Revised May 13, 2008

FARM BILL CONFERENCE AGREEMENT CONTAINS
SIGNIFICANT DOMESTIC NUTRITION IMPROVEMENTS
By Dottie Rosenbaum

The conference agreement on the 2008 Farm Bill makes numerous improvements in domestic food assistance programs to help low-income Americans put food on the table in the face of rising food and fuel prices.  The nutrition title includes more than $10 billion over ten years in increases in these programs — including $7.8 billion for the Food Stamp Program, $1.26 billion for the Emergency Food Assistance Program (TEFAP), and $1 billion for the free fresh fruit and vegetable snack program, which is targeted to schools with high shares of low- income families.[1]

The nutrition title of the farm bill would:

• End years of erosion in the purchasing power of food stamps by raising and indexing for inflation the program’s standard deduction and minimum benefit.  These changes would help about 11 million low income people, including families with children, seniors, and people with disabilities.  With these changes, Food Stamp Program rules would fully account for annual inflation for the first time since the program’s creation over 40 years ago, and food stamp households would stop losing food purchasing power each year.

• Support working-poor families by eliminating the cap on the dependent care deduction, reducing the chances that families will have to forego food to pay for decent and safe child care.

• Promote savings by improving the program’s resource limits and no longer counting tax-preferred retirement accounts and education accounts toward the resource limit.

• Simplify administration of the Food Stamp Program for participants and states by building on successful initiatives from the last farm bill.

• Rename and update the Food Stamp Program.  The program name would be changed to the “Supplemental Nutrition Assistance Program,” or SNAP.  The bill also includes numerous provisions to strengthen program operations, integrity, and oversight.

• Help emergency feeding organizations such as food banks, food pantries, and soup kitchens meet increasing demand and rising food prices by increasing annual funding for commodity purchases for TEFAP from $140 million to $250 million and subsequently adjusting this amount for food inflation.

• Dramatically increase the availability of fruits and vegetables in low-income schools by expanding the Fresh Fruit and Vegetable Program under the Richard B. Russell National School Lunch Act, which provides free fresh fruits and vegetables, typically as snacks, to children in schools.

MAJOR NUTRITION PROVISIONS

Below are short descriptions of the major nutrition provisions in the conference agreement.  The Center on Budget and Policy Priorities has conducted a preliminary analysis of the state-by-state impacts of some of the key provisions:  those affecting the food stamp standard deduction, child care deduction, and minimum benefit, as well as the increased funding for the Fresh Fruit and Vegetable Program and TEFAP.  Tables at the end of this report present estimates of the number of people affected in each state and the size of the benefit increases under the bill, based on information that the Congress has made available, Congressional Budget Office cost estimates, and CBPP analysis.

Ends the erosion in the Standard Deduction.  As a result of benefit cuts enacted in 1996, the purchasing power of most households’ food stamp benefits has eroded each year.  Similar to income tax rules, food stamp rules allow households to subtract a standard deduction from their income to reflect the cost of non-food essentials such as housing, transportation, and medical care.  For more than a decade this amount has been frozen at $134 a month for households with three or fewer members, a group that makes up 75 percent of food stamp households.[2]  As a result of the 1996 cuts, a typical working parent with two children receives about $37 less in food stamps each month in 2008 than she would have without the 1996 cuts.  Under current law, because of the frozen level of the standard deduction, the cut grows larger each year because of inflation.

Under the current agreement, the minimum standard deduction would increase from $134 to $144 in 2009 and would be indexed in subsequent years for inflation.  In 2009, the change would provide a typical working family of three with an additional $4 to $5 a month in food stamp benefits.   In nominal terms, this amount would rise to $17 a month by 2017.  As a result, the food stamp benefit’s purchasing power would no longer shrink each year, and some of the lost ground would be made up.  (See Figure 1 below.)

The provision would help about 10 million recipients in an average month and would increase food stamp benefits by $5.4 billion over the 2009 to 2017 period.

Increases the $10 minimum benefit and ends erosion in its value.  Under current food stamp rules, one- and two-person households that qualify for a monthly benefit amount of less than $10 receive a $10 “minimum benefit.” The minimum benefit goes overwhelmingly to people who are elderly or have a disability, and has not been adjusted for inflation in more than 30 years.  As a result, households that receive the minimum benefit can purchase only about one-third as much food with their food stamp benefits as they could have purchased in 1979, when the minimum benefit went into effect.  Under the bill, the minimum benefit would be set at 8 percent of the maximum benefit (or Thrifty Food Plan) for a household of 1, rounded to the nearest whole dollar — or about $14 a month in fiscal year 2009[3] — and would be adjusted for inflation in subsequent years.

Approximately 650,000 households with 780,000 individuals would receive higher benefits under this provision, nearly all of them containing seniors or people with disabilities.  Food stamp benefits would increase by about $280 million over the 2009 to 2017 period.

Eliminates the cap on the dependent care deduction.  For low-income working families who have preschool or young school-age children, high quality, affordable child care is often essential for finding and keeping employment.  The food stamp benefit formula allows families to deduct some of their child care expenses from their income to reflect the fact that they have less money available to purchase food.  Yet under current law, this deduction is capped at $175 per month per child ($200 for infants), well below the amounts that some low-income families must pay for child care.

