How NOT to go Retro: Pennsylvania Brings Back Asset Limits for SNAP

Things tend to get better with successive iterations; think the newest i(anything). Returning to a previous version is usually a sign that things have taken a turn for the worse: think Coke II. Public policy can also follow this pattern. Tomorrow, however, Pennsylvania bring back their asset test for SNAP. Classic Coke it ain't. 

SNAP helps poor families buy food. This is a critical service during times of sustained economic hardship. Over the course of the recession, for instance, national participation has jumped from 28.2 million people in 2008 to 44.7 people in 2011. Federal legislation established asset limits floors at $2,000 for most families and $3,000 for families with a disabled or elderly member in 1986. But, states can modernize these levels by raising or even eliminate them, and currently 41 states, including Pennsylvania, have done so. This trend has been driven with the best interest of both state budgets and the needs of its citizens in mind. Going retro now is a reckless move. Here’s why.

First, reinstating asset limits will hurt the state’s bottom line by reducing revenue and increasing cost. Since SNAP is almost entirely federally funded, the $2.7 billion a year that it brings in to the state is really the proverbial free federal money. Curbing the number of families who participate in the program will bring this down. If one percent of participants (8,000 families) are kicked off the program, as the Department of Public Welfare estimates, the state would lose $26 million based on current USDA data. The state would also lose the multiplier effect advantage of having that money spent immediately and circulate locally, which Economist Mark Zandi values at $1.73 for every $1 in SNAP benefit. So, Pennsylvania would actually be out $45 million in lost economic activity.

Not only will the state have less money coming in, it will have more money going out. The only portion of SNAP that is financed by the state is half of its administrative costs. Any savings to the state from reducing its administrative costs on one percent of its caseload will be eclipsed by the cost of newly verifying the assets of the remaining ninety-nine percent of families. In contrast, states that have gone the way of eliminating asset tests actually save money. Virginia, for example, has saved about $250,000 a year by getting grid of its asset test for the Temporary Assistance to Needy Families program and Oklahoma has saved about $1 million by doing the same for Medicaid.

Second, reinstating asset limits will hurt families by creating an unnecessary trade-off between their present and future wellbeing. Programs like SNAP are intended to help family’s meet their immediate needs and then transition to financial stability. Savings that a family has on hand help this transition stick by providing traction as families climb up the economic ladder. Without it, events as common as a car breaking down can devolve into choice a between getting to work and putting food on the table. According to research done at the Urban Institute, the more savings a low-income family has, the less likely they are to encounter hardship, including food insecurity, when a financial shock occurs, but even modest amounts can make a big difference. Asset limits, however, explicitly restrict the amount of savings a family can have and be eligible for support. Removing them is a clear way of insuring that assistance is a temporary and not sustained need.

The demonstrable downsides of bringing back asset limits overpower the anemic claims by the Governor that it’s a necessary measure to curb waste, fraud, and abuse and target limited resources. When fraud accounts for only one tenth of one percent of cases nationally and more state resources will be spent after this takes affect than before, it seems that waste is what’s being generated, not prevented and that poor families are the actual target.

The federal government can and should act to reverse course in Pennsylvania and prevent additional backsliding in other states. It can do this in one of two ways. First, in the next authorization of the Farm Bill, due to take place this year, Congress can simply eliminate the consideration of assets for SNAP eligibility. Since most states have already elected to take this step, there should be little cost involved. In fact, a recent report by the Congressional Budget Office puts the price tag at $100 million a year. Second, in the President’s FY 2011 budget, he included a proposal to establish a $10,000 asset limit floor across most public assistance programs, including SNAP. This would help streamline eligibility criteria, making it easier for families to navigate the application process for benefits. States, however, would still bear the cost of administering the verification process. Eliminating the asset test completely would go one step better.

Perhaps Governor Corbett is feeling nostalgic for the higher state spending, less federal resources, and more administrative errors that accompany an asset test. Whatever the reason, this is the wrong direction for policy to be moving and the federal policy makers should take action to prevent other states from trading in their iphone for a couple tin cans attached to a string.