or the Secretary or anyone else to give $10 million in cash to any United Nations member out of section 32 funds, is there?

Mr. GRANT. That is correct. Mr. Chairman, it is my understanding that this cash contribution is to be made from appropriations made to the Agency for International Development and does not go through the Department of Agriculture.

Mr. WHITTEN. It is not in your budget?

Mr. GRANT. No, it is not.

Mr. WHITTEN. That is the point I wished to find out. Is this part of what we cover in the restoration of impairment periodically under Public Law 480?

Mr. GRANT. These commodities under the world food program of UN-FAO will be donated under title II of Public Law 480 and would be included in the appropriations to reimburse the corporation for title II costs.

TRANSFER FROM SECTION 32 FUNDS

Mr. WHITTEN. Turning back to section 32, how much money has been transferred and to what agencies for operating expenses? I believe the Foreign Agricultural Service receives funds here. Describe how much money goes to various and sundry segments of the Department for other than program uses.

Mr. LENNARTSON. There is $5,200,000 estimated for transfer to the Department of the Interior under Public Law 1024 of the 84th Congress.

Mr. WHITTEN. What is the nature of that?

Mr. LENNARTSON. That was available to them for the removal of surplus fish products, in similar manner as we remove surpluses, and for fishery educational and research programs and for market development, and so on. Then there is an additional transfer to the Foreign Agricultural Service

Mr. WHITTEN. What is the nature of that?

Mr. LENNARTSON. In the amount of $3,117,000.

Mr. WHITTEN. What is the basis for that?

Mr. LENNARTSON. Mr. Holmaas, can you help me out on that? I presume it is market development but I am not sure.

Mr. HOLMAAS. As I understand it, this is a transfer made pursuant to the Appropriations Act to Salaries and expenses, Foreign Agricultural Service. Is that correct Mr. Grant?

Mr. GRANT. Yes. For many years, Mr. Chairman, this was handled as an allotment and was used by Foreign Agricultural Service for market development activities and market competition studies. Several years ago a proviso was written into the appropriation language, which actually merges it with the Salaries and expenses appropriation of the Foreign Agricultural Service and the amount is controlled in the Appropriation Act by the Congress each year. Mr. WHITTEN. What other transfers do you make?

Mr. LENNARTSON. These are the only transfers reflected for 1964 in addition to the $45 million transfer to School lunch, referred to earlier, which is done in the Appropriation Act.

SURPLUS REMOVAL OPERATING EXPENSE

Mr. WHITTEN. What charges do you make against the section 32 fund for administration within your own organization?

Mr. LENNARTSON. Two items, Mr. Chairman, one would be the operating expenses in terms of surplus removal operations in the amount of $4,253,000, proposed for 1964.

Mr. WHITTEN. How many employees do you have paid from that fund?

Mr. LENNARTSON. Mr. Holmaas?

Mr. HOLMAAS. We had budgeted 433 people for this year, 432 for next year, against the operating expenses, exclusive of the food stamp program.

Mr. WHITTEN. How are they listed in the organizational setup of the Department?

Mr. LENNARTSON. They would be scattered through divisions, food distribution division, audit and investigation, program accounting, and so forth.

MARKETING AGREEMENTS AND ORDERS

Mr. WHITTEN. Marketing argreements and orders, how are those financed, what part do they play in connection with these funds?

Mr. LENNARTSON. There are three items that make up $4,754,000. One is the administration of the 40 or more fruit and vegetable marketing orders. There is another amount that is used for administering the 83 Federal milk orders, and there is an additional amount, that is used in the development of programs including referendums under the Agricultural Act of 1961 for marketing order activities.

FUNDS AVAILABLE, ESTIMATED USE AND CARRYOVER

Mr. WHITTEN. How much carryover funds do you think you might have for the current fiscal year?

Mr. LENNARTSON. For the current fiscal year, we estimate we will return to the Treasury just about $40 million.

Mr. WHITTEN. You have a total availability of $608,183,000 according to the figures furnished to me.

