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Mr. KOENIG. That is in the CCC legislation.
Mr. ABERNETHY. In other words, when $61 million was expended in fiscal 1957 for the school-milk program, the appropriations bill for this year is supposed to carry an item which reimburses Commodity Credit Corporation for that money; is that correct?
Mr. KOENIG. CCC comes in for an appropriation to restore its capital every so often.
Mr. ABERNETHY. I know that.
Mr. ABERNETHY. I know that. But does this legislation direct a restoration of that capital?
Mr. KOENIG. The special milk legislation does not do that, as to restoration of capital, but it provides that the money shall come from CCC. And then when CCC supplies the money, obviously it has
Mr. ABERNETHY. To get some more.
Mr. KOENIG. It has to go and get some more. That is authorized by the CCC legislation.
Mr. ABERNETHY. All right. Does the Department look upon this as a price-support operation ?
Mr. DAVIS. Yes, sir.
Mr. ABERNETHY. Is it a price-support operation technically as such? Do you
think it is? Mr. Davis. Yes, sir. In that since we are committed to the purchase of manufactured dairy products in an effort to maintain a certain return to the producer, any additional fluid milk that can be consumed will mean just that much less purchases.
Mr. ABERNETHY. It isn't generally accepted as a price-support operation. It is generally accepted by most everyone, the public and even the majority of the Congress, as a supplement to the school lunch program and the school lunch program is not a price-support program?
Mr. Davis. No, sir.
Mr. ABERNETHY. Well, then, would it not be better for us to meet this thing head on and forthrightly and just supplement the school lunch program with a school milk program, if that is what it is, why don't we do it that way, instead of charging it up as a price-support operation ?
Mr. Davis. In response to the request for reports on legislation that would propose doing just what you say, transferring the program to an appropriation rather than charging it to price supports, the Department has taken the position that they do regard the special milk program as a price-support measure.
Mr. ABERNETHY. I think they would have to. Mr. Davis. And would recommend continuing on that basis. Mr. ABERNETHY. I think they have to by virtue of the fact, by reason of the fact that is the way the legislation is written. I do not feel that this program will do everything. I think the program is more or less permanent. I do not think it is regarded by the public, by the Congress, although technically it is, but it is not regarded by them as a price-support operation. It is a school milk program. We talk about getting milk to the children and the need there and the necessity for
children to consume more milk. It just occurs to me that the appropriate thing to do would be to transfer it to the school lunch program or rather combine the school lunch program and school milk and earmark so much for school milk.
I base my reasoning on this: Each year the CCC publishes a total figure of its cost of operation. The word goes out to the country that the CCC has spent X million or billion dollars this year in price supports. Actually that school-milk money right now is not really spent for price-support purposes.
It is spent as a school-milk program and I don't think it is accepted by anyone as a price-support program, and it is my feeling we ought to set up a permanent school-milk program of some kind or another and get out of the price-support operation.
Mr. Davis. To be sure that there will be no misunderstanding, I am sure that the wonderful support that this program has received from the school people, from the States, from the local communities, and from the parents, has been on the basis of their desire to see that more children are able to take advantage of more milk from a nutritional standpoint.
Mr. ABERNETHY. They are getting more benefit from it than the farmers are, but when the general public reads the balance sheet at the end of each year--it hardly could be called a balance sheet, because it is not ever in balance—then they sit around and cuss the farmers about it. They are the ones that drank up the milk.
Mr. Davis. Regardless of where or how it was financed, it would still show up as an agricultural appropriation.
Mr. ABERNETHY. It does not show up in the school-lunch program?
Mr. Tewes. You have had an interesting line of questioning which I would like to follow, too, Mr. Chairman. You opened your statement on this by saying that when the program was inaugurated everyone was worried about the disposal of the milk. It seems to me that the remarks you have been making in this latter part of your statement lead to the conclusion that you have the opposite view namely, that this is not a surplus disposal program but really is a program intended primarily to benefit the children.
