NEW JERSEY SPEEDS EXPANSION OF EBT

DENISE ZIMMERMAN

NEW YORK -- An electronic- benefits-transfer pilot program now being tested in one county in New Jersey will be expanded to two additional counties beginning this fall.

The EBT program, designed to replace the traditional paper-based system for distributing government-mandated benefits such as food stamps, has been undergoing extensive testing in Camden County, N.J., since February. An estimated 500 supermarkets have been involved in the test program thus far.

Based on early positive results, the program will be expanded earlier than planned, said Thom Shortt, chairman of the New Jersey Electronic Benefits Transfer executive committee and director of retail services at Twin County Grocers, Edison, N.J.

"In Camden County alone, we are electronically delivering benefits to more than 24,000 recipients in more than 500 food stores," representing $120 million in benefits annually, he said.

Shortt, a member of the Food Marketing Institute's Electronic Payment Systems Committee, spoke about the New Jersey program at an FMI-sponsored EBT panel presentation here this month.

The New Jersey EBT test program, expected eventually to be rolled out statewide, could represent one more step toward establishing a national system. Vice President Al Gore, as part of his program to reinvent and streamline government, called last fall for the creation of a nationwide EBT system by 1999.

Electronic distribution of benefits could reduce labor costs, fraud and processing inefficiencies for retailers, according to

EBT advocates. Speedier settlement, including same-day or next-day funds reconciliation and easier access to benefits revenue, represent other potential benefits for retailers.

Called "Families First," the New Jersey program relies on a single card with a magnetic strip that benefit recipients use to redeem food stamps and cash checks drawn from the Aid to Families with Dependent Children program.

At the checkstand, a recipient passes the state-issued card through an electronic terminal, enters a personal identification number, and the cost of purchases is automatically deducted from the family's account.

One immediate benefit from the EBT program has been to eliminate a monthly processing crunch, Shortt said. With the paper-based system, retailers were deluged with food stamp processing tasks on the first of the month. In contrast, EBT program participants in Camden County use their "Families First" card an average of seven times over the course of a month.

The New Jersey EBT test will begin in Essex County Oct. 1 and in Hudson County in March 1995, several months before their originally planned launch, Shortt said.

Collectively, the three counties will deliver $560 million in food stamps and AFDC benefits to 80,000 recipients through 2,500 food retailers annually, he added. "To my knowledge, this is by far the biggest [EBT] project -- not counting Maryland, which has a statewide program." Though Maryland boasts the only statewide system, EBT programs are in various stages of development in other states, including Iowa, Minnesota, New Mexico, Ohio, South Carolina, Texas, Wyoming and Pennsylvania.

Shortt and George Hood, director of electronic banking services at Wegmans Food Markets, Rochester, N.Y., agreed that supermarkets will be rewarded by new efficiencies brought by electronic distribution of government benefits.

Wegmans is focusing today on maximizing the efficiencies it began to enjoy in 1988, when the chain rolled out a "full blown" electronic funds transfer program, Hood said.

"[Electronic check] and debit, in our environment, are the cheapest transactions for us, and the electronic platform allows us to steer customers to use what we feel are the most cost-efficient transactions," he explained.

"There are lots of ways to save money," Hood continued. "For example, today we're experimenting with transmitting check information to banks, with paper to follow. It's nothing new or amazing but people [sometimes] look at the electronic side of the world without looking at the cost savings."

The electronic platform at Wegmans became home to a proprietary shopper card system that Hood said yields valuable customer demographics. "The basic solution was to tie all the different potential transactions to a single payment platform," he said.

That theory of connectivity lies at the core of a federal EBT effort announced last fall and outlined by Jack Radzikowski, executive director of the Federal EBT Task Force, Washington, following Hood's presentation.

Radzikowski said the federal program now in development intends to replace the paper-based benefits system with an electronic one by 1999. Unlike the New Jersey test, which involves two benefits programs, a national EBT system would incorporate a dozen benefits programs.

"What I mean by that is to take the pool of benefits paid in the United States -- food stamps, Social Security checks, Women, Infants and Children program vouchers -- and put them on a single debit card. That single debit card can have $112 billion in benefits currently paid to folks who have no banking relationship.

"There are approximately 31 million people who receive welfare assistance in food stamps at one end of the economic spectrum," he continued, "but there are also those who receive Social Security, veterans' benefits, railroad retirement -- there's a list of 12 programs."

A nationwide EBT program could go a long way toward reducing fraud, he added. Under the current, paper-based system, for example, "Food stamps are trafficked on street corners and traded as underground currency," he said; electronic distribution of benefits would eliminate that activity.