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Provide Adequate SNAP Funding for Fiscal Year 2021

The Agriculture appropriations bill for fiscal year 2021 that the Senate Appropriations Committee released Tuesday includes substantially less funding for SNAP (food stamps) than the program is likely to need, because the bill’s funding level is based on outdated, pre-COVID-19 funding estimates. Traditionally, appropriators wait until the House-Senate conference committee meets to set the final number for SNAP. This year, at a minimum, significant adjustments will be needed to update the number to reflect current need.

There are two basic issues. First, it’s unclear just how much funding SNAP will need for fiscal year 2021, which started October 1, given the high degree of uncertainty concerning the depth and duration of the pandemic and the economic downturn (as well as the uncertainty surrounding various expansions in unemployment insurance and other programs and policies that were enacted in response to COVID but are slated to expire at the end of December). Second, although SNAP is an entitlement program — meaning that anyone who qualifies under program rules can receive benefits if they apply — Congress has historically appropriated a specific dollar amount for SNAP each year, and program costs cannot exceed the appropriated amount.

Congress could solve this problem by treating SNAP in the same manner as it treats most other entitlement programs: that is, by providing in the appropriations bill an amount reflecting an estimate of what will be needed, but accompanying that with flexibility for the federal agency operating the program to spend whatever is needed in the last quarter of the fiscal year so benefits are available throughout the year for all eligible applicants. This structure ensures that a program cannot run out of funding because of unexpected enrollment increases or other unanticipated costs.

Let’s take the two issues in turn.

Uncertainty about need. When the Trump Administration developed its estimates nearly a year ago for the number of people who will participate in SNAP in fiscal year 2021 — and the funding required to meet that need — unemployment was below 4 percent and food inflation had been below 1 percent a year for five consecutive years. With a relatively strong economy, SNAP caseloads had fallen every year since peaking in fiscal year 2013. As a result, the Administration’s estimates — upon which Senate appropriators based the SNAP funding level in their new bill — assumed that SNAP participation would continue to fall in 2021, to 37 million people a month, on average, and that food costs would rise only modestly.

But, due to COVID-19 and the resulting economic downturn, SNAP participation has risen to more than 43 million people, and food costs increased by more than 5 percent between June 2019 and June 2020, the month upon which SNAP benefit levels for fiscal year 2021 are based.

Moreover, the path of the recovery remains highly uncertain. The Congressional Budget Office’s (CBO) most recent forecast, which projects unemployment rates of 9.4 percent for the first quarter of calendar year 2021 and 7.6 percent for the fourth quarter, is out of date. More recent private forecasts reflect varying assumptions about the trajectory of the coronavirus, the recession, and future policy changes. Goldman Sachs, for example, forecasts that unemployment will remain at a still-elevated 6.6 percent in the first quarter of 2021 even with further economic stimulus.

Another factor is that the Families First Coronavirus Response Act expanded SNAP benefits and eligibility for a temporary period that’s tied to federal and state public health emergency declarations being in effect, and it’s unclear how long the emergencies will last, given the uncertain course of the virus.

The SNAP appropriations level in the Senate bill does not adjust for these factors. There is no adjustment for higher food prices than were forecast before the pandemic and recession hit, higher unemployment or its effects on SNAP participation, or the cost of continuing the Families First SNAP benefit increases.

It’s very uncertain how much funding SNAP will need next year. But the Senate bill clearly is tens of billions of dollars too low.

The nature of the SNAP appropriation. If SNAP were funded like most other entitlement programs, its funding would adjust automatically to actual conditions, rising when more people are eligible for it and shrinking when fewer are.

But, as we’ve explained, SNAP and child nutrition (including school lunches and breakfasts) are the only major entitlements under which beneficiaries face the risk of two types of failures in the appropriations process: if the annual funding level proves inadequate to cover program needs for an entire fiscal year, or if a government shutdown occurs because policymakers haven’t succeeded in enacting legislation to fund some or all government programs for a particular year. Such failures can risk leaving tens of millions of low-income families and children unable to afford adequate food. They also risk causing confusion and harm to food retailers and schools.

Many entitlement programs that provide benefits to all eligible people who apply don’t require annual appropriations because the laws establishing the programs provide funding directly. These include Social Security, unemployment insurance, and farm price supports through the Commodity Credit Corporation.

For most other entitlements that policymakers fund through the appropriations process — such as Medicare parts B and D, Medicaid, Supplemental Security Income, veterans’ compensation and pensions, and crop insurance — the House and Senate Appropriations committees provide protections in their bills against one or both types of appropriations failures.

For SNAP, the only “cushion” that the appropriations bills have provided in recent years to address possible funding shortfalls — and the only cushion included in the new Senate bill — is a $3 billion “contingency benefit reserve” for the Agriculture Department (USDA) to use if the SNAP funding level proves too low. That would have covered less than a month of SNAP benefits before the pandemic. In recent years, Congress has extended the contingency fund’s availability, and unused amounts from the annual $3 billion are available for a couple of years into the future. However, USDA likely used some of the prior years’ cushion to meet fiscal year 2020 SNAP program costs, so less will likely be available for fiscal year 2021 than in recent years despite the increased economic uncertainty.

For other appropriated entitlements, policymakers have a simple way to protect against inadequate annual funding: by providing uncapped appropriations for the last quarter of the fiscal year to fulfill the requirements of the underlying law governing the program in question. That approach doesn’t “cost” the Appropriations Committees any money under congressional budget rules, nor would it for SNAP. It would simply protect low-income families with children, seniors, and people with disabilities from hunger if SNAP funding falls short or if political or other factors interrupt or delay the appropriations process.

All of this raises the question of how to move forward. We expect the House and Senate Appropriations committees to revisit the SNAP appropriations level in coming weeks before agreeing to a final level during House-Senate conference committee negotiations. And a new stimulus/relief bill could contain some of the COVID-related additional SNAP funding needed, if such a bill materializes. It remains quite uncertain, however, if or when a new stimulus/relief measure will pass both houses of Congress and be enacted. Given the substantial economic uncertainties and the increased numbers of people struggling with food needs and other hardships, we recommend that Congress make the fix that’s most certain to be fully effective, by placing SNAP’s appropriation on a par with other major entitlements and protecting it fully from possible funding shortfalls.