Three years after the end of the recession, which officially

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1 Issues 2012 M M A N H A T T A N I N S T I T U T E F O R P O L I C Y R E S E A R C H I No. 23 September 2012 THE FOOD STAMP RECOVERY: The Unprecedented Increase in the Supplemental Nutrition Assistance Program Diana Furchtgott-Roth 1 Senior Fellow Claire Rogers Research Assistant INTRODUCTION Three years after the end of the 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 Published by the Manhattan Institute There is much concern surrounding this unprecedented increase in America s SNAP program, which began in 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 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.

2 Figure 1: Share of Population on Food Stamps by Months into Recovery Source: SNAP Program Data from USDA Food and Nutrition Service, published and unpublished SNAP monthly data, Census Bureau Civilian Population Monthly Estimates, and Manhattan Institute Calculations. Issues 2012 No. 23 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 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 , Domestic Food Assistance Program authorized USDA to pay 50 percent of states September 2012 administrative costs. There were 10 million participants in This grew to nearly 14 million in 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 Table 1: SNAP Eligibility Income Thresholds, FY 2012 Household Size Gross Monthly Income (130 percent of poverty) Net Monthly Income (100 percent of poverty) 1 $1,180 $ ,594 1, ,008 1, ,422 1, ,836 2, ,249 2, ,663 2, ,077 3,136 Each additional member Source: U.S. Department of Agriculture, Food and Nutrition Services, Supplemental Nutrition Assistance Program Eligibility, April 11, 2012, 2

3 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 Table 2: Characteristics of Food Stamp Participants, Fiscal Year Gross Income (Real Dollars) Net Income (Real Dollars) SNAP Benefit (Real Dollars) Gross Income as a Percentage of Poverty Guidelines Source: USDA, Food and Nutrition Service, Characteristics of Supplemental Nutrition Assistance Program Households: Fiscal Year 2010, Report No. SNAP-11-CHAR, September 2011, Table A.27, p. 63, The Food Stamp Recovery: The Unprecedented Increase in the Supplemental Nutrition Assistance Program

4 Figure 2: Participant Average Monthly Income in Real 2010 Dollars, Source: USDA, Food and Nutrition Service, Characteristics of Supplemental Nutrition Assistance Program Households: Fiscal Year 2010, Report No. SNAP-11-CHAR, September 2011, Table A.27, p. 63, Figure 3: Participant Average Monthly Gross Income as a Percentage of Poverty Guidelines, Issues 2012 No. 23 September 2012 Source: USDA, Food and Nutrition Service, Characteristics of Supplemental Nutrition Assistance Program Households: Fiscal Year 2010, Report No. SNAP-11-CHAR, September 2011, Table A.27, p. 63, 4

5 Figure 4: Monthly SNAP Benefit in Real 2010 Dollars, Source: USDA, Food and Nutrition Service, Characteristics of Supplemental Nutrition Assistance Program Households: Fiscal Year 2010, Report No. SNAP-11-CHAR, September 2011, Table A.27, p. 63, 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 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 Depen- The Food Stamp Recovery: The Unprecedented Increase in the Supplemental Nutrition Assistance Program

6 Issues 2012 No. 23 dent 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 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, September 2012 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 recession from July 1981 to November 1982; the recession from July 1990 to March 1991; the 2001 recession from March 2001 to November 2001; and the most recent recession, from December 2007 to June Figure 1 shows that SNAP usage has been far higher both during the 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 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 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 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 6

7 Table 3: Increase in Food Stamp Usage between End of Recession and 36 Months into Recovery Recession Start Date End Date Duration of Recession Increase (percentage points) 1980 Recession January 1980 July months Recession July 1981 November months Recession July 1990 March months Recession March 2001 November months Recession December 2007 June months 3.5 Source: SNAP Program Data from USDA Food and Nutrition Service, published and unpublished SNAP monthly data, Census Bureau Civilian Population Monthly Estimates, NBER, and Manhattan Institute Calculations. 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 in SNAP because SSI recipients receive a state 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: , 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 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 , though the trafficking amount increased to $330 million annually, the rate remained one percent. 11 The Food Stamp Recovery: The Unprecedented Increase in the Supplemental Nutrition Assistance Program

8 Figure 5: State Unemployment Rate (7/12) and Share of Pop. on Food Stamps (6/12) Issues 2012 No. 23 September 2012 Source: SNAP Program Data from USDA Food and Nutrition Service, published and unpublished SNAP state monthly data, Census Bureau Civilian State Population Estimates, and Manhattan Institute Calculations. 8

