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Issues 2012

No.23 September 2012


THE FOOD STAMP RECOVERY:

The Unprecedented Increase in the Supplemental Nutrition Assistance Program 200812

Diana Furchtgott-Roth1 Senior Fellow

Claire Rogers Research Assistant
Manhattan Institute.

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OP-ED
Food Stamps Expand By Leaps, Washington Examiner, 09-19-12
Lax Rules Author Spike In Food Stamp Usage, RealClearMarkets.com, 09-18-12
MEDIA COVERAGE
Linked on Washington Post's Think Tanked, 9-19-12
Linked on Drudge Report, 9-18-12
Mitt Romney finds a better way to discuss food stamps, Los Angeles Times, 9-18-12
Benefit Expansion Responsible for Food Stamp Growth, Newsmax.com, 9-18-12


Three years after the end of the 200709 recession, which officially began in December 2007 and ended in June 2009, 47 million people each month are using the Supplemental Nutrition Assistance Program (SNAP). At the beginning of the recession, fewer than one in 10 Americans received SNAP benefits. Nearly 15 percent of Americans now use SNAP benefits, formerly called food stamps, a program administered by the United States Department of Agriculture (USDA). This translates to more than one in 7 Americans currently using SNAP benefits, a record non-emergency high.[2]

There is much concern surrounding this unprecedented increase in America's SNAP program, which began in 2008. Food stamp participation has always increased during a recession and in the initial stages of a recovery. The purpose of this report is to determine whether the recent increase in SNAP participation is comparable to increases during other recent recessions. Our results demonstrate that levels seen since the end of this recession are far higher than in prior recoveries (see Figure 1). While the 36 month periods following the recessions of the early 1980s saw decreases in food stamp usage, the recessions of the early 1990s and in 2001 saw increases between 1 and 2 percent over the same period, in comparison with an increase of 3.5 percent following the recession ending in 2009. In addition to the difficult job market, this is because of changes in the program that began in October 2008, including expansion of benefits and elimination of the cap for child care expenses.


History of Eligibility

Inception and Expansion of the Food Stamp Program

Since its inception on a national scale in 1964 through the Food Stamp Act of 1964, eligibility requirements have periodically been expanded and tightened with each reauthorization bill. Large increases in participation reflect not only population growth and economic variation, but also responses to eligibility changes. For instance, the program originally had a purchase requirement meaning that recipients were required to purchase food stamps, "paying an amount commensurate with their normal expenditures for food and receiving an amount of food stamps representing an opportunity more nearly to obtain a low-cost nutritionally adequate diet."[3] This requirement was later eliminated.

In 1971, P.L. 91-671 "Amendments to the 1964 Food Stamp Act" standardized national eligibility and work requirements. It also expanded the Food Stamp Program to Guam, Puerto Rico, and the U.S. Virgin Islands. In 1974, P.L. 93-347, Domestic Food Assistance Program authorized USDA to pay 50 percent of states' administrative costs. There were 10 million participants in 1971. This grew to nearly 14 million in 1974.

Limitations in the Late 1970s and Early 1980s

The Food Stamp Act of 1977, which went into effect January 1, 1979, set the net income threshold for food stamps eligibility at 100 percent of the poverty line. For current eligibility thresholds, see Table 1. The 1977 Act also eliminated categorical eligibility and replaced a number of income deductions with a standard deduction. The Act restricted student and alien eligibility, and penalized household heads who voluntarily quit jobs. However, the resource limit was also increased. The most significant structural change to the program under this Act was the elimination of the purchase requirement. Once the purchase requirement was eliminated in January 1979, there was a 1.5 million increase in food stamp program participants. The Omnibus Budget Reconciliation Act of 1981 added a gross income limit of 130 percent of poverty (for households with no elderly or disabled members).

Expansions in the Mid- to Late-1980s

In response to widespread domestic hunger problems, legislators eased requirements for participation. The resources limit was increased to $2,000, categorical eligibility was reinstituted, the homeless became eligible, and the advanced earned income tax credits were excluded from income calculations. Also, sales taxes on food stamp purchases were eliminated, and applying medical deductions was made easier.

Table 2 and Figures 2, 3, and 4 show the average income and benefit levels per participant in real terms from 1989 to 2010.

Limitations in the Personal Responsibility and Work Opportunities Reconciliation Act of 1996

As can be seen in Figure 2, average income of program participants increased between 1996 and the early 2000s, after having declined slightly between 1989 and 1996. The 1996 welfare legislation eliminated eligibility of legal immigrants, placed a three month limit on Able-Bodied Adults Without Dependents (ABAWDs) working less than 20 hours a week over 36 month period, reduced the maximum allotment, froze the standard deduction and minimum benefit, and revised provisions for disqualification.

Expansions and Changes in the Farm Bills of 2002 and 2008

In May 2002, the food stamp program was changed under the Farm Security and Rural Investment Act which restored eligibility of legal immigrants, indexed the standard deduction to inflation, incentivized state administration outcomes with performance bonuses, simplified eligibility processes for states by aligning them with other means-tested programs, and cut employment and training funds.

