July 27, 1999 Web posted at: 11:45 a.m. EDT (1545 GMT) by Colleen O'Hara

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(IDG) -- The costs of providing food stamps electronically to assistance recipients across state lines are lower than expected, removing a possible barrier to shifting the entire U.S. food-stamp program to electronic benefits transfer (EBT), a recently released study found.

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The preliminary study sponsored by the National Automated Clearing House Association (NACHA), which represents 13,000 financial institutions, found that it would cost some $500,000 a year to cover the fees associated with processing electronic food-stamp transactions among EBT networks operated in different states. Currently, 39 states and the District of Columbia have EBT infrastructures that enable recipients electronically to receive food stamps and cash benefits. Of those, 23 states and the district now use common operating rules called Quest in an effort to provide interoperability among state systems.

The NACHA study looked at food-stamp and cash EBT transaction data from April 1 to May 31 in the states following the Quest rules. The study estimates that some 5.5 million interstate EBT transactions a year would occur if every household that receives food stamps receives its benefits electronically. In addition, the study found that only 1.3 percent of EBT food-stamp transactions are interstate transactions.

Before the recent study there was not a good indication of the costs of allowing beneficiaries to access food-stamp benefits outside their home state or how often the practice might occur. "Now that we have put a figure on it, we can see how best to handle that," said David Temoshok, a General Services Administration employee and director of Access America. "Down the road, we will see the full scope of switched EBT transactions. We want to understand what we have to plan for."

Delivering food-stamp benefits electronically is cheaper for the government, said Joseph Leo, the acting executive director of the Agriculture Department's Support Services Bureau. In 1993 Leo prepared recommendations for a nationwide approach to EBT. "Just to ship and store paper-based food stamps cost several million dollars," Leo said, adding that printing the coupons costs about $40 million. Currently, some 47 percent of food-stamp benefits are issued by EBT, he said.

The next step is to decide who will cover the annual costs of interstate transactions. Price said it should be the federal government. "It shouldn't be us who pays for interstate transaction fees. That's the national view of the food-stamp program," Price said, adding that it would take legislation to enable the USDA, which operates the food stamp program, to cover those costs. It is clear, however, that interoperable interstate transactions are something that states will need to do in the future, she said.

The final report is expected after the end of the study period on Sept. 30.