Background Briefing by Senior Administration Official

The Briefing Room

1:20 P.M. EDT

SENIOR ADMINISTRATION OFFICIAL: Good afternoon. I'm assuming that all of you have gotten the press release today on the Social Security reinvention of its operations. We stress that this was a package designed the way the Social Security Administration conducts its business. The idea is to make sure that this agency is sound and well-run well into the next century.

It has traditionally been a fairly well-run agency. It operates at an extremely small overhead, considering the size of the money that it deals with. We're very proud of the agency and continue to be very proud of the agency.

And I'll take any questions.

Q: What happened to the idea to privatize part of this operation?

SENIOR ADMINISTRATION OFFICIAL: We did not announce it today because we started to think about how we would do this, and the first thing we thought of was that it would be important to start showing the low performing states what the high performing states are doing. And that really hasn't been tried before. If you -- in other words, Social Security has rank ordered these states on several productivity measures, and what's clear is that some states are doing a really wonderful job. And so one idea we came up with in the course of discussing this whole option was that it would probably make sense before we went to any more drastic steps to create a technical assistance program under the leadership of SSA, start almost doing a buddy system with the high-performing states and the low-performing states, and seeing if there weren't lessons to be learned, that we could bring the low-performing states up to the national average. So we thought that was the first step we should take before we went to anything more dramatic.

Q: Why have states administer a federal program, make a key decision in a federal program?

SENIOR ADMINISTRATION OFFICIAL: Well, remember that they don't make the key decisions. Social Security provides the -- there's statute, and then Social Security does all the regulation. So this is actually an historical anomaly, if you will. When the program was set up, states were set up to administer a portion of it.

What happens is if you go into -- you're disabled; you go in and the first person you see is a federal employee in a Social Security office, that employee collects all sorts of documentation from you on your disability. But then for the processing and determination of that initial step of your claim, that goes to a set of state employees who are paid by Social Security and who work under federal regulations to do the processing.

Over the years at Social Security there's been all sorts of debates about should we federalize the whole thing, make all of them federal workers, et cetera. As we've seen, frankly, the system in half of the states actually works very well. So there's really no reason to change it. So the focus of the reinvention here has been on the more poorly performing states and trying to bring them up to par.

Q: How much of this package will have to be approved by Congress?

SENIOR ADMINISTRATION OFFICIAL: A fair amount of it will have to be approved by Congress. Some of it will not require congressional approval.

Q: Can you say which is which?

SENIOR ADMINISTRATION OFFICIAL: Well, yes. Let's see. The cycling, payment-day cycling probably, technically, does not have to be approved by Congress. However, it's one of those things where, because it's been on the same day for 60 years, okay, that I think the feeling at SSA is that they would feel better if they did go to Congress.

Obviously, the improvement in the 1-800 technology is a management initiative that we have begun with them; does not need approval. Direct deposit, electronic transfers -- we have done a lot of that. I think this will require -- to get to the final phase, we probably will require congressional approval.

This is something, by the way, that the entire government is doing in all of its transfer programs. A big part of the first reinventing government initiative was electronic benefit transfer programs. We expect that by the next -- beginning of the next century, almost all federal dollars will be transmitted electronically.

One-stop benefit application -- I don't -- you'll have to ask Social Security that one. I suspect it does not. Regional office consolidation -- office consolidations rarely require the explicit approval of Congress. They often require that Congress be included in some way. Stop collecting attorneys fees will require congressional action. Electronic wage reporting I believe will require congressional action. The improvement of the disability adjudication process will not. The immigration and naturalization processing I do not believe will require it, but you ought to check with SSA on that. And the SSA IRS filing will not require congressional approval. So it's a kind of mixed bag.

Again, I always offer these with a grain of caution because, of course, congressional committees in their oversight capacity sometimes require approval of things that are not technically statutory. I will say that this is a package that is designed to modernize the system. Social Security is very conscious of the fact that they will be retiring the baby boom; in 10 to 15 years, they'll be beginning to get the first wave of the baby boom. And they hope to be able to do that without a huge expansion in their administrative costs. And we think they're well on the way to doing that. They're an agency that does plan ahead; they can plan ahead because they can watch demographic trends, et cetera. And the concentration on the new technology is obviously an important part of this.

Q: The big baby boom problem is not processing the applications, it's making the trust fund solvent in the distant future. Does the administration have any plans to make a proposal on how to do that?

SENIOR ADMINISTRATION OFFICIAL: There is a -- the administration issued a statement on this I believe a week ago when the trust fund report came out showing the system was solvent through 2030. And I think the first step in that process is for the new Social Security -- I believe it is called the Advisory Board -- is going to start working on the solvency issue. But absolutely. And this will -- there is no doubt that the solvency question will be addressed. It will be addressed; it will obviously be a bipartisan effort. And we feel very confident that it will be addressed and solved.

Q: Does allowing employees the option of applying for Social Security benefits through their employers involve any mandate on employers? And also, would it raise their administrative costs?

SENIOR ADMINISTRATION OFFICIAL: Raise whose administrative costs?

Q: The employers.

SENIOR ADMINISTRATION OFFICIAL: I think that this is proposed as purely a voluntary thing for big companies. So many companies have, in fact, the complete personnel record for someone ready to retire. They often will do the work for someone ready to retire, certainly with regard to a private pension plan. This is an effort to be user friendly and to help people apply for Social Security benefits if their employer is set up to do it, to let them take the initial action and file the form.

It's anticipated also that there be some improvements in accuracy if the employers were filing directly, because a lot of times people will go in and they'll get a wage history wrong, et cetera. So, again, this is something that is geared toward making the system more customer friendly.

