 1, 1982 (other than those relating to licensed 
vehicles and inaccessible resources), and shall, in addition, 
include in financial resources any boats, snowmobiles, and 
airplanes used for recreational purposes, any vacation homes, 
any mobile homes used primarily for vacation purposes, any 
licensed vehicle (other than one used to produce earned income 
or that is necessary for transportation of a physically 
disabled household member and any other property, real or 
personal, to the extent that it is directly related to the 
maintenance or use of such vehicle) used for household 
transportation or used to obtain or continue employment to the 
extent that the fair market value of any such vehicle exceeds a 
level set by the Secretary, which shall be $4,500 through 
August 31, 1994, $4,550 beginning September 1, 1994, through 
September 30, 1995, $4,600 beginning October 1, 1995, through 
September 30, 1996, and $5,000 beginning October 1, 1996, as 
adjusted on such date and on each October 1 thereafter to 
reflect changes in the new car component of the Consumer Price 
Index for All Urban Consumers published by the Bureau of Labor 
Statistics for the 12-month period ending on June 30 preceding 
the date of such adjustment and rounded to the nearest $50, 
and, regardless of whether there is a penalty for early 
withdrawal, any savings or retirement accounts (including 
individual accounts). The Secretary shall exclude from 
financial resources the value of a vehicle that a household 
depends upon to carry fuel for heating or water for home use 
when such transported fuel or water is the primary source of 
fuel or water for the household.]
            (2) Included assets.--
                    (A) In general.--Subject to the other 
                provisions of this paragraph, the Secretary 
                shall, in prescribing inclusions in, and 
                exclusions from, financial resources, follow 
                the regulations in force as of June 1, 1982 
                (other than those relating to licensed vehicles 
                and inaccessible resources).
                    (B) Additional included assets.--The 
                Secretary shall include in financial 
                resources--
                            (i) any boat, snowmobile, or 
                        airplane used for recreational 
                        purposes;
                            (ii) any vacation home;
                            (iii) any mobile home used 
                        primarily for vacation purposes;
                            (iv) subject to subparagraph (C), 
                        any licensed vehicle that is used for 
                        household transportation or to obtain 
                        or continue employment to the extent 
                        that the fair market value of the 
                        vehicle exceeds $4,600; and
                            (v) any savings or retirement 
                        account (including an individual 
                        account), regardless of whether there 
                        is a penalty for early withdrawal.
                    (C) Excluded vehicles.--A vehicle (and any 
                other property, real or personal, to the extent 
                the property is directly related to the 
                maintenance or use of the vehicle) shall not be 
                included in financial resources under this 
                paragraph if the vehicle is--
                            (i) used to produce earned income;
                            (ii) necessary for the 
                        transportation of a physically disabled 
                        household member; or
                            (iii) depended on by a household to 
                        carry fuel for heating or water for 
                        home use and provides the primary 
                        source of fuel or water, respectively, 
                        for the household.
          * * * * * * *
    (k)(1) For purposes of subsection (d)(1), except as 
provided in paragraph (2), assistance provided to a third party 
on behalf of a household by a State or local government shall 
be considered money payable directly to the household if the 
assistance is provided in lieu of--
            (A) a regular benefit payable to the household for 
        living expenses under a State [plan for aid to families 
        with dependent children approved] program funded under 
        part A of title IV of the Social Security Act (42 
        U.S.C. 601 et seq.); or
            (B) a benefit payable to the household for housing 
        expenses[, not including energy or utility-cost 
        assistance,] under--
                    (i) a State or local general assistance 
                program; or
                    (ii) another basic assistance program 
                comparable to general assistance (as determined 
                by the Secretary).
    (2) Paragraph (1) shall not apply to--
            (A) medical assistance;
            (B) child care assistance;
            [(C) energy assistance;]
            (C) a payment or allowance described in subsection 
        (d)(11);
            (D) assistance provided by a State or local housing 
        authority;
            (E) emergency assistance for migrant or seasonal 
        farmworker households during the period such households 
        are in the job stream;
            [(F) housing assistance payments made to a third 
        party on behalf of the household residing in 
        transitional housing for the homeless;
            [(G)] (F) emergency and special assistance, to the 
        extent excluded in regulations prescribed by the 
        Secretary; or
            [(H)] (G) assistance provided to a third party on 
        behalf of a household under a State or local general 
        assistance program, or another local basic assistance 
        program comparable to general assistance (as determined 
        by the Secretary), if, under State law, no assistance 
        under the program may be provided directly to the 
        household in the form of a cash payment.
          * * * * * * *
            (4) Third party energy assistance payments.--
                    (A) Energy assistance payments.--For 
                purposes of subsection (d)(1), a payment made 
                under a Federal or State law to provide energy 
                assistance to a household shall be considered 
                money payable directly to the household.
                    (B) Energy assistance expenses.--For 
                purposes of subsection (e)(7), an expense paid 
                on behalf of a household under a Federal or 
                State law to provide energy assistance shall be 
                considered an out-of-pocket expense incurred 
                and paid by the household.

                     ELIGIBILITY DISQUALIFICATIONS

    Sec. 6. (a)  * * *
    (b)(1) Any person who has been found by any State or 
Federal court or administrative agency to have intentionally 
(A) made a false or misleading statement, or misrepresented, 
concealed or withheld facts, or (B) committed any act that 
constitutes a violation of this Act, the regulations issued 
thereunder, or any State statute, for the purpose of using, 
presenting, transferring, acquiring, receiving, or possessing 
coupons or authorization cards shall, immediately upon the 
rendering of such determination, become ineligible for further 
participation in the program--
            (i) for a period of [six months] 1 year upon the 
        first occasion of any such determination;
            (ii) for a period of [1 year] 2 years upon--
                    (I) the second occasion of any such 
                determination; or
                    (II) the first occasion of a finding by a 
                Federal, State, or local court of the trading 
                of a controlled substance (as defined in 
                section 102 of the Controlled Substances Act 
                (21 U.S.C. 802)) for coupons; and
            (iii) permanently upon--
                    (I) the third occasion of any such 
                determination;
                    (II) the second occasion of a finding by a 
                Federal, State, or local court of the trading 
                of a controlled substance (as defined in 
                section 102 of the Controlled Substances Act 
                (21 U.S.C. 802)) for coupons; [or]
                    (III) the first occasion of a finding by a 
                Federal, State, or local court of the trading 
                of firearms, ammunition, or explosives for 
                coupons[.]; or
                    (IV) a conviction of an offense under 
                subsection (b) or (c) of section 15 involving 
                an item covered by subsection (b) or (c) of 
                section 15 having a value of $500 or more.
During the period of such ineligibility, no household shall 
receive increased benefits under this Act as the result of a 
member of such household having been disqualified under this 
subsection.
          * * * * * * *
    [(d)(1) Unless otherwise exempted by the provisions of 
paragraph (d)(2) of this subsection, (A) no person shall be 
eligible to participate in the food stamp program who is a 
physically and mentally fit person between the ages of sixteen 
and sixty who (i) refuses at the time of application and once 
every twelve months thereafter to register for employment in a 
manner determined by the Secretary; (ii) refuses without good 
cause to participate in an employment and training program 
under paragraph (4), to the extent required under paragraph 
(4), including any reasonable employment requirements as are 
prescribed by the State agency in accordance with paragraph 
(4), and the period of ineligibility shall be two months; or 
(iii) refuses without good cause (including the lack of 
adequate child care for children above the age of five and 
under the age of twelve) to accept an offer of employment at a 
wage not less than the higher of either the applicable State or 
Federal minimum wage, or 80 per centum of the wage that would 
have governed had the minimum hourly rate under the Fair Labor 
Standards Act of 1938, as amended (29 U.S.C. 206(a)(1)), been 
applicable to the offer of employment, and at a site or plant 
not then subject to a strike or lockout; and (B) no household 
shall be eligible to participate in the food stamp program (i) 
if the head of the household is a physically and mentally fit 
person between the ages of sixteen and sixty and such 
individual refuses to do any of those acts described in clause 
(A) of this sentence, or (ii) if the head of the household 
voluntarily quits any job without good cause, but, in such 
case, the period of ineligibility shall be ninety days. The 
State agency shall allow the household to select an adult 
parent of children in the household as its head where all adult 
household members making application agree to the selection. 
The household may designate its head of household under this 
paragraph each time the household is certified for 
participation in the food stamp program, but may not change the 
designation during a certification period unless there is a 
change in the composition of the household. An employee of the 
Federal Government, or of a State or political subdivision of a 
State, who engaged in a strike against the Federal Government, 
a State or political subdivision of a State and is dismissed 
from his job because of his participation in the strike shall 
be considered to have voluntarily quit such job without good 
cause. Any period of ineligibility for violations under this 
paragraph shall end when the household member who committed the 
violation complies with the requirement that has been violated. 
If the household member who committed the violation leaves the 
household during the period of ineligibility, such household 
shall no longer be subject to sanction for such violation and, 
if it is otherwise eligible, may resume participation in the 
food stamp program, but any other household of which such 
person thereafter becomes the head of the household shall be 
ineligible for the balance of the period of ineligibility.]
    (d) Conditions of Participation.--
            (1) Work requirements.--
                    (A) In general.--No physically and mentally 
                fit individual over the age of 15 and under the 
                age of 60 shall be eligible to participate in 
                the food stamp program if the individual--
                            (i) refuses, at the time of 
                        application and every 12 months 
                        thereafter, to register for employment 
                        in a manner prescribed by the 
                        Secretary;
                            (ii) refuses without good cause to 
                        participate in an employment and 
                        training program under paragraph (4), 
                        to the extent required by the State 
                        agency;
                            (iii) refuses without good cause to 
                        accept an offer of employment, at a 
                        site or plant not subject to a strike 
                        or lockout at the time of the refusal, 
                        at a wage not less than the higher of--
                                    (I) the applicable Federal 
                                or State minimum wage; or
                                    (II) 80 percent of the wage 
                                that would have governed had 
                                the minimum hourly rate under 
                                section 6(a)(1) of the Fair 
                                Labor Standards Act of 1938 (29 
                                U.S.C. 206(a)(1)) been 
                                applicable to the offer of 
                                employment;
                            (iv) refuses without good cause to 
                        provide a State agency with sufficient 
                        information to allow the State agency 
                        to determine the employment status or 
                        the job availability of the individual;
                            (v) voluntarily and without good 
                        cause--
                                    (I) quits a job; or
                                    (II) reduces work effort 
                                and, after the reduction, the 
                                individual is working less than 
                                30 hours per week; or
                            (vi) fails to comply with section 
                        20.
                    (B) Household ineligibility.--If an 
                individual who is the head of a household 
                becomes ineligible to participate in the food 
                stamp program under subparagraph (A), the 
                household shall, at the option of the State 
                agency, become ineligible to participate in the 
                food stamp program for a period, determined by 
                the State agency, that does not exceed the 
                lesser of--
                            (i) the duration of the 
                        ineligibility of the individual 
                        determined under subparagraph (C); or
                            (ii) 180 days.
                    (C) Duration of ineligibility.--
                            (i) First violation.--The first 
                        time that an individual becomes 
                        ineligible to participate in the food 
                        stamp program under subparagraph (A), 
                        the individual shall remain ineligible 
                        until the later of--
                                    (I) the date the individual 
                                becomes eligible under 
                                subparagraph (A);
                                    (II) the date that is 1 
                                month after the date the 
                                individual became ineligible; 
                                or
                                    (III) a date determined by 
                                the State agency that is not 
                                later than 3 months after the 
                                date the individual became 
                                ineligible.
                            (ii) Second violation.--The second 
                        time that an individual becomes 
                        ineligible to participate in the food 
                        stamp program under subparagraph (A), 
                        the individual shall remain ineligible 
                        until the later of--
                                    (I) the date the individual 
                                becomes eligible under 
                                subparagraph (A);
                                    (II) the date that is 3 
                                months after the date the 
                                individual became ineligible; 
                                or
                                    (III) a date determined by 
                                the State agency that is not 
                                later than 6 months after the 
                                date the individual became 
                                ineligible.
                            (iii) Third or subsequent 
                        violation.--The third or subsequent 
                        time that an individual becomes 
                        ineligible to participate in the food 
                        stamp program under subparagraph (A), 
                        the individual shall remain ineligible 
                        until the later of--
                                    (I) the date the individual 
                                becomes eligible under 
                                subparagraph (A);
                                    (II) the date that is 6 
                                months after the date the 
                                individual became ineligible;
                                    (III) a date determined by 
                                the State agency; or
                                    (IV) at the option of the 
                                State agency, permanently.
                    (D) Administration.--
                            (i) Good cause.--The Secretary 
                        shall determine the meaning of good 
                        cause for the purpose of this 
                        paragraph.
                            (ii) Voluntary quit.--The Secretary 
                        shall determine the meaning of 
                        voluntarily quitting and reducing work 
                        effort for the purpose of this 
                        paragraph.
                            (iii) Determination by state 
                        agency.--
                                    (I) In general.--Subject to 
                                subclause (II) and clauses (i) 
                                and (ii), a State agency shall 
                                determine--
                                            (aa) the meaning of 
                                        any term in 
                                        subparagraph (A);
                                            (bb) the procedures 
                                        for determining whether 
                                        an individual is in 
                                        compliance with a 
                                        requirement under 
                                        subparagraph (A); and
                                            (cc) whether an 
                                        individual is in 
                                        compliance with a 
                                        requirement under 
                                        subparagraph (A).
                                    (II) Not less 
                                restrictive.--A State agency 
                                may not determine a meaning, 
                                procedure, or determination 
                                under subclause (I) to be less 
                                restrictive than a comparable 
                                meaning, procedure, or 
                                determination under a State 
                                program funded under part A of 
                                title IV of the Social Security 
                                Act (42 U.S.C. 601 et seq.).
                            (iv) Strike against the 
                        government.--For the purpose of 
                        subparagraph (A)(v), an employee of the 
                        Federal Government, a State, or a 
                        political subdivision of a State, who 
                        is dismissed for participating in a 
                        strike against the Federal Government, 
                        the State, or the political subdivision 
                        of the State shall be considered to 
                        have voluntarily quit without good 
                        cause.
                            (v) Selecting a head of 
                        household.--
                                    (I) In general.--For the 
                                purpose of this paragraph, the 
                                State agency shall allow the 
                                household to select any adult 
                                parent of a child in the 
                                household as the head of the 
                                household if all adult 
                                household members making 
                                application under the food 
                                stamp program agree to the 
                                selection.
                                    (II) Time for making 
                                designation.--A household may 
                                designate the head of the 
                                household under subclause (I) 
                                each time the household is 
                                certified for participation in 
                                the food stamp program, but may 
                                not change the designation 
                                during a certification period 
                                unless there is a change in the 
                                composition of the household.
                            (vi) Change in head of household.--
                        If the head of a household leaves the 
                        household during a period in which the 
                        household is ineligible to participate 
                        in the food stamp program under 
                        subparagraph (B)--
                                    (I) the household shall, if 
                                otherwise eligible, become 
                                eligible to participate in the 
                                food stamp program; and
                                    (II) if the head of the 
                                household becomes the head of 
                                another household, the 
                                household that becomes headed 
                                by the individual shall become 
                                ineligible to participate in 
                                the food stamp program for the 
                                remaining period of 
                                ineligibility.
    (2) A person who otherwise would be required to comply with 
the requirements of paragraph (1) of this subsection shall be 
exempt from such requirements if he or she is (A) currently 
subject to and complying with a work registration requirement 
under title IV of the Social Security Act, as amended (42 
U.S.C. 602), or the Federal-State unemployment compensation 
system, in which case, failure by such person to comply with 
any work requirement to which such person is subject [that is 
comparable to a requirement of paragraph (1)] shall be the same 
as failure to comply with that requirement of paragraph (1); 
[(B) a parent or other member of a household with 
responsibility for the care of a dependent child under age six 
or of an incapacitated person;] (B) a parent or other member of 
a household with responsibility for the care of (i) a dependent 
child under the age of 6 or any lower age designated by the 
State agency that is not under the age of 1, or (ii) an 
incapacitated person; (C) a bona fide student enrolled at least 
half time in any recognized school, training program, or 
institution of higher education (except that any such person 
enrolled in an institution of higher education shall be 
ineligible to participate in the food stamp program unless he 
or she meets the requirements of subsection (e) of this 
section); (D) a regular participant in a drug addiction or 
alcoholic treatment and rehabilitation program; (E) employed a 
minimum of thirty hours per week or receiving weekly earnings 
which equal the minimum hourly rate under the Fair Labor 
Standards Act of 1938, as amended (29 U.S.C. 206(a)(1)), 
multiplied by thirty hours; or (F) a person between the ages of 
sixteen and eighteen who is not a head of a household or who is 
attending school, or enrolled in an employment training 
program, on at least a half-time basis.
          * * * * * * *
    (4)(A) [Not later than April 1, 1987, each] Each State 
agency shall implement an employment and training program 
designed by the State agency and approved by the Secretary for 
the purpose of assisting members of households participating in 
the food stamp program in gaining skills, training, work, or 
experience that will increase their ability to obtain regular 
employment. Each component of an employment and training 
program carried out under this paragraph shall be delivered 
through a statewide workforce development system, unless the 
component is not available locally through the statewide 
workforce development system.
    (B) For purposes of this Act, an ``employment and training 
program'' means a program that contains one or more of the 
following components[:], except that the State agency shall 
retain the option to apply employment requirements prescribed 
under this subparagraph to a program applicant at the time of 
application:
            (i) Job search programs [with terms and conditions 
        comparable to those prescribed in subparagraphs (A) and 
        (B) of section 402(a)(35) of part A of title IV of the 
        Social Security Act, except that the State agency shall 
        retain the option to apply employment requirements 
        prescribed under this clause to program applicants at 
        the time of application].
            (ii) Job search training programs that include, to 
        the extent determined appropriate by the State agency, 
        reasonable job search training and support activities 
        that may consist of jobs skills assessments, job 
        finding clubs, training in techniques for 
        employability, job placement services, or other direct 
        training or support activities, including educational 
        programs, determined by the State agency to expand the 
        job search abilities or employability of those subject 
        to the program.
            (iii) Workfare programs operated under section 20.
            (iv) Programs designed to improve the employability 
        of household members through actual work experience or 
        training, or both, and to enable individuals employed 
        or trained under such programs to move promptly into 
        regular public or private employment. An employment or 
        training experience program established under this 
        clause shall--
                    [(I) limit employment experience 
                assignments to projects that serve a useful 
                public purpose in fields such as health, social 
                services, environmental protection, urban and 
                rural development and redevelopment, welfare, 
                recreation, public facilities, public safety, 
                and day care;
                    [(II) to the extent possible, use the prior 
                training, experience, and skills of the 
                participating member in making appropriate 
                employment or training experience assignments;]
                    [(III)] (I) not provide any work that has 
                the effect of replacing the employment of an 
                individual not participating in the employment 
                or training experience program; and
                    [(IV)] (II) provide the same benefits and 
                working conditions that are provided at the job 
                site to employees performing comparable work 
                for comparable hours.
          * * * * * * *
    (D)(i) Each State agency may exempt from any requirement 
for participation in any program under this paragraph 
categories of household members [to which the application of 
such participation requirement is impracticable as applied to 
such categories due to factors such as the availability of work 
opportunities and the cost-effectiveness of the employment 
requirements. In making such a determination, the State agency 
may designate a category consisting of all such household 
members residing in a specific area of the State. Each State 
may exempt, with the approval of the Secretary, members of 
households that have participated in the food stamp program 30 
days or less].
    (ii) Each State agency may exempt from any requirement for 
participation individual household members not included in any 
category designated as exempt under clause (i) [but with 
respect to whom such participation is impracticable because of 
personal circumstances such as lack of job readiness and 
employability, the remote location of work opportunities, and 
unavailability of child care].
    (iii) Any exemption of a category or individual under this 
subparagraph shall be periodically evaluated to determine 
whether[, on the basis of the factors used to make a 
determination under clause (i) or (ii), the exemption continues 
to be valid. Such evaluations shall occur no less often than at 
each certification or recertification in the case of exemptions 
under clause (ii)] the exemption continues to be valid.
    (E) Each State agency shall establish requirements for 
participation by individuals not exempt under subparagraph (D) 
in one or more employment and training programs under this 
paragraph, including the extent to which any individual is 
required to participate. Such requirements may vary among 
participants. [Through September 30, 1995, two States may, on 
application to and after approval by the Secretary, give 
priority in the provision of services to voluntary participants 
(including both exempt and non-exempt participants), except 
that this sentence shall not excuse a State from compliance 
with the performance standards issued under subparagraphs (K) 
and (L), and the Secretary may, at the Secretary's discretion, 
approve additional States' requests to give such priority if 
the Secretary reports to Congress on the number and 
characteristics of voluntary participants given priority under 
this sentence and such other information as the Secretary 
determines to be appropriate.]
          * * * * * * *
    [(G)(i) The State] (G) The State agency may operate any 
program component under this paragraph in which individuals 
elect to participate.
    [(ii) The State agency shall permit, to the extent it 
determines practicable, individuals not subject to requirements 
imposed under subparagraph (E) or who have complied, or are in 
the process of complying, with such requirements to participate 
in any program under this paragraph.]
    [(H)(i) The Secretary shall issue regulations under which 
each State agency shall establish a conciliation procedure for 
the resolution of disputes involving the participation of an 
individual in the program.
    [(ii) Federal funds] (H) Federal funds made available to a 
State agency for purposes of the component authorized under 
subparagraph (B)(v) shall not be used to supplant non-Federal 
funds used for existing services and activities that promote 
the purposes of this component.
    (I)(i) The State agency shall provide payments or 
reimbursements to participants in programs carried out under 
this paragraph, including individuals participating under 
subparagraph (G), for--
            (I) the actual costs of transportation and other 
        actual costs (other than dependent care costs), that 
        are reasonably necessary and directly related to 
        participation in the program, except that the State 
        agency may limit such reimbursement to each participant 
        to $25 per month; and
            (II) the actual costs of such dependent care 
        expenses that are determined by the State agency to be 
        necessary for the participation of an individual in the 
        program (other than an individual who is the caretaker 
        relative of a dependent in a family receiving benefits 
        under part A of title IV of the Social Security Act (42 
        U.S.C. 601 et seq.) in a local area where an 
        employment, training, or education program under title 
        IV of such Act is in operation[, or was in operation, 
        on the date of enactment of the Hunger Prevention Act 
        of 1988) up to any limit set by the State agency (which 
        limit shall not be less than the limit for the 
        dependent care deduction under section 5(e)), but in no 
        event shall such payment or reimbursements exceed the 
        applicable local market rate as determined by 
        procedures consistent with any such determination under 
        the Social Security Act]), except that no such payment 
        or reimbursement shall exceed the applicable local 
        market rate. Individuals subject to the program under 
        this paragraph may not be required to participate if 
        dependent costs exceed the limit established by the 
        State agency under this subclause or other actual costs 
        exceed any limit established under subclause (I).
          * * * * * * *
    [(K)(i) For any fiscal year, the Secretary shall establish 
performance standards for each State that, in the case of 
persons who are subject to employment requirements under this 
section and who are not exempt under subparagraph (D), 
designate the minimum percentages (not to exceed 10 percent in 
fiscal years 1992 and 1993, and 15 percent in fiscal years 1994 
and 1995) of such persons that State agencies shall place in 
programs under this paragraph. Such standards need not be 
uniform for all the States, but may vary among the several 
States. The Secretary shall consider the cost to the States in 
setting performance standards and the degree of participation 
in programs under this paragraph by exempt persons. The 
Secretary shall not require the plan of a State agency to 
provide for the participation of a number of recipients greater 
than 10 percent in fiscal years 1992 and 1993, and 15 percent 
in fiscal years 1994 and 1995, of the persons who are subject 
to employment requirements under this section and who are not 
exempt under subparagraph (D).
    [(ii) In making any determination as to whether a State 
agency has met a performance standard under clause (i), the 
Secretary shall--
            [(I) consider the extent to which persons have 
        elected to participate in programs under this 
        paragraph;
            [(II) consider such factors as placement in 
        unsubsidized employment, increases in earnings, and 
        reduction in the number of persons participating in the 
        food stamp program; and
            [(III) consider other factors determined by the 
        Secretary to be related to employment and training.
    [(iii) The Secretary shall vary the performance standards 
established under clause (i) according to differences in the 
characteristics of persons required to participate and the type 
of program to which the standard is applied.
    [(iv) The Secretary may delay establishing performance 
standards for up to 18 months after national implementation of 
the provisions of this paragraph, in order to base performance 
standards on State agency experience in implementing this 
paragraph.
    [(L)(i) The Secretary shall establish performance standards 
and measures applicable to employment and training programs 
carried out under this paragraph that are based on employment 
outcomes, including increases in earnings.
    [(ii) Final performance standards and measures referred to 
in clause (i) shall be published not later than 12 months after 
the date that the final outcome-based performance standards are 
published for job opportunities and basic skills training 
programs under part F of title IV of the Social Security Act 
(42 U.S.C. 681 et seq.).
    [(iii) The standards shall encourage States to serve those 
individuals who have greater barriers to employment and shall 
take into account the extent to which persons have elected to 
participate in employment and training programs under this 
paragraph. The standards shall require participants to make 
levels of efforts comparable to those required under the 
regulations set forth in section 273.7(f)(1) of title 7, Code 
of Federal Regulations in effect on January 1, 1991.
    [(iv) The performance standards in effect under 
subparagraph (K) shall remain in effect during the period 
beginning on October 1, 1988, and ending on the date the 
Secretary implements the outcome-based performance standards 
described in this subparagraph.
    [(v) A State agency shall be considered in compliance with 
applicable performance standards under subparagraph (K) if the 
State agency operates an employment and training program in a 
manner consistent with its approved plan and if the program 
requires participants to make levels of effort comparable to 
those required under the regulations set forth in section 
273.7(f)(1) of title 7, Code of Federal Regulations in effect 
on January 1, 1991.]
                    (K) Limitation on funding.--Notwithstanding 
                any other provision of this paragraph, the 
                amount of funds a State agency uses to carry 
                out this paragraph (including under 
                subparagraph (I)) for participants who are 
                receiving benefits under a State program funded 
                under part A of title IV of the Social Security 
                Act (42 U.S.C. 601 et seq.) shall not exceed 
                the amount of funds the State agency used in 
                fiscal year 1995 to carry out this paragraph 
                for participants who were receiving benefits in 
                fiscal year 1995 under a State program funded 
                under part A of title IV of the Act (42 U.S.C. 
                601 et seq.).
    [(M) (i)] (L) The Secretary shall ensure that State 
agencies comply with the requirements of this paragraph and 
section 11(e)(22).
    [(ii) If the Secretary determines that a State agency has 
failed, without good cause, to comply with such a requirement, 
including any failure to meet a performance standard under 
subparagraph (J), the Secretary may withhold from such State, 
in accordance with section 16 (a), (c), and (h), such funds as 
the Secretary determines to be appropriate, subject to 
administrative and judicial review under section 14.
    [(N)] (M) The facilities of the State public employment 
offices and agencies operating programs under the Job Training 
Partnership Act may be used to find employment and training 
opportunities for household members under the programs under 
this paragraph.
          * * * * * * *
    (f) No individual who is a member of a household otherwise 
eligible to participate in the food stamp program under this 
section shall be eligible to participate in the food stamp 
program as a member of that or any other household unless he or 
she is (1) a resident of the United States and (2) either (A) a 
citizen or (B) an alien lawfully admitted for permanent 
residence as an immigrant as defined by sections 101(a)(15) and 
101(a)(20) of the Immigration and Nationality Act (8 U.S.C. 
1101(a)(15) and 8 U.S.C. 1101(a)(20)), excluding, among others, 
alien visitors, tourists, diplomats, and students who enter the 
United States temporarily with no intention of abandoning their 
residence in a foreign country; or (C) an alien who entered the 
United States prior to June 30, 1948, or such subsequent date 
as is enacted by law, has continuously maintained his or her 
residence in the United States since then, and is not 
ineligible for citizenship, but who is deemed to be lawfully 
admitted for permanent residence as a result of an exercise of 
discretion by the Attorney General pursuant to section 249 of 
the Immigration and Nationality Act (8 U.S.C. 1259); or (D) an 
alien who has qualified for conditional entry pursuant to 
sections 207 and 208 of the Immigration and Nationality Act (8 
U.S.C. 1157 and 1158); or (E) an alien who is lawfully present 
in the United States as a result of an exercise of discretion 
by the Attorney General for emergent reasons or reasons deemed 
strictly in the public interest pursuant to section 212(d)(5) 
of the Immigration and Nationality Act (8 U.S.C. 1182(d)(5)); 
or (F) an alien within the United States as to whom the 
Attorney General has withheld deportation pursuant to section 
243 of the Immigration and Nationality Act (8 U.S.C. 1253(h)). 
No aliens other than the ones specifically described in clauses 
(B) through (F) of this subsection shall be eligible to 
participate in the food stamp program as a member of any 
household. [The income (less a pro rata share) and financial 
resources of the individual rendered ineligible to participate 
in the food stamp program under this subsection shall be 
considered in determining the eligibility and the value of the 
allotment of the household of which such individual is a 
member.] The State agency shall, at its option, consider either 
all income and financial resources of the individual rendered 
ineligible to participate in the food stamp program under this 
subsection, or such income, less a pro rata share, and the 
financial resources of the ineligible individual, to determine 
the eligibility and the value of the allotment of the household 
of which such individual is a member.
          * * * * * * *
    (i) Comparable Treatment for Disqualification.--
            (1) In general.--If a disqualification is imposed 
        on a member of a household for a failure of the member 
        to perform an action required under a Federal, State, 
        or local law relating to a means-tested public 
        assistance program, the State agency may impose the 
        same disqualification on the member of the household 
        under the food stamp program.
            (2) Rules and procedures.--If a disqualification is 
        imposed under paragraph (1) for a failure of an 
        individual to perform an action required under part A 
        of title IV of the Social Security Act (42 U.S.C. 601 
        et seq.), the State agency may use the rules and 
        procedures that apply under part A of title IV of the 
        Act to impose the same disqualification under the food 
        stamp program.
            (3) Application after disqualification period.--A 
        member of a household disqualified under paragraph (1) 
        may, after the disqualification period has expired, 
        apply for benefits under this Act and shall be treated 
        as a new applicant, except that a prior 
        disqualification under subsection (d) shall be 
        considered in determining eligibility.
    (j) Disqualification for Receipt of Multiple Food Stamp 
Benefits.--An individual shall be ineligible to participate in 
the food stamp program as a member of any household for a 10-
year period if the individual is found by a State agency to 
have made, or is convicted in a Federal or State court of 
having made, a fraudulent statement or representation with 
respect to the identity or place of residence of the individual 
in order to receive multiple benefits simultaneously under the 
food stamp program.
    (k) Disqualification of Fleeing Felons.--No member of a 
household who is otherwise eligible to participate in the food 
stamp program shall be eligible to participate in the program 
as a member of that or any other household during any period 
during which the individual is--
            (1) fleeing to avoid prosecution, or custody or 
        confinement after conviction, under the law of the 
        place from which the individual is fleeing, for a 
        crime, or attempt to commit a crime, that is a felony 
        under the law of the place from which the individual is 
        fleeing or that, in the case of New Jersey, is a high 
        misdemeanor under the law of New Jersey; or
            (2) violating a condition of probation or parole 
        imposed under a Federal or State law.
    (l) Custodial Parent's Cooperation With Child Support 
Agencies.--
            (1) In general.--At the option of a State agency, 
        subject to paragraphs (2) and (3), no natural or 
        adoptive parent or other individual (collectively 
        referred to in this subsection as ``the individual'') 
        who is living with and exercising parental control over 
        a child under the age of 18 who has an absent parent 
        shall be eligible to participate in the food stamp 
        program unless the individual cooperates with the State 
        agency administering the program established under part 
        D of title IV of the Social Security Act (42 U.S.C. 651 
        et seq.)--
                    (A) in establishing the paternity of the 
                child (if the child is born out of wedlock); 
                and
                    (B) in obtaining support for--
                            (i) the child; or
                            (ii) the individual and the child.
            (2) Good cause for noncooperation.--Paragraph (1) 
        shall not apply to the individual if good cause is 
        found for refusing to cooperate, as determined by the 
        State agency in accordance with standards prescribed by 
        the Secretary in consultation with the Secretary of 
        Health and Human Services. The standards shall take 
        into consideration circumstances under which 
        cooperation may be against the best interests of the 
        child.
            (3) Fees.--Paragraph (1) shall not require the 
        payment of a fee or other cost for services provided 
        under part D of title IV of the Social Security Act (42 
        U.S.C. 651 et seq.).
    (m) Noncustodial Parent's Cooperation With Child Support 
Agencies.--
            (1) In general.--At the option of a State agency, 
        subject to paragraphs (2) and (3), a putative or 
        identified noncustodial parent of a child under the age 
        of 18 (referred to in this subsection as ``the 
        individual'') shall not be eligible to participate in 
        the food stamp program if the individual refuses to 
        cooperate with the State agency administering the 
        program established under part D of title IV of the 
        Social Security Act (42 U.S.C. 651 et seq.)--
                    (A) in establishing the paternity of the 
                child (if the child is born out of wedlock); 
                and
                    (B) in providing support for the child.
            (2) Refusal to cooperate.--
                    (A) Guidelines.--The Secretary, in 
                consultation with the Secretary of Health and 
                Human Services, shall develop guidelines on 
                what constitutes a refusal to cooperate under 
                paragraph (1).
                    (B) Procedures.--The State agency shall 
                develop procedures, using guidelines developed 
                under subparagraph (A), for determining whether 
                an individual is refusing to cooperate under 
                paragraph (1).
            (3) Fees.--Paragraph (1) shall not require the 
        payment of a fee or other cost for services provided 
        under part D of title IV of the Social Security Act (42 
        U.S.C. 651 et seq.).
            (4) Privacy.--The State agency shall provide 
        safeguards to restrict the use of information collected 
        by a State agency administering the program established 
        under part D of title IV of the Social Security Act (42 
        U.S.C. 651 et seq.) to purposes for which the 
        information is collected.
    (n) Disqualification for Child Support Arrears.--
            (1) In general.--At the option of the State agency, 
        no individual shall be eligible to participate in the 
        food stamp program as a member of any household during 
        any month that the individual is delinquent in any 
        payment due under a court order for the support of a 
        child of the individual.
            (2) Exceptions.--Paragraph (1) shall not apply if--
                    (A) a court is allowing the individual to 
                delay payment; or
                    (B) the individual is complying with a 
                payment plan approved by a court or the State 
                agency designated under part D of title IV of 
                the Social Security Act (42 U.S.C. 651 et seq.) 
                to provide support for the child of the 
                individual.
    (o) Work Requirement.--
            (1) Definition of work program.--In this 
        subsection, the term ``work program'' means--
                    (A) a program under the Job Training 
                Partnership Act (29 U.S.C. 1501 et seq.);
                    (B) a program under section 236 of the 
                Trade Act of 1974 (19 U.S.C. 2296); or
                    (C) a program of employment and training 
                operated or supervised by a State or political 
                subdivision of a State that meets standards 
                approved by the Governor of the State, 
                including a program under section 6(d)(4), 
                other than a job search program or a job search 
                training program.
            (2) Work requirement.--Subject to the other 
        provisions of this subsection, no individual shall be 
        eligible to participate in the food stamp program as a 
        member of any household if, during the preceding 12-
        month period, the individual received food stamp 
        benefits for not less than 4 months during which the 
        individual did not--
                    (A) work 20 hours or more per week, 
                averaged monthly; or
                    (B) participate in and comply with the 
                requirements of a work program for 20 hours or 
                more per week, as determined by the State 
                agency; or
                    (C) participate in a program under section 
                20 or a comparable program established by a 
                State or political subdivision of a State.
            (3) Exception.--Paragraph (2) shall not apply to an 
        individual if the individual is--
                    (A) under 18 or over 50 years of age;
                    (B) medically certified as physically or 
                mentally unfit for employment;
                    (C) a parent or other member of a household 
                with responsibility for a dependent child;
                    (D) otherwise exempt under section 6(d)(2); 
                or
                    (E) a pregnant woman.
            (4) Waiver.--
                    (A) In general.--On the request of a State 
                agency, the Secretary may waive the 
                applicability of paragraph (2) to any group of 
                individuals in the State if the Secretary makes 
                a determination that the area in which the 
                individuals reside--
                            (i) has an unemployment rate of 
                        over 10 percent; or
                            (ii) does not have a sufficient 
                        number of jobs to provide employment 
                        for the individuals.
                    (B) Report.--The Secretary shall report the 
                basis for a waiver under subparagraph (A) to 
                the Committee on Agriculture of the House of 
                Representatives and the Committee on 
                Agriculture, Nutrition, and Forestry of the 
                Senate.
            (5) Subsequent eligibility.--
                    (A) In general.--Paragraph (2) shall cease 
                to apply to an individual if, during a 30-day 
                period, the individual--
                            (i) works 80 or more hours;
                            (ii) participates in and complies 
                        with the requirements of a work program 
                        for 80 or more hours, as determined by 
                        a State agency; or
                            (iii) participates in a program 
                        under section 20 or a comparable 
                        program established by a State or 
                        political subdivision of a State.
                    (B) Limitation.--During the subsequent 12-
                month period, the individual shall be eligible 
                to participate in the food stamp program for 
                not more than 4 months during which the 
                individual does not--
                            (i) work 20 hours or more per week, 
                        averaged monthly;
                            (ii) participate in and comply with 
                        the requirements of a work program for 
                        20 hours or more per week, as 
                        determined by the State agency; or
                            (iii) participate in a program 
                        under section 20 or a comparable 
                        program established by a State or 
                        political subdivision of a State.

                      ISSUANCE AND USE OF COUPONS

    Sec. 7. (a)  * * *
          * * * * * * *
    (i)[(1)(A) Any State agency may, with the approval of the 
Secretary, implement an on-line electronic benefit transfer 
system in which household benefits determined under section 
8(a) are issued from and stored in a central data bank and 
electronically accessed by household members at the point-of-
sale.
    [(B) No State agency may implement or expand an electronic 
benefit transfer system without prior approval from the 
Secretary.]
            (1) Electronic benefit transfers.--
                    (A) Implementation.--Each State agency 
                shall implement an electronic benefit transfer 
                system in which household benefits determined 
                under section 8(a) or 26 are issued from and 
                stored in a central databank before October 1, 
                2002, unless the Secretary provides a waiver 
                for a State agency that faces unusual barriers 
                to implementing an electronic benefit transfer 
                system.
                    (B) Timely implementation.--State agencies 
                are encouraged to implement an electronic 
                benefit transfer system under subparagraph (A) 
                as soon as practicable.
                    (C) State flexibility.--Subject to 
                paragraph (2), a State agency may procure and 
                implement an electronic benefit transfer system 
                under the terms, conditions, and design that 
                the State agency considers appropriate.
                    (D) Operation.--An electronic benefit 
                transfer system should take into account 
                generally accepted standard operating rules 
                based on--
                            (i) commercial electronic funds 
                        transfer technology;
                            (ii) the need to permit interstate 
                        operation and law enforcement 
                        monitoring; and
                            (iii) the need to permit monitoring 
                        and investigations by authorized law 
                        enforcement agencies.
    (2) The Secretary shall issue final regulations [effective 
no later than April 1, 1992,] that establish standards for the 
approval of such a system. The standards shall include--
            (A) determining the cost-effectiveness of the 
        system to ensure that its operational cost, including 
        the pro rata cost of capital expenditures and other 
        reasonable startup costs, does not exceed[, in any 1 
        year,] the operational cost of issuance systems in use 
        prior to the implementation of the [on-line] electronic 
        benefit transfer system;
            (B) defining the required level of recipient 
        protection regarding privacy, ease of use, and access 
        to and service in retail food stores;
            (C) the terms and conditions of participation by 
        retail food stores, financial institutions, and other 
        appropriate parties;
            [(D) system security;]
            (D)(i) measures to maximize the security of a 
        system using the most recent technology available that 
        the State agency considers appropriate and cost 
        effective and which may include personal identification 
        numbers, photographic identification on electronic 
        benefit transfer cards, and other measures to protect 
        against fraud and abuse; and
            (ii) effective not later than 2 years after the 
        effective date of this clause, to the extent 
        practicable, measures that permit a system to 
        differentiate items of food that may be acquired with 
        an allotment from items of food that may not be 
        acquired with an allotment.
            (E) system transaction interchange, reliability, 
        and processing speeds;
            (F) financial accountability;
            (G) the required testing of system operations prior 
        to implementation; [and]
            (H) the analysis of the results of system 
        implementation in a limited project area prior to 
        expansion[.]; and
            (I) procurement standards.
          * * * * * * *
            (7) Replacement of benefits.--Regulations issued by 
        the Secretary regarding the replacement of benefits and 
        liability for replacement of benefits under an 
        electronic benefit transfer system shall be similar to 
        the regulations in effect for a paper food stamp 
        issuance system.
            (8) Replacement card fee.--A State agency may 
        collect a charge for replacement of an electronic 
        benefit transfer card by reducing the monthly allotment 
        of the household receiving the replacement card.
            (9) Optional photographic identification.--
                    (A) In general.--A State agency may require 
                that an electronic benefit card contain a 
                photograph of 1 or more members of a household.
                    (B) Other authorized users.--If a State 
                agency requires a photograph on an electronic 
                benefit card under subparagraph (A), the State 
                agency shall establish procedures to ensure 
                that any other appropriate member of the 
                household or any authorized representative of 
                the household may utilize the card.
            (10) Application of anti-tying restrictions to 
        electronic benefit transfer systems.--
                    (A) In general.--A company shall not sell 
                or provide electronic benefit transfer 
                services, or fix or vary the consideration for 
                such services, on the condition or requirement 
                that the customer--
                            (i) obtain some additional point-
                        of-sale service from the company or any 
                        affiliate of the company; or
                            (ii) not obtain some additional 
                        point-of-sale service from a competitor 
                        of the company or competitor of any 
                        affiliate of the company.
                    (B) Definitions.--In this paragraph--
                            (i) Affiliate.--The term 
                        ``affiliate'' shall have the same 
                        meaning as in section 2(k) of the Bank 
                        Holding Company Act.
                            (ii) Company.--The term ``company'' 
                        shall have the same meaning as in 
                        section 106(a) of the Bank Holding 
                        Company Act Amendments of 1970, but 
                        shall not include a bank, bank holding 
                        company, or any subsidiary of a bank 
                        holding company.
                            (iii) Electronic benefit transfer 
                        service.--The term ``electronic benefit 
                        transfer service'' means the processing 
                        of electronic transfers of household 
                        benefits determined under section 8(a) 
                        or 26 where the benefits are--
                                    (I) issued from and stored 
                                in a central databank;
                                    (II) electronically 
                                accessed by household members 
                                at the point of sale; and
                                    (III) provided by a Federal 
                                or state government.
                            (iv) Point-of-sale service.--The 
                        term ``point-of-sale service'' means 
                        any product or service related to the 
                        electronic authorization and processing 
                        of payments for merchandise at a retail 
                        food store, including but not limited 
                        to credit or debit card services, 
                        automated teller machines, point-of-
                        sale terminals, or access to on-line 
                        systems.
                    (C) Consultation with the federal reserve 
                board.--Before promulgating regulations or 
                interpretations of regulations to carry out 
                this paragraph, the Secretary shall consult 
                with the Board of Governors of the Federal 
                Reserve System.

