U.S.D.A. study explores alternative methods for adjusting SNAP benefits

by Jay Sjerven
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WASHINGTON — With hundreds of thousands or even millions of individuals losing or poised to lose their jobs because of the economic downturn, participation in the Supplemental Nutrition Assistance Program (SNAP), formerly known as the Food Stamp Program, was expected to expand significantly in coming months. Increased participation and prospects for longer-term assistance for individuals during the recession renewed concerns about the purchasing power of SNAP benefits, a subject addressed by a study issued last month by the Economic Research Service of the U.S. Department of Agriculture and titled "Rising Food Prices Take a Bite Out of Food Stamp Benefits."

The study indicated in the past several years, program participants regularly experienced decreases in the purchasing power of the SNAP benefits they received each month because of food price inflation. The study compared the current method for adjusting SNAP benefits to account for inflation with two alternative methods that were employed in the past.

Since 1977, the maximum SNAP benefit has been tied to cost of the U.S.D.A.’s Thrifty Food Plan (T.F.P.), a market basket of foods that if prepared and consumed at home would provide a complete and nutritious diet at minimal cost. Between 1997 and 2007, the SNAP maximum benefit fell short of the cost of the T.F.P. each month except for three months in fiscal 2003.

Since the 1997 welfare reform, food stamp benefits have been adjusted annually at the beginning of the fiscal year (October-September). In October, the maximum benefit is set equal to the cost of the T.F.P. in the previous June. So by October, when the new benefit schedule takes effect, the SNAP benefits adjustment fails to correct for nearly four months of price changes. And since the adjustment is made only once a year, nearly 16 months pass before benefits are adjusted again.

In October 2007, the fiscal year 2008 maximum monthly SNAP benefit for a reference family of four (adult female, adult male, one child between 6 and 8 years old and one child between 9 and 11) was set at $542 a month, which was the cost of the T.F.P. for such a family in June 2007. In October 2007, the cost of the T.F.P. was $554, so the SNAP benefit of $542 received that month was $12 below the cost of the T.F.P. as fiscal year 2008 began. In September 2008, the last month of fiscal year 2008, the cost of the T.F.P. was about $606, so the reference family would have required another $64 on top of its SNAP benefit that month to purchase the same basket of food $542 purchased the previous June.

The fiscal year 2009 maximum food stamp benefit (for the reference family of four) was set at $588 per month based on the June 2008 cost of the T.F.P. Between June and October 2008, the cost of the T.F.P. rose to $606, 3.1% more than the maximum benefit in the first month of fiscal year 2009.

The E.R.S. study indicated the average monthly loss of food purchasing power for households receiving the maximum benefit for their family size ranged from $2.60 in fiscal year 2003 to $12 in fiscal year 2007 and to $22 in fiscal year 2008.

The study considered two alternative methods of adjusting the maximum SNAP benefit for inflation, both of which were used in the past. The first alternative method would entail setting a maximum benefit for a fiscal year based at 103% of the cost of the T.F.P. in the previous June and the second would be based on semiannual adjustments with the first implemented in October and based on the cost of the T.F.P. in the previous June and the second implemented in April and based on the cost of the T.F.P. of the previous December.

If the maximum benefit for a fiscal year was calculated based on 103% of the cost of the June T.F.P., the loss in food purchasing power would have been reduced by 73% in fiscal year 2007 and 43% in fiscal year 2008 compared with the current method. Per household, the average monthly loss would have been reduced to $3.30 from $12 in fiscal year 2007 and to $12.40 from $22 in fiscal year 2008. For years in which food price inflation is less than 3%, this alternative method of adjustment results in an average monthly gain in food purchasing power for households receiving the maximum benefit.

In fiscal year 2007, use of the 103% option would have added $1.2 billion to federal costs for the additional benefits issued. The costs of additional benefits would have been $1.35 billion in fiscal year 2008.

Employing the method requiring semiannual adjustments to the maximum benefit would have reduced the loss in food purchasing power compared with the current program by 20% in fiscal year 2007 and 26% in fiscal year 2008. Per household, the average monthly loss would have been reduced to $9.70 from $12 in fiscal year 2007 and to $16.20 from $22 in fiscal year 2008.

In fiscal year 2007, the use of this alternative would have added $330 million in federal costs of benefits issued. The costs of additional benefits would have been $790 million in fiscal year 2008.

This article can also be found in the digital edition of Food Business News, January 20, 2009, starting on Page 25. Click here to search that archive.

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