This provision of the bill would allow households to deduct the full amount of dependent care costs that they incur in order to work (or to participate in approved education and training programs), and thereby targets more food assistance to working families that are less able to afford food because of this expense.

This change would increase food stamp benefits by $500 million over the 2009 to 2017 period.  It would provide an average of almost $500 more per year (about $40 per month) to approximately 100,000 households that pay high child care costs.  A mother of three who works 35 hours a week at $9 an hour and pays $350 a month for child care for a pre-school-aged child (the average out-of-pocket costs for employed mothers with income below the poverty level, according to the Census Bureau) would receive an additional $79 in food stamps each month ($334 rather than $255), or almost $1,000 more over the course of a year.

Encourages savings.  The food stamp asset limits have been frozen since 1986, at $2,000 for most households and $3,000 for households with members who are elderly or disabled.  The steady shrinkage in the inflation-adjusted value of the asset limits discourages saving and undermines a key path to self-sufficiency.  The bill would address this problem by indexing the asset limits to inflation.

In addition, consistent with an Administration proposal, tax-preferred retirement accounts and education accounts would no longer be counted toward the asset limit.  This would remove the current disincentive for working households to save for retirement and education.

The Food Stamp Program’s current rules exclude amounts in 401(k) retirement plans from the asset test but count amounts in Individual Retirement Accounts (IRAs).  As a result, working families who manage to save more than $2,000 for retirement in an IRA must partially liquidate that account to qualify for food stamps during periods of unemployment.  This forces families to choose between hardship when they lose their job and a higher risk of poverty in old age.

CBO estimates that these changes would, by 2017, make about 125,000 people newly eligible for food stamps.  Individuals in these households would receive an average of about $90 to $125 a month in food stamps.  CBO estimates the provision would increase food stamp benefits by about $1.2 billion over the 2009 to 2017 period.

Builds on the successes of the 2002 Farm Bill.  The conference agreement would build upon several state options to simplify benefit delivery that were enacted in the 2002 Farm Bill.  It would streamline paperwork burdens on seniors and people with disabilities and would expand the “transitional benefit” option to cover more families leaving welfare for work.  It also would support state efforts to modernize service delivery, based on recent state innovations.  For example, the conference agreement would establish a new state option to allow states to take food stamp applications over the telephone.  The conference agreement also enhances program integrity by increasing penalties for retailers who abuse the program and requiring adequate testing of large new automated systems before they can be implemented.

Increases support for emergency feeding organizations.  Currently, mandatory funding under the Food Stamp Act for The Emergency Food Assistance Program (TEFAP), which supports food purchases by food banks and other emergency feeding organizations, is set at $140 million per year.  This amount has been flat since 2002, even as food prices have climbed more than 15 percent.  Had the amount kept pace with inflation, it would be $163 million in fiscal year 2008.

In addition, the TEFAP program receives “bonus commodities” that USDA purchases and provides under other authority.  “Bonus commodities” from USDA have declined by more than 70 percent in the past three years.

Under the conference agreement, annual funding for commodity purchases for TEFAP would increase from $140 million to $250 million in 2009 and be increased in accordance with changes in the cost of the Thrifty Food Plan in years after that, so the funding level keeps pace with food prices.  TEFAP also would receive $50 million in additional funding for the remainder of fiscal year 2008.

Expands free fresh fruits and vegetables in low-income schools.  The bill would expand and improve the Fresh Fruit and Vegetable Program under the Richard B. Russell National School Lunch Act.  This program has been receiving $9 million a year in mandatory funds and currently operates in 14 states.  (Three Indian tribes also operate the program.)  In fiscal year 2008, an additional $9.9 million in discretionary funds was provided to expand the program into all states and the District of Columbia.

Under the conference agreement, mandatory funding would increase to $40 million for the 2008-2009 school year and grow in each subsequent year through 2012.  By 2012, the program would be funded at nearly eight times its current size: $150 million each year, with annual adjustments for inflation in years after that.  A significant portion of the new program would be financed by restricting the Secretary’s “Section 32” spending authority, which provides the Secretary with broad authority to use a share of annual customs receipts to support the agricultural sector.

In addition to providing increased funding, the conference agreement would target program funds to elementary schools with a significant share of low-income children.  Free fresh fruits and vegetables would be provided to all elementary schools in the country where more than half of the children are eligible for free or reduced price school meals.  Each such school would receive $50 to $75 per child per year for fruit and vegetable purchases.  CBO estimates the ten-year cost of the expansion at a little over $1 billion.

End Notes:

[1] On May 13, 2008 the House and Senate Agriculture Committee posted the final conference report language.  See http://agriculture.house.gov/inside/FarmBill.html, http://agriculture.senate.gov/.

[2] In the 2002 Farm Bill, Congress addressed benefit erosion for larger households.

[3] This estimate is based on the Congressional Budget Office’s March 2008 projection for the TFP for a household of 1 in FY09.