The 2018 Farm Bill failed to address a key loophole in the country’s main food assistance program, the Supplemental Nutrition Assistance Program (SNAP) — a loophole that states have increasingly used over the past decade to expand SNAP income eligibility beyond the intent of the law. In July, the U.S. Department of Agriculture (the federal agency that administers SNAP) proposed a rule that closes this loophole. This is a necessary move to increase the integrity of SNAP, which provided more than $60 billion to almost 40 million low-income individuals last year.
The loophole stems from a provision in SNAP called “categorical eligibility” that makes a household automatically eligible for food assistance based on receipt of another means-tested benefit. For example, a household can bypass SNAP income or resource tests when they are receiving assistance from the Temporary Assistance for Needy Families (TANF) program. The intent of categorical eligibility is to simplify the administration of the program. Why make a household (and a government agency) go through the full eligibility process for SNAP when they have already been determined eligible for another means-tested program?
The problem is that many states exploit the 1996 welfare reform law to provide expanded eligibility or “broad-based categorical eligibility” in SNAP. The welfare reform law gave states flexibility to use TANF to cover a variety of services beyond traditional cash assistance, such as child care or transportation aid, and these services can be provided to households with gross incomes up to 200% of the federal poverty line.
SNAP is supposed to be limited to households with incomes under 130% of the federal poverty line, but states discovered that they could provide a token TANF benefit or service to expand SNAP eligibility for higher-income households. In an issue brief accompanying the proposed rule, the USDA notes that some states apply categorical eligibility for TANF services as minimal as receiving a brochure or a referral to a social services telephone number.
States have also used this loophole to essentially eliminate asset tests for SNAP. In 37 states (including Wisconsin), a household that qualifies for SNAP through broad-based categorical eligibility does not have to meet the SNAP asset limit, roughly $2,250 for most households. In practical terms, this means that households with incomes above 130% of the federal poverty line as well as those with substantial assets can receive SNAP in the states that choose to allow it.
The USDA’s proposed rule wants to eliminate the ability of states to apply broad-based categorical eligibility with token TANF benefits or services to make a household SNAP eligible. The proposed rule states that TANF benefits must be “substantial and ongoing” totaling at least $50 per month for six or more months to be considered for categorical eligibility. The Congressional Research Service estimates that this loophole results in 530,000 SNAP households (or 4.2% of all SNAP households without an elderly or disabled member) to be eligible even though their household income exceeds program limits. The proposed rule would likely eliminate SNAP eligibility for a large share of this population. It is unclear how many SNAP households would become ineligible if only for the asset limit, but it likely would be more.
Some will characterize the proposed rule as an attempt to take food assistance away from poor households. Instead, this proposal should be viewed as a way to ensure that food assistance through SNAP is going to the nation’s most needy households and is aligned with the eligibility guidelines of the program. Allowing broad-based categorical eligibility to continue would mean ignoring the intent of the law and allowing states to find ways around established income and asset rules. It might be time for Congress to revisit income or asset limits for SNAP. But until then, the Department of Agriculture has responsibility for ensuring the integrity of SNAP.
This article first appeared on AEIdeas public policy blog. Dr. Angela Rachidi is an American Enterprise Institute research fellow in poverty studies and is conducting research for the Badger Institute on federal income-support programs for low-income families in Wisconsin.