                           VALUE OF ALLOTMENT

    Sec. 8. (a) The value of the allotment which State agencies 
shall be authorized to issue to any households certified as 
eligible to participate in the food stamp program shall be 
equal to the cost to such households of the thrifty food plan 
reduced by an amount equal to 30 per centum of the household's 
income, as determined in accordance with section 5 (d) and (e) 
of this Act, rounded to the nearest lower whole dollar: 
Provided, That for households of one and two persons the 
minimum allotment shall be $10 per month[, and shall be 
adjusted on each October 1 to reflect the percentage change in 
the cost of the thrifty food plan without regard to the special 
adjustments under section 3(o) for the 12-month period ending 
the preceding June, with the result rounded to the nearest $5].
          * * * * * * *
    (c)(1)  * * *
    (2) As used in this subsection, the term ``initial month'' 
means (A) the first month for which an allotment is issued to a 
household, (B) the first month for which an allotment is issued 
to a household following any period [of more than one month] in 
which such household was not participating in the food stamp 
program under this Act after the expiration of a certification 
period or after the termination of the certification of a 
household, during a certification period, when the household 
ceased to be eligible after notice and an opportunity for a 
hearing under section 11(e)(10), and (C) in the case of a 
migrant or seasonal farmworker household, the first month for 
which allotment is issued to a household that applies following 
any period of more than 30 days in which such household was not 
participating in the food stamp program after previous 
participation in such program.
    [(3) A State agency--
            [(A) in the case of a household that is not 
        entitled in the month in which it applies to expedited 
        service under section 11(e)(9), may provide that an 
        eligible household applying after the 15th day of the 
        month shall receive, in lieu of its initial allotment 
        and its regular allotment for the following month, an 
        allotment that is the aggregate of the initial 
        allotment and the first regular allotment, which shall 
        be provided in accordance with paragraph (3) of section 
        11(e); and
            [(B) in the case of a household that is entitled in 
        the month in which it applies to expedited service 
        under section 11(e)(9), shall provide that an eligible 
        household applying after the 15th day of the month 
        shall receive, in lieu of its initial allotment and its 
        regular allotment for the following month, an allotment 
        that is the aggregate of the initial allotment and the 
        first regular allotment, which shall be provided in 
        accordance with paragraphs (3) and (9) of section 
        11(e).]
            (3) Optional combined allotment for expedited 
        households.--A State agency may provide to an eligible 
        household applying after the 15th day of a month, in 
        lieu of the initial allotment of the household and the 
        regular allotment of the household for the following 
        month, an allotment that is equal to the total amount 
        of the initial allotment and the first regular 
        allotment. The allotment shall be provided in 
        accordance with section 11(e)(3) in the case of a 
        household that is not entitled to expedited service and 
        in accordance with paragraphs (3) and (9) of section 
        11(e) in the case of a household that is entitled to 
        expedited service.
    [(d) A household against which a penalty has been imposed 
for an intentional failure to comply with a Federal, State, or 
local law relating to welfare or a public assistance program 
may not, for the duration of the penalty, receive an increased 
allotment as the result of a decrease in the household's income 
(as determined under sections 5(d) and 5(e)) to the extent that 
the decrease is the result of such penalty.
    [(e)(1) The Secretary may permit not more than five 
statewide projects (upon the request of a State) and not more 
than five projects in political subdivisions of States (upon 
the request of a State or political subdivision) to operate a 
program under which a household shall be considered to have 
satisfied the application requirements prescribed under section 
5(a) and the income and resource requirements prescribed under 
subsections (d) through (g) of section 5 if such household--
            [(A) includes one or more members who are 
        recipients of--
                    [(i) aid to families with dependent 
                children under part A of title IV of the Social 
                Security Act (42 U.S.C. 601 et seq.);
                    [(ii) supplemental security income under 
                title XVI of such Act (42 U.S.C. 1381 et seq.); 
                or
                    [(iii) medical assistance under title XIX 
                of such Act (42 U.S.C. 1396 et seq.); and
            [(B) has an income that does not exceed the 
        applicable income standard of eligibility described in 
        section 5(c).
    [(2) Except as provided in paragraph (3), a State or 
political subdivision that elects to operate a program under 
this subsection shall base the value of an allotment provided 
to a household under subsection (a) on--
            [(A)(i) the size of the household; and
            [(ii)(I) benefits paid to such household under a 
        State plan for aid to families with dependent children 
        approved under part A of title IV of the Social 
        Security Act; or
            [(II) the income standard of eligibility for 
        medical assistance under title XIX of such Act; or
            [(B) at the option of the State or political 
        subdivision, the standard of need for such size 
        household under the programs referred to in clause 
        (A)(ii).
    [(3) The Secretary shall adjust the value of allotments 
received by households under a program operated under this 
subsection to ensure that the average allotment by household 
size for households participating in such program and receiving 
such aid to families with dependent children, such supplemental 
security income, or such medical assistance, as the case may 
be, is not less than the average allotment that would have been 
provided under this Act but for the operation of this 
subsection, for each category of households, respectively, in a 
State or political subdivision, for any period during which 
such program is in operation.
    [(4) The Secretary shall evaluate the impact of programs 
operated under this subsection on recipient households, 
administrative costs, and error rates.
    [(5) The administrative costs of such programs shall be 
shared in accordance with section 16.
    [(6) In implementing this section, the Secretary shall 
consult with the Commissioner of Social Security and the 
Secretary of Health and Human Services to ensure that to the 
extent practicable, in the case of households participating in 
such programs, the processing of applications for, and 
determinations of eligibility to receive, food stamp benefits 
are simplified and are unified with the processing of 
applications for, and determinations of eligibility to receive, 
benefits under such titles of the Social Security Act (42 
U.S.C. 601 et seq.).]
    (d) Reduction of Public Assistance Benefits.--
            (1) In general.--If the benefits of a household are 
        reduced under a Federal, State, or local law relating 
        to a means-tested public assistance program for the 
        failure of a member of the household to perform an 
        action required under the law or program, for the 
        duration of the reduction--
                    (A) the household may not receive an 
                increased allotment as the result of a decrease 
                in the income of the household to the extent 
                that the decrease is the result of the 
                reduction; and
                    (B) the State agency may reduce the 
                allotment of the household by not more than 25 
                percent.
            (2) Rules and procedures.--If the allotment of a 
        household is reduced under this subsection for a 
        failure to perform an action required under part A of 
        title IV of the Social Security Act (42 U.S.C. 601 et 
        seq.), the State agency may use the rules and 
        procedures that apply under part A of title IV of the 
        Act to reduce the allotment under the food stamp 
        program.
    (e) Allotments for Households Residing in Centers.--
            (1) In general.--In the case of an individual who 
        resides in a center for the purpose of a drug or 
        alcoholic treatment program described in the last 
        sentence of section 3(i), a State agency may provide an 
        allotment for the individual to--
                    (A) the center as an authorized 
                representative of the individual for a period 
                that is less than 1 month; and
                    (B) the individual, if the individual 
                leaves the center.
            (2) Direct payment.--A State agency may require an 
        individual referred to in paragraph (1) to designate 
        the center in which the individual resides as the 
        authorized representative of the individual for the 
        purpose of receiving an allotment.

       APPROVAL OF RETAIL FOOD STORES AND WHOLESALE FOOD CONCERNS

    Sec. 9. (a)(1) Regulations issued pursuant to this Act 
shall provide for the submission of applications for approval 
by retail food stores and wholesale food concerns which desire 
to be authorized to accept and redeem coupons under the food 
stamp program and for the approval of those applicants whose 
participation will effectuate the purposes of the food stamp 
program. In determining the qualifications of applicants, there 
shall be considered among such other factors as may be 
appropriate, the following: (A) the nature and extent of the 
food business conducted by the applicant; (B) the volume of 
coupon business which may reasonably be expected to be 
conducted by the applicant food store or wholesale food 
concern; and (C) the business integrity and reputation of the 
applicant. Approval of an applicant shall be evidenced by the 
issuance to such applicant of a nontransferable certificate of 
approval. No retail food store or wholesale food concern of a 
type determined by the Secretary, based on factors that include 
size, location, and type of items sold, shall be approved to be 
authorized or reauthorized for participation in the food stamp 
program unless an authorized employee of the Department of 
Agriculture, a designee of the Secretary, or, if practicable, 
an official of the State or local government designated by the 
Secretary has visited the store or concern for the purpose of 
determining whether the store or concern should be approved or 
reauthorized, as appropriate.
          * * * * * * *
            (3) Authorization periods.--The Secretary shall 
        establish specific time periods during which 
        authorization to accept and redeem coupons, or to 
        redeem benefits through an electronic benefit transfer 
        system, shall be valid under the food stamp program.
          * * * * * * *
    (c) Regulations issued pursuant to this Act shall require 
an applicant retail food store or wholesale food concern to 
submit information, which may include relevant income and sales 
tax filing documents, which will permit a determination to be 
made as to whether such applicant qualifies, or continues to 
qualify, for approval under the provisions of this Act or the 
regulations issued pursuant to this Act. The regulations may 
require retail food stores and wholesale food concerns to 
provide written authorization for the Secretary to verify all 
relevant tax filings with appropriate agencies and to obtain 
corroborating documentation from other sources so that the 
accuracy of information provided by the stores and concerns may 
be verified. Regulations issued pursuant to this Act shall 
provide for safeguards which limit the use or disclosure of 
information obtained under the authority granted by this 
subsection to purposes directly connected with administration 
and enforcement of the provisions of this Act or the 
regulations issued pursuant to this Act, except that such 
information may be disclosed to any used by Federal law 
enforcement and investigative agencies and law enforcement and 
investigative agencies of a State government for the purposes 
of administering or enforcing this Act or any other Federal or 
State law and the regulations issued under this Act or such 
law, and State agencies that administer the special 
supplemental nutrition program for women, infants and children, 
authorized under section 17 of the Child Nutrition Act of 1966, 
for purposes of administering the provisions of that Act and 
the regulations issued under that Act. Any person who 
publishes, divulges, discloses, or makes known in any manner or 
to any extent not authorized by Federal law (including a 
regulation) any information obtained under this subsection 
shall be fined not more than $1,000 or imprisoned not more than 
1 year, or both. The regulations shall establish the criteria 
to be used by the Secretary to determine whether the 
information is needed. The regulations shall not prohibit the 
audit and examination of such information by the Comptroller 
General of the United States authorized by any other provision 
of law.
    (d) Any retail food store or wholesale food concern which 
has failed upon application to receive approval to participate 
in the food stamp program may obtain a hearing on such refusal 
as provided in section 14 of this Act. A retail food store or 
wholesale food concern that is denied approval to accept and 
redeem coupons because the store or concern does not meet 
criteria for approval established by the Secretary may not, for 
at least 6 months, submit a new application to participate in 
the program. The Secretary may establish a longer time period 
under the preceding sentence, including permanent 
disqualification, that reflects the severity of the basis of 
the denial.
          * * * * * * *

                             ADMINISTRATION

    Sec. 11. (a)  * * *
          * * * * * * *
    (e) The State plan of operation required under subsection 
(d) of this section shall provide, among such other provisions 
as may be required by regulation--
            (1)  * * *
            [(2) that each household which contacts a food 
        stamp office in person during office hours to make what 
        may reasonably be interpreted as an oral or written 
        request for food stamp assistance shall receive and 
        shall be permitted to file, on the same day that such 
        contact is first made, a simplified, uniform national 
        application form for participation in the food stamp 
        program designed by the Secretary, unless the Secretary 
        approves a deviation from that form by a particular 
        State agency because of the use by that agency of a 
        dual public assistance food stamp application form 
        pursuant to subsection (i) of this section, the 
        requirements of an agency's computer system, or other 
        exigencies as determined by the Secretary, and in 
        approving such deviation, the Secretary takes into 
        account whether such State forms are easy to use, brief 
        and readable. In consultation with the Secretary of 
        Health and Human Services, the Secretary shall develop 
        a program to provide assistance to States that request 
        assistance in the development of brief, simply-written 
        and readable application forms including application 
        forms that cover the food stamp program, the aid to 
        families with dependent children program under part A 
        of title IV of the Social Security Act (42 U.S.C. 601 
        et seq.), and medical assistance programs administered 
        by the Secretary of Health and Human Services under 
        title XIX of the Social Security Act (42 U.S.C. 1396 et 
        seq.). Each food stamp application form shall contain, 
        in plain and prominent language on its front cover, a 
        place where applicants can write their names, 
        addresses, and signatures, and (on or near its front 
        cover) explanations in understandable terms informing 
        households of their right to file the application 
        without immediately completing additional sections, 
        describing the expedited processing requirements of 
        section 11(e)(9) and informing households that benefits 
        are provided only from the date of application. Each 
        application form shall contain a description in 
        understandable terms in prominent and boldface 
        lettering of the appropriate civil and criminal 
        provisions dealing with violations of this Act, 
        including the penalties therefor, by members of an 
        eligible household. Each application shall also contain 
        in understandable terms and in prominent and boldface 
        lettering a statement that the information provided by 
        the applicant in connection with the application for a 
        coupon allotment will be subject to verification by 
        Federal, State, and local officials to determine if 
        such information is factual and that if any material 
        part of such information is incorrect, food stamps may 
        be denied to the applicant, and that the applicant may 
        be subjected to criminal prosecution for knowingly 
        providing incorrect information. The State agency shall 
        waive in-office interviews, on a household's request, 
        if a household is unable to appoint an authorized 
        representative pursuant to paragraph (7) and has no 
        adult household members able to come to the appropriate 
        State agency office because such members are elderly, 
        are mentally or physically handicapped, live in a 
        location not served by a certification office, or have 
        transportation difficulties or similar hardships as 
        determined by the State agency (including hardships due 
        to residing in a rural area, illness, care of a 
        household member, prolonged severe weather, or work or 
        training hours). If an in-office interview is waived, 
        the State agency may conduct a telephone interview or a 
        home visit. The State agency shall provide for 
        telephone contact by, mail delivery of forms to, and 
        mail return of forms by, households that have 
        transportation difficulties or similar hardships. The 
        State agency shall require that an adult representative 
        of each household that is applying for food stamp 
        benefits shall certify in writing, under penalty of 
        perjury, that the information contained in the 
        application is true and that all members of the 
        household are either citizens or are aliens eligible to 
        receive food stamps under section 6(f). The signature 
        of the adult under this section shall be deemed 
        sufficient to comply with any provision of Federal law 
        requiring household members to sign the application or 
        statements in connection with the application process. 
        The State agency shall provide a method of certifying 
        and issuing coupons to eligible households that do not 
        reside in permanent dwellings or who do not have fixed 
        mailing addresses. In carrying out the preceding 
        sentence, the State agency shall take such steps as are 
        necessary to ensure that participation in the food 
        stamp program is limited to eligible households;]
            (2)(A) that the State agency shall establish 
        procedures governing the operation of food stamp 
        offices that the State agency determines best serve 
        households in the State, including households with 
        special needs, such as households with elderly or 
        disabled members, households in rural areas with low-
        income members, homeless individuals, households 
        residing on reservations, and households in areas in 
        which a substantial number of members of low-income 
        households speak a language other than English;
            (B) that in carrying out subparagraph (A), a State 
        agency--
                    (i) shall provide timely, accurate, and 
                fair service to applicants for, and 
                participants in, the food stamp program;
                    (ii) shall develop an application 
                containing the information necessary to comply 
                with this Act;
                    (iii) shall permit an applicant household 
                to apply to participate in the program on the 
                same day that the household first contacts a 
                food stamp office in person during office 
                hours;
                    (iv) shall consider an application that 
                contains the name, address, and signature of 
                the applicant to be filed on the date the 
                applicant submits the application;
                    (v) shall require that an adult 
                representative of each applicant household 
                certify in writing, under penalty of perjury, 
                that--
                            (I) the information contained in 
                        the application is true; and
                            (II) all members of the household 
                        are citizens or are aliens eligible to 
                        receive food stamps under section 6(f);
                    (vi) shall provide a method of certifying 
                and issuing coupons to eligible homeless 
                individuals, to ensure that participation in 
                the food stamp program is limited to eligible 
                households; and
                    (vii) may establish operating procedures 
                that vary for local food stamp offices to 
                reflect regional and local differences within 
                the State;
            (C) that nothing in this Act shall prohibit the use 
        of signatures provided and maintained electronically, 
        storage of records using automated retrieval systems 
        only, or any other feature of a State agency's 
        application system that does not rely exclusively on 
        the collection and retention of paper applications or 
        other records;
            (D) that the signature of any adult under this 
        paragraph shall be considered sufficient to comply with 
        any provision of Federal law requiring a household 
        member to sign an application or statement;
            (3) that the State agency shall thereafter promptly 
        determine the eligibility of each applicant household 
        by way of verification of income other than that 
        determined to be excluded by section 5(d) of this Act 
        (in part through the use of the information, if any, 
        obtained under section 16(e) of this Act), household 
        size (in any case such size is questionable), and such 
        other eligibility factors as the Secretary determines 
        to be necessary to implement sections 5 and 6 of this 
        Act, although the State agency may verify prior to 
        certification, whether questionable or not, the size of 
        any applicant household and such other eligibility 
        factors as the State agency determines are necessary, 
        so as to complete certification of and provide an 
        allotment retroactive to the period of application to 
        any eligible household not later than thirty days 
        following its filing of an application, and that the 
        State agency [shall--
                    [(A) provide each] shall provide each 
                applicant household, at the time of 
                application, a clear written statement 
                explaining what acts the household must perform 
                to cooperate in obtaining verification and 
                otherwise completing the application process;
                    [(B) assist each applicant household in 
                obtaining appropriate verification and 
                completing the application process;
                    [(C) not require any household to submit 
                additional proof of a matter on which the State 
                agency already has current verification as 
                determined under regulations issued by the 
                Secretary, unless the State agency has reason 
                to believe that the information possessed by 
                the agency is inaccurate, incomplete, or 
                inconsistent;
                    [(D) subject to subparagraph (E), not deny 
                any application for participation under this 
                program solely because of the failure of a 
                person outside the household to cooperate 
                (other than an individual failing to cooperate 
                who would otherwise be a household member but 
                for the operation of any of the individual 
                disqualification provisions of subsections (b), 
                (d), (e), (f), and (g) of section 6); and
                    [(E) process applications if a household 
                complies with the requirements of the first 
                sentence of section 6(c), by taking appropriate 
                steps to verify information otherwise required 
                to be verified under this Act,
        [and that the State agency shall provide the household, 
        at the time of each certification and recertification, 
        with a statement describing the reporting 
        responsibilities of the household under this Act, and 
        provide a toll-free or local telephone number, or a 
        telephone number at which collect calls will be 
        accepted by the State agency, at which the household 
        may reach an appropriate representative of the State 
        agency. Under rules prescribed by the Secretary, a 
        State agency shall develop standard estimates of the 
        shelter expenses that may reasonably be expected to be 
        incurred by households in which all members are 
        homeless but that are not receiving free shelter 
        throughout the month. The Secretary may issue 
        regulations to preclude the use of the estimates for 
        households with extremely low shelter costs for whom 
        the following sentence shall not apply. A State agency 
        shall use the estimates in determining the allotments 
        of the households, unless a household verifies higher 
        expenses;]
          * * * * * * *
            (6) [that (A) the] that--
                    (A) the State agency shall undertake the 
                certification of applicant households in 
                accordance with the general procedures 
                prescribed by the Secretary in the regulations 
                issued pursuant to this [Act; (B) the] Act; and
                    (B) the State agency personnel utilized in 
                undertaking such certification shall be 
                employed in accordance with the current 
                standards for a Merit System of Personnel 
                Administration or any standards later 
                prescribed by the [United States Civil Service 
                Commission] Office of Personnel Management 
                pursuant to section 208 of the 
                Intergovernmental Personnel Act of 1970 
                modifying or superseding such standards 
                relating to the establishment and maintenance 
                of personnel standards on a merit basis; [(C) 
                the State agency shall provide a continuing, 
                comprehensive program of training for all 
                personnel undertaking such certification so 
                that eligible households are promptly and 
                accurately certified to receive the allotments 
                for which they are eligible under this Act; (D) 
                the State agency, at its option, may undertake 
                intensive training to ensure that State agency 
                personnel who undertake the certification of 
                households that include a member who engages in 
                farming are qualified to perform such 
                certification; and (E) at its option, the State 
                agency may provide, or contract for the 
                provision of, training and assistance to 
                persons working with volunteer or nonprofit 
                organizations that provide program information 
                activities or eligibility screening to persons 
                potentially eligible for food stamps;]
          * * * * * * *
            (8) safeguards which limit the use or disclosure of 
        information obtained from applicant households to 
        persons directly connected with the administration or 
        enforcement of the provisions of this Act, regulations 
        issued pursuant to this Act, Federal assistance 
        programs, or federally assisted State programs, except 
        [that (A) such] that--
                    (A) the safeguards shall not prevent the 
                use or disclosure of such information to the 
                Comptroller General of the United States for 
                audit and examination authorized by any other 
                provision of [law, (B) notwithstanding] law;
                    (B) notwithstanding any other provision of 
                law, all information obtained under this Act 
                from an applicant household shall be made 
                available, upon request, to local, State or 
                Federal law enforcement officials for the 
                purpose of investigating an alleged violation 
                of this Act or any regulation issued under this 
                [Act, and (C) such] Act;
                    (C) the safeguards shall not prevent the 
                use by, or disclosure of such information, to 
                agencies of the Federal Government (including 
                the United States Postal Service) for purposes 
                of collecting the amount of an overissuance of 
                coupons, as determined under section 13(b) of 
                this Act [and excluding claims arising from an 
                error of the State agency, that has not been 
                recovered pursuant to such section], from 
                Federal pay (including salaries and pensions) 
                as authorized pursuant to section 5514 of title 
                5 of the United States Code or a Federal income 
                tax refund as authorized by section 3720A of 
                title 31, United States Code;
                    (D) notwithstanding any other provision of 
                law, the address, social security number, and, 
                if available, photograph of any member of a 
                household shall be made available, on request, 
                to any Federal, State, or local law enforcement 
                officer if the officer furnishes the State 
                agency with the name of the member and notifies 
                the agency that--
                            (i) the member--
                                    (I) is fleeing to avoid 
                                prosecution, or custody or 
                                confinement after conviction, 
                                for a crime (or attempt to 
                                commit a crime) that, under the 
                                law of the place the member is 
                                fleeing, is a felony (or, in 
                                the case of New Jersey, a high 
                                misdemeanor), or is violating a 
                                condition of probation or 
                                parole imposed under Federal or 
                                State law; or
                                    (II) has information that 
                                is necessary for the officer to 
                                conduct an official duty 
                                related to subclause (I);
                            (ii) locating or apprehending the 
                        member is an official duty; and
                            (iii) the request is being made in 
                        the proper exercise of an official 
                        duty; and
                    (E) the safeguards shall not prevent 
                compliance with paragraph (16);
            (9) that the State agency shall--
                    (A) provide coupons no later than [five 
                days] 7 days after the date of application to 
                any household which--
                            (i)(I) has gross income that is 
                        less than $150 per month; or
                            (II) is a destitute migrant or a 
                        seasonal farmworker household in 
                        accordance with the regulations 
                        governing such households in effect 
                        July 1, 1982; and
                            (ii) has liquid resources that do 
                        not exceed $100; and
                    [(B) provide coupons no later than five 
                days after the date of application to any 
                household in which all members are homeless 
                individuals and that meets the income and 
                resource criteria for coupons under this Act;
                    [(C) provide coupons no later than five 
                days after the date of application to any 
                household that has a combined gross income and 
                liquid resources that is less than the monthly 
                rent, or mortgage, and utilities of the 
                household; and
                    [(D)] (B) to the extent practicable, verify 
                the income and liquid resources of a household 
                referred to in subparagraph (A)[, (B), or (C)] 
                prior to issuance of coupons to the household;
            (10) for the granting of a fair hearing and a 
        prompt determination thereafter to any household 
        aggrieved by the action of the State agency under any 
        provision of its plan of operation as it affects the 
        participation of such household in the food stamp 
        program or by a claim against the household for an 
        overissuance: Provided, That any household which timely 
        requests such a fair hearing after receiving individual 
        notice of agency action reducing or terminating its 
        benefits within the household's certification period 
        shall continue to participate and receive benefits on 
        the basis authorized immediately prior to the notice of 
        adverse action until such time as the fair hearing is 
        completed and an adverse decision rendered or until 
        such time as the household's certification period 
        terminates, whichever occurs earlier, except that in 
        any case in which the State agency receives from the 
        household a written statement containing information 
        that clearly requires a reduction or termination of the 
        household's benefits, the State agency may act 
        immediately to reduce or terminate the household's 
        benefits and may provide notice of its action to the 
        household as late as the date on which the action 
        becomes effective. At the option of a State, at any 
        time prior to a fair hearing determination under this 
        paragraph, a household may withdraw, orally or in 
        writing, a request by the household for the fair 
        hearing. If the withdrawal request is an oral request, 
        the State agency shall provide a written notice to the 
        household confirming the withdrawal request and 
        providing the household with an opportunity to request 
        a hearing;
          * * * * * * *
            [(14) that the State agency shall prominently 
        display in all food stamp and public assistance offices 
        posters prepared or obtained by the Secretary 
        describing the information contained in subparagraphs 
        (A) through (D) of this paragraph and shall make 
        available in such offices for home use pamphlets 
        prepared or obtained by the Secretary listing (A) foods 
        that contain substantial amounts of recommended daily 
        allowances of vitamins, minerals, and protein for 
        children and adults; (B) menus that combine such foods 
        into meals; (C) details on eligibility for other 
        programs administered by the Secretary that provide 
        nutrition benefits; and (D) general information on the 
        relationship between health and diet;
            [(15)] (14) that the State agency shall specify a 
        plan of operation for providing food stamps for 
        households that are victims of a disaster; that such 
        plan shall include, but not be limited to, procedures 
        for informing the public about the disaster program and 
        how to apply for its benefits, coordination with 
        Federal and private disaster relief agencies and local 
        government officials, application procedures to reduce 
        hardship and inconvenience and deter fraud, and 
        instruction of caseworkers in procedures for 
        implementing and operating the disaster program;
            [(16)] (15) that the State agency shall require 
        each household certified as eligible to participate by 
        methods other than the out-of-office methods specified 
        in the fourth sentence of paragraph (2) of this 
        subsection in those project areas or parts of project 
        areas in which the Secretary, in consultation with the 
        Department's Inspector General, finds that it would be 
        useful to protect the program's integrity and would be 
        cost effective, to present a photographic 
        identification card when using its authorization card 
        in order to receive its coupons. The State agency may 
        permit a member of a household to comply with this 
        paragraph by presenting a photographic identification 
        card used to receive assistance under a welfare or 
        public assistance program;
            [(17)] (16) notwithstanding paragraph (8) of this 
        subsection, for the immediate reporting to the 
        Immigration and Naturalization Service by the State 
        agency of a determination by personnel responsible for 
        the certification or recertification of households that 
        any member of a household is ineligible to receive food 
        stamps because that member is present in the United 
        States in violation of the Immigration and Nationality 
        Act;
            [(18)] (17) at the option of the State agency, for 
        the establishment and operation of an automatic data 
        processing and information retrieval system that meets 
        such conditions as the Secretary may prescribe and that 
        is designed to provide efficient and effective 
        administration of the food stamp program;
            [(19) that information is] (18) at the option of 
        the State agency, that information may be requested and 
        exchanged for purposes of income and eligibility 
        verification in accordance with a State system which 
        meets the requirements of section 1137 of the Social 
        Security Act and that any additional information 
        available from agencies administering State 
        unemployment compensation laws under the provisions of 
        section 303(d) of the Social Security Act [shall be 
        requested] may be requested and utilized by the State 
        agency (described in section 3(n)(1) of this Act) to 
        the extent permitted under the provisions of section 
        303(d) of the Social Security Act;
            [(20)] (19) that, in project areas or parts thereof 
        where authorization cards are used, and eligible 
        households are required to present photographic 
        identification cards in order to receive their coupons, 
        the State agency shall include, in any agreement or 
        contract with a coupon issuer, a provision that (A) the 
        issuer shall (i) require the presenter to furnish a 
        photographic identification card at the time the 
        authorization card is presented, and (ii) record on the 
        authorization card the identification number shown on 
        the photographic identification card; and (B) if the 
        State agency determines that the authorization card has 
        been stolen or otherwise was not received by a 
        household certified as eligible, the issuer shall be 
        liable to the State agency for the face value of any 
        coupons issued in the transaction in which such card is 
        used and the issuer fails to comply with the 
        requirements of clause (A) of this paragraph;
            [(21)] (20) that the State agency shall establish a 
        system and take action on a periodic basis to verify 
        and otherwise assure that an individual does not 
        receive coupons in more than one jurisdiction within 
        the State;
            [(22)] (21) the plans of the State agency for 
        carrying out employment and training programs under 
        section 6(d)(4), including the nature and extent of 
        such programs, the geographic areas and households to 
        be covered under such program, and the basis, including 
        any cost information, for exemptions of categories and 
        individuals and for the choice of employment and 
        training program components reflected in the plans;
            [(23)] (22) in a project area in which 5,000 or 
        more households participate in the food stamp program, 
        for the establishment and operation of a unit for the 
        detection of fraud in the food stamp program, including 
        the investigation, and assistance in the prosecution, 
        of such fraud;
            [(24)] (23) at the option of the State, for 
        procedures necessary to obtain payment of uncollected 
        overissuance of coupons from unemployment compensation 
        pursuant to section 13(c); [and]
            [(25) a procedure for designating project areas or 
        parts of project areas that are rural and in which low-
        income persons face substantial difficulties in 
        obtaining transportation. The State agency shall 
        designate the areas according to procedures approved by 
        the Secretary. In each area so designated, the State 
        agency shall provide for the issuance of coupons by 
        mail to all eligible households in the area, except 
        that any household with mail losses exceeding levels 
        established by the Secretary shall not be entitled to 
        such a mailing and the State agency shall not be 
        required to issue coupons by mail in those localities 
        within such area where the mail loss rates exceed 
        standards set by the Secretary.]
            (24) the guidelines the State agency uses in 
        carrying out section 6(i); and
            (25) if a State elects to carry out a Simplified 
        Food Stamp Program under section 26, the plans of the 
        State agency for operating the program, including--
                    (A) the rules and procedures to be followed 
                by the State agency to determine food stamp 
                benefits;
                    (B) how the State agency will address the 
                needs of households that experience high 
                shelter costs in relation to the incomes of the 
                households; and
                    (C) a description of the method by which 
                the State agency will carry out a quality 
                control system under section 16(c).
          * * * * * * *
    (g) If the Secretary determines, upon information received 
by the Secretary, investigation initiated by the Secretary, or 
investigation that the Secretary shall initiate upon receiving 
sufficient information evidencing a pattern of lack of 
compliance by a State agency of a type specified in this 
subsection, that in the administration of the food stamp 
program there is a failure by a State agency without good cause 
to comply with any of the provisions of this Act, the 
regulations issued pursuant to this Act, the State plan of 
operation submitted pursuant to subsection (d) of this section, 
the State plan for automated data processing submitted pursuant 
to subsection (o)(2) of this section, or [the Secretary's 
standards for the efficient and effective administration of the 
program established under section 16(b)(1) or] the requirements 
established pursuant to section 23 of this Act, the Secretary 
shall immediately inform such State agency of such failure and 
shall allow the State agency a specified period of time for the 
correction of such failure. If the State agency does not 
correct such failure within that specified period, the 
Secretary may refer the matter to the Attorney General with a 
request that injunctive relief be sought to require compliance 
forthwith by the State agency and, upon suit by the Attorney 
General in an appropriate district court of the United States 
having jurisdiction of the geographic area in which the State 
agency is located and a showing that noncompliance has 
occurred, appropriate injunctive relief shall issue, and, 
whether or not the Secretary refers such matter to the Attorney 
General, the Secretary shall proceed to withhold from the State 
such funds authorized under sections 16(a), 16(c), and 16(g) of 
this Act as the Secretary determines to be appropriate, subject 
to administrative and judicial review under section 14 of this 
Act.
          * * * * * * *
    [(i) Notwithstanding any other provision of law, the 
Secretary, the Commissioner of Social Security and the 
Secretary of Health and Human Services shall develop a system 
by which (1) a single interview shall be conducted to determine 
eligibility for the food stamp program and the aid to families 
with dependent children program under part A of title IV of the 
Social Security Act; (2)]
    (i) Application and Denial Procedures.--
            (1) Application procedures.--Notwithstanding any 
        other provision of law, households in which all members 
        are applicants for or recipients of supplemental 
        security income shall be informed of the availability 
        of benefits under the food stamp program and be 
        assisted in making a simple application to participate 
        in such program at the social security office and be 
        certified for eligibility utilizing information 
        contained in files of the Social Security 
        Administration[; (3) households in which all members 
        are included in a federally aided public assistance or 
        State or local general assistance grant in a State that 
        has a single State-wide general assistance application 
        form shall have their application for participation in 
        the food stamp program contained in the public 
        assistance or general assistance application form, and 
        households applying for a local general assistance 
        grant in a local jurisdiction in which the agency 
        administering the general assistance program also 
        administers the food stamp program shall be provided an 
        application for participation in the food stamp program 
        at the time of their application for general 
        assistance, along with information concerning how to 
        apply for the food stamp program; and (4) new 
        applicants, as well as households which have recently 
        lost or been denied eligibility for public assistance 
        or general assistance, shall be certified for 
        participation in the food stamp program based on 
        information in the public assistance or general 
        assistance case file to the extent that reasonably 
        verified information is available in such case file. In 
        addition to implementing paragraphs (1) through (4), 
        the State agency shall inform applicants for benefits 
        under part A of title IV of the Social Security Act (42 
        U.S.C. 601 et seq.) that such applicants may file, 
        along with their application for such benefits, an 
        application for benefits under this Act, and that if 
        such applicants file, they shall have a single 
        interview for food stamps and for benefits under part A 
        of title IV of the Social Security Act. No].
            (2) Denial and termination.--Other than in a case 
        of disqualification as a penalty for failure to comply 
        with a public assistance program rule or regulation, no 
        household shall have its application to participate in 
        the food stamp program denied nor its benefits under 
        the food stamp program terminated solely on the basis 
        that its application to participate has been denied or 
        its benefits have been terminated under any of the 
        programs carried out under the statutes specified in 
        the second sentence of section 5(a) and without a 
        separate determination by the State agency that the 
        household fails to satisfy the eligibility requirements 
        for participation in the food stamp program.
          * * * * * * *
    (p) State Verification Option.--Notwithstanding any other 
provision of law, in carrying out the food stamp program, a 
State agency shall not be required to use an income and 
eligibility or an immigration status verification system 
established under section 1137 of the Social Security Act (42 
U.S.C. 1320b-7).

 CIVIL MONEY PENALTIES AND DISQUALIFICATION OF RETAIL FOOD STORES AND 
                        WHOLESALE FOOD CONCERNS

    Sec. 12. (a) Any approved retail food store or wholesale 
food concern may be disqualified for a specified period of time 
from further participation in the food stamp program, or 
subjected to a civil money penalty of up to $10,000 for each 
violation if the Secretary determines that its disqualification 
would cause hardship to food stamp households, on a finding, 
made as specified in the regulations, that such store or 
concern has violated any of the provisions of this Act or the 
regulations issued pursuant to this Act. Regulations issued 
pursuant to this Act shall provide criteria for the finding of 
violations and the suspension or disqualification of a retail 
food store or wholesale food concern on the basis of evidence 
which may include, but is not limited to, facts established 
through on-site investigations, inconsistent redemption data or 
evidence obtained through transaction reports under electronic 
benefit transfer systems.
    (b) Disqualification under subsection (a) shall be--
            (1) for a reasonable period of time, of no less 
        than six months nor more than five years, upon the 
        first occasion of disqualification;
            (2) for a reasonable period of time, of no less 
        than twelve months nor more than ten years, upon the 
        second occasion of disqualification; [and]
            (3) permanent upon--
                    (A)  * * *
          * * * * * * *
                    (C) a finding of the sale of firearms, 
                ammunition, explosives, or controlled substance 
                (as defined in section 802 of title 21, United 
                States Code) for coupons, except that the 
                Secretary shall have the discretion to impose a 
                civil money penalty of up to $20,000 for each 
                violation (except that the amount of civil 
                money penalties imposed for violations 
                occurring during a single investigation may not 
                exceed $40,000) in lieu of disqualification 
                under this subparagraph if the Secretary 
                determines that there is substantial evidence 
                (including evidence that neither the ownership 
                nor management of the store or food concern was 
                aware of, approved, benefited from, or was 
                involved in the conduct or approval of the 
                violation) that the store or food concern had 
                an effective policy and program in effect to 
                prevent violations of this Act[.]; and
            (4) for a reasonable period of time to be 
        determined by the Secretary, including permanent 
        disqualification, on the knowing submission of an 
        application for the approval or reauthorization to 
        accept and redeem coupons that contains false 
        information about a substantive matter that was a part 
        of the application.
          * * * * * * *
    (g) Disqualification of Retailers Who Are Disqualified 
Under the WIC Program.--
            (1) In general.--The Secretary shall issue 
        regulations providing criteria for the disqualification 
        under this Act of an approved retail food store and a 
        wholesale food concern that is disqualified from 
        accepting benefits under the special supplemental 
        nutrition program for women, infants, and children 
        established under section 17 of the Child Nutrition Act 
        of 1966 (7 U.S.C. 1786).
            (2) Terms.--A disqualification under paragraph 
        (1)--
                    (A) shall be for the same length of time as 
                the disqualification from the program referred 
                to in paragraph (1);
                    (B) may begin at a later date than the 
                disqualification from the program referred to 
                in paragraph (1); and
                    (C) notwithstanding section 14, shall not 
                be subject to judicial or administrative 
                review.

                  COLLECTION AND DISPOSITION OF CLAIMS

    Sec. 13. (a)  * * *
    [(b)(1)(A) In the case of any ineligibility determination 
under section 6(b) of this Act, the household of which such 
ineligible individual is a member is required to agree to a 
reduction in the allotment of the household of which such 
individual is a member, or payment in cash, in accordance with 
a schedule determined by the Secretary, that will be sufficient 
to reimburse the Federal Government for the value of any 
overissuance of coupons resulting from the activity that was 
the basis of the ineligibility determination. If a household 
refuses to make an election on the date of receipt (or, if the 
date of receipt is not a business day, on the next business 
day) of a demand for an election, or elects to make a payment 
in cash under the provisions of the preceding sentence and 
fails to do so, the household shall be subject to an allotment 
reduction.
    [(B) State agencies shall collect any claim against a 
household arising from the overissuance of coupons based on an 
ineligibility determination under section 6(b), other than 
claims collected pursuant to subparagraph (A), by using other 
means of collection, unless the State agency demonstrates to 
the satisfaction of the Secretary that such other means are not 
cost effective.
    [(2)(A) State agencies shall collect any claim against a 
household arising from the overissuance of coupons, other than 
claims the collection of which is provided for in paragraph (1) 
of this subsection and claims arising from an error of the 
State agency, by reducing the monthly allotments of the 
household, except that the household shall be given notice 
permitting it to elect another means of repayment and given 10 
days to make such an election before the State agency commences 
action to reduce the household's monthly allotment. These 
collections shall be limited to 10 per centum of the monthly 
allotment (or $10 per month, whenever that would result in a 
faster collection rate).
    [(B) State agencies may collect any claim against a 
household arising from the overissuance of coupons, other than 
claims collected pursuant to paragraph (1) or subparagraph (A), 
by using other means of collection.]
    (b) Collection of Overissuances.--
            (1) In general.--Except as otherwise provided in 
        this subsection, a State agency shall collect any 
        overissuance of coupons issued to a household by--
                    (A) reducing the allotment of the 
                household;
                    (B) withholding amounts from unemployment 
                compensation from a member of the household 
                under subsection (c);
                    (C) recovering from Federal pay or a 
                Federal income tax refund under subsection (d); 
                or
                    (D) any other means.
            (2) Cost effectiveness.--Paragraph (1) shall not 
        apply if the State agency demonstrates to the 
        satisfaction of the Secretary that all of the means 
        referred to in paragraph (1) are not cost effective.
            (3) Maximum reduction absent fraud.--If a household 
        received an overissuance of coupons without any member 
        of the household being found ineligible to participate 
        in the program under section 6(b)(1) and a State agency 
        elects to reduce the allotment of the household under 
        paragraph (1)(A), the State agency shall not reduce the 
        monthly allotment of the household under paragraph 
        (1)(A) by an amount in excess of the greater of--
                    (A) 10 percent of the monthly allotment of 
                the household; or
                    (B) $10.
            (4) Procedures.--A State agency shall collect an 
        overissuance of coupons issued to a household under 
        paragraph (1) in accordance with the requirements 
        established by the State agency for providing notice, 
        electing a means of payment, and establishing a time 
        schedule for payment.
          * * * * * * *
    (d) The amount of an overissuance of coupons [as determined 
under subsection (b) and except for claims arising from an 
error of the State agency,], as determined under subsection 
(b)(1), that has not been recovered pursuant to such subsection 
may be recovered from Federal pay (including salaries and 
pensions) as authorized by section 5514 of title 5 of the 
United States Code or a Federal income tax refund as authorized 
by section 3720A of title 31, United States Code.

