Surprise: Small Grocery Stores Gouging Poor Customers on WIC Program

Here's another installment in the welfare reform series.

See the New York Times, "WIC Caps California Reimbursements After Stores Raise Food Prices":

At Rancho Grande Supermarket in San Pablo, a package of 18 corn tortillas recently cost $7.80.

Taxpayers footed the bill for the pricy tortillas, which were bought in early April with a government voucher from the California Women, Infants and Children program, a federally financed nutrition program that is administered by the state.

Despite its name, Rancho Grande Supermarket is a small grocery store located in a strip mall on San Pablo Avenue. Less than a mile away at FoodMaxx, a megastore where WIC vouchers are also accepted, the same tortillas are sold for $1.44.

The California WIC program, which provides staple foods like milk, dried beans and peanut butter to 1.48 million low-income Californians, is the largest in the country. But it is being hit hard by runaway food costs, driven by high prices at small stores, costing the program tens of millions of dollars a year. Under pressure from the United States Department of Agriculture, which oversees the program, California is scrambling to bring food costs down.

“No one should be using these programs to reap obscene profits off of the backs of mothers and young children,” said the Rev. Douglas Greenaway, president and chief executive of the National WIC Association, a nonprofit group.

In recent years, California WIC has seen a flood of small stores seeking to join the program, and it has welcomed many of them. Those stores, some of which have been increasing their prices and aggressively marketing to WIC shoppers, can receive higher reimbursements from California WIC than bigger stores do.

In February 2012, California stores with just one or two cash registers were reimbursed for WIC foods at prices that were 50 percent higher than prices paid to other vendors for comparable foods, according to the U.S.D.A. That is twice as high as the difference in prices paid to stores with one or two registers in fiscal year 2008-9.

While prices are going up in small stores, more WIC vouchers are being redeemed at them. Between October 2009 and September 2011, food costs to the WIC programs in other Western states went down a combined average of more than 7 percent. In California’s WIC program, they increased more than 4 percent.

“When food costs go up, it reduces the pool of food resources available to serve mothers and young children,” said Mr. Greenaway. The California WIC program currently spends about $94 million a month on food, according to the California Department of Public Health.

It is not the first time the program has struggled to contain escalating costs. In 2004, the proliferation of so-called WIC-only stores, catering to WIC shoppers, inspired Congress to impose new regulations on those stores, which curbed the problem.

While there's no excuse for gouging by these grocers, the more fundamental problem is the system of vouchers itself. Providing food aid by voucher is designed to make sure that families obtain needed food support. WIC administrators can't give cash to recipients --- because they could spend the money on alcohol, drugs, or anything else --- but they could distribute generic debit cards that don't identify the families as WIC recipients. Here's another program in which bureaucratic control can't get things just right.