The state of the states

Supermarkets have had varied experiences with EBT, depending on the nature of the programs in their states, cost factors, outages and interoperability. Here are some examples.



Rolling along in Ohio

In Ohio, one of two states using smart cards instead of magnetic stripes, the program is doing very well, says Tom Jackson, president of the Ohio Grocers Association, Columbus. The card is now being used for food-stamp transactions in 70% to 80% of the state, Jackson estimates. He predicts that the roll out should be complete by late fall, a few months earlier than the Jan. 1, 2000 projection date.

There have been only a few problems, generally about settlement and poor service, but these have been minor, Jackson says. "I get a lot of phone calls when things are not going well, and I'm not getting any on EBT," he says.



Minor change in Maryland

In Maryland, the site of the first statewide test of EBT about six years ago, Deluxe Data's contract expired and the company was replaced by Citicorp Services. As a result, Maryland is now using the Quest operating rules.

Since the Maryland program was a test, the retailers didn't have to pay for equipment, but the equipment is proprietary and can't be used for any purpose other than electronic transfer of food stamps. As a result, retailers who went into debit/credit cards either had to use an identical footprint or pay fees, says Denis Zegar, a consultant who recently resigned as president of the Mid-Atlantic Food Dealers Association.



Problems in Pennsylvania

After an acrimonious start, relationships are improving in Pennsylvania, says Jennifer Fry, director of government relations for the Pennsylvania Food Merchants Association (PFMA), Camp Hill, Pa.

When the state converted to EBT, the problems were of such magnitude that PFMA, acting for its members, sued the State Department of Public Welfare and Citibank, the EBT contractor, last year. The problems included computer crashes, wires being cut in error and confusion among recipients. PFMA estimated that it would cost its members up to $10 million in the first year to adapt to EBT although the changeover was not supposed to cost anything, according to the newsletter EBT Watch. Retailers said they were not given enough machines and had to pay up to $8,000 to convert their own equipment. And if a retailer modified his own machine, he had to pay 9 cents per swipe of the access card for an out-of-network transaction, according to the newsletter.

PFMA lost the suit. But now the association has a good, positive working relationship with the Department of Public Welfare and with Citibank, says Fry. There were severe problems last April and May during the first phase of the roll out, she says. The result was big backups at checkout lanes.

The state and Citibank are trying to refine the process. The state has agreed to issue terminals based on food-stamp volume, Fry says. The state-issued terminals are good only for food stamps. Retailers who pay a transaction fee and work through commercial providers can also use the card for cash assistance.

After the severe down times, an EBT stakeholders group was formed, including PFMA members and representatives of Citibank and the Department of Public Welfare to try to work out solutions to the problems. The roll out was completed last November, and many of the problems have been addressed, says Fry.



Overloads in Illinois

The system is not working all that well in Illinois, says Brian Jordan, president of the Illinois Food Retailers Association, Lombard. The biggest complaint has been system overload on peak benefit days on state-issued equipment. It takes a long time for the transaction to go through, Jordan says. After a while the system goes blank and the cashier has to swipe the card again. Most of the delay problems seem to be taking place in Chicago, and the problem lies in the telephone lines, he says.

Illinois has been using EBT for food stamps statewide for more than 11/2 years. The initial processor was Transactive. That company is getting out of the EBT processing field after its contracts expire. In Illinois, the expiration is in 2001, so the state will begin to look for a new contractor soon, Jordan says.



'A little heartburn' in Chattanooga

The Tennessee EBT roll out began in January and is scheduled to be completed by August. After starting in four counties with small populations, the program moved to Hamilton County (Chattanooga) where "we had a little heartburn" with getting all the switches thrown and communications running smoothly, says Wes Ball, president of the Tennessee Grocers Association, Nashville. Twenty-three counties were added in March and the same number in April. The schedule then calls for 18 counties in May, 15 in June, 13 in July and the last in August. That is the county encompassing Memphis, which has by far the biggest food-stamp caseload, says Ball.

Tennessee borders with seven states, but there have been few cross-border problems since all are members of the Southern Alliance of States, with the exception of Virginia, which does not yet have an EBT program. The Tennessee program handles food stamps and TANF, as well as such Federal payments as Social Security, disability benefits and railroad pensions.

The state extension service is in charge of customer training. "But the reality has been that our cashiers will train the recipients," Ball says. "The biggest challenge has been getting recipients up to speed at the front end of the store. Remember that 40% of the public doesn't have bank accounts. The fight is between the banks and others to see who controls the cash transactions. The banks will give them [recipients] money on cards, but only through ATMs," he says.



Delay in Indiana

The EBT pilot was delayed in Indiana because Transactive, which had the contract, was in negotiations to be acquired by Citicorp. Because of the anticipated acquisition, which fell apart after the Justice Department objected, the state held back. The rationale was that it was pointless to start and then have to change the system, says Joseph Lackey, president of the Indiana Grocery & Convenience Store Association.

The state is trying to negotiate with Citicorp without filing a new request for proposal (RFP), but Lackey is not optimistic that it can be done that way. He doesn't expect a pilot to start until at least mid-2000.



The Jersey bounce

System crashes have bedeviled EBT in New Jersey to the extent that the penultimate roll out was delayed from April 1 to May 1. The Commissioner of Human Services granted the delay at the request of the New Jersey Food Council, says Linda Doherty, vice president, communications and public affairs, for the Trenton-based association. The roll out is scheduled to be completed in June.

Last September, the system crashed during the first three days of the month. That is a crucial time when the program is starting in new counties because there is a learning curve for cashiers and recipients, says Doherty.

There was another major outage, but that was in the middle of the month and didn't cause a major problem, she says. However, in February there was an outage of almost three hours that affected both state and integrated terminals. "Everything crashed. There were lost sales, spoiled groceries because full carts were left in aisles and, in some stores, security had to be brought in," Doherty says.

There was no pattern to the outages. "Each involved a unique set of circumstances," she says. "Part of the contract with the state stipulates that if a retailer is using a third party or its own processor, the state will provide one processor per store in case of problems. "That didn't help in February since everything crashed."

The state reimburses 1.4 cents per transaction to stores that use their own terminals or contract with third-party processors. Doherty concedes that is low, but points out that originally the state didn't want to reimburse anything.

The New Jersey EBT program is only for food stamps and TANF. Down the road, cash will be added, Doherty says.