                   ADMINISTRATIVE AND JUDICIAL REVIEW

    Sec. 14. (a)(1) Whenever an application of a retail food 
store or wholesale food concern to participate in the food 
stamp program is denied pursuant to section 9 of this Act, or a 
retail food store or wholesale food concern is disqualified or 
subjected to a civil money penalty under the provisions of 
section 12 of this Act, or a retail food store or wholesale 
food concern forfeits a bond under section 12(d) of this Act, 
or all or part of any claim of a retail food store or wholesale 
food concern is denied under the provisions of section 13 of 
this Act, or a claim against a State agency is stated pursuant 
to the provisions of section 13 of this Act, notice of such 
administrative action shall be issued to the retail food store, 
wholesale food concern, or State agency involved.
    (2) Such notice shall be delivered by certified mail or 
personal service.
    (3) If such store, concern, or State agency is aggrieved by 
such action, it may, in accordance with regulations promulgated 
under this Act, within ten days of the date of delivery of such 
notice, file a written request for an opportunity to submit 
information in support of its position to such person or 
persons as the regulations may designate.
    (4) If such a request is not made or if such store, 
concern, or State agency fails to submit information in support 
of its position after filing a request, the administrative 
determination shall be final.
    (5) If such request is made by such store, concern, or 
State agency, such information as may be submitted by the 
store, concern, or State agency, as well as such other 
information as may be available, shall be reviewed by the 
person or persons designated by the Secretary, who shall, 
subject to the right of judicial review hereinafter provided, 
make a determination which shall be final and which shall take 
effect thirty days after the date of the delivery or service of 
such final notice of determination.
    (6) Determinations regarding claims made pursuant to 
section 16(c) (including determinations as to whether there is 
good cause for not imposing all or a portion of the penalty) 
shall be made on the record after opportunity for an agency 
hearing in accordance with section 556 and 557 of title 5, 
United States Code, in which one or more administrative law 
judges appointed pursuant to section 3105 of such title shall 
preside over the taking of evidence.
    (7) Such judges shall have authority to issue and enforce 
subpoenas in the manner prescribed in sections 13 (c) and (d) 
of the Perishable Agricultural Commodities Act of 1930 (7 
U.S.C. 499m (c) and (d)) and to appoint expert witnesses under 
the provisions of Rule 706 of the Federal Rules of Evidence.
    (8) The Secretary may not limit the authority of such 
judges presiding over determinations regarding claims made 
pursuant to section 16(c).
    (9) The Secretary shall provide a summary procedure for 
determinations regarding claims made pursuant to section 16(c) 
in amounts less than $50,000.
    (10) Such summary procedure need not include an oral 
hearing.
    (11) On a petition by the State agency or sua sponte, the 
Secretary may permit the full administrative review procedure 
to be used in lieu of such summary review procedure for a claim 
of less than $50,000.
    (12) Subject to the right of judicial review hereinafter 
provided, a determination made by an administrative law judge 
regarding a claim made pursuant to section 16(c) shall be final 
and shall take effect thirty days after the date of the 
delivery or service of final notice of such determination.
    (13) If the store, concern, or State agency feels aggrieved 
by such final determination, it may obtain judicial review 
thereof by filing a complaint against the United States in the 
United States court for the district in which it resides or is 
engaged in business, or, in the case of a retail food store or 
wholesale food concern, in any court of record of the State 
having competent jurisdiction, within thirty days after the 
date of delivery or service of the final notice of 
determination upon it, requesting the court to set aside such 
determination.
    (14) The copy of the summons and complaint required to be 
delivered to the official or agency whose order is being 
attacked shall be sent to the Secretary or such person or 
persons as the Secretary may designate to receive service of 
process.
    (15) The suit in the United States district court or State 
court shall be a trial de novo by the court in which the court 
shall determine the validity of the questioned administrative 
action in issue, except that judicial review of determinations 
regarding claims made pursuant to section 16(c) shall be a 
review on the administrative record.
    (16) If the court determines that such administrative 
action is invalid, it shall enter such judgment or order as it 
determines is in accordance with the law and the evidence.
    (17) During the pendency of such judicial review, or any 
appeal therefrom, the administrative action under review shall 
be and remain in full force and effect, unless on application 
to the court on not less than ten days' notice, and after 
hearing thereon and a consideration by the court of the 
applicant's likelihood of prevailing on the merits and of 
irreparable injury, the court temporarily stays such 
administrative action pending disposition of such trial or 
appeal.
            (18) Suspension of stores pending review.--
        Notwithstanding any other provision of this subsection, 
        any permanent disqualification of a retail food store 
        or wholesale food concern under paragraph (3) or (4) of 
        section 12(b) shall be effective from the date of 
        receipt of the notice of disqualification. If the 
        disqualification is reversed through administrative or 
        judicial review, the Secretary shall not be liable for 
        the value of any sales lost during the disqualification 
        period.
          * * * * * * *

                       VIOLATIONS AND ENFORCEMENT

    Sec. 15. (a)  * * *
          * * * * * * *
    (g) The Secretary may subject to forfeiture and denial of 
property rights any nonfood items, moneys, negotiable 
instruments, securities, or other things of value that are 
furnished [or intended to be furnished] by any person in 
exchange for coupons, authorization cards or access devices, or 
anything of value obtained by use of an access device, in any 
manner contrary to this Act or the regulations issued under 
this Act. Any forfeiture and disposal of property forfeited 
under this subsection shall be conducted in accordance with 
procedures contained in regulations issued by the Secretary.
    (h) Criminal Forfeiture.--
            (1) In general.--In imposing a sentence on a person 
        convicted of an offense in violation of subsection (b) 
        or (c), a court shall order, in addition to any other 
        sentence imposed under this subsection, that the person 
        forfeit to the United States all property described in 
        paragraph (2).
            (2) Property subject to forfeiture.--All property, 
        real and personal, used in a transaction or attempted 
        transaction, to commit, or to facilitate the commission 
        of, a violation (other than a misdemeanor) of 
        subsection (b) or (c), or proceeds traceable to a 
        violation of subsection (b) or (c), shall be subject to 
        forfeiture to the United States under paragraph (1).
            (3) Interest of owner.--No interest in property 
        shall be forfeited under this subsection as the result 
        of any act or omission established by the owner of the 
        interest to have been committed or omitted without the 
        knowledge or consent of the owner.
            (4) Proceeds.--The proceeds from any sale of 
        forfeited property and any monies forfeited under this 
        subsection shall be used--
                    (A) first, to reimburse the Department of 
                Justice for the costs incurred by the 
                Department to initiate and complete the 
                forfeiture proceeding;
                    (B) second, to reimburse the Department of 
                Agriculture Office of Inspector General for any 
                costs the Office incurred in the law 
                enforcement effort resulting in the forfeiture;
                    (C) third, to reimburse any Federal or 
                State law enforcement agency for any costs 
                incurred in the law enforcement effort 
                resulting in the forfeiture; and
                    (D) fourth, by the Secretary to carry out 
                the approval, reauthorization, and compliance 
                investigations of retail stores and wholesale 
                food concerns under section 9.

            ADMINISTRATIVE COST-SHARING AND QUALITY CONTROL

    Sec. 16. (a) The Secretary is authorized to pay to each 
State agency an amount equal to 50 per centum of all 
administrative costs involved in each State agency's operation 
of the food stamp program, which costs shall include, but not 
be limited to, the cost of (1) the certification of applicant 
households, (2) the acceptance, storage, protection, control, 
and accounting of coupons after their delivery to receiving 
points within the State, (3) the issuance of coupons to all 
eligible households, (4) food stamp informational activities, 
including those undertaken under section 11(e)(1)(A), but not 
including recruitment activities, (5) fair hearings, (6) 
automated data processing and information retrieval systems 
subject to the conditions set forth in subsection (g), (7) food 
stamp program investigations and prosecutions, and (8) 
implementing and operating the immigration status verification 
system established under section 1137(d) of the Social Security 
Act (42 U.S.C. 1320b-7(d)): Provided, That the Secretary is 
authorized at the Secretary's discretion to pay any State 
agency administering the food stamp program on all or part of 
an Indian reservation under section 11(d) of this Act such 
amounts for administrative costs as the Secretary determines to 
be necessary for effective operation of the food stamp program, 
as well as to permit each State to retain [25 percent during 
the period beginning October 1, 1990, and ending September 30, 
1995, and 50 percent thereafter of the value of all funds or 
allotments recovered or collected pursuant to subsections 
(b)(1) and (c) of section 13 and 10 percent during the period 
beginning October 1, 1990, and ending September 30, 1995, and 
25 percent thereafter of the value of all funds or allotments 
recovered or collected pursuant to section 13(b)(2) of this 
Act, except the value of funds or allotments recovered or 
collected pursuant to section 13(b)(2) which arise from an 
error of a State agency] 25 percent of the overissuances 
collected by the State agency under section 13, except those 
overissuances arising from an error of the State agency. The 
officials responsible for making determinations of 
ineligibility under this Act shall not receive or benefit from 
revenues retained by the State under the provisions of this 
subsection.
    [(b) The Secretary shall (1) establish standards for the 
efficient and effective administration of the food stamp 
program by the States, including standards for the periodic 
review of the hours that food stamp offices are open during the 
day, week, or month to ensure that employed individuals are 
adequately served by the food stamp program, and (2) instruct 
each State to submit, at regular intervals, reports which shall 
specify the specific administrative actions proposed to be 
taken and implemented in order to meet the efficiency and 
effectiveness standards established pursuant to clause (1) of 
this subsection.]
    (b) Work Supplementation or Support Program.--
            (1) Definition of work supplementation or support 
        program.--In this subsection, the term ``work 
        supplementation or support program'' means a program 
        under which, as determined by the Secretary, public 
        assistance (including any benefits provided under a 
        program established by the State and the food stamp 
        program) is provided to an employer to be used for 
        hiring and employing a public assistance recipient who 
        was not employed by the employer at the time the public 
        assistance recipient entered the program.
            (2) Program.--A State agency may elect to use an 
        amount equal to the allotment that would otherwise be 
        issued to a household under the food stamp program, but 
        for the operation of this subsection, for the purpose 
        of subsidizing or supporting a job under a work 
        supplementation or support program established by the 
        State.
            (3) Procedure.--If a State agency makes an election 
        under paragraph (2) and identifies each household that 
        participates in the food stamp program that contains an 
        individual who is participating in the work 
        supplementation or support program--
                    (A) the Secretary shall pay to the State 
                agency an amount equal to the value of the 
                allotment that the household would be eligible 
                to receive but for the operation of this 
                subsection;
                    (B) the State agency shall expend the 
                amount received under subparagraph (A) in 
                accordance with the work supplementation or 
                support program in lieu of providing the 
                allotment that the household would receive but 
                for the operation of this subsection;
                    (C) for purposes of--
                            (i) sections 5 and 8(a), the amount 
                        received under this subsection shall be 
                        excluded from household income and 
                        resources; and
                            (ii) section 8(b), the amount 
                        received under this subsection shall be 
                        considered to be the value of an 
                        allotment provided to the household; 
                        and
                    (D) the household shall not receive an 
                allotment from the State agency for the period 
                during which the member continues to 
                participate in the work supplementation or 
                support program.
            (4) Other work requirements.--No individual shall 
        be excused, by reason of the fact that a State has a 
        work supplementation or support program, from any work 
        requirement under section 6(d), except during the 
        periods in which the individual is employed under the 
        work supplementation or support program.
            (5) Length of participation.--A State agency shall 
        provide a description of how the public assistance 
        recipients in the program shall, within a specific 
        period of time, be moved from supplemented or supported 
        employment to employment that is not supplemented or 
        supported.
            (6) Displacement.--A work supplementation or 
        support program shall not displace the employment of 
        individuals who are not supplemented or supported.
    (c)(1) The program authorized under this Act shall include 
a system that enhances payment accuracy by establishing fiscal 
incentives that require State agencies with high error rates to 
share in the cost of payment error and provide enhanced 
administrative funding to States with the lowest error rates. 
Under such system--
            (A)  * * *
            (B) the Secretary shall foster management 
        improvements by the States [pursuant to subsection (b)] 
        by requiring State agencies other than those receiving 
        adjustments under subparagraph (A) to develop and 
        implement corrective action plans to reduce payment 
        errors; and
          * * * * * * *
    [(h)(1)(A) The Secretary shall allocate among the State 
agencies in each fiscal year, from funds appropriated for the 
fiscal year under section 18(a)(1), the amount of $75,000,000 
for each of the fiscal years 1991 through 2002 to carry out the 
employment and training program under section 6(d)(4), except 
as provided in paragraph (3), during the fiscal year.
    [(B) In making the allocation required by subparagraph (A) 
for each of the fiscal years 1992 through 2002, the Secretary 
shall allocate $15,000,000 among the States based on State 
agency performance under section 6(d)(4), as determined by the 
Secretary.
    [(C) In making the allocation required by subparagraph (A) 
for fiscal year 1992, the Secretary shall allocate 
nonperformance funding of $60,000,000 among the States in a 
manner such that each State is allocated funds equal to--
            [(i) a funding level determined under the 
        nonperformance funding allocation formula used for 
        fiscal year 1991;
            [(ii) increased by one half of the difference 
        between such funding level and an amount, if larger, 
        based on the State's proportion of the number of 
        individuals registered for work under section 6(d)(4); 
        or
            [(iii) decreased by one half of the difference 
        between such funding level and such amount, if such 
        amount is smaller.
    [(D) In making the allocation required by subparagraph (A) 
for each of the fiscal years 1993 through 2002, the Secretary 
shall allocate nonperformance funding of $60,000,000 among the 
States based on each State's proportion of the number of 
individuals registered for work under section 6(d)(4).
    [(E) Notwithstanding subparagraphs (C) and (D), the 
Secretary shall--
            [(i) for fiscal year 1992, ensure that each State 
        is allocated at least $50,000 by reducing, to the 
        extent necessary, the funds allocated to States (other 
        than States allocated less than $50,000) whose funding 
        level has been increased under subparagraph (C); and
            [(ii) for each of the fiscal years 1993 through 
        2002, ensure that each State is allocated at least 
        $50,000 by reducing, to the extent necessary, the funds 
        allocated to those States allocated more than $50,000.
    [(F) Each such State's share of such reduction under 
subparagraph (E) shall represent its proportion of individuals 
registered for work under section 6(d)(4) in all States subject 
to the reduction.]
    (h) Funding of Employment and Training Programs.--
            (1) In general.--
                    (A) Amounts.--To carry out employment and 
                training programs, the Secretary shall reserve 
                for allocation to State agencies from funds 
                made available for each fiscal year under 
                section 18(a)(1) the amount of--
                            (i) for fiscal year 1996, 
                        $75,000,000;
                            (ii) for fiscal year 1997, 
                        $79,000,000;
                            (iii) for fiscal year 1998, 
                        $81,000,000;
                            (iv) for fiscal year 1999, 
                        $84,000,000;
                            (v) for fiscal year 2000, 
                        $86,000,000;
                            (vi) for fiscal year 2001, 
                        $88,000,000; and
                            (vii) for fiscal year 2002, 
                        $90,000,000.
                    (B) Allocation.--The Secretary shall 
                allocate the amounts reserved under 
                subparagraph (A) among the State agencies using 
                a reasonable formula (as determined by the 
                Secretary) that gives consideration to the 
                population in each State affected by section 
                6(o).
                    (C) Reallocation.--
                            (i) Notification.--A State agency 
                        shall promptly notify the Secretary if 
                        the State agency determines that the 
                        State agency will not expend all of the 
                        funds allocated to the State agency 
                        under subparagraph (B).
                            (ii) Reallocation.--On notification 
                        under clause (i), the Secretary shall 
                        reallocate the funds that the State 
                        agency will not expend as the Secretary 
                        considers appropriate and equitable.
                    (D) Minimum allocation.--Notwithstanding 
                subparagraphs (A) through (C), the Secretary 
                shall ensure that each State agency operating 
                an employment and training program shall 
                receive not less than $50,000 in each fiscal 
                year.
    (2) If, in carrying out such program during such fiscal 
year, a State agency incurs costs that exceed the amount 
allocated to the State agency under paragraph (1), the 
Secretary shall pay such State agency an amount equal to 50 per 
centum of such additional costs, subject to the first 
limitation in paragraph (3), including the costs for case 
management and casework to facilitate the transition from 
economic dependency to self-sufficiency through work.
          * * * * * * *
    (5)[(A)] The Secretary shall monitor the employment and 
training programs carried out by State agencies under section 
6(d)(4) to measure their effectiveness in terms of the increase 
in the numbers of household members who obtain employment and 
the numbers of such members who retain such employment as a 
result of their participation in such employment and training 
programs.
    [(B) The Secretary shall, not later than January 1, 1989, 
report to the Committee on Agriculture of the House of 
Representatives and the Committee on Agriculture, Nutrition, 
and Forestry of the Senate on the effectiveness of such 
employment and training programs.]
    [(6) The Secretary shall develop, and transmit to the 
Committee on Agriculture of the House of Representatives and 
the Committee on Agriculture, Nutrition, and Forestry of the 
Senate, a proposal for modifying the rate of Federal payments 
under this subsection so as to reflect the relative 
effectiveness of the various States in carrying out employment 
and training programs under section 6(d)(4).]
            (6) Block grant states.--Each State electing to 
        operate a program under section 27 shall--
                    (A) receive the greater of--
                            (i) the total dollar value of the 
                        funds received under paragraph (1) by 
                        the State during fiscal year 1994; or
                            (ii) the average per fiscal year of 
                        the total dollar value of all funds 
                        received under paragraph (1) by the 
                        State during each of fiscal years 1992 
                        through 1994; and
                    (B) be eligible to receive funds under 
                paragraph (2), within the limitations in 
                section 6(d)(4)(K).
          * * * * * * *

                RESEARCH, DEMONSTRATION, AND EVALUATIONS

    Sec. 17. (a)  * * *
    (b)(1)(A) The Secretary may conduct on a trial basis, in 
one or more areas of the United States, pilot or experimental 
projects designed to test program changes that might increase 
the efficiency of the food stamp program and improve the 
delivery of food stamp [benefits to eligible households, 
including] benefits to eligible households, and may waive any 
requirement of this Act to the extent necessary for the project 
to be conducted.
                    (B) Project requirements.--
                            (i) Program goal.--The Secretary 
                        may not conduct a project under 
                        subparagraph (A) unless the project is 
                        consistent with the goal of the food 
                        stamp program of providing food 
                        assistance to raise levels of nutrition 
                        among low-income individuals.
                            (ii) Permissible projects.--The 
                        Secretary may conduct a project under 
                        subparagraph (A) to--
                                    (I) improve program 
                                administration;
                                    (II) increase the self-
                                sufficiency of food stamp 
                                recipients;
                                    (III) test innovative 
                                welfare reform strategies; and
                                    (IV) allow greater 
                                conformity with the rules of 
                                other programs than would be 
                                allowed but for this paragraph.
                            (iii) Impermissible projects.--The 
                        Secretary may not conduct a project 
                        under subparagraph (A) that--
                                    (I) involves the payment of 
                                the value of an allotment in 
                                the form of cash, unless the 
                                project was approved prior to 
                                the date of enactment of this 
                                subparagraph;
                                    (II) substantially 
                                transfers funds made available 
                                under this Act to services or 
                                benefits provided primarily 
                                through another public 
                                assistance program; or
                                    (III) is not limited to a 
                                specific time period.
                            (iv) Additional included 
                        projects.--Pilot or experimental 
                        projects may include projects involving 
                        the payment of the value of allotments 
                        or the average value of allotments by 
                        household size in the form of cash to 
                        eligible households all of whose 
                        members are age sixty-five or over or 
                        any of whose members are entitled to 
                        supplemental security income benefits 
                        under title XVI of the Social Security 
                        Act or to aid to families with 
                        dependent children under part A of 
                        title IV of the Social Security Act, 
                        the use of countersigned food coupons 
                        or similar identification mechanisms 
                        that do not invade a household's 
                        privacy, and the use of food checks or 
                        other voucher-type forms in place of 
                        food coupons. [The Secretary may waive 
                        the requirements of this Act to the 
                        degree necessary for such projects to 
                        be conducted, except that no project, 
                        other than a project involving the 
                        payment of the average value of 
                        allotments by household size in the 
                        form of cash to eligible households or 
                        a project conducted under paragraph 
                        (3), shall be implemented which would 
                        lower or further restrict the income or 
                        resource standards or benefit levels 
                        provided pursuant to sections 5 and 8 
                        of this Act.] Any pilot or experimental 
                        project implemented under this 
                        paragraph and operating as of October 
                        1, 1981, involving the payment of the 
                        value of allotments in the form of cash 
                        to eligible households all of whose 
                        members are either age sixty-five or 
                        over or entitled to supplemental 
                        security income benefits under title 
                        XVI of the Social Security Act shall be 
                        continued through October 1, 2002, if 
                        the State so requests.
    [(B)] (C)(i) No waiver or demonstration program shall be 
approved under this Act after the date of enactment of this 
subparagraph unless--
            (I) any household whose food assistance is issued 
        in a form other than coupons has its allotment 
        increased to the extent necessary to compensate for any 
        State or local sales tax that may be collected in all 
        or part of the area covered by the demonstration 
        project, the tax on purchases of food by any such 
        household is waived, or the Secretary determines on the 
        basis of information provided by the State agency that 
        the increase is unnecessary on the basis of the limited 
        nature of the items subject to the State or local sales 
        tax; and
            (II) the State agency conducting the demonstration 
        project pays the cost of any increased allotments.
    (ii) Clause (i) shall not apply if a waiver or 
demonstration project already provides a household with 
assistance that exceeds that which the household would 
otherwise be eligible to receive by more than the estimated 
amount of any sales tax on the purchases of food that would be 
collected from the household in the project area in which the 
household resides.
                    (D) Response to waivers.--
                            (i) Response.--Not later than 60 
                        days after the date of receiving a 
                        request for a waiver under subparagraph 
                        (A), the Secretary shall provide a 
                        response that--
                                    (I) approves the waiver 
                                request;
                                    (II) denies the waiver 
                                request and explains any 
                                modification needed for 
                                approval of the waiver request;
                                    (III) denies the waiver 
                                request and explains the 
                                grounds for the denial; or
                                    (IV) requests clarification 
                                of the waiver request.
                            (ii) Failure to respond.--If the 
                        Secretary does not provide a response 
                        in accordance with clause (i), the 
                        waiver shall be considered approved, 
                        unless the approval is specifically 
                        prohibited by this Act.
                            (iii) Notice of denial.--On denial 
                        of a waiver request under clause 
                        (i)(III), the Secretary shall provide a 
                        copy of the waiver request and a 
                        description of the reasons for the 
                        denial to the Committee on Agriculture 
                        of the House of Representatives and the 
                        Committee on Agriculture, Nutrition, 
                        and Forestry of the Senate.
    (2) The Secretary shall, jointly with the Secretary of 
Labor, implement two pilot projects involving the performance 
of work in return for food stamp benefits in each of the seven 
administrative regions of the Food and Nutrition Service of the 
Department of Agriculture, such projects to be (A) 
appropriately divided in each region between locations that are 
urban and rural in characteristics and among locations selected 
to provide a representative cross-section of political 
subdivisions in the States and (B) submitted for approval prior 
to project implementation, together with the names of the 
agencies or organizations that will be engaged in such 
projects, to the Committee on Agriculture of the House of 
Representatives and the Committee on Agriculture, Nutrition, 
and Forestry of the Senate. Under such pilot projects, any 
person who is subject to the work registration requirements 
pursuant to section 6(d) of this Act, and is a member of a 
household that does not have earned income equal to or 
exceeding the allotment to which the household is otherwise 
entitled pursuant to section 8(a) of this Act, shall be 
ineligible to participate in the food stamp program as a member 
of any household during any month in which such person refuses, 
after not being offered employment in the private sector of the 
economy for more than thirty days (ten days in at least one 
pilot project area designated by the Secretary) after the 
initial registration for employment referred to in section 
[6(d)(1)(i)] 6(d)(1)(A)(i) of this Act, to accept an offer of 
employment from a political subdivision or a prime sponsor 
pursuant to the Comprehensive Employment and Training Act of 
1973, as amended (29 U.S.C. 812), for which employment 
compensation shall be paid in the form of the allotment to 
which the household is otherwise entitled pursuant to section 
8(a) of this Act, with each hour of employment entitling the 
household to a portion of the allotment equal in value to 100 
per centum of the Federal minimum hourly rate under the Fair 
Labor Standards Act of 1938, as amended (29 U.S.C. 206(a)(1)); 
which employment shall not, together with any other hours 
worked in any other capacity by such person exceed forty hours 
a week; and which employment shall not be used by the employer 
to fill a job opening created by the action of such employer in 
laying off or terminating the employment of any regular 
employee not supported under this paragraph in anticipation of 
filling the vacancy so created by hiring an employee or 
employees to be supported under this paragraph: Provided, That 
all of the political subdivision's or prime sponsor's public 
service jobs supported under the Comprehensive Employment and 
Training Act of 1973, as amended (29 U.S.C. 812), are filled 
before such subdivision or sponsor can extend a job offer 
pursuant to this paragraph: Provided further, That the sponsor 
of each such project shall provide the assurances required of 
prime sponsors under section 205(c)(7), (8), (15), (19), and 
(24) of the Comprehensive Employment and Training Act of 1973, 
as amended (29 U.S.C. 845(c)), and the Secretary shall require 
such sponsors to comply with the conditions contained in 
sections 208(a)(1), (4), and (5) and (c) and 703(4) of the 
Comprehensive Employment and Training Act of 1973, as amended 
(29 U.S.C. 848 (a) and (c) and 983). The Secretary and the 
Secretary of Labor shall jointly issue reports to the 
appropriate committees of Congress on the progress of such 
pilot projects no later than six and twelve months following 
enactment of this Act, shall issue interim reports no later 
than October 1, 1979, October 1, 1980, and March 30, 1981, 
shall issue a final report describing the results of such pilot 
projects based upon their operation from their commencement 
through the fiscal year ending September 30, 1981, and shall 
pay to the agencies or organizations operating such pilot 
projects 50 per centum of all administrative costs involved in 
such operation.
          * * * * * * *
    [(d)(1) As used in this subsection, the term 
``qualification period'' means a period of time immediately 
preceding--
            [(A) in the case of a new applicant for benefits 
        under this Act, the date on which application for such 
        benefits is made by the individual; or
            [(B) in the case of an otherwise continuing 
        recipient of coupons under this Act, the date on which 
        such coupons would otherwise be issued to the 
        individual.
    [(2) Upon application of a State or political subdivision 
thereof, the Secretary may conduct one pilot project involving 
the employment requirements described in this subsection in 
each of four project areas selected by the Secretary.
    [(3) Under the pilot projects conducted pursuant to this 
subsection, except as provided in paragraphs (4), (5), and (6), 
an individual who resides in a project area shall not be 
eligible for assistance under this Act if the individual was 
not employed a minimum of twenty hours per week, or did not 
participate in a workfare program established under section 20, 
during a qualification period of--
            [(A) thirty or more consecutive days, in the case 
        of an individual whose benefits under a State or 
        Federal unemployment compensation law were terminated 
        immediately before such qualification period began; or
            [(B) sixty or more consecutive days, in the case of 
        an individual not described in clause (A).
    [(4) The provisions of paragraph (3) shall not apply in the 
case of an individual who--
            [(A) is under eighteen or over fifty-nine years of 
        age;
            [(B) is certified by a physician as physically or 
        mentally unfit for employment;
            [(C) is a parent or other member of a household 
        with responsibility for the care of a dependent child 
        under six years of age or of an incapacitated person;
            [(D) is a parent or other caretaker of a child 
        under six years of age in a household in which there is 
        another parent who, unless covered by clause (A) or 
        (B), or both such clauses, is employed a minimum of 
        twenty hours per week or participating in a workfare 
        program established under section 20;
            [(E) is in compliance with section 6(d) and 
        demonstrates, in a manner prescribed by the Secretary, 
        that the individual is able and willing to accept 
        employment but is unable to obtain such employment; or
            [(F) is a member of any other group described by 
        the Secretary.
    [(5) The Secretary may waive the requirements of paragraph 
(3) in the case of all individuals within all or part of a 
project area if the Secretary finds that such area--
            [(A) has an unemployment rate of over 10 per 
        centum; or
            [(B) does not have a sufficient number of jobs to 
        provide employment for individuals subject to this 
        subsection.
    [(6) An individual who has become ineligible for assistance 
under this Act by reason of paragraph (3) may reestablish 
eligibility for assistance after a period of ineligibility by--
            [(1) becoming employed for a minimum of twenty 
        hours per week during any consecutive thirty-day 
        period; or
            [(2) participating in a workfare program 
        established under section 20 during any consecutive 
        thirty-day period.]
    (d) Employment Initiatives Program.--
            (1) Election to participate.--
                    (A) In general.--Subject to the other 
                provisions of this subsection, a State may 
                elect to carry out an employment initiatives 
                program under this subsection.
                    (B) Requirement.--A State shall be eligible 
                to carry out an employment initiatives program 
                under this subsection only if not less than 50 
                percent of the households that received food 
                stamp benefits during the summer of 1993 also 
                received benefits under a State program funded 
                under part A of title IV of the Social Security 
                Act (42 U.S.C. 601 et seq.) during the summer 
                of 1993.
            (2) Procedure.--
                    (A) In general.--A State that has elected 
                to carry out an employment initiatives program 
                under paragraph (1) may use amounts equal to 
                the food stamp allotments that would otherwise 
                be issued to a household under the food stamp 
                program, but for the operation of this 
                subsection, to provide cash benefits in lieu of 
                the food stamp allotments to the household if 
                the household is eligible under paragraph (3).
                    (B) Payment.--The Secretary shall pay to 
                each State that has elected to carry out an 
                employment initiatives program under paragraph 
                (1) an amount equal to the value of the 
                allotment that each household would be eligible 
                to receive under this Act but for the operation 
                of this subsection.
                    (C) Other provisions.--For purposes of the 
                food stamp program (other than this 
                subsection)--
                            (i) cash assistance under this 
                        subsection shall be considered to be an 
                        allotment; and
                            (ii) each household receiving cash 
                        benefits under this subsection shall 
                        not receive any other food stamp 
                        benefit for the period for which the 
                        cash assistance is provided.
                    (D) Additional payments.--Each State that 
                has elected to carry out an employment 
                initiatives program under paragraph (1) shall--
                            (i) increase the cash benefits 
                        provided to each household under this 
                        subsection to compensate for any State 
                        or local sales tax that may be 
                        collected on purchases of food by any 
                        household receiving cash benefits under 
                        this subsection, unless the Secretary 
                        determines on the basis of information 
                        provided by the State that the increase 
                        is unnecessary on the basis of the 
                        limited nature of the items subject to 
                        the State or local sales tax; and
                            (ii) pay the cost of any increase 
                        in cash benefits required by clause 
                        (i).
            (3) Eligibility.--A household shall be eligible to 
        receive cash benefits under paragraph (2) if an adult 
        member of the household--
                    (A) has worked in unsubsidized employment 
                for not less than the preceding 90 days;
                    (B) has earned not less than $350 per month 
                from the employment referred to in subparagraph 
                (A) for not less than the preceding 90 days;
                    (C)(i) is receiving benefits under a State 
                program funded under part A of title IV of the 
                Social Security Act (42 U.S.C. 601 et seq.); or
                    (ii) was receiving benefits under a State 
                program funded under part A of title IV of the 
                Social Security Act (42 U.S.C. 601 et seq.) at 
                the time the member first received cash 
                benefits under this subsection and is no longer 
                eligible for the State program because of 
                earned income;
                    (D) is continuing to earn not less than 
                $350 per month from the employment referred to 
                in subparagraph (A); and
                    (E) elects to receive cash benefits in lieu 
                of food stamp benefits under this subsection.
            (4) Evaluation.--A State that operates a program 
        under this subsection for 2 years shall provide to the 
        Secretary a written evaluation of the impact of cash 
        assistance under this subsection. The State agency, 
        with the concurrence of the Secretary, shall determine 
        the content of the evaluation.
          * * * * * * *
    [(i)(1) The Secretary may conduct four demonstration 
projects, in both urban and rural areas, under which households 
in which each member receives benefits under a State plan 
approved under part A of title IV of the Social Security Act 
(42 U.S.C. 601 et seq.) (hereafter in this subsection referred 
to as an ``eligible household'') shall be issued monthly 
allotments following the rules and procedures of programs under 
part A of title IV of the Social Security Act, and without 
regard to the eligibility, benefit, and administrative rules 
established under this Act other than those terms and 
conditions specified under this subsection or established by 
the Secretary to ensure program integrity.
    [(2) In carrying out the demonstration projects, the 
Secretary shall ensure the following:
            [(A) The third sentence of section 3(i), 
        subsections (b) and (d)(2) of section 6, the first 
        sentence of section 6(c), paragraphs (1)(B), (3), (4), 
        and (9) of section 11(e), and all applicable provisions 
        of this Act dealing with the treatment of homeless 
        individuals and migrant and seasonal farm worker 
        households shall apply.
            [(B) Assistance under the food stamp program shall 
        be furnished to all eligible households who make 
        application for assistance by providing any information 
        that is needed by the State agency to determine the 
        correct monthly allotment and that has not been 
        provided as part of the household's application for 
        assistance under part A of title IV of the Social 
        Security Act.
            [(C) Eligible households' monthly allotments shall 
        be calculated under section 8(a), except that a 
        household's income shall be determined in accordance 
        with subparagraphs (D) and (E). The allotments shall be 
        provided retroactive to the date of application.
            [(D) For purposes of determining monthly allotments 
        under this subsection, household income shall be the 
        benefit provided under part A of title IV of the Social 
        Security Act and the amount used to determine the 
        household's benefit under such part (not including any 
        amount disregarded for dependent care expenses), except 
        that the amount shall be calculated without regard to 
        section 402(a)(7)(C) of such Act (42 U.S.C. 
        602(a)(7)(C)) and shall not include nonrecurring lump-
        sum income and income deemed or allocated to the 
        household under such part.
            [(E) In computing household income for purposes of 
        determining monthly allotments, all eligible households 
        shall be allowed the standard, earned income, excess 
        shelter, and medical expense deductions provided under 
        section 5(e) in lieu of any earned income disregards 
        provided under section 402(a)(8) of the Social Security 
        Act (42 U.S.C. 602(a)(8)). Alternatively, the Secretary 
        may approve demonstration projects under which 
        households without earned income are allowed such 
        standard, excess shelter, and medical expense 
        deductions, and household income for households with 
        earned income is computed using such deductions and the 
        earned income disregards provided under section 
        402(a)(8) of the Social Security Act to the extent that 
        the Secretary determines they are consistent with the 
        purposes of the demonstration projects required under 
        this subsection.
            [(F) Uninterrupted food stamp assistance shall be 
        provided to households who become ineligible to receive 
        the assistance under this subsection but are determined 
        otherwise eligible for food stamp assistance and to 
        households receiving food stamp assistance other than 
        under this subsection who are determined eligible under 
        this subsection.
            [(G) Any other requirements and administrative 
        procedures equivalent to those applicable under part A 
        of title IV of the Social Security Act (42 U.S.C. 601 
        et seq.) may be used in implementing the demonstration 
        projects required under this subsection, if the 
        Secretary determines that the requirements or 
        procedures further the purposes of this subsection and 
        do not undermine program integrity.
    [(3) In establishing the projects, the Secretary shall 
solicit proposals from, and consult with, interested State and 
local agencies and shall consult with the Secretary of Health 
and Human Services on waivers of Federal rules under part A of 
title IV of the Social Security Act that would assist in 
carrying out the projects required under this subsection.
    [(4) Not later than six months after termination of any 
project, the Secretary shall submit a report to the Committee 
on Agriculture of the House of Representatives and the 
Committee on Agriculture, Nutrition, and Forestry of the Senate 
evaluating the results of the demonstration projects 
established under this subsection, including evaluations of the 
effects on recipients and administrators.
    [(j)] (i)(1)(A) Subject to the availability of funds 
specifically appropriated to carry out this subsection and 
subject to the other provisions of this subsection, during each 
of fiscal years 1992 through 2002, the Secretary shall make 
grants competitively awarded to public or private nonprofit 
organizations to fund food stamp outreach demonstration 
projects (hereinafter in this subsection referred to as the 
``projects'') and related evaluations in areas of the United 
States to increase participation by eligible low-income 
households in the food stamp program. The total amount of 
grants provided during a fiscal year may not exceed $5,000,000. 
Funds appropriated to carry out this subsection shall be used 
in the year during which the funds are appropriated. Not more 
than 20 percent of the funds appropriated to carry out this 
subsection shall be used for evaluations.
          * * * * * * *
    [(k)] (j) The Secretary shall conduct, under such terms and 
conditions as the Secretary shall prescribe, for a period not 
to exceed 4 years, projects to test allowing not more than 
11,000 eligible households, in the aggregate, to accumulate 
resources up to $10,000 each (which shall be excluded from 
consideration as a resource) for later expenditure for a 
purpose directly related to improving the education, training, 
or employability (including self-employment) of household 
members, for the purchase of a home for the household, for a 
change of the household's residence, or for making major 
repairs to the household's home.
    [(l)] (k) The Secretary shall use up to $4,000,000 of the 
funds provided in advance in appropriations Acts for projects 
authorized by this section to conduct demonstration projects in 
which State or local food stamp agencies test innovative ideas 
for working with State or local law enforcement agencies to 
investigate and prosecute coupon trafficking.
    (l) Research On Optional State Food Assistance Block 
Grant.--The Secretary may conduct research on the effects and 
costs of a State program carried out under section 27.

                    AUTHORIZATION FOR APPROPRIATIONS

    Sec. 18. (a)(1) To carry out this Act, there are authorized 
to be appropriated such sums as are necessary for each of the 
fiscal years [1991 through 1997] 1996 through 2002. Not to 
exceed one-fourth of 1 per centum of the previous year's 
appropriation is authorized in each such fiscal year to carry 
out the provisions of section 17 of this Act, subject to 
paragraph (3). The Secretary shall, by the fifteenth day of 
each month, submit a report to the Committee on Agriculture of 
the House of Representatives and the Committee on Agriculture, 
Nutrition, and Forestry of the Senate setting forth the 
Secretary's best estimate of the second preceding month's 
expenditure, including administrative costs, as well as the 
cumulative totals for the fiscal year. In each monthly report, 
the Secretary shall also state whether there is reason to 
believe that supplemental appropriations will be needed to 
support the operation of the program through the end of the 
fiscal year.
          * * * * * * *

                                WORKFARE

    Sec. 20. (a)  * * *
          * * * * * * *
    [(f) In the event that any person fails to comply with the 
requirements of this section, neither that person nor the 
household to which that person belongs shall be eligible to 
participate in the food stamp program for two months, unless 
that person or another person in the household satisfies all 
outstanding workfare obligations prior to the end of the two-
month disqualification period.]
    (f) Disqualification.--An individual or a household may 
become ineligible under section 6(d)(1) to participate in the 
food stamp program for failing to comply with this section.
          * * * * * * *

SEC. 26. SIMPLIFIED FOOD STAMP PROGRAM.

    (a) Definition of Federal Costs.--In this section, the term 
``Federal costs'' does not include any Federal costs incurred 
under section 17.
    (b) Election.--Subject to subsection (d), a State may elect 
to carry out a Simplified Food Stamp Program (referred to in 
this section as a ``Program''), statewide or in a political 
subdivision of the State, in accordance with this section.
    (c) Operation of Program.--If a State elects to carry out a 
Program, within the State or a political subdivision of the 
State--
            (1) a household in which all members receive 
        assistance under a State program funded under part A of 
        title IV of the Social Security Act (42 U.S.C. 601 et 
        seq.) shall automatically be eligible to participate in 
        the Program; and
            (2) subject to subsection (f), benefits under the 
        Program shall be determined under rules and procedures 
        established by the State under--
                    (A) a State program funded under part A of 
                title IV of the Social Security Act (42 U.S.C. 
                601 et seq.);
                    (B) the food stamp program (other than 
                section 27); or
                    (C) a combination of a State program funded 
                under part A of title IV of the Social Security 
                Act (42 U.S.C. 601 et seq.) and the food stamp 
                program (other than section 27).
    (d) Approval of Program.--
            (1) State plan.--A State agency may not operate a 
        Program unless the Secretary approves a State plan for 
        the operation of the Program under paragraph (2).
            (2) Approval of plan.--The Secretary shall approve 
        any State plan to carry out a Program if the Secretary 
        determines that the plan--
                    (A) complies with this section; and
                    (B) contains sufficient documentation that 
                the plan will not increase Federal costs for 
                any fiscal year.
    (e) Increased Federal Costs.--
            (1) Determination.--During each fiscal year and not 
        later than 90 days after the end of each fiscal year, 
        the Secretary shall determine whether a Program being 
        carried out by a State agency is increasing Federal 
        costs under this Act above the Federal costs incurred 
        under the food stamp program in operation in the State 
        or political sub-division of the State for the fiscal 
        year prior to the implementation of the Program, 
        adjusted for any changes in--
                    (A) participation;
                    (B) the income of participants in the food 
                stamp program that is not attributable to 
                public assistance; and
                    (C) the thrifty food plan under section 
                3(o).
            (2) Notification.--If the Secretary determines that 
        the Program has increased Federal costs under this Act 
        for any fiscal year or any portion of any fiscal year, 
        the Secretary shall notify the State not later than 30 
        days after the Secretary makes the determination under 
        paragraph (1).
            (3) Enforcement.--
                    (A) Corrective action.--Not later than 90 
                days after the date of a notification under 
                paragraph (2), the State shall submit a plan 
                for approval by the Secretary for prompt 
                corrective action that is designed to prevent 
                the Program from increasing Federal costs under 
                this Act.
                    (B) Termination.--If the State does not 
                submit a plan under subparagraph (A) or carry 
                out a plan approved by the Secretary, the 
                Secretary shall terminate the approval of the 
                State agency operating the Program and the 
                State agency shall be ineligible to operate a 
                future Program.
    (f) Rules and Procedures.--
            (1) In general.--In operating a Program, a State or 
        political subdivision of a State may follow the rules 
        and procedures established by the State or political 
        subdivision under a State program funded under part A 
        of title IV of the Social Security Act (42 U.S.C. 601 
        et seq.) or under the food stamp program.
            (2) Standardized deductions.--In operating a 
        Program, a State or political subdivision of a State 
        may standardize the deductions provided under section 
        5(e). In developing the standardized deduction, the 
        State shall consider the work expenses, dependent care 
        costs, and shelter costs of participating households.
            (3) Requirements.--In operating a Program, a State 
        or political subdivision shall comply with the 
        requirements of--
                    (A) subsections (a) through (g) of section 
                7;
                    (B) section 8(a) (except that the income of 
                a household may be determined under a State 
                program funded under part A of title IV of the 
                Social Security Act (42 U.S.C. 601 et seq.));
                    (C) subsection (b) and (d) of section 8;
                    (D) subsections (a), (c), (d), and (n) of 
                section 11;
                    (E) paragraphs (8), (12), (16), (18), (20), 
                (24), and (25) of section 11(e);
                    (F) section 11(e)(10) (or a comparable 
                requirement established by the State under a 
                State program funded under part A of title IV 
                of the Social Security Act (42 U.S.C. 601 et 
                seq.)); and
                    (G) section 16.
            (4) Limitation on eligibility.--Notwithstanding any 
        other provision of this section, a household may not 
        receive benefits under this section as a result of the 
        eligibility of the household under a State program 
        funded under part A of title IV of the Social Security 
        Act (42 U.S.C. 601 et seq.), unless the Secretary 
        determines that any household with income above 130 
        percent of the poverty guidelines is not eligible for 
        the program.