9 Option Table 4: State Options Number of States Simplified Reporting Earned Income Households Only 1 Simplified Reporting Expanded to Other Households 49 Simplified Reporting Certification Periods (6/12/Combination) 10/9/1932 Quarterly Reporting 1 Monthly Reporting 2 Change Reporting 24 Transitional Benefits 21 Verification of Deductible Expenses (Child Support/Child Care/Housing) 45/42/30 Simplified Definition of Income 37 Simplified Definition of Resources 34 Vehicle Rules: Excludes All Vehicles 36 Vehicle Rules: Not All But At Least One Vehicle Excluded 15 Vehicle Rules: Exemption > $4,650 2 Expanded Categorical Eligibility (Broad/Narrow) 41/7 Simplified Homeless Housing Cost 26 Standard Utility Allowance 52 Mandatory Standard Utility Allowance 46 Simplified Utility Allowance 46 Simplified Deductions 8 Child Support Expense Income Exclusion 14 Simplified Self-Employment Determination 18 State Option SNAP 7 Ineligible Non-Citizens Income & Deductions (Prorate /All -None /All-Prorate) 48/3/2 Extended E&T Sanction Periods 7 E&T Household Disqualification 4 Comparable Disqualification 19 Child Support Disqualification: Failure to Cooperate Only 3 Child Support Disqualification: Both Failure to Cooperate & Arrearage 1 Drug Felony Disqualification: Lifetime Ban 15 Drug Felony Disqualification: Modified Ban 19 Drug Felony Disqualification: No Ban 19 Online Application & Case Management (Application/Case Management Only) 29/3 Waiver of Face-to-Face Interview 47 Call Centers 30 Document Imaging 26 Program Integration (Fully/Partially) 40/7 Names for SNAP (SNAP/Food Stamp Program/Alternate Name) 29/7/17 Source: USDA, Food and Nutrition Service, Supplemental Nutrition Assistance Program, State Options Report, Ninth Edition, November 2010, The Food Stamp Recovery: The Unprecedented Increase in the Supplemental Nutrition Assistance Program

10 CONCLUSION The increase in food stamp usage following the most recent recession vis-à-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 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 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, 4 USDA, Food and Nutrition Services, Supplemental Nutrition Assistance Program, A Short History of SNAP, April 16, 2012, 5 U.S. Department of Agriculture, Food and Nutrition Services, Supplemental Nutrition Assistance Program Eligibility, April 11, 2012, 6 U.S. Department of Agriculture, Food and Nutrition Services, Supplemental Nutrition Assistance Program Eligibility, April 11, 2012, 7 USDA, Food and Nutrition Services, Supplemental Nutrition Assistance Program Eligibility, April 11, 2012, 8 USDA, Food and Nutrition Services, Supplemental Nutrition Assistance Program Eligibility, April 11, 2012, 9 USDA, Food and Nutrition Service, Supplemental Nutrition Assistance Program, State Options Report, Ninth Edition, November 2010, 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), 11 USDA, Food and Nutrition Service, Office of Research and Analysis, The Extent of Trafficking in the Supplemental Nutrition Issues 2012 No. 23 Assistance Program: , March 2011, p. 3, September

11 Appendix Table 1: Share of Population on Food Stamps by Months into Recovery Month 1980 Recession (percent) Recession (percent) Recession (percent) 2001 Recession (percent) Recession (percent) Recession End Jul Nov Mar Nov Jun Aug Dec Apr Dec Jul Sep Jan May Jan Aug Oct Feb Jun Feb Sep Nov Mar Jul Mar Oct Dec Apr Aug Apr Nov Jan May Sep May Dec Feb Jun Oct Jun Jan Mar Jul Nov Jul Feb Apr Aug Dec Aug Mar May Sep Jan Sep Apr Jun Oct Feb Oct May Jul Nov Mar Nov Jun Aug Dec Apr Dec Jul Sep Jan May Jan Aug Oct Feb Jun Feb Sep Nov Mar Jul Mar Oct Dec Apr Aug Apr Nov Jan May Sep May Dec Feb Jun Oct Jun Jan Mar Jul Nov Jul Feb Apr Aug Dec Aug Mar May Sep Jan Sep Apr Jun Oct Feb Oct May Jul Nov Mar Nov Jun Aug Dec Apr Dec Jul Sep Jan May Jan Aug Oct Feb Jun Feb Sep Nov Mar Jul Mar Oct Dec Apr Aug Apr Nov Jan May Sep May Dec Feb Jun Oct Jun Jan Mar Jul Nov Jul Feb Apr Aug Dec Aug Mar May Sep Jan Sep Apr Jun Oct Feb Oct May Jul Oct Mar Nov Jun Difference Source: SNAP Program Data from USDA Food and Nutrition Service, published and unpublished SNAP monthly data, Census Bureau Civilian Population Monthly Estimates, and Manhattan Institute Calculations. The Food Stamp Recovery: The Unprecedented Increase in the Supplemental Nutrition Assistance Program