Mr. ABERNETHY. It was.
Mr. TEWES. I was not here when it was initiated. Which opinion do you hold?
Mr. ABERNETHY. When it was inaugurated-I think these gentlemen will confirm the amendment was put into the Agricultural Act of 1954, and when it was put in, it was put in for the purpose of having another method of disposing of surplus milk. That is right, isn't it? Is that correct?
Mr. Davis. Yes.
Mr. ABERNETHY. That is what it was put in for. But when we got over to the floor we shed all of our tears about the children.
Mr. TEWES. I appreciate your statement.
Mr. ABERNETHY. The underfed children. I think it was begun as a milk disposal program, but it has never been so accepted by the general public and I think that the acceptance that they now have of it is the correct one.
It isn't any longer a milk disposal program. I don't think it is. There would be just as much milk consumed one way or another, no matter which way the program operates. I do not think it makes any difference whether we have it as a surplus disposal program or a supplement to school lunches. The additional emphasis would still be put upon the consumption of milk. I know of no objection to the emphasis being put upon the consumption of milk. I am for that. But my objection to it is that it is charged up as a loss to the Commodity Credit Corporation and it should not be. The farmers are taking a licking for it. Those who get the milk are the ones who are giving it to them.
Mr. TEWES. You and I do not need to fence with each other. We know there are some political overtones.
Mr. ABERNETHY. There are no political overtones whatsoever. I am in favor of the program. My personal opinion is that I think that the program ought to be made a part of the school lunch program, so the farmer would not be charged with it. I want to get the consumers off the farmer's back.
Mr. Tewes. The question I then want to ask you is this: If the surplus in dairy products disappears will this program continue?
Mr. Davis. I think the Department would recommend that it be discontinued.
Mr. TEWES. Discontinued ?
Mr. Davis. I think the Department's position has been that it is a price support measure.
Mr. Tewes. I would like to know a little bit about this program, How does this milk get from the CCC to my son who is in school buying the milk?
Mr. Davis. We draw up as I pointed out before, the quantities, the amount of money, that we would propose to apportion to each State for the program. As was explained, this year we based that on 115 percent of the actual expense last year. Then we break that amount down into quarterly payments to the State agencies which have agreed to be responsible for this program in each State.
Mr. TEWES. What agency is that?
Mr. Johnson. The superintendent of the schools has it up in my State.
Mr. Davis. Then the mechanics are that we draw up an order on the Treasury for a check to be mailed to the State in a certain amount quarterly. And that money is actually paid to the State.
Then they in turn enter into agreements with the schools, that is the school system, whereby they agree to abide by the regulations and so forth. Then they also agree to reimburse the school for either 3 or 4 cents, depending upon whether the school is in the National School Lunch Program, and depending on the plan that that individual school has developed. In other words, what they pay for their milk, what they plan to sell it to the child for, and they submit a plan as to how much they are going to hold out of the money to pay for straws or icing and various expenses that they have to go to.
If that plan is acceptable to the State, the State then agrees to accept the school on that basis. The school
ahead and serves the milk to the children. They send in a claim at the end of the month
stating how many half pints were sold over and above their type A lunch, and minus any adult milk. That is sent in to the State educational office and they mail them a check in the amount that they are due.
In the meantime your child has gotten his milk at about 2 cents under the cost to the school perhaps, 2 or 3 cents. In some instances even more than that. Where the schools may be paying 61/2 or 634 cents for the milk, the child may pay as little as 3 cents.
Mr. Tewes. That is all, Mr. Chairman. Thank you.
Mr. ABERNETHY. I want to make one thing clear. I may not have made myself clear a while ago. I, certainly, do not want to leave the wrong impression in this record. If I may say for the record what we did-and I was a party to it and for it-our late and lamented friend Mr. Andresen, I think, in this I think I am right-originated this idea. He made the motion one morning to set up this school milk program and authorized the expenditure of money up to $50 million of the capital assets of the Commodity Credit Corporation to finance it. I thought it was fine. In fact, I don't think there was any objection to it whatever in the committee. The Department was not a party to this proposal. And I may be wrong, but I do not know whether it had even been brought to the attention of the Department.