SEC. 27. STATE FOOD ASSISTANCE BLOCK GRANT.

    (a) Definitions.--In this section:
            (1) Food assistance.--The term ``food assistance'' 
        means assistance that may be used only to obtain food, 
        as defined in section 3(g).
            (2) State.--The term ``State'' means each of the 50 
        States, the District of Columbia, Guam, and the Virgin 
        Islands of the United States.
    (b) Establishment.--The Secretary shall establish a program 
to make grants to States in accordance with this section to 
provide--
            (1) food assistance to needy individuals and 
        families residing in the State; and
            (2) funds for administrative costs incurred in 
        providing the assistance.
    (c) Election.--
            (1) In general.--A State may annually elect to 
        participate in the program established under subsection 
        (b) if the State--
                    (A) has fully implemented an electronic 
                benefit transfer system that operates in the 
                entire State;
                    (B) has a payment error rate under section 
                16(c) that is not more than 6 percent as 
                announced most recently by the Secretary; or
                    (C) has a payment error rate in excess of 6 
                percent and agrees to contribute non-Federal 
                funds for the fiscal year of the grant, for 
                benefits and administration of the State's food 
                assistance program, the amount determined under 
                paragraph (2).
            (2) State mandatory contributions.--
                    (A) In general.--In the case of a State 
                that elects to participate in the program under 
                paragraph (1)(C), the State shall agree to 
                contribute, for a fiscal year, an amount equal 
                to--
                            (i) the benefits issued in the 
                        State; multiplied by
                            (ii) the payment error rate of the 
                        State; minus
                    (B)(i) the benefits issued in the State; 
                multiplied by
                    (ii) 6 percent.
                    (B) Determination.--Notwithstanding 
                sections 13 and 14, the calculation of the 
                contribution shall be based solely on the 
                determination of the Secretary of the payment 
                error rate.
                    (C) Data.--For purposes of implementing 
                subparagraph (A) for a fiscal year, the 
                Secretary shall use the data for the most 
                recent fiscal year available.
            (3) Election limitation.--
                    (A) Re-entering food stamp program.--A 
                State that elects to participate in the program 
                under paragraph (1) may in a subsequent year 
                decline to elect to participate in the program 
                and instead participate in the food stamp 
                program in accordance with the other sections 
                of this Act.
                    (B) Limitation.--Subsequent to re-entering 
                the food stamp program under subparagraph (A), 
                the State shall only be eligible to participate 
                in the food stamp program in accordance with 
                the other sections of this Act and shall not be 
                eligible to elect to participate in the program 
                established under subsection (b).
            (4) Program exclusive.--
                    (A) In general.--A State that is 
                participating in the program established under 
                subsection (b) shall not be subject to, or 
                receive any benefit under, this Act except as 
                provided in this section.
                    (B) Contract with federal government.--
                Nothing in this section shall prohibit a State 
                from contracting with the Federal Government 
                for the provision of services or materials 
                necessary to carry out a program under this 
                section.
    (d) Lead Agency.--A State desiring to receive a grant under 
this section shall designate, in an application submitted to 
the Secretary under subsection (e)(1), an appropriate State 
agency responsible for the administration of the program under 
this section as the lead agency.
    (e) Application and Plan.--
            (1) Application.--To be eligible to receive 
        assistance under this section, a State shall prepare 
        and submit to the Secretary an application at such 
        time, in such manner, and containing such information 
        as the Secretary shall by regulation require, 
        including--
                    (A) an assurance that the State will comply 
                with the requirements of this section;
                    (B) a State plan that meets the 
                requirements of paragraph (3); and
                    (C) an assurance that the State will comply 
                with the requirements of the State plan under 
                paragraph (3).
            (2) Annual plan.--The State plan contained in the 
        application under paragraph (1) shall be submitted for 
        approval annually.
            (3) Requirements of plan.--
                    (A) Lead agency.--The State plan shall 
                identify the lead agency.
                    (B) Use of block grant funds.--The State 
                plan shall provide that the State shall use the 
                amounts provided to the State for each fiscal 
                year under this section--
                            (i) to provide food assistance to 
                        needy individuals and families residing 
                        in the State, other than residents of 
                        institutions who are ineligible for 
                        food stamps under section 3(i); and
                            (ii) to pay administrative costs 
                        incurred in providing the assistance.
                    (C) Groups served.--The State plan shall 
                describe how and to what extent the program 
                will serve specific groups of individuals and 
                families and how the treatment will differ from 
                treatment under the food stamp program under 
                the other sections of this Act of the 
                individuals and families, including--
                            (i) elderly individuals and 
                        families;
                            (ii) migrants or seasonal 
                        farmworkers;
                            (iii) homeless individuals and 
                        families;
                            (iv) individuals and families who 
                        live in institutions eligible under 
                        section 3(i);
                            (v) individuals and families with 
                        earnings; and
                            (vi) members of Indian tribes or 
                        tribal organizations.
                    (D) Assistance for entire state.--The State 
                plan shall provide that benefits under this 
                section shall be available throughout the 
                entire State.
                    (E) Notice and hearings.--The State plan 
                shall provide that an individual or family who 
                applies for, or receives, assistance under this 
                section shall be provided with notice of, and 
                an opportunity for a hearing on, any action 
                under this section that adversely affects the 
                individual or family.
                    (F) Assessment of Needs.--The State plan 
                shall assess the food and nutrition needs of 
                needy persons residing in the State.
                    (G) Eligibility standards.--The State plan 
                shall describe the income, resource, and other 
                eligibility standards that are established for 
                the receipt of assistance under this section.
                    (H) Disqualification of fleeing felons.--
                The State plan shall provide for the 
                disqualification of any individual who would be 
                disqualified from participating in the food 
                stamp program under section 6(k).
                    (I) Receiving benefits in more than 1 
                jurisdiction.--The State plan shall establish a 
                system for the exchange of information with 
                other States to verify the identity and receipt 
                of benefits by recipients.
                    (J) Privacy.--The State plan shall provide 
                for safeguarding and restricting the use and 
                disclosure of information about any individual 
                or family receiving assistance under this 
                section.
                    (K) Other information.--The State plan 
                shall contain such other information as may be 
                required by the Secretary.
            (4) Approval of application and plan.--The 
        Secretary shall approve an application and State plan 
        that satisfies the requirements of this section.
    (f) No Individual or Family Entitlement to Assistance.--
Nothing in this section--
            (1) entitles any individual or family to assistance 
        under this section; or
            (2) limits the right of a State to impose 
        additional limitations or conditions on assistance 
        under this section.
    (g) Benefits for Aliens.--
            (1) Eligibility.--No individual who is an alien 
        shall be eligible to receive benefits under a State 
        plan approved under subsection (e)(4) if the individual 
        is not eligible to participate in the food stamp 
        program due to the alien status of the individual.
            (2) Income.--The State plan shall provide that the 
        income of an alien shall be determined in accordance 
        with section 5(i).
    (h) Employment and Training.--
            (1) Work requirements.--No individual or household 
        shall be eligible to receive benefits under a State 
        plan funded under this section if the individual or 
        household is not eligible to participate in the food 
        stamp program under subsection (d) or (o) of section 6.
            (2) Work programs.--Each State shall implement an 
        employment and training program in accordance with the 
        terms and conditions of section 6(d)(4) for individuals 
        under the program and shall be eligible to receive 
        funding under section 16(h).
    (i) Enforcement.--
            (1) Review of compliance with state plan.--The 
        Secretary shall review and monitor State compliance 
        with this section and the State plan approved under 
        subsection (e)(4).
            (2) Noncompliance.--
                    (A) In general.--If the Secretary, after 
                reasonable notice to a State and opportunity 
                for a hearing, finds that--
                            (i) there has been a failure by the 
                        State to comply substantially with any 
                        provision or requirement set forth in 
                        the State plan approved under 
                        subsection (e)(4); or
                            (ii) in the operation of any 
                        program or activity for which 
                        assistance is provided under this 
                        section, there is a failure by the 
                        State to comply substantially with any 
                        provision of this section;
                the Secretary shall notify the State of the 
                finding and that no further grants will be made 
                to the State under this section (or, in the 
                case of noncompliance in the operation of a 
                program or activity, that no further grants to 
                the State will be made with respect to the 
                program or activity) until the Secretary is 
                satisfied that there is no longer any failure 
                to comply or that the noncompliance will be 
                promptly corrected.
                    (B) Other penalties.--In the case of a 
                finding of noncompliance made pursuant to 
                subparagraph (A), the Secretary may, in 
                addition to, or in lieu of, imposing the 
                penalties described in subparagraph (A), impose 
                other appropriate penalties, including 
                recoupment of money improperly expended for 
                purposes prohibited or not authorized by this 
                section and disqualification from the receipt 
                of financial assistance under this section.
                    (C) Notice.--The notice required under 
                subparagraph (A) shall include a specific 
                identification of any additional penalty being 
                imposed under subparagraph (B).
            (3) Issuance of regulations.--The Secretary shall 
        establish by regulation procedures for--
                    (A) receiving, processing, and determining 
                the validity of complaints made to the 
                Secretary concerning any failure of a State to 
                comply with the State plan or any requirement 
                of this section; and
                    (B) imposing penalties under this section.
    (j) Grant.--
            (1) In general.--For each fiscal year, the 
        Secretary shall pay to a State that has an application 
        approved by the Secretary under subsection (e)(4) an 
        amount that is equal to the grant of the State under 
        subsection (m) for the fiscal year.
            (2) Method of Grant.--The Secretary shall make a 
        grant to a State for a fiscal year under this section 
        by issuing 1 or more letters of credit for the fiscal 
        year, with necessary adjustments on account of 
        overpayments or underpayments, as determined by the 
        Secretary.
            (3) Spending of grants by state.--
                    (A) In general.--Except as provided in 
                subparagraph (B), a grant to a State determined 
                under subsection (m)(1) for a fiscal year may 
                be expended by the State only in the fiscal 
                year.
                    (B) Carryover.--The State may reserve up to 
                10 percent of a grant determined under 
                subsection (m)(1) for a fiscal year to provide 
                assistance under this section in subsequent 
                fiscal years, except that the reserved funds 
                may not exceed 30 percent of the total grant 
                received under this section for a fiscal year.
            (4) Food assistance and administrative 
        expenditures.--In each fiscal year, not more than 6 
        percent of the Federal and State funds required to be 
        expended by a State under this section shall be used 
        for administrative expenses.
            (5) Provision of food assistance.--A State may 
        provide food assistance under this section in any 
        manner determined appropriate by the State, such as 
        electronic benefit transfer limited to food purchases, 
        coupons limited to food purchases, or direct provision 
        of commodities.
    (k) Quality Control.--Each State participating in the 
program established under this section shall maintain a system 
in accordance with, and shall be subject to section 16(c), 
including sanctions and eligibility for incentive payment under 
section 16(c), adjusted for State specific characteristics 
under regulations issued by the Secretary.
    (l) Nondiscrimination.--
            (1) In general.--The Secretary shall not provide 
        financial assistance for any program, project, or 
        activity under this section if any person with 
        responsibilities for the operation of the program, 
        project, or activity discriminates with respect to the 
        program, project, or activity because of race, 
        religion, color, national origin, sex, or disability.
            (2) Enforcement.--The powers, remedies, and 
        procedures set forth in title VI of the Civil Rights 
        Act of 1964 (42 U.S.C. 2000d et seq.) may be used by 
        the Secretary to enforce paragraph (1).
    (m) Grant Calculation.--
            (1) State grant.--
                    (A) In general.--Except as provided in 
                subparagraph (B), from the amounts made 
                available under section 18 for each fiscal 
                year, the Secretary shall provide a grant to 
                each State participating in the program 
                established under this section an amount that 
                is equal to the sum of--
                            (i) the greater of, as determined 
                        by the Secretary--
                                    (I) the total dollar value 
                                of all benefits issued under 
                                the food stamp program 
                                established under this Act by 
                                the State during fiscal year 
                                1994; or
                                    (II) the average per fiscal 
                                year of the total dollar value 
                                of all benefits issued under 
                                the food stamp program by the 
                                State during each of fiscal 
                                years 1992 through 1994; and
                            (ii) the greater of, as determined 
                        by the Secretary--
                                    (I) the total amount 
                                received by the State for 
                                administrative costs under 
                                section 16(a) (not including 
                                any adjustment under section 
                                16(c)) for fiscal year 1994; or
                                    (II) the average per fiscal 
                                year of the total amount 
                                received by the State for 
                                administrative costs under 
                                section 16(a) (not including 
                                any adjustment under section 
                                16(c)) for each of fiscal years 
                                1992 through 1994.
                    (B) Insufficient funds.--If the Secretary 
                finds that the total amount of grants to which 
                States would otherwise be entitled for a fiscal 
                year under subparagraph (A) will exceed the 
                amount of funds that will be made available to 
                provide the grants for the fiscal year, the 
                Secretary shall reduce the grants made to 
                States under this subsection, on a pro rata 
                basis, to the extent necessary.
            (2) Reduction.--The Secretary shall reduce the 
        grant of a State by the amount a State has agreed to 
        contribute under subsection (c)(1)(C).

SEC. 28. AVAILABILITY OF COMMODITIES FOR THE EMERGENCY FOOD ASSISTANCE 
                    PROGRAM.

    (a) Purchase of Commodities.--From amounts appropriated 
under this Act, for each of fiscal years 1997 through 2002, the 
Secretary shall purchase $300,000,000 of a variety of 
nutritious and useful commodities of the types that the 
Secretary has the authority to acquire through the Commodity 
Credit Corporation or under section 32 of the Act entitled ``An 
Act to amend the Agricultural Adjustment Act, and for other 
purposes'', approved August 24, 1935 (7 U.S.C. 612c), and 
distribute the commodities to States for distribution in 
accordance with section 214 of the Emergency Food Assistance 
Act of 1983 (Public Law 98-8; 7 U.S.C. 612c note).
    (b) Basis for Commodity Purchases.--In purchasing 
commodities under subsection (a), the Secretary shall, to the 
extent practicable and appropriate, make purchases based on--
            (1) agricultural market conditions;
            (2) preferences and needs of States and 
        distributing agencies; and
            (3) preferences of recipients.
                              ----------                              


   SECTION 2605 OF THE LOW-INCOME HOME ENERGY ASSISTANCE ACT OF 1981

                     applications and requirements

    Sec. 2605. (a)  * * *
          * * * * * * *
    (f)[(1)] Notwithstanding any other provision of law unless 
enacted in express limitation of this paragraph, the amount of 
any home energy assistance payments or allowances provided 
directly to, or indirectly for the benefit of, an eligible 
household under this title shall not be considered income or 
resources of such household (or any member thereof) for any 
purpose under any Federal or State law, including any law 
relating to taxation, [food stamps,] public assistance, or 
welfare programs.
    [(2) For purposes of paragraph (1) of this subsection and 
for purposes of determining any excess shelter expense 
deduction under section 5(e) of the Food Stamp Act of 1977 (7 
U.S.C. 2014(e))--
            [(A) the full amount of such payments or allowances 
        shall be deemed to be expended by such household for 
        heating or cooling expenses, without regard to whether 
        such payments or allowances are provided directly to, 
        or indirectly for the benefit of, such household; and
            [(B) no distinction may be made among households on 
        the basis of whether such payments or allowances are 
        provided directly to, or indirectly for the benefit of, 
        any of such households.]
                              ----------                              


                 EMERGENCY FOOD ASSISTANCE ACT OF 1983

          * * * * * * *

            TITLE II--EMERGENCY FOOD ASSISTANCE ACT OF 1983

          * * * * * * *

                    [ELIGIBILITY RECIPIENT AGENCIES

    [Sec. 201A. As used in this Act the term ``eligible 
recipient agencies'' means public or nonprofit organizations 
that administer--
            [(1) activities and projects providing nutrition 
        assistance to relieve situations of emergency and 
        distress through the provision of food to needy 
        persons, including low-income and unemployed persons 
        (including the activities and projects of charitable 
        institutions, food banks, hunger centers, soup 
        kitchens, and similar public or private nonprofit 
        eligible recipient agencies) hereinafter in this title 
        referred to as ``emergency feeding organizations'';
            [(2) school lunch programs, summer camps for 
        children, and other child nutrition programs providing 
        food service;
            [(3) nutrition projects operating under the Older 
        Americans Act of 1965, including congregate nutrition 
        sites and providers of home-delivered meals;
            [(4) activities and projects that are supported 
        under section 4 of the Agricultural and Consumer 
        Protection Act of 1973;
            [(5) activities of charitable institutions, 
        including hospitals and retirement homes, to the extent 
        that needy persons are served; or
            [(6) disaster relief programs;
and that have been designated by the appropriate State agency, 
or by the Secretary, and approved by the Secretary for 
participation in the program established under this Act.

            [AVAILABILITY OF CCC FLOUR, CORNMEAL, AND CHEESE

    [Sec. 202A. Notwithstanding any other provision of law--
    [(a)(1) To the extent provided in advance in an 
appropriation Act, in fiscal year 1988, flour, cornmeal, and 
cheese acquired by the Commodity Credit Corporation that are in 
excess of quantities needed to--
            [(A) carry out other domestic donation programs,
            [(B) meet other domestic obligations (including 
        quantities needed to carry out a payment-in-kind 
        acreage diversion program),
            [(C) meet international market development and food 
        aid commitments, and
            [(D) carry out the farm price and income 
        stabilization purposes of the Agricultural Adjustment 
        Act of 1938, the Agricultural Act of 1949, and the 
        Commodity Credit Corporation Charter Act,
shall be made available as provided in paragraph (2).
    [(2) The Secretary shall make such excess flour, cornmeal, 
and cheese available in any State, in addition to the normal 
allotment of such commodities (adjusted by any reallocation) 
for fiscal year 1988 under this Act, at the request of the 
chief executive officer of such State who certifies to the 
Secretary that--
            [(A)(i) individuals in such State who are eligible 
        to receive flour, cornmeal, and cheese under this Act 
        are not receiving such commodities distributed under 
        other provisions of this Act, or
            [(ii) the number of unemployed individuals in such 
        State has increased during the most recent 90-day 
        period for which unemployment statistics are available 
        prior to the date of the certification is made, and
            [(B) the distribution of flour, cornmeal, and 
        cheese under this section in such State will not 
        substantially displace the commercial sale of such 
        commodities in such State.
    [(b) Flour, cornmeal, and cheese made available under this 
section by the Secretary shall be made available without charge 
or credit in fiscal year 1988, in a usable form, for use by 
eligible recipient agencies in a State.
    [(c) The amount of cheese made available under this section 
in fiscal year 1988 shall not exceed 14,000,000 pounds.
    [(d) Whenever the Secretary receives a request submitted 
under subsection (a)(2), the Secretary shall immediately notify 
the Committee on Agriculture of the House of Representatives 
and the Committee on Agriculture, Nutrition, and Forestry of 
the Senate that such request was received.]

SEC. 201A. DEFINITIONS.

    In this Act:
            (1) Additional commodities.--The term ``additional 
        commodities'' means commodities made available under 
        section 214 in addition to the commodities made 
        available under sections 202 and 203D.
            (2) Average monthly number of unemployed persons.--
        The term ``average monthly number of unemployed 
        persons'' means the average monthly number of 
        unemployed persons in each State in the most recent 
        fiscal year for which information concerning the number 
        of unemployed persons is available, as determined by 
        the Bureau of Labor Statistics of the Department of 
        Labor.
            (3) Eligible recipient agency.--The term ``eligible 
        recipient agency'' means a public or nonprofit 
        organization--
                    (A) that administers--
                            (i) an emergency feeding 
                        organization;
                            (ii) a charitable institution 
                        (including a hospital and a retirement 
                        home, but excluding a penal 
                        institution) to the extent that the 
                        institution serves needy persons;
                            (iii) a summer camp for children, 
                        or a child nutrition program providing 
                        food service;
                            (iv) a nutrition project operating 
                        under the Older Americans Act of 1965 
                        (42 U.S.C. 3001 et seq.), including a 
                        project that operates a congregate 
                        nutrition site and a project that 
                        provides home-delivered meals; or
                            (v) a disaster relief program;
                    (B) that has been designated by the 
                appropriate State agency, or by the Secretary; 
                and
                    (C) that has been approved by the Secretary 
                for participation in the program established 
                under this Act.
            (4) Emergency feeding organization.--The term 
        ``emergency feeding organization'' means a public or 
        nonprofit organization that administers activities and 
        projects (including the activities and projects of a 
        charitable institution, a food bank, a food pantry, a 
        hunger relief center, a soup kitchen, or a similar 
        public or private nonprofit eligible recipient agency) 
        providing nutrition assistance to relieve situations of 
        emergency and distress through the provision of food to 
        needy persons, including low-income and unemployed 
        persons.
            (5) Food bank.--The term ``food bank'' means a 
        public or charitable institution that maintains an 
        established operation involving the provision of food 
        or edible commodities, or the products of food or 
        edible commodities, to food pantries, soup kitchens, 
        hunger relief centers, or other food or feeding centers 
        that, as an integral part of their normal activities, 
        provide meals or food to feed needy persons on a 
        regular basis.
            (6) Food pantry.--The term ``food pantry'' means a 
        public or private nonprofit organization that 
        distributes food to low-income and unemployed 
        households, including food from sources other than the 
        Department of Agriculture, to relieve situations of 
        emergency and distress.
            (7) Poverty line.--The term ``poverty line'' has 
        the same meaning given the term in section 673(2) of 
        the Community Services Block Grant Act (42 U.S.C. 
        9902(2)).
            (8) Soup kitchen.--The term ``soup kitchen'' means 
        a public or charitable institution that, as an integral 
        part of the normal activities of the institution, 
        maintains an established feeding operation to provide 
        food to needy homeless persons on a regular basis.
            (9) Total value of additional commodities.--The 
        term ``total value of additional commodities'' means 
        the actual cost of all additional commodities made 
        available under section 214 that are paid by the 
        Secretary (including the distribution and processing 
        costs incurred by the Secretary).
            (10) Value of additional commodities allocated to 
        each state.--The term ``value of additional commodities 
        allocated to each State'' means the actual cost of 
        additional commodities made available under section 214 
        and allocated to each State that are paid by the 
        Secretary (including the distribution and processing 
        costs incurred by the Secretary).

SEC. 202A. STATE PLAN.

    (a) In General.--To receive commodities under this Act, a 
State shall submit a plan of operation and administration every 
4 years to the Secretary for approval. The plan may be amended 
at any time, with the approval of the Secretary.
    (b) Requirements.--Each plan shall--
            (1) designate the State agency responsible for 
        distributing the commodities received under this Act;
            (2) set forth a plan of operation and 
        administration to expeditiously distribute commodities 
        under this Act;
            (3) set forth the standards of eligibility for 
        recipient agencies; and
            (4) set forth the standards of eligibility for 
        individual or household recipients of commodities, 
        which shall require--
                    (A) individuals or households to be 
                comprised of needy persons; and
                    (B) individual or household members to be 
                residing in the geographic location served by 
                the distributing agency at the time of applying 
                for assistance.
    (c) State Advisory Board.--The Secretary shall encourage 
each State receiving commodities under this Act to establish a 
State advisory board consisting of representatives of all 
interested entities, both public and private, in the 
distribution of commodities received under this Act in the 
State.
          * * * * * * *

                   FEDERAL AND STATE RESPONSIBILITIES

    Sec. 203B. (a) The Secretary shall, as expeditiously as 
possible, provide the commodities made available under this Act 
in such quantities as can be used without waste to State 
agencies designated by the Governor or other appropriate State 
official for distribution to eligible recipient agencies, 
except that the Secretary may provide such commodities directly 
to eligible recipient agencies and to private companies that 
process such commodities for eligible recipient agencies under 
section [203 and 203A of this Act] 203A. Notwithstanding any 
other provision of this Act, in the distribution of commodities 
under this Act, each State agency shall have the option to give 
priority to existing food bank networks and other organizations 
whose ongoing primary function is to facilitate the 
distribution of food to low-income households, including food 
from sources other than the Department of Agriculture.
          * * * * * * *

                    AUTHORIZATION AND APPROPRIATIONS

    Sec. 204. (a)(1) There are authorized to be appropriated 
$50,000,000 for each of the fiscal years 1991 through 2002, for 
the Secretary to make available to the States [for State and 
local payments for costs associated with the distribution of 
commodities by emergency feeding organizations under this 
title] to pay for the direct and indirect administrative costs 
of the State related to the processing, transporting, and 
distributing to eligible recipient agencies of commodities 
provided by the Secretary under this Act and commodities 
secured from other sources. Funds appropriated under this 
paragraph for any fiscal year shall be allocated to the States 
on an advance basis, dividing such funds among the States in 
the same proportions as the commodities distributed under this 
[title] Act for such fiscal year are divided among the States. 
If a State agency is unable to use all of the funds so 
allocated to it, the Secretary shall reallocate such unused 
funds among the other States. [States may also use funds 
provided under this paragraph to pay for the costs associated 
with the distribution of commodities under the program 
authorized under section 110 of the Hunger Prevention Act of 
1988, and to pay for the costs associated with the distribution 
of additional commodities provided pursuant to section 214.]
    (2) Each State shall make available to emergency feeding 
organizations in the State not less than 40 per centum of the 
funds provided as authorized in paragraph (1) that it has been 
allocated for a fiscal year, as necessary to pay for, or 
provide advance payments to cover, the direct expenses of the 
emergency feeding organizations for distributing commodities to 
needy persons, but only to the extent such expenses are 
actually so incurred by such organizations. As used in this 
paragraph, the term direct expenses'' includes costs of 
transporting, storing, handling, repackaging, processing, and 
distributing commodities incurred after they are received by 
the organization; costs associated with determinations of 
eligibility, verification, and documentation; costs of 
providing information to persons receiving commodities under 
this Act concerning the appropriate storage and preparation of 
such commodities; and costs of recordkeeping, auditing, and 
other administrative procedures required for participation in 
the program under this [title] Act. If a State makes a payment, 
using State funds, to cover direct expenses of emergency 
feeding organizations, the amount of such payment shall be 
counted toward the amount a State must make available for 
direct expenses of emergency feeding organizations under this 
paragraph.
          * * * * * * *
    (4)(A) Except as provided in subparagraph (B), effective 
January 1, 1987, to be eligible to receive funds under this 
subsection, a State shall provide in cash or in kind (according 
to procedures approved by the Secretary for certifying these 
in-kind contributions) from non-Federal sources a contribution 
equal to the difference between--
            (i) the amount of such funds so received; and
            (ii) any part of the amount allocated to the State 
        and paid by the State--
                    (I) to emergency feeding organizations; or
                    (II) for the direct expenses of such 
                organizations;
            for use in carrying out this [title] Act.
          * * * * * * *

                              REGULATIONS

    Sec. 210. (a)  * * *
          * * * * * * *
    (e) The Secretary is authorized to issue final regulations 
without first issuing proposed regulations [(except as 
otherwise provided for in section 214(j))] for public comment 
in order to carry out the provisions of sections 213 and 214. 
If final regulations are issued without such prior public 
comment the Secretary shall permit public comment on such 
regulations, consider pertinent comments, and make 
modifications of such regulations as appropriate not later than 
1 year after the date of enactment of this subsection. Such 
final and modified regulations shall be accompanied by a 
statement of the basis and purpose for such regulations.
          * * * * * * *

                          [PROGRAM TERMINATION

    [Sec. 212. Except for section 207, this Act shall terminate 
on September 30, 2002.]
          * * * * * * *

SEC. 214. REQUIRED PURCHASES OF COMMODITIES.

    [(a) Purpose.--It is the purpose of this section to 
establish a formula so that the amount, measured by their 
value, of additional commodities that are to be allocated to 
each State can be precisely calculated for fiscal years 1991 
through 2002. The share of commodities, as measured by their 
value, to be allocated to each State shall be based 60 percent 
on the number of persons in households within the State having 
incomes below the poverty level and 40 percent on the number of 
unemployed persons within the State.
    [(b) Definitions.--As used in this section--
            [(1) Additional commodities.--The term ``additional 
        commodities'' means commodities purchased under this 
        section in addition to the commodities otherwise made 
        available under sections 202 and 203D(a).
            [(2) Average monthly number of unemployed 
        persons.--The term ``average monthly number of 
        unemployed persons'' refers to the average monthly 
        number of unemployed persons within each State in the 
        most recent fiscal year for which such information is 
        available as determined by the Bureau of Labor 
        Statistics of the Department of Labor.
            [(3) Poverty line.--The term ``poverty line'' has 
        the same meaning given such term in section 673(2) of 
        the Community Services Block Grant Act (42 U.S.C. 
        9902(2)).
            [(4) Total value of additional commodities.--The 
        term ``total value of additional commodities'' means 
        the actual cost (including the distribution and 
        processing costs incurred by the Secretary), as paid by 
        the Secretary, for all additional commodities purchased 
        under subsection (e).
            [(5) Value of additional commodities allocated to 
        each state.--The term ``value of additional commodities 
        allocated to each State'' means the actual cost for 
        additional commodities (including the distribution and 
        processing costs incurred by the Secretary) as paid by 
        the Secretary under this section and allocated to such 
        State.
    [(c) Purchase of Commodities.--The Secretary shall purchase 
a variety of nutritious and useful commodities of the types 
that the Secretary has the authority to acquire through the 
Commodity Credit Corporation or under section 32 of the Act 
entitled ``An Act to amend the Agricultural Adjustment Act, and 
for other purposes'', approved August 24, 1935 (7 U.S.C. 612c 
note), to supplement the commodities otherwise provided under 
the program authorized by this Act.
    [(d) Types and Varieties.--The Secretary shall, to the 
extent practicable and appropriate, purchase types and 
varieties of commodities--
            [(1) with high nutrient density per calorie;
            [(2) that are easily and safely stored;
            [(3) that are convenient to use and consume;
            [(4) that are desired by recipient agencies; and
            [(5) that meet the requirement imposed by section 
        203C(a).
    [(e) Amounts.--To carry out this section there are 
authorized to be appropriated $175,000,000 for fiscal year 
1991, $190,000,000 for fiscal year 1992, and $220,000,000 for 
each of the fiscal years 1993 through 2002 to purchase, 
process, and distribute additional commodities under this 
section. Any amounts provided for fiscal years 1991 through 
2002 shall be available only to the extent and in such amounts 
as are provided in advance in appropriations Acts.
    [(f)] (a) Mandatory Allotments.--In each fiscal year, the 
Secretary shall allot--
            (1) 60 percent of the total value of additional 
        commodities provided to States in a manner such that 
        the value of additional commodities allocated to each 
        State bears the same ratio to 60 percent of the total 
        value of additional commodities as the number of 
        persons in households within the State having incomes 
        below the poverty line bears to the total number of 
        persons in households within all States having incomes 
        below such poverty line, and each State shall be 
        entitled to receive such value of additional 
        commodities; and
            (2) 40 percent of the total value of additional 
        commodities provided to States in a manner such that 
        the value of additional commodities allocated to each 
        State bears the same ratio to 40 percent of the total 
        value of additional commodities as the average monthly 
        number of unemployed persons within the State bears to 
        the average monthly number of unemployed persons within 
        all States during the same fiscal year, and each State 
        shall be entitled to receive such value of additional 
        commodities.
    [(g)] (b) Reallocation.--The Secretary shall notify each 
State of the amount of the additional commodities that such 
State is allotted to receive under [subsection (f) or 
subsection (j) if applicable,] subsection (a) and each State 
shall promptly notify the Secretary if such State determines 
that it will not accept any or all of the commodities made 
available under such allocation. On such a notification by a 
State, the Secretary shall reallocate and distribute the amount 
the State was allocated to receive under the formula prescribed 
in [subsection (f)] subsection (a) but declines to accept. The 
Secretary shall further establish procedures to permit States 
to decline to receive portions of such allocation during each 
fiscal year as the State determines is appropriate and the 
Secretary shall reallocate and distribute such allocation. In 
the event of any drought, flood, hurricane, or other natural 
disaster affecting substantial numbers of persons in a State, 
county, or parish, the Secretary may request that States 
unaffected by such a disaster consider assisting affected 
States by allowing the Secretary to reallocate commodities to 
which each such unaffected State is entitled to States 
containing areas adversely affected by the disaster.
    [(h) Administration.--Subject to subsections (e) and (f), 
or subsection (j) if applicable, purchases under this section 
shall be made by the Secretary at such times and under such 
conditions as the Secretary determines appropriate within each 
fiscal year. All such commodities purchased for each such 
fiscal year shall be delivered at reasonable intervals to 
States based on the allotments calculated under subsection (f), 
or reallocated under subsection (g), or calculated under 
subsection (j) if applicable, before the end of such fiscal 
year. Each State shall be entitled to receive that value of 
additional commodities that results from the application of the 
formula set forth in this section to the total value of 
additional commodities.]
    (c) Administration.--
            (1) In general.--Commodities made available for 
        each fiscal year under this section shall be delivered 
        at reasonable intervals to States based on the grants 
        calculated under subsection (a), or reallocated under 
        subsection (b), before December 31 of the following 
        fiscal year.
            (2) Entitlement.--Each State shall be entitled to 
        receive the value of additional commodities determined 
        under subsection (a).
    [(i)] (d) Maintenance of Effort.--If a State uses its own 
funds to provide commodities or services to organizations 
receiving funds or services under this section, such State 
shall not diminish the level of support it provides to such 
organizations [or reduce the amount of funds available for 
other nutrition programs in the State in each fiscal year].
    [(j) New Formula.--Notwithstanding the provisions of this 
section that set forth the specific formula for allocating 
additional commodities to each State, the Secretary is 
authorized to promulgate a different precise formula, after 
prior notice and comment as required by section 553 of title 5, 
United States Code, only to the extent that--
            [(1) any such formula is effective at the outset 
        of, and throughout any given fiscal year;
            [(2) any such formula can be used to precisely 
        calculate the amount of commodities to be made 
        available to each State by the Secretary for each 
        fiscal year; and
            [(3) such formula provides that each State is 
        entitled to receive that value of additional 
        commodities which results from the application of such 
        formula to the total value of additional commodities.]
          * * * * * * *
                              ----------                              


             SECTION 1571 OF THE FOOD SECURITY ACT OF 1985

                                [report

    [Sec. 1571. Not later than April 1, 1987, the Secretary of 
Agriculture shall report to Congress on the activities of the 
program conducted under the Temporary Emergency Food Assistance 
Act of 1983. Such report shall include information on--
            [(1) the volume and types of commodities 
        distributed under the program;
            [(2) the types of State and local agencies 
        receiving commodities for distribution under the 
        program;
            [(3) the populations served under the program and 
        their characteristics;
            [(4) the Federal, State, and local costs of 
        commodity distribution operations under the program 
        (including transportation, storage, refrigeration, 
        handling, distribution, and administrative costs); and
            [(5) the amount of Federal funds provided to cover 
        State and local costs under the program.]
                              ----------                              


    SECTION 3 OF THE CHARITABLE ASSISTANCE AND FOOD BANK ACT OF 1987

[SEC. 3. FOOD BANK DEMONSTRATION PROJECT.

    [(a) The Secretary of Agriculture shall carry out no less 
than one demonstration project to provide and redistribute 
agricultural commodities and food products thereof as 
authorized under section 32 of the Act entitled ``An Act to 
amend the Agricultural Adjustment Act, and for other 
purposes'', approved August 24, 1935, as amended (7 U.S.C. 
612c), to needy individuals and families through community food 
banks. The Secretary may use a State agency or any other food 
distribution system for such provision or redistribution of 
section 32 agricultural commodities and food products through 
community food banks under a demonstration project.
    [(b) Each food bank participating in the demonstration 
projects under this section shall establish a recordkeeping 
system and internal procedures to monitor the use of 
agricultural commodities and food products provided under this 
section. The Secretary shall develop standards by which the 
feasibility and effectiveness of the project shall be measured, 
and shall conduct an ongoing review of the effectiveness of the 
projects.
    [(c) The Secretary shall determine the quantities, 
varieties, and types of agricultural commodities and food 
products to be made available under this section.
    [(d) This section shall be effective for the period 
beginning on the date of enactment of this Act and ending on 
December 31, 1990.
    [(e) The Secretary shall submit annual progress reports to 
Congress beginning on July 1, 1988, and a final report on July 
1, 1990, regarding each demonstration project carried out under 
this section. Such reports shall include analyses and 
evaluations of the provision and redistribution of agricultural 
commodities and food products under the demonstration projects. 
In addition, the Secretary shall include in the final report 
any recommendations regarding improvements in the provision and 
redistribution of agricultural commodities and food products to 
community food banks and the feasibility of expanding such 
method of provisions and redistribution of agricultural 
commodities and food products to other community food banks.]
                              ----------                              


                     HUNGER PREVENTION ACT OF 1988

          * * * * * * *

                  TITLE I--EMERGENCY HUNGER PREVENTION

          * * * * * * *

         Subtitle B--Soup Kitchens and Other Emergency Food Aid

[SEC. 110. SOUP KITCHENS AND FOOD BANKS.

