Mandatory Spending Option 13

Function 600 - Income Security

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

CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.

Billions of Dollars 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017-2021 2017-2026
Change in Mandatory Outlays                        
  SNAP 0 -30 -28 -27 -26 -25 -24 -23 -22 -22 -111 -227
  SSI 0 * -4 -4 -5 -10 -6 -1 -7 -7 -13 -43
  Child nutrition programs 0 -8 -8 -9 -10 -11 -11 -12 -13 -14 -35 -97
    Total 0 -37 -41 -41 -40 -45 -40 -36 -42 -44 -160 -367
Change in Discretionary Spending for SSI 0 -5 -5 -5 -5 -6 -6 -6 -6 -6 -21 -50

This option would take effect in October 2017.

SNAP = Supplemental Nutrition Assistance Program; SSI = Supplemental Security Income; * = between zero and $500 million.

Several sizable federal programs assist people who have relatively low income. Such programs include the Supplemental Nutrition Assistance Program (SNAP; formerly the Food Stamp program), Supplemental Security Income (SSI), and a collection of child nutrition programs. Federal spending for SNAP, SSI, and child nutrition programs in 2016 was $156 billion, or roughly 4 percent of total federal spending.

SNAP provides benefits to help low-income households buy food. Federal outlays for the program were $73 billion in 2016. SSI provides cash assistance to elderly or disabled people who have low income and few assets; spending (most of it mandatory) for that program totaled $61 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 2016, spending for those programs was $22 billion, most of it for the National School Lunch Program and the School Breakfast Program.

Beginning in October 2017, this option would convert SNAP, SSI, and the child nutrition programs to separate, smaller block grants to the states. Each of the three block grants would provide a set amount of funding to states each year, and states would be allowed to significantly change 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 amounts would include outlays for both benefits and administrative costs and, for child nutrition programs, would represent total spending for that set of programs. For SSI, the 2007 amount would be adjusted to account for 12 monthly benefit payments instead of 11.)

By the Congressional Budget Office’s estimates, this option would reduce spending on SNAP by $227 billion from 2017 through 2026—or by 31 percent of the amount that would be spent under current law. For SSI, mandatory spending during that period would decline by $43 billion, or by 7 percent. For child nutrition programs, the reduction would be $97 billion, or 35 percent. In addition, funding to administer SSI is provided annually in discretionary appropriations; this option would eliminate those appropriations, resulting in $50 billion in discretionary savings during the 2017–2026 period, so long as 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 faster than specified—savings would be smaller (and increasingly so) each year. Savings also would be less if the starting values for the grants were based on larger amounts than the outlays in 2007—for example, the outlays for those programs in more recent years. And savings would be less if spending in 2018 and the following few years was adjusted downward from CBO’s current-law projections more slowly instead of immediately reverting to the 2007 amounts adjusted for inflation.

Although the formula used to set the amount of each separate 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, 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 2017–2022 period and then slowly increase through 2026. The number of people receiving benefits will decline as the economy improves over the 10-year period, but the increase in per-person benefits in the later years will outweigh the effect of the decline in the number of participants. (SNAP benefits are adjusted annually for changes in food prices.) By contrast, under the option, spending on SNAP would increase over the 10-year period. Under current law, spending on SNAP will be $73 billion in 2018, CBO projects; this option would reduce that amount by an estimated $30 billion, or by 41 percent. In 2026, spending on SNAP under current law is projected to be $74 billion; the option would cut that figure by an estimated $22 billion, or by 30 percent.

For SSI, the estimated reduction in mandatory outlays from converting to the specified block grant would generally increase, both in dollar terms and as a share of projected spending under current law. (The reduction in spending would fluctuate 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 under current law, participation in the program will increase. Under current law, mandatory spending on SSI will be $50 billion in 2018, CBO projects; this option would increase that spending by less than $500 million. In 2026, mandatory spending on SSI under current law is projected to be $69 billion; the option would cut that figure by an estimated $7 billion, or by 10 percent.

For child nutrition programs, the estimated reduction in federal spending from converting to the specified block grant would increase, both in dollar terms and as a share of projected spending under current law. In 2018, the estimated reduction in spending would be $8 billion, or about one-third; and in 2026, the estimated reduction would be $14 billion, or more than 40 percent. The savings would be greater in the later years of the period for two reasons: 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. Also, by CBO’s expectations under current law, 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 that this option affects must, under current law, make payments to eligible people. Therefore, spending automatically increases or decreases without any legislative changes. For example, outlays for SNAP benefits more than doubled between 2007 and 2011, primarily because participation in the program increased mainly as a result of deteriorating 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 worked elsewhere.

A rationale against this option is that, from 2018 to 2026, it would cut mandatory federal spending for programs that support lower-income people by $367 billion (with an additional cut of $50 billion in discretionary spending, if appropriations were reduced as specified). Whom that cut in spending affected—and how—would depend on how states structured their programs and how state spending changed. But such a cut—amounting to 25 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 be less responsive to economic conditions than the current federal programs. 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 more people qualified for benefits, states that could not increase their spending (probably at a time when their own revenues were declining) would have to reduce per-person benefits or tighten eligibility, perhaps adding to the hardship for families just when their need was greatest.