No doubt it had-we all know Mr. Andresen was a very vigorous man and probably knew this subject as well as any one man that has ever served in this Congress. Then the program came on for extension and amendment which increased the first year's operation, I believe. I think there was an extra appropriation for the first year. And then in the next Congress he proposed, possibly others did, that it be extended to $75 million. Each year thereafter the Commodity Credit Corporation has issued its statements showing the cost of this operation, as a price support operation, and this item has been carried as a price support operation. When the figures go out to the country and the people of the country look at them, they say, "Well, this old price support program has cost us taxpayers X billions of dollars."
The consumer who complains in many instances does not realize that he has been the benefactor of the program, that his children were the ones who got this milk and they got it at a very nominal cost, and the Government paid for it.
With all deference, Mr. Tewes, I did not mean to leave any political implications, if I did, I did not so intend. My feeling is that if the program is to be continued, and I favor its continuance, I do not feel Îike the farmer ought to take it on the back and be criticized for it. While he does get some benefit from it, the consuming public likewise gets benefits; just as the consuming public gets the benefit from the school lunch program. It is an item that I think should not be charged to the American farmer altogether. I think it should be charged to the consumer as a service which is being rendered to the consumer, that is the consumer's children. That is what I was trying to put over a whole ago. And I do not know whether I made it any clearer than before, but I am trying awfully hard.
Mr. JOHNSON. Another thing that might be pointed right at this point, if the school milk program did not exist and the CCC was going to take this surplus milk they would be buying at a price of 314 per hundred. They would be buying at the retail price that it is being sold to the schoolchildren. Could you estimate for the committee how much these half pints are costing? If you are going to charge the farmer with anything, all you could charge him with is the 344 per hundred which it would be bought for if it were made into butter and cheese and dried milk.
Mr. Davis. Our average reimbursement last year was under 31, cents.
Mr. Johnson. How much is that in hundred pounds of milk?
Mr. Davis. You convert that to pounds. My arithmetic is not very good.
Mr. Johnson. Anyhow, probably it would be closer to $20 a hundred than to 314.
Mr. Davis. You say it is?
Mr. Johnson. It must be more than that because nobody is retailing milk at that.
Mr. KOENIG. The 3 cents a half pint is 6 cents a pint and a pint is about a pound.
Mr. Johnson. Do you mean to tell me that milk dealers are furnishing that milk?
Mr. KOENIG. I am talking about the cost to the Government, the 3 cents to the Government.
Mr. Johnson. I am talking about the actual cost to the Government of the actual pounds they buy.
Mr. Davis. I think the staff's arithmetic would show it was around $5.50 a hundred pounds on those purchases. That is only the beginning of the cost. I think the cost to the CCC of purchasing dairy products would be considerably more than the price support level for 100 pounds of milk.
Mr. Johnson. Yes.
Mr. POLK. What are some of the other costs to the CCC? That is your last statement that raises that question?
Mr. Davis. The cost of purchasing these manufactured products, the cost of transporting, the cost of storing them, the cost of reprocessing and packaging them for donation?
Mr. JOHNSON. I am just thinking of the milk.
Mr. POLK. It is my understanding that the schools buy this milk locally. Is that true?
Mr. Davis. I misunderstood you. I thought you were referring to the other costs involved in the price-support purchases of manufactured products.
Mr. Polk. I was talking on milk. Mr. Davis. On the special milk program the one we are concerned with here primarily, the only cost beyond this average 312-cent reimbursement per half pint, is our administrative cost which has been running around 2 percent, I believe, or a little less.
Mr. Polk. It should not be too much over on this milk program. This milk is purchased locally, is it not?
Mr. Davis. There is no overhead, other than the Federal administrative cost. And I am corrected on that figure that it is closer to 1 percent.