    [(a) Purpose.--It is the purpose of this section to 
establish a formula so that the amount, measured by their 
value, of additional commodities that are to be provided to 
each State for redistribution to soup kitchens and food banks 
can be precisely calculated for fiscal years 1989 through 2002. 
The share of commodities, as measured by their value, to be 
provided to each State shall be based 60 percent on the number 
of persons in households within the State having incomes below 
the poverty level and 40 percent on the number of unemployed 
persons within the State.
    [(b) Definitions.--As used in this section--
            [(1) Additional commodities.--The term ``additional 
        commodities'' means commodities purchased under this 
        section in addition to the commodities otherwise made 
        available to soup kitchens and food banks providing 
        nutrition assistance to relieve situations of emergency 
        and distress.
            [(2) Average monthly number of unemployed 
        persons.--The term ``average monthly number of 
        unemployed persons'' refers to the average monthly 
        number of unemployed persons within each State in the 
        most recent fiscal year for which such information is 
        available as determined by the Bureau of Labor 
        Statistics of the Department of Labor.
            [(3) Food banks.--The term ``food bank'' refers to 
        public and charitable institutions that maintain an 
        established operation involving the provision of food 
        or edible commodities, or the products thereof, to food 
        pantries, soup kitchens, hunger relief centers, or 
        other food or feeding centers that provide meals or 
        food to needy persons on a regular basis as an integral 
        part of their normal activities.
            [(4) Food pantry.--The term `food pantry' means a 
        public or private nonprofit organization that 
        distributes food to low-income and unemployed 
        households, including food from sources other than the 
        Department of Agriculture, to relieve situations of 
        emergency and distress.
            [(5) Poverty line.--The term ``poverty line'' has 
        the same meaning given such term in section 673(2) of 
        the Community Services Block Grant Act (42 U.S.C. 
        9902(2)).
            [(6) Secretary.--The term ``Secretary'' means the 
        Secretary of Agriculture.
            [(7) Soup kitchens.--The term ``soup kitchens'' 
        refers to public and charitable institutions that 
        maintain an established feeding operation to provide 
        food to needy homeless persons on a regular basis as an 
        integral part of their normal activities.
            [(8) Total value of additional commodities.--The 
        term ``total value of additional commodities'' means 
        the actual cost (including the processing and 
        distribution costs of the Secretary), as paid by the 
        Secretary, for all additional commodities purchased 
        under subsection (c).
            [(9) Value of additional commodities allocated to a 
        state.--The term ``value of additional commodities 
        allocated to a State'' means the actual cost for 
        additional commodities (including the processing and 
        distribution costs of the Secretary) as paid by the 
        Secretary for commodities purchased under this section 
        and allocated to such State.
    [(c) Amounts.--
            [(1) 1991 fiscal year.--During fiscal year 1991, 
        the Secretary shall spend $32,000,000, to purchase, 
        process, and distribute additional commodities to 
        States for distribution to soup kitchens and food banks 
        within a given State that provide nutrition assistance 
        to relieve situations of emergency and distress through 
        the provision of food and meals to needy persons and to 
        other institutions that can demonstrate, in accordance 
        with subsection (j)(3), that they serve predominantly 
        needy persons.
            [(2) Subsequent fiscal years.--There are authorized 
        to be appropriated $40,000,000 for each of the fiscal 
        years 1992 through 2002 to purchase, process, and 
        distribute additional commodities to States for 
        distribution to soup kitchens and food banks within a 
        given State that provide nutrition assistance to 
        relieve situations of emergency and distress through 
        the provision of food and meals to needy persons and to 
        other institutions that can demonstrate, in accordance 
        with subsection (j)(3), that they serve predominantly 
        needy persons. Any amounts provided for fiscal years 
        1992 through 2002 shall be available only to the extent 
        and in such amounts as are provided in advance in 
        appropriations Acts.
            [(3) Food pantries.--In instances in which food 
        banks do not operate within a given State, the State 
        may distribute commodities to food pantries.
    [(d) Mandatory Allotments.--In each fiscal year, the 
Secretary shall allot--
            [(1) 60 percent of the total value of additional 
        commodities provided to States in a manner such that 
        the value of additional commodities allocated to each 
        State bears the same ratio to 60 percent of the total 
        value of additional commodities as the number of 
        persons in households within the State having incomes 
        below the poverty line bears to the total number of 
        persons in households within all States having incomes 
        below such poverty line, and each State shall be 
        entitled to receive such value of additional 
        commodities; and
            [(2) 40 percent of the total value of additional 
        commodities provided to States in a manner such that 
        the value of additional commodities allocated to each 
        State bears the same ratio to 40 percent of the total 
        value of additional commodities as the average monthly 
        number of unemployed persons within the State bears to 
        the average monthly number of unemployed persons within 
        all States during the same fiscal year, and each State 
        shall be entitled to receive such value of additional 
        commodities.
    [(e) Allocation and Reallocation.--
            [(1) Notification by secretary.--The Secretary 
        shall notify each State of the amount of the allocation 
        that the State is entitled to receive under subsection 
        (d).
            [(2) Notification by state.--
                    [(A) Acceptance amount.--A State shall 
                promptly notify the Secretary of the amount of 
                commodities that will be accepted by soup 
                kitchens or food banks. In determining such 
                amount, the State shall give priority to 
                institutions that provide meals to homeless 
                individuals.
                    [(B) Less than full amount accepted.--A 
                State shall promptly notify the Secretary if 
                the State determines that it will not accept 
                the full amount of the allocation under 
                subsection (d) (or a portion thereof).
            [(3) Reallocation.--Whenever the Secretary receives 
        a notification under paragraph (2)(B), the Secretary 
        shall reallocate and distribute the amount of such 
        allocation (or any portion thereof) not accepted, in a 
        fair and equitable manner among the States that accept 
        the full amount of their respective allocations under 
        subsection (d) and that have requested receipt of 
        additional allocations.
    [(f) Administration.--Subject to subsection (c), purchases 
under this section shall be made by the Secretary at such times 
and under such conditions as the Secretary determines to be 
appropriate within each fiscal year. All commodities purchased 
under subsection (c) within each fiscal year shall be provided 
to States prior to the end of each such fiscal year.
    [(g) Maintenance of Effort.--If a State uses its own funds 
to provide commodities or services under this section, such 
State funds shall not be obtained from existing Federal or 
State programs.
    [(h) Increased Commodity Levels and Maintenance of 
Effort.--
            [(1) Increased commodity levels.--Commodities 
        provided under the amendments made by section 104 and 
        under this section shall be in addition to the 
        commodities otherwise provided (through commodity 
        donations traditionally provided by the Secretary or 
        the Commodity Credit Corporation) to emergency feeding 
        organizations. The value of the commodity donations 
        traditionally provided to such organizations shall not 
        be diminished as a result of the purchases required by 
        the amendments made by section 104 and this section.
            [(2) Federal maintenance.--The purchase of 
        commodities required under the amendments made by 
        section 104 and under this section, shall not be made 
        in such a manner as to cause any reduction in the value 
        of the bonus commodities that would otherwise be 
        distributed, in the absence of section 104 and this 
        section, to charitable institutions, or to any other 
        domestic food assistance program, such as the programs 
        authorized under the National School Lunch Act, the 
        Child Nutrition Act of 1966, the Food Stamp Act of 
        1977, or sections 4 and 5 of the Agriculture and 
        Consumer Protection Act of 1973.
            [(3) Other maintenance.--Local agencies receiving 
        commodities purchased under this section shall provide 
        an assurance to the State that donations of foodstuffs 
        from other sources shall not be diminished as a result 
        of the receipt of commodities under this section.
    [(i) New Formula.--Notwithstanding the provisions of this 
section that set forth the specific formula for allocating 
additional commodities to each State, the Secretary is 
authorized to establish a different precise formula, after 
prior notice and comment as required by section 553 of title 5, 
United States Code, only to the extent that--
            [(1) any such formula is effective at the outset 
        of, and throughout any given fiscal year;
            [(2) any such formula can be used to precisely 
        calculate the amount of commodities to be made 
        available to each State by the Secretary for each 
        fiscal year; and
            [(3) such formula provides that each State is 
        entitled to receive that value of additional 
        commodities which results from the application of such 
        formula to the total value of additional commodities.
    [(j) Priority System for State Distribution of 
Commodities.--
            [(1) Soup kitchens.--In distributing commodities 
        under this section, the distributing agency, under 
        procedures determined appropriate by the distributing 
        agency, shall offer, or otherwise make available, its 
        full allocation of commodities for distribution to soup 
        kitchens and other like organizations that serve meals 
        to homeless persons, and to food banks for distribution 
        to such organizations.
            [(2) Institutions that serve only low-income 
        recipients.--If distributing agencies determine that 
        they will not likely exhaust their allocation of 
        commodities under this section through distribution to 
        institutions referred to in paragraph (1), the 
        distributing agencies shall make the remaining 
        commodities available to food banks for distribution to 
        institutions that distribute commodities to the needy. 
        When such institutions distribute commodities to 
        individuals for home consumption, eligibility for such 
        commodities shall be determined through a means test as 
        determined appropriate by the State distributing 
        agency.
            [(3) Other institutions.--If the distributing 
        agency's commodity allocation is not likely to be 
        exhausted after distribution under paragraphs (1) and 
        (2) (as determined by the food bank), food banks may 
        distribute the remaining commodities to institutions 
        that serve meals to needy persons and do not employ a 
        means test to determine eligibility for such meals, 
        provided that the organizations have documented, to the 
        satisfaction of the food bank, that the organizations 
        do, in fact, serve predominantly needy persons.
    [(k) Settlement and Adjustment of Claims.--
            [(1) In general.--The Secretary or a designee of 
        the Secretary shall have the authority to--
                    [(A) determine the amount of, settle, and 
                adjust any claim arising under this section; 
                and
                    [(B) waive such a claim if the Secretary 
                determines that to do so will serve the 
                purposes of this section.
            [(2) Litigation.--Nothing contained in this 
        subsection shall be construed to diminish the authority 
        of the Attorney General of the United States under 
        section 516 of title 28, United States Code, to conduct 
        litigation on behalf of the United States.]
          * * * * * * *

                    TITLE II--NUTRITION IMPROVEMENTS

          * * * * * * *

             [Subtitle C--Food Processing and Distribution

[SEC. 220. ENCOURAGEMENT OF FOOD PROCESSING AND DISTRIBUTION BY 
                    ELIGIBLE RECIPIENT AGENCIES.

    [(a) Solicitation of Applications.--
            [(1) In general.--Not later than 60 days after the 
        date of enactment of this Act, the Secretary of 
        Agriculture shall, to the extent that the Commodity 
        Credit Corporation's inventory levels permit, solicit 
        applications, in accordance with paragraph (2), for 
        surplus commodities available for distribution under 
        section 202 of the Emergency Food Assistance Act of 
        1983 (7 U.S.C. 612c note).
            [(2) Requirements.--The solicitation by the 
        Secretary of Agriculture under paragraph (1) shall be 
        in the form of a request that any eligible recipient 
        agency (as defined in section 201A of the Emergency 
        Food Assistance Act of 1983) submit an application to 
        the Secretary that shall include an assurance that such 
        agency will--
                    [(A) process any agricultural commodity 
                received in response to such application into 
                end-use products suitable for distribution 
                through the Emergency Food Assistance Program;
                    [(B) package such products for use by 
                individual households; and
                    [(C) distribute such products to State 
                agencies responsible for the administration of 
                the Emergency Food Assistance Program, at no 
                cost to the State agency, for distribution 
                through the Emergency Food Assistance Program.
            [(3) Prohibition on payment of processing costs.--
        Funds made available under section 204 of the Emergency 
        Food Assistance Act of 1983 (7 U.S.C. 612c note) or 
        funds of the Commodity Credit Corporation shall not be 
        used to pay any costs incurred for the processing, 
        storage, transportation or distribution of the 
        commodities or end-use products prior to their delivery 
        to the State agency.
    [(b) Review of Applications.--
            [(1) Time of review.--Not later than 60 days after 
        the Secretary of Agriculture receives an application 
        solicited under subsection (a), the Secretary shall 
        approve or disapprove such application.
            [(2) Notice of disapproval.--If the Secretary 
        disapproves the application submitted under subsection 
        (a), the Secretary shall inform the applicant of the 
        reasons for such disapproval.]
          * * * * * * *

                    TITLE V--DEMONSTRATION PROJECTS

          * * * * * * *

[SEC. 502. FOOD BANK DEMONSTRATION PROJECTS.

    [(a) In General.--The Secretary of Agriculture may carry 
out demonstration projects to provide and redistribute to needy 
individuals and families through community food banks and other 
charitable food banks--
            [(1) agricultural commodities or the products 
        thereof made available under section 416 of the 
        Agricultural Act of 1949 (7 U.S.C. 1431); and
            [(2) to the extent practicable, agricultural 
        commodities or the products thereof made available 
        under section 32 of the Act entitled ``An Act to amend 
        the Agricultural Adjustment Act, and for other 
        purposes'', approved August 24, 1935 (7 U.S.C. 612c).
    [(b) Food Types.--The Secretary shall determine the 
quantities, varieties, and types of agricultural commodities 
and products thereof to be made available to community food 
banks under this section.
    [(c) Report.--Not later than July 1, 1990, the Secretary 
shall submit, to the Committee on Agriculture of the House of 
Representatives and the Committee on Agriculture, Nutrition, 
and Forestry of the Senate, a report describing any 
demonstration projects carried out under this section. The 
report shall include an analysis and evaluation of the 
distribution and redistribution of food under the demonstration 
projects and the feasibility of expanding the projects to other 
community food banks.
    [(d) Termination.--The authority provided under this 
section shall terminate on September 30, 1990.
    [(e) Authorization of Appropriations.--There are authorized 
to be appropriated to carry out this section, $400,000 for each 
of the fiscal years 1989 through 1990.]
          * * * * * * *
                              ----------                              


 SECTION 1773 OF THE FOOD, AGRICULTURE, CONSERVATION, AND TRADE ACT OF 
                                  1990

SEC. 1773. COMMODITY DISTRIBUTION REFORM.

    (a)  * * *
          * * * * * * *
    [(f) Report on Entitlement Commodity Processing.--
            [(1) In general.--Not later than January 1, 1992, 
        the Comptroller General of the United States shall 
        submit a report regarding processing of entitlement 
        commodities used in child nutrition programs to the 
        Committee on Agriculture of the House of 
        Representatives and the Committee on Agriculture, 
        Nutrition, and Forestry of the Senate.
            [(2) Consultation.--The Comptroller General shall 
        consult with representatives of State and Federal 
        commodity distribution authorities, local elected 
        school authorities, local school food service 
        authorities, and food processors with experience 
        providing service to child nutrition programs regarding 
        the scope and design of the report.
            [(3) Evaluation.--The report shall evaluate the 
        extent to which--
                    [(A) processing of entitlement commodities 
                occurs in the States;
                    [(B) governmental requirements for 
                participation in the processing vary among 
                States; and
                    [(C) entitlement commodity recipients are 
                satisfied with access to and services provided 
                through entitlement commodity processing.]
                              ----------                              


            SECTION 904 OF THE ELECTRONIC FUND TRANSFER ACT

Sec. 904. Regulations

    (a)  * * *
          * * * * * * *
    [(d) In the event] (d) Applicability to Service Providers 
Other Than Certain Financial Institutions.--
            (1) In general.--In the event that electronic fund 
        transfer services are made available to consumers by a 
        person other than a financial institution holding a 
        consumer's account, the Board shall by regulation 
        assure that the disclosures, protections, 
        responsibilities, and remedies created by this title 
        are made applicable to such persons and services.
            (2) State and local government electronic benefit 
        transfer programs.--
                    (A) Exemption generally.--The disclosures, 
                protections, responsibilities, and remedies 
                established under this title, and any 
                regulation prescribed or order issued by the 
                Board in accordance with this title, shall not 
                apply to any electronic benefit transfer 
                program established under State or local law or 
                administered by a State or local government.
                    (B) Exception for direct deposit into 
                recipient's account.--Subparagraph (A) shall 
                not apply with respect to any electronic funds 
                transfer under an electronic benefit transfer 
                program for deposits directly into a consumer 
                account held by the recipient of the benefit.
                    (C) Rule of construction.--No provision of 
                this paragraph may be construed as--
                            (i) affecting or altering the 
                        protections otherwise applicable with 
                        respect to benefits established by 
                        Federal, State, or local law; or
                            (ii) otherwise superseding the 
                        application of any State or local law.
                    (D) Electronic benefit transfer program 
                defined.--For purposes of this paragraph, the 
                term ``electronic benefit transfer program''--
                            (i) means a program under which a 
                        government agency distributes needs-
                        tested benefits by establishing 
                        accounts to be accessed by recipients 
                        electronically, such as through 
                        automated teller machines, or point-of-
                        sale terminals; and
                            (ii) does not include employment-
                        related payments, including salaries 
                        and pension, retirement, or 
                        unemployment benefits established by 
                        Federal, State, or local governments.
                    TITLE II--COMMITTEE ON COMMERCE

                       table of contents of title

                   Subtitle A--Restructuring Medicaid

Sec. 2001. Short title of subtitle.
Sec. 2002. Finding; goals for medicaid restructuring.
Sec. 2003. Restructuring the medicaid program.
    ``Sec. 1500. Purpose; State plans.

                   ``Part A--Eligibility and Benefits

    ``Sec. 1501. Guaranteed eligibility and benefits.
    ``Sec. 1502. Other provisions relating to eligibility and benefits.
    ``Sec. 1503. Limitations on premiums and cost-sharing.
    ``Sec. 1504. Description of process for developing capitation 
              payment rates.
    ``Sec. 1505. Preventing spousal impoverishment.
    ``Sec. 1506. Preventing family impoverishment.
    ``Sec. 1507. State flexibility.
    ``Sec. 1508. Private rights of action.

                      ``Part B--Payments to States

    ``Sec. 1511. Allotment of funds among States.
    ``Sec. 1512. Payments to States.
    ``Sec. 1513. Limitation on use of funds; disallowance.

          ``Part C--Establishment and Amendment of State Plans

    ``Sec. 1521. Description of strategic objectives and performance 
              goals.
    ``Sec. 1522. Annual reports.
    ``Sec. 1523. Periodic, independent evaluations.
    ``Sec. 1524. Description of process for State plan development.
    ``Sec. 1525. Consultation in State plan development.
    ``Sec. 1526. Submittal and approval of State plans.
    ``Sec. 1527. Submittal and approval of plan amendments.
    ``Sec. 1528. Process for State withdrawal from program.
    ``Sec. 1529. Sanctions for noncompliance.
    ``Sec. 1530. Secretarial authority.

                 ``Part D--Program Integrity and Quality

    ``Sec. 1551. Use of audits to achieve fiscal integrity.
    ``Sec. 1552. Fraud prevention program.
    ``Sec. 1553. Information concerning sanctions taken by State 
              licensing authorities against health care practitioners 
              and providers.
    ``Sec. 1554. State fraud control units.
    ``Sec. 1555. Recoveries from third parties and others.
    ``Sec. 1556. Assignment of rights of payment.
    ``Sec. 1557. Quality assurance requirements for nursing facilities.
    ``Sec. 1558. Other provisions promoting program integrity.

                      ``Part E--General Provisions

    ``Sec. 1571. Definitions.
    ``Sec. 1572. Treatment of territories.
    ``Sec. 1573. Description of treatment of Indian Health Service 
              facilities.
    ``Sec. 1574. Application of certain general provisions.
    ``Sec. 1575. Optional master drug rebate agreements.
Sec. 2004. State election; termination of current program; and 
          transition.
Sec. 2005. Integration demonstration project.

                      Subtitle B--Other Provisions

Part 1--Involvement of Commerce Committee in Federal Government Position 
                               Reductions

Sec. 2101. Involvement of Commerce Committee in Federal government 
          position reductions.

             Part 2--Restricting Public Benefits for Aliens

                SUBPART A--ELIGIBILITY FOR FEDERAL BENEFITS

Sec. 2211. Aliens who are not qualified aliens ineligible for Federal 
          public benefits.
Sec. 2212. Limited eligibility of qualified aliens for medical 
          assistance.
Sec. 2213. Five-year limited eligibility of qualified aliens for Federal 
          means-tested public benefit.
Sec. 2214. Notification.

                       SUBPART B--GENERAL PROVISIONS

Sec. 2221. Definitions.
Sec. 2222. Verification of eligibility for Federal public benefits.

                        Part 3--Energy Assistance

Sec. 2131. Energy assistance.

                   Subtitle A--Restructuring Medicaid

SEC. 2001. SHORT TITLE OF SUBTITLE.

    This subtitle may be cited as the ``Medicaid Restructuring 
Act of 1996''.

SEC. 2002. FINDING; GOALS FOR MEDICAID RESTRUCTURING.

    (a) Finding.--The Congress finds that the National 
Governors' Association on February 6, 1996, adopted unanimously 
and on a bipartisan basis goals to guide the restructuring of 
the medicaid program.
    (b) Goals for Restructuring.--The following are the 4 
primary goals so adopted:
            (1) The basic health care needs of the nation's 
        most vulnerable populations must be guaranteed.
            (2) The growth in health care expenditures must be 
        brought under control.
            (3) States must have maximum flexibility in the 
        design and implementation of cost-effective systems of 
        care.
            (4) States must be protected from unanticipated 
        program costs resulting from economic fluctuations in 
        the business cycle, changing demographics, and natural 
        disasters.

SEC. 2003. RESTRUCTURING THE MEDICAID PROGRAM.

    The Social Security Act is amended by inserting after title 
XIV the following new title:

 ``TITLE XV--PROGRAM OF MEDICAL ASSISTANCE FOR LOW-INCOME INDIVIDUALS 
                              AND FAMILIES

                       ``table of contents of title

``Sec. 1500. Purpose; State plans.

                   ``Part A--Eligibility and Benefits

``Sec. 1501. Guaranteed eligibility and benefits.
``Sec. 1502. Other provisions relating to eligibility and benefits.
``Sec. 1503. Limitations on premiums and cost-sharing.
``Sec. 1504. Description of process for developing capitation payment 
          rates.
``Sec. 1505. Preventing spousal impoverishment.
``Sec. 1506. Preventing family impoverishment.
``Sec. 1507. State flexibility.
``Sec. 1508. Private rights of action.

                      ``Part B--Payments to States

``Sec. 1511. Allotment of funds among States.
``Sec. 1512. Payments to States.
``Sec. 1513. Limitation on use of funds; disallowance.

          ``Part C--Establishment and Amendment of State Plans

``Sec. 1521. Description of strategic objectives and performance goals.
``Sec. 1522. Annual reports.
``Sec. 1523. Periodic, independent evaluations.
``Sec. 1524. Description of process for State plan development.
``Sec. 1525. Consultation in State plan development.
``Sec. 1526. Submittal and approval of State plans.
``Sec. 1527. Submittal and approval of plan amendments.
``Sec. 1528. Process for State withdrawal from program.
``Sec. 1529. Sanctions for noncompliance.
``Sec. 1530. Secretarial authority.

                 ``Part D--Program Integrity and Quality

``Sec. 1551. Use of audits to achieve fiscal integrity.
``Sec. 1552. Fraud prevention program.
``Sec. 1553. Information concerning sanctions taken by State licensing 
          authorities against health care practitioners and providers.
``Sec. 1554. State fraud control units.
``Sec. 1555. Recoveries from third parties and others.
``Sec. 1556. Assignment of rights of payment.
``Sec. 1557. Quality assurance requirements for nursing facilities.
``Sec. 1558. Other provisions promoting program integrity.

                      ``Part E--General Provisions

``Sec. 1571. Definitions.
``Sec. 1572. Treatment of territories.
``Sec. 1573. Description of treatment of Indian Health Service 
          facilities.
``Sec. 1574. Application of certain general provisions.
``Sec. 1575. Optional master drug rebate agreements.

``SEC. 1500. PURPOSE; STATE PLANS.

    ``(a) Purpose.--The purpose of this title is to provide 
funds to States to enable them to provide medical assistance to 
low-income individuals and families in a more effective, 
efficient, and responsive manner.
    ``(b) State Plan Required.--A State is not eligible for 
payment under section 1512 unless the State has submitted to 
the Secretary under part C a plan (in this title referred to as 
a `State plan') that--
            ``(1) sets forth how the State intends to use the 
        funds provided under this title to provide medical 
        assistance to needy individuals and families consistent 
        with the provisions of this title, and
            ``(2) is approved under such part.
    ``(c) Continued Approval.--An approved State plan shall 
continue in effect unless and until--
            ``(1) the State amends the plan under section 1527,
            ``(2) the State terminates participation under this 
        title under section 1528, or
            ``(3) the Secretary finds substantial noncompliance 
        of the plan with the requirements of this title under 
        section 1529.
    ``(d) State Entitlement.--This title constitutes budget 
authority in advance of appropriations Acts and represents the 
obligation of the Federal Government to provide for the payment 
to States of amounts provided under part B.
    ``(e) Effective Date.--No State is eligible for payments 
under section 1512 for any calendar quarter beginning before 
October 1, 1996.

                   ``Part A--Eligibility and Benefits

``SEC. 1501. GUARANTEED ELIGIBILITY AND BENEFITS.

    ``(a) Guaranteed Coverage and Benefits for Certain 
Populations.--
            ``(1) In general.--Each State plan shall provide 
        for making medical assistance available for benefits in 
        the guaranteed benefit package (as defined in paragraph 
        (2)) to individuals within each of the following 
        categories:
                    ``(A) Poor pregnant women.--Pregnant women 
                with family income below 133 percent of the 
                poverty line.
                    ``(B) Children under 6.--Children under 6 
                years of age whose family income does not 
                exceed 133 percent of the poverty line.
                    ``(C) Children 6 to 19.--Children born 
                after September 30, 1983, who are over 5 years 
                of age, but under 19 years of age, whose family 
                income does not exceed 100 percent of the 
                poverty line.
                    ``(D) Disabled individuals.--As elected by 
                the State under paragraph (3), either--
                            ``(i) disabled individuals (as 
                        defined by the State) who meet the 
                        income and resource standards 
                        established under the plan, or
                            ``(ii) individuals who are under 65 
                        years of age, who are disabled (as 
                        determined under section 1614(a)(3)), 
                        and who, using the methodology provided 
                        for determining eligibility for payment 
                        of supplemental security income 
                        benefits under title XVI, meet the 
                        income and resource standards for 
                        payment of such benefits.
                    ``(E) Poor elderly individuals.--Subject to 
                paragraph (4), elderly individuals who, using 
                the methodology provided for determining 
                eligibility for payment of supplemental 
                security income benefits under title XVI, meet 
                the income and resource standards for payment 
                of such benefits.
                    ``(F) Children receiving foster care or 
                adoption assistance.--Subject to paragraph (5), 
                children who meet the requirements for receipt 
                of foster care maintenance payments or adoption 
                assistance under title IV.
                    ``(G) Certain low-income families.--Subject 
                to paragraph (6), individuals and members of 
                families who meet current AFDC income and 
                resource standards (as defined in paragraph 
                (6)(C)) in the State, determined using the 
                methodology for determining eligibility for aid 
                under the State plan under part A or part E of 
                title IV (as in effect as of May 1, 1996).
            ``(2) Guaranteed benefits package.--In this title, 
        the term `guaranteed benefit package' means benefits 
        (in an amount, duration, and scope specified under the 
        State plan) for at least the following categories of 
        services:
                    ``(A) Inpatient and outpatient hospital 
                services.
                    ``(B) Physicians' surgical and medical 
                services.
                    ``(C) Laboratory and x-ray services.
                    ``(D) Nursing facility services.
                    ``(E) Home health care.
                    ``(F) Federally-qualified health center 
                services and rural health clinic services.
                    ``(G) Immunizations for children (in 
                accordance with a schedule for immunizations 
                established by the Health Department of the 
                State in consultation with the State agency 
                responsible for the administration of the 
                plan).
                    ``(H) Prepregnancy family planning services 
                and supplies (as specified by the State).
                    ``(I) Prenatal care.
                    ``(J) Physician assistance services, 
                pediatric and family nurse practitioner 
                services and nurse midwife services.
                    ``(K) EPSDT services (as defined in section 
                1571(e)) for individuals who are under the age 
                of 21.
        A State may establish criteria, including utilization 
        review, and cost effectiveness of alternative covered 
        services, for purposes of specifying the amount, 
        duration, and scope of benefits provided under the 
        State plan.
            ``(3) State election of disabled individuals to be 
        guaranteed coverage.--
                    ``(A) In general.--Each State shall specify 
                in its State plan, before the beginning of each 
                Federal fiscal year, whether to guarantee 
                coverage of disabled individuals under the plan 
                under the option described in paragraph 
                (1)(D)(i) or under the option described in 
                paragraph (1)(D)(ii). An election under this 
                paragraph shall continue in effect for the 
                subsequent fiscal year unless the election is 
                changed before the beginning of the fiscal 
                year.
                    ``(B) Consequences of election.--
                            ``(i) State flexible definition 
                        option.--If a State elects the option 
                        described in paragraph (1)(D)(i) for a 
                        fiscal year--
                                    ``(I) the State plan must 
                                provide under section 1502(c) 
                                for a set aside of funds for 
                                disabled individuals for the 
                                fiscal year, and
                                    ``(II) disabled individuals 
                                are not taken into account in 
                                determining a State 
                                supplemental umbrella allotment 
                                under section 1511(g).
                            ``(ii) SSI definition option.--If a 
                        State elects the option described in 
                        paragraph (1)(D)(ii) for a fiscal 
                        year--
                                    ``(I) section 1502(c) shall 
                                not apply for the fiscal year, 
                                and
                                    ``(II) the State is 
                                eligible for an increase under 
                                section 1511(g) in its outlay 
                                allotment for the fiscal year 
                                based on an increase in the 
                                number of guaranteed and 
                                optional disabled individuals 
                                covered under the plan.
            ``(4) Continuation of special eligibility standards 
        for section 209(b) states.--
                    ``(A) In general.--A section 209(b) State 
                (as defined in subparagraph (B)) may elect to 
                treat any reference in paragraph (1)(E) to 
                `elderly individuals who meet the income and 
                resource standards for the payment of 
                supplemental security income benefits under 
                title XVI' as a reference to `elderly 
                individuals who meet the standards described in 
                the first sentence of section 1902(f) (as in 
                effect on the day before the date of the 
                enactment of this title)'.
                    ``(B) Section 209(b) state defined.--In 
                subparagraph (A), the term `section 209(b) 
                State' means a State to which section 1902(f) 
                applied as of the day before the date of the 
                enactment of this title.
            ``(5) Option for application of current 
        requirements for certain children.--A State may elect 
        to apply paragraph (1)(F) by treating any reference to 
        `requirements for receipt of foster care maintenance 
        payments or adoption assistance under title IV' as a 
        reference to `requirements for receipt of foster care 
        maintenance payments or adoption assistance as in 
        effect under its State plan under part E of title IV as 
        of the date of the enactment of this title'.
            ``(6) Special rules for low-income families.--
                    ``(A) Optional use of lower national 
                average standards.--In the case of a State in 
                which the current AFDC income and resource 
                standards are above the national average of the 
                current AFDC income and resource standards for 
                the 50 States and the District of Columbia, as 
                determined and published by the Secretary, in 
                applying paragraph (1)(G), the State may elect 
                to substitute such national average income and 
                resource standards for the current AFDC income 
                and resource standards in that State.
                    ``(B) Optional eligibility based on link to 
                other assistance.--
                            ``(i) In general.--Subject to 
                        clause (ii), in the case of a State 
                        which maintains a link between 
                        eligibility for aid or assistance under 
                        one or more parts of title IV and 
                        eligibility for medical assistance 
                        under this title, in applying paragraph 
                        (1)(G), the State may elect to treat 
                        any reference in such paragraph to 
                        `individuals and members of families 
                        who meet current AFDC income and 
                        resource standards in the State' as a 
                        reference to `members of families who 
                        are receiving assistance under a State 
                        plan under part A or E of title IV'.
                            ``(ii) Limitation on election.--A 
                        State may only make the election 
                        described in clause (i) if, and so long 
                        as, the State demonstrates to the 
                        satisfaction of the Secretary that the 
                        such election does not result in 
                        Federal expenditures under this title 
                        (taking into account any supplemental 
                        amounts provided pursuant to section 
                        1511(g)) that are greater than the 
                        Federal expenditures that would have 
                        been made under this title if the State 
                        had not made such election.
                    ``(C) Current afdc income and resource 
                standards defined.--In this subsection, the 
                term `current AFDC income and resource 
                standards' means, with respect to a State, the 
                income and resource standards for the payment 
                of assistance under the State plan under part A 
                or E of title IV (as in effect as of May 1, 
                1996).
                    ``(D) Medical assistance required to be 
                provided for 1 year for families becoming 
                ineligible for family assistance due to 
                increased earnings from employment or 
                collection of child support.--A State plan 
                shall provide that if any family becomes 
                ineligible to receive assistance under the 
                State program funded under part A of title IV 
                as a result of increased earnings from 
                employment or as a result of the collection or 
                increased collection of child or spousal 
                support, or a combination thereof, having 
                received such assistance in at least 3 of the 6 
                months immediately preceding the month in which 
                such ineligibility begins, the family shall be 
                eligible for medical assistance under the State 
                plan during the immediately succeeding 12-month 
                period for so long as family income is less 
                than the poverty line, and that the family will 
                be appropriately notified of such eligibility.
            ``(7) Methodology.--Family income shall be 
        determined for purposes of subparagraphs (A) through 
        (C) of paragraph (1) in the same manner (and using the 
        same methodology) as income was determined under the 
        State medicaid plan under section 1902(l) (as in effect 
        as of May 1, 1996).
    ``(b) Guaranteed Coverage of Medicare Premiums and Cost-
Sharing for Certain Medicare Beneficiaries.--
            ``(1) Guaranteed eligibility.--Each State plan 
        shall provide--
                    ``(A) for making medical assistance 
                available for required medicare cost-sharing 
                (as defined in paragraph (2)) for qualified 
                medicare beneficiaries described in paragraph 
                (3);
                    ``(B) for making medical assistance 
                available for payment of medicare premiums 
                under section 1818A for qualified disabled and 
                working individuals described in paragraph (4); 
                and
                    ``(C) for making medical assistance 
                available for payment of medicare premiums 
                under section 1839 for individuals who would be 
                qualified medicare beneficiaries described in 
                paragraph (3) but for the fact that their 
                income exceeds 100 percent, but is less than 
                120 percent, of the poverty line for a family 
                of the size involved.
            ``(2) Required medicare cost-sharing defined.--
                    ``(A) In general.--In this subsection, the 
                term `required medicare cost-sharing' means, 
                with respect to an individual, costs incurred 
                for medicare cost-sharing described in 
                paragraphs (1) through (4) of section 1571(c) 
                (and, at the option of a State, section 
                1571(c)(5)) without regard to whether the costs 
                incurred were for items and services for which 
                medical assistance is otherwise available under 
                the plan.
                    ``(B) Limitation on obligation for certain 
                cost-sharing assistance.--In the case of 
                medical assistance furnished under this title 
                for medicare cost-sharing described in 
                paragraph (2), (3), or (4) of section 1571(c) 
                relating to the furnishing of a service or item 
                to a medicare beneficiary, nothing in this 
                title shall be construed as preventing a State 
                plan--
                            ``(i) from limiting the assistance 
                        to the amount (if any) by which (I) the 
                        amount that is otherwise payable under 
                        the plan for the item or service for 
                        eligible individuals who are not such 
                        medicare beneficiaries (or, if payments 
                        for such items or services are made on 
                        a capitated basis, an amount reasonably 
                        related or derived from such capitated 
                        payment amount), exceeds (II) the 
                        amount of payment (if any) made under 
                        title XVIII with respect to the service 
                        or item, and
                            ``(ii) if the amount described in 
                        subclause (II) of clause (i) exceeds 
                        the amount described in subclause (I) 
                        of such clause, from treating the 
                        amount paid under title XVIII as 
                        payment in full and not requiring or 
                        providing for any additional medical 
                        assistance under this subsection.
            ``(3) Qualified medicare beneficiary defined.--In 
        this subsection, the term `qualified medicare 
        beneficiary' means an individual--
                    ``(A) who is entitled to hospital insurance 
                benefits under part A of title XVIII (including 
                an individual entitled to such benefits 
                pursuant to an enrollment under section 1818, 
                but not including an individual entitled to 
                such benefits only pursuant to an enrollment 
                under section 1818A),
                    ``(B) whose income (as determined under 
                section 1612 for purposes of the supplemental 
                security income program, except as provided in 
                paragraph (5)) does not exceed 100 percent of 
                the poverty line applicable to a family of the 
                size involved, and
                    ``(C) whose resources (as determined under 
                section 1613 for purposes of the supplemental 
                security income program) do not exceed twice 
                the maximum amount of resources that an 
                individual may have and obtain benefits under 
                that program.
            ``(4) Qualified disabled and working individual 
        defined.--In this subsection, the term `qualified 
        disabled and working individual' means an individual--
                    ``(A) who is entitled to enroll for 
                hospital insurance benefits under part A of 
                title XVIII under section 1818A;
                    ``(B) whose income (as determined under 
                section 1612 for purposes of the supplemental 
                security income program) does not exceed 200 
                percent of the poverty line applicable to a 
                family of the size involved;
                    ``(C) whose resources (as determined under 
                section 1613 for purposes of the supplemental 
                security income program) do not exceed twice 
                the maximum amount of resources that an 
                individual or a couple (in the case of an 
                individual with a spouse) may have and obtain 
                benefits for supplemental security income 
                benefits under title XVI; and
                    ``(D) who is not otherwise eligible for 
                medical assistance under this title.
            ``(5) Income determinations.--
                    ``(A) In general.--In determining under 
                this subsection the income of an individual who 
                is entitled to monthly insurance benefits under 
                title II for a transition month (as defined in 
                subparagraph (B)) in a year, such income shall 
                not include any amounts attributable to an 
                increase in the level of monthly insurance 
                benefits payable under such title which have 
                occurred pursuant to section 215(i) for 
                benefits payable for months beginning with 
                December of the previous year.
                    ``(B) Transition month defined.--For 
                purposes of subparagraph (A), the term 
                `transition month' means each month in a year 
                through the month following the month in which 
                the annual revision of the poverty line is 
                published.

``SEC. 1502. OTHER PROVISIONS RELATING TO ELIGIBILITY AND BENEFITS.

    ``(a) Optional Eligibility Groups for Which Umbrella 
Supplemental Funding Is Available.--In addition to the 
guaranteed coverage categories described in section 1501(a)(1), 
the following are population groups with respect to which 
supplemental allotments may be made under section 1511(g), but 
only if (for the individual involved) medical assistance is 
made available under the State plan for the guaranteed benefit 
package (as defined in section 1501(a)(2)):
            ``(1) Certain disabled individuals.--Individuals 
        (not described in section 1501(a)(1)(D)(ii)) who are 
        disabled (as determined under section 1614(a)(3)), 
        covered under the State plan, and meet the eligibility 
        standards for coverage under the State medicaid plan 
        under title XIX (as in effect as of May 1, 1996).
            ``(2) Certain elderly individuals.--Elderly 
        individuals (not described in section 1501(a)(1)(E)) 
        who are covered under the State plan and who meet the 
        eligibility standards for coverage under the State 
        medicaid plan under title XIX (as in effect as of May 
        1, 1996) other than solely on the basis of being an 
        individual described in section 1902(a)(10)(E).
Eligibility under paragraphs (1) and (2) shall be determined 
using the methodologies that are not more restrictive than the 
methodologies used under the State medicaid plan as in effect 
as of May 1, 1996.
    ``(b) Other Provisions Relating to General Eligibility and 
Benefits.--
            ``(1) General description.--Each State plan shall 
        include a description (consistent with this title) of 
        the following:
                    ``(A) Eligibility guidelines for the non-
                guaranteed, non-umbrella population.--The 
                general eligibility guidelines of the plan for 
                eligible low-income individuals who are not 
                covered under subsection (a) or (b) of section 
                1501 or under subsection (a) of this section.
                    ``(B) Scope of assistance.--The amount, 
                duration, and scope of health care services and 
                items covered under the plan, including 
                differences among different eligible population 
                groups.
                    ``(C) Delivery method.--The State's 
                approach to delivery of medical assistance, 
                including a general description of--
                            ``(i) the use (or intended use) of 
                        vouchers, fee-for-service, or managed 
                        care arrangements (such as capitated 
                        health care plans, case management, and 
                        case coordination); and
                            ``(ii) utilization control systems.
                    ``(D) Fee-for-service benefits.--To the 
                extent that medical assistance is furnished on 
                a fee-for-service basis--
                            ``(i) how the State determines the 
                        qualifications of health care providers 
                        eligible to provide such assistance; 
                        and
                            ``(ii) how the State determines 
                        rates of reimbursement for providing 
                        such assistance.
                    ``(E) Cost-sharing.--Beneficiary cost-
                sharing (if any), including variations in such 
                cost-sharing by population group or type of 
                service and financial responsibilities of 
                parents of recipients who are children and the 
                spouses of recipients.
                    ``(F) Utilization incentives.--Incentives 
                or requirements (if any) to encourage the 
                appropriate utilization of services.
                    ``(G) Support for certain hospitals.--
                            ``(i) In general.--With respect to 
                        hospitals described in clause (ii) 
                        located in the State, a description of 
                        the extent to which provisions are made 
                        for expenditures for items and services 
                        furnished by such hospitals and covered 
                        under the State plan.
                            ``(ii) Hospitals described.--A 
                        hospital described in this clause is a 
                        short-term acute care general hospital 
                        or a children's hospital, the low-
                        income utilization rate of which 
                        exceeds the lesser of--
                                    ``(I) 1 standard deviation 
                                above the mean low-income 
                                utilization rate for hospitals 
                                receiving payments under a 
                                State plan in the State in 
                                which such hospital is located, 
                                or
                                    ``(II) 1\1/4\ standard 
                                deviations above the mean low-
                                income utilization rate for 
                                hospitals receiving such 
                                payments in the 50 States and 
                                the District of Columbia.
                            ``(iii) Low-income utilization 
                        rate.--For purposes of clause (ii), the 
                        term `low-income utilization rate' 
                        means, for a hospital, a fraction 
                        (expressed as a percentage), the 
                        numerator of which is the hospital's 
                        number of patient days attributable to 
                        patients who (for such days) were 
                        eligible for medical assistance under a 
                        State plan or were uninsured in a 
                        period, and the denominator of which is 
                        the total number of the hospital's 
                        patient days in that period.
                            ``(iv) Patient days.--For purposes 
                        of clause (iii), the term `patient day' 
                        includes each day in which--
                                    ``(I) an individual, 
                                including a newborn, is an 
                                inpatient in the hospital, 
                                whether or not the individual 
                                is in a specialized ward and 
                                whether or not the individual 
                                remains in the hospital for 
                                lack of suitable placement 
                                elsewhere; or
                                    ``(II) an individual makes 
                                one or more outpatient visits 
                                to the hospital.
            ``(2) Conditions for guarantees and relation of 
        guarantees to financing.--The guarantees of States 
        required under subsection (a) and (b) of section 1501 
        and subsection (d) of this section are subject to the 
        limitations on payment to the States provided under 
        section 1511 (including the provisions of subsection 
        (g), relating to supplemental umbrella allotments). In 
        submitting a plan under this title, a State voluntarily 
        agrees to accept payment amounts provided under such 
        section as full payment from the Federal Government in 
        return for providing for the benefits (including the 
        guaranteed benefit package) under this title.
            ``(3) Secondary payment.--Nothing in this section 
        shall be construed as preventing a State from denying 
        benefits to an individual to the extent such benefits 
        are available to the individual under the medicare 
        program under title XVIII or under another public or 
        private health care insurance program.
            ``(4) Residency requirement.--In the case of an 
        individual who--
                    ``(A) is described in section 1501(a)(1),
                    ``(B) changed residence from another State 
                to the State, and
                    ``(C) has resided in the State for less 
                than 180 days,
        the State may limit the benefits provided to such 
        individual in the guaranteed benefits package under 
        paragraph (2) of section 1501(a) to the amount, 
        duration, and scope of benefits available under the 
        State plan of the individual's previous State of 
        residence.
    ``(c) Set-Aside of Funds for the Low-Income Disabled.--
            ``(1) In general.--In the case of a State that has 
        elected the option described in section 
        1501(a)(1)(D)(i) for a fiscal year, the State plan 
        shall provide that the percentage of funds expended 
        under the plan for medical assistance for eligible low-
        income individuals who are not elderly individuals and 
        who are eligible for such assistance on the basis of a 
        disability, including being blind, for the fiscal year 
        is not less than the minimum low-income-disabled 
        percentage specified in paragraph (2) of the total 
        funds expended under the plan for medical assistance 
        for the fiscal year.
            ``(2) Minimum low-income-disabled percentage.--The 
        minimum low-income-disabled percentage specified in 
        this paragraph for a State is equal to 90 percent of 
        the percentage of the expenditures under title XIX for 
        medical assistance in the State during Federal fiscal 
        year 1995 which was attributable to expenditures for 
        medical assistance for benefits furnished to 
        individuals whose coverage (at such time) was on a 
        basis directly related to disability status, including 
        being blind.
            ``(3) Computations.--States shall calculate the 
        minimum percentage under paragraph (2) in a reasonable 
        manner consistent with reports submitted to the 
        Secretary for the fiscal years involved and medical 
        assistance attributable to the exception provided under 
        section 1903(v)(2) shall not be considered to be 
        expenditures for medical assistance.
    ``(d) Transitional Payment for Federally-Qualified Health 
Center Services and Rural Health Clinic Services.--Each State 
plan shall provide that, for Federally-qualified health center 
services and rural health clinic services (as defined in 
section 1571(f)) furnished under the plan during the first 8 
calendar quarters in which the plan is in effect and for which 
payment is made under the plan, payment shall be made for such 
services at a rate based on 100 percent of costs which are 
reasonable and related to the cost of furnishing such services 
or based on such other tests of reasonableness, as the 
Secretary prescribes in regulations under section 1833(a)(3), 
or, in the case of services to which those regulations do not 
apply, on the same methodology used under section 1833(a)(3).
    ``(e) Preexisting Condition Exclusions.--Notwithstanding 
any other provision of this title--
            ``(1) a State plan may not deny or exclude coverage 
        of any item or service for an eligible individual for 
        benefits under the State plan for such item or service 
        on the basis of a preexisting condition; and
            ``(2) if a State contracts or makes other 
        arrangements (through the eligible individual or 
        through another entity) with a capitated health care 
        organization, insurer, or other entity, for the 
        provision of items or services to eligible individuals 
        under the State plan and the State permits such 
        organization, insurer, or other entity to exclude 
        coverage of a covered item or service on the basis of a 
        preexisting condition, the State shall provide, through 
        its State plan, for such coverage (through direct 
        payment or otherwise) for any such covered item or 
        service denied or excluded on the basis of a 
        preexisting condition.
    ``(f) Solvency Standards for Capitated Health Care 
Organizations.--
            ``(1) In general.--A State may not contract with a 
        capitated health care organization, as defined in 
        section 1504(c)(1), for the provision of medical 
        assistance under a State plan under which the 
        organization is--
                    ``(A) at full financial risk, as defined by 
                the State, unless the organization meets 
                solvency standards established by the State for 
                private health maintenance organizations or is 
                described in paragraph (4) and meets other 
                solvency standards established by the State, or
                    ``(B) is not at such risk, unless the 
                organization meets solvency standards that are 
                established under the State plan.
            ``(2) Treatment of public entities.--Paragraph (1) 
        shall not apply to an organization that is a public 
        entity or if the solvency of such organization is 
        guaranteed by the State.
            ``(3) Transition.--In the case of a capitated 
        health care organization that as of the date of the 
        enactment of this title has entered into a contract 
        with a State for the provision of medical assistance 
        under title XIX under which the organization assumes 
        full financial risk and is receiving capitation 
        payments, paragraph (1) shall not apply to such 
        organization until 3 years after the date of the 
        enactment of this title.
            ``(4) Organization described.--An organization 
        described in this paragraph is a capitated health 
        organization which is (or is controlled by) one or more 
        Federally-qualified health centers or rural health 
        clinics. For purposes of this paragraph, the term 
        `control' means the possession, whether direct or 
        indirect, of the power to direct or cause the direction 
        of the management and policies of a capitated health 
        organization through membership, board representation, 
        or an ownership interest equal to or greater than 50.1 
        percent.
    ``(g) For Services Provided at Federally-Qualified Health 
Centers and Rural Health Clinics.--
            ``(1) In general.--Subject to paragraph (2), a 
        State plan shall provide that the amount of funds 
        expended under the plan for medical assistance for 
        services provided at rural health clinics (as defined 
        in section 1861(aa)(2)) and Federally-qualified health 
        centers (as defined in section 1861(aa)(4)), for 
        eligible low-income individuals for a fiscal year is 
        not less than 85 percent of the average annual 
        expenditures under title XIX for medical assistance in 
        the State during Federal fiscal year 1995 which were 
        attributable to expenditures for medical assistance for 
        rural health clinic services and Federally-qualified 
        health center services (as defined in section 1905(l)).
            ``(2) Alternative minimum set-asides.--
                    ``(A) In general.--Beginning with fiscal 
                year 2001, a State may provide in its State 
                plan (through an amendment to the plan) for a 
                lower percentage of expenditures than the 
                minimum percentages specified in paragraph (1) 
                if the State determines to the satisfaction of 
                the Secretary that--
                            ``(i) the health care needs of the 
                        low-income populations described in 
                        such paragraph who are eligible for 
                        medical assistance under the plan 
                        during the previous fiscal year can be 
                        reasonably met without the expenditure 
                        of the percentage otherwise required to 
                        be expended;
                            ``(ii) the performance goals 
                        established under section 1521 relating 
                        to such population can reasonably be 
                        met with the expenditure of such lower 
                        percentage of funds; and
                            ``(iii) the health care needs of 
                        eligible low-income individuals 
                        residing in medically underserved rural 
                        areas can reasonably be met without the 
                        level of expenditure for such services 
                        otherwise required and the performance 
                        goals established under section 1521 
                        relating to such individuals can 
                        reasonably be met with such lower level 
                        of expenditures.
                    ``(B) Period of application.--The 
                determination under subparagraph (A) shall be 
                made for such period as a State may request, 
                but may not be made for a period of more than 3 
                consecutive Federal fiscal years (beginning 
                with the first fiscal year for which the lower 
                percentage is sought). A new determination must 
                be made under such subparagraph for any 
                subsequent period.

