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Food Stamp Reauthorization: A Guide to Program Changes for State Legislators

Prepared by Lee Posey, Senior Policy Specialist,
NCSL Human Services and Welfare Committee
September 20, 2002
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On May 13, 2002, the President signed into law the Farm Security and Rural Investment Act of 2002, referred to as the Farm Bill. The nutrition title (Title IV) of the Farm Bill (P.L. 107-171) reauthorizes the food stamp program through FY 2007 and provides an additional $6.4 billion in new funds for nutrition programs over the next ten years. The nutrition title makes a number of program simplifications and changes in the Quality Control (Q.C) system, a major lobbying success for states. It restores Food Stamp benefits to legal immigrants who lost these benefits with the passage of the 1996 welfare reform law, reversing a federal cost shift to the states. And it provides states new flexibility to improve the Food Stamp program for low-income workers. This issue brief details important provisions of the bill and their effective date. Most provisions of the bill take effect on October 1, 2002. Three mandatory provisions that take effect are: restructuring the standard deduction; increasing the resource limit for the disabled; and making certain disabled legal immigrants eligible for Food Stamps.

Food Stamp program benefits are 100% federally funded. Administrative costs are split 50/50 between the federal government and the states. Thus, benefit changes offer a chance for states to help low-income families without spending additional state dollars. Program simplifications can represent administrative cost savings provided if implementation costs are not large.

Some implementation information has been sent to state Food Stamp administrators. Additional guidance material, and eventually regulations, will be forthcoming from the USDA's Food and Nutrition Service. This guide will be updated over time to incorporate further information from the Food and Nutrition Service. The Food and Nutrition Service web site has information on Farm Bill implementation at http://www.fns.usda.gov/fsp/rules/Legislation/farmbill.htm.

The USDA has identified increasing participation in the program as a major goal. Program participation by eligible families has declined. The Farm Bill contained major changes in Food Stamp program eligibility, so communicating with low-income households about the new program requirements will be important. States may want to consider undertaking such activities as encouraging businesses to participate in providing information to employees about the program, convening meetings of food stamp partners, launching public education campaigns, and publicizing prescreening tools that give families an idea of their eligibility.

QUALITY CONTROL REFORM

Currently the federal government uses the Quality Control (Q.C.) system to measure the accuracy of a state's food stamp payments. If a state has an error rate over the national average, it is subject to penalties. The Farm Bill contains a system that is less punitive for states.

Beginning October 1, 2002, a state may only be penalized if there is a 95% statistical probability that its error rate has been above 105% of the national average for two consecutive years. The bill extends the date for completing QC reviews and resolving state/federal difference to May 31^st and extends the date for announcing QC error rates to June 30^th. Also, states will be held harmless for Q.C. purposes in implementing new law provisions for 120 days--- either 120 days from the mandatory implementation date, or, if it is an optional provision, 120 days from the initial implementation date.

Beginning with FY 03, the current enhanced funding system that is based on error rates is replaced. A new performance-based system will award $48 million a year to states with high or improved performance for actions taken to correct errors, reduce the rates of error, improve eligibility determination or other activities that demonstrate effective administration as determined by USDA.

Currently, states may give households leaving cash welfare (TANF) for work up to three

months of continuing food stamps. P.L. 107-171 made changes in the existing transitional benefits option by allowing states to give provide transitional food stamps to TANF leavers for up to five months instead of three. States may continue these food stamps even if more than a year has passed since the household's last eligibility determination. States are allowed to adjust the food stamp allotment to take into account the loss of TANF income rather than simply freezing the benefit level. States will also have the ability to take into account information about the family's income learned from other programs such as child care subsidies. This option is available after October 1, 2002.

Advocacy groups often cite monthly reporting of changes in the household's circumstances as a burden on working households. Recently, the USDA adopted regulations that permit states to collect information on working households only every six months. P.L. 107-171 allows states to extend this option beyond households with earnings to almost all food stamp households. During the six-month period, a family's food stamp level would be frozen and the family would report only if its monthly income rose above the eligibility limit (130% of poverty). Nineteen states already take the option for households with earned income. The expanded option is available to states beginning October 1, 2002.

Removal of the cap on employment and training expense reimbursement for expenses involved in participating in food stamp employment and training programs, including required uniforms and supplies. Such reimbursements had been capped at $25 per month. The USDA pays one half of this amount, and state pays the other half.

