Funding for a state program that transfers about $1 million a year to Iowa grocers that process purchases made with federal food assistance  is likely to be at least reduced, according to State Sen. Tom Courtney, Chair of the Government Oversight Committee.

Courtney’s comments to the Iowa Independent Tuesday follow a hearing to examine the program last week at the Statehouse. Iowa is one of six states to pay grocers for accepting food assistance payments, which are processed like debit cards and can carry a similar transaction fee. At 7 cents per transaction, Iowa’s payments are the most generous in the nation.

Critics call the payments a wasteful corporate handout.The Department of Human Services, which administers the program, has itself opposed the payments for four years. Roger Munns, a spokesman for the department, called the payments a “gift.”

“This is providing grocers the incentive to do something they would do anyway,” Munns told the Iowa Independent. “They aren’t going to stop selling $300 million in groceries if the state doesn’t provide them 7 cents per swipe on a swipe card.”

The Iowa Fiscal Partnership, a joint initiative of the Iowa Policy Project and the Child and Family Poverty Center, also opposes the program. Mike Owen, spokesperson for the partnership, said the time has come for Iowa to stop the payments. “If the program goes away, Iowa taxpayers save half a million dollars,” he said.

But grocers want the payments to continue. Jerry Fleagle, president of the Iowa Grocery Industry Association, said eliminating the program would force grocers to shift the costs of accepting food assistance payments onto all consumers in the form of higher prices. “I think Iowa ought to be proud that they reimburse,” Fleagle said.

Opponents see it differently. Ending the program would merely treat food assistance payments the same as other forms of electronic payment like credit cards and debit cards, argued Munns. “If groceries are having a hard time with that 7 cents, then they should raise their prices.”

Electronic Benefit Transfer Cards replaced paper food stamps as the means of distributing federal food assistance starting in the late 1990s. Today, food stamps remain “stamps” in name only – recipients usually make purchases by swiping their cards in the very same machines that other customers use for their credit and debit cards.

According to the Government Accountability Office, the transition to an electronic system helped reduce fraud and abuse in the program, as well as lessened the stigma that some food stamp recipients felt when using the paper coupons in grocery stores.

Iowa currently spends about $500,000 a year on its program, and the federal government matches the money, bringing the total payments to $1 million. Were the program to end, Iowa would no longer qualify for the $500,000 in matching federal funds.

At last week’s hearing, the Iowa Grocery Industry Association argued that if the Department of Human Services is concerned about cutting costs, it should instead look to a program designed to help people on food assistance access farmers’ markets. In that initiative, which cost $378,004 in 2007, the department helps farmers pay for wireless systems to process food assistance payments and then reimburses them for the transaction fees. In 2007 alone, the department spent $268,562 on outreach, including statewide radio advertisements, posters, flyers, and coloring books designed to publicize the farmers’ market program.

The department rejects the idea that there is any contradiction between its support for the farmers’ market program and its opposition to the grocer subsidy.

Courtney also defended the program. “The farmers’ market culture is important to our culture in Iowa,” he said. “For now, there is a feeling in the Legislature that that is worth saving.”

Although Courtney confirmed that there may be changes coming to Iowa’s reimbursement program, so far, there are no proposals being seriously considered. Last week’s hearing was not meant to resolve the issue.

Asked why payments to grocers continued despite a four-year push for their elimination, Munns sounded a cynical note. “I think the grocers are getting their money’s worth with their lobbyists,” he said.

“They’ve got more money than we do.”