Mr. LENNARTSON. For 1964?

Mr. WHITTEN. For 1964. How much of this do you propose to use? Mr. LENNARTSON. It is estimated now $108 million will revert to the Treasury.

Mr. WHITTEN. $500 million is the maximum you can build up this fund to.

Mr. LENNARTSON. $300 million carryover plus the annual increment based on 30 percent of customs receipts.

REQUEST FOR INFORMATION ON SALES

Mr. WHITTEN. In connection with this information I have asked for on these sales, I want to repeat, I want those cases which are on a parallel, where there has been a firm contract. In connection with the tobacco matter, I would like to know, since it was sold at a fixed price, how long before the sale the determination was made, by whom, how widespread the information might have been as to the terms of condition, who was eligible and who had time to buy. I believe in both instances I have asked you for the names of those with whom you contracted, in one case, and those to whom you sold or made your payments in the other case.

Mr. SMITH. Yes.

Mr. WHITTEN. I can easily see through the years I have been here, that there have been times the Department felt they should go in and buy surpluses and prior to the time of buying them, there was a change and they didn't buy them.

But from my own recollection, I have never known where they went in with a firm contract, and when the other fellow could make a lot of money out of it, they turned around and let him have the commodities back, make the money and let the Government stand there with its commitment across its shoulder. I don't have any recollection of that. Mr. Natcher.

BUDGET FOR INSPECTION AND GRADING SERVICES, 1964

Mr. NATCHER. Mr. Smith, in your request for inspection and grading services, I notice that there is only one increase for fiscal year 1964, and that, I believe, pertains to poultry products inspection. Is that correct?

Mr. SMITH. That is correct.

Mr. NATCHER. Are you requesting adequate funds for inspection and grading services for all of the basic commodities?

Mr. SMITH. We think this budget will provide adequate funds to carry out the services, sir.

Mr. NATCHER. Thank you, Mr. Chairman. That is all.
Mr. WHITTEN. Mr. Horan?

DIRECT DISTRIBUTION ACTIVITIES

Mr. HORAN. Mr. Davis, I believe in the direct distribution of foodstuff's you spent in 1962 a total of-diversion payments would not be a part of that, would it?

Mr. DAVIS. No.

Mr. HORAN. You spent a total of $131,228,572. Now you estimate the total of those two for 1963, the year we are in, at $163,984,000 direct purchases. Those are the ones that go into the distribution in the 1,500 areas that you mentioned?

Mr. LENNARTSON. Most of that is for purchases which go to schools, institutions, and the needy people.

Mr. HORAN. Of the needy people, what portion of that cost do you estimate is for them?

Mr. DAVIS. In 1962, this ran about $227 million, of which $96.5 million was from section 32.

Mr. HORAN. And covered how many people and in how many areas? Mr. DAVIS. It was over 1,400 areas, I believe, plus about 200 or 215 cities and towns. The average number for the whole year 1962, I believe, was right around six and a half million persons. The peak was last March, I believe, when it went up to 7.4.

Mr. HORAN. What is your best estimate for this year, 1963?

Mr. DAVIS. So far this year it has been running a little under last year. Our most recent figures were for January when it was somewhat under 7 million. We would estimate that the average for this year might very well be somewhat less than last. It is difficult to tell whether it would drop as low as 6.4 or what it might drop to, I am not sure.

Mr. HORAN. Now, the procedures for this direct distribution of food, the mechanics of it, the county commissioners of the local governing bodies have to request it?

Mr. DAVIS. Yes, it works this way. We enter into agreements with State agencies who agree to handle all phases of the program. They, in turn, usually, in all but just several instances, pass this on the counties, so in essence what you say is correct, that the county determines whether they want to come into the program. They go to the State and say they do, and the State arranges it with us. The county, in most instances, pays the cost of determining who is eligible, and of actually distributing the food to those people. Also, it involves local storage and local transportation, to a certain extent. Mr. HORAN. Well, I have always believed in the ability of local people to run their own business.