The existing standard deduction, which has been frozen since 1995, is changed to a deduction that varies by household size and increases with inflation. As the standard deduction from household income increases, Food Stamp benefits increase. The new amount will be 8.31% of the federal poverty level for each household size, but not less than the current deduction of $134 for a household of six in the 48 states and D.C. Alaska, Hawaii, Guam and the U.S. Virgin Islands have different standard deduction levels under prior law; these deductions would be similarly tied to the poverty line. This change is not an option. It is effective October 1, 2002. States should be aware that if they fail to implement the provision in a timely manner, and a household was entitled to a higher standard deduction than it received, the state must issue restored benefits to the household. Until final USDA regulations are issued, a state has an option regarding how it treats ineligible or disqualified persons when determining the proper standard deduction amount for the household size.

The asset limit for a household with a disabled member is raised to $3,000 the same limit as for households with an elderly member, thus conforming the treatment of the two kinds of households. (The existing level is $2,000.) This provision is effective October 1, 2002.

P.L. 107-171 allows states to exclude certain types of income in the Food Stamp Program that it excludes as income in the TANF or Medicaid programs, and to exclude resources that the state excludes in its TANF or Medicaid program. Both of these options are available October 1, 2002.

Most homeless individuals do not make regular rental payments that would allow them to receive the benefit of the food stamp deduction for shelter costs; nevertheless, they may incur shelter costs. States currently have the option of providing a standard homeless shelter deduction (up to $143 a month) to homeless households that do incur shelter expenses. P.L. 107-171 provides an option for states to provide a flat deduction of $143 a month without having to demonstrate to the USDA that the amount is a reasonable estimate of these families' expenses. This option is available October 1, 2002.

Under the new law, states have two options that simplify the rules of the Food Stamp program regarding child support payments. Both of these options are available October 1, 2002.

• States may exclude child support payment amounts all together, rather than deducting the payment amounts in calculating the household's net income.
• States may rely on payment information from its child support enforcement agency, rather than require households to verify their current child support payments.

All states currently use a Standard Utility Allowance (SUA) to approximate household's utility costs. In most states, households choose whether to use their actual utility expenses or the SUA. Twelve states have adopted an existing option that allows them to require that all households use the SUA. P.L. 107-171 contains a provision that allows states to ignore certain rules regarding the SUA, making the mandatory SUA more attractive. Specifically, if a state makes using the SUA mandatory, it can ignore rules that prohibit the state for using the SUA for households doubled up with other families or households in public housing whose utility costs are partially paid by the housing authority. State legislators should bear in mind that households benefit from reduced paperwork under a mandatory SUA as they only have to verify that they are charged for utilities and don't have to verify the amount of those expenses. However, households with high utility expenses would have their food stamp allotments reduced under a mandatory SUA provision. State legislators may want to carefully consider the impact of this change and how any reduction might be offset for households.

In 1996, the federal welfare law ended food stamp benefits for legal immigrants, with few exceptions. Unlike other limits placed on legal immigrants in TANF and Medicaid, where immigrants were barred from the program for five years, food stamp restrictions were both prospective and retrospective, affecting those who were in the country as of 8/22/96, the effective date of the law. In order to meet the needs of immigrants that lost access to the program in 1996, 17 states offer nutritional benefits to immigrants, and other increased funds for food banks and other sources of emergency food assistance.

In 1998, benefits were restored to children, the disabled and the elderly who had entered the U.S. prior to August 22, 1996. That restoration dealt with pre-TANF arrivals. The benefit restoration in the Farm Bill affects post-TANF arrivals. The Farm Bill restores eligibility for food stamps for "qualified immigrants," making Food Stamp program consistent with the TANF program and the Medicaid and SCHIP programs.

Eligibility for benefits is phased in. States will want to consider these provisions carefully and consider the needs of their immigrant populations when making funding decisions about state assistance programs. The effective dates for different categories of immigrants is as follows:

• Effective October 1, 2002- disabled "qualified" legal immigrants who meet the definition of disability in the Food Stamp law, regardless of date of entry into the United States;
• Effective April 1, 2003-"qualified" immigrants age 18-64 who have been in the United States for five years. This provision end the seven year limit on food stamp benefits for refugees and asylees; and
• Effective October 1, 2003, qualified immigrant children are eligible, without the five-year residency requirement. Sponsor deeming rules (rules that consider the income of the sponsor of an immigrant in determining his or her eligibility for benefits) will not apply.

To assist with state outreach, the Food and Nutrition Service is translating Food Stamp materials into 34 languages.