``SEC. 1503. LIMITATIONS ON PREMIUMS AND COST-SHARING.

    ``(a) Limitation on Premiums.--
            ``(1) None for guaranteed population.--The State 
        plan shall not impose any enrollment fee, premium, or 
        similar charge for eligible individuals described in 
        subsection (a) or (b) of section 1501 or section 
        1502(a).
            ``(2) Income-related for other populations.--The 
        State plan may impose an enrollment fee, premium, or 
        similar charge for eligible individuals not described 
        in paragraph (1) if it is related to the individual's 
        income (and does not exceed 2 percent of the 
        individual's gross income).
    ``(b) Limitation on Cost-Sharing.--Subject to subsection 
(c)--
            ``(1) Guaranteed populations.--With respect to 
        individuals covered under subsection (a) or (b) of 
        section 1501 or section 1502, the State may not impose 
        any cost-sharing with respect to items and services 
        unless the amount is nominal in amount. For purposes of 
        this paragraph, an amount is nominal if it does not 
        exceed 6 percent of the amount otherwise payable, or, 
        if greater, 50 cents.
            ``(2) Other populations.--With respect to 
        individuals not described in paragraph (1), the State 
        may not impose any cost-sharing with respect to items 
        and services unless such cost sharing is pursuant to a 
        public cost-sharing schedule and such cost-sharing is 
        not in excess of the average, nominal cost-sharing 
        imposed in the State for health plans offered by health 
        maintenance organizations (and similar organizations) 
        for the same or similar items and services, as 
        determined by the State insurance commissioner.
    ``(c) Certain Cost-Sharing Permitted.--
            ``(1) In general.--Subject to paragraph (2), a 
        State may--
                    ``(A) impose additional cost-sharing to 
                discourage the inappropriate use of emergency 
                medical services delivered through a hospital 
                emergency room, a medical transportation 
                provider, or otherwise;
                    ``(B) impose additional cost-sharing 
                differentially in order to encourage the use of 
                primary and preventive care and discourage 
                unnecessary or less economical care; and
                    ``(C) from imposing additional cost-sharing 
                based on the failure to participate in 
                employment training programs, drug or alcohol 
                abuse treatment, counseling programs, or other 
                programs promoting personal responsibility.
            ``(2) Limitation.--The additional cost-sharing 
        imposed under paragraph (1) may not result--
                    ``(A) in the case of an individual 
                described in subsection (b)(1), in aggregate 
                cost-sharing that exceeds the maximum amount of 
                cost-sharing that may be imposed under 
                subsection (b)(2) (determined without regard to 
                this subsection); or
                    ``(B) in the case of an individual 
                described in subsection (b)(2), in aggregate 
                cost-sharing that exceeds twice the maximum 
                amount of cost-sharing that may be imposed 
                under such subsection (determined without 
                regard to this subsection).
    ``(d) Prohibition on Balance Billing.--An individual 
eligible for benefits for items and services under the State 
plan who is furnished such an items or service by a provider 
under the plan may not be billed by the provider for such item 
or service, other than such amount of cost-sharing as is 
permitted with this section.
    ``(e) Cost-Sharing Defined.--In this section, the term 
`cost-sharing' includes copayments, deductibles, coinsurance, 
and other charges for the provision of health care services.

``SEC. 1504. DESCRIPTION OF PROCESS FOR DEVELOPING CAPITATION PAYMENT 
                    RATES.

    ``(a) In General.--If a State contracts (or intends to 
contract) with a capitated health care organization (as defined 
in subsection (c)(1)) under which the State makes a capitation 
payment (as defined in subsection (c)(2)) to the organization 
for providing or arranging for the provision of medical 
assistance under the State plan for a group of services, 
including at least inpatient hospital services and physicians' 
services, the plan shall include a description of the 
following:
            ``(1) Use of actuarial science.--The extent and 
        manner in which the State uses actuarial science--
                    ``(A) to analyze and project health care 
                expenditures and utilization for individuals 
                enrolled (or to be enrolled) in such an 
                organization under the State plan, and
                    ``(B) to develop capitation payment rates, 
                including a brief description of the general 
                methodologies used by actuaries.
            ``(2) Qualifications of organizations.--The general 
        qualifications, including any accreditation, State 
        licensure or certification, or provider network 
        standards, required by the State for participation of 
        capitated health care organizations under the State 
        plan.
            ``(3) Dissemination process.--The process used by 
        the State under subsection (b) and otherwise to 
        disseminate, before entering into contracts with 
        capitated health care organizations, actuarial 
        information to such organizations on the historical 
        fee-for-service costs (or, if not available, other 
        recent financial data associated with providing covered 
        services) and utilization associated with individuals 
        described in paragraph (1)(A).
    ``(b) Public Notice and Comment.--Under the State plan the 
State shall provide a process for providing, before the 
beginning of each contract year--
            ``(1) public notice of--
                    ``(A) the amounts of the capitation 
                payments (if any) made under the plan for the 
                contract year preceding the public notice, and
                    ``(B)(i) the information described under 
                subsection (a)(1) with respect to capitation 
                payments for the contract year involved, or 
                (ii) amounts of the capitation payments the 
                State expects to make for the contract year 
                involved,
        unless such information is designated as proprietary 
        and not subject to public disclosure under State law, 
        and
            ``(2) an opportunity for receiving public comment 
        on the amounts and information for which notice is 
        provided under paragraph (1).
    ``(c) Definitions.--In this title:
            ``(1) Capitated health care organization.--The term 
        `capitated health care organization' means a health 
        maintenance organization or any other entity (including 
        a health insuring organization, managed care 
        organization, prepaid health plan, integrated service 
        network, or similar entity) which under State law is 
        permitted to accept capitation payments for providing 
        (or arranging for the provision of) a group of items 
        and services including at least inpatient hospital 
        services and physicians' services.
            ``(2) Capitation payment.--The term `capitation 
        payment' means, with respect to payment, payment on a 
        prepaid capitation basis or any other risk basis to an 
        entity for the entity's provision (or arranging for the 
        provision) of a group of items and services, including 
        at least inpatient hospital services and physicians' 
        services.

``SEC. 1505. PREVENTING SPOUSAL IMPOVERISHMENT.

    ``(a) Special Treatment for Institutionalized Spouses.--
            ``(1) Supersedes other provisions.--In determining 
        the eligibility for medical assistance of an 
        institutionalized spouse (as defined in subsection 
        (h)(1)), the provisions of this section supersede any 
        other provision of this title which is inconsistent 
        with them.
            ``(2) Does not affect certain determinations.--
        Except as this section specifically provides, this 
        section does not apply to--
                    ``(A) the determination of what constitutes 
                income or resources, or
                    ``(B) the methodology and standards for 
                determining and evaluating income and 
                resources.
            ``(3) No application in commonwealths and 
        territories.--This section shall only apply to a State 
        that is one of the 50 States or the District of 
        Columbia.
    ``(b) Rules for Treatment of Income.--
            ``(1) Separate treatment of income.--During any 
        month in which an institutionalized spouse is in the 
        institution, except as provided in paragraph (2), no 
        income of the community spouse shall be deemed 
        available to the institutionalized spouse.
            ``(2) Attribution of income.--In determining the 
        income of an institutionalized spouse or community 
        spouse for purposes of the post-eligibility income 
        determination described in subsection (d), except as 
        otherwise provided in this section and regardless of 
        any State laws relating to community property or the 
        division of marital property, the following rules 
        apply:
                    ``(A) Non-trust property.--Subject to 
                subparagraphs (C) and (D), in the case of 
                income not from a trust, unless the instrument 
                providing the income otherwise specifically 
                provides--
                            ``(i) if payment of income is made 
                        solely in the name of the 
                        institutionalized spouse or the 
                        community spouse, the income shall be 
                        considered available only to that 
                        respective spouse,
                            ``(ii) if payment of income is made 
                        in the names of the institutionalized 
                        spouse and the community spouse, \1/2\ 
                        of the income shall be considered 
                        available to each of them, and
                            ``(iii) if payment of income is 
                        made in the names of the 
                        institutionalized spouse or the 
                        community spouse, or both, and to 
                        another person or persons, the income 
                        shall be considered available to each 
                        spouse in proportion to the spouse's 
                        interest (or, if payment is made with 
                        respect to both spouses and no such 
                        interest is specified, \1/2\ of the 
                        joint interest shall be considered 
                        available to each spouse).
                    ``(B) Trust property.--In the case of a 
                trust--
                            ``(i) except as provided in clause 
                        (ii), income shall be attributed in 
                        accordance with the provisions of this 
                        title; and
                            ``(ii) income shall be considered 
                        available to each spouse as provided in 
                        the trust, or, in the absence of a 
                        specific provision in the trust--
                                    ``(I) if payment of income 
                                is made solely to the 
                                institutionalized spouse or the 
                                community spouse, the income 
                                shall be considered available 
                                only to that respective spouse,
                                    ``(II) if payment of income 
                                is made to both the 
                                institutionalized spouse and 
                                the community spouse, \1/2\ of 
                                the income shall be considered 
                                available to each of them, and
                                    ``(III) if payment of 
                                income is made to the 
                                institutionalized spouse or the 
                                community spouse, or both, and 
                                to another person or persons, 
                                the income shall be considered 
                                available to each spouse in 
                                proportion to the spouse's 
                                interest (or, if payment is 
                                made with respect to both 
                                spouses and no such interest is 
                                specified, \1/2\ of the joint 
                                interest shall be considered 
                                available to each spouse).
                    ``(C) Property with no instrument.--In the 
                case of income not from a trust in which there 
                is no instrument establishing ownership, 
                subject to subparagraph (D), \1/2\ of the 
                income shall be considered to be available to 
                the institutionalized spouse and \1/2\ to the 
                community spouse.
                    ``(D) Rebutting ownership.--The rules of 
                subparagraphs (A) and (C) are superseded to the 
                extent that an institutionalized spouse can 
                establish, by a preponderance of the evidence, 
                that the ownership interests in income are 
                other than as provided under such 
                subparagraphs.
    ``(c) Rules for Treatment of Resources.--
            ``(1) Computation of spousal share at time of 
        institutionalization.--
                    ``(A) Total joint resources.--There shall 
                be computed (as of the beginning of the first 
                continuous period of institutionalization of 
                the institutionalized spouse)--
                            ``(i) the total value of the 
                        resources to the extent either the 
                        institutionalized spouse or the 
                        community spouse has an ownership 
                        interest, and
                            ``(ii) a spousal share which is 
                        equal to \1/2\ of such total value.
                    ``(B) Assessment.--At the request of an 
                institutionalized spouse or community spouse, 
                at the beginning of the first continuous period 
                of institutionalization of the 
                institutionalized spouse and upon the receipt 
                of relevant documentation of resources, the 
                State shall promptly assess and document the 
                total value described in subparagraph (A)(i) 
                and shall provide a copy of such assessment and 
                documentation to each spouse and shall retain a 
                copy of the assessment for use under this 
                section. If the request is not part of an 
                application for medical assistance under this 
                title, the State may, at its option as a 
                condition of providing the assessment, require 
                payment of a fee not exceeding the reasonable 
                expenses of providing and documenting the 
                assessment. At the time of providing the copy 
                of the assessment, the State shall include a 
                notice indicating that the spouse will have a 
                right to a fair hearing under subsection 
                (e)(2).
            ``(2) Attribution of resources at time of initial 
        eligibility determination.--In determining the 
        resources of an institutionalized spouse at the time of 
        application for medical assistance under this title, 
        regardless of any State laws relating to community 
        property or the division of marital property--
                    ``(A) except as provided in subparagraph 
                (B), all the resources held by either the 
                institutionalized spouse, community spouse, or 
                both, shall be considered to be available to 
                the institutionalized spouse, and
                    ``(B) resources shall be considered to be 
                available to an institutionalized spouse, but 
                only to the extent that the amount of such 
                resources exceeds the amount computed under 
                subsection (f)(2)(A) (as of the time of 
                application for medical assistance).
            ``(3) Assignment of support rights.--The 
        institutionalized spouse shall not be ineligible by 
        reason of resources determined under paragraph (2) to 
        be available for the cost of care where--
                    ``(A) the institutionalized spouse has 
                assigned to the State any rights to support 
                from the community spouse,
                    ``(B) the institutionalized spouse lacks 
                the ability to execute an assignment due to 
                physical or mental impairment but the State has 
                the right to bring a support proceeding against 
                a community spouse without such assignment, or
                    ``(C) the State determines that denial of 
                eligibility would work an undue hardship.
            ``(4) Separate treatment of resources after 
        eligibility for medical assistance established.--During 
        the continuous period in which an institutionalized 
        spouse is in an institution and after the month in 
        which an institutionalized spouse is determined to be 
        eligible for medical assistance under this title, no 
        resources of the community spouse shall be deemed 
        available to the institutionalized spouse.
            ``(5) Resources defined.--In this section, the term 
        `resources' does not include--
                    ``(A) resources excluded under subsection 
                (a) or (d) of section 1613, and
                    ``(B) resources that would be excluded 
                under section 1613(a)(2)(A) but for the 
                limitation on total value described in such 
                section.
    ``(d) Protecting Income for Community Spouse.--
            ``(1) Allowances to be offset from income of 
        institutionalized spouse.--After an institutionalized 
        spouse is determined or redetermined to be eligible for 
        medical assistance, in determining the amount of the 
        spouse's income that is to be applied monthly to 
        payment for the costs of care in the institution, there 
        shall be deducted from the spouse's monthly income the 
        following amounts in the following order:
                    ``(A) A personal needs allowance (described 
                in paragraph (2)(A)), in an amount not less 
                than the amount specified in paragraph (2)(C).
                    ``(B) A community spouse monthly income 
                allowance (as defined in paragraph (3)), but 
                only to the extent income of the 
                institutionalized spouse is made available to 
                (or for the benefit of) the community spouse.
                    ``(C) A family allowance, for each family 
                member, equal to at least \1/3\ of the amount 
                by which the amount described in paragraph 
                (4)(A)(i) exceeds the amount of the monthly 
                income of that family member.
                    ``(D) Amounts for incurred expenses for 
                medical or remedial care for the 
                institutionalized spouse as provided under 
                paragraph (6).
        In subparagraph (C), the term `family member' only 
        includes minor or dependent children, dependent 
        parents, or dependent siblings of the institutionalized 
        or community spouse who are residing with the community 
        spouse.
            ``(2) Personal needs allowance.--
                    ``(A) In general.--The State plan must 
                provide that, in the case of an 
                institutionalized individual or couple 
                described in subparagraph (B), in determining 
                the amount of the individual's or couple's 
                income to be applied monthly to payment for the 
                cost of care in an institution, there shall be 
                deducted from the monthly income (in addition 
                to other allowances otherwise provided under 
                the plan) a monthly personal needs allowance--
                            ``(i) which is reasonable in amount 
                        for clothing and other personal needs 
                        of the individual (or couple) while in 
                        an institution, and
                            ``(ii) which is not less (and may 
                        be greater) than the minimum monthly 
                        personal needs allowance described in 
                        subparagraph (C).
                    ``(B) Institutionalized individual or 
                couple defined.--In this paragraph, the term 
                `institutionalized individual or couple' means 
                an individual or married couple--
                            ``(i) who is an inpatient (or who 
                        are inpatients) in a medical 
                        institution or nursing facility for 
                        which payments are made under this 
                        title throughout a month, and
                            ``(ii) who is or are determined to 
                        be eligible for medical assistance 
                        under the State plan.
                    ``(C) Minimum allowance.--The minimum 
                monthly personal needs allowance described in 
                this subparagraph is $40 for an 
                institutionalized individual and $80 for an 
                institutionalized couple (if both are aged, 
                blind, or disabled, and their incomes are 
                considered available to each other in 
                determining eligibility).
            ``(3) Community spouse monthly income allowance 
        defined.--
                    ``(A) In general.--In this section (except 
                as provided in subparagraph (B)), the community 
                spouse monthly income allowance for a community 
                spouse is an amount by which--
                            ``(i) except as provided in 
                        subsection (e), the minimum monthly 
                        maintenance needs allowance 
                        (established under and in accordance 
                        with paragraph (4)) for the spouse, 
                        exceeds
                            ``(ii) the amount of monthly income 
                        otherwise available to the community 
                        spouse (determined without regard to 
                        such an allowance).
                    ``(B) Court ordered support.--If a court 
                has entered an order against an 
                institutionalized spouse for monthly income for 
                the support of the community spouse, the 
                community spouse monthly income allowance for 
                the spouse shall be not less than the amount of 
                the monthly income so ordered.
            ``(4) Establishment of minimum monthly maintenance 
        needs allowance.--
                    ``(A) In general.--Each State shall 
                establish a minimum monthly maintenance needs 
                allowance for each community spouse which, 
                subject to subparagraph (B), is equal to or 
                exceeds--
                            ``(i) 150 percent of \1/12\ of the 
                        poverty line applicable to a family 
                        unit of 2 members, plus
                            ``(ii) an excess shelter allowance 
                        (as defined in paragraph (4)).
                A revision of the poverty line referred to in 
                clause (i) shall apply to medical assistance 
                furnished during and after the second calendar 
                quarter that begins after the date of 
                publication of the revision.
                    ``(B) Cap on minimum monthly maintenance 
                needs allowance.--The minimum monthly 
                maintenance needs allowance established under 
                subparagraph (A) may not exceed $1,500 (subject 
                to adjustment under subsections (e) and (g)).
            ``(5) Excess shelter allowance defined.--In 
        paragraph (4)(A)(ii), the term `excess shelter 
        allowance' means, for a community spouse, the amount by 
        which the sum of--
                    ``(A) the spouse's expenses for rent or 
                mortgage payment (including principal and 
                interest), taxes and insurance and, in the case 
                of a condominium or cooperative, required 
                maintenance charge, for the community spouse's 
                principal residence, and
                    ``(B) the standard utility allowance (used 
                by the State under section 5(e) of the Food 
                Stamp Act of 1977) or, if the State does not 
                use such an allowance, the spouse's actual 
                utility expenses,
        exceeds 30 percent of the amount described in paragraph 
        (4)(A)(i), except that, in the case of a condominium or 
        cooperative, for which a maintenance charge is included 
        under subparagraph (A), any allowance under 
        subparagraph (B) shall be reduced to the extent the 
        maintenance charge includes utility expenses.
            ``(6) Treatment of incurred expenses.--With respect 
        to the post-eligibility treatment of income under this 
        section, there shall be disregarded reparation payments 
        made by the Federal Republic of Germany and, there 
        shall be taken into account amounts for incurred 
        expenses for medical or remedial care that are not 
        subject to payment by a third party, including--
                    ``(A) medicare and other health insurance 
                premiums, deductibles, or coinsurance, and
                    ``(B) necessary medical or remedial care 
                recognized under State law but not covered 
                under the State plan under this title, subject 
                to reasonable limits the State may establish on 
                the amount of these expenses.
    ``(e) Notice and Fair Hearing.--
            ``(1) Notice.--Upon--
                    ``(A) a determination of eligibility for 
                medical assistance of an institutionalized 
                spouse, or
                    ``(B) a request by either the 
                institutionalized spouse, or the community 
                spouse, or a representative acting on behalf of 
                either spouse,
        each State shall notify both spouses (in the case 
        described in subparagraph (A)) or the spouse making the 
        request (in the case described in subparagraph (B)) of 
        the amount of the community spouse monthly income 
        allowance (described in subsection (d)(1)(B)), of the 
        amount of any family allowances (described in 
        subsection (d)(1)(C)), of the method for computing the 
        amount of the community spouse resources allowance 
        permitted under subsection (f), and of the spouse's 
        right to a fair hearing under the State plan respecting 
        ownership or availability of income or resources, and 
        the determination of the community spouse monthly 
        income or resource allowance.
            ``(2) Fair hearing.--
                    ``(A) In general.--If either the 
                institutionalized spouse or the community 
                spouse is dissatisfied with a determination 
                of--
                            ``(i) the community spouse monthly 
                        income allowance;
                            ``(ii) the amount of monthly income 
                        otherwise available to the community 
                        spouse (as applied under subsection 
                        (d)(3)(A)(ii));
                            ``(iii) the computation of the 
                        spousal share of resources under 
                        subsection (c)(1);
                            ``(iv) the attribution of resources 
                        under subsection (c)(2); or
                            ``(v) the determination of the 
                        community spouse resource allowance (as 
                        defined in subsection (f)(2));
                such spouse is entitled to a fair hearing under 
                the State plan with respect to such 
                determination if an application for benefits 
                under this title has been made on behalf of the 
                institutionalized spouse. Any such hearing 
                respecting the determination of the community 
                spouse resource allowance shall be held within 
                30 days of the date of the request for the 
                hearing.
                    ``(B) Revision of minimum monthly 
                maintenance needs allowance.--If either such 
                spouse establishes that the community spouse 
                needs income, above the level otherwise 
                provided by the minimum monthly maintenance 
                needs allowance, due to exceptional 
                circumstances resulting in significant 
                financial duress, there shall be substituted, 
                for the minimum monthly maintenance needs 
                allowance in subsection (d)(3)(A)(i), an amount 
                adequate to provide such additional income as 
                is necessary.
                    ``(C) Revision of community spouse resource 
                allowance.--If either such spouse establishes 
                that the community spouse resource allowance 
                (in relation to the amount of income generated 
                by such an allowance) is inadequate to raise 
                the community spouse's income to the minimum 
                monthly maintenance needs allowance, there 
                shall be substituted, for the community spouse 
                resource allowance under subsection (f)(2), an 
                amount adequate to provide such a minimum 
                monthly maintenance needs allowance.
    ``(f) Permitting Transfer of Resources to Community 
Spouse.--
            ``(1) In general.--An institutionalized spouse may, 
        without regard to any other provision of the State plan 
        to the contrary, transfer an amount equal to the 
        community spouse resource allowance (as defined in 
        paragraph (2)), but only to the extent the resources of 
        the institutionalized spouse are transferred to, or for 
        the sole benefit of, the community spouse. The transfer 
        under the preceding sentence shall be made as soon as 
        practicable after the date of the initial determination 
        of eligibility, taking into account such time as may be 
        necessary to obtain a court order under paragraph (3).
            ``(2) Community spouse resource allowance 
        defined.--In paragraph (1), the `community spouse 
        resource allowance' for a community spouse is an amount 
        (if any) by which--
                    ``(A) the greatest of--
                            ``(i) $12,000 (subject to 
                        adjustment under subsection (g)), or, 
                        if greater (but not to exceed the 
                        amount specified in clause (ii)(II)) an 
                        amount specified under the State plan,
                            ``(ii) the lesser of (I) the 
                        spousal share computed under subsection 
                        (c)(1), or (II) $60,000 (subject to 
                        adjustment under subsection (g)),
                            ``(iii) the amount established 
                        under subsection (e)(2), or
                            ``(iv) the amount transferred under 
                        a court order under paragraph (3);
                exceeds
                    ``(B) the amount of the resources otherwise 
                available to the community spouse (determined 
                without regard to such an allowance).
            ``(3) Transfers under court orders.--If a court has 
        entered an order against an institutionalized spouse 
        for the support of the community spouse, any provisions 
        under the plan relating to transfers or disposals of 
        assets for less than fair market value shall not apply 
        to amounts of resources transferred pursuant to such 
        order for the support of the spouse or a family member 
        (as defined in subsection (d)(1)).
    ``(g) Indexing Dollar Amounts.--For services furnished 
during a calendar year after 1989, the dollar amounts specified 
in subsections (d)(3)(C), (f)(2)(A)(i), and (f)(2)(A)(ii)(II) 
shall be increased by the same percentage as the percentage 
increase in the consumer price index for all urban consumers 
(all items; U.S. city average) between September 1988 and the 
September before the calendar year involved.
    ``(h) Definitions.--In this section:
            ``(1) Institutionalized spouse.--The term 
        `institutionalized spouse' means an individual--
                    ``(A)(i) who is in a medical institution or 
                nursing facility, or
                    ``(ii) at the option of the State (I) who 
                would be eligible under the State plan under 
                this title if such individual was in a medical 
                institution, (II) with respect to whom there 
                has been a determination that but for the 
                provision of home or community-based services 
                such individual would require the level of care 
                provided in a hospital, nursing facility or 
                intermediate care facility for the mentally 
                retarded the cost of which could be reimbursed 
                under the plan, and (III) who will receive home 
                or community-based services pursuant the plan; 
                and
                    ``(B) who is married to a spouse who is not 
                in a medical institution or nursing facility;
        but does not include any such individual who is not 
        likely to meet the requirements of subparagraph (A) for 
        at least 30 consecutive days.
            ``(2) Community spouse.--The term `community 
        spouse' means the spouse of an institutionalized 
        spouse.

``SEC. 1506. PREVENTING FAMILY IMPOVERISHMENT.

    ``(a) Responsibilities for Long-term and Institutional Care 
Generally.--A State plan may not--
            ``(1) require an adult child or any other 
        individual (other than the applicant or recipient of 
        services or the spouse of such an applicant or 
        recipient) to contribute to the cost of covered nursing 
        facility services, other long-term care services, and 
        hospital and other institutional services under the 
        plan; and
            ``(2) take into account with respect to such 
        services the financial responsibility of any individual 
        for any applicant or recipient of assistance under the 
        plan unless such applicant or recipient is such 
        individual's spouse or such individual's child who is 
        under age 21 or (with respect to States eligible to 
        participate in the State program established under 
        title XVI), is blind or permanently and totally 
        disabled, or is blind or disabled as defined in section 
        1614 (with respect to States which are not eligible to 
        participate in such program).
    ``(b) Limitations on Liens.--
            ``(1) In general.--No lien may be imposed against 
        the property of any individual prior to the 
        individual's death on account of medical assistance 
        paid or to be paid on the individual's behalf under a 
        State plan, except--
                    ``(A) pursuant to the judgment of a court 
                on account of benefits incorrectly paid on 
                behalf of such individual; or
                    ``(B) in the case of the real property of 
                an individual--
                            ``(i) who is an inpatient in a 
                        nursing facility, intermediate care 
                        facility for the mentally retarded, or 
                        other medical institution, if such 
                        individual is required, as a condition 
                        of receiving services in such 
                        institution under the plan, to spend 
                        for costs of medical care all but a 
                        minimal amount of the individual's 
                        income required for personal needs, and
                            ``(ii) with respect to whom the 
                        State determines, after notice and 
                        opportunity for a hearing (in 
                        accordance with procedures established 
                        by the State), that the individual 
                        cannot reasonably be expected to be 
                        discharged from the medical institution 
                        and to return home,
                except as provided in paragraph (2).
            ``(2) Exception.--No lien may be imposed under 
        paragraph (1)(B) on such individual's home if--
                    ``(A) the spouse of such individual,
                    ``(B) such individual's child who is under 
                age 21, or (with respect to States eligible to 
                participate in the State program established 
                under title XVI) is blind or permanently and 
                totally disabled, or (with respect to States 
                which are not eligible to participate in such 
                program) is blind or disabled as defined in 
                section 1614, or
                    ``(C) a sibling of such individual (who has 
                an equity interest in such home and who was 
                residing in such individual's home for a period 
                of at least one year immediately before the 
                date of the individual's admission to the 
                medical institution),
        is lawfully residing in such home.
            ``(3) Dissolution upon return home.--Any lien 
        imposed with respect to an individual pursuant to 
        paragraph (1)(B) shall dissolve upon that individual's 
        discharge from the medical institution and return home.

``SEC. 1507. STATE FLEXIBILITY.

    ``(a) State Flexibility in Benefits, Geographical Coverage 
Area, and Selection of Providers.--The State under its State 
plan may--
            ``(1) specify those items and services for which 
        medical assistance is provided (consistent with 
        guarantees under subsections (a) and (b) of section 
        1501), the providers which may provide such items and 
        services, and the amount and frequency of providing 
        such items and services (consistent with the 
        requirements of section 1502(d));
            ``(2) specify the extent to which the same medical 
        assistance will be provided in all geographical areas 
        or political subdivisions of the State, so long as 
        medical assistance is made available in all such areas 
        or subdivisions;
            ``(3) specify the extent to which the medical 
        assistance made available to any individual eligible 
        for medical assistance is comparable in amount, 
        duration, or scope to the medical assistance made 
        available to any other such individual; and
            ``(4) specify the extent to which an individual 
        eligible for medical assistance with respect to an item 
        or service may choose to obtain such assistance from 
        any institution, agency, or person qualified to provide 
        the item or service.
    ``(b) State Flexibility With Respect to Managed Care.--
Nothing in this title shall be construed--
            ``(1) to limit a State's ability to contract with, 
        on a capitated basis or otherwise, health care plans or 
        individual health care providers for the provision or 
        arrangement of medical assistance,
            ``(2) to limit a State's ability to contract with 
        health care plans or other entities for case management 
        services or for coordination of medical assistance, or
            ``(3) to restrict a State from establishing 
        capitation rates on the basis of competition among 
        health care plans or negotiations between the State and 
        one or more health care plans.

``SEC. 1508. PRIVATE RIGHTS OF ACTION.

    ``(a) Limitation on Federal Causes of Action.--Except as 
provided in this section, no person or entity may bring an 
action against a State in Federal court based on its failure to 
comply with any requirement of this title.
    ``(b) State Causes of Action.--
            ``(1) Administrative and judicial procedures.--A 
        State plan shall provide for--
                    ``(A) an administrative procedure whereby 
                an individual alleging a denial of eligibility 
                for benefits or a denial of benefits under the 
                State plan may receive a hearing regarding such 
                denial, and
                    ``(B) judicial review, through a private 
                right of action in a State court by an 
                individual or class of individuals, regarding 
                such a denial, but a State may require 
                exhaustion of administrative remedies before 
                such an action may be taken.
        The administrative procedure under subparagraph (A) 
        shall include impartial decision makers and a fair 
        process and timely decisions.
            ``(2) Writ of certiorari.--An individual or class 
        may file a petition for certiorari before the Supreme 
        Court of the United States in a case of a denial of 
        benefits under the State plan to review a determination 
        of the highest court of a State regarding such denial.
            ``(3) Construction.--Nothing in this subsection 
        shall be construed as requiring a State to provide a 
        private right of action in State court by a provider, 
        health plan, or a class of providers or health plans.
    ``(c) Secretarial Relief.--
            ``(1) In general.--The Secretary may bring an 
        action in Federal court against a State and on behalf 
        of an individual or class of individuals in order to 
        assure that a State provides benefits to individuals 
        and classes of individuals as guaranteed under 
        subsection (a) or (b) of section 1501 under its State 
        plan.
            ``(2) No private right.--No action may be brought 
        in any court against the Secretary based on the 
        Secretary's bringing, or failure to bring, an action 
        under paragraph (1).
            ``(3) Construction.--Nothing in this title shall be 
        construed as authorizing the Secretary to bring an 
        action on behalf of a provider, health plan, or a class 
        of providers or health plans.

                      ``Part B--Payments to States

``SEC. 1511. ALLOTMENT OF FUNDS AMONG STATES.

