Research & Commentary: Shutting SNAP Loopholes Protects Aid for Truly in Need

Published August 2, 2019

In July 2019, the U.S. Department of Agriculture’s (USDA) Food and Nutrition Service (FNS) proposed a new rule titled, “Revision of Categorical Eligibility in the Supplemental Nutrition Assistance Program”. The rule would close the categorical eligibility loophole that allows states to make applicants in certain programs automatically eligible to participate in SNAP. Many states use this loophole to essentially eliminate asset tests for SNAP recipients.

According to the Congressional Research Service (CRS), 43 jurisdictions have implemented broad-based categorical eligibility as of October 2018. In these states and territories, all households with incomes below a state-determined threshold are eligible for SNAP. This is done by providing households with a low-cost, easy-to-administer, welfare-funded benefit or service that is used to qualify the household for SNAP, which increases the number of recipients and funding. These can include energy assistance programs or welfare benefits; in many states only a brochure or referral to a telephone hotline is needed to fulfill categorical eligibility.

The proposed rule would limit this practice by establishing that welfare benefits must be “substantial and ongoing” totaling at least $50 per month for six or more months to be considered for categorical eligibility. This ensures that the benefits being received are not trivial and more likely subject to more stringent eligibility rules and tests. The number of people using this loophole is significant. CRS estimates the loophole results in 530,000 SNAP households are considered eligible for SNAP even though their household income exceeds program limits.

SNAP is the fourth-largest means-tested program for low-income families and individuals, comprising more than 75 percent of the Farm Bill’s annual allotment. In 2016, 44.2 million Americans received SNAP benefits, at a cost of $70.9 billion to taxpayers. Although SNAP has experienced a slow decline in participation since 2013, there are still more than 18 million Americans receiving food stamps than in 2007.

The primary problem with SNAP is lax eligibility standards and lack of rigorous enforcement methods. The current income and asset tests for SNAP require applicants to have a gross income below 130 percent of the poverty level and a net income below 100 percent of the poverty level. Applicants must also not possess more than $2,000 in assets. Although these standards may seem reasonable, several loopholes exist that allow states and applicants to bypass the requirements.

In many states, SNAP recipients are accepted under less-stringent standards than those cited above, through what is known as “categorical eligibility.” In states with a categorical eligibility SNAP program, applicants are judged by standards established through participation in other cash welfare assistance programs, many of which have far lower income and asset standards.

Critics of the proposed rule argue it will take food assistance away from poor households. However, asset tests are vital in managing the cost of welfare programs. They ensure individuals use their own resources before turning to taxpayers for support, while preventing abuse and fraud by those who do not truly need government aid. Indeed, if every state matched its asset testing for SNAP eligibility to the federal baseline, 749,000 fewer Americans would receive benefits. This would save taxpayers more than $1.1 billion every year.

The real focus of welfare programs should be to provide temporary or supplemental assistance when absolutely necessary, while encouraging work and self-reliance.

The following articles examine welfare reform in greater detail.

The Supplemental Nutrition Assistance Program (SNAP): Categorical Eligibility
In this report, the Congressional Research Service discusses categorical eligibility and some of the issues raised by it.

Proposed Rule Change would Increase SNAP Integrity
In this article, Angela Rachidi of the American Enterprise Institute examines the proposed new rule on categorical eligibility for SNAP and how it could improve the integrity of the program.

Welfare Reform Report Card: A State-by-State Analysis of Anti-Poverty Performance and Welfare Reform Policies
In 2015, The Heartland Institute published an updated version of its Welfare Reform Report Card. This report card compiles extensive data on five “inputs” and five “outputs” of state welfare and anti-poverty programs and assigns a final grade to each state for its welfare policies.

Food Stamp Dependence in the States
This interactive map from Foundation for Government Accountability shows what percentage of each state’s population is dependent on food stamps and how much it costs the state.

Research & Commentary: Work Requirements Are a Necessary Component of Any SNAP Reform Plan–commentary-work-requirements-are-a-necessary-component-of-any-snap-reform-plan?source=policybot
In this Heartland Institute Research & Commentary, Matthew Glans examines the Supplemental Nutrition Assistance Program and recent proposals to reform food stamp programs by restoring work requirements.

Welfare Rules Database 
The Urban Institute’s Welfare Rules Database provides a “comprehensive, sophisticated resource for comparing cash assistance programs between states” and for researching changes in cash assistance rules between states.

Maine Food Stamp Work Requirement Cuts Non-Parent Caseload by 80 Percent
Robert Rector, Rachel Sheffield, and Kevin Dayaratna of The Heritage Foundation examine Maine’s food stamp reforms and discuss how they could act as a model for other states. “The Maine food stamp work requirement is sound public policy. Government should aid those in need, but welfare should not be a one-way handout. Able-bodied, nonelderly adults who receive cash, food, or housing assistance from the government should be required to work or prepare for work as a condition of receiving aid. Giving welfare to those who refuse to take steps to help themselves is unfair to taxpayers and fosters a harmful dependence among beneficiaries,” the authors wrote.

Maine Entitlement Reforms, Audits Cut ‘SNAP’ Fraud Rates
Kimberly Morin writes in Budget & Tax News about entitlement reforms in Maine that have substantially reduced fraud and abuse.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget & Tax News website, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

The Heartland Institute can send an expert to your state to testify or brief your caucus, host an event in your state, or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact the government relations team at [email protected] or 312/377-4000.