The federal government has always funded the full benefit amount for the Supplemental Nutrition Assistance Program (SNAP), helping more than 42 million Americans keep food on their tables. Now, Congress is considering significant cuts to SNAP during the budget reconciliation process, including shifting some of the benefit cost to the states.
Though the exact proposals vary, some would require states to shoulder 10 percent of SNAP benefit costs. This change would significantly strain state budgets in normal economic circumstances and would make it very difficult for states to maintain SNAP coverage and benefits during a recession, hurting families already struggling to meet basic needs and likely worsening the recession.
Shifting SNAP benefit costs to states would increase budget dilemmas in an economic downturn
Economists are already warning that a recession may be on the horizon, meaning any potential SNAP benefit cost share would increase budgetary dilemmas for states in the near term, in addition to the immediate challenge they would face in paying a share of SNAP benefits without a recession. In a recession, states often struggle to raise enough revenue to meet their balanced budget requirements, and shifting SNAP benefit costs to the states would cause additional pressure.
As a result, many states might find it necessary to cut SNAP program costs at the time when residents need it most, even if they had managed to afford the cost share before the recession. Although states maintain rainy day funds that could help them through a moderate economic downturn under current federal policy, federal proposals to reduce spending would create substantial new budgetary pressures that would require difficult choices in coming years.
In new Urban Institute analysis, we find that if job losses occurred in similar magnitude to the Great Recession, causing more people to need SNAP benefits, states would need to spend an additional $980 million to cover the increased costs in the first year of the downturn under a 10 percent cost share.
State budgets would take on additional costs ranging from $2 million per year in Alaska, North Dakota, Vermont, and Wyoming to $92 million in Texas and $111 million in California. To cover the additional SNAP costs a recession would cause, states would have to raise taxes, cut other spending, reduce SNAP benefits, or limit the number of households eligible for SNAP.
If states reduce benefits, more people would fall into poverty
Though the federal government can expand spending to meet increased needs, states are required to balance their budgets, even in tough economic times. A recession might require states to reduce SNAP benefits to balance their books. Under one plausible scenario, we find that if states reduced SNAP benefits during a recession to balance their budgets, all SNAP enrollees would face an average annual benefit reduction of $327 per household, and 862,000 people who would be above the poverty level if SNAP were fully funded would fall into poverty.
A reduction in benefits or changes to SNAP eligibility would risk significant harm to families already struggling to meet basic needs and would likely worsen a recession. The US Department of Agriculture estimates that for every additional dollar spent on SNAP during a recession, more than $1.50 is generated in the economy. This suggests that if states choose not to fund the nearly $1 billion dollars in SNAP needed during the first year of a downturn, then the economy could lose out on an additional $1.54 billion in gross domestic product, which would otherwise be expected to generate 13,560 jobs.
These economic benefits accrue because SNAP dollars are spent quickly in local economies and support a wide range of businesses—including farms and food factories, package manufacturers and trucking companies, and farmers’ markets and grocery stores. In other words, fully funding SNAP is an investment in our food economy and the overall resilience of local communities.
Cuts to SNAP could negatively affect health outcomes and raise health care costs for states
Congress is simultaneously considering substantial reductions in federal funding for Medicaid and other safety net programs, which would exacerbate the challenges states face to potentially funding a SNAP cost share. Because different congressional committees oversee SNAP and Medicaid, we risk a siloed approach to policymaking despite these programs sharing important synergies.
Recent research indicates that SNAP is associated with lower health care costs for adults, with estimated savings of around $1,400 per adult annually. Cutting SNAP may increase costs for programs like Medicaid in which states already foot some of the bill. On the flip side, some research suggests food security improved among adults in Medicaid expansion states when compared with nonexpansion states. Thus, cuts to Medicaid may worsen food security and contribute to a host of negative health outcomes.
As Congress moves forward with drafting legislation, federal policymakers should strongly consider the significant risks of a state SNAP cost share, which would strain state budgets even in the best of times. Given the potential for an economic downturn, the potential cuts to SNAP and Medicaid could seriously undermine the health and well-being of millions of Americans.
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