November 13, 2013
OPTIONS FOR REDUCING THE DEFICIT: 2014 TO 2023

Mandatory SpendingOption 11

600 - Income Security

Tighten Eligibility and Determinations of Income for the Supplemental Nutrition Assistance Program

(Billions of dollars) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2014-2018 2014-2023
Change in Outlays                        
  Apply income and asset limits to categorically eligible households 0 -0.5 -1.3 -1.3 -1.2 -1.2 -1.2 -1.2 -1.2 -1.2 -4.3 -10.3
  Lower the gross income limit to 100 percent of the federal poverty guidelines 0 -0.1 -0.3 -0.2 -0.2 -0.2 -0.2 -0.2 -0.1 -0.1 -0.9 -1.7
  Eliminate the automatic deduction from income for recipients of LIHEAP benefits 0 -0.7 -1.3 -1.3 -1.3 -1.2 -1.2 -1.2 -1.3 -1.3 -4.6 -10.8
  All of the above policiesa 0 -3.0 -6.2 -6.1 -5.9 -5.8 -5.7 -5.7 -5.7 -5.6 -21.2 -49.8

Notes: This option would take effect in October 2014.

LIHEAP = Low Income Home Energy Assistance Program.

a. If all three policies were enacted together, the total effects would be greater than the sum of the effects for each policy because of interactions among the approaches. In particular, the savings from lowering the gross income limit would be greater if the income and asset limits were applied to categorically eligible households.

The Supplemental Nutrition Assistance Program (SNAP, formerly known as the Food Stamp program) provides benefits to low-income households to help them purchase food. Eligibility is generally based on participation in other government assistance programs or on the income and assets of a household. Most households that receive SNAP benefits—about 90 percent in fiscal year 2011—are considered to be “categorically eligible”; that is, they automatically qualify for benefits on the basis of their participation in other federal or state programs.

Among categorically eligible households, the majority—almost three-quarters in 2011—qualify for benefits under what is termed broad-based categorical eligibility. Namely, all household members receive or are authorized to receive noncash benefits from the Temporary Assistance for Needy Families (TANF) program (such as child care, transportation assistance, or even a token benefit such as a pamphlet describing TANF). The remaining categorically eligible households—roughly one-quarter in 2011—are ones in which all members receive cash assistance from TANF, Supplemental Security Income (SSI), or certain state programs that serve people with low income.

Households that receive SNAP benefits but are not categorically eligible for the program—about 10 percent of all participating households in 2011—qualify by meeting certain income and asset tests set by law that vary depending on households’ characteristics. For households that do not include an elderly or disabled person, total income must be less than or equal to 130 percent of the federal poverty guidelines (commonly known as the federal poverty level, or FPL), and cash assets must be less than or equal to $2,000. For households that include an elderly or disabled person, different tests apply.

This option encompasses three approaches for reducing SNAP spending. The first approach would apply the standard income and asset requirements to people who would otherwise be entitled to benefits through broad-based categorical eligibility. The Congressional Budget Office estimates that this approach would yield federal savings of $10 billion from 2015 to 2023.

The second approach would lower the income limit for households that are not categorically eligible for benefits and that have no elderly or disabled members. For those households, the approach would lower the limit from 130 percent of the FPL to 100 percent. The approach would yield federal savings of $2 billion from 2015 to 2023, CBO estimates.

The third approach would modify how net income—the measure used to determine benefit amounts—is calculated for some households. Under current law, net income is calculated by deducting certain amounts from a household’s gross income, including a portion of earnings and certain expenses for shelter, dependent care, and medical care. This approach would modify those deductions from income by changing how receiving energy assistance payments (such as those through the Low Income Home Energy Assistance Program, or LIHEAP) affects the deductible amount. Under current law, households qualify for a heating and cooling standard utility allowance (HCSUA), which is typically worth several hundred dollars a month, if they pay heating or cooling expenses or if they receive any assistance through LIHEAP. The number of households claiming the utility allowance through LIHEAP has increased in recent years, in part because some states now send token LIHEAP benefit amounts (typically between $1 and $5 and typically only once per year) to SNAP participants so they can qualify for the allowance. This approach would eliminate that automatic qualification for the allowance, thereby allowing only households that pay heating or cooling expenses to claim the related deductions. The approach would yield federal savings of $11 billion over the 2015–2023 period, CBO estimates.

CBO expects that implementing all three approaches simultaneously would yield savings of $50 billion through 2023, considerably more than the sum of the effects of the three approaches taken one at a time. When considered alone, lowering the income limit for eligibility for SNAP from 130 percent to 100 percent of the FPL would not affect participants who were eligible for benefits through broad-based categorical eligibility. However, if broad-based categorical eligibility was eliminated and the income limit for eligibility was lowered to 100 percent of the FPL simultaneously, eligibility for people who are not elderly and not disabled would be based on the lower income limit. As a result, the savings from implementing those two approaches together would be larger than the sum of the savings from implementing either of them separately. By contrast, eliminating SNAP participants’ ability to automatically qualify for the utility allowance because they receive assistance through LIHEAP would produce smaller federal savings if implemented together with the other two approaches: Because those approaches would reduce the number of recipients of SNAP benefits, the changed treatment of LIHEAP assistance would affect fewer people.

A rationale for eliminating broad-based categorical eligibility or for lowering the income limit for eligibility is that doing so would focus SNAP benefits on those most in need. A rationale for eliminating the automatic utility allowance based on participation in LIHEAP is that doing so would end a practice that artificially inflates deductions from income. Moreover, some of the households receiving token LIHEAP benefits have their heating and cooling costs included in their rent, and their rent is already considered in the deductions of expenses for shelter. Finally, eliminating broad-based categorical eligibility or the automatic utility allowance would make the eligibility for and benefits from SNAP more consistent across states because states currently have different policies regarding other assistance programs and LIHEAP.

An argument against eliminating broad-based categorical eligibility or eliminating the automatic utility allowance is that doing so would increase the complexity and time involved in verifying information on SNAP applications, which would probably result in more errors and greater administrative costs. Adopting either of those approaches would also increase the paperwork for applicants. An argument against eliminating broad-based categorical eligibility or lowering the income limit for eligibility to 100 percent of the FPL is that doing so would eliminate benefits for some households in difficult financial situations.