The increase in participation in 2008 was caused by a combination of widened benefit eligibility, the recession, and a concerted effort to expand access to benefits. The 2008 Farm Bill changed the name of the program from the Food Stamp Program to SNAP, in an effort to reduce the social stigma associated with receiving benefits. As of October 1, 2008, the minimum benefit and standard deduction for households were increased. The cap for child care expenses was also eliminated. There were also changes aimed at combating fraud, including disqualification of people who sold benefits or food obtained with SNAP benefits for cash, and the bill allowed the USDA more flexibility in setting consequences including fines and disqualification periods for retailers who engaged in food stamp fraud.[4]

Current Funding and Eligibility

The current income limits are listed in Table 1. In order to receive SNAP benefits, most households must have both a gross income under 130 percent of the poverty level and a net income under 100 percent of the poverty level. Households with an elderly or disabled member need only have a net income under 100 percent of the poverty line.

Furthermore, households in which all members receive public assistance (Temporary Assistance for Needy Families, formerly Aid to Families with Dependent Children, and Supplemental Security Income) are automatically eligible.

Additionally, households are permitted to have $2,000 ($3,250 for households with a senior or disabled person) in "countable resources," which include banks accounts, vehicles, and some other household assets.

Recipients are allowed to make deductions which determine the difference between the household's gross and net incomes. Twenty percent of earned income may also be deducted, as well as a standard deduction of $147 for a household with one to three members, or $155 for larger households. Households may deduct some expenses, including child care (when necessary for work, training, or education), child support, medical bills, and in some cases shelters and utilities costs.[5]

ABAWDs ages 18-50 are still generally limited to three months of SNAP benefits within a three year period if they do not work or participate in workfare or workforce training programs.[6] However, in some areas these requirements can be waived. Employment and training grants are used to assist SNAP participants with attaining, retaining, and training for work opportunities.

The Food Stamp Act of 1964 stipulated that the federal government funds benefits (and bears responsibility for authorization of retailers and wholesalers), and the states handle certification and issuance. The costs of administering the program are shared between the federal government and the states. For most activities the federal government pays 50 percent. However, the federal government pays for 100 percent of employment and training grants, and nutrition education programs, and 75 percent of the administration costs for Indian reservations.


Analysis of Recovery Participation Data

The expansion of the program had a predictable effect: use of the program rose. This can be seen from our analysis of 36 months of data for the five most recent recession recoveries from 1980 to the present, beginning in the month the recession ended. (June 2012 figures are the latest data available for SNAP participation.) We examine the 1980 recession from January 1980 to July 1980; the 198182 recession from July 1981 to November 1982; the 199091 recession from July 1990 to March 1991; the 2001 recession from March 2001 to November 2001; and the most recent 200709 recession, from December 2007 to June 2009.

Figure 1 shows that SNAP usage has been far higher both during the 200709 recession and thereafter than following prior recessions. In June 2009, 11.4 percent of the population was on SNAP (compared to 9.3 percent when the recession began in December 2007). Thirty-six months afterward, in June 2012, the percent of the population on SNAP had increased by 3.5 percentage points, to 14.9 percent.

The 2001 recession saw an increase of 2.1 percentage points in the 36 months following the end of the recession, from 6.5 percent at the end of the recession to 8.6 percent. The level of usage and the increase were dramatically lower than the recession of 200709.

During the three-year period following the 1991 recession, the percentage of people using food stamps rose by 1.6 percentage points, from 9.2 percent to 10.8 percent.

In contrast, the percentage of people who used food stamps declined during the three-year period after the 1980s recessions, by just under one percentage point after the 198182 recession, and by over half a percentage point following the 1980 recession.

The length of the recession does not have a direct relationship to the increase (or decrease) in food stamp usage during the recovery (see Table 3). While the 18-month 200709 recession ending in June 2009 yielded a 3.5 percentage point increase in the share of the population using SNAP benefits, the 16-month recession ending November 1982 saw a 0.9 percentage point decrease. Of course, there are many factors at play, and one of the most important is likely how prolonged employment effects were during recoveries from these recessions.


