Program’s Cost-Cutting to Help Grocery Buyers

SACRAMENTO — A government program that once paid top dollar for milk, eggs and cheese for poor mothers and children has cut costs in a move that benefits other California consumers.

Several grocery stores throughout the state have already lowered prices on some essential foods to comply with new edicts from the Women, Infants and Children (WIC) program, a federally financed food and nutrition program that serves more than 1.2 million Californians.

Effective May 1, the program dramatically reduced the maximum price it would pay for items such as milk, eggs, cheese, cereal and juice.

For example, milk the program bought for as much as $4.19 a gallon must now be $3.25 or less. Grocery stores that accept program vouchers had a choice: accept the new prices or quit the program.

“Of the 3,600 stores we work with, only three told us they didn’t want to do business with WIC anymore,” said Phyllis Bramson-Paul, chief of the program’s branch of the California Department of Health Services. She said it was unclear which or how many of the 3,600 stores have lowered prices.

The program will save millions of dollars with the new policy, and avoid having to cut about 25,000 poor mothers and children from its roster.

One of the few social programs that has bipartisan support, the effort is geared toward preventing health problems in low-income mothers and young children by providing basic food supplements. It serves pregnant women, breast-feeding mothers up to a year after childbirth, infants and young children up to age 5. California operates the nation’s largest program, which pumps nearly $1 billion each year into the state’s economy.

Like many California households, the program was hard hit by skyrocketing milk prices in late 1998. In March, the program announced it would have to drop some recipients to stay within its budget.

The announcement caught the attention of John Burton (D-San Francisco), the powerful, blunt-speaking president pro tem of the California Senate. He immediately called lobbyists and government officials to a meeting.

“He told them they better find a way to fix this because he didn’t want any . . . poor people losing food assistance,” said Laurie True, executive director of the California WIC Assn., which represents local agencies that administer the program.

Bramson-Paul said she was ready to propose an option that the new administration of Gov. Gray Davis was already considering: reducing the maximum the program would pay for each food item, particularly milk.

It was a break from the program’s traditional policy on prices, which had been deliberately high to ensure that program mothers wouldn’t be turned away by grocery stores. The worry was whether the stores, which are critical to the program, would balk at lowering prices.

Burton swiveled his chair toward the lobbyists representing grocers, and demanded to know if they would go along.

“I said, ‘What . . . are we going to do about this?’ ” Burton recalled. “I’m in politics to take care of people who need help like this. If you can’t help hungry women and children, then what in the hell are you going to do?”

The lobbyists not only agreed to support the change but also went along with a request to put it in place fast, so savings could begin immediately and no one would be cut from the program.

“We realized our members would not think it would be a good thing if the state had to drop 25,000 from WIC, a program designed to keep women and children healthy,” said Pamela Williams, vice president of the California Retailers Assn. “Our approach was, ‘What do we need to do to ensure this doesn’t happen?’ ”

Burton introduced legislation authorizing the state Department of Health Services to set prices for the program’s commodities. The bill swept through the Legislature and was signed into law by Davis on May 4.

“The thing that is unique about this is that it is a partnership with the retail food industry. . . . After 25 years of basically making money on the WIC program now they’re being asked to give something back,” said True.

“I think it’s the kind of solution government is going to have to come up with more often because the handwriting is on the wall: There’s not going to be a cash cow for these programs anymore.”

But government has to strike a delicate balance, she said, because businesses such as retail food stores have small profit margins that don’t allow for much price maneuvering.

Bramson-Paul acknowledged that the changes posed a serious problem for grocery stores, especially big chains, which had less than three weeks to train hundreds of checkout clerks on the new WIC provisions.

Along with the new prices came new policies: the program would no longer pay for premium-priced products such as reduced-fat or low-fat peanut butter and specialty eggs, such as organic or free-range eggs.

“That’s really not enough time and we knew that,” she said. “But somehow it all worked.”

For some grocers the new maximums were lower than the prices they were charging for some items, particularly juices, and they were forced to make adjustments.

While the price changes were designed to solve an immediate problem, Bramson-Paul said the program has to continue finding new ways to keep its budget in balance so recipients won’t have to be dropped.

Funding shortages have become a way of life in recent years, and Congress has been reluctant to increase its budget even though the number of mothers and children seeking benefits is growing.

“We’re facing bad news in Congress,” Bramson-Paul said. “Yet we need to maintain our caseload in California because the need has not gone away. This basically is the way we can keep the WIC budget balanced. We ask our other partners to share in the WIC pain.”