There is a certain town on the eastern seaboard that has not had much success with the direct distribution of these foods, isn't there? Mr. DAVIS. I think I know the situation you are alluding to, Mr. IIoran. We have done a great deal investigating of that situation in cooperation with the local officials, including the local police department. We have found some rather serious irregularities, but to date we have not found any widespread condition of ineligible people getting the commodities, nor have we found any evidence to date of any large-scale diversion of these commodities, sale of them. The irregularities that have been found we are quite concerned with and are in very close working touch with the local officials, to clean it up and we think we can correct these problems.

Mr. HORAN. Brave words.

Mr. DAVIS. It will cost that community a little more money than they have been spending, however.

Mr. HORAN. Now the hue and cry goes up. And I believe one of the Governors of that area has indicated that he would like to see the food stamp plan in place of the present arrangement. That would involve more Federal jurisdiction, would it not?

Mr. DAVIS. No, sir. Our relationships with the States and local communities under the stamp plan allow every bit as much local authority and local jurisdiction, local discretion, as the direct distribution program. In that regard it is modeled very closely after the direction distribution program. The chief distinction between the way the two programs are being administered is that this being a new and pilot program, we have insisted that the local authorities have qualified merit system personnel doing the certifying job and we in turn have recognized the fact that to get this it requires some Federal administrative money, which we have been supplying. But as far as the local community deciding whether they want the stamp program or not, whether they want to discontinue it or not, whether they prefer it or the direct distribution, they have their choice, this is entirely a local matter, just as it is with direct distribution.

Mr. HORAN. Well, as it looks now, we will have both programs.
Mr. DAVIS. No, sir. Not in the same community.

Mr. HORAN. But federally, we will have both programs?
Mr. DAVIS. Yes, sir.

FUTURE LEVEL OF FOOD STAMP PROGRAM

Mr. HORAN. I think the chairman's points he raised are very valid. Isn't it possible we are starting something here that will have no ending, no control, that will encourage people to surrender to the status of welfare as a way of life, once having procured 33 percent of their income in this way, pretty soon it becomes a dignified and respectable thing and they aren't going to give it up, are they?

I must admit that-I imagine that you or I, had we gone out and said what we know now about aid to dependent children, when we see the records indicating as high as four generations in the same family have grown up within the framework of aid to dependent children, in fact a newborn baby is a cause for joy, because it is another welfare check, but if you had said that 25 years ago, knowing what you know now, you would have been hung to the nearest apple tree, or higher than that, a good solid oak, I imagine.

Isn't that true?

Mr. DAVIS. I think I might make two observations. One, if the program continues to be run as it is now, the size of the program will depend upon Congress and how much money they want to appropriate for this purpose.

One thing I think we ought to make clear is that we recognize that if we go beyond a pilot program we should have specific legislation and a specific separate appropriation for this program and the budget as it is submitted contemplates that.

In other words, we would not see a program that went beyond the pilot stage as being a proper use of section 32 funds. The budget provides $26.5 million of our section 32 funds to be used for this purpose in 1964 and an additional $25 million separate appropriation if the legislation is passed.

Mr. HORAN. That is tentative?

Mr. LENNARTSON. This is reflected as a supplemental. There would be a supplemental proposed if the legislation is passed.

Mr. DAVIS. The budget material presented, I should say, rather than the budget.

Now the President has asked for the continuation of the program next year, if the Congress so concurs, at about the same level and that we will be when we finally get all of the presently designated pilot areas into operation.

Mr. HORAN. This discussion, Mr. Davis, is no reflection, on the good work you are doing and the management of your part of this program. I want to thank you for being frank with us, and I want to also warn you that I would like to see our bounty placed where it will do the most good, but I don't want to see us have so many programs that are heading in that direction, nor so big a part of our total budget.

In the discussion of this thing, I don't think we can disassociate this direct distribution of food, the food stamp program, from our school lunch, because that does an awful lot of good for underprivileged households and families and that brings me to my last question.