November 13, 2013

Mandatory SpendingOption 13

Function 600 - Income Security

Convert Multiple Assistance Programs for Lower-Income People Into Smaller Block Grants to States

(Billions of dollars) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2014-2018 2014-2023
Change in Mandatory Outlays                        
  SNAP 0 -38 -38 -35 -33 -31 -29 -27 -26 -24 -144 -281
  SSI 0 -3 -8 -4 1 -5 -5 -6 -12 -7 -14 -49
  Child nutrition programs 0 -6 -7 -7 -7 -8 -9 -9 -10 -11 -27 -74
    Total 0 -48 -52 -46 -40 -44 -43 -42 -48 -42 -186 -404
Change in Discretionary Outlays for SSI 0 -4 -4 -4 -4 -5 -5 -5 -5 -5 -17 -42

Notes: This option would take effect in October 2014.

SNAP = Supplemental Nutrition Assistance Program; SSI = Supplemental Security Income.

A number of sizable federal programs assist people who have relatively low income. Such programs include the Supplemental Nutrition Assistance Program (SNAP), Supplemental Security Income (SSI), and a collection of child nutrition programs. Federal spending for SNAP, SSI, and child nutrition programs in 2013 was $156 billion, the Congressional Budget Office estimates, or roughly 5 percent of total federal spending.

SNAP, formerly known as the Food Stamp program, provides benefits to low-income households to help them purchase food. Federal outlays for the program were $83 billion in 2013, CBO estimates. SSI provides cash assistance to people who are disabled, aged, or both and who have low income and few assets; spending (most of it mandatory) for that program totaled an estimated $54 billion that year. Child nutrition programs subsidize meals provided to children at school, at child care centers, in after-school programs, and in other settings; in 2013, spending for those programs was an estimated $19 billion, most of it for the National School Lunch Program and the School Breakfast Program.

This option would convert SNAP, SSI, and the child nutrition programs into separate, smaller block grants to the states beginning in 2015. Each of the three block grants would provide a set amount of funding to states each year, and states would be allowed to make significant changes to the structure of the programs. The annual funding provided would equal federal outlays for each program in 2007, increased to account for inflation for all urban consumers since then. (The 2007 starting values would include outlays for both benefits and administrative costs and, for child nutrition programs, would represent total spending for that set of programs.)

By CBO’s estimates, this option would reduce spending on SNAP by $281 billion from 2015 through 2023—or by 41 percent of the amount that would be spent under current law. For SSI, mandatory spending during that period would decline by $49 billion, or by 9 percent. For child nutrition programs, the reduction would be $74 billion, or 33 percent. In addition, funding for the administration of SSI is provided annually in discretionary appropriations; this option would eliminate those appropriations, which would result in $42 billion in discretionary savings during the 2015–2023 period provided that appropriations were adjusted accordingly.

The budgetary effects of switching SNAP, SSI, and child nutrition programs to block grants would depend heavily on the formulas used to set the amounts of the grants. For this option, the inflation-adjusted value of the grants would remain at 2007 amounts. If, instead, the grants were fixed in nominal dollars (as is, for example, the block grant for Temporary Assistance for Needy Families), savings would be larger (and increasingly so) each year. By contrast, if the grants were indexed for both inflation and population growth—that is, if they were allowed to grow at faster rates than specified—savings would be smaller (and increasingly so) each year. Savings would also be less if the starting values for the grants were based on higher amounts than the outlays in 2007—for example, the outlays of those programs in more recent years. And savings would be less if spending in 2015 and the following few years was adjusted downward from CBO’s current-law projections more slowly, rather than immediately reverting to the 2007 amounts adjusted for inflation.

Although the formula used to set the amount of each block grant in this option is the same, the effects on spending for the programs would differ. For SNAP, the effect on projected spending would be larger early on, whereas for the child nutrition programs and, in general, for SSI, the effects would be larger in the later years.

For SNAP, the estimated reduction in federal spending from converting to the specified block grant would decline over time, both in dollar terms and as a share of projected spending under current law. CBO projects that, under current law, spending on SNAP will decline over the 2015–2023 period because the number of people receiving benefits will decline as the economy improves and the effect of the decline in the number of participants will outweigh the increase in per-person benefits (SNAP benefits are adjusted annually for changes in food prices). By contrast, under the option, spending on SNAP would increase over time. Under current law, spending on SNAP will be $79 billion in 2015, CBO projects; this option would reduce that amount by an estimated $38 billion, or by about one-half. In 2023, spending on SNAP under current law is projected to be $73 billion; the option would cut that figure by an estimated $24 billion, or by about one-third.

For SSI, the estimated reduction in mandatory outlays from converting to the specified block grant would generally increase over time, both in dollar terms and as a share of projected spending under current law. (The reduction in spending would bounce up and down in a few years because, as scheduled under current law, benefit payments in October shift to the previous fiscal year when the first day of the month falls on a weekend.) The option would result in greater reductions in the later years primarily because, by CBO’s estimates, participation in the program will increase. Under current law, mandatory spending on SSI will be $52 billion in 2015, CBO projects; this option would reduce that spending by $3 billion, or by 6 percent. In 2023, mandatory spending on SSI under current law is projected to be $66 billion; the option would cut that figure by an estimated $7 billion, or by 11 percent.

For child nutrition programs, the estimated reduction in federal spending from converting to the specified block grant would increase over time, both in dollar terms and as a share of projected spending under current law. In 2015, the estimated reduction in spending would be $6 billion, or 28 percent; and in 2023, the estimated reduction would be $11 billion, or 37 percent. The savings would be greater in the later years of the period because most spending for the programs under current law is indexed to an inflator that adjusts benefits for changes in the price of food away from home—which CBO projects will be larger than the changes in prices to which the specified block grant is indexed—and because, by CBO’s expectations, participation in the programs will grow.

A rationale for this option is that block grants would make spending by the federal government more predictable. The programs affected by this option are currently legally obligated to make payments to people who meet the eligibility criteria. Therefore, spending increases or decreases without any legislative changes. For example, outlays for SNAP benefits more than doubled between 2007 and 2011, primarily because of an increase in the number of participants that stemmed in large part from the deterioration in labor market conditions. And even if the number of participants in a program does not change, the benefits paid per person can change if the income of participants changes.

Another rationale for the option is that state programs might better suit local needs and might be more innovative. States could define eligibility and administer benefits in ways that might better serve their populations. Moreover, allowing states to design their own programs would result in more experimentation, and some states could adopt approaches that had been successful elsewhere.

A rationale against this option is that, from 2015 to 2023, it would cut mandatory federal spending for programs that support lower-income people by $404 billion (with an additional cut of $42 billion in discretionary spending, if appropriations were reduced as specified). Who was affected by that cut in spending and how they were affected would depend on how states structured their programs and how state spending changed. But such a cut—amounting to 28 percent of the projected mandatory spending on SNAP, SSI, and child nutrition programs during those years—would almost certainly eliminate benefits for some people who would have otherwise received them, as well as significantly reduce the benefits of some people who remained in the programs.

Another rationale against this option is that block grants would not be as responsive to economic conditions as the current federal programs are. The automatic changes in spending on benefits under current law help stabilize the economy, reducing the depth of recessions during economic downturns. Those stabilizing effects would be lost under the option. Furthermore, if federal spending did not increase during a future economic downturn and the number of people eligible for benefits increased, states that could not increase their spending (probably at a time when their own revenues were declining) would have to reduce the benefits received by each participant or tighten eligibility, perhaps adding to the hardship for families just when their need was greatest.