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The Effect of State Food Stamp and TANF Policies on Food Stamp Program Participation

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Document date: March 01, 2007
Released online: March 29, 2007

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.


Abstract

This paper uses monthly SIPP data from 1996 through 2003 and state-level policy data to measure the effects of specific food stamp and welfare policies, as well as the minimum wage and EITC, on the food stamp receipt of the low-income population. We find strong evidence that more lenient vehicle exemption policies, longer recertification periods, and expanded categorical eligibility increase food stamp receipt and that the use of biometric technology reduces food stamp receipt. We also find some evidence that more lenient immigrant eligibility rules, simplified reporting, implementation of the EBT program, and outreach spending increase food stamp receipt.


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Introduction

Food stamps are an important component of low-income families' monthly resources, increasing the chance families are able to meet basic needs. Food stamps have been found to increase by 36 percent the purchasing power of a family of four supported by a full-time, yearround minimum wage worker (Rosenbaum and Super 2005). The effectiveness of the Food Stamp Program (FSP), however, depends on the extent to which persons take up the benefits to which they are entitled. In the mid- to late-1990s, the food stamp participation rate fell sharply, from 74.8 percent in 1994 to 57.9 percent in 1999 (Barrett and Poikolainen 2006). The participation rate fell further in 2000 and 2001, but increased in recent years and was 60.5 percent in 2004 (Barrett and Poikolainen 2006).

In response to the falling participation of the 1990s, many states made changes to their Food Stamp Programs to improve accessibility. While benefits and income limits are set at the federal level, the Food Stamp Program is state administered, so states had discretion to change some aspects of their programs, such as the length of recertification periods, the application process, and outreach spending. During the same period, the federal government increased state flexibility. During the late 1990s, new options such as simplified reporting for earners and vehicle exemptions for applicants were made available through administrative actions and legislation.

These changes culminated in the Farm Security and Rural Investment Act of 2002 (the Farm Bill), which provides broader flexibility to states along many dimensions. States, for example, were given 10 new options designed to improve the delivery of food stamp benefits to eligible households (Dean and Rosenbaum 2002). Many of these options make the program more accessible to working families, who are larger shares of FSP eligibles and of FSP participants now than in the early 1990s (Barrett and Poikolainen 2006; Cunnyngham 2002). Other options allow states to modify some of the effects of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996, which restricted food stamp eligibility for non-citizens and placed time limits on participation by unemployed Able-Bodied Adults Without Dependents (ABAWDs).

States have been making changes to their Food Stamp Programs with limited information on how different policies and rules affect decisions to receive food stamp benefits. Results from this study provide states with information on the extent to which 15 specific state food stamp policies (and rules) affect households' food stamp receipt. Our analysis also examines how Temporary Assistance to Needy Families (TANF) policies (and rules), the minimum wage, and the Earned Income Tax Credit (EITC) affect food stamp receipt. We consider these non-FSP programs because food stamp receipt may be influenced by factors beyond state FSP policy. State TANF policies, for example, can affect food stamp receipt because TANF and food stamp receipt are often linked administratively and in terms of program rules and populations. We focus on the working-age population and examine two key research questions:

  1. To what extent have FSP policies affected food stamp receipt?
  2. To what extent have TANF, minimum wage, and EITC policies affected food stamp receipt?

Individual-level data for this analysis come from the 1996 and 2001 panels of the Survey of Income and Program Participation (SIPP), providing monthly data from January 1996 through December 2003 (with the exception of March 2000 through September 2000). Policy data come from a unique data set we have compiled from a variety of sources including the United States Department of Agriculture (USDA) Food and Nutrition Service (FNS) National Databank Public Elements (NDPE), FNS waiver database, FNS State Options Reports, and the Urban Institute's Welfare Rules Database.

Increases in the flexibility states have to set FSP policies have resulted in variation in FSP policies across states. It is this variation across states and over time that has allowed researchers to examine the effect of specific FSP policies on FSP participation and caseloads. This paper contributes to the growing body of literature in this area in two important ways. First, we examine a comprehensive set of FSP policies, while most studies examine only a limited set of FSP policies. If states implement multiple FSP policies that are related, then excluding a particular policy from the analysis can lead to biased estimates. Our analysis includes a comprehensive set of 15 FSP policies that fall into five categories—eligibility requirements, recertification periods and reporting requirements, interactions with other welfare programs, issuance and outreach, and biometrics (e.g., fingerprint imaging).

Second, we contribute to the literature with an empirical analysis that incorporates detailed measures of states' TANF policies, as well as state minimum wage and EITC policies. Because policies aimed at the low-income are often related, a model that includes a fuller set of policy variables is less likely to have biased estimates that result from omitting important variables. In addition, including these additional policies in our analysis provides important information on how these non-FSP policies affect FSP participation. Much of the literature defines welfare reform as the implementation of any major waiver or TANF (e.g., Hanratty 2006, Danielson and Klerman 2006). Examining the relationship between specific welfare reform policies and FSP participation provides a more complete picture because different welfare reform policies (e.g., earnings disregards and time limits) can have opposite effects on FSP participation; these opposite effects can offset one another to create no overall effect. We also estimate models similar to the literature that include indicators of welfare reform implementation (any major waiver and TANF) rather than the specific TANF policies.

Results from this study suggest that a number of FSP policies affect households' receipt of food stamp benefits. Consistent with our hypotheses, we find evidence that more lenient vehicle exemption rules, restoration of benefits to non-citizens, longer recertification periods, simplified reporting requirements, expanded categorical eligibility, electronic benefit transfer (EBT) implementation, and outreach spending increase food stamp receipt. We also find that biometric procedures (e.g., fingerprint imaging and facial matching) lead to lower food stamp receipt. In terms of TANF policies, our results suggest that more lenient earnings disregards and higher benefit levels lead to higher food stamp receipt, while more severe sanction policies lead to lower food stamp receipt. Finally, we find evidence that increases in the minimum wage and the EITC reduce food stamp receipt.

Below we begin with a discussion of the relevant literature. This is followed by a description of the study population and data used for the analysis, including the individual-level SIPP data, the state-level policy data, and the economic data. Next we present the empirical model, followed by the results. The last section concludes.

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Topics/Tags: | Poverty, Assets and Safety Net


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