    ``(a) Allotments.--
            ``(1) Computation.--The Secretary shall provide for 
        the computation of State obligation and outlay 
        allotments in accordance with this section for each 
        fiscal year beginning with fiscal year 1997. Nothing in 
        this part shall be construed as authorizing payment 
        under this part to any State for fiscal year 1996.
            ``(2) Limitation on obligations.--
                    ``(A) In general.--Subject to the 
                succeeding provisions of this paragraph, the 
                Secretary shall not enter into obligations with 
                any State under this title for a fiscal year in 
                excess of the sum of the following allotments 
                for the State for the fiscal year:
                            ``(i) Base obligation allotment.--
                        The amount of the base obligation 
                        allotment for that State for the fiscal 
                        year under paragraph (4).
                            ``(ii) Supplemental allotment for 
                        certain aliens.--The amount of any 
                        supplemental allotment for that State 
                        for the fiscal year under subsection 
                        (f).
                            ``(iii) Supplemental per 
                        beneficiary umbrella allotment.--The 
                        amount of any supplemental per 
                        beneficiary umbrella allotment for that 
                        State for the fiscal year under 
                        subsection (g).
                            ``(iv) Supplemental allotment for 
                        indian health services.--The amount of 
                        any supplemental allotment for that 
                        State for the fiscal year under 
                        subsection (h).
        The sum of the base obligation allotments for all 
        States in any fiscal year (excluding amounts carried 
        over under subparagraph (B) and excluding changes in 
        allotments effected under paragraph (4)(D)) shall not 
        exceed the aggregate limit on new base obligation 
        authority specified in paragraph (3) for that fiscal 
        year.
                    ``(B) Adjustments.--
                            ``(i) Carryover of base allotment 
                        permitted.--Subject to clauses (ii), if 
                        the amount of obligations entered into 
                        under this part with a State for 
                        quarters in a fiscal year is less than 
                        the amount of the obligation allotment 
                        under this section to the State for the 
                        fiscal year, the amount of the 
                        difference (less any amount computed 
                        under clause (iii)) shall be added to 
                        the amount of the State obligation 
                        allotment otherwise provided under this 
                        section for the succeeding fiscal year.
                            ``(ii) No carryover permitted for 
                        states receiving supplemental umbrella 
                        allotments.--Clause (i) shall not 
                        apply, insofar as it permits a 
                        carryover for a State from a particular 
                        year to the next year, if in the 
                        particular year the State receives a 
                        supplemental umbrella allotment under 
                        subsection (g).
                            ``(iii) No carryover of alien and 
                        indian supplemental allotments.--The 
                        amount of any carryover under clause 
                        (i) from a fiscal year shall be reduced 
                        by the amount (if any) by which the 
                        amount of the outlays for expenditures 
                        described in subsection (f) or (h) for 
                        the fiscal year is less than the amount 
                        of any supplemental allotment provided 
                        under the respective subsection for the 
                        State and fiscal year involved.
                    ``(C) Reduction for new obligations under 
                title xix in fiscal year 1997.--The amount of 
                the base obligation allotment otherwise 
                provided under this section for fiscal year 
                1997 for a State shall be reduced by the amount 
                of the obligations entered into with respect to 
                the State under section 1903(a) during such 
                fiscal year.
                    ``(D) No effect on prior year 
                obligations.--Subparagraph (A) shall not apply 
                to or affect obligations for a fiscal year 
                prior to fiscal year 1997.
                    ``(E) Obligation.--For purposes of this 
                section, the Secretary's establishment of an 
                estimate under section 1512(b) of the amount a 
                State is entitled to receive for a quarter 
                (taking into account any adjustments described 
                in such subsection) beginning during or after 
                fiscal year 1997 shall be treated as the 
                obligation of such amount for the State as of 
                the first day of the quarter.
                    ``(F) Relation to guarantees.--The Federal 
                Government's obligations for payments under 
                this title are limited as provided under 
                subparagraph (A) and are only subject to 
                adjustment based on any guarantee provided 
                under section 1501 as provided under subsection 
                (g).
            ``(3) Aggregate limit on new base obligation 
        authority.--
                    ``(A) In general.--For purposes of this 
                subsection, subject to subparagraph (C), the 
                `aggregate limit on new base obligation 
                authority', for a fiscal year, is the base pool 
                amount under subsection (b) for the fiscal 
                year, divided by the payout adjustment factor 
                (described in subparagraph (B)) for the fiscal 
                year.
                    ``(B) Payout adjustment factor.--For 
                purposes of this subsection, the `payout 
                adjustment factor'--
                            ``(i) for fiscal year 1997 is 
                        0.950,
                            ``(ii) for fiscal year 1998 is 
                        0.986, and
                            ``(iii) for a subsequent fiscal 
                        year is 0.998.
                    ``(C) Transitional adjustment for pre-
                fiscal year 1997-obligation outlays.--In order 
                to account for pre-fiscal year 1997-obligation 
                outlays described in paragraph (4)(C)(iv), in 
                determining the aggregate limit on new 
                obligation authority under subparagraph (A) for 
                fiscal year 1997, the pool amount for such 
                fiscal year is equal to--
                            ``(i) the pool amount for such 
                        year, reduced by
                            ``(ii) $12,000,000,000.
            ``(4) Base obligation allotments.--
                    ``(A) General rule for 50 states and the 
                district of columbia.--Except as provided in 
                this paragraph, the `base obligation allotment' 
                for any of the 50 States or the District of 
                Columbia for a fiscal year (beginning with 
                fiscal year 1997) is an amount that bears the 
                same ratio to the base outlay allotment under 
                subsection (c)(2) for such State or District 
                (not taking into account any adjustment due to 
                an election under subsection (c)(4)) for the 
                fiscal year as the ratio of--
                            ``(i) the aggregate limit on new 
                        base obligation authority (less the 
                        total of the obligation allotments 
                        under subparagraph (B)) for the fiscal 
                        year, to
                            ``(ii) the base pool amount (less 
                        the sum of the base outlay allotments 
                        for the territories) for such fiscal 
                        year.
                    ``(B) Territories.--The base obligation 
                allotment for each of the Commonwealths and 
                territories for a fiscal year is the base 
                outlay allotment for such Commonwealth or 
                Territory (as determined under subsection 
                (c)(5)) for the fiscal year divided by the 
                payout adjustment factor for the fiscal year 
                (as defined in paragraph (3)(B)).
                    ``(C) Transitional rule for fiscal year 
                1997.--
                            ``(i) In general.--The obligation 
                        amount for fiscal year 1997 for any 
                        State (including the District of 
                        Columbia, a Commonwealth, or Territory) 
                        is determined according to the formula: 
                        A=(B-C)/D, where--
                                    ``(I) `A' is the base 
                                obligation amount for such 
                                State,
                                    ``(II) `B' is the base 
                                outlay allotment of such State 
                                for fiscal year 1997, as 
                                determined under subsection 
                                (c),
                                    ``(III) `C' is the amount 
                                of the pre-enactment-obligation 
                                outlays (as established for 
                                such State under clause (ii)), 
                                and
                                    ``(IV) `D' is the payout 
                                adjustment factor for such 
                                fiscal year (as defined in 
                                paragraph (3)(B)).
                            ``(ii) Pre-fiscal year 1997-
                        obligation outlay amounts.--Not later 
                        than November 1, 1996, the Secretary 
                        shall estimate (based on the best data 
                        available) and publish in the Federal 
                        Register the amount of the pre-fiscal 
                        year 1997-obligation outlays (as 
                        defined in clause (iv)) for each State 
                        (including the District of Columbia, 
                        Commonwealths, and Territories). The 
                        total of such amounts shall equal the 
                        dollar amount specified in paragraph 
                        (3)(C)(ii).
                            ``(iii) Agreement.--The submission 
                        of a State plan by a State under this 
                        title is deemed to constitute the 
                        State's acceptance of the obligation 
                        allotment limitations under this 
                        subsection, including the formula for 
                        computing the amount of the base 
                        obligation allotment and any 
                        supplemental obligation allotments.
                            ``(iv) Pre-fiscal year 1997-
                        obligation outlays defined.--In this 
                        subsection, the term `pre-fiscal year 
                        1997-obligation outlays' means, for a 
                        State, the outlays of the Federal 
                        Government that result from obligations 
                        that have been incurred under title XIX 
                        with respect to the State before 
                        October 1, 1996, but for which payments 
                        to States have not been made as of such 
                        date.
                    ``(D) Adjustment to reflect adoption of 
                alternative growth formula.--Any State that has 
                elected an alternative growth formula under 
                subsection (c)(4) which increases or decreases 
                the dollar amount of an outlay allotment for a 
                fiscal year is deemed to have increased or 
                decreased, respectively, its obligation amount 
                for such fiscal year by the amount of such 
                increase or decrease.
                    ``(E) Transitional correction for fiscal 
                year 1997.--
                            ``(i) In general.--The base 
                        obligation amount for fiscal year 1998 
                        for any State described in clause (ii) 
                        shall be increased by the amount by 
                        which the amount described in clause 
                        (ii)(I) exceeds the amount described in 
                        clause (ii)(II), divided by the payout 
                        adjustment factor specified in 
                        paragraph (3)(B) for fiscal year 1997. 
                        The increase under this clause shall be 
                        paid to a State in the first quarter of 
                        fiscal year 1998.
                            ``(ii) States described.--A State 
                        described in this clause is a State for 
                        which--
                                    ``(I) the amount of the 
                                pre-fiscal year 1997-obligation 
                                outlays (as established for 
                                such State under subparagraph 
                                (C)(ii)), exceeded
                                    ``(II) the outlays of the 
                                Federal Government during 
                                fiscal year 1997 that are 
                                attributable to obligations 
                                that were incurred under title 
                                XIX with respect to the State 
                                before October 1, 1996, but for 
                                which payments to States had 
                                not been made as of such date.
            ``(5) Sequence of obligations.--For purposes of 
        carrying out this title, payments under section 1512 to 
        a State eligible for a supplemental outlay allotment 
        that are attributable to--
                    ``(A) expenditures for medical assistance 
                described in the second sentence of subsection 
                (f)(1) or the second sentence of subsection 
                (h)(1) shall first be counted toward the 
                supplemental outlay allotment provided under 
                subsection (f) or (h), respectively, rather 
                than toward the base outlay allotment otherwise 
                provided under this section; or
                    ``(B) subsection (g) (relating to the 
                umbrella fund) shall first be counted toward 
                the allotment provided other than under such 
                subsection, and then to such subsection.
    ``(b) Base Pool of Available Funds.--
            ``(1) In general.--For purposes of this section, 
        the `base pool amount' under this subsection for--
                    ``(A) fiscal year 1996 is $96,601,037,894,
                    ``(B) fiscal year 1997 is $103,447,755,053,
                    ``(C) fiscal year 1998 is $108,430,173,129,
                    ``(D) fiscal year 1999 is $113,652,562,483,
                    ``(E) fiscal year 2000 is $119,126,480,999,
                    ``(F) fiscal year 2001 is $124,864,043,230,
                    ``(G) fiscal year 2002 is $130,877,947,213, 
                and
                    ``(H) each subsequent fiscal year is the 
                pool amount under this paragraph for the 
                previous fiscal year increased by the lesser of 
                4.82 percent or the annual percentage increase 
                in the gross domestic product for the 12-month 
                period ending in June before the beginning of 
                that subsequent fiscal year.
            ``(2) National growth percentage.--For purposes of 
        this section for a fiscal year (beginning with fiscal 
        year 1997), the `national growth percentage' is the 
        percentage by which--
                    ``(A) the base pool amount under paragraph 
                (1) for the fiscal year, exceeds
                    ``(B) such base pool amount for the 
                previous fiscal year.
    ``(c) State Base Outlay Allotments.--
            ``(1) Fiscal year 1996.--For each of the 50 States 
        and the District of Columbia, the amount of the State 
        base outlay allotment under this subsection for fiscal 
        year 1996 is, subject to paragraph (4), determined in 
        accordance with the following table:
``State or District:Outlay allotment (in dollars):
  Alabama...........1,517,652,207.......................................
  Alaska............204,933,213.........................................
  Arizona...........1,385,781,297.......................................
  Arkansas..........1,011,457,933.......................................
  California........8,946,838,461.......................................
  Colorado..........757,492,679.........................................
  Connecticut.......1,463,011,635.......................................
  Delaware..........212,327,763.........................................
  District of Columb501,412,091.........................................
  Florida...........3,715,624,180.......................................
  Georgia...........2,426,320,602.......................................
  Hawaii............323,124,375.........................................
  Idaho.............278,329,686.........................................
  Illinois..........3,467,274,342.......................................
  Indiana...........1,952,467,267.......................................
  Iowa..............835,235,895.........................................
  Kansas............713,700,869.........................................
  Kentucky..........1,577,828,832.......................................
  Louisiana.........2,622,000,000.......................................
  Maine.............694,220,790.........................................
  Maryland..........1,369,699,847.......................................
  Massachusetts.....2,870,346,862.......................................
  Michigan..........3,465,182,886.......................................
  Minnesota.........1,793,776,356.......................................
  Mississippi.......1,261,781,330.......................................
  Missouri..........1,849,248,945.......................................
  Montana...........312,212,472.........................................
  Nebraska..........463,900,417.........................................
  Nevada............257,896,453.........................................
  New Hampshire.....560,000,000.........................................
  New Jersey........2,854,621,241.......................................
  New Mexico........634,756,945.........................................
  New York..........12,901,793,038......................................
  North Carolina....2,587,883,809.......................................
  North Dakota......241,168,563.........................................
  Ohio..............4,034,049,690.......................................
  Oklahoma..........911,198,775.........................................
  Oregon............1,088,670,440.......................................
  Pennsylvania......4,454,423,400.......................................
  Rhode Island......545,686,262.........................................
  South Carolina....1,621,021,815.......................................
  South Dakota......262,804,959.........................................
  Tennessee.........2,519,934,251.......................................
  Texas.............6,351,909,343.......................................
  Utah..............484,274,254.........................................
  Vermont...........248,158,729.........................................
  Virginia..........1,144,962,509.......................................
  Washington........1,763,460,996.......................................
  West Virginia.....1,156,813,157.......................................
  Wisconsin.........1,709,500,642.......................................
  Wyoming...........132,915,390.........................................
            ``(2) For subsequent fiscal years.--
                    ``(A) In general.--Subject to the 
                succeeding provisions of this subsection, the 
                amount of the State base outlay allotment under 
                this subsection for one of the 50 States and 
                the District of Columbia for a fiscal year 
                (beginning with fiscal year 1997) is equal to 
                the product of--
                            ``(i) the needs-based amount 
                        determined under subparagraph (B) for 
                        such State or District for the fiscal 
                        year, and
                            ``(ii) the adjustment factor 
                        described in subparagraph (C) for the 
                        fiscal year.
                    ``(B) Needs-based amount.--The needs-based 
                amount under this subparagraph for a State or 
                the District of Columbia for a fiscal year is 
                equal to the product of--
                            ``(i) the State's or District's 
                        aggregate expenditure need for the 
                        fiscal year (as determined under 
                        subsection (d)), and
                            ``(ii) the State's or District's 
                        old Federal medical assistance 
                        percentage (as defined in section 
                        1512(d)) for the fiscal year (or, in 
                        the case of fiscal year 1997, the 
                        Federal medical assistance percentage 
                        determined under section 1905(b) for 
                        fiscal year 1996).
                    ``(C) Adjustment factor.--The adjustment 
                factor under this subparagraph for a fiscal 
                year is such proportion so that, when it is 
                applied under subparagraph (A)(ii) for the 
                fiscal year (taking into account the floors and 
                ceilings under paragraph (3)), the total of the 
                base outlay allotments under this subsection 
                for all the 50 States and the District of 
                Columbia for the fiscal year (not taking into 
                account any increase in a base outlay allotment 
                for a fiscal year attributable to the election 
                of an alternative growth formula under 
                paragraph (4)) is equal to the amount by which 
                (i) the base pool amount for the fiscal year 
                (as determined under subsection (b)), exceeds 
                (ii) the sum of the base outlay allotments 
                provided under paragraph (5) for the 
                Commonwealths and Territories for the fiscal 
                year.
            ``(3) Floors and ceilings.--
                    ``(A) Floors.--Subject to the ceiling 
                established under subparagraph (B), in no case 
                shall the amount of the State base outlay 
                allotment under paragraph (2) for a fiscal year 
                be less than the greatest of the following:
                            ``(i) In general.--Beginning with 
                        fiscal year 1998, 0.24 percent of the 
                        pool amount for the fiscal year.
                            ``(ii) Floor based on previous 
                        year's outlay allotment.--Subject to 
                        clause (iii)--
                                    ``(I) for fiscal year 1997, 
                                103.5 percent of the amount of 
                                the State base outlay allotment 
                                under this subsection for 
                                fiscal year 1996,
                                    ``(II) for fiscal year 
                                1998, 103 percent of the amount 
                                of the State base outlay 
                                allotment under this subsection 
                                for fiscal year 1997,
                                    ``(III) for fiscal year 
                                1999, 102.5 percent of the 
                                amount of the State base outlay 
                                allotment under this subsection 
                                for fiscal year 1998,
                                    ``(IV) for fiscal year 
                                2000, 102.25 percent of the 
                                amount of the State base outlay 
                                allotment under this subsection 
                                for fiscal year 1999, and
                                    ``(V) for each of fiscal 
                                years 2001 and 2002, 102 
                                percent of the amount of the 
                                State base outlay allotment 
                                under this subsection for the 
                                previous fiscal year.
                            ``(iii) Floor based on outlay 
                        allotment growth rate in first year.--
                        Beginning with fiscal year 1998, in the 
                        case of a State for which the outlay 
                        allotment under this subsection for 
                        fiscal year 1997 exceeded its outlay 
                        allotment under this subsection for the 
                        previous fiscal year by more than 95 
                        percent of the national growth 
                        percentage for fiscal year 1997, 90 
                        percent of the national growth 
                        percentage for the fiscal year 
                        involved.
                    ``(B) Ceilings.--
                            ``(i) In general.--Subject to 
                        clause (ii), in no case shall the 
                        amount of the State base outlay 
                        allotment under paragraph (2) for a 
                        fiscal year be greater than the product 
                        of--
                                    ``(I) the State base outlay 
                                allotment under this subsection 
                                for the State for the preceding 
                                fiscal year, and
                                    ``(II) the applicable 
                                percent (specified in clause 
                                (ii) or (iii)) for the fiscal 
                                year involved.
                            ``(ii) General rule for applicable 
                        percent.--For purposes of clause (i), 
                        subject to clause (iii), the 
                        `applicable percent' for fiscal year 
                        1997 is 126.98 percent and for a 
                        subsequent fiscal year is 133 percent 
                        of the national growth percentage for 
                        the fiscal year.
                            ``(iii) Special rule.--For a fiscal 
                        year after fiscal year 1997, in the 
                        case of a State (among the 50 States 
                        and the District of Columbia) that is 
                        one of the 10 States with the lowest 
                        Federal spending per resident-in-
                        poverty rates (as determined under 
                        clause (iv)) for the fiscal year, the 
                        `applicable percent' is 150 percent of 
                        the national growth percentage for the 
                        fiscal year.
                            ``(iv) Determination of federal 
                        spending per resident-in-poverty 
                        rate.--For purposes of clause (iii), 
                        the `Federal spending per resident-in-
                        poverty rate' for a State for a fiscal 
                        year is equal to--
                                    ``(I) the State's outlay 
                                allotment under this subsection 
                                for the previous fiscal year 
                                (determined without regard to 
                                paragraph (4)), divided by
                                    ``(II) the average annual 
                                number of residents of the 
                                State in poverty (as defined in 
                                subsection (d)(2)) with respect 
                                to the fiscal year.
                    ``(C) Special rule.--
                            ``(i) In general.--Notwithstanding 
                        the preceding subparagraphs of this 
                        paragraph, the State base outlay 
                        allotment for--
                                    ``(I) Louisiana, subject to 
                                subclause (II), for each of the 
                                fiscal years 1997 through 2000, 
                                is $2,622,000,000,
                                    ``(II) Louisiana for fiscal 
                                year 1997 only, as otherwise 
                                determined, shall be increased 
                                by $37,048,207, and
                                    ``(III) Nevada for each of 
                                fiscal years 1997, 1998, and 
                                1999, as otherwise determined, 
                                shall be increased by 
                                $90,000,000.
                            ``(ii) Exception.--A State 
                        described in subclause (I) of clause 
                        (i) may apply to the Secretary for use 
                        of the State base outlay allotment 
                        otherwise determined under this 
                        subsection for any fiscal year, if such 
                        State notifies the Secretary not later 
                        than March 1 preceding such fiscal year 
                        that such State will be able to expend 
                        sufficient State funds in such fiscal 
                        year to qualify for such allotment.
                            ``(iii) Treatment of increase as 
                        supplemental allotment.--Any increase 
                        in an outlay allotment under clause 
                        (i)(II) or (i)(III) shall not be taken 
                        into account for purposes of 
                        determining--
                                    ``(I) the adjustment factor 
                                under paragraph (2) for fiscal 
                                year 1997,
                                    ``(II) any State base 
                                outlay allotment for a fiscal 
                                year after fiscal year 1997,
                                    ``(III) the base pool 
                                amount for a fiscal year after 
                                fiscal year 1997, or
                                    ``(IV) determination of the 
                                national growth percentage for 
                                any fiscal year.
            ``(4) Election of alternative growth formula.--
                    ``(A) Election.--In order to reduce 
                variations in increases in outlay allotments 
                over time, any of the 50 States or the District 
                of Columbia may elect (by notice provided to 
                the Secretary by not later than April 1, 1997) 
                to adopt an alternative growth rate formula 
                under this paragraph for the determination of 
                the State's base outlay allotment in fiscal 
                year 1997 and for the increase in the amount of 
                such allotment in subsequent fiscal years.
                    ``(B) Formula.--The alternative growth 
                formula under this paragraph may be any formula 
                under which a portion of the State base outlay 
                allotment for fiscal year 1997 under paragraph 
                (1) is deferred and applied to increase the 
                amount of its base outlay allotment for one or 
                more subsequent fiscal years, so long as the 
                total amount of such increases for all such 
                subsequent fiscal years does not exceed the 
                amount of the base outlay allotment deferred 
                from fiscal year 1997.
            ``(5) Commonwealths and territories.--
                    ``(A) In general.--The base outlay 
                allotment for each of the Commonwealths and 
                Territories for a fiscal year is the maximum 
                amount that could have been certified under 
                section 1108(c) (as in effect on the day before 
                the date of the enactment of this title) with 
                respect to the Commonwealth or Territory for 
                the fiscal year with respect to title XIX, if 
                the national growth percentage (as determined 
                under subsection (b)(2)) for the fiscal year 
                had been substituted (beginning with fiscal 
                year 1997) for the percentage increase referred 
                to in section 1108(c)(1)(B) (as so in effect).
                    ``(B) Disregard of rounding requirements.--
                For purposes of subparagraph (A), the rounding 
                requirements under section 1108(c) shall not 
                apply.
                    ``(C) Limitation on total amount for fiscal 
                year 1996.--Notwithstanding the provisions of 
                subparagraph (A), the total amount of the base 
                outlay allotments for the Commonwealths and 
                Territories for fiscal year 1996 may not exceed 
                $139,950,000.
    ``(d) State Aggregate Expenditure Need Determined.--
            ``(1) In general.--For purposes of subsection (c), 
        the `State aggregate expenditure need' for a State or 
        the District of Columbia for a fiscal year is equal to 
        the product of the following 4 factors:
                    ``(A) Program need.--The program need for 
                the State for the fiscal year, as determined 
                under paragraph (2).
                    ``(B) Health care cost index.--The health 
                care cost index for the State (as determined 
                under paragraph (3)) for the most recent fiscal 
                year for which data are available.
                    ``(C) Projected inflation.--The CPI 
                increase factor for the fiscal year (as defined 
                in subsection (g)(4)(C)).
                    ``(D) National average spending per 
                resident in poverty.--The national average 
                spending per resident in poverty (as determined 
                under paragraph (4)).
            ``(2) Program need.--
                    ``(A) In general.--In this subsection and 
                subject to subparagraph (D), the `program need' 
                of a State for a fiscal year is equal to the 
                sum, for each of the population groups 
                described in subparagraph (B), of the product 
                described in subparagraph (C) for that 
                population group.
                    ``(B) Population groups described.--The 
                population groups described in this 
                subparagraph are as follows:
                            ``(i) Individuals between 60 and 
                        85.--Individuals who are least 60, but 
                        less than 85, years of age.
                            ``(ii) Individuals 85 or older.--
                        Individuals who are 85 years of age or 
                        older.
                            ``(iii) Disabled individuals.--
                        Individuals who are eligible for 
                        medical assistance because such 
                        individuals are blind or disabled and 
                        are not described in clause (i) or 
                        (ii).
                            ``(iv) Children.--Individuals 
                        described in subsection (g)(2)(B).
                            ``(v) Other individuals.--
                        Individuals not described in a previous 
                        clause of this subparagraph.
                    ``(C) Product described.--The product 
                described in this subparagraph, with respect to 
                a population group for a fiscal year for a 
                State (or District), is the product of the 
                following 2 factors for that group, year, and 
                State (or District):
                            ``(i) Weighting factor reflecting 
                        relative need for the group.--For all 
                        States, the national average per 
                        recipient expenditures under this title 
                        in the 50 States and the District of 
                        Columbia for individuals in such group, 
                        as determined under subparagraph (E), 
                        divided by the national average of such 
                        averages for all such groups (weighted 
                        by the number of recipients in each 
                        group).
                            ``(ii) Number of needy in group.--
                        The product of--
                                    ``(I) for all groups, the 
                                average annual number of 
                                residents in poverty in such 
                                State or District (based on 
                                data made generally available 
                                by the Bureau of the Census 
                                from the Current Population 
                                Survey) for the most recent 3-
                                calendar-year period (ending 
                                before the fiscal year) for 
                                which such data are available; 
                                and
                                    ``(II) the proportion, of 
                                all individuals who received 
                                medical assistance under this 
                                title in such State or 
                                District, that were individuals 
                                in such group.
                        In clause (ii)(II), the term `resident 
                        in poverty' means an individual whose 
                        family income does not exceed the 
                        poverty threshold (as such terms are 
                        defined by the Office of Management and 
                        Budget and are generally interpreted 
                        and applied by the Bureau of the Census 
                        for the year involved).
                    ``(D) Floors and ceilings on program 
                need.--
                            ``(i) In general.--In no case shall 
                        the value of the program need for a 
                        State for a fiscal year be less than 90 
                        percent, or be more than 115 percent, 
                        of the program need based on national 
                        averages (determined under clause (ii)) 
                        for that State for the fiscal year.
                            ``(ii) Program need based on 
                        national averages.--For purposes of 
                        clause (i), the `program need based on 
                        national average' for a fiscal year is 
                        equal to the sum of the product (for 
                        each of the population groups) of the 
                        following 3 factors (for that group, 
                        year, and State or District):
                                    ``(I) Weighting factor for 
                                group.--The weighting factor 
                                for the group (described in 
                                subparagraph (C)(i)).
                                    ``(II) Total number of 
                                needy in state.--For all 
                                groups, the average annual 
                                number of residents in poverty 
                                in such State or District (as 
                                defined in subparagraph 
                                (C)(ii)(I)).
                                    ``(III) National proportion 
                                of needy in group.--The 
                                proportion, of all individuals 
                                who received medical assistance 
                                under this title in all of the 
                                States and the District in all 
                                such groups, that were 
                                individuals in such group.
                    ``(E) Determination of national averages 
                and proportions.--The national averages per 
                recipient and the proportions referred to in 
                subparagraph (C)(ii) and (C)(iii), 
                respectively, shall be determined by the 
                Secretary using the most recent data available.
                    ``(F) Expenditure defined.--For purposes of 
                this paragraph, the term `expenditure' means 
                medical vendor payments by basis of eligibility 
                as reported by HCFA Form 2082.
            ``(3) Health care cost index.--
                    ``(A) In general.--In this section, the 
                `health care cost index' for a State or the 
                District of Columbia for a fiscal year is the 
                sum of--
                            ``(i) 0.15, and
                            ``(ii) 0.85 multiplied by the ratio 
                        of (I) the annual average wages for 
                        hospital employees in such State or 
                        District for the fiscal year (as 
                        determined under subparagraph (B)), to 
                        (II) the annual average wages for 
                        hospital employees in the 50 States and 
                        the District of Columbia for such year 
                        (as determined under such 
                        subparagraph).
                    ``(B) Determination of annual average wages 
                of hospital employees.--The Secretary shall 
                provide for the determination of annual average 
                wages for hospital employees in a State or the 
                District of Columbia and, collectively, in the 
                50 States and the District of Columbia for a 
                fiscal year based on the area wage data 
                applicable to hospitals under section 
                1886(d)(2)(E) (or, if such data no longer 
                exists, comparable data of hospital wages) for 
                discharges occurring during the fiscal year 
                involved.
            ``(4) National average spending per resident in 
        poverty.--For purposes of this subsection, the 
        `national average spending per resident in poverty'--
                    ``(A) for fiscal year 1997 is equal to--
                            ``(i) the sum (for each of the 50 
                        States and the District of Columbia) of 
                        the total of the Federal and State 
                        expenditures under title XIX for 
                        calendar quarters in fiscal year 1994, 
                        increased by the percentage by which 
                        (I) the base pool amount for fiscal 
                        year 1997, exceeds (II) $83,213,431,458 
                        (which represents Federal medicaid 
                        expenditures for such States and 
                        District for fiscal year 1994); divided 
                        by
                            ``(ii) the sum of the number of 
                        residents in poverty (as defined in 
                        paragraph (2)(C)(ii)(I)) for all of the 
                        50 States and the District of Columbia 
                        for fiscal year 1994; and
                    ``(B) for a succeeding fiscal year is equal 
                to the national average spending per resident 
                in poverty under this paragraph for the 
                preceding fiscal year increased by the national 
                growth percentage (as defined in subsection 
                (b)(2)) for the fiscal year involved.
    ``(e) Publication of Obligation and Outlay Allotments.--
            ``(1) Notice of preliminary allotments.--Not later 
        than April 1 before the beginning of each fiscal year 
        (beginning with fiscal year 1997), the Secretary shall 
        initially compute, after consultation with the 
        Comptroller General, and publish in the Federal 
        Register notice of the proposed base obligation 
        allotment, base outlay allotment, and supplemental 
        allotments under subsections (f) and (h) for each State 
        under this section (not taking into account subsection 
        (a)(2)(B)) for the fiscal year. The Secretary shall 
        include in the notice a description of the methodology 
        and data used in deriving such allotments for the year.
            ``(2) Review by gao.--The Comptroller General shall 
        submit to Congress by not later than May 15 of each 
        such fiscal year, a report analyzing such allotments 
        and the extent to which they comply with the precise 
        requirements of this section.
            ``(3) Notice of final allotments.--Not later than 
        July 1 before the beginning of each such fiscal year, 
        the Secretary, taking into consideration the analysis 
        contained in the report of the Comptroller General 
        under paragraph (2), shall compute and publish in the 
        Federal Register notice of the final allotments under 
        this section (both taking into account and not taking 
        into account subsection (a)(2)(B)) for the fiscal year. 
        The Secretary shall include in the notice a description 
        of any changes in such allotments from the initial 
        allotments published under paragraph (1) for the fiscal 
        year and the reasons for such changes. Once published 
        under this paragraph, the Secretary is not authorized 
        to change such allotments.
            ``(4) GAO report on final allotments.--The 
        Comptroller General shall submit to Congress by not 
        later than August 1 of each such fiscal year, a report 
        analyzing the final allotments under paragraph (3) and 
        the extent to which they comply with the precise 
        requirements of this section.
            ``(5) Transitional rule for fiscal year 1997.--With 
        respect to fiscal year 1997, the deadlines under the 
        previous provisions of this subsection shall be 
        extended by a number of days equal to the number of 
        days between May 1, 1996, and the date of the enactment 
        of this title.
    ``(f) Supplemental Allotment for Certain Health Care 
Services to Certain Aliens.--
            ``(1) In general.--For purposes of this section for 
        each of fiscal years 1998 through 2002 in the case of a 
        subsection (f) supplemental allotment eligible State, 
        the amount of the supplemental allotment under this 
        subsection is the amount provided under paragraph (2) 
        for the State for that year. Such amount may only be 
        used for the purpose of providing medical assistance 
        for care and services for aliens described in paragraph 
        (1) of section 1513(f) and for which the exception 
        described in paragraph (2) of such section applies. 
        Section 1512(f)(4) shall apply to such assistance in 
        the same manner as it applies to medical assistance 
        described in such section.
            ``(2) Supplemental amount.--
                    ``(A) In general.--For purposes of 
                paragraph (1), the supplemental amount for a 
                subsection (f) supplemental allotment eligible 
                State for a fiscal year is equal to the 
                subsection (f) supplemental allotment ratio (as 
                defined in subparagraph (C)) multiplied by the 
                subsection (f) supplemental pool amount 
                (specified in subparagraph (D)) for the fiscal 
                year.
                    ``(B) Subsection (f) supplemental allotment 
                eligible state.--In this subsection, the term 
                `subsection (f) supplemental allotment eligible 
                State' means one of the 15 States with the 
                highest number of undocumented alien residents 
                of all the States.
                    ``(C) Subsection (f) supplemental allotment 
                ratio.--In this paragraph, the `subsection (f) 
                supplemental allotment ratio' for a State is 
                the ratio of--
                            ``(i) the number of undocumented 
                        aliens residing in the State, to
                            ``(ii) the sum of such numbers for 
                        all subsection (f) supplemental 
                        allotment eligible States.
                    ``(D) Subsection (f) supplemental pool 
                amount.--In this paragraph, the `subsection (f) 
                supplemental pool amount'--
                            ``(i) for fiscal year 1998 is 
                        $500,000,000,
                            ``(ii) for fiscal year 1999 is 
                        $600,000,000,
                            ``(iii) for fiscal year 2000 is 
                        $700,000,000,
                            ``(iv) for fiscal year 2001 is 
                        $800,000,000, and
                            ``(v) for fiscal year 2002 is 
                        $900,000,000.
                    ``(E) Determination of number.--
                            ``(i) In general.--The number of 
                        undocumented aliens residing in a State 
                        under this paragraph--
                                    ``(I) for fiscal year 1998 
                                shall be determined based on 
                                estimates of the resident 
                                illegal alien population 
                                residing in each State prepared 
                                by the Statistics Division of 
                                the Immigration and 
                                Naturalization Service as of 
                                October 1992, and
                                    ``(II) for a subsequent 
                                fiscal year shall be determined 
                                based on the most recent 
                                updated estimate made under 
                                clause (ii).
                            ``(ii) Updating estimate.--For each 
                        fiscal year beginning with fiscal year 
                        1999, the Secretary, in consultation 
                        with the Commission of the Immigration 
                        and Naturalization Service, States, and 
                        outside experts, shall estimate the 
                        number of undocumented aliens residing 
                        in each of the 50 States and the 
                        District of Columbia.
    ``(g) Supplemental Per Beneficiary Umbrella Allotment for 
States with Excess Growth in Certain Population Groups.--
            ``(1) In general.--Subject to paragraphs (5) 
        through (7), for purposes of this section the amount of 
        the supplemental allotment under this subsection for a 
        State for a fiscal year (beginning with fiscal year 
        1997) is the sum, for each supplemental allotment 
        population group described in paragraph (2), of the 
        product of the following:
                    ``(A) Excess number of individuals.--The 
                excess number of individuals (if any, 
                determined under paragraph (3)) for State and 
                the fiscal year who are in the population 
                group.
                    ``(B) Applicable per beneficiary amount.--
                The applicable per beneficiary amount 
                (determined under paragraph (4)) for the State 
                and fiscal year for the population group.
                    ``(C) FMAP.--The old Federal medical 
                assistance percentage (as defined in section 
                1512(d)) for the State and fiscal year.
            ``(2) Supplemental allotment population group.--In 
        this subsection, each of the following shall be 
        considered to be a separate `supplemental allotment 
        population group':
                    ``(A) Poor pregnant women.--Individuals 
                described in section 1501(a)(1)(A).
                    ``(B) Poor children.--Individuals (not 
                described in subparagraph (C))--
                            ``(i) described in subparagraph (B) 
                        or (C) of section 1501(a)(1), or
                            ``(ii) described in subparagraph 
                        (F) or (G) of section 1501(a)(1) who 
                        are under 21 years of age and who are 
                        not pregnant women.
                    ``(C) Poor disabled individuals.--Only in 
                the case of a State that has elected the option 
                (of guaranteeing coverage of disabled 
                individuals) described in section 
                1501(a)(1)(D)(ii) for the fiscal year (and, in 
                the case of a fiscal year after fiscal year 
                1997, for the previous fiscal year), 
                individuals--
                            ``(i) who are described in such 
                        section; or
                            ``(ii) who are described in section 
                        1502(a) under paragraph (1) of that 
                        section.
                    ``(D) Poor elderly individuals.--
                Individuals who are--
                            ``(i) described in section 
                        1501(a)(1)(E); or
                            ``(ii) described in section 1502(a) 
                        under paragraph (2) of that section.
                    ``(E) Qualified medicare beneficiaries.--
                Individuals described in section 1501(b)(1)(A) 
                who are not described in subparagraph (D).
                    ``(F) Qualified disabled and working 
                individuals.--Individuals described in section 
                1501(b)(1)(B) who are not described in 
                subparagraph (D).
                    ``(G) Certain other medicare 
                beneficiaries.--Individuals described in 
                section 1501(b)(1)(C) who are not described in 
                subparagraph (D).
                    ``(H) Other poor adults.--Individuals 
                described in section 1501(a)(1)(G) who are not 
                within a population group described in a 
                previous subparagraph.
            ``(3) Excess number of individuals.--
                    ``(A) In general.--In this subsection, the 
                `excess number of individuals', for a State for 
                a fiscal year with respect to a supplemental 
                allotment population group, is equal to the 
                amount (if any) by which--
                            ``(i) the number of full-year 
                        equivalent individuals in the 
                        population group for the State and 
                        fiscal year, exceeds
                            ``(ii) the anticipated number of 
                        such individuals (as determined under 
                        subparagraph (B)) for the State and 
                        fiscal year in such group.
                    ``(B) Anticipated number.--
                            ``(i) In general.--In subparagraph 
                        (A)(ii), the `anticipated number' of 
                        individuals for a State in a 
                        supplemental allotment population group 
                        for--
                                    ``(I) fiscal year 1997 is 
                                equal to the number of full-
                                year equivalent individuals in 
                                such group enrolled in the 
                                State medicaid plan under title 
                                XIX in fiscal year 1996 
                                increased by the percentage 
                                increase factor (described in 
                                clause (ii)) for fiscal year 
                                1997; or
                                    ``(II) a subsequent fiscal 
                                year is equal to the number of 
                                full-year equivalent 
                                individuals in the population 
                                group for the State for the 
                                previous fiscal year increased 
                                by the percentage increase 
                                factor (described in clause 
                                (ii)) for that subsequent 
                                fiscal year.
                            ``(ii) Percentage increase 
                        factor.--For purposes of this 
                        subparagraph, the `percentage increase 
                        factor' for a fiscal year is equal to 
                        zero or, if greater, the number of 
                        percentage points by which (I) the 
                        State percentage growth factor (as 
                        defined in subparagraph (C)) for the 
                        fiscal year, exceeds (II) the 
                        percentage increase in the consumer 
                        price index for all urban consumers 
                        (U.S. city average) during the 12-month 
                        period beginning with July before the 
                        beginning of the fiscal year.
                    ``(C) State percentage growth factor.--In 
                this paragraph, the term `State percentage 
                growth factor' means, for a State for a fiscal 
                year, the percentage by which (i) the State 
                outlay allotment for the State for the fiscal 
                year (determined under this section without 
                regard to this subsection or subsection (f) or 
                (h)), exceeds (ii) such outlay allotment for 
                such State for the preceding fiscal year (as so 
                determined).
                    ``(D) Individuals count only once.--An 
                individual may at any time not be counted in 
                more than one supplemental allotment population 
                group.
            ``(4) Applicable per beneficiary amount.--
                    ``(A) In general.--In this subsection, 
                subject to subparagraph (D), the `applicable 
                per beneficiary amount', for a State for a 
                fiscal year for a supplemental allotment 
                population group, is equal to the base per 
                beneficiary amount (determined under 
                subparagraph (B)) for the State for the group, 
                increased by the Secretary's estimate of the 
                increase in the per beneficiary expenditures 
                under this title (and title XIX) for States 
                between fiscal year 1995 and fiscal year 1996, 
                and further increased (for each subsequent 
                fiscal year up to the fiscal year involved and 
                in a compounded manner) by the CPI increase 
                factor (as defined in subparagraph (C)) for 
                each such fiscal year.
                    ``(B) Base per beneficiary amount.--
                            ``(i) In general.--The Secretary 
                        shall determine for each State a base 
                        per beneficiary amount for each 
                        supplemental allotment population group 
                        equal to--
                                    ``(I) the sum of the total 
                                expenditure amounts described 
                                in clauses (ii) and (iii), 
                                divided by
                                    ``(II) the full-year 
                                equivalent number of such 
                                individuals in such group 
                                enrolled under the State plan 
                                under title XIX for fiscal year 
                                1995.
                            ``(ii) Medical assistance 
                        expenditures.--The total expenditure 
                        amount described in this clause, with 
                        respect to a supplemental allotment 
                        population group, is the total amount 
                        of expenditures for which Federal 
                        financial participation was provided to 
                        the State under paragraphs (1) and (5) 
                        of section 1903(a) for fiscal year 1995 
                        with respect to medical assistance 
                        furnished with respect to individuals 
                        included in such group. Such amount 
                        shall not include expenditures 
                        attributable to payment adjustments 
                        under section 1923.
                            ``(iii) Administrative 
                        expenditures.--The total expenditure 
                        amount described in this clause, with 
                        respect to a supplemental allotment 
                        population group, is the product of--
                                    ``(I) the total amount of 
                                administrative expenditures for 
                                which Federal financial 
                                participation was provided to 
                                the State under section 1903(a) 
                                (other than paragraphs (1) and 
                                (5) of such section) for fiscal 
                                year 1995, and
                                    ``(II) the ratio described 
                                in clause (iv) for the 
                                population group.
                    ``(iv) Ratio described.--The ratio 
                described in this clause for a group is the 
                ratio of--
                                    ``(I) the total amount of 
                                expenditures described in 
                                clause (ii) for the group, to
                                    ``(II) the total amount of 
                                expenditures described in such 
                                clause for all individuals 
                                under the State plan under 
                                title XIX in the base fiscal 
                                year.
                    ``(C) CPI increase factor.--In subparagraph 
                (A), the `CPI increase factor' for a fiscal 
                year is the percentage by which--
                            ``(i) the Secretary's estimate of 
                        the average value of the consumer price 
                        index for all urban consumers (all 
                        items, U.S. city average) for months in 
                        the fiscal year, exceeds
                            ``(ii) the average value of such 
                        index for months in the previous fiscal 
                        year.
                    ``(D) Special rules for certain medicare 
                beneficiaries.--
                            ``(i) Qualified disabled and 
                        working individuals.--In the case of 
                        the supplemental allotment population 
                        group described in paragraph (2)(F), 
                        the `applicable per beneficiary 
                        amount', for all States for a fiscal 
                        year is the sum of the medicare 
                        premiums applied under section 1818A 
                        for months in the fiscal year.
                            ``(ii) Other medicare 
                        beneficiaries.--In the case of the 
                        supplemental allotment population group 
                        described in paragraph (2)(G), the 
                        `applicable per beneficiary amount', 
                        for all States for a fiscal year is the 
                        sum of the medicare premiums applied 
                        under section 1839 for months in the 
                        fiscal year.
            ``(5) Conditions for access to umbrella 
        supplemental allotment.--
                    ``(A) In general.--A State may receive a 
                supplemental umbrella allotment under this 
                subsection for a fiscal year only if the 
                following conditions are met:
                            ``(i) The State provides assurances 
                        satisfactory to the Secretary that it 
                        will obligate during the fiscal year 
                        the full amount of the allotment 
                        otherwise provided under this section 
                        for the fiscal year.
                            ``(ii) The State provides 
                        assurances satisfactory to the 
                        Secretary that any amount attributable 
                        to a carryover from a previous fiscal 
                        year under subsection (a)(2)(B) shall 
                        also be obligated under the plan by the 
                        end of the fiscal year.
                            ``(iii) The State submits to the 
                        Secretary on a periodic basis such 
                        reports on numbers of individuals 
                        within each supplemental allotment 
                        population group as the Secretary may 
                        determine necessary to assure the 
                        accuracy of the supplemental umbrella 
                        allotments under this subsection. The 
                        Secretary may not require the 
                        submission of such reports more 
                        frequently than quarterly.
                            ``(iv) The State provides 
                        assurances satisfactory to the 
                        Secretary that it has in effect such 
                        data collection procedures as may be 
                        necessary to provide for the reports 
                        described in clause (iii).
                    ``(B) Estimate.--The amount of any 
                supplemental allotment under this subsection 
                shall be estimated in advance of the fiscal 
                year involved, based on data required to be 
                reported under subparagraph (A)(iii). The 
                Secretary is authorized to adjust such data on 
                a preliminary basis if the Secretary determines 
                that the estimates do not reasonably reflect 
                the actual excess number of individuals in the 
                supplemental allotment population groups for 
                the fiscal year involved. Section 1512(b)(6) 
                provides for adjustment of payments of the 
                supplemental allotment under this subsection 
                based on a final determination using data on 
                actual numbers of individual in each 
                supplemental allotment population group.
            ``(6) Adjustment in allotment for savings from 
        slower population growth.--
                    ``(A) In general.--The amount of the 
                supplemental umbrella allotment to a State 
                under this subsection for a fiscal year shall 
                be reduced (but not below zero) by the sum, for 
                each supplemental allotment population group 
                described in paragraph (2), of the product of 
                the following:
                            ``(i) Less-than-anticipated number 
                        of individuals.--The less-than-
                        anticipated number of individuals (if 
                        any, determined under subparagraph (B)) 
                        for State and the fiscal year who are 
                        in the population group.
                            ``(ii) Applicable per beneficiary 
                        amount.--The applicable per beneficiary 
                        amount (determined under paragraph (4)) 
                        for the State and fiscal year for the 
                        population group.
                            ``(iii) FMAP.--The old Federal 
                        medical assistance percentage (as 
                        defined in section 1512(d)) for the 
                        State and fiscal year.
                    ``(B) Less-than-anticipated number of 
                individuals.--In this paragraph, the `less-
                than-anticipated number of individuals', for a 
                State for a fiscal year with respect to a 
                supplemental allotment population group, is 
                equal to the amount (if any) by which--
                            ``(i) the anticipated number of 
                        such individuals (as determined under 
                        paragraph (3)(B)) for the State and 
                        fiscal year in such group, exceeds
                            ``(ii) the number of full-year 
                        equivalent individuals in the 
                        population group for the State and 
                        fiscal year.
            ``(7) Special rule for fiscal year 1997.--In 
        applying this subsection to fiscal year 1997--
                    ``(A) in determining the excess number of 
                individuals under paragraph (3)--
                            ``(i) the number of full-year 
                        equivalent individuals shall only be 
                        determined based on the portion of 
                        fiscal year 1997 in which the State 
                        plan is in effect under this title, and
                            ``(ii) the anticipated number of 
                        such individuals (referred to in 
                        paragraph (3)(A)(ii)) shall be the 
                        anticipated number otherwise determined 
                        multiplied by the proportion of fiscal 
                        year 1997 in which such State plan will 
                        be in effect; and
                    ``(B) if the State plan is effective before 
                April 1, 1997, the amount of the supplemental 
                allotment otherwise determined under this 
                subsection shall be multiplied by the ratio of 
                the portion of fiscal year 1997 that occurs on 
                or after April 1, 1997, to the total portion of 
                such fiscal year in which the State plan is in 
                effect.
    ``(h) Allotment for Medical Assistance for Services 
Provided in Indian Health Service and Related Facilities.--
            ``(1) In general.--For purposes of this section for 
        each of fiscal years 1998 through 2002 in the case of a 
        subsection (h) supplemental allotment eligible State, 
        the amount of the supplemental allotment under this 
        subsection is the amount provided under paragraph (2) 
        for the State for that year. Such amount may only be 
        used for the purpose of providing medical assistance 
        described in section 1512(f)(3) (relating to services 
        provided by the Indian Health Service and related 
        facilities).
            ``(2) Supplemental outlay allotment.--
                    ``(A) In general.--For purposes of 
                paragraph (1), the amount under this paragraph 
                for a subsection (h) supplemental allotment 
                eligible State for a fiscal year is equal to 
                the subsection (h) supplemental allotment ratio 
                (as defined in subparagraph (C)) multiplied by 
                the subsection (h) supplemental pool amount 
                (specified in subparagraph (D)) for the fiscal 
                year.
                    ``(B) Subsection (h) supplemental allotment 
                eligible state.--In this subsection, the term 
                `subsection (h) supplemental allotment eligible 
                State' means a State that has one or more 
                facilities described in section 1512(f)(3)(A).
                    ``(C) Subsection (h) supplemental allotment 
                ratio.--In this paragraph, the `subsection (h) 
                supplemental allotment ratio' for a State is 
                the ratio of--
                            ``(i) the number of Indians 
                        residing in the State, to
                            ``(ii) the sum of such numbers for 
                        all subsection (h) supplemental 
                        allotment eligible States.
                    ``(D) Subsection (h) supplemental pool 
                amount.--In this paragraph, the `subsection (h) 
                supplemental pool amount', for--
                            ``(i) fiscal year 1998 is 
                        $89,090,082,
                            ``(ii) fiscal year 1999 is 
                        $94,238,788,
                            ``(iii) fiscal year 2000 is 
                        $99,685,050,
                            ``(iv) fiscal year 2001 is 
                        $105,446,063, and
                            ``(v) fiscal year 2002 is 
                        $111,540,017.
                    ``(E) Determination of number.--The number 
                of Indians residing in a State under this 
                paragraph for a fiscal year shall be based on 
                the most recent available estimate of the 
                Secretary of the Interior.
            ``(3) Indian defined.--The term `Indian' has the 
        meaning given such term in section 4(d) of the Indian 
        Self-Determination and Education Assistance Act (25 
        U.S.C. 450b(d)).