States

June 2012 data show while nationwide participation was 15 percent, state participation rates vary from 6 percent to 22 percent (with 23 percent of District of Columbia residents on food stamps.) The wide variation in participation can be explained by two main factors: differences in state economies and variation in the eligibility rules adopted by individual states. Figure 5 presents the unemployment rates as well as the share of the population receiving SNAP benefits. Contrary to what might be expected, the unemployment rate and food stamp participation rate do not appear to have a strong relationship. This would suggest that the differences in eligibility and other administrative standards play a large role in varying participation rates. One consistent relationship is that, with the exceptions of California and New Jersey, the percentage of the population on food stamps always exceeded the state's unemployment rate. California residents have a low participation rate because in SNAP because SSI recipients receive a state SSI supplement instead of SNAP benefits.[7]

States have the ability to place some restrictions on SNAP use. States have some control over the administration of deductions, which can only amount to the difference between gross and net household income. For example, states can choose whether or not to exclude some or all of the value of the household's primary vehicle when assessing income and countable resources. Thirty-nine states exclude any vehicle value when assessing a household's resources, 11 states exclude the value of one or more vehicles, and three states "exempt an amount higher than the SNAP's standard auto exemption (currently set at $4,650) from fair market value to determine countable resource value of a vehicle."[8] States may also choose to allow exemptions for homeless shelter costs up to $143, and utility costs.[9] A complete list of state options is listed in Table 4.


Fraud

According to the USDA's Office of Research Analysis, rates of fraud have been declining. In a March 2011 report entitled The Extent of Trafficking in the Supplemental Nutrition Assistance Program: 20062008, the Department summarized trafficking data for several summary periods. In 1993 the total amount of SNAP benefits reached $22 billion.[10] Of these, $811 million, or about 3.8 percent, were diverted by trafficking. Six hundred and sixty million dollars, a rate of 3.5 percent, were trafficked between 1996 and 1998. From 1999 to 2002, the average annual trafficking amount was $393 million, or 2.5 percent of the total benefits, and from 2002 to 2005, the rate decreased to one percent with $241 million per year being misused. In 200608, though the trafficking amount increased to $330 million annually, the rate remained one percent.[11]


Conclusion

The increase in food stamp usage following the most recent 200709 recession vis--vis the smaller increases in other recessions is troubling. Designing and administering a social safety net is a balancing act. While assisting and empowering those who are truly in need, we must guard against creating perverse incentives to depend on public assistance for long term sustenance.

It is important to acknowledge that unemployment rate has remained above 8 percent for 43 months, since February 2009, which is longer than in any other recession since 1980. However, Americans experienced unemployment over 8 percent for 27 months from November 1981 to January 1984, but ultimately saw a decrease in food stamp usage during the 36 months following that recession. The prolonged unemployment effects of the 200709 recession are partly responsible for the growth in current food stamp usage, but cannot fully explain it. More likely, increased eligibility, income deductions, and benefit levels have precipitated unprecedented growth in the program.

The Supplemental Nutrition Assistance Program is to be applauded for making strides in combating fraud, allowing state flexibility in administration, and providing the neediest citizens with choices in how to best fulfill their dietary needs. But the data beg the question: Does 15 percent of our population truly qualify as the neediest among us?


ENDNOTES

  1. The authors are grateful to Leah Loversky of Pomona College and Chi Zhang of Swarthmore College for research help with this Issue Brief. All errors are the authors' own.
  2. Food stamp usage typically spikes during and after natural disasters.
  3. USDA, Food and Nutrition Services, Supplemental Nutrition Assistance Program, A Short History of SNAP, April 16, 2012, http://www.fns.usda.gov/snap/rules/Legislation/about.htm.
  4. USDA, Food and Nutrition Services, Supplemental Nutrition Assistance Program, A Short History of SNAP, April 16, 2012, http://www.fns.usda.gov/snap/rules/Legislation/about.htm.
  5. U.S. Department of Agriculture, Food and Nutrition Services, Supplemental Nutrition Assistance Program Eligibility, April 11, 2012, http://www.fns.usda.gov/snap/applicant_recipients/eligibility.htm.
  6. U.S. Department of Agriculture, Food and Nutrition Services, Supplemental Nutrition Assistance Program Eligibility, April 11, 2012, http://www.fns.usda.gov/snap/applicant_recipients/eligibility.htm.
  7. USDA, Food and Nutrition Services, Supplemental Nutrition Assistance Program Eligibility, April 11, 2012, http://www.fns.usda.gov/snap/applicant_recipients/eligibility.htm.
  8. USDA, Food and Nutrition Services, Supplemental Nutrition Assistance Program Eligibility, April 11, 2012, http://www.fns.usda.gov/snap/applicant_recipients/eligibility.htm.
  9. USDA, Food and Nutrition Service, Supplemental Nutrition Assistance Program, State Options Report, Ninth Edition, November 2010, http://www.fns.usda.gov/snap/rules/Memo/Support/State_Options/9-State_Options.pdf. This document includes state flexibilities in place as of November 2010, a more current version is due out this fall.
  10. USDA, Food and Nutrition Service, Supplemental Nutrition Assistance Program Participation and Costs (Data as of July 26, 2012), http://www.fns.usda.gov/pd/SNAPsummary.htm.
  11. USDA, Food and Nutrition Service, Office of Research and Analysis, The Extent of Trafficking in the Supplemental Nutrition Assistance Program: 20062008, March 2011, p. 3, http://www.fns.usda.gov/ora/menu/published/SNAP/FILES/ProgramIntegrity/Trafficking2006.pdf.


 
 
 

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