SB 0971 - Fiscal Note

Fiscal Note - SB 0971 - Requires electronic benefits transfer (EBT) for bene- ficiaries of the Women, Infants and Children (WIC) program

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 4008-01

BILL NO. SB 971

SUBJECT: Electronic Benefits Tranfer for Women, Infants, and Children Program

TYPE: Original

DATE: March 9, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue*	($199,000)	($100,000)	($100,000)
Total Estimated Net Effect on All State Funds	($199,000)	($100,000)	($100,000)

* Totals do not include future one-time costs expected to total $5,405,000 and annual costs expected at $4,155,000 and possible cost avoidance of $400,000 annually.

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
None
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 5 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials from the Office of Administration - Division of Accounting assume this proposal will not fiscally impact their agency.

Officials from the Office of State Treasurer (STO) indicated a bank account would be created for this proposal and this might slightly increase the cost for banking services for the state. Some off-sets will occur as a result of converting from a paper payment system to an electronic payment system. The movement to an electronic payment system should produce other efficiencies throughout the entire payment process. The STO assumes any additional costs for the STO could be absorbed through existing resources.

Officials from the Department of Social Services (DOS) assume this proposal will not fiscally impact the DOS. The DOS already provides some assistance through electronic benefits transfer (EBT) and they assume if the Department of Health (DOH) would want to join their system, then the DOH would pay for any incremental costs.

Officials from the Department of Health (DOH) assume this proposal will provide grocery stores with quicker access to the funds used by the Women, Infants, and Children (WIC) program clients to purchase WIC eligible foods. This proposal will change the process by which grocery stores receive reimbursement for WIC benefits redeemed by participants. Federal regulation 7 CFR246.12(m) "Payment of Food Vendors" requires the state agency to ensure food vendors are promptly paid for food costs. The current system serves over 130,000 WIC clients a month who redeem at least 240,000 vouchers at over 800 grocery stores.

The DOH stated the requirement in the proposal that "If less than the total amount of benefits is withdrawn, the recipient shall be given a receipt showing the current status of the account," will not be feasible to implement within the next 3 years. The recipient can not be given an "account status" of WIC. The recipient is given a food prescription and may fill parts of the food prescription at any time during the period authorized. To electronically check the status of the available food prescription would require the use of a computer chip "smart" card. No other state has gone to a full statewide implementation of a WIC electronic benefits transfer (EBT) system because the infrastructure is not in place in the business community to support that use. This proposal will require approval from United States Department of Agriculture (USDA). Potential full-implementation and expense would be incurred more than 3-years after passage of this proposal

The DOH notes that Federal Handbook 901 requires expenditures of over $25,000 on system planning & development to receive prior approval from the federal funding source. The USDA funding is limited so that state WIC programs must be phased into EBT.

ASSUMPTION (continued)

The USDA will require a feasibility study and development of a plan before EBT can be started in Missouri. This is normally a 3 year process. If state funds are to be used for any phase of the conversion of Missouri WIC to EBT, USDA will still require an approved advance planning document.

In the fiscal years indicated, Missouri would go through a feasibility study and advanced planning. Upon completion of the feasibility study and the advanced planning document, the DOH would need to request an Accounting Analyst II, Project Specialist, Management Analyst Specialist II and a Clerk Typist III, plus the estimated future conversion costs listed below.

Oversight agrees with the DOH and has shown the feasibility study and contract for advance planning document as the only cost of this proposal for the next three fiscal years and as being charged to the General Revenue Fund.

The DOH indicates that if Missouri WIC is approved by the USDA to go forward with conversion to EBT, the future costs of the conversion and possible cost avoidance may include:

Future Costs

System development by DOH: $ 925,000

"Architectural" changes to mainframe: $1,500,000 (estimate originally done for magnetic stripe card was $1 million; assumption is smart card changes will be higher)

Unit to produce card $1,500,000 (160 units at $9,012 each; includes installation, PC interface, camera wall mount, etc. WIC

currently has 160 full-time sites.)

Annual system operating costs $4,000,000 (estimate; current costs to DOS are 3.2 million; assume WIC costs will be higher because of more complicated nature of transactions, smart cards, etc. However, shared costs between both departments could make this less.)

ASSUMPTION (continued)

Point-of-sale terminals at stores $1,030,000 (WIC currently has 812 contracted stores; cost of one POS terminal for smart cards is $1,268 so this is the minimum cost if WIC does EBT independent of DOS; based on the type of POS devices currently in the stores, an add-on unit costs approximately $200-$400, so costs could lowered if those devices are upgradeable)

PC to act as LAN control $ 450,000 (for more than one lane to accept WIC, this cost would be necessary; assume half of stores might need/want more than one lane)

On-going maintenance fee POS $ 155,000 (15% cost of all POS devices, assuming the lowest possible numbers installed)

Future Cost Avoidance (when system is up and running)

$400,000 on voucher processing fees, printing of vouchers, data entry, etc.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
GENERAL REVENUE FUND
Costs - Department of Health
Feasibility Study	($199,000)	$0	$0
Contract for Advanced Planning Document	$0	($100,000)	($100,000)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND*	($199,000)	($100,000)	($100,000)
* Totals do not include future one-time costs expected to total $5,405,000 and annual costs expected at $4,155,000 and possible cost avoidance of $400,000 annually.
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
	$0	$0	$0
FISCAL IMPACT - Small Business

The Department of Health assumes this proposal will require small grocery stores to incur expenses of mounting hardware (approximately $150 per point-of-sale terminal) and unknown costs for re-cabling of facilities in order to be a participating WIC EBT store. These cost are necessary because the point-of-sale devices in their stores will need to be able to access the DOH data base on benefits issued. Oversight assumes this cost is unknown.

DESCRIPTION

This proposal requires that benefits provided by the Women, Infants and Children Program of the Department of Health be provided by electronic benefits transfer.

This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.

SOURCES OF INFORMATION

Department of Health

Department of Social Services

Office of State Treasurer

Office of Administration

Jeanne Jarrett, CPA

Director

March 9, 1998