We look -- let me just say, we obviously did not look at the solvency question. That was not within the -- that's not what reinventing government does. It's obviously a much bigger and larger, longer-term question. We looked at SSA with an eye towards customer service. It is, with the exception of the IRS, the agency that -- where the federal government touches everybody in their lifetime at one point or another. So we have, since the very beginning, paid attention to customer service initiatives at Social Security Administration. And Commissioner Chater has made from the outset it her goal to make sure that Social Security delivers world- class service. And so many of these innovations are in that mode of thought.

Q: You mentioned that you expected bipartisan support on the solvency question. What about the individual items that you've outlined here that require congressional action -- any evidence at this point?

SENIOR ADMINISTRATION OFFICIAL: Not much evidence, but on the other hand, not many of these things are terribly contentious along -- they're not ideological questions. They're really sort of management questions. We've gotten fairly good reaction on the package from seniors groups so far. And Social Security, again, in keeping with its goal to be sort of the best in customer service in the government, before it started on the -- before it made the decision to change the check days, they did focus groups of current beneficiaries. In other words, they did what we're always asking everybody in the government to do -- ask your customers is this working, would it work. And what they discovered is that a lot of seniors had built their financial lives around the day that the check arrived.

So trying to change this system with current beneficiaries clearly would have been an awful lot of trouble, probably more trouble than it was worth. And we urge everyone in the media to please make clear that this change is only for new beneficiaries. It is only prospective, because the last thing we need is a lot of panicked seniors calling and saying, you mean I'm not going to get my check on the 3rd? And it's one of the lessons to us about how important it is for the government to also be constantly communicating with its customers about what it -- the kind of service that it's giving.

Q: This effort to have companies file the retirement applications of their employees, will there be additional efforts to privatize Social Security, having companies like H&R Block, for example, file disability as well as retirement applications?

SENIOR ADMINISTRATION OFFICIAL: That is not under serious consideration right now. Really -- remember that Social Security does all of its administration at 1.6 percent of the cost of the program. That is a number, that is a price of overhead that is the envy of many, many insurance companies and other financial companies. So it's not likely that it would prove to be terribly cost-efficient. We are open always to looking at those options if we think it's going to be cost-efficient and improve customer service. But that's not under consideration right now.

Q: Electronic transfer -- I would assume that saves some money. The stories going around of --

SENIOR ADMINISTRATION OFFICIAL: Oh, lots of money.

Q: of postmen now being armed, especially in California --

SENIOR ADMINISTRATION OFFICIAL: Oh, yes.

Q: around the 3rd --

SENIOR ADMINISTRATION OFFICIAL: Yes.

Q: I would think there would be a move to expedite that, for that reason, as well as other reasons.

SENIOR ADMINISTRATION OFFICIAL: That's in here. Oh, yes. Listen, this electronic transfer is enormously important in a whole bunch -- for a whole bunch of reasons. Much of the Social Security population right now already uses electronic transfer. And you have both accuracy reasons and you have a lot of safety reasons, particularly for seniors. The checks don't get stolen. They don't get lost, et cetera, et cetera. This plan purports to move everybody to electronic transfer. Right now what happens is people who have bank accounts get electronic transfer. People who are "unbanked", tend to be poorer people, don't.

What we have already begun to do very aggressively with food stamps, and we will begin to do with Social Security and other federal benefits, is to move the "unbanked" population to essentially what we call an EBT card, electronic benefit transfer card, which works like a credit card. And they are already being used all across the country by food stamp recipients in grocery stores and other places where you get point of sale.

And there's a lot of -- there's many advantages. There's the safety advantage. It's harder to steal them because you need a PIN number. So, I mean, not to say that there isn't -- people don't figure out ways to do fraud, but it makes it much harder to steal them. Secondly, in food stamps there's, as you probably know, a real black market in the food stamps. And they are used for all sorts of things besides what they're -- not what they're supposed to be used for. And so the EBT cards cut down on that black market for food stamps, et cetera.

So there's a lot of advantages for the recipients to electronic benefit transfers. There's also a lot of benefits to the government. The cost of these transactions are -- and I think it's in the press release -- I think it's about a 39 cent savings per -- yes, direct deposit would save 35 cents per check. So in the case of Social Security, that's $70 million a year. And that doesn't even include the costs for lost checks, stolen checks, et cetera.

When you begin to look at those savings across all of the benefit transfers the federal government does, from AFDC, food stamps, WIC, federal retirement, military retirement, et cetera, you can see that we're looking at a huge savings in the future by moving the government totally electronic.

Q: Will this total electronic apply to the supplement security income recipients?

SENIOR ADMINISTRATION OFFICIAL: The broad vision is that at some point in the next century, the government will do all its business electronically. The timing for which programs come on when is -- that's not clear to me right now. When we designed the electronic benefit transfer protocols -- and there's a group here formed by the National Performance Review called the EBT Task Force -- one of the things that we did, and one of the reasons we did it at the federal level, and the states wanted us to do it at the federal level, is so that we created some uniformity in the systems so that eventually you could add on different federal programs and then begin to add on state programs. And so there's a lot of issues about standardization, connectivity, what's the role of the banks in these, et cetera, that had to have federal guidance. And we've been working on this since September of 1993.

Q: But this doesn't apply to the SSI program that Social Security administers?

SENIOR ADMINISTRATION OFFICIAL: No, not -- SSI will not go on immediately, no.

THE PRESS: Thank you.

END1:25 P.M. EDT