``SEC. 1512. PAYMENTS TO STATES.

    ``(a) Amount of Payment.--From the allotment of a State 
under section 1511 for a fiscal year, subject to the succeeding 
provisions of this title, the Secretary shall pay to each State 
which has a State plan approved under part C, for each quarter 
in the fiscal year--
            ``(1) an amount equal to the applicable Federal 
        medical assistance percentage (as defined in subsection 
        (c)) of the total amount expended during such quarter 
        as medical assistance under the plan; plus
            ``(2) an amount equal to the applicable Federal 
        medical assistance percentage of the total amount 
        expended during such quarter for medically-related 
        services (as defined in section 1571(g)); plus
            ``(3) subject to section 1513(c)--
                    ``(A) an amount equal to 90 percent of the 
                amounts expended during such quarter for the 
                design, development, and installation of 
                information systems and for providing 
                incentives to promote the enforcement of 
                medical support orders, plus
                    ``(B) an amount equal to 75 percent of the 
                amounts expended during such quarter for 
                medical personnel, administrative support of 
                medical personnel, operation and maintenance of 
                information systems, modification of 
                information systems, quality assurance 
                activities, utilization review, medical and 
                peer review, anti-fraud activities, independent 
                evaluations, coordination of benefits, and 
                meeting reporting requirements under this 
                title, plus
                    ``(C) an amount equal to 50 percent of so 
                much of the remainder of the amounts expended 
                during such quarter as are expended by the 
                State in the administration of the State plan.
    ``(b) Payment Process.--
            ``(1) Quarterly estimates.--Prior to the beginning 
        of each quarter, the Secretary shall estimate the 
        amount to which a State will be entitled under 
        subsection (a) for such quarter, such estimates to be 
        based on (A) a report filed by the State containing its 
        estimate of the total sum to be expended in such 
        quarter in accordance with the provisions of such 
        subsections, and stating the amount appropriated or 
        made available by the State and its political 
        subdivisions for such expenditures in such quarter, and 
        if such amount is less than the State's proportionate 
        share of the total sum of such estimated expenditures, 
        the source or sources from which the difference is 
        expected to be derived, and (B) such other 
        investigation as the Secretary may find necessary.
            ``(2) Payment.--
                    ``(A) In general.--The Secretary shall then 
                pay to the State, in such installments as the 
                Secretary may determine and in accordance with 
                section 6503(a) of title 31, United States 
                Code, the amount so estimated, reduced or 
                increased to the extent of any overpayment or 
                underpayment which the Secretary determines was 
                made under this section (or section 1903) to 
                such State for any prior quarter and with 
                respect to which adjustment has not already 
                been made under this subsection (or under 
                section 1903(d)).
                    ``(B) Treatment as overpayments.--
                Expenditures for which payments were made to 
                the State under subsection (a) shall be treated 
                as an overpayment to the extent that the State 
                or local agency administering such plan has 
                been reimbursed for such expenditures by a 
                third party pursuant to the provisions of its 
                plan in compliance with section 1555.
                    ``(C) Recovery of overpayments.--For 
                purposes of this subsection, when an 
                overpayment is discovered, which was made by a 
                State to a person or other entity, the State 
                shall have a period of 60 days in which to 
                recover or attempt to recover such overpayment 
                before adjustment is made in the Federal 
                payment to such State on account of such 
                overpayment. Except as otherwise provided in 
                subparagraph (D), the adjustment in the Federal 
                payment shall be made at the end of the 60 
                days, whether or not recovery was made.
                    ``(D) No adjustment for uncollectables.--In 
                any case where the State is unable to recover a 
                debt which represents an overpayment (or any 
                portion thereof) made to a person or other 
                entity on account of such debt having been 
                discharged in bankruptcy or otherwise being 
                uncollectable, no adjustment shall be made in 
                the Federal payment to such State on account of 
                such overpayment (or portion thereof).
            ``(3) Federal share of recoveries.--The pro rata 
        share to which the United States is equitably entitled, 
        as determined by the Secretary, of the net amount 
        recovered during any quarter by the State or any 
        political subdivision thereof with respect to medical 
        assistance furnished under the State plan shall be 
        considered an overpayment to be adjusted under this 
        subsection.
            ``(4) Timing of obligation of funds.--Upon the 
        making of any estimate by the Secretary under this 
        subsection, any appropriations available for payments 
        under this section shall be deemed obligated.
            ``(5) Disallowances.--In any case in which the 
        Secretary estimates that there has been an overpayment 
        under this section to a State on the basis of a claim 
        by such State that has been disallowed by the Secretary 
        under section 1116(d) or in the case described in 
        paragraph (6)(C), and such State disputes such 
        disallowance or an adjustment under such paragraph, the 
        amount of the Federal payment in controversy shall, at 
        the option of the State, be retained by such State or 
        recovered by the Secretary pending a final 
        determination with respect to such payment amount. If 
        such final determination is to the effect that any 
        amount was properly disallowed, and the State chose to 
        retain payment of the amount in controversy, the 
        Secretary shall offset, from any subsequent payments 
        made to such State under this title, an amount equal to 
        the proper amount of the disallowance plus interest on 
        such amount disallowed for the period beginning on the 
        date such amount was disallowed and ending on the date 
        of such final determination at a rate (determined by 
        the Secretary) based on the average of the bond 
        equivalent of the weekly 90-day treasury bill auction 
        rates during such period.
            ``(6) Adjustments in payments reflecting over- and 
        under-estimations of supplemental umbrella allotment.--
                    ``(A) In general.--Based on data reported 
                under section 1511(g)(5)(A)(iii) and annual 
                audits provided for under section 1551(a) on 
                the actual excess number of individuals in each 
                population group for a fiscal year, the 
                Secretary shall determine the final amount of 
                the supplemental umbrella allotment for each 
                State for the fiscal year and whether, based on 
                such final amount, the amount of payment made 
                for the fiscal year was greater, or less, than 
                the amount that should have been paid if 
                payments had been made based on such final 
                amount.
                    ``(B) Payment in case of underestimation.--
                If the Secretary determines under subparagraph 
                (A) there was an underpayment to a State, the 
                Secretary shall increase the amount of the next 
                quarterly payment under this section to the 
                State by the amount of such underpayment.
                    ``(C) Offsetting of payments in case of 
                overestimation.--If the Secretary determines 
                under subparagraph (A) there was an overpayment 
                to a State, the Secretary shall, subject to the 
                procedures provided under paragraph (5), 
                decrease the amount of the payment for the next 
                quarter (or, at the discretion of the 
                Secretary, over a period of not more than 4 
                calendar quarters) by the amount of such 
                overpayment. In the case in which a State seeks 
                review of such a determination in accordance 
                with the procedures under paragraph (5), the 
                Secretary shall provide for completion of such 
                review process within 1 year after the date the 
                State requests such review.
    ``(c) Applicable Federal Medical Assistance Percentage 
Defined.--In this section, except as provided in subsection 
(f), the term `applicable Federal medical assistance 
percentage' means, with respect to one of the 50 States or the 
District of Columbia, at the State's or District's option--
            ``(1) the old Federal medical assistance percentage 
        (as determined in subsection (d));
            ``(2) the lesser of--
                    ``(A) new Federal medical assistance 
                percentage (as determined under subsection (e)) 
                or
                    ``(B) the old Federal medical assistance 
                percentage plus 10 percentage points; or
            ``(3) 60 percent.
    ``(d) Old Federal Medical Assistance Percentage.--
            ``(1) In general.--Except as provided in paragraph 
        (2) and subsection (f), the term `old Federal medical 
        assistance percentage' for any State is 100 percent 
        less the State percentage; and the State percentage is 
        that percentage which bears the same ratio to 45 
        percent as the square of the per capita income of such 
        State bears to the square of the per capita income of 
        the continental United States (including Alaska) and 
        Hawaii.
            ``(2) Limitation on range.--In no case shall the 
        old Federal medical assistance percentage be less than 
        50 percent or more than 83 percent.
            ``(3) Promulgation.--The old Federal medical 
        assistance percentage for any State shall be determined 
        and promulgated in accordance with the provisions of 
        section 1101(a)(8)(B).
    ``(e) New Federal Medical Assistance Percentage Defined.--
            ``(1) In general.--
                    ``(A) Term defined.--Except as provided in 
                paragraph (3) and subsection (f), the term `new 
                Federal medical assistance percentage' means, 
                for each of the 50 States and the District of 
                Columbia, 100 percent reduced by the product 
                0.39 and the ratio of--
                            ``(i)(I) for each of the 50 States, 
                        the total taxable resources (TTR) ratio 
                        of the State specified in subparagraph 
                        (B), or
                            ``(II) for the District of 
                        Columbia, the per capita income ratio 
                        specified in subparagraph (C),
                to--
                            ``(ii) the aggregate expenditure 
                        need ratio of the State or District, as 
                        described in subparagraph (D).
                    ``(B) Total taxable resources (ttr) 
                ratio.--For purposes of subparagraph (A)(i)(I), 
                the total taxable resources (TTR) ratio for 
                each of the 50 States is--
                            ``(i) an amount equal to the most 
                        recent 3-year average of the total 
                        taxable resources (TTR) of the State, 
                        as determined by the Secretary of the 
                        Treasury, divided by
                            ``(ii) an amount equal to the sum 
                        of the 3-year averages determined under 
                        clause (i) for each of the 50 States.
                    ``(C) Per capita income ratio.--For 
                purposes of subparagraph (A)(i)(II), the per 
                capita income ratio of the District of Columbia 
                is--
                            ``(i) an amount equal to the most 
                        recent 3-year average of the total 
                        personal income of the District of 
                        Columbia, as determined in accordance 
                        with the provisions of section 
                        1101(a)(8)(B), divided by
                            ``(ii) an amount equal to the total 
                        personal income of the continental 
                        United States (including Alaska) and 
                        Hawaii, as determined under section 
                        1101(a)(8)(B).
                    ``(D) Aggregate expenditure need ratio.--
                For purposes of subparagraph (A), with respect 
                to each of the 50 States and the District of 
                Columbia for a fiscal year, the aggregate 
                expenditure need ratio is--
                            ``(i) the State aggregate 
                        expenditure need (as defined in section 
                        1511(d)) for the State for the fiscal 
                        year, divided by
                            ``(ii) the sum of such State 
                        aggregate expenditure needs for the 50 
                        States and the District of Columbia for 
                        the fiscal year.
            ``(2) Limitation on range.--Except as provided in 
        subsection (f), the new Federal medical assistance 
        percentage shall in no case be less than 40 percent or 
        greater than 83 percent.
            ``(3) Promulgation.--The new Federal medical 
        assistance percentage for any State shall be 
        promulgated in a timely manner consistent with the 
        promulgation of the old Federal medical assistance 
        percentage under section 1101(a)(8)(B).
    ``(f) Special Rules.--For purposes of this title:
            ``(1) Commonwealths and territories.--In the case 
        of Puerto Rico, the Virgin Islands, Guam, the Northern 
        Mariana Islands, and American Samoa, the old and new 
        Federal medical assistance percentages are 50 percent.
            ``(2) Alaska.--In the case of Alaska, the old 
        Federal medical assistance percentage is that 
        percentage which bears the same ratio to 45 percent as 
        the square of the adjusted per capita income of such 
        State bears to the square of the per capita income of 
        the continental United States. For purposes of the 
        preceding sentence, the adjusted per capita income for 
        Alaska shall be determined by dividing the State's most 
        recent 3-year average per capita by the health care 
        cost index for such State (as determined under section 
        1511(d)(3)).
            ``(3) Indian health service and related 
        facilities.--The old and new Federal medical assistance 
        percentages shall be 100 percent with respect to the 
        amounts expended as medical assistance for services 
        provided by--
                    ``(A) an Indian Health Service facility;
                    ``(B) an Indian health program operated by 
                an Indian tribe or tribal organization (as 
                defined in section 4 of the Indian Health Care 
                Improvement Act) pursuant to a contract, grant, 
                cooperative agreement, or compact with the 
                Indian Health Service under the Indian Self-
                Determination Act; or
                    ``(C) an urban Indian health program 
                operated by an urban Indian organization 
                pursuant to a grant or contract with the Indian 
                Health Service under title V of the Indian 
                Health Care Improvement Act.
            ``(4) No state matching required for certain 
        expenditures.--In applying subsection (a)(1) with 
        respect to medical assistance provided to unlawful 
        aliens pursuant to the exception specified in section 
        1513(f)(2), payment shall be made for the amount of 
        such assistance without regard to any need for a State 
        match.
            ``(5) Special transitional rule.--
                    ``(A) In general.--Notwithstanding 
                subsection (a), in order to receive the full 
                State outlay allotment described in section 
                1511(c)(3)(C)(i), a State described in 
                subparagraph (C) shall expend State funds in a 
                fiscal year (before fiscal year 2000) under a 
                State plan under this title in an amount not 
                less than the adjusted base year State 
                expenditures, plus the applicable percentage of 
                the difference between such expenditures and 
                the amount necessary to qualify for the full 
                State outlay allotment so described in such 
                fiscal year as determined under this section 
                without regard to this paragraph.
                    ``(B) Reduction in allotment if expenditure 
                not met.--In the event a State described in 
                subparagraph (C) fails to expend State funds in 
                an amount required by subparagraph (A) for a 
                fiscal year, the outlay allotment described in 
                section 1511(c)(3)(C)(i) for such year for such 
                State shall be reduced by an amount which bears 
                the same ratio to such outlay allotment as the 
                State funds expended in such fiscal year bears 
                to the amount required by subparagraph (A).
                    ``(C) Adjusted base year state 
                expenditures.--For purposes of this paragraph, 
                the term `adjusted base year State 
                expenditures' means, for Louisiana, 
                $355,000,000.
                    ``(D) Applicable percentage.--For purposes 
                of this paragraph, the applicable percentage 
                for a fiscal year is specified in the following 
                table:

                                                              Applicable
``Fiscal year:                                               Percentage:
    1996......................................................       20 
    1997......................................................       40 
    1998......................................................       60 
    1999......................................................       80.

            ``(6) Treatment of expenditures attributable to 
        umbrella fund.--The `applicable Federal medical 
        assistance percentage' with respect to amounts 
        attributable to supplemental amounts described in 
        section 1511(g), is the old Federal medical assistance 
        percentage.
    ``(g) Use of Local Funds.--
            ``(1) In general.--Subject to paragraph (2), a 
        State may use local funds to meet the non-Federal share 
        of the expenditures under the State plan with respect 
        to which payments may be made under this section.
            ``(2) Limitation.--For any fiscal year local funds 
        may not exceed 40 percent of the total of the non-
        Federal share of such expenditures for the fiscal year.
    ``(h) Permitting Inter-Governmental Funds Transfers.--
            ``(1) In general.--Public funds, as defined in 
        paragraph (2), may be considered as the State's share 
        in determining State financial participation under this 
        title.
            ``(2) Public funds defined.--For purposes of this 
        subsection, the term `public funds' means funds--
                    ``(A) that are--
                            ``(i) appropriated directly to the 
                        State or to the local agency 
                        administering the State plan under this 
                        title, or transferred from other public 
                        agencies (including Indian tribes) to 
                        the State or local agency and under its 
                        administrative control, or
                            ``(ii) certified by the 
                        contributing public agency as 
                        representing expenditures eligible for 
                        Federal financial participation under 
                        this title; and
                    ``(B) that--
                            ``(i) are not Federal funds, or
                            ``(ii) are Federal funds authorized 
                        by Federal law to be used to match 
                        other Federal funds.
    ``(i) Application of Provider Tax and Donation 
Restrictions.--
            ``(1) In general.--Subject to paragraph (2), the 
        provisions of section 1903(w) (as in effect on June 1, 
        1996) shall apply under this title in the same manner 
        as they applied under title XIX (as of such date).
            ``(2) Waiver authority.--Beginning 2 years after 
        the date of the enactment of this title, the Secretary, 
        taking into account the report submitted under section 
        1513(j)(2), may waive, upon the application of a State, 
        paragraph (1) as it applies in that State if the 
        Secretary determines that the waiver would not 
        financially undermine the program under this title and 
        would not otherwise be abusive.

``SEC. 1513. LIMITATION ON USE OF FUNDS; DISALLOWANCE.

    ``(a) In General.--Funds provided to a State under this 
title shall only be used to carry out the purposes of this 
title.
    ``(b) Disallowances For Excluded Providers.--
            ``(1) In general.--Payment shall not be made to a 
        State under this part for expenditures for items and 
        services furnished--
                    ``(A) by a provider who was excluded from 
                participation under title V, XVIII, or XX or 
                under this title pursuant to section 1128, 
                1128A, 1156, or 1842(j)(2), or
                    ``(B) under the medical direction or on the 
                prescription of a physician who was so 
                excluded, if the provider of the services knew 
                or had reason to know of the exclusion.
            ``(2) Exception for emergency services.--Paragraph 
        (1) shall not apply to emergency items or services, not 
        including hospital emergency room services.
    ``(c) Limitations on Payments for Medically-Related 
Services and Administrative Expenses.--
            ``(1) In general.--No Federal financial assistance 
        is available for expenditures under the State plan 
        for--
                    ``(A) medically-related services for a 
                quarter to the extent such expenditures exceed 
                5 percent of the total expenditures under the 
                plan for the quarter, or
                    ``(B) total administrative expenses (other 
                than expenses described in paragraph (2) during 
                the first 8 quarters in which the plan is in 
                effect under this title) for quarters in a 
                fiscal year to the extent such expenditures 
                exceed the sum of $20,000,000 plus 10 percent 
                of the total expenditures under the plan for 
                the year.
            ``(2) Administrative expenses not subject to 
        limitation.--The administrative expenses referred to in 
        this paragraph are expenditures under the State plan 
        for the following activities:
                    ``(A) Quality assurance.
                    ``(B) The development and operation of the 
                certification program for nursing facilities 
                and intermediate care facilities for the 
                mentally retarded under section 1557.
                    ``(C) Utilization review activities, 
                including medical activities and activities of 
                peer review organizations.
                    ``(D) Inspection and oversight of providers 
                and capitated health care organizations.
                    ``(E) Anti-fraud activities.
                    ``(F) Independent evaluations.
                    ``(G) Activities required to meet reporting 
                requirements under this title.
    ``(d) Treatment of Third Party Liability.--No payment shall 
be made to a State under this part for expenditures for medical 
assistance provided for an individual under its State plan to 
the extent that a private insurer (as defined by the Secretary 
by regulation and including a group health plan (as defined in 
section 607(1) of the Employee Retirement Income Security Act 
of 1974), a service benefit plan, and a health maintenance 
organization) would have been obligated to provide such 
assistance but for a provision of its insurance contract which 
has the effect of limiting or excluding such obligation because 
the individual is eligible for or is provided medical 
assistance under the plan.
    ``(e) Secondary Payer Provisions.--Except as otherwise 
provided by law, no payment shall be made to a State under this 
part for expenditures for medical assistance provided for an 
individual under its State plan to the extent that payment has 
been made or can reasonably be expected to be made promptly (as 
determined in accordance with regulations) under any other 
federally operated or financed health care insurance program, 
other than an insurance program operated or financed by the 
Indian Health Service, as identified by the Secretary. For 
purposes of this subsection, rules similar to the rules for 
overpayments under section 1512(b) shall apply.
    ``(f) Limitation on Payments For Services to Nonlawful 
Aliens.--
            ``(1) In general.--Notwithstanding the preceding 
        provisions of this section, except as provided in 
        paragraph (2), no payment may be made to a State under 
        this part for medical assistance furnished to an alien 
        who is not lawfully admitted for permanent residence or 
        otherwise permanently residing in the United States 
        under color of law.
            ``(2) Exception.--Payment may be made under this 
        section for care and services that are furnished to an 
        alien described in paragraph (1) only if--
                    ``(A) such care and services are necessary 
                for the treatment of an emergency medical 
                condition of the alien (or, at the option of 
                the State, for prenatal care),
                    ``(B) such alien otherwise meets the 
                eligibility requirements for medical assistance 
                under the State plan (other than a requirement 
                of the receipt of aid or assistance under title 
                IV, supplemental security income benefits under 
                title XVI, or a State supplementary payment), 
                and
                    ``(C) such care and services are not 
                related to an organ transplant procedure.
            ``(3) Emergency medical condition defined.--For 
        purposes of this subsection, the term `emergency 
        medical condition' means a medical condition (including 
        emergency labor and delivery) manifesting itself by 
        acute symptoms of sufficient severity (including severe 
        pain) such that the absence of immediate medical 
        attention could reasonably be expected to result in--
                    ``(A) placing the patient's health in 
                serious jeopardy,
                    ``(B) serious impairment to bodily 
                functions, or
                    ``(C) serious dysfunction of any bodily 
                organ or part.
    ``(g) Limitation on Payment for Certain Outpatient 
Prescription Drugs.--
            ``(1) In general.--No payment may be made to a 
        State under this part for medical assistance for 
        covered outpatient drugs (as defined in section 
        1575(i)(2)) of a manufacturer provided under the State 
        plan unless the manufacturer (as defined in section 
        1575(i)(4)) of the drug--
                    ``(A) has entered into a master rebate 
                agreement with the Secretary under section 
                1575,
                    ``(B) is otherwise complying with the 
                provisions of such section,
                    ``(C) subject to paragraph (4), is 
                complying with the provisions of section 8126 
                of title 38, United States Code, including the 
                requirement of entering into a master agreement 
                with the Secretary of Veterans Affairs under 
                such section, and
                    ``(D) subject to paragraph (4), is 
                complying with the provisions of section 340B 
                of the Public Health Service Act, including the 
                requirement of entering into an agreement with 
                the Secretary under such section.
            ``(2) Construction.--Nothing in this subsection 
        shall be construed as requiring a State to participate 
        in the master rebate agreement under section 1575.
            ``(3) Effect of subsequent amendments.--For 
        purposes of subparagraphs (C) and (D) of paragraph (1), 
        in determining whether a manufacturer is in compliance 
        with the requirements of section 8126 of title 38, 
        United States Code, or section 340B of the Public 
        Health Service Act--
                    ``(A) the Secretary shall not take into 
                account any amendments to such sections that 
                are enacted after the enactment of title VI of 
                the Veterans Health Care Act of 1992, and
                    ``(B) a manufacturer is deemed to meet such 
                requirements if the manufacturer establishes to 
                the satisfaction of the Secretary that the 
                manufacturer would comply (and has offered to 
                comply) with the provisions of such sections 
                (as in effect immediately after the enactment 
                of the Veterans Health Care Act of 1992) and 
                would have entered into an agreement under such 
                section (as such section was in effect at such 
                time), but for a legislative change in such 
                section after the date of the enactment of the 
                Veterans Health Care Act of 1992.
            ``(4) Effect of establishment of alternative 
        mechanism under public health service act.--If the 
        Secretary does not establish a mechanism to ensure 
        against duplicate discounts or rebates under section 
        340B(a)(5)(A) of the Public Health Service Act within 
        12 months of the date of the enactment of such section, 
        the following requirements shall apply:
                    ``(A) Each covered entity under such 
                section shall inform the State when it is 
                seeking reimbursement from the State plan for 
                medical assistance with respect to a unit of 
                any covered outpatient drug which is subject to 
                an agreement under section 340B(a) of such Act.
                    ``(B) Each such State shall provide a means 
                by which such an entity shall indicate on any 
                drug reimbursement claims form (or format, 
                where electronic claims management is used) 
                that a unit of the drug that is the subject of 
                the form is subject to an agreement under 
                section 340B of such Act, and not submit to any 
                manufacturer a claim for a rebate payment with 
                respect to such a drug.
    ``(h) Limitation on Payment for Abortions.--
            ``(1) In general.--Payment shall not be made to a 
        State under this part for any amount expended under the 
        State plan to pay for any abortion or to assist in the 
        purchase, in whole or in part, of health benefit 
        coverage that includes coverage of abortion.
            ``(2) Exception.--Paragraph (1) shall not apply to 
        an abortion--
                    ``(A) if the pregnancy is the result of an 
                act of rape or incest, or
                    ``(B) in the case where a woman suffers 
                from a physical disorder, illness, or injury 
                that would, as certified by a physician, place 
                the woman in danger of death unless an abortion 
                is performed.
    ``(i) Limitation on Payment for Assisting Deaths.--Payment 
shall not be made to a State under this part for amounts 
expended under the State plan to pay for, or to assist in the 
purchase, in whole or in part, of health benefit coverage that 
includes payment for any drug, biological product, or service 
which was furnished for the purpose of causing, or assisting in 
causing, the death, suicide, euthanasia, or mercy killing of a 
person.
    ``(j) Study and Report on State Funding.--
            ``(1) Study.--The Comptroller General shall provide 
        for a study of the methods by which States provide for 
        financing their share of expenditures under this title. 
        Such study shall include an examination of the use of 
        provider taxes and donations, as well as 
        intergovernmental transfers.
            ``(2) Report.--Not later than 2 years after the 
        date of the enactment of this title, the Comptroller 
        General shall submit to Congress a report on such 
        study. The report shall include such recommendations as 
        the Comptroller General deems appropriate.

          ``Part C--Establishment and Amendment of State Plans

``SEC. 1521. DESCRIPTION OF STRATEGIC OBJECTIVES AND PERFORMANCE GOALS.

    ``(a) Description.--A State plan shall include a 
description of the strategic objectives and performance goals 
the State has established for providing health care services to 
low-income populations under this title, including a general 
description of the manner in which the plan is designed to meet 
these objectives and goals.
    ``(b) Certain Objectives and Goals Required.--A State plan 
shall include strategic objectives and performance goals 
relating to rates of childhood immunizations, reductions in 
infant mortality and morbidity, and access to services for 
children with special health care needs (as defined by the 
State).
    ``(c) Considerations.--In specifying these objectives and 
goals the State may consider factors such as the following:
            ``(1) The State's priorities with respect to 
        providing assistance to low-income populations.
            ``(2) The State's priorities with respect to the 
        general public health and the health status of 
        individuals eligible for assistance under the State 
        plan.
            ``(3) The State's financial resources, the 
        particular economic conditions in the State, and 
        relative adequacy of the health care infrastructure in 
        different regions of the State.
    ``(d) Performance Measures.--To the extent practicable--
            ``(1) one or more performance goals shall be 
        established by the State for each strategic objective 
        identified in the State plan; and
            ``(2) the State plan shall describe, how program 
        performance will be--
                    ``(A) measured through objective, 
                independently verifiable means, and
                    ``(B) compared against performance goals, 
                in order to determine the State's performance 
                under this title.
    ``(e) Period Covered.--
            ``(1) Strategic objectives.--The strategic 
        objectives shall cover a period of not less than 5 
        years and shall be updated and revised at least every 3 
        years.
            ``(2) Performance goals.--The performance goals 
        shall be established for dates that are not more than 3 
        years apart.

``SEC. 1522. ANNUAL REPORTS.

    ``(a) In General.--In the case of a State with a State plan 
that is in effect for part or all of a fiscal year, no later 
than March 31 following such fiscal year the State shall 
prepare and submit to the Secretary and the Congress a report 
on program activities and performance under this title for such 
fiscal year.
    ``(b) Contents.--Each annual report under this section for 
a fiscal year shall include the following:
            ``(1) Expenditure and beneficiary summary.--
                    ``(A) Initial summary.--For the report for 
                fiscal year 1997, a summary of all expenditures 
                under the State plan during the fiscal year as 
                follows:
                            ``(i) Aggregate medical assistance 
                        expenditures, disaggregated to the 
                        extent required to determine compliance 
                        with the set-aside requirement of 
                        section 1502(c) and to determine the 
                        program need of the State under section 
                        1511(d)(2).
                            ``(ii) For each general category of 
                        eligible individuals (specified in 
                        subsection (c)(1)), aggregate medical 
                        assistance expenditures and the total 
                        and average number of eligible 
                        individuals under the State plan.
                            ``(iii) By each general category of 
                        eligible individuals, total 
                        expenditures for each of the categories 
                        of health care items and services 
                        (specified in subsection (c)(2)) which 
                        are covered under the State plan and 
                        provided on a fee-for-service basis.
                            ``(iv) By each general category of 
                        eligible individuals, total 
                        expenditures for payments to capitated 
                        health care organizations (as defined 
                        in section 1504(c)(1)).
                            ``(v) Total administrative 
                        expenditures.
                    ``(B) Subsequent summaries.--For reports 
                for each succeeding fiscal year, a summary of--
                            ``(i) all expenditures under the 
                        State plan, and
                            ``(ii) the total and average number 
                        of eligible individuals under the State 
                        plan for each general category of 
                        eligible individuals.
            ``(2) Utilization summary.--
                    ``(A) Initial summary.--For the report for 
                fiscal year 1997, summary statistics on the 
                utilization of health care services under the 
                State plan during the year as follows:
                            ``(i) For each general category of 
                        eligible individuals and for each of 
                        the categories of health care items and 
                        services which are covered under the 
                        State plan and provided on a fee-for-
                        service basis, the number and 
                        percentage of persons who received such 
                        a type of service or item during the 
                        period covered by the report.
                            ``(ii) Summary of health care 
                        utilization data reported to the State 
                        by capitated health care organizations.
                    ``(B) Subsequent summaries.--For reports 
                for each succeeding fiscal year, summary 
                statistics on the utilization of health care 
                services under the State plan.
            ``(3) Achievement of performance goals.--With 
        respect to each performance goal established under 
        section 1521 and applicable to the year involved--
                    ``(A) a brief description of the goal;
                    ``(B) a description of the methods to be 
                used to measure the attainment of such goal;
                    ``(C) data on the actual performance with 
                respect to the goal;
                    ``(D) a review of the extent to which the 
                goal was achieved, based on such data; and
                    ``(E) if a performance goal has not been 
                met--
                            ``(i) why the goal was not met, and
                            ``(ii) actions to be taken in 
                        response to such performance, including 
                        adjustments in performance goals or 
                        program activities for subsequent 
                        years.
            ``(4) Program evaluations.--A summary of the 
        findings of evaluations under section 1523 completed 
        during the fiscal year covered by the report.
            ``(5) Fraud and abuse and quality control 
        activities.--A general description of the State's 
        activities under part D to detect and deter fraud and 
        abuse and to assure quality of services provided under 
        the program.
            ``(6) Plan administration.--
                    ``(A) A description of the administrative 
                roles and responsibilities of entities in the 
                State responsible for administration of this 
                title.
                    ``(B) Organizational charts for each entity 
                in the State primarily responsible for 
                activities under this title.
                    ``(C) A brief description of each 
                interstate compact (if any) the State has 
                entered into with other States with respect to 
                activities under this title.
                    ``(D) General citations to the State 
                statutes and administrative rules governing the 
                State's activities under this title.
    ``(c) Description of Categories.--In this section:
            ``(1) General categories of eligible individuals.--
        Each of the following is a general category of eligible 
        individuals:
                    ``(A) Pregnant women.
                    ``(B) Children.
                    ``(C) Blind or disabled adults who are not 
                elderly individuals.
                    ``(D) Elderly individuals.
                    ``(E) Other adults.
            ``(2) Categories of health care items and 
        services.--The health care items and services described 
        in each paragraph of section 1571(a) shall be 
        considered a separate category of health care items and 
        services.

``SEC. 1523. PERIODIC, INDEPENDENT EVALUATIONS.

    ``(a) In General.--During fiscal year 1999 and every third 
fiscal year thereafter, each State shall provide for an 
evaluation of the operation of its State plan under this title.
    ``(b) Independent.--Each such evaluation with respect to an 
activity under the State plan shall be conducted by an entity 
that is neither responsible under State law for the submission 
of the State plan (or part thereof) nor responsible for 
administering (or supervising the administration of) the 
activity. If consistent with the previous sentence, such an 
entity may be a college or university, a State agency, a 
legislative branch agency in a State, or an independent 
contractor.
    ``(c) Research Design.--Each such evaluation shall be 
conducted in accordance with a research design that is based on 
generally accepted models of survey design and sampling and 
statistical analysis.

``SEC. 1524. DESCRIPTION OF PROCESS FOR STATE PLAN DEVELOPMENT.

    ``Each State plan shall include a description of the 
process under which the plan shall be developed and implemented 
in the State (consistent with section 1525).

``SEC. 1525. CONSULTATION IN STATE PLAN DEVELOPMENT.

    ``(a) Public Notice Process.--Before submitting a State 
plan or a plan amendment described in subsection (c) to the 
Secretary under this part, a State shall provide--
            ``(1) public notice respecting the submittal of the 
        proposed plan or amendment, including a general 
        description of the plan or amendment,
            ``(2) a means for the public to inspect or obtain a 
        copy (at reasonable charge) of the proposed plan or 
        amendment,
            ``(3) an opportunity for submittal and 
        consideration of public comments on the proposed plan 
        or amendment, and
            ``(4) for consultation with one or more advisory 
        committees established and maintained by the State.
The previous sentence shall not apply to a revision of a State 
plan (or revision of an amendment to a plan) made by a State 
under section 1529(c)(1) or to a plan amendment withdrawal 
described in section 1529(c)(4).
    ``(b) Contents of Notice.--A notice under subsection (a)(1) 
for a proposed plan or amendment shall include a description 
of--
            ``(1) the general purpose of the proposed plan or 
        amendment (including applicable effective dates),
            ``(2) where the public may inspect the proposed 
        plan or amendment,
            ``(3) how the public may obtain a copy of the 
        proposed plan or amendment and the applicable charge 
        (if any) for the copy, and
            ``(4) how the public may submit comments on the 
        proposed plan or amendment, including any deadlines 
        applicable to consideration of such comments.
    ``(c) Amendments Described.--An amendment to a State plan 
described in this subsection is an amendment which makes a 
material and substantial change in eligibility under the State 
plan or the benefits provided under the plan.
    ``(d) Publication.--Notices under this section may be 
published (as selected by the State) in one or more daily 
newspapers of general circulation in the State or in any 
publication used by the State to publish State statutes or 
rules.
    ``(e) Comparable Process.--A separate notice, or notices, 
shall not be required under this section for a State if notice 
of the State plan or an amendment to the plan will be provided 
under a process specified in State law that is substantially 
equivalent to the notice process specified in this section.

``SEC. 1526. SUBMITTAL AND APPROVAL OF STATE PLANS.

    ``(a) Submittal.--As a condition of receiving funding under 
part B, each State shall submit to the Secretary a State plan 
that meets the applicable requirements of this title.
    ``(b) Approval.--Except as the Secretary may provide under 
section 1529 (including subsection (b) relating to 
noncompliance with required guarantees), a State plan submitted 
under subsection (a)--
            ``(1) shall be approved for purposes of this title, 
        and
            ``(2) shall be effective beginning on a date that 
        is specified in the plan, but in no case earlier than 
        60 days after the date the plan is submitted.
    ``(c) Construction.--Nothing in this section shall be 
construed as prohibiting a State from submitting a State plan 
that includes the coverage and benefits (including those 
provided under a waiver granted under section 1115) of its 
State plan under title XIX (as in effect as of the date of the 
enactment of the Medicaid Restructuring Act of 1996), so long 
as such plan complies with the applicable requirements of this 
title, including the guarantees under section 1501, and remains 
subject to the funding provisions of section 1511.

``SEC. 1527. SUBMITTAL AND APPROVAL OF PLAN AMENDMENTS.

    ``(a) Submittal of Amendments.--A State may amend, in whole 
or in part, its State plan at any time through transmittal of a 
plan amendment under this section.
    ``(b) Approval.--Except as the Secretary may provide under 
section 1529 (including subsection (b) relating to 
noncompliance with required guarantees), an amendment to a 
State plan submitted under subsection (a)--
            ``(1) shall be approved for purposes of this title, 
        and
            ``(2) shall be effective as provided in subsection 
        (c).
    ``(c) Effective Dates for Amendments.--
            ``(1) In general.--Subject to the succeeding 
        provisions of this subsection, an amendment to a State 
        plan shall take effect on one or more effective dates 
        specified in the amendment.
            ``(2) Amendments relating to eligibility or 
        benefits.--Except as provided in paragraph (4)--
                    ``(A) Notice requirement.--Any plan 
                amendment that eliminates or restricts 
                eligibility or benefits under the plan may not 
                take effect unless the State certifies that it 
                has provided prior or contemporaneous public 
                notice of the change, in a form and manner 
                provided under applicable State law.
                    ``(B) Timely transmittal.--Any plan 
                amendment that eliminates or restricts 
                eligibility or benefits under the plan shall 
                not be effective for longer than a 60-day 
                period unless the amendment has been 
                transmitted to the Secretary before the end of 
                such period.
            ``(3) Other amendments.--Subject to paragraph (4), 
        any plan amendment that is not described in paragraph 
        (2) becomes effective in a State fiscal year may not 
        remain in effect after the end of such fiscal year (or, 
        if later, the end of the 90-day period on which it 
        becomes effective) unless the amendment has been 
        transmitted to the Secretary.
            ``(4) Exception.--The requirements of paragraphs 
        (2) and (3) shall not apply to a plan amendment that is 
        submitted on a timely basis pursuant to a court order 
        or an order of the Secretary.

``SEC. 1528. PROCESS FOR STATE WITHDRAWAL FROM PROGRAM.

    ``(a) In General.--A State may rescind its State plan and 
discontinue participation in the program under this title at 
any time after providing--
            ``(1) the public with 90 days prior notice in a 
        publication in one or more daily newspapers of general 
        circulation in the State or in any publication used by 
        the State to publish State statutes or rules, and
            ``(2) the Secretary with 90 days prior written 
        notice.
    ``(b) Effective Date.--Such discontinuation shall not apply 
to payments under part B for expenditures made for items and 
services furnished under the State plan before the effective 
date of the discontinuation.
    ``(c) Proration of Allotments.--In the case of any 
withdrawal under this section other than at the end of a 
Federal fiscal year, notwithstanding any provision of section 
1511 to the contrary, the Secretary shall provide for such 
appropriate proration of the application of allotments under 
section 1511 as is appropriate.

``SEC. 1529. SANCTIONS FOR NONCOMPLIANCE.

    ``(a) Prompt Review of Plan Submittals.--The Secretary 
shall promptly review State plans and plan amendments submitted 
under this part to determine if they substantially comply with 
the requirements of this title.
    ``(b) Determinations of Noncompliance with Certain 
Guarantees.--
            ``(1) At time of plan or amendment submittal.--If 
        the Secretary determines that a State plan or plan 
        amendment submitted under this part violates the 
        guarantees of coverage and benefits under subsections 
        (a) and (b) of section 1501, the Secretary shall notify 
        the State in writing of such determination and shall 
        issue an order specifying that the plan or amendment, 
        insofar as it is in violation with such requirement, 
        shall not be effective, except as provided in 
        subsection (d), as of the date specified in the order.
            ``(2) Violations in administration of plan.--If the 
        Secretary determines, after reasonable notice and 
        opportunity for a hearing for the State, that in the 
        administration of a State plan there is a violation of 
        guarantee of coverage and benefits under subsection (a) 
        or (b) of section 1501, the Secretary shall provide the 
        State with written notice of the determination and with 
        an order to remedy such violation. Such an order shall 
        become effective prospectively, as specified in the 
        order, after the date of receipt of such written 
        notice. Such an order may include the withholding of 
        funds, consistent with subsection (g), for parts of the 
        State plan affected by such violation, until the 
        Secretary is satisfied that the violation has been 
        corrected.
            ``(3) Consultation with state.--Before making a 
        determination adverse to a State under this section, 
        the Secretary shall--
                    ``(A) reasonably consult with the State 
                involved,
                    ``(B) offer the State a reasonable 
                opportunity to clarify the submission and 
                submit further information to substantiate 
                compliance with the requirements of subsections 
                (a) and (b) of section 1501, and
                    ``(C) reasonably consider any such 
                clarifications and information submitted.
            ``(4) Justification of any inconsistencies in 
        determinations.--If the Secretary makes a determination 
        under this section that is, in whole or in part, 
        inconsistent with any previous determination issued by 
        the Secretary under this title, the Secretary shall 
        include in the determination a detailed explanation and 
        justification for any such difference.
    ``(c) Determinations of Other Substantial Noncompliance.--
            ``(1) At time of plan or amendment submittal.--
                    ``(A) In general.--If the Secretary, during 
                the 30-day period beginning on the date of 
                submittal of a State plan or plan amendment--
                            ``(i) determines that the plan or 
                        amendment substantially violates 
                        (within the meaning of paragraph (5)) a 
                        requirement of this title, and
                            ``(ii) provides written notice of 
                        such determination to the State,
                the Secretary shall issue an order specifying 
                that the plan or amendment, insofar as it is in 
                substantial violation of such a requirement, 
                shall not be effective, except as provided in 
                subsection (d), beginning at the end of a 
                period of not less than 30 days (or 120 days in 
                the case of the initial submission of the State 
                plan) specified in the order beginning on the 
                date of the notice of the determination.
                    ``(B) Extension of time periods.--The time 
                periods specified in subparagraph (A) may be 
                extended by written agreement of the Secretary 
                and the State involved.
            ``(2) Violations in administration of plan.--
                    ``(A) In general.--If the Secretary 
                determines, after reasonable notice and 
                opportunity for a hearing for the State, that 
                in the administration of a State plan there is 
                a substantial violation of a requirement of 
                this title, the Secretary shall provide the 
                State with written notice of the determination 
                and with an order to remedy such violation. 
                Such an order shall become effective 
                prospectively, as specified in the order, after 
                the date of receipt of such written notice. 
                Such an order may include the withholding of 
                funds, consistent with subsection (g), for 
                parts of the State plan affected by such 
                violation, until the Secretary is satisfied 
                that the violation has been corrected.
                    ``(B) Effectiveness.--If the Secretary 
                issues